ON THE LAND

New Zealand Herald, Volume LX, Issue 18389, 3 May 1923, Page 10

ON THE LAND

■ (WiHAT IS LAND WORTH?

MEASURE OF PRODUCTION. i ' ______ YIELD OF HIGH-PRICED LAND.. ■.■,./ , . RESULT OF GOOD FARMING. FIGURES FOR INVESTORS. As the keynote to & proper judgment of land values is knowledge of the actual producing capacity of the land concerned, Mr. W. Goodfollow, managing director of the Now Zealand Co-operative Dairy Co., Ltd., was to-day asked by a Herald representative if he had any data bearing upon the individual earnings of men on high-priced land. The inquiry was made because a proper balance of land values is essential to the continued prosperity of the Souths Auckland Province, and keen interest is being manifested in this subject on all sides— by farmers themselves and by merchants and traders doing business with fanners. «Yea," said Mr. Goodfellow. "Curiously enough we have been collecting information on that point. . A remark recently made by a certain financial authority that he considered no land in New Zealand worth more than £40 an acre for dairying purposes prompted our action, because many of our suppliers reported that this remark wa 8 frightening investors from lending on rural securities. As the only way to assess the real value of land is to ascertain what it is producing wo sought information from a number of farmers who we know to bo working on high-priced holdings. To our questions we have so far received 11 replies, and taking them as they come we find their standard of production is as follows :•—- ' \ \>N Averager Butter-fat Acres. Cows. Butter-fat. per cow. per acre. ■ . , .- lb. lb. lb. 68 , 50 18,687 272 201 ■ 884 ■ 28 8.484 303 96 814 30 5.737 191 71 100 80 2,2926 286 229 62 ''■'.' 30 ■ 8.556 285 164 934 30 . 9.000 800 97 150 76 1,8400 242 IS3 120 80 1.9600 248 163 18U 53 1,3251 265 73 51 ' 22 6,670 303 130 100 :/.". 48 1,4640 SOS • 146 1086 ' 527~~ 14,0951 267 130 "I give these figures (which are derived from farms on both rich swamp and light lands) in detail;'' said Mr. Goodfellow, " because they <iieraonstrate the absurdity of many statements frequently made regarding the average production of. our . dairy cows. It will be noted that only one herd averaged below 2001b. of , fat/ and that owner explains that they were late.in coming in. Some seven or eight years ago an official computation was made to the effect that the average production of the New Zealand cow was 1611b. of 'butter- per annum. This figure was an estimate and not an actual average,, but it has done service ever since, and, no further official attempt' has been made to bring the average up to date. As a matter of fact, the Government's, present method of- compiling statistics does not provide for any effort being made to reach the average production of distinctively dairy herds. I have long held the opinion that the old figure of • 1611b. of butter-fat per cow constitutes a libel upon Dominion dairymen, and does" not allow for the heroic effort toward improvement that has been manifested, particularly in the last few seasons. This season approx. 20,000 cows in the South Auckland Province have been tested under different schemes, and when these figures ' are - finally available it should be possible to; arrive at some idea of what is a fair average for this district. Personally, I believe that our average will be found to be even now over 2001b. of butter-fat per cow, arid it will progressively increase as" breeding improvement yields results. A standard of 3001b. per annum should be attained in 10 year's time.

; .Reply to a Critic. v " These figures in themselves," commented Mr.. Goodfellow, "answer a recent critic, who'went at gome length into the question of land values. This gentleman made a great feature of his extreme generosity in assuming that in 10 year's time it might be possible for a dairyman on 60 acres of laud to carry 25 cows, producing 2501b. of butter-fat each. That standard-is already attained and exceeded on farms of , that type, ; as is clearly shown by comparing that assumed good farmer of the,future with the three small farms whose actual returns are available to us. ,''' ■ .'-■ -■ ;,■ ■ •'. „ •".'. _ ,- Average Butter-fat Acres. .. Cows. Butter-fat. per cow. per acre. lb. lb. V lb. 68 50 1.3G87 272 201 52 30 8,556 285 164 51 22 6,670 303 130 Assumed-' possible, future case: 50 25 .6,250. 250 125 "These :•■ figures mean that if . this imaginary farmer of the future were as good a farmer as the best actual performance in the returns given and could equal the production per acre—which is the real basis of comparison would convert his pessimistic loss sftt down at £67 into a profit of £295 on butter-fat alone. What farmers are doing now surely.they will do 10 years hence. In face of, the facts that' his basis of. computation has already been handsomely exceeded his elaborate criticism collapses . like a pack of cards. Its foundation was wrong. My remarks also pre-supposed a degree of development and cultivation capable of a much greater carrying capacity than 1 cow to 2 acres. That would be necessary to justify the value suggested. ' It only ' remains to be further said that this gentleman's version of my statement is distorted. It is apparently impossible for some people to appreciate and reason from a qualified statement. The tenor of my statement was that looking into the future and allowing for the factors (1) /that with tho permanently higher cost of production due to heavy taxation the tendency would be for goods to appreciate in value; (2) that full improvement and cultivation of farms would increase their carrying capacity, and the quality of their stock; and (3) that our climate < gave us a definite advantage, in economic dairy production, compared with competing dairy countries in Continental Europe, allowing for thes factor?, I said that ' 1 felt safe in saying that a decade hence there would be very little land in the South Auckland district, fully improved and in close cultivation, that' would not bo worth very nearly £100 an acre.' To say that some land will not be improved in 10 years or 50 years' time is no answer to a statement that that land which is improved and fully, cultivated will be worth somewhere near the figure suggested. , The Real Question of To-day. " One other point, mentioned," said Mr. Goodfellow, " brings us to the real question of 'to-day. I am asked when and where a farmer can get money for less than 6£ per cent. A moment's thought would have enabled this gentleman to answer his own question. The answer is ' Never and nowhere ' —so long as supposed friends of the farmer combine on the one hand to abuse the mortgagee and on the other to persist in telling him that they are such poor farmers that they cannot farm successfully at more than £10 an acre, which is the absurd suggestion made by this writer. " While it is wrong to boost land to .-in unduly high figure it is equally harmful to endeavour to depress values below a fair standard. It was because I knew of tho harm being done to legitimate farmers by arbitrary statements of land values that I made the remarks I did. We all know that the boom prices were too high ' as a permanent leveljust as they were too • in residential areas and merchants' stocks—but the swing of the pendulum can go too far in the other direction, and work definite harm to men : not affected by boom prices but working upon sane values. What is required at the present time is a sane middle course between unduly - inflated prices and ridiculously low ones. .Of the 8000

dairy farmers in the South Auckland pro-, vince, possibly 10 per cent, or 800 were seriously affected by the boom figures. The other .90 per cent, have purchased their farms. upon a reasonable basis. Of this 10 per cent, of boom victims some have already failed some have secured adjustments from their mortgagees; others await the final closure from mortgagees who, themselves farmers, are content to take back their property. Tl'.-s process of re-adjustment in connection with that 10 per cent, of the farming community is practically speaking completed. Some borderline cases have yet to be adjusted but an broad lines the time has now coma when attention may be turned from the victims of the boom to the needs of the 90 per cent, of farmers unaffected by excessive land values. It is the needs of this section of the farming community with which I am chiefly concerned.

."Old-time mortgages given by these men. either require renewal or re-adjust-ment to permit of further development. New capital is required by others who are widening the circle of production and bringing in new land. It is vital from the community point of view that capital shall be available to them. But because of the undue concentration of attention upon victims of the boom, combined with arbitrary and unjustified dos clarations as to what the value of land should be by men without a practical acquaintance with the position, such mortgage money as is available for investment is being frightened away from rural securities. The inevitable result of this will be to throw a greater burden upon our banking institutions. The better course at the present time would bs to encourage, as far as possible, private mortgagees to come forward and invest in rural securities. But if farmers want money to be available for farm securities they must make the proposition attractive; they must show the lender that they can pay interest on reasonable —that they are thriving and not starving; that the future is bright and not black, and that their securities are going to appreciate as time goes on, ' and not depreciate. This is the only way capital can be attracted toward farm securities and so permit the normal development of this province to go forward. > Good Returns From Dear Land. "From' the answers so far returned to the questions remitted in our recent inquiry, I have selected five farms working on high capitalisations. A close analysis of their position is of interest. These figures are actual and not speculative. To bring their returnji down to a hard business basis depreciation on a fairly liberal scale has been added in each case, although in actual farm practice the allowance for depreciation on a herd is frequently provided for in the valuation of the 6tock. Farms 1, 3, and! 5 are on swamp land, and farm 2 and 4 on average Waikato country in good condition. The returns are the actual cash receipts for the slump year, with a final butterfat realisation of 16.62 d per lb. This season, so far as can reasonably be seen at the present time, the realisations should be at least 2d per lb. more, so that the receipts of these farms will this year be from 10 to 12 per cent, greater than for last season on an equal production. Yet in spite of / last year's low cash returns the interesting fact stands out that even on the high capitalisation shown every property, save one, paid not only all expenses and charges, but also 7 per cent, on, the owners' own equity, and left an amount over and above interest. While this amount, representing the farmer's labour wage, is small in some cases has to he remembered that the farmer secures housing and a fair amount of his living off his property, and ' that -such' a bad year as last year is not likely to \be repeated. ,'.- : '.-,■-',

BALANCE-SHEETS OP FIVE HIGH-P / ■ •■:■'„ '■•'.' Stock and Kece _ . Capital Imple- B-fat i Acres. Price, value. menta. ' Pisa ( , ; . £ £ £ ■ £ (1) 68 85 6780 900 889/ (2) 88 i 50 4425 600 676/ (8) 100 70 :•■: .7000 1100 ".: 1616 (4) 52 60 3120 460/625/ (5) 120, 76 9120 1136 1494 • ■•' In some cases these farms are held at 1 "boom, figure" of the locality concerned, tions, but to demonstrate that such prop than £40 an acre. ,; .

. The details of ; expenditure in eaoh of. the five, farms, referred to above are given as under, ; omitting shillings and pence: ■' --..A'.''.--',',■ • -■:•■•.■.■■'■ ','■•■„' VTks exes, _ i ' i • '■ ''''- -'■"■' .. and Interest ■ • Depre- m'nt'npaid. Rates. Taxes. Wages, ciation. ance. £ £ £ £ ■'£■' £ 130 30 26 100 100 .' 120 17 15 — 104 60 144 i — .50 10 338 300 251 36- 9 3 4G 50 35 . 692 24 — . 105 200 ■ 189 Safe Investments , Offered. "These balance-sheets," concluded Mr. Goodfellow, "definitely prove the absurdity of any dogmatic and unqualified statement that 1 no land is worth more than £40 an acre for dairying. Some of the rich swamp and volcanic lands of the Auckland Province with their combined virtues of good soil and a wonderful climate, are worth " very much more than this, and it is wrong that their owners should be subjected to inconvenience and hardship because of the incomplete knowledge of any land critic. To avoid misunderstanding and misrepresentation, 1 want to say emphatically that I do not wish to see land held at an unduly high figure, but equally it is unfair to deliberately depress it below its' genuine value. I do not advance these balancesheets as a justification for the prices at which they j>re submitted, but they do show that they can pay. interest and be a safe security of a figure very much above £40 an aero. What is required now is to find a happy mean—a fair average value for land in relation to its quality, situation, and possibilities.' The best judges of land are those experienced valuers who have guided investments for years past. I do not know of any cases where money actually lent as an investment on first mortgage upon a reputable valuer's recommendation has suffered loss. "The position now is that the aftermath of the boom has been fairly well cleared up, or is in process of being finalised. The problem now facing us is to promote the ordinary legitimate development of farming on a reasonable basis— to attract capital to farm investments, and not frighten it away. I repeat that the only way farmers will do this is by demonstrating their ability to earn well and pay well. Investors and investing institutions look chiefly for security, if farmers will endeavour to demonstrate their real security upon a permanent basis then such investments will be sought, interest will drop, production increase and general trade be stimulated. It is to the interest of the cities to achieve this end, as much as it is to that of the countryside, because tho economic life of the Dominion is unquestionably based upon rural prosperity. Bricks and mortar in cities will speedily lose their value unless a steady stream of production from the country provides trade to maintain city life. "By investing in broad acres and allowing farming improvements to be effected and new areas brought in, continued and increased production is assured, and it is this production prosperity for both the city and the country. For instance, this dairying season the South Auckland Province alone has sent forward for export approximately 40,000 tons of produce wJ.Lh will return to the country over £5,000,000 sterling. Three seasons back our production of all dairy produce was less than 20,000 tons, and the question for each influential city investor to decide is whether it would be to the interests of the city to see production decline through lack of available capital. The city flourishes only as the farmer prospers, and city investors, on the proved capacity of Auckland farmers to produce, can well regard investments on broad acres, made on a reasonable basis, as the best of securities. One big advantage that the Waikato and Thames Valley land has over more settled areas, such as the Wairarapa, Manawatu and Taranaki, is that it is new territory and not yet fully improved. Because of the margin for improvement in the carrying

capacity of the country cash values wU be maintained and ,'■ improved, as hard work and judgment steadily increase the earning power of our land?, It'is. easily possible to increase the carrying (capacity of the South Auckland Province by 50 per cent, over a period of/years and by careful • selection and stock improvement to increase the average butter-fat production by anything from, 25 per cent, to 50 per cent. > Proof of this lies in the performance of the Lower Waikato. ,! Ten years ago this area was regarded as fully unproved, but it has shared in the in ; creased production of the last few seasons on an exact ratio with newer areas. Extending this prospect over a period of years the future can be regarded with equanimity and satisfaction. ■

'EICED FARMS IN THE SLUMP YEAR. iipts. Total Balance 7 p.c. on 'Amount and expe-n- ; remain-- own remaining only, diture; ing. money, over int. : £ ■;■■■£. ■■':■ £-,■■£ '12/1 506 ' " .383/12/1 339 44/12/1 '19/1 381/4/6 285/14/7 332/11/- . — - 949 667 567 100 '16/6 179/8/- 346/8/6 ' 216 130 , . : 1210 . 284 78 206 less money than the price quoted, which is the The object is not to justify these capitalisa>erties are definitely worth very much more