Guy Trafford takes another look at a growing problem that never seems to get resolved, notes a full effort to protect 'old world' markets, and assesses changes to farm gate prices

Guy Trafford takes another look at a growing problem that never seems to get resolved, notes a full effort to protect 'old world' markets, and assesses changes to farm gate prices
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By Guy Trafford

New Zealand horticulture has made the news recently with the demand for fruit harvesters that is not being meet. With the unemployment rate hovering around 4% (3.9% is latest data) the likelihood of finding enough staff from that sector is reasonably remote.

The same issue has been an ongoing one for agriculture. Dairying has had an ongoing issue with finding and maintaining staff and while sheep and beef and cropping have lower rates of turn over, finding new staff has still been a problem and getting more difficult by the year.

When the age profile of those working in agriculture is examined then more concern should be raised.

While most New Zealand industries have some variation of a bell shaped curve, agriculture, based upon the 2013 census results and it will have only got worse since, has a distinctly lop sided graph with the major age group involved being the 65+ group at over 14%. This is 3% higher than the next largest group 50 -54 at 11.3%, and when compared to the average New Zealand worker's age of around 43, it is over 4% higher. This does not paint a positive picture going forward for NZ ag and with the demise of ag training institutions it is not going to get better anytime soon.

Any solution is proving elusive. Bringing in more migrants will meet some of the requirements, but the need has now grown so great that productivity is being affected. For some time, large back country stations have had to curtail their expectations around farm intensification due to the additional staffing needs required to operate such systems, likewise some dairy farms. More migrants from a worker's perspective also means that there is more demand for housing and inevitable downward pressure on workers' wages.

A current article by Andrew Coleman, published here discusses whether New Zealand’s taxation system is adversely affecting productivity by the ‘signals’ it sends through the taxation process. New Zealand is lagging behind other OECD countries when it comes to productivity and largely this is due to a lack of capital going into areas of productivity. So, investing in newer and more efficient ‘technologies’ should be seen as part of the solution. However, while most sectors are enjoying reasonably good returns at the moment there is no guarantee these will remain. And with the already large rural debt, investors will need to think hard about adding to it in uncertain times.

The soon to be announced proposals from the Tax Working Group (TWG) may change some of the incentives away from investing in property to putting capital into more productive uses. This may have the effect of further highlighting the lack of skilled labour to take up some of the opportunities, but it may also provide the overdue impetus to upgrade technologies and reduce less skilled labour requirements. An irony coming on the back of the Taratahi Training Institute going into receivership is that now Agresearch is selling off the bulk of the Winchmore Irrigation farm. It may be that it has had its time, obviously Agresearch believe so. But New Zealand Ag does have the appearance of being steadily run down at the national level and no indications of a comprehensive plan going forward. Perhaps the heavy investment into combatting the M.Bovis outbreak is the best that can be hoped for.

The Government does appear to be trying to front foot New Zealand’s interests in maintaining and protecting market access into the UK. A Prime Minister to Prime Minister meeting took place last Monday with Theresa May providing assurances that the current access will be maintained. However, given the uncertainty that currently reigns over what the UK’s border access is going to look like post March 29th, any assurances have to be taken with a fairly liberal grain of salt. Already there is an issue with the sheep meat quota being agreed between the UK and Brussels being set at what the current division between the two parties is. This may suit for the time being but if Britain does leave the EU then the trade between them is very likely to change. This will impact on the amount of sheep meat flowing from Britain to the EU and change the current balance. So New Zealand’s EU markets may change, most likely improve if larger tariffs are imposed on UK lamb and conversely with more lamb staying at home the UK market may diminish. This is all speculation but what we do know is that nobody knows what the fallout will be even to the point that there could be a change of government. To date the impasse seems to have split Parliament in about four groups who have preferred options and none have the numbers to push through their view and so the ‘soap’ continues.

Markets

Little change to markets overall from last week when the major news was the lift in the Global Dairy Trade auction, the fourth in succession.

SHEEP

Lamb schedules have had some tweaking downwards and mutton schedules remain largely unchanged. Saleyard prices have reduced as a result of the falling works prices and with the climate now reverting to more normal patterns growth has reduced, reducing demand, and more store lambs are coming onto the market.

WOOL

The sale last week held onto the small gains made in the previous sale, however brokers comments seem to indicate they still think prices are at a precarious level with buyers being somewhat fickle.

BEEF

Manufacturing grades remained unchanged but there was some positive movement in the prime grades although nothing too dramatic. Stores prices remained firm.

VENISON

The largest falls in the schedules occurred here with prices dropping by about -15 cents per kg. Fortunately, producers have been receiving good prices for velvet which for those who farm for it will be getting some compensation.

Y Lamb

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15 Comments

Look, we do not have a shortage of workers. Look at the stats department statistics.

We have anywhere from 300k to 500k people sitting around doing nothing.

They say the unemployment rate is circa 4.5% BUT if you work 1 hour a week, then you're considered to be employed. If you are not really looking (i.e. no interviews in the last 4 weeks) then you are not counted as being unemployed.

My family owns a dairy farm. So I'm not uninformed: Agriculture struggle to get people into jobs because they are sh*t jobs, with sh*t conditions and sh*t pay. Often in remote areas. And they are temporary roles much of the time with less than 40 hours a week also.

How about agriculture businesses offer full time (40 hours) work on a permanent basis to workers? And pay them a decent rate?

And perhaps stop harping on about how they need more Phillipino workers, who they can work to death for f**k all pay?

How would your family dairy farm go it they took your advice and implimented what you recommend for others, with permanent roles paying a good (city) levels for the type of work conditions?

If they paid economic rates for labor and environmental degradation, then the land values would drop.
Perhaps pricing back to a level on par with other business activities. Maybe then the corporates would exit, share milking would re-vitalise and the viable model become mum, dad and the kids with a manageable debt laod.

The dairy boom has been a disaster - due to greed.

Davo's farm is no doubt one of the very few that pay their employees more than the industry going rate of $50k p.a for 60 hour weeks.

they don't have to pay city rates David, they are just short of labor willing to work at the price they were advertising.

I think it would go fine actually.

The amount of income the farm generates per year is relatively high, like in the hundreds of thousands. There's only 1 worker, so if that worker was paid another $20k per annum, it wouldn't really hurt the business.

But the thing is, they don't have to. Because there's a never ending supply of people who are willing to work for what I consider to be quite low wages. So when a worker leaves, they just get a new employed at the same rate as last time.

I guess in all businesses, one keeps expenses down. Only sensible to do so. I imagine if there's a snot load of young journos out there ready to work for very little, why would you pay an older, more established journo more to do the same thing? I'm talking about basic stories here, not in depth ones that require a lot of skill.

But the trouble is, we're just not paying people enough, and on good enough conditions to have a decent life.

All the farmers I know started out in farming for their love of the lifestyle - that being they liked the company of animals and the physical labour combined with the ability to use their personal initiative and innovation that farming offered. But none of that would have been enough to steer them into the farming profession - there had to be the prospect of ownership someday.

I suspect, if you take away the prospect of future ownership, no amount of wages make up for it.

For me it boils back to sharemilking and land prices.

It's always been a physical, 365 day a year job. When I looked at my employers who were Farm Owners in their 50's and compared their prospects at 20 compared to someone coming into the industry today at 20. It's like night and day.

https://www.dairynz.co.nz/news/latest-news/sharemilking-remains-a-viable...

The Pathways to Progression report shows that sharemilkers continue to make up 35 percent of the industry, but HOSM has declined to 17 percent from 25 percent in 1995

These guys slogged it out, made sacrifices but the carrot was there, sharemilking was a viable way to own a farm quickly, some of these guys were farm owners in their 30's.

Fast forward to today, there is less chance of getting a SM job. If this young person is lucky enough to get one they'll need to be in it for longer to make that jump into farm ownership due to land prices

And this is why I didn't stay in the industry long, there was that expectation from these Farm Owners I would work as hard as they did, and I did but the carrot is harder to reach and further away than in their day and in the end I wasn't prepared to bust my arse in the best physical years of my life for someone else with the goalposts of farm ownership moving further away

Good call I reckon. The land values are just way too high now.

Which leads farmers (including sharemilkers) to try and ring every last dollar out of a farm. Which usually means environmental degradation.

I would like to know the change in % of farmers who own more than one farm. Seems to me , talking to farmers locally, several seem to own more than one farm, and buy more when able. Owning 6 or 7 farms not unusual . Whereas I don't think I have heard of or talked to a new farmer who has brought a farm in years.
I would be interested to see the case you could put to a bank to buy a farm , at today's prices, presuming you have say a 10 % deposit , but no other income other than the farm you are buying.

On one side of our farm we have a neighbour who owns 4 farms plus wintering blocks - two of which neighbour us. On another side our neighbour owns 3 dairy farms plus a support block. We farm in a sensitive catchment which is considered by some to be a 'no go' area to buy land. Consequently local farmers are about the only ones happy to purchase farms in the area. It is not common to have 'outsiders' purchase in our area due to uncertainty of environmental restrictions - which all said and done applies really to all of Southland. We are almost the 'odd ones out' in our catchment as being a single farm (plus wintering block) owner with a less than <500 cow farm. :-) Having said that, these particular neighbours all have adult children working on the farms - sort of a farm for every child type mentality. Southland doesn't have many small farms. The greater Waikato for example would show quite a different profile.
Banks usually require 50% deposit for a dairy farm so a 10% deposit unless you are leveraging existing assets will see you laughed out of the bank.
Two young farmers I know of who have bought farms outright, in recent years all had family assistance to do so. Those who went via equity partnerships were able to do it without family assistance.

Yes , I am in the Waikato. Still quite a few small farms , but as We are pointing out , many own multiple farms,
The 50 % deposit requirement, I did not know that , but it makes my point even more , I think , how can any young farmer afford to come up with that ? And th banks are requiring it because the risk to return ratio is high .

In short - without help or substantial assets they can't. Many herd owning sharemilkers (50/50) that I know, if they are not planning to go in to an equity partnership then the chatter is that they will remain where they are and continue to reap 20-25%ROI and look to exit the industry in their 40s. Ever increasing regulations and compliance requirements are almost making it too cumbersome/time consuming for smaller farms. Better to own multiple farms and have the efficiency to employ someone to deal with it all, if you are going to own any. In Central Otago we have seen some buy in to the horticulture options here as a diversification. Commercial property is another option some are pursuing while they are still sharemilking. Most of these are no longer looking at farm ownership as an option. If land prices substantially came back it might change.
If you are looking at a standalone proposal (not leveraging of extended family assets) Banks require equity of around 70-80% for sheep/beef - including stock, and 50% for dairy - sharemilkers usually already own enough stock & machinery at time of farm purchase. When we started farming decades ago Rural Bank did vast majority of lending (Govt owned) and you were required to have 50% equity - but the whole structure of farming was different then.

Yep, my point above.

Canada's Saputo interested in Westland Milk - report

Those current account deficits catching up with us, all those Audis purchased on the house.

https://www.nzherald.co.nz/the-country/news/article.cfm?c_id=16&objectid...