Guy Trafford wonders how farms can compete with shorter, easier urban working conditions, especially when farms are price takers and urban businesses are price setters. Only immigrants seem to be prepared to work hard on farms

Guy Trafford wonders how farms can compete with shorter, easier urban working conditions, especially when farms are price takers and urban businesses are price setters. Only immigrants seem to be prepared to work hard on farms

While prices for dairy products are looking sound, the issues around compliance and labour are having an impact upon dairy farm prices and this is not helped by improving employment conditions in some urban firms.

The announcement earlier this week that Vodafone are allowing their staff to ‘knock off’ at 2 pm on Friday afternoons if they have finished their work for the week got me thinking. Several issues came to mind; the first being if they are so well staffed and profitable, they can pay for 40 hours work (presumably) and only expect 37 hours in return then they are probably charging their consumers too much. Research was quoted as showing such schemes usually mean staff actually are more productive in the 37-hour period than they would’ve been in the previous 40 hours. It speaks volumes about us as a community, and probably how we really would rather be somewhere else than at work.

While I can only be envious of the Vodafone staff it also occurred to me as someone in a (small) start up business and also involved in agriculture, that schemes like this are going to force all employers to look at what it is going to take to make working for them a competitive and desirable option for current and potential staff. Dairying is the industry that has the most distance to move, a ‘good’ farm may have a 6-days-on, 2-off roster while others have 11-on 3-off (and a few have 5-on and 2-off like our urban brethren). Most farms would also require to move to 8 hours per day but that will need to be spread over a 12 to 13-hour period.

Most forms of agriculture and horticulture are finding it increasingly difficult to compete with the urban trend.

This conversation has been ongoing for over a decade and much of the trouble is while staffing conditions are improving overall, farmers are price-takers and unlike Vodafone (and others) we can't pass on these costs to consumers. Jealousy aside, I felt vaguely dispirited when thinking about Vodafone, as one of many in the self-employed ranks I regularly clock up 70 hours-plus in a week and probably for less than the minimum wage. I imagine there are plenty of others in similar situation.

However, these are the choices we make in chasing opportunities and for the privilege of being self-employed. It is staffing situations along with compliance costs that are driving many family farms away from agriculture, resulting in more corporate styled businesses fulling the void. Bigger farms are better able to employ ‘experts’ able to specialise in areas such as compliance and provide better pathways for staff to climb the promotions ladder. It is a situation that is occurring throughout the world and not just in developed nations agricultural sectors. This is despite family farms traditionally being able to ‘tighten their respective belts’ and ride out the lean periods.

The life style gap between the urban and rural workforce does appear to be going in favour of the urban sector as is shown by the high rates in international workers required to provide the man (and woman) power to work our farms, another trend that has occurred in other developed countries. The USA ag sector would grind to a halt without the Mexican workers, legal or otherwise. Any solutions are going to be very difficult to find; automation and modern technologies are going to help when possible. However, many jobs still require the human element and many firms still work on the labour-before-capital principle simply because the technologies the capital can provide are very expensive and future returns in agriculture are always uncertain.

Reinforcing the views above is the news that dairy farm sales are down and the issues around compliance, labour and uncertainty are given as the major reason for the slump. Most sales that are occurring are limited to the more desirable farms.

In the year ending December 2019 nearly 42% fewer dairy farms were sold than in the previous 12 month period. This drop is occurring at a time when dairy product prices are lifting. The number of dairy farm sales of just 23 was the lowest December since 2009. Other types of farms, while also showing falls in sales over the 12 month period did not experience falls to the same degree. 1,266 farms were sold in 2019, -16% fewer than 2018, with -42% fewer dairy farms, -3% fewer grazing farms, -31% fewer finishing farms, and -11% fewer arable farms sold.

The median price per hectare for all farms sold in the three months to December 2019 was $38,152 compared to $40,589 recorded for three months ended December 2018 (-6.0%).

Farm sales

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Source: REINZ
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My pet peeve these days is rice crackers. They used to make 'em in Australia. Now when you turn over the packet it reads "made in places with no food standards".

I no longer trust the rice crackers on our supermarket shelves, and no longer consume them.

Could farmers afford to pay more if their mortgage repayments were lower? Would Farms be overvalued if they were forced to properly compete with urban working conditions?

Excuse my lack of knowledge on farm cash-flows but anecdotally farms without mortgages seem to have cash to spare.

tim52 - the short answer is yes.
We could either pay more or /and employ more staff reducing hours worked per week.
We are a "good" employer with a 6 on 2 off roster which comes at a financial disadvantage to farmer employers with 12 on 2 day off rosters but recently reading about the move to a 4 day working week scares me. Some jobs such as milking are not just a factor of labour efficiency but taking the time to complete the job well.
Any dollar not spent on farm mortgage payments could be spent on something else.

Debt servicing is by far the biggest on farm expense

Maybe for some farmers. For us our largest cost is wages and that is before any allowance for management (me).

Well you are one of the lucky ones to be freehold

Freehold? Hahaha

Or you have a debt level far below the average

Tut, tut, W. You are quoting Real Data from an Actual Farm. That just confuses the entire debate.

Labour (for anything but a small farm) must be the second, I was just not sure of the ratio.
Like housing investors, buyers keep pushing the prices up until the cash-flow is barely viable, and hope for capital gains. Getting access to cheap immigrant labour was obviously, in hindsight, going to push up farm values. Existing farmers have got their capital gains and new ones can't afford anything but cheap labour.

Farmers can only realise those capital gains by selling their farm or ticking up more debt usually by acquiring more land, which further inflames the price of land

The farmers should just sell, and then there won't be poor working conditions with low pay, and no more dirty dairy. Win/Win.

We pay our staff between $25 and $40hr depending on seniority. Our lowest paid full time staff member is on just under $60,000. No tertiary education required, no student loan, good housing provided and the ability to be on $90-$100k by 30 years old.
Yes you work outside so sometimes mud and rain but balanced by days of warm sunny weather and an occasional afternoon fishing.

The rest of the industry should take note of your example Wilco. I imagine you don't struggle to retain or attract decent staff

We are probably middle of the road as employers. My wife would be the first to tell you I am not perfect. Our remuneration and hours are better than many but the bigger operators offer even further scope for promotion and pay. Recently we were approached by a farm manager looking for a change but he was on $120,000.
I too have worked for the occasional mongrel who almost destroyed my enthusiasm. It doesn't have to be like that.
Don't give up on farming - just change boss.

I havent given up on farming. One day I would like to go back to being involved in farming but I don't know if the land prices would allow me to own a farm. Loved growing up and living on farm it beats the hell out of suburbia

There are so many variables in dairy as to who the 'farmer employer' actually is ie who employs staff and what those staff are. Some farm employers are owner operators that may employ only casual staff (relief milkers etc), some are equity managers. Some farms employ lower order contract milkers, who employ the staff, some employ 50/50 sharemilkers who employ the staff. Younger farm employers are likely to employ staff and pay an hourly rate. I am seeing sharemilkers doing that in increasing numbers. There is variability in hourly rate employment too. e.g. approx 800 cows staff, paid hrly, work an average of 40hours pw - all season long. Sharemilker is one of the 4 milkers on roster until early summer. Casual staff are brought in to fill the gaps - locals for the shorter terms, or else folks on their OE here working say Oct - March. This system works on larger herds. Interestingly these young employers believe it is only a matter of time before avg 40hr weeks for farm staff will be the norm - through industry competition for staff. Some hrly rate employers use a traditional roster as Wilco refers to above.

It does seem like financial interest (land price rises, speculation?) has effectively taken the place of what previously went to labour, when labour was paid more.

Only immigrants seem to be prepared to work hard on farms

This smells. It's supply and demand. Wages and working conditions are not attracting New Zealanders as they once did, so businesses are demanding cheap, exploitable imported workers instead. It's the government's job apparently to protect them from supply and demand. The stories that emerge of labour exploitation in the horticultural and agricultural sectors (as well as, obviously, hospitality) only further encourage Kiwis to look elsewhere.

My father worked as a fruit picker in earlier decades. He was effectively the shift manager (he assigned other pickers to their rows as well as picking, himself) over a small group of pickers, perhaps 10 people. He was paid the equivalent of $36 per hour.

The unfortunate fact is that supply and demand means there are few Kiwis seeking exploitative labour conditions for poor pay.

My take on this is the business model that farmers are buying in to. Farmers are not understanding and planning their business model well enough. Guy mentions being in a small business start up. I am assuming prior to jumping into it he had fully mapped out his costs, income projections and so on. A big part for farmers, of it is the initial starting costs including buying the land. if you don't have the cash to buy you have to borrow it, so a significant cost will be servicing that debt. You also have to have a realistic perspective of what kind of return you will get on whatever product you'll be producing. Many dairy farmers are dependant on ~$5 milk prices (or at least over $4), when they hit $4 for the first time only 10 years ago. They seldom seem to factor in downsides, in the case of food (vegetable) production, things like weather events. Pay and conditions for workers are a part of this picture.

A little over 10 years ago my wife and I worked for a dairy farmer by Waverley. We were putting in between us over 100 hours a week, but our combined income was only $60K. We had one weekend off a month. When we tried to talk to him about this he laughed at us and bluntly said if we didn't like it we could go else where. This while he had all the flash toys such as a big fishing boat, nice hunting guns which he used a lot while crying poor, but also went an purchased two new $100K+ tractors. The $4 milk solid payout had him singing very loudly!

So farmers need to be a lot better at how they manage their business's and how they treat their staff. It starts with how much they pay for their farms.

Well, if some commenters on this 'ere august site were to have their projections come true, we'd mostly all be out in the fields, stoop labouring, until we cark it and are ploughed under (with wooden implements and horses if them horses haven't already been turned into Tasty Pies) so as to fertilize the next crop.

Nah we are living the dream in front of our screens - oui wuld like to be out in dim fields with all that fush har and sin?

I'm going to have to ask, what is the potential of cultivated meat and milk alternatives?

The UK is %18 vegetarian and the trend is growing. the biggest reason for going vegetarian was concern over how animals are treated.
Growing vegetables is hard on environment regards leaching etc.

If cultured meat continues to make present leaps in technology, we have cause to worry. Wool never recovered from synthetics competing, i'm still patiently waiting mind you.

Plant-based milk continues to take more market share - long way to go but signs are positive. Oat Milk seems to be winning the race..
Kiwi oat milk producer takes Kiwi oats to the world

Fresh milk sales have been declining for a long time, back %20 since 1999 in USA. Alternatives are definitely a problem we just don't know how much of a problem.
It's putting up the millions to buy into an industry that's not that flexible, facing what could be massive change and the change is by the look of it is following some kind of Moores law, so could develop very rapidly.
I noticed Swedish farmers growing oats for the 'milk market', that market has legs.

This is the very reason NZ should remain GE free, as there will always be people willing to pay for the real thing, and they will want the best. We are one of the few countries left that could offer this.

On behalf of the possums, wasps and other sundry pests that a bit of gene editing could wipe out, I thank yez, good xir.

I'd say that the benefits of allowing GE would outweigh the GE free tag. The full potential is yet to be unlocked but the current advances are good enough

Yer/Nah .
5 big takeaways from the most thorough review of GMOs yet -
There's little evidence that current GM crops have greatly boosted potential yields. In fact, conventional plant-breeding techniques appear to be more successful on this score thus far. On the other hand, some insect-resistant GM traits do appear to have increased actual yield for certain crops by minimizing pest losses in places like India or the United States. So it's a mixed bag.

In the future, new genetic modifications might conceivably do more to boost potential yields for certain crops by, for instance, improving photosynthesis or increasing the nutrient uptake of plants. But the report cautions that it's way too early to predict success, so we should be wary any overconfident claims.

That article is good. However, only focused on crops. GE has more applications for example biological control of invasive pests, which could help our pest problem and in turn helps boosts yields by preventing crop fouling or destruction. Predator free 2050 is a pipe dream unless GE is used

Richard Branson

Great to see @MemphisMeats close the largest funding moment in the history of the cell-based meat industry. As an investor, I'm excited to see how clean meat production will leave a more positive impact on the environment, our health and animal welfare

I Just Ate Meat For The First Time In 20 Years

Even if it just replaces pet food it's a game changer.

In the past the continuation of the rural community came directly from the rural community, families were larger and in most cases there was at least one or two siblings who would stay rural. A number of factors have changed that, smaller families, corporatisation of farms that make ownership much harder for individuals, mechanisation meaning fewer people needed to name some. It is rare once the move has been made to be urban that people then return to the land, a few do, but only a very few. This a bed that the corporatization and the reaming out of rural communities has well and truly made for itself.
I also think much of the complaint is about seasonal work, which is a whole another kettle of fish and I think we should be using the RSE scheme (minus the bloody rorting of course) to fill these gaps. There are simply not enough suitable people for this in the right places in the country.

As for dairy farming, even if people hadn't moved townward we still would have run into trouble for workers on dairy farms as more and more land converted to it, often not by people already farming or living locally.

I think you are onto it, family farms breed their own labour while large corporates etc, have to hire it. When I was young my father had two shepherds, when i came to work on the farm we did it with two of us. The advantage of being brought up on a farm and knowing the system being run.
Just got to watch the meta game going on around you.

I am sure the laws of supply and demand will kick in. Growing food has to be profitable or we all die of hunger. The basic laws of economics will prevail. Dairy got a bit overdone....white gold. Haw haw haw. Most of us dry stock farmers saw the writing on the wall 15 years ago. If you had the guts, you got in and dealt in the property climb. And got out.
Now its just the old fools who believed the white gold nonsense and stayed farming cows. And some young ones which if they ride the current misery will come through just fine. The peaks and troughs of farming. We have just been through some very good highs for beef and lamb. The next few months is looking very dicey tho....

how dry are you Belle? we are getting a little toasty and some areas about are much worse.

Hi there Aj, we have had our driest January here since I started collecting rainfall records. Assuming there is no rain in the next week. However we had a very wet december so there is still good feed on the hills. But I am thinking this will be a bad one. Just a feeling. I have been unloading stock as fast as I can. Which is pretty slow as the works are full for the foreseeable future. As the schedule tumbles. Arghhh the delights of farming

I'm thinking the same thing, going to be a struggle to get through this one. My bore is lowest I've seen it,river flows low but irrigators still running.
Doesn't take more than a few 34 degree days with breeze like today to gobble up any moisture.

Up north here feed is disappearing real fast, store market appears good buying - if you have grass, would say boner cows are about to start running. Processors will be happy. $6.00 for prime may just be a memory for a while. Councils on water restrictions, even water carriers to house tanks. We have more than our share of Bovis farms, one more worry to contend with.

Hi Wilco, yes the boner cows are primes next worry. Apparently you cant get big cattle killed for love nor money because of the bull kill. So if the cows start running....oh bum.

Interested in your perspective on the corporate avocado farming going on up there. Much effect on beef and lamb farmers? I was told when up there recently that people have been complaining about the big avocado farms reducing the aquifers.

Rick I think NZ is well overdue in having a discussion about who owns our natural resources, particularly water. The story up north like similar stories is that while a few are using a resource, such as water, and it appears endless it has no monetary value but as soon as intensification happens or changed land use, such as avocados,the water has a limit and a value at which point ownership and control become important including customary rights.
We are so dependent on councils to get their calculations right when it comes to allocating water that any miscalculation could have huge consequences for generations. And with a "first in first served" attitude to water allocation your neighbours' allocation can have a significant affect on your own options going forward and ability to generate an income.
The speed and scale of the orchard expansion up in the far north is scaring the locals who up to now have had unfettered access to a large underground aquifier.

Its still green in most places. Albeit larger tinges of yellow each day. The wind has been unending. In the district we had 8 to 15 ml about 10 days ago. But no follow up. So that green wont last long.

Aha the pennies dropping. Simple demographics are going to cause huge problems. I recently talked to a farming friend who employed a Shepard. House and $47k per annum. Locals are up in arms that he is way over the top!! I was stunned. A good machine operator in civil or forestry can earn $75 to $100k per annum plus. Ag is going to struggle more and more to get people unless you meet the market. An aging population and employment options will make it hard. I’ve worked for my own business for over 30 years. Employ over 600 people. Guy - the long hours never end and some days you wonder why you do it but to create something and provide jobs to a lot of people and their families is my biggest reward.

I agree all farmers and orchardists should be forced to meet the market for labour.

Andrew this season the big cherry packhouses here are paying pickers an hourly rate plus bucket rate. Plus other incentives. Had more kiwis in the picking crew at our orchard this year than the previous 2years. Difficult season though - cherry exports running less than last year and that wasn't a great year for most. Lot of wind damage, some hit with hail, and splits. If an orchard had 50% damage some packhouses wouldn't pick it. Some sad stories around here this year. Unlike other summerfruit, you can't insure cherries. One old timer told me we had the heaviest rain they had ever seen in almost a lifetime of living here. Cumulatively might not look bad but it was about the amount that fell on the few days we did get it. Farmers have had it green up until quite recently around here.

been a very difficult season in HB, talked to a cropping friend with irrigation and he said it was the worse year he can remember. Hail nailed the summer fruit early on. Just one of those years, first time all my summer crops failed.

How can farms compete with WFF? Talking to a manufacture this week whose staff don't work Fridays else they will lose their benefits. WFF has them nicely trapped in the reliant on government vortex. No wonder our productivity and wages are lousy.

Yes I remember a time years ago when I discovered there was no point our company paying us any more, as I lost WFF. But I did look at it as just paying my tax back to me while I was a struggling parent.

Of course since then WFF has become a monster. Massive payments that are not just a helping hand but a mortgage payment on overpriced houses made possible by ....WFF

Agree, WFF and the Accommodation Supplement are two travesties that need to go. Neither major party seems willing to do so though...John Key labeled it "communism by stealth" while on the campaign trail years ago but did nothing when in power. And last time around both National and Labour seemed to be running on increasing them.

Just remember ALL employers staff qualify - farming as well. WFF really shows that we are a low wage economy in a 1st world cost economy. If all employers had to pay the equivalent wages they would really struggle then. I think its something like 20% of people pay 80% of the tax ( I certainly pay my fair share!!) - Having traveled a lot Im happy to pay my tax (I still keep 2/3 of it) and spread the income around as I don't want people living in poverty you see around other "Wealthy" countries. Getting labour in the future will become the biggest challenge for business and especially so in Rural and Provincial areas. This applies to all sectors in these areas - not just farming and horticulture.

Paying your tax back you yourself - but helping employ a Wellington bureaucrat to process that merry go round for you.

Belle I have a weather app called ''Ventusky' it's worth downloading, not much action on the horizon.

In my extensive interactions with the rural sector I have come to the conclusion that many farmers run their businesses very poorly with little or no real world business experience beyond the farmgate that they and their ancestors were raised behind. Some are exceedingly good but are a rarity. You only have to look at how many farmers got sucked in by the swaps derivatives to confirm my view. Signing up to something without conducting diligence....thats just piss poor business practice and nothing less. Likewise for on farm employees. I have encountered hundreds of ex farm workers who moved into construction after bring exploited by their farm employers. Now its not all beer and skittles in construction either but the consistent feedback from these guys is that being paid properly, having a safe workplace, not overworked, trained adequately, suprisingly those sort of things really matter to an employee and apparently many farm employers do not even cover those basics. If thats true across the sector then its no suprises that staff are scarce, could you blame them for acting in their own best interest?

The trouble is the path to farm ownership is very difficult now. Workers use to put up with shit jobs because they could see a path forward to ownership. Now its a road to nowhere.

Hit it on the head. A group of top farm consultants told me only 20% of their clients have any understanding of what financially is happening on the farm - I didn't believe them but they insisted its true and some good farming friends of mine privately backed it up. A big survey done by the meat industry concluded that 20% of farmers are good at business. Below this it drops away quickly. They had UMR do a survey at the same time - they asked over 1,000 farmers to rank whether they thought they were in the top 20% - 80% of the farmers believed they were in the top 20% - hmm delusion comes to mind - I would almost bet a large chuck of the 20% who said they weren't in the top 20% actually are in the top 20% as they never set still and always believe they can do better.

I should add that most of the farmers I have dealt with who are running succesful businesses have either pursued higher education which has endowed them with the skills to operate their business succesfully or they utilise the services of top rate professionals to aid decision making on the farm. Either way the results are clear. I often wonder how much more succesful the sector could be if that degree of competency was more widespread...

Traditionally bankers were part of the 'trusted advisors' and some farmers are very loyal as it is part of their own values - loyal/trustworthy etc. This loyalty and the banks (according to Damien O'Connor on radio this week), proving to being 'fairweather friends' is shattering some families. One farming family who is intergenerational with a bank, is doing the rounds looking for another bank to take them them on. 'Sorry, your bank was irresponsible to lend that amount of funding to you' is what some of the other banks are saying. Interesting to hear O'Connor say he will be calling banks in for a meeting on their withdrawal of support to the ag sector after what appears to be his view that the banks aren't taking responsibility for their lending.

What effect is the banks moving away from ag going to have on the progression pathways for dairy? The pathway to farm ownership for many young farmers, especially those without a family farm behind them, has been via the sharemilking system. An advertisement for a 50/50 sharemilker for a 500cow farm attracted only 3 applicants. One of which was an existing sharemilker looking for an additional sharemilking contract. 500cows is considered 1st sharemilking position in Southland.