Pomeroy & Reynolds (1991) reported that a study undertaken in 1988 by Chappell, for the Rural Bank, showed that the physical size of the farm was not a factor in the viability of farms. However, the 1991 study showed that the ratio of liabilities to EVAO decreased with size of farm. This suggests that, as farm size increased, viability improved, as a result of the value of liabilities being a smaller proportion of the value of output. Our analysis tends to support this view for all farm types other than dairying. Dairying is the only farm type where the value of liabilities did not decrease with the increase in the value of gross output (Table 14). For all farm types, the ratio of liabilities to gross income of small farms is substantially different from that for all the other farm size quintiles.

Table 14 Ratio of liabilities to gross income (Average total liabilities/average gross farm income)

Land represented around 70 percent of the value of total assets (Table 15). Dairy farms had the highest average total-asset value of all farm types and horticulture farms the lowest. The average value of dairy farms was 2.4 times higher than that of horticultural farms sampled, 30 percent greater than sheep and beef farms, and 8 percent greater than cropping farms. Some of the value of dairy farms appeared to be capitalised in dairy company shares; furthermore a proportion of dairy farmers who are sharefarmers did not own farmland. On dairy farms 17 percent of the total assets were livestock, compared to only 11 percent on sheep and beef farms.

Table 15 Average value of assets and proportion of total assets represented by each type of asset, by farm type

As expected, the average dollar value of total equity increased with farm size, although this trend was less marked for horticulture (Fig. 8, Table 16). Overall, the average value of equity was greatest for "other" farm types and least for horticulture (which in any case tended to be smaller farms). Median data showed a similar trend, although average equity values were about 25–30 percent greater than median values for sheep and beef, dairy, and horticulture farms. This might indicate that there were a few large farms of these farm types with large equity. The average value of equity for cropping farms was 10 percent greater than the median value, and it was 270 percent higher for "other" farm types (indicating that for "other" farm types, a few farms tend to have much higher equity values than most farms in the "other" category).

Figure 8 Total equity by farm size and farm type (average per farm)

Table 16 Equity by farm size and farm type

A more informative measure is percentage farm equity because this represents the proportion of net assets to total assets. A substantial number of farms had equity of more than 80 percent of the value of total assets, in particular those with sheep and beef, horticulture, and "other" farms (Fig. 9). Eighty-three percent of sheep and beef farms had more than 60 percent equity, 64 percent of dairy farms, 68 percent of horticulture farms, 69 percent of cropping farms, and 75 percent of "other" farms. Just over 1 percent of sheep and beef, dairy, and "other" farms had negative equity. Larger farms tended to have lower percentage equity than smaller farms. However, because larger farms also had lower liabilities in proportion to gross income than smaller farms (with the exception of dairying), they potentially have the ability to service their greater debt.

Figure 9 Percentage of farms in each equity class by farm type