19 June 1985 Farm-enlargement report released

Farmers deciding to enlarge their farms usually hope to make capital gains, achieve increased returns, or want to help a son into farming, according to Lincoln College sociologist Dr John Fairweather.

Dr Fairweather late last year surveyed farmers to get a reasonable representation of nation-wide farm enlargement in New Zealand during 1982 and 1983.

Main intention of his research, funded by the Social Science Research Fund Committee, was to examine the nature and extent of farm enlargement.

He gives his findings in a research report just released by the Agricultural Economics Research Unit at Lincoln College.

Opportunity was important in deciding to make a farm larger,with capital gains, increased returns, or the desire to help a son get established being roughly equal in motivating a farmer .

Generally, farm enlargement involved adding significant areas to the original farm rather than adjusting boundaries.

Dairy farms were larger than average while sheep-beef farms were smaller than average before enlargement.

On 37 per cent of farms the ratio of the current market value of the added land to the current market value of the original land was between a quarter and a half.

Most farm enlargement involved an economic unit to which was added an uneconomic unit, but 11 per cent of farms added on an economic
unit.

About half of the farmers estimated an economic unit to be smaller than their original farm.

Dr Fairweather says the results of his study compel the conclusion that the 1952 Land Settlement Promotion and Land Acquisition Act has not been effective.

Undue aggregation of land, which the act was intended to prevent, has probably occurred, and the act has not been effective in achieving closer settlement.

Evidence suggests that the act should be changed, and if closer settlement is a desirable objective an effective policy should be derived.

The opportunity to pursue enlargement is motivated by capital gains, increased returns, or a desire to get a son established in farming.

Also, increased returns were needed because some farmers felt that their farms were too small, and wanted to increase farm income.

About one-third of those surveyed had sons who wanted to go into farming.

Many farmers emphasised the importance of capital gains in their financial thinking, but did not evaluate enlarging a farm in terms of efficiency.

They saw paying the mortgage as being more important than estimating the return on land investment.

The contrast between agriculture and industry is important, suggesting that for agriculture the management of land is more important than
for industry.

In agriculture land is important because of being in limited supply and being important in production.

There has not been a significant increase in the area of occupied land since earlier this century.

Also, there is growing competition for land as cities expand and recreational users and others use rural resources.

Dr Fairweather says that where production is still tied to the land then increases in production require changes in the quality or
quantity of land use.

Increasing production requires either intensifying land use or extending the areas under production.

The distinctive character of land in agricultural production helps farm enlargement to be understood.

Each of the three motivations - capital gains, increasing returns, or getting a son into farming is linked to the land.

First, land has special values and meanings for those who own it, because land supports its owners and sustains a life-style.

Not everyone can own land and for those that do there is a natural concern to retain control of this valuable factor of production in the family.

Because of this, succession is important in agriculture, involving the land as a bearer of cultural values and economic returns.

An obvious way to increase production, although not necessarily efficiency, is to buy more land.

Farmers, especially successful farmers, are always alert to buying additional land.

The limited supply of land ensures that demand is usually high, and prices tend to exceed productive capacity.

Farmers farm for capital gains, to a greater or lesser degree, and for those who do not have sons interested in farming, and whose farm size is adequate, land purchase may be solely to obtain further capital gains.

Farm enlargement has implications for theories of agricultural development, and changes in the present structure may be heralding changes in New Zealand agriculture.

In the evolution of New Zealand agriculture there are sporadic flows of capital, and with each flow there are changes in the type of production.

These changes also involve the technologies used, the research support, and the social organisation of production.

The first change was from runs to estates in the 1860s, and the second change was from estates to family farm production after 1890.

Dr Fairweather says that perhaps in the 1980s there will be a further transition involving another capital flow into even more
intensified production.

Horticulture and non-traditional plant and animal crops are attracting capital and the attention of research institutions.

The change to horticulture brings about a change from family labour to large-scale wage labour, and there is an increase in the complexity of management.

The present trend to more small farms and more large farms supports the view that agriculture is in a transition phase.

If this is so, remaining farms can be expected to increase in size in a struggle to maintain profitability.

Land suitable for horticulture and intensive production will undergo production changes and will sustain an increased number of producers.

Further information from Dr John Fairweather, Agricultural Economics Research Unit, Lincoln College 8150, Canterbury, New Zealand.