THE PRESS SATURDAY, DECEMBER 28, 1985. Treating farming as business

Press, 28 December 1985, Page 12

THE PRESS SATURDAY, DECEMBER 28, 1985. Treating farming as business

Even the most casual observer of New Zealand fanning has reason to know that things are generally bleak down on the farm. A recent report said that stock and station agents had on their books about 5000 farms which the owners were interested in selling. Prices for lamb have not been good. When the value of the New Zealand dollar was high, the return for wool was disappointing. Beef prices have left much to be desired. The sales of dairy products have been more profitable, but the markets are limited.

In addition to those problems, the high interest rates have been crippling and the internal costs have been high enough in some instances for the farmer to get next to nothing for sheep or lamb. The question arises, not just for farmers, but for the whole of New Zealand because exports of meat, wool, and dairy products are still the biggest earners of overseas funds for New Zealand: what will become of farming?

What has become clear is the direction the Government thinks fanning needs to take and which some farmers are already taking. In brief, the message is quite simple: the days of farming as a way of life are gone, the days of fanning as a business are here. Essentially, what the Government has done is remove the support systems from farming and put farming on similar terms to other businesses. Farms are being exposed to market forces. The farmers who will do best, and perhaps the only farmers who will survive, are those who produce what the market wants and at a price the market will support. Put that way, the idea is not novel but has been embraced by a number of groups for years. The change is that there are next to no relief measures to shelter farmers from the problems of costs at home, or from the market forces abroad.

Since New Zealand began to be farmed by Europeans, the family farm and the special attitudes that go with it have dominated New Zealand farming. This style of farming suited the New Zealand economy. Individual selfreliance and resourcefulness, a personal or family drive to improve farms and output, and pride in the quality of produce all benefited farming as a whole.

Problems of access to markets and a downturn in the terms of trade — that is, the relationship between what New Zealand products could sell for and what could be bought with the money they fetched — drove many farmers into a way of farming not so much for profit, but more into farming for the capital gain that came when the farm was sold. Provided that farms yielded a reasonable living year by year, their rising values seemed to be a good investment for the future. Since the value of land has fallen, mainly because of the direct exposure of farming to overseas markets, farmers can no longer count on capital gains as the final rewards for investment. To many farmers, that capital gain was their nest-egg for retirement.

Farming has gone through bad patches before; but a recovery in land values is unlikely until buyers can foresee a return from farming that puts earnings more in line with earnings from capital put into other enterprises. Another profound implication in the

changes that have overtaken farming is that still more specialised knowledge is going to be demanded of a farmer. Farm advisers and specialist accountants and lawyers already serve the industry. The education system is better equipped than most to prepare young farmers with the range of knowledge that is needed to run a farm. Even so, the circumstances in which farmers find themselves today require still finer judgments before land is committed to production and before money is assigned to fanning gear and stock.

None of this, in spite of Government hopes, is going to remove the risks that farms have always faced. These risks have been diminished by more effective control of animal and plant diseases, by better storage of produce, and by farm machinery that can handle crops more quickly. The risks have not been diminished by strikes or other delays off the farm. They have been made more acute by high interest rates. Better management has improved New Zealand farming in the past, mainly along the lines of higher production and greater productivity from land and labour. Better management will doubtless improve farming in the future, probably along the lines of tailoring production for the market and diversifying, where possible, the product of farms. Nevertheless, anyone who imagines that farming will become a safe enterprise, secure against the trials of weather, markets, industrial problems, price changes, mechanical breakdowns, and many other uncertainties, is wide of the mark. As a business investment, farming is just about as hazardous as ever. For every problem solved and every risk diminished, new problems arise. The thinking of the Government appears to be that pushing the industry into a more businesslike frame of mind will put farming into a better economic perspective, that farming will get the level of investment deserved by its earnings, and even that production will adjust itself to the level required by the market. To some degree this may prove to be so. The changes away from misleading support systems, arguably serviceable in the short term, certainly remind the whole industry that its output and costs must relate firmly to the market. On one count, however, an exclusively business approach may never succeed. This is because a farmer, and the people immediately around the farm, must have a drive to persevere and succeed even in the worst of times. A strict business judgment, made without sufficient regard for the tenacity and resolve that are required to make a farm work, would probably lead to the conclusion that much of New Zealand’s farming is not worth while. This is not a conclusion that would suit > an economy still heavily reliant on farm exports. Marginal farms may collapse, be absorbed into other farms, or may be put to other uses. Many farmers will cease their efforts to increase output. Above all, the non-commercial motives that have kept farms going in the past are likely to prevail over a collapse of the industry because it does not yield the same return on capital as other industries.