A study of the financial returns to process pea growers in Hawke's Bay : a thesis presented at Massey University of Manawatu in partial fulfilment of the requirements for the degree of Master of Agricultural Science

Copyright is owned by the Author of the thesis. Permission is given for

a copy to be downloaded by an individual for the purpose of research and

private study only. The thesis may not be reproduced elsewhere without

the permission of the Author.

A STtDY OP THE PINANCIAL RETURm TO HlOCE~ BU GR<JIEBS n, HARE'S BAY.

A Thesis presented at Massey

University of Manmratu. in pu-tial.

fulfilmant of the nqu:lrements far

the Degree of Kaster of Agricultural Soience.

Januar,y

1961..

The author gratefully ackna.-ledgea his 8Upem.sor, Professor

w.v.

^{Oan.Uer, &ad of the} Deparinent of Agricultural Econamica

am

Pam Kanagemsnt, tor his willing guidallce

am.

uaistanoe, and whose astute oritic:hRD

at

all taoeta

ot

this ~ haft been

ot

untold.

benefit to the author.

Speoial aokncw~dgemanta U'8 alao due to:-

Dr. J.D. Swnrt

ot

Linltoln College, who g&ft up his Tal.uable tia on ^two occuiona to nperriae processing

or

the linear program on the Illl 1620 computer at the Cente.rbur., Uni.,-eraity Schoal

ot

E.ngi.Rlering, D.am.

The Kusey Librarian, Mias M.G. Campbell and ller sw"t

tor

their aasi:staDCe \ in obta:lJdng library texts far the author throughout this

st~.

Jbo. D.A. Evans tor hi.a :valuable aaoia~ dDl criticiam

at

^the

linear progranml.ng section.

Kr. Don Goble, Dan:lnion Secntary to the 1'ff Zealand Vegetable and Produce Gronra l'edaration (Im.)

tar

his oloae liaison between the

, '

Federation and Jlaasey throughout the duration

ot

the surYey.

The farmer who proriaa4 the 1nf'01"1D&tion

tar

the lintar ^program.

showed such iniaffR in the 4,rve1opnent ot tha mdel, ml

tor

~

his ~uable ocmmnta on the results af tbe final plan. Untortunately, becawae the intcmnation

wu

obta:tnecl in

atr1c,

ocmtidenoe, th1a person m u a t r a a i n ~ .

!he Ber Zealand Vegetabla anl Jroduoe G-l'Olf9n Faden.ti.on (Ino.) te the opparhnity-

exten:led to

^the mdihor to ~ the Sulwy. Withou\

'bu--

wholamute4 oo-o,erati.cm end &Hiatanoe in deaignjng the

sur,ey and selecting pea. gr<1R8rs fran among their members in Hawke• s

:sq• am

the provision d financial backing• the stuly would probabl,y never have been done.

~ - to all those tarmers who participated in the surny and ^sc, freel,y an:1. abl,y answered the questions put to ~ the author extends his thanks.

CBAP'£ER II

2.1.

2.1 .1.

2.1.2.

2.1 • .3.

2.1.4.

2.1.5.

2.2.

2.2.1.

2.2.2.

2.3.

. ,.1. ,.2.

,.,.

3.J+.

3.4.1.

,.s.

,.,.

(1)

CONTENTS

... _ ... ___ _

IN'mODUCTION

otivation of the

stw\Y

Charaoter.laUoa of a Parm &irftl.Y

A Guiae to the !bed.a

J'ARlt

@VEYS

'!he H:latoz:y ~ Pam Management ~ -

Cornell

Coat

Stu4iea

Jlinneaota Coai>«oute StucU.ea

1um Account Boob 1!le8uneylletho4

SWnroary of the Hiator,y of Parm Surl'eya ibe Place of Parm Surre,ya

Enumerative Surveya InterT.l.ew Surftye Small Sample Surnlye

'l1tE DESIGN OP

A PARM

SUR.VE? OP HAWKE'S

BAY PEA

•

GROWERS -

F@ SELF.CTIOB Ag P@ CLASSIFICATION Choice of the Surle,y' AN&

Choice of the Period for Which Int'o:rmation Woul.4 be Collected

The P.rob.lema ~ Sampling Sel.ection

or

^{Surrf:\y' 1'uma}

lleJ'uaala

to Co-operate

in Stir"'1 Deacri.ption of the &ll'fty Area

1r.1.ei- Deaor1pt1011

er · umtnc ~•

1n Bnke•a

Bav'

Cl.ua I. Intaiaiw Cropping Stocki»&

Claaa

n.

^{Sbewp and Cropping}

Claa•

m . ~ ana.

Cropping Clue IV• Part-time

.razmuag

~

1

~ Diatinctia ' I I A i - -

Survey ~

ai8D

Of the a:UCID11111NI

1.n&P&D.terlatloa

or

the lam Pa'ttafn.

ot

Operationa

,_~~-

ata . .

lletm-na Obr

Bnterpr1••

1 2

'

,

6

5 7

9 11

17

18

20 21 23

4.2.s.

z...2.6.

1,..2.1.

4-.2.a.

'"'· 4.3.1.

~-

u.

CHAP!'EllV

, .. ,.

5.2.

.5.J.

CJJAP'ml'fl

6.1.

6.2.

,.,.

6.4.

4,.3.2.

4,..3.3.

4.3.4.

lc-.3.S.

5.1.1.

5.1.2.

5.1.3.

,.1.i...

,.2.1.

&.2.2.

&.2.3.

6.2.t..

,.s.

r.fW'?'P w

7.1.

1.2.

1.,.

(:li)

CtJN'l'EN1'S

(Cont'

cl}•

ihe Plue o~ Pee.a in the :Parm Plan Pea Jfarketing

A4Tia017 Serrioe aml the l'ecleration Pinazlce

~ Fift l'orma of

Specific Queatiorus Diabotomoua Questions

11ult:ip1e Choice Queationa

Open

End

Que tiona

Tabul.ationa Calendars

Pre-testing the Queationnai1'e Limitation.a o~ the ~eatJoma:iN

PC q

co~

ACCOUNTING AND BUDGB'rilC

Coat Accounting

1!Jeoretical. Cond.derationa ot Coat Aocounting

Practical Conaiderat:iona of Coat .Accounting h Pour

~ea

~

Co.ta

Applioation to the Pea

Sur,ey

aic1get1ng

Linear Progrmmdng

DETAILS AND RESULTS OJ!' mE CO§'£ 4':COUN'l'IrC PllOOlwlU

Idantit:ie-a Used in the Coat Accounting Stuq Deri:n.t:lon and All.ooa+.ioa ~ I!Mli.Tidual Coats Gron llnenue anl "Obaervable' eo ta

•~tbem. aed

t

Coate

•Al.located• Coata PJ.D4 Costs

Si1MN1.17 ~ -.ul.ta

Dhcuaaion ~ the Coat .kcountlng Reaul

ta SuDlla'L-J'

i

l!e.

49 z.s

49 50 51 S1 51 S3 .51.

57 61 62

65

68 70 72

75 Tl 8t

82

a,..

84.

8.5

85 85 -9.5

91 110 111 118

119

119

121,

121

7.4..

1.,.1.

7.3.2.

1.,.,.

1.,.i..

7.5.

1.s.1.

1.s.a.

1.s.,.

1.s.i..

7.5.S.

1.s.6.

1.'J.1.

1.s.a.

7.5.9.

s.1.

a.1.1.

s.1.2.

a.2.

a.2.1.

a.2.2.

s.2.:,.

8.J.

a.,.1.

8.4,.

9.1.

9.2.

9J.

V!C

8J.2.

8J.J.

a.,.i..

a.,.s.

a.,.,.

(ill)

Cf'H'PM'S

(Cont' 4) •

Deftn1 tion of Acti:fi tie a Deftnition of lleatrictiona

DeriT&tion of the Ind:i:n.dual. Coetticienta Der1:wation of Net Reftmlea

fJJie Bade Jlatrlx

!l1Je

Reeulta

The PamPlan

Aotintiea in the Pinal Plan Labour Ron in the Buis .Aotiri tie• Rot in the Plan Bttect:l ve Reatri.ctiona

!!le Place ~ Peu in the Pam Plan

Diacmaaion ot lPa1"lll Plana

lln:1.ew of the Situation ].Pc,r Parm No.

2'.

Simc~

1P@!!§B 'S COJO@!TS Clf THE

L1lWJl Rl.QGW RESULT§

Errors in tbe Initial Program

'l'eobnical. Jlia-atatement of tba Problem by the Author

lliaunderst.AJ'JQ1 ng of the Problem by the Anthor PJ,e-aentation of Reaul ta

The BtMlget

'Die Fam Production Pattern

Slm1:ch

:rum

^Plana

Thel'aDm"'aecanenta

lill>ro'V91118Jlta in Crop umd Uae

•Inefi'icient Rotationa•

Cro}) Vax1nnm and CNJ> Kinimum Reatrictiona Labour B.eqainmenta

other Re•ourc Snppliea Cbangea in Crop llsftnuea Gell81"8l Commenta

~ M P - f f OP • •

lfPP no

^COft

U&ing Con Accounting B.eaul ta

Uaetul. Intonation ham Linear P.rog,-aumng Gm1. Conumta

(See Volume II).

!!a.

122 129 1,S 14-1

143

1l,.5

145 151 155

158

160 162

171

17' 174,

175 175 175 176 180 180 181 182

187 187 187

188

18'

191

191

t'2

TW!

.3.1.

.3.2.

,.,.

JJ...

3.5.

4.1.

4.2.

7.4-.

1.s.

1.,.

1.1.

1.a.

7.9.

1.10.

7.1,.

7.12,

7.1,.

7.14.

7.15.

1.16-.

1.,1.

7.18.

(iT)

CLASS I. Intensi.w Si:ooldng and Cropping CLASS

n.

^{Sheep and Cropping '}

CLASS

m.

J>ait:ying and Cropping

CLASS IV.

Part-time Farming

~ l>eacription SUll'Dfll7

~tor, Lal>our and Macb1ner., Usage

Pattern ot Pana Operatt.ona. Three Tear Calemlar

ot

Land

u.e.

A Seot1ol1 ot the CalendaP

or

^l"ana Operationa - Labour Uae Buggeated Valuea 1'ai' Estimating .Anm1el 1lepa1.r,

lldntenanoA and :Lubr.t.oation Chargea

Eat.t.matea ~ Economic S8"1oe LUe

or

Varioua :,ara Mecltfnea

.&wrap Anm:wJ Sumr., Overhead lbrpenaea tor Pana Tnotora UDder

u.z.

conc:1:lticma

Awrage Annual Sundry OY8l'bea4 Ezpenaea tor Tl:actor-

Drawn lnl>lementa Under

N.z.

Conditiona

S1Jmne17 o~ Coats and

Return.

s A Coq,ariaon

or

All Crops Ranked Order ~ Proftta.biliV

or

^{Cropa With Reterence}

To Anra&e Groaa Margin Per Ame

Banked Order

ot

PJ:ooft tabili

V

of Cropa With Reference

!l'o Aft1"8g8 Per Ac-re t lleturna Act1ri:tiea in the Baaio Jla.trilt

PenDanent Labour SUpp~ aa Eat:uaated by ti. lVmm' Total

Permanent

Laboul" Sappliea Ani l able 7or l'arlll

2',

After Jooounts.ng for

6o

Aorea

or

^{Lease Land}

!be Tnuf'er Row

SClll8 Inli"ri.clual Coettioienta tor Rotation .Aoti'Yii;,y P 1 • Ba.a1o llatrix

Bapl .. emen't

Labour

8Jppliea ~or ~le 7.6.

Pl-ogl'all aol.uUon. Ht.ring a Jlax1nm

or

~ Jlen Labour ll1l"ec1 far 1961-62 lfam, PllUl the Linear P1"ograa PJ.m

Btteota et Pr.lee

Cban&e•

oa

Aetluv

^p11

Labouz-P.d.oia

Parwt.r!loall1r Var.tel Dl1'ecl Labour PJ:,ioea lPor 1'hl9e Soluts.ona

lton-Buio AotiYlU • Bftlectt.w llestr1ott.0Qa

Upper an4 Lower Pr1oe st.al>il!tq ld:m.ta rd tm 1-a •

Jbregraaa 8ee4 AatS:dt1n

Upper ~ P.rioe 8tab11:t:'\r ldlllta

ot

Gt:ou PN.

Pr.Loe Pa Pounl

&••·M"J'

^{of the Etftiot td Changea} 1n Groaa P.r.lcea o~

Cz,,pa Oil Pea ~ l'ar tbe • mN4 11en• Plan lbari.oal. Data ~ ftgure

7.2.

?!I!.

31

40

lt2 43

45

55

S8a

60

91

99 101 103 111 112 113 125 131t,

136 1J7

1,.,,.. 138 146

14,7

1so 153 155 157

1.59

161 16J

1&,

168

1 · 70

1.1.

7.2.

8.1.

· a.2. a.,.

!1J.! --

^{0 .,}

---

^JIIQUJlES

!he Surny Area and Diatribntion ~ Sanple luma • Cen-tre.l Hawb' a Bq

Land

Uae Calendar

lP<r

P'

and.

P12

Pour Parm Pl.mus According to Le.bour Iaput.

Land U,se 1'o:r Year I Lem Uae

tor

Tear

n

Lani Use :rem, Year III

28 128 169a

1m.

183 18j

CHAPTER I

Dl.rR<DUCTION

1.1. Motivation of the Stuly

This s ~ steumed initially tran discussions between New Zealani farIIlltrs concerning the economics of grcrdng certain agricultural crops for toed processing. These discussions lead direct~ to one main problem which~ be outlined. within a two-told objective name~:-

(1) 'ro determine the profitability of groring green peas for food processing, aDd

(2) To assess 0011St aooounting

am

linear programning as athoda for farm management

anaqsis.

Within their National Federation, growers

ot

food processing crops

town

the support an:l finance to conduct an eeonamic investigation to provide them with information concerning the costs associated. with

producing their main.crop, peas. Further information wa.s required in the

form

at

the extent of the price fall of peas in relation to existing prices, which could be absorbed by growers

tore

mnr production alterna- tives would have to be considered as replacements for the pea crop. The present stmy stems, then, fran the felt needs

ot

farmers produoing peas

tor

processing.

Although the problem one

ot

national intere

t

to growera, it was realia that neaningf'ul answers could o ~ be derived for om

district at a

tm.

^{The N tional} Pederation decided that the most

suitable a in. which

to comuct

the investigation would be th Central Hmdm • s ~ area, ODB of the richest primary producing cllatricts

at

N

ZAalem. At this s • a.t the in'litation of the Pedera.t1on, the ~

bee the primary conoern

ot

the uthor.

-2-

The investigation was directed primarily towards assisting growers within Hawke's

B83

to make better inforned and more contSdent decisions as to the place

ot

peas within their respective farm management plans, an:l to provide the Growers• Federation with actual

am

^imputed eosts

ot

grori.ng peas an:l other crops urxler the comi tions encountered in Hmrke • s Bay. In other words information obtained am analysed pertaimd sol.e~

to the individual farm level. llacro-econardc aspeots such as outlets available in overseas trading for processed tocxls an:l subsequent effects on the possibility

ot

increasing crop prod.uction in New Zealand, toad.

factory prodmtion

trems,

^{and long-tem price changes re ignored..}

Both cost acoounting and linear programn:lng were used to help stu:l37 the profitability of pea grorl.ng. At the outset, it was suspected that the cost accounting results would not be as useful as those deriV9d by

linear programning. In view of this, a concerted attempt was made to extract as much information as possible from the cost accounting results to enable a critical oan:pe.rison of the two mthods to be made. At the same ti.ma, the National Federation, ard individual farmers, f lt that they would

•um.er-

stand" the cost accomiting results, whereas they doubted it linear programning results would be int~l J igibl.e. The relative meaningtul.mss

ot

the results obtained in these two ~ s are d.iscusaed in the main b ~

at

the thesis.

1.2,

Characteristics

or

Parm surve;r

'P~ both limar programoing and coet accounting, the

on4r

"ff3 to obtain the relffallt intol'!!!A-i:i~n . to talk to the f al'!llffS who

wre

gl"OW1ng pa

i,11

Central Hmdm's

:sq.

It

wu

not poas:!bl.e to gain the information frail aqy ¢her ouroe. This

tact

iDlicatea. the collection

-3-

ot im'ormation in the form of a series

ot

intem.en with farmers about a particular mnagemant practice, a

"tam

survey' in tact. "Farm sUl"V'9y"

is here ued in the sense ot:

" ••••• the term 'farm survey,' is used to mean a series of interrievs with farmers to gain information about some one management practice. U s ~ all interri.ews will be com1J1Jted by the research worlter himself ard particular attention will be paid to the ~ the farm practice has

fitted into each tanner's owrall management syst In shori, the fem survey is a prooedu:re for interriering farmers to test the hypothesis that a particular ^manage- ment practice is profitable. At the aame tin!, the research warla,r att ^mpts to define exa.ctl,y what are the pre-com! ticms necessary f~ poocess, and what associated changes are

necessary."

V

The above quotation ad.equate~ summarizes the objective

ot

the stm.y in relation to pea production in Hawk.e's

Ba.v•

Thirty-five farmare were a.et~ intem.ewed for the BU1"NY'• As the survey was done at the invitation of the New Zealand Vegetable and

Produce Gro.,ers Federation. the sample of farmers interviewed consisted

ot

7!:ffo

Federation Members a.rd $ Federation non-meni>ers •

.?/

^{A 11 the}

interviews with tumers were con:lucted by the author, with inf'orma.tion being collected on a prepared qu,stionnaire.

l.3.

^{A Guida} to the Thesis.

A brief sunmary

ot

ti. contents ot this Thesis naff' follows.

Chapter 2 deals with farm surveys. 'rhe role of farm. smwys 1n farm management rese~ ^and a brief history

ot

the dnelopmnt

ot

surreys

am

theil' b ic

tozm:s

is d.iscussed. bpter

3

ia conoerned with problem sooiated with dei11gning the s

pea groners,

am

discusses 1n detail the a lection of farms and

theil"

O&D:ll.er, W.

v. :

^{9Produot1 onomics}

am

^{Prob of Animal}

lTodllCtion." ProQ. N.Z. Soo.An.P.red.

a

^p.]421 1962.

s/

^{The details-ct}

tam

selection appear in

c,.i.. }.

-4-

classif'ication into the tour main groups. Chapter 4, concl\lles Part I with a detailed discussion

ot

designing

am

pre-testing the

questionnaire.

Chapter

5

provides a critical

anaJ.srsis

of coet accotmting

am.

bu:lgeting as tools for tarm managemnt research. This chapter sets out an algebraic statement of the cost accounting convention which it is hoped, will help to clarify much that has been written about this method

ot

^{anal;ysis. The results of} the cost accounting ~ i s appear in Chapter

6,

while Chapter

7

sets out the linear progranming model

together with the results obtained. The major points in these results are also discussed.. Chapter 8 provides the f'armer•s caamients on the linear programning results tor his

ta.rm.

The oonments in:licate that

the farmer felt that the linear programming model had adequately represented his mana.geJIEnt problem, and had produced meaningf'ul, and even improved

farm plans which he would seriotSly consider adopting. Chapter 9 deals with a c<D,Parison

ot

the results obtained by cost accounting and linear

progranming, and is f oll.olred by the Thesis sumnary.