21 January 1994 Crop Farming Categories Identified in Lincoln Research

Five distinctive types of intensive crop farming operations exist in Canterbury, according to Lincoln University research.

Each is characterised by a particular strategic management focus with the emphasis in the individual cases being described as either "stability", "production/market outlet focus", "production/production flexibility", "arbitrage", or "differentiation".

Until the investigation had been conducted it was generally assumed that all farmers followed relatively similar patterns of business marketing behaviour. This was in contrast to the urban business world in which marketing and strategic management are complex processes and businesses utilise a variety of strategies to gain a competitive edge.

The research was carried out as a doctoral project by Mr Fraser McLeay under the supervision of Professor Tony Zwart of Lincoln's Economics and Marketing Department, and Dr Sandra Martin of the Farm Management Department.

"The overall aim was to fill an information gap about the business activities of farmers," says Mr McLeay. "Little is known about their strategic management processes, and in particular we wanted to know about the strategic decisions they make, the alternatives available and the resulting outcomes.

"Through a better understanding of the strategic groups which exist at the farm business level it may be possible to increase the understanding of the marketing behaviour and strategic management processes of farmers."

The researchers felt that relative to those involved in other farming systems, arable farmers seemed particularly suitable for the study because a high level of diversity existed in the strategic and marketing decisions they could make. They can adjust their strategies, especially by changing product mixes, more quickly than other farmers.

The study was limited to Canterbury where the majority of New Zealand arable farmers are concentrated.

For the purposes of the study, intensive crop farms were classified as those farm businesses which received more than 75 percent of income from cropping. All such farms in Canterbury, a total of 247, were included in the sample. An eight-page questionnaire was circulated to the farmers and 72 percent replied.

The data the researchers sought to collect and analyse spanned 13 "strategic dimensions" of crop farmers' management processes. Questions asked included the extent to which farmers pursued various strategic and marketing activities, their attitude towards non-controllable environmental factors, and how they ranked information sources in their business operation. There were also questions about crop mixes, sales methods and outlets, and environmental factors in relation to business performance.

From the survey results the "stability" group emerged as the largest single category (32 percent), followed by the group with a "production/market outlet" focus (21 percent), the group emphasising a "production/production flexibility" approach (20 percent), the "arbitrage" group (18 percent) and the "differentiation" group (10 percent).

The 32 percent of farmers who followed a "stability" strategy grew a stable mix of crops which had been grown previously on their farms and they took a standardised approach to management. They were relatively older than other farmers and had the greatest experience in terms of the years they had spent crop farming. They were usually financially secure and believed there was little they could do to influence the price of their produce. They viewed their business operation with a relatively simple financial focus and appeared to perceive the boundary of their business as the farm gate. Little attention was paid to market signals or other types of information and these farmers felt they had low levels of market knowledge.

The 21 percent of farmers who followed a "production/market outlet" strategy placed emphasis on production activities while having an inflexible production mix. They sold to a large number of different agents or outlets and continually searched for new markets, weighing up the costs and returns of selling to respective outlets. Relatively high levels of information about management practices, crop costs and returns, personal records, and crop field days were utilised.

The 20 percent of farmers who pursued a "production/production flexibility" strategy concentrated on the costs and efficiency of production rather than sales concerns. This group had large farm and crop areas and the largest area of irrigated land. Members spent more time working away from the farm at farm related activities than other farmers and utilised many types and sources of information, especially those associated with production planning, production techniques and management practices. Their flexible production focus was driven by external market signals.

The 18 percent of farmers who followed an "arbitrage" strategy were characterised by a focus on sales and investment opportunities both on and off-farm. Their high levels of sales flexibility suggested that they would store crops and wait for the price to improve or use a number of marketing channels to sell produce.  Farmers in this group appeared to obtain satisfaction by obtaining high crop prices, quality premiums, selling produce at an optimal time of the year, or selling through a marketing channel which provides high returns. They spent more time working at non-farm jobs than members of other groups and had the smallest farms and cropping areas. These farmers saw that information about quality discounts and premiums and crop prices was most important to them.

The smallest strategic group (10 percent) were the "differentiators". They concentrated on differentiating their produce from that of other producers by growing specialty or niche crops, or being involved with adding value, further processing or marketing activities. Differentiators were most likely to be owners, managers or directors of non-farm businesses and to occupy positions of responsibility in marketing co-operatives and farmer organisations. Compared with members of other strategic groups, differentiators were more likely to have attended university and they had the largest farms and the highest levels of debt. They utilised a wide variety of types and sources of information.

The results of the study suggest that arable farmers can choose from a range of alternative strategies, each of which has specific marketing implications. The study also shows that the characteristics of farmers in each strategic group differ significantly.

Furthermore, the results of the study suggest that marketing is much more than an activity which occurs after the product leaves the farm gate.

"Marketing behaviour can be much more than sales decisions and an undue focus on this behaviour leads to the exclusion of other activities such as production planning and product differentiation. Similarly a view of farm management which excludes marketing and integrated strategic behaviour is restrictive," say the Lincoln researchers. "Our study clearly shows that farm firms, like other businesses, make strategic choices from a number of strategic dimensions.

"No one strategy is likely to be optimal for all farmers with the strategy most suitable for a particular business being the one which best aligns the distinctive competencies and resource endowments of a business with environmental opportunities and threats."

Looking to the future the researchers say that their findings open a number of avenues worth investigation. For example a longitudinal study might provide information about how farmers' strategic approaches vary over time and ascertain whether farmers move from one strategic group to another.

Ian Collins, Journalist, Lincoln University, Canterbury, New Zealand.