Summary of Results and Conclusions
The outstanding result of the study is the high variation that occurred in income levels between years over the 12 year series, the large downward trend in income, and the lack of ability farmers had to counter this trend and the troughs.
Performance levels also varied considerably between years, but to a much lesser extent than did income levels.
These variations in income and performance levels were generally caused by influences beyond the farmers' control.
The influences beyond the farmers' control causing performance level variation were predominantly climatic (droughts, flood and exceptionally good growing seasons). Farmers showed that although undesirable climatic events did affect stock performance levels, they could minimise the effect of this on income levels.
For the 10 properties over the 12 year series, no relationship occurred between volumes of product sold and gross farm income. The dominant influence on farm incomes was the external product price variation over the time series.
This major influence on variation in income levels was beyond the farmers' control. The external product price variation was caused by change in government policy (including removal of SMP payments in 1984/85 and the withdrawal of support for the Meat Industry Stabilisation Account) combined with changing (generally lowering) produce prices on the international markets.
For the 10 properties over the 12-year series, gross farm income variation was high. The major impact came from product price changes and not the droughts of the period.
The effect of the above external influences on individual properties varied considerably dependent on the individual situation, particularly the physical and financial structure at the time. These were a result of the personal goals and motivations in farming and in several cases the stage in farming.
Generally speaking, those properties affected to a lesser degree by the external influences were the more established, more financially sound, higher performing and more conservatively farmed properties. That is to say, those being farmed in a stable environment were better able to deal with unexpected and sudden changes, especially large reductions in product price, whereas those who had recently made major changes in their system or who were in an establishment phase, were far more vulnerable to unexpected changes.
The latter could generally be said to have made well-informed decisions within the physical and financial environment existing at the time. These decisions were made in the late 1970's and early 1980's in a climate of government regulation and incentives with absolutely no indication that this environment would change and certainly not to the dramatic degree it did.
To some extent, the degree of hardship and suffering of farming families in the mid- and late 1980's was a function of luck dependent on their stage of farming and the decisions they made in the early 1980's when the change in farming environment was completely unforeseen.
Over the period of change, many farmers became very bitter toward the government. They felt betrayed because of the dramatic, unforeseen and unannounced change in their circumstances over which they had no control. To farmers, farming had been a family lifestyle, often hard, but good. Now they saw its traditional position of importance to New Zealand being devalued. The business environment in which they had operated was suddenly and dramatically altered by changes in Government Policy.
Again, farmers' reaction to this situation differed depending on their circumstances. On properties where a younger generation was just entering the farm, their energy and enthusiasm tended to drive the property to progress as it could in the new environment. In such a case, the support in knowledge and finance of the experienced older generation was essential. On properties without this energy injection, the feelings of bitterness and betrayal often dominated so that farmers felt no inclination or incentive to push their systems. An example of the attitude was why produce more just to pay it in taxes to a government who has treated us so badly.
Looking back over the period of the 1970's and 1980's, the farmers identified that many government interventions and supports had been detrimental by providing false signals and encouraging farmers to make decisions for the wrong reasons. Low interest rate loans in many shapes and forms were often taken up to provide a much needed cash injection, rather than as a deliberate decision to take on new debt for a specific purpose. In this way, government assistance often resulted in an undesirable outcome for farmers. The change in the livestock tax system was another example which had a major effect on two properties in the study which had invested in deer.
Despite identifying most government regulations as undesirable, the farmers felt that the process of deregulation had been badly managed by Government and that the Government had been particularly ruthless and insensitive to the circumstances of farmers and their families.
A very apparent result of the study was how little a sheep farmer could do in the short term to counter a sudden drop in product price.
All farmers reduced farm expenditure in an attempt to counter the income falls from 1985186 onward. The results clearly show the limited degree to which this was possible and the large impact that reducing incomes had on cash farm surplus and disposable profit levels.
It is interesting to compare the effect of the rural downturn on other businesses in South Canterbury at the time and their ability to change. One small business, a welder building steel gates, went out of business due to a massive reduction in orders, whereas a Timaru shoe shop proprietor, previously servicing the family shoe market, was able to change his buying pattern within a season to begin selling to the more lucrative women's fashion and sports markets.
In contrast to the shoe shop proprietor, sheep farmers are limited in the selling strategies they can alter on a seasonal basis and require several years to implement most product changes through breeding, management or sale and repurchase avenues.
'The study highlighted the large variation in motivation behind farming. The farmers were certainly not all striving to maximise cash farm surplus and purchase larger properties as may be assumed by some to be the ultimate goal. Several farmed small properties and low stock numbers with the aim of maintaining a modest lifestyle from these properties while intensifying production and drawing income from off the farm if necessary.
Many properties saw setting the farm up for the children to have the opportunity to farm as a priority, whereas others were prepared to help children if and when the children first showed interest, and others expected the children to leave farming and take up another trade or profession before returning to farming if they then wished.
A final result of note is the caution which must be taken by farmers, consultants and financiers when using annual physical and financial performance indices and ratios for a farm to compare with other farms or for different years on the same farm. These comparative criteria are shown to be very dynamic which emphasises the importance of evaluating the performance of a farm over time, both historically and in the future. The criteria do have merit, but users must be aware of the limitations and interpret them in light of the climatic and economic conditions and the physical and management resources of the farm business.
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