The bottom line is the whole story when it came to analysis of agriculture businesses says National Bank rural economist Kevin Wilson. "Everyone talks about economic surplus per hectare, or per dry matter produced, or dollars, but we don't talk about the bottom line. "This was gross revenue, lower work expenses, interest, depreciation and drawings."Sometimes it is above the break-even line and sometimes it is below but what really matters, is where it is over time." Looking at statistics for sheep and beef a loss had been happening "for more years than we would like to think." This was the same in the dairy industry, Mr Wilson said to the Gisborne Herald. Long-term debt would be an issue for agriculture in the future and the outcome was there would be a sharper focus as the industry makes sure the bottom line is plus. Mr Wilson said having a cash buffer gave farmers control over their business and they could manage "one-offs" like drought. The question was why land values were being driven up the way they had. In the past few years there has been a 13 percent increase in land values that did not match the business return or the cash return on capital of one to two percent. Land values have got to be corrected for the long term good of the industry. The correction had started with values back between 10 and 20 percent and volumes down 75 percent. Interest rates could rise to nine percent or higher, compared with the long run average of 8.5 percent and how much debt and how it was structured was important. Looking after cash and structuring the business properly was a way through, Mr Wilson said. Big issues with the volatility and value of the New Zealand dollar meant farmers would face marked income shifts and systems to cope with the flexibility were needed. In the future more progress will need to be made in pasture and genetics in the sheep and beef industry. Another factor sheep and beef and dairy could improve on was wastage. In sheep and beef, there was a big difference between scanning figures and docking figures and in the dairy industry 5 to 7 percent of empty cows used to be acceptable and now 15 percent was.
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