Gisborne East Coast Farm Study Groups
SFF 02-042: A systems approach to sustainable farm management
Analysis of financial and physical data across participating farms
Revised Milestone 3
Prepared by Rex Webby, AgResearch Ruakura
Aim
To measure changes in the financial performance of the farm businesses involved in group over the duration of the project.
Background
There were 11 participating farms that started the project in the Gisborne area and a further 9 around Ruatoria. One of the farms in the Ruatoria group was close to Gisborne but run in conjunction with a farm on the slopes of Mount Hikurangi inland from Ruatoria. Similarly a farm in Central Hawkes Bay was linked to a Gisborne farm and was a participant in the Gisborne group.
The participating farmers were sent a form each year on which to summarise livestock and financial performance. Essentially most of this information was available in the farms annual business accounts and the process was just a case of transposing on to the standardised format.
The effective (area in pasture) farm areas were:
| Gisborne group | 16,521 ha |
| Ruatoria group | 6,901 ha |
| Total | 23,422 ha |
Table 1: Income, expenditure and economic farm surplus (EFS) across the 3 years of the project and the two farm groups
Gisborne Group
| Year | Gross income | Expenditure | EFS |
| 2001/2002 | $651 | $363 | $289 |
| 2002/2003 | $543 | $366 | $177 |
| 2003/2004 | $525 | $369 | $157 |
Ruatoria Group
| Year | Gross income | Expenditure | EFS |
| 2001/2002 | $553 | $458 | $95 |
| 2002/2003 | $423 | $492 | -$68 |
| 2003/2004 | $411 | $527 | -$116 |
Comment
Over the 3 years of the project, weather patterns were reasonable consistent with the climate history of the area. Although there were no extremes of dry weather there were a number of heavy rain storms that caused localised damage that affected a few of the participating farms. The largest financial impact has come from rising NZ dollar values reducing commodity prices and in particular a drop in beef prices. This is reflected in the drop in gross farm income.
It is interesting to note that the Gisborne farmers were consistent with there level of expenditure over the 3 years varying only $6 per ha whereas the Ruatoria farmers have increased their level of expenditure over this time. The difference in expenditure between the two groups is substantial, in 2003/2004 the Ruatoria group spent 43% more per ha than the Gisborne group.
Total monies involved across both groups
On a weighted average basis overall across all farms:
| Total income | $11,509,836 |
| Farm expenditure | $9,733,076 |
| EFS | $1,780,072 |
The farm expenditure is essentially what the farmer spends in their local community to run the farm. It includes wages, animal health products, fencing equipment, vehicles expenses, shearing costs etc. The EFS or economic farm surplus is what’s left over to pay interest on borrowed money, taxes, personal drawing, distributions etc.
Relationships
To help understand some of the key drivers of the farm businesses, various performance relationships were analysed. The Gisborne and Ruatoria area were analysed separately and the results are summarised in Table 2 below.
| Parameters | Area | Relationship | Correlation | Graph |
| RoC vs % su in sheep | Gisborne | Positive | Weak | |
| Ruatoria | Negative | Weak | ||
| RoC vs % su in cattle | Gisborne | Negative | Weak | |
| Ruatoria | Positive | Weak | ||
| RoC vs sheep income | Gisborne | Positive | Weak | |
| Ruatoria | Positive | Weak | ||
| RoC vs cattle income | Gisborne | Positive | Weak | Yes |
| Ruatoria | Positive | Strong over all years | Yes | |
| GFI vs Fertiliser as % FWE | Both | None | ||
| EFS vs FWE | Gisborne | None | Yes | |
| Ruatoria | Negative | Strong in 2003/2004 | Yes | |
| EFS vs Fixed costs | Gisborne | Negative | Weak | Yes |
| Ruatoria | Negative | Weak but stronger than Gisborne | Yes | |
| EFS vs FWe as % GFI | Gisborne | Negative | Strong | Yes |
| Ruatoria | Negative | Strong | Yes | |
| EFS vs Lambing % | Both | None | ||
| EFS vs Calving % | Both | None | ||
| Sheep income vs Calving % | Both | None | ||
| Sheep income vs % su in sheep | Gisborne | Positive | Reasonable | Yes |
| Ruatoria | None | Yes | ||
| Cattle income vs % su in cattle | Gisborne | Positive | Reasonably strong | Yes |
| Ruatoria | None | Yes |
Glossary
RoC = Return on Capital invested in the farm business
vs = verses or in relation to
su = stock units as in standard stock units
GFI = Gross farm income
FWE = Farm working expenses
EFS = Economic farm surplus
