Features of Farm Businesses that Survive and Thrive

by Graeme Doole, DairyNZ

The New Zealand dairy sector is currently experiencing strong evolutionary forces from a variety of sources. The milk price is highly variable, while costs have experienced an upward trend over the last several seasons. Farmers are also under pressure on the compliance side, in terms of how we deal with concerns related to animal welfare, greenhouse gas emissions, and water quality. Taken together, these challenges are arguably greater than those that the sector faced when subsidies were removed in the 1980s. Accordingly, they provide an opportunity for us to work together to achieve what, in time, could be seen as one of the most-significant transformations in pastoral farming observed in New Zealand.

Last year, I first met with SMASH farmers in the context of a project I was leading in the area of farm-business resilience. There are many different interpretations of resilience, but we were really focused on how we make sure that as farmers we survive and thrive in a challenging environment. During this project, I had spoken to world leaders in resilience thinking, to better understand about how to farm through change. Yet, during that meeting with SMASH farmers, I learnt more about farming through change than I could from people who had not lived and breathed it.

Resilience is among the most important facets of life and business. When I think of resilience, I think of the kahikatea (Dacrycarpus dacrydioides). One was there looking at me in the Rangitikei when I was growing up, beside the road as I walked to the school bus. It was enormous—the biggest tree I had ever seen—but grew in a spot that was wet for half the year, and flooded the rest. This tree was around 600 years old, but my grandfather had not cleared it because it was in a place where stock would have grazed.

A lot of people think that the kauri (Agathis australis) is the largest of the native trees. However, the tallest tree that we have a New Zealand is a kahikatea. It stands at over 66 m tall and is about two hours walk up the Kaniwhaniwha Stream in the Pirongia Forest Park. I really want to walk there, but am still motivating my family to join me on what they don’t see as a jaunt.

Like the kahikatea is a bastion of our forest, the dairy sector is a central part of our national economy. It remains the largest industry in New Zealand. The New Zealand dairy sector also generates export revenue of around $17 billion per year. Further, it employed around 46,000 people in 2017, with around 70% of these jobs being on farms.

Each large kahikatea produces a few million seeds a year. Very few, if any, will become large trees. This always reminds me of farming. At primary school, most of us wanted to be farmers. This trend continues to this day. At DairyNZ, I meet a lot of people who still have a dream to farm. I went to university to help prepare for a lifetime of farming. However, somewhere along the line, I never went back. It still sits as my largest regret. I’ve done many things, but riding a horse or shearing a sheep still rate higher than almost anything I have done. I think sometimes we need to be reminded how special it is to be a farmer. It is tough going, but also is a privilege that many will not experience.

The most lousy thing that a kahikatea can be used for is fence posts. I remember kicking them, so that they broke off at ground level. Once the tree comes down, it is never the same. This reinforces to me how important it is to really treasure the opportunity to farm. My father has recently retired after 40 years of farming, and he will tell you the same thing.

Another feature of this tree is the seed. It is a powerhouse. It contains a strong inherent drive to survive and then, if conditions are right, to grow. This is a reminder to us all. The most important thing we have to do personally is stay alive. It seems so simple, but when things are against us, it doesn’t. This also carries over to the business side. We have to be engaged with our business and understand what the figures mean. This helps us survive and then, when the conditions are right, work on growing the business.

Another feature that makes the kahikatea so resilient is the fact that it surrounds itself with others. The kahikatea can act as a host for thirty other species, one of the largest numbers for a native tree. This has benefits, both for itself and others. Just like the tree, we also need connections. They help to diffuse the challenges that we may be bearing too heavily on our own. One of the easiest ways to improve resilience is to begin talking. The only time it ever looked like my marriage was on the rocks was when I stopped talking. It went on for two weeks and I gradually was growing away from my wife and children. My wife saw this and cooked my goose, she called my father. Lo and behold, I got a call on the way to work one day. My father reminded me what was important and helped my wife and I start talking again. It was the alternative perspective that helped us. I was too close to the issue and I needed somebody from outside to help me see and overcome what seemed insurmountable in my head.

The kahikatea is a large tree, so also is very efficient in its use of energy. A kahikatea will often have no branches for the first ten or twenty metres, reducing the amount of leaves available to perform photosynthesis. Further, it will often have to compete for light in dense forests, particularly when young and/or competing with exotic tree species.

A dairy farm is much the same. It has to be efficient to survive. The one thing that determines the competitiveness of our dairy sector, and the resilience of individual farms, is our cost of production. By maintaining a low cost of production, we increase our profit margin regardless of the milk price. The break-even milk price in the 2017-18 season was 70 cents per kilogram of milksolids higher than the season prior, reflecting higher farm working expenses, tax payments, and drawings. Accordingly, around a quarter of New Zealand dairy farms had a break-even milk price higher than their payout in 2017/18. This highlights the need to focus on the cost of production, and discuss with others how we can improve the financial sustainability of our businesses. A goal of mine is to declare a war on the cost of production across the sector. However, as a middle manager at DairyNZ, I am not permitted to declare a war without approval from our senior management. We will see how this conversation goes…

One of the most prominent features of the kahikatea is also its buttressed roots. These allow it to remain stable in very wet soils, including within swamps. This emphasises the importance of building up stocks as a foundation for hard times. Important personal stocks involve investing in yourself and others. It is easier to build strong bonds when the pressure is not on. Important farm business stocks to build are farm equity and infrastructure. Investing in soil fertility and the feed base can also reap long-term rewards.

I think these aspects of the kahikatea symbolise everything great that I learnt from SMASH farmers last year. I think the only one missing is that if it gets really hard, that’s when you send your partner to work in town, provided they are not there already.

Before colonisation by Europeans, the kahikatea was broadly distributed across the lowland areas of the Waikato. However, only 2% of the kahikatea that were present before broadscale settlement exist today. This is a lesson in itself. It emphasises the need for adaptation if we are to survive and thrive when the world is changing around us. Our experience and knowledge provide an ideal foundation for producing competitive milk products at low cost. We have a strong potential to play a key role in New Zealand’s future. However, this will only be realised if we focus on building ourselves and our businesses, so that they can survive and thrive as challenges present themselves.

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