The potential for increased production on sheep farms in Wairoa County : thesis presented in partial fulfilment of the requirements for the degree of Master of Agricultural Science in Massey University

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.

THE POTENTIAL

FOR INCREASED PRODUCTION

ON SHEEP FARMS IN

W.AIROA COUNTY

by

R.W. CARTWRIGHT

Thesis Presented in Partial Fulfilment of the Requirements for the

Degree of Master of Agricultural Science in Massey University

January, 1967.

ACKNOWLEDGEMENTS

The author wishes to thank Professor W.V. Candler for his advice and

encouragement during this study. The author benefited from several discussions with Messrs. J.N. Hodgson and N. Watson.

The efforts of the many people who assisted with this study, are appreciated. Special thanks are due to many farmers in Wairoa County for their unstinting co-operation during the Farm Survey.

During the early part of this study, the author was employed by the New Zealand Department of Agriculture which also met the full cost of the Farm Survey. This support is gratefully acknowledged, as is the financial

assistance provided by scholarships from the Bank of New South Wales and the New Zealand Wool Board.

Thanks are due to Mesdames M. Clifford and A. Smith, who typed this thesis and to Mrs. J. Cartwright who traced the figures and assisted with proof-reading.

Thanks are also due to the library staff for their assistance in obtaining references.

CONTENTS

CHAPTER 1 INTRODUCTION AND THESIS GUIDE 1.1 Introduction

1.2 Objectives of the Study 1.3 Sources of Information 1.4 Thesis Guide

CHAPTER 2 WAIROA COUNTY 2.1 Introduction 2.11

2.2 2.21 2.22 2.221 2.23 2.231 2.232 2.233 2.3

2.4

2. 41

2.42

2.43

2.44

2.45

2.46

2. 47

2. 48 2. 481 2. 482 2. 483

Location

Natural Features Topography

Soil types Main soil types Climate

Rainfall Temperature Wind conditions Land Use and Tenure Auxiliary Services Roads

Telegraphic services Transport services

Agricultural contracting services Farm supply and trading services

Stock slaughtering and meat freezing facilities Sources of farm credit

Fnrm advisory services Managerial advice Financial advice Technical advice

CHAPTER 3 FARM MANAGEMENT RESEARCH AND FARM SURVEYS 3.1 Introduction

3.2 Farm Management Research 3.3 Farm Surveys

3.31 Descriptive or recording surveys Interview or management surveys

Page 1

1 2 4 5

7 7 7 7 7 8

10 13 13 14 14 14 16 16 16 17 17 18

20 20 21 21 22 23

24 24 24 27 28 29

3.4

The Wairoa County Farm Survey

3.41

The nature of the survey

3.42

Selection of farms

3.43

Selection of Random Group farms

3.44

Selection of Purposively Selected farms

3.45

Interviewing procedure and experience

3,5

Analysis of Survey Data

3.51

Basic information

3,52

Management practices

3.53

Financial analysis

3,531

Standardised costs and prices

3.532

Profits and profitability

3.533

Ex poste and ex ante analysis of profitability

3.54

Attitudes to development

CHAPTER

4 4.1 4.2 4.21 4.22 4.23 4.3 4.31 4.32 4.4 4.5 4.6 4.61 4.7 4.8 4.9 4.10 4.11 4.12 4.13

PRODUCTION AND INCOMES ON WAIROA HILL COUNTRY F.~RMS

Introduction Farm Organisation Size of farms Tenure of farms

Responsibility for management Farm Labour in Wairoa County Labour used

Availability of labour Farm Topography

Land Use on Farms

Farming Enterprises and Stocking Rates Stocking rates

Production Farm Incomes

Capital Structure of Random Farms

Recent Production Increases in Wairoa County Future Levels of Production

Restraints on Production Increases Summary and Conclusions

CHAPTER 5 MANAGE~1ENT PRACTICES ON WAIROA FARMS Introduction

32 32

33 33 36

38 39 39 39

4o 4o

41 43 45

46 46 46 46

49

50

51 51 52 53 57 59 59

63

65 72 75

77 78

80

5.2 5.21 5.22 5.23 5.24 5.25 5.26 5.3 5.31 5.32 5.4

5.

41 5.42

5.5

5.51

5.52

5.6 5.61 5.62 5.63 5.631 5.632 5.633 5.64

5.65 5.7 5. 71 5.711 5.712 5.72 5.721 5.722 5.8

Stock Management Breeding ewes Hoggets

Other dry sheep Breeding cows Dry cattle

An atypical cattle management system Pasture Management

Topdressing practices

Subdivision and grazing management The Control of Weeds and Pests Weeds

Pests

Technical Problems Encountered by Wairoa Farmers 'Clover ill-thrift'

Copper deficiency

Farm Development Techniques in Wairoa County Fencing techniques

Pasture improvement by oversowing and topdressing Establishment of pastures on unproductive land Development from manuka

Development from manuka and blackberry Development from blackberry

Changes in stocking policies during farm development Finance used for farm development

High Production on Hill Country Outside the County State experimental farms

Tangoio and Waerenga-o-kuri Te Awa

Experience of innovating farmers 'Wairere'

'Ratahiwi'

Summary and Conclusions

83

84 89 91 92 94

95 97 98

102 103 104 105 106 106 108 108 109 111 112 113 118 119

122

123 124 125 125 127 129 130

132

133

CHAPTER

6

THE EVALUATION OF HILL COUNTRY DEVELOPMENT PROGRAMMES 136

6.1 Introduction 136

6.2 Definitions 136

6.3 The Need for Evaluation of Development Programmes 137

6.31 6.32 6.4

6.

41 6.42 6.43 6. 44

6.5 6.51

6.52

6.53

6.54

6.6

6.7 6.71 6.72

6.

721 6.722 6.73 6. 731 6.732 6.733 6.734 6.8

Evaluation by farmers

Evaluation by planning agencies The Development Model

Temporal considerations Production

Profits Overdraft

Expressing the Profitability of Development Programmes The present value of profits

Estimating asset increments Return on Investment

Increase in Owner's Drawings Objectives Other Than Profit

A Worked Example of Development Programme Evaluation The raw data

Preliminary computations Base Year computations

Development year 1 computations Computation of profitability

Present Value of Development Cash Profits Return on Investment

Asset Increment

Additional information Conclusion

CHAPTER

7

HILL COUNTRY DEVELOPMENT PROGRAMMES IN WAIROA COUNTY 7.1 Introduction

7.2 Assumptions in Programme Analysis 7.Z\1

7.22 7.221 7.222 7.223 7.224 7.23 7.3 7.4 7. 41

Costs and prices Taxation

Standard values

Personal and family exemptions Life insurance premiums

Spreading-forward exemptions Living expenses

Case Development Programmes

Case Development Programme I - Farm 21 The development programme

137 139 141 142 142 142 144 145

146

147 149 150 151 151 152 155

155

158 161 162 162

163

163 164

165

165

166

166

167 168

168

169

169

170 171

173

173

7. 42

Evaluation of Programme I

180

7.421

Evaluation under Condition A.

180

7.422

Evaluation under Condition B

181

7.5

^Case Development Programme II - Farm

22 181

7.51

^The development programme

182

7.52

^{Evaluation of} Programme II 185

7.521

Evaluation under Condition A

185

7-522

Evaluation under Condition B

188

7.6

Case Development Programme III - Farm

24 188

7.61

^{The development programme}

189

7.62

Evaluation of Programme III

193

7.621

Evaluation under Condition A

197

7.622

^{Evaluation under Condition B} 197

7.7

Case Development Programme IV - Farm 25

198

7.

71 ^{The development programme}

198

7.72

Evaluation of Programme IV

204

7.721

Evaluation under Condition A

204

7.722

^{Evaluation under Condition B} 204

7.8

Case Development Programme v - Farm

26 205

7.81

^The development programme

205

7.82

Evaluation of Programme V

209

7.

821 Evaluation under Condition A

209

7.

822 Evaluation under Condition B

210

?.9

^{Su~mary and} Conclusions

213

CHAPTER 8 A MODEL DEVELOPMENT PROGRAMME FOR WAIROA COUNTY

218

8.1 Introduction

218

8.2 The Hypothetical Farm

220

8.21 Size of the farm

220

8.22 ^Natural features of the farm

221

8.23 Pre-development physical condition

221

8.3 Pre-development Situation

223

8.31 ^Improvements

223

8.311 ^Fencing

223

8.312 ^Buildings

223

8.313 ^{Water supplies}

223

8.314 Tracking

223

8.32 Stock policy

224

8.4 The Development Programme

224

8.41 8. 42 8.421 8. 4211 8. 4212 8. 4213 8. 4214 8.422 8.43 8.5 8. 51 8.52 8.53 8.54 8.541 8.542 8.543 8.55 8.6

CHAPTER 9.1 9.2 9.3 9.4 9. 41 9.42 9.5

9

The stocking _I policy

The land development programme Land development~chniques

Fencing techniques Pasture improvement Pasture establishment

Installation of water supplies

A summary of the land development programme Other resources for development

Financial Analysis of the Development Programme The price assumptions

Derivation of the budgetary response surface Acceptance of the budgetary response functions Interpretation of the budgetary response surface Point responses

The sensitivity of budgetary responses 'Break-even' points

A review of the response surface approach Conclusions

THE IJv,PACT OF TAXATION ON THE PROFIT.I\BILITY OF FARM

224 233 235 235 236 237 237 238 241 243 244 247 252 255 255 257 262 270 270

DEVELOPMENT 273

Introduction 273

A Review of Empirical Results 274

A Theoretical Explanation 277

The Implications for Farm Development 281

The misallocation of resources 282

The restriction on funds 284

Conclusion 284

CHAPTER 10 THE POTENTIAL FOR INCREASED PRODUCTION IN WAIROA COUNTY 285

1~.1

1.0.2 10.21 10.22 10.3 10.4 10.5

Introduotion

Potential Increases in Stock Numbers Stock increases in Wairoa County

Stock increases on adjacent hill country Potential Production Increases

A Comment on the Value of Production Increases Additional Resource Requirements

285 285 286 287 288 289 290

10.51 10.52 10.53 10.54 10.55 10.56 10.57 10.6

Fertiliser requirements Farm labour requirements

Requirements for long-term credit Advieory services

Transport services

Aerial topdressing services Farm supply and trading services Summary

290 291 291 292 292 292 293 293

CHhPTER 11 CONCLUSIONS tillD SUGGESTIONS FOR INCREASING PRODUCTION 295 11.1

11.2 11.3 11.4 11.5 11.6 11.61 11.62 11.63 11.7 11.71

Introduction

The Feasibility

of

Increasing Production Changes in Farm Management

Production Potentials

The Profitability of Increasing Production

Resources Required to Attain Potential Production Advisory services during development

Credit for development Farm labour for development Stimulating Increased Production

The case for a management demonstration farm

BIBLIOGRAPHY APPENDICES

A

B

c

D E F G

H I

J

Letter Sent to Survey Farmers The Data Sheet

Iso-stocking Rate Curves Analysis of Farm Incomes

Comments on Two Measures of Profitability Spreading Tax Exemptions

Budgets for Case Develo~ment Programmes

The Effect on Tax of Spreading Exemptions Near-optimally Flow Diagram of an Algorithm for Obtaining Break-even

Levels of Independent Variables in a Budgetary Response Function

~udgetary Functions and Response Surfaces

295 295 295 298 298 299 299

301 303 303 304

306

LIST OF TABLES

Table Page

1.1 Sources of Background Information 4

2.1 Major Soil Types in Wairoa County

12

2.2

Mean Monthly Rainfall

1921

to 1950

13

2.3

Tenure of Land Held for Pastoral Farming Purposes

15 2.4

Tenure of Land Held for Purposes other than Pastoral

Farming

16

2.5

Proportions of Different Bulk Fertilisers Railed to Wairoa

Bulk Stores

(1964/65) 19

3.1 Fate of Random Selections

36

4.1

Size, Tenure, and Responsibility for Management of

Random Farms

47

4.2 Size, Tenure, and Responsibility for Management of

Purposive Farms 48

4.3

Topography of Random Farms

55

4.4

Topography of Purposive Farms

56

4.5

Land Use on Random Farms

58

4.6

Stock Conversion Coefficients for Stock Wintered

59

4.7 Stocking Rates on Random Farms (Winter

1965) 61

4.8

Stock Production on Random Farms

64

4.9

Expected Future Wool and Stock Prices

68

4.10 Analysis of Incomes on Random Farms 69

4.11 Capital Structure of Random Farms

74

4.12 Stocking Rate Increases on Purposive Farms

76 5.1

Fertiliser Usage on Random Farms

(1964/65)

99

5.2

Estimated Costs of Fences

110

5.3

Production on Tangoio Grazing Trial

126

5.4

Production on Waerenga-o-kuri Grazing Trial 127

5.5

Production on Te Awa 128 ·

6.1 Expenditure Items from a Hypothetical Profit and Loss

Account

153

6.2 Non-deductible Cash Expenditure Items from a Hypothetical

6.3 6.4 6.5

7.1 7.2

Balance Sheet

Data Extracted from Hypothetical Stock and Wool Accounts Preliminary Computations

Pre-tax and Post-tax Development Cash Profits Case Programme I - Land Development Programme Case Programme I - Land Use

154

155

160

161

175

176

7·3 7.4 7.5

7.6

7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14 7.15

7.16

7.17 7.18 7.19 7.20 7.21 7.22 7.23 7.24 8.1 8.2

8.4

8.5

8.6

8.7

8.8 8.9

8.10

Case Programme I - Stocking and Production 177 Case Programme I, Condition A, Preliminary Computations 178 Case Programme I, Condition B, Preliminary Computations 179 Case Programme II - Land Development Programme 183 Case Programme II - Other Resource Requirements 183 Case Programme II - Stocking and Production 184 Case Pre) gramme II, Condition A, Preliminary Computations 186

Case Programme II, Condition B, Preliminary Computations 187 Case Programme III - Land Development Programme and Land

Use 192

Case Programme III - Stocking and Production 194 Case Pro;ramme III, Condition A, Preliminary Computations 195 Case Programme III, Condition B, Preliminary Computations 196

Case Programme IV - Land Development Programme 200 Case Programme IV - Stocking and Production 201 Case Programme IV, Condition A, Preliminary Computations 202 Case Programme IV, Condition B, Preliminary Computations 203 Case Programme V - Land Development and Land Use 207 Case Programme V - Stocking and Production 208 Case Programme V, Condition A, Preliminary Computations 211 Case Programme V, Condition B, Preliminary Computations 212 Evaluations of Case Development Programmes Under Condition

A - Summary 213

Evaluations of Case Development Programmes Under Condition

B - Summary 214

Model Development Programme - Stock Wintered 227 Model Development Programme - Stock Sales and Purchases

and Wool Production 228

Model Development Programme - Initiation of Land

Development 239

Model Development Pro6ramme - Topdressing, Land Use, and

Feed Reconciliation 240

Model Development Programme - Miscellaneous Resources 242 Design of Observations for thG Budgetary Response Surface 249 Evaluations of the Model Development Programme at

Yarious Price Levels 250

Model Development Programme - Budgetary Response Functions 251 Comparison of Budgetted Responses with Responses Estimated

by the Derived Functions 254

Sensitivity of Present Value of Post-tax Development Cash

Profits (P.V.) to Changes in Stock Price 259

8.11

8.12

8.13

8.14 8.15 8.16 8.17

D.1 G.1 G.2 G.3

G.4

G.5

H.1 H.2 H.3 H.4 H.5

Sensitivity of Present Value of Post-tax Development Cash

Profits (P.V.) to Changes in Wool Price 260 Sensitivity of the Present Value of Post-tax Development

Cash Profits (P.V.) to Changes in Fertiliser Price 262 The Sensitivity of Present Value of Post-tax Development

Cash Profits (P.V.) to Changes in Stock Price, Wool Price, and Fertiliser Price under Condition A Assumptions 264

Break-even Levels of Stock Price 266

Break-even Levels of Wool Price 267

Break-even Levels of Fertiliser Price 268 Break-even Levels of Stock Price, Wool Price, and

Fertiliser Price Under Condi-:ion A Assumptions 269 A Summary of the Impact of Taxation on the Profitability

of Case Programmes and the Model Development Programme 275 Annual Financial Data from a Hypothetical Farm D.1 Budgets for Case Development Programme I G.2 Budgets for Case Development Programme II G.3 Budgets for Case Development Programme III

Budgets for Case Development Programme IV Budgets for Case Development Programme V Spreading Exemptions in Case Programme I Spreading Exemptions in Case Programme II Spreading Exemptions in Case Programme III Spreading Exemptions in Case Programme IV Spreading Exemptions in Case Programme V

G. 4 and G. 5 G.6

G .7

H.2 H.2 H.3 H.4 H.4

Figure 2.1 2.2 2.3 3. 1

5.1 6.1 8.1 9.1 9.2

c.

¹

LIST OF FIGURES

Location of iNairoa County

Ash Showers of Gisborne-Wairoa District

Mean Annual Rainfall in Wairoa County 1921-50 Location of Farms in the Survey

Land Development in Wairoa County

Schematic Representation of a Development Programme Budgetary Iso-response Curves

A Farm Development Programme

Misallocation of Resources due to Taxation Breeding Ewe-Mature Wether Iso-stocking Curves

Between Pages 7 and 8 9 and 10 13 and 14 37 ^and 38 112 and 113 141 and 142 257 and 258 277 and 278 282 and 283

C.1 and C. 2