CHAPTER 3 - Method
On 10 farms time series financial and physical data was collected from current and historical accounts for the period July 1978 to June 1990; this data represents the farm accounting years 1978/79 through 1989/90 (a 12 year series).
The farms were selected from South Canterbury (summer dry) sheep and beef farms such that there was a variety of farms and farmers in the sample. Farms were chosen from a sample of farm owners all using the same accountant; this assisted in ensuring standardisation of historical data across farms. The sample was not a random sample of farms. The sample was chosen by the accountant to represent a range of farmer ages, stages in farming and decision making styles.
The financial data was compared using graphs and tables by expressing all the financial data in 1990-dollar values.
The Statistics New Zealand consumer price index (CPI) was used to convert historical dollars (nominal of actual data) into real terms (1990-dollar values).
Whilst a number of indices are available to measure price and cost changes over time, the CPI was chosen because it may be used as a deflator (or inflator) to convert other statistical series into constant dollar terms in order to facilitate comparisons over time1. The change in the CPI is also the official measure of inflation. To maintain the relativities of individual revenue and expenditure items in the historical data when converted to 1990 dollars it is necessary to multiply each revenue and expenditure item by the same index. The adjusted 1990 dollar values described in the graphs show the relative spending on each item shown; the adjusted figures do not necessarily represent the same relative changes to the volume of inputs since each item of expenditure may be associated with a different relative price change per unit of input; in other words, the changes to the price per unit of each individual expenditure item may not be the same as the aggregated consumer price index.
Carrying capacity in terms of livestock units for the different stock types and classes of livestock was available for most farms; however, this data was not available for some of the earlier years in the series for some farms.
The following time periods were analysed and are commented on in the results and conclusions and for each case study farm:
- Whole series 1978/79 to 1989/90
- Pre 1984
- 1985 to 1987
- Post 1987
The variability in the data was expressed using the standard deviation and the coefficient of variation (standard deviation divided by the mean) as well as mean or average result for each period in the series.
The coefficient of variation gives a measure of the variation of the data in relation to the mean value by expressing the ratio (SD/mean) as a decimal or percentage figure (eg 0.31 = 31 percent). The larger the coefficient of variation the greater the variation in the data relative to the mean value for the data.
The agreed approach was to complete 10 case studies representing the spectrum of farming performance from a specific farm type as assessed by a private sector accountant. The data set includes physical and financial data; the financial data set is established on both a real and nominal basis.
The selected properties were visited and managers were interviewed to ascertain the developments that have occurred while the existing operators have been involved in the business. Often this involvement was over two generations. In addition, a number of specific factors were also explored including Information on physical changes to the property, the farmer's goals/motivation, perceptions or risk and risk trade-off, expenditure priorities under separate income scenarios, technological and external changes, and farm management impacts.
The outcome from the interviews was the preparation of a property time-line outlining the sequence of events and factors influencing decision making.
The interviews for the 10 case study properties are written up in Part II of this report. The descriptions in each case study are the interviewer's interpretation of the situation on each property gained during the interview.
See Appendix 1 for the detailed interview outline. Appendix 2 contains the summary of farmer observations made during the interviews.
Annual farm accounts were collected and were then used to develop physical
and financial performance profiles of each property over the time series.
NOTE: Tables and Figures - Most tables and figures in this report read chronologically from right to left. The two exceptions are:
- Figure 2.1, Rainfall Data,
- Average Mortgage Rates.
1 - New Zealand official Yearbook 1993, 96th Edition" Department of Statistics
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