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Success for the Maori primary sector is success for all New Zealand.

Executive Summary

The present National Government has identified policy and priorities relative to the New Zealand’s economic outputs and opportunities. Within the set of priorities they further determined that the ‘Maori economy’ in particular has the ability to contribute significantly more to the overall economic strategy for New Zealand, both domestic and export. This view is reiterated and presented through government policy and subsequently by the various ministries including Treasury. This focus on the Maori economy is not new, however there is an increasing emphasis by this government and its political allies to ‘grow’ the Maori sector at a faster and improved rate to whatever other sectors it sits alongside.

Further to this the Government has set an ambitious goal for New Zealand; to increase the ratio of exports to GDP from the current 30% to 40% by 2025. This will require a concentrated effort to encourage investors to develop more internationally competitive businesses, in both the commodity and high-value technology-based sectors. Setting this goal ensures the Government remains focused on supporting the confidence and growth of our high productivity export firms (Hon. Ministers Joyce & English, The Business Growth Agenda, 2012).

The present National government instigated a Maori Economic Development Panel in 2012 . This panel is mandated to seek to improve Maori GDP per capita to equal that of the average GDP per capita by 2040. GDP contribution by Maori needs to be proportionate to the Maori population, ~ 15%, at the very least (Strategy 2040, Maori Economic Development Panel, 2012).

Research Question:

This report will attempt to answer the question: “Is the Maori contribution to regional GDP through agribusiness appropriately understood and quantified?”

For the purposes of this report it is necessary to first define the Maori Economy. The literature does not give a single definition however New Zealand’s Treasury have identified some clear parameters they use as defining the Maori economy through the Maori Asset Base. They state:

The Maori economy and asset base has grown significantly over the last 100 years. As such Maori and Iwi increasingly contribute and play a key role in New Zealand ‘s economy. Maori contribution to the New Zealand economy is multi-faceted and includes the primary sector, natural resources, small and medium enterprises and tourism.

…the government’s lead economic advisor is working with agencies across the public sector to support the growth and development of the Maori economy.

In 2001 the asset base of the Maori economy was estimated to be worth $9.4 billion, this figure rose to $16.5 billion by 2006, and we now estimate it was worth at least $36.9 billion in 2010. The Maori asset base includes:

  • Businesses of employers $20.8 billion
  • Other Maori entities $6.7 billion
  • Businesses of self – employed Maori $5.4 billion
  • Trust and incorporations $4 billion. (BERL (2010), The Asset Base, Income , Expenditure and GDP of the 2010 Maori Economy)

It should be noted that this definition of the ‘Maori’ economy specifically is drawn from political interests and does not necessarily meet the definition of those who identify as Maori and may or may not participate in the economy in the way policy and academics define. The Western worldview is somewhat reductionist and uses definitions to support a very specific understanding of terms and activities. Indigenous interpretations are generally more holistic in their definition, and, as an example, Maori would likely expect any definition of a Maori economy to somehow align to a cultural association ahead of any other factor. The policy definition of the Maori economy above will be held for this report.

Success for the Maori Primary sector is success for all New Zealand – Brad Tatere

Opportunities for private equity investment within the sheep/beef and deer industries

Executive Summary

Use of private equity is well established in the agriculture sector. The dairy industry, in particular, has used private equity partners to fund purchases and conversions, successfully driving growth of businesses across different stages.
This report identifies the limitations and opportunities of private equity for the sheep and beef industry, where capital constraints and cash-flow issues are an inherent hurdle to growth.
Modern farming systems, technology, and sciences are evolving along with the way businesses are being financed and governed.
This evolution is influenced by such factors as investment costs, social and environmental pressures, availability of skill sets and price volatility – factors that shape how we farm today and into the future.
The backbone of New Zealand agriculture is family-farmed businesses. The industry has been further shaped over the last two centuries by strong trading cycles influenced by political and environmental dynamics ranging from economic recessions, global conflicts and subsidies, to technological and land use advances and high interest rates.
While the traditional family-owned farm remains a strong part of the agriculture industry now and into the future, structures are evolving with the rapid growth of corporates, foreign investors, multi shareholder businesses, leases and their relative hybrid models.
My views and interest in private equity are based on my personal background of growing up on a family farm, my education, work, business experience and the family succession process.
Capital – or lack of it – is probably the largest factor influencing the sustainability and growth of my farming businesses.
The focus on both cost of capital investment in the farming business and on ownership structures has elevated rapidly, driven by high levels of capital appreciation in the last two decades.
Perhaps the issue is best demonstrated by a discussion I had with a former employer about the cost of buying a farm, this was about the in the year 2000. He reflected on how tough farmers thought things were in the 1980’s when the capital cost was about three times the gross turnover of a stock unit. He noted that this was nothing compared to where it sat in 2000 – nearly eight times the gross turnover.
So, 16 years after that discussion, the cost is over 10-12 times the gross turnover, and there are now far greater compliance costs and social and environmental concerns increase the cost of doing business.
While high capital gains have created wealth, this has created its own challenges around succession and entry into the industry. Issues over land availability, land use change and investors paying aesthetics values for marginal producing land have all impacted on the environment we farm in today.
I hope this report will stimulate debate and highlight opportunities with the use of private equity for the benefit of industry businesses.

Opportunities for private equity investment within the sheep/beef and deer industries – Edward Pinckey

Farm succession the key to success.

Executive Summary

The sheep and beef industry is one of New Zealand’s leading exporting industries. Many sheep and beef farms have remained within the same family for generations due to successful farm succession across multiple generations, as evident every year at the New Zealand Century Farms and Station Awards (NZCFSA).

Succession planning is the development of a strategy that will allow a smooth transition of the business and assets with minimal disruption to the business or, more importantly family relationships. Often family members will have different expectations in respect of future ownership of assets and aspirations in respect of involvement in the business. A poorly planned and executed succession strategy may not only have financial and taxation implications but can also have a major impact on family relationships.

After conducting a literature review and three case studies I have formed three recommendations for successful farm succession of the family farm. They are;

    1. Open Communication – Encourage diversity of thinking during farm succession process helps to get a better understanding of all family members vision for the family farm. Who to involve;
        • Both farming and non farming family members and their spouses.
        • Accountants, bank manager and lawyers.
        • And seek advice from an independent farm succession facilitator.
    2. Document Everything – The gold standard would be to devise a comprehensive business plan and distribute to all family members. Documents to consider include;
        • Minutes from every meeting.
        • Farm succession strategy.o Businessgoals.
          o Timeframes.
          o Rolesandresponsibilities.
        • Updated Wills. But most importantly….

      3. Start Early – It is never too early to start!! Conversations should start at an early age and be maintained over the years – we all know how young people’s interest and capabilities change over time. Things to avoid;

  • Making assumptions, as these can turn into expectations.
  • Devising a strategy at short notice, as a poorly planned and poorly executed strategy can have a detrimental effect on family relationships.
  • Not giving praise. Everybody likes praise, but farmers are very reluctant to give any sort of praise. Acknowledgement during succession planning can go a long way to building stronger family relationships.

I hope this report stimulates people to start farm succession planning now!! Enjoy your read.

Farm Succession The Key To Success – Hayden Peter

The NZ honey export company ltd pure New Zealand natural honey.

Executive Summary

It is well known that the honey market is very crowded with multiple brands and product types; however, I believe there is space in the market for a special premium brand. The new brand would target the more sophisticated, educated, wealthy, female market. The brand would be differentiated by refined upmarket packaging and a range of value added products that are well-designed, well- engineered, well-crafted, and selling the experience and story of New Zealand, with a touch of exclusive artisanal look of luxury (Roberts, 2004).

There will be a full range of premium honey products including active manuka, an organic honey range, high-end drinks and other bee products including prololis, royal jelly and bee pollen. Further the value added premium honey products would include sophisticated skin care natural products range targeting successful businesswomen (Cropp, 2015).

A combination of pooled knowledge and technical capabilities of advisors, leadership team, and a strong management team will allow The NZ Honey Export Company to be competitive in the marketplace and provide significant benefit to customers.

Initially, the company will purchase from the retiring owner an existing honey packing facility complete with machinery, labels and licences. The purchase cost for the entire packing plant, equipment and working capital will be approximately $350,000. The initial production would be performed in the vendor’s existing factory.

As The NZ Honey Export Company establishes its footprint and gains a solid reputation, it will leverage its core competencies for continued growth, and to differentiate the company from competitors.

The NZ Honey Export Company Ltd Pure New Zealand Natural Honey – Wendy Oliver

How can New Zealand dairy farmers thrive in the face of milk price volatility?

Executive Summary

New Zealand is a significant participant in the global dairy export market, making up 30% of this market. The major dairy export item from New Zealand is currently Whole Milk Powder (WMP), which is one of the most price volatile commodities in the world. The United States and European Union regions have become prominent competitors in the global dairy market. Farmers in these regions have access to a variety of price risk management (PRM) tools, which they utilise to protect their profit margins. New Zealand has been very slow to develop similar tools, and is at risk of being left behind by these larger competitors.
Around the world there are a variety of exchange traded futures and options contracts for dairy commodity products. In addition many overseas dairy companies and cooperatives, as well as banks and share broking firms, offer ‘over the counter’ (OTC) type price risk management products. These include fixed milk price offerings. The first example of a PRM tool in New Zealand was Fonterra’s Guaranteed Milk Price scheme, which was introduced in 2014, but has since been discontinued. Following the discontinuation of this scheme, the New Zealand Stock Exchange (NZX) has recently developed and launched a range of Milk Price futures and options contracts. This is linked to the Fonterra farmgate milk price, and is a bold and exciting step forward in price risk management for New Zealand dairy farmers.
It is essential that the New Zealand dairy companies/ co-ops, as well as banks look at offering additional OTC type hedging products to dairy farmers as soon as possible. This will enhance the variety and accessibility of PRM tools to farmers, as well as helping maximise the liquidity of the NZX derivatives markets. Stock feed companies, fertiliser co-ops and rural supply organisations also need to broaden their existing offerings and/or introduce packages for farmers to hedge some of the large farm operating expenses. For effective profit margin insurance from PRM tools, it is important that dairy farmers have the ability to hedge both their revenue, through milk price; as well as their largest expenses.
As a primary price risk management strategy, all New Zealand dairy farmers need to operate a sound business. The key principles to this are:

  • Operate a farming system that achieves Gross Operating Expenses low enough, and Production high enough to achieve a regular Operating Cost of Production as low as possible- preferably close to or under $4.
  • Keep debt levels of the business at manageable levels -less than $20/kgMS.
  • Utilise the increased profit during high payout years to reduce debt, and accumulate/manage cash reserves within the business for use in less profitable years.
  • Utilise the Income Equalisation Scheme offered by the IRD to smooth tax obligations.

When these strategies have been implemented, then further price risk management through the utilisation of derivative type products may be appropriate, but will vary for each business. Farmers need to ensure that these tools are used to insure profitability in a low payout, rather than for speculation with the aim of increasing profits.
The Rural Professionals sector needs to significantly upskill in the area of price risk management. These Professionals form an important link between the derivatives market, third parties and farmers, and will be required by farmers to ensure that the best solutions are found for each farm business.
For New Zealand to retain and strengthen its place in the global dairy export market, the New Zealand dairy industry as a whole needs to move to a new level of sophistication in price risk management.

How Can New Zealand Dairy Farmers thrive in the face of milk price volatility? – Paul Martin

What does it take to effectively lead a group of volunteers: an exploration of the research and resources on leading volunteers.

Executive Summary

Volunteering by the individual and society at large brings benefits across the social spectrum. The contributions it makes socially and economically are very important and volunteering contributes to a more cohesive society by building trust and reciprocity among citizens.

In 2014 44% of New Zealanders did some form of voluntary work – that put us first in the OECD countries for the proportion of population involved in volunteering. In 2015 voluntary workers added nearly $7bn of value to New Zealand’s GDP. This makes volunteering big business and while our volunteering numbers are going up, poor leadership can disincentivise people from volunteering and that has a negative impact on society. The question then begs to be asked: What does it take to effectively lead a volunteer organisation?

This project reviews the available literature and resources associated with leadership and volunteering. It looks to define the common themes for effective volunteer leadership and the common capabilities needed to motivate people to engage in volunteer work. The method of thematic analysis was coupled with critical thinking, to collate the relevant literature.

All the factors and required capabilities for effective volunteer leadership found in the readings were grouped using Fullan’s (2001) Framework for Leadership. Four common themes emerged from the literature on volunteer leadership:

  • Passion for the cause

  • Communication

  • Relationship development and maintenance

  • Leader capability and leadership development

Three of the most interesting points that emerged from the literature were: Firstly the complexity of volunteer leadership. It is not just about ‘turning up and pointing a few people in a direction’ but instead it is a complex process using many varied leadership theories and styles all at once.
The result from using a combination of the effective leader’s capabilities is that volunteers will want to do what you want them to do by their own free will and the organisational goals will be achieved. Further to this they will be motivated to become more active in volunteer leadership roles instead of being ‘reluctant’ leaders or inactive members. Secondly, the skills that volunteer leaders can build over their time in leadership roles have marked synergies with leadership roles in their paid work environment. The motivation to get leadership right is more important when trying to retain or attract a team member who has no financial incentive to remain there but is present by their own personal choice. The volunteer may also get leadership opportunities that would not normally be available in a paid environment.

Thirdly, what was lacking in the resources was lack of support in the form of formal training available for volunteer leaders. The only non sector-specific course highlighted was deemed expensive for volunteers. The suggestion has to be made that with volunteering adding so much value to the economy and social fabric of New Zealand, should the Government not step into the breech and support more training for volunteer leaders?

Deer Farmers attitudes towards benchmarking and data recording system requirements

Executive Summary

Deer Industry New Zealand is currently involved in a Primary Growth Partnership and levy payer funded project called Passion to Profit (P2P). The overall aims are to improve market returns and on-farm productivity for deer farms. One of the contributing projects to P2P is the definition and recording of Key Performance Indicators (KPIs) and industry benchmarks.

Data recording and benchmarking is important for business growth and a feature of higher performing farms. Benchmarking requires real-time management of data within an electronic database. Use of electronic data storage can be considered a “new technology” on farms which have traditionally kept pen and paper records. Adoption of new technologies follows a well described pattern amongst populations.

This study aimed to determine the attitudes of farmers towards data recording and benchmarking and the system requirements to encourage uptake of digital data recording technology.

The study design was an online survey of seventy eight farmers using SurveyMonkey. Of these seventy five responses provided useful data. Questions related to demographic information, current practices, attitudes towards data recording and benchmarking and requirements and impediments to the use of digital data recording systems.

Deer Farmers have a high level of interest in setting targets, recording production and benchmarking. They consider previous performance on their own properties and on farms similar to themselves as the most important factors for determining what their targets are.

Respondents considered that it is not adequate to solely focus on own performance and that comparison with other farms within the same year is also necessary to help them set realistic targets and identify potential areas for improvement.

The level of uptake of digital recording of production is low and manual records using paper and diaries are the most common method. Data are more likely to be formally recorded when there is a mandatory requirement to do so. For example financial accounts for tax return purposes.

There are a wide range of reasons for limited uptake of digital production data recording and benchmarking. These reasons vary between farmers. Relative satisfaction with current systems probably provides inertia for change along with the perception that current systems on offer will not provide a significant level of advantage, are too complicated to use or have other limitations.

The most important factors for achieving a high level of uptake are a simple system that is easy to use with good support. It needs to be reasonably priced, integrate well with other systems and give immediate feedback on the situation on the farm by comparing year on year and generating graphs and printable reports. The system should be accessible to all farmers and thus allow for offline use in situations of poor internet connectivity.

A wide range of privately managed digital recording and management options exist. These are not well integrated with each other, except perhaps for FarmIQ and data is not directly comparable or accessible between the systems. There is a relatively small number of deer farms in New Zealand so a high level of participation in a single platform will be required for adequate benchmarking. The deer industry should investigate whether a nationally managed collectively owned database is appropriate similar to those provided by Beef and Lamb NZ and Dairy NZ.

 

 

Deer Farmers attitudes towards benchmarking and data recording system requirements Pania Flint 

Technology use by sheep and beef farmers

EXECUTIVE SUMMARY

Farming is increasing in complexity. As such technology is becoming more important in businesses to understand impacts on both financial and physical performance. Top farmers typically lead effective technology adoption. However, this is not always the case. Five Wairarapa farmers along with one Central North Island Farmer were interviewed to determine how and why technology is used in farm businesses, to be a top farmer.
Past research in this area has been minimal, particularly in the sheep and beef sector. The majority of the research has been conducted with dairy industry funding. As such, little is really known about how and why top sheep and beef farmers use technology.
Budgeting technology was a key part of each farm business, and the only technology used by all six farmers. Farmax and Farm IQ were the two other technologies that were utilised in four of these farm businesses and were a key to their success.
Three important findings have emerged from this research. Firstly, top farmers are intrinsically successful. Technology just assists them in knowing their position to make informed decisions. Secondly, ground-truthing the results from technology with the farmers gut-feel and observations in the paddock is critical to effective decision making. Finally, technology provides some level of ‘insurance’ against events that may render the key decision maker unable to perform their duties for an extended period.
Technology use is unique to individuals, but some themes emerge time after time. Therefore, a greater understanding of these will lead to a more successful and resilient sheep and beef industry.
It is hoped this report will stimulate further discussion and investigation into technology-use on farms by farmers and industry professionals alike.

How has the financial viability of Sauvignon Blanc in Marlborough changed over the last five years in the three major growing areas?

EXECUTIVE SUMMARY

The financial viability of Sauvignon Blanc in Marlborough has never been stronger, showing returns on investment for the 2015/16 season of 24.47%, now who wouldn’t chase returns like that? Growers and investors are purchasing the remaining bare flat land to develop and keep up with world demand this is seeing record prices paid for both bare land and existing vineyards.
I undertook a literature review in conjunction with interviewing three growers, I was better able to understanding the characteristics of the Marlborough wine region its sub regions, and how these characteristics play out in the flavour of the wine, value of the land and the factors that are driving the current expansion.
What I wasn’t aware of before undertaking this report was just how well this industry was performing and had been over the last 5 years peaking last season as mentioned above, I quickly learned that if we suggest these things to be cyclic then it would appear to me that we are very high in the cycle right now, are we at the peak or do we still have room to move? This report will give you an understanding of where the market is today.

The Urban Rural Divide

EXECUTIVE SUMMARY Dairy farmer’s rights, like those of every member of society are bound by what that society is prepared to defend. This defence is called our social licence and it is the trust that has been built up over time between two parties.
The goal of this report is to identify ways in which dairy farmers can better their social licence and hopefully in doing so build enough trust with the public that allows farmers of the future a form of negotiated autonomy.
This need for a strong social licence has always been there but has come to the fore quickly over the last few years as the rise of digital media has meant people can now quickly share or find information on anything at the click of a button. Sometimes the facts of this media are not always accurate, sometimes they are but it may be taken out of context. Trust can be broken down a lot faster than it is made.
My investigation was done with a literature review on how other industries around the world have handled their situations with diminishing trust from communities and what ways they used to improve that standing. I have also conducted a survey of the community to see if any trends were obvious and used the feedback given to formulate some of my research and conclusions.
What I found from the surveys were a difference of opinions on the state of the environment from farmers to more urbanised people with farmers thinking the environment is better than those outside of farming. I also found that people are becoming more environmentally aware.
Results pointed to farmers not wanting to educate themselves at a field day as they thought they knew enough just working on the farm. I believe this is one of the key reasons we are getting a widening of the rural-urban divide and a weakening of the social licence farmers have with the NZ public.
In my opinion, the dairy industry needs to invest more into promoting its story. Farmers need to be implementing and displaying good on farm practices, principles
and values. These actions need to be backed up by Dairy NZ with relatable facts to show what is being achieved on farm nationally and how it relates to the NZ public where possible.
More farmers need to play their part in educating the public. This can be done by hosting open field days, community groups and schools onto their farms to show case what happens on farms and connect the milk in the supermarket to the cow in the paddock.
A unified effort towards improving farming practices in general needs to be done as a collaborative approach by the primary producer industry bodies. The siloed approached to public perception and social license is not effective and I believe this should be a united voice.
I think using on farm certification schemes is a significant way to encourage farmers to go over and above industry requirements. More promotion and adoption of these initiatives will also go a long way to building trust of the public sector. Examples of these programs are Synlait’s “Lead with Pride” and Miraka’s “Te ara Miraka”.
Although change may be painful and costly for some in the short term, embracing the requirements of the social licence in a positive way may be the most effective way for farmers to receive continued support from the community.