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Farming: Does nepotism hold the red meat sector back?

15 May 2018

An aspirational target was set by the Red Meat Sector Strategy Report back in 2011. The goal is to get the red meat sector returns up from $8 billion to $14 billion by 2025.

I have just read a very good paper by Con Williams, rural economist of ANZ, on progress to date for the red meat sector in which he identifies the secrets of top-performing red meat farmers (ANZ Paper). He has used ANZ and Beef & Lamb data to shed more light on the original findings.

A key strategy of the Red Meat Sector Plan, as most will already know, is to find what makes the top 20% of farmers tick and develop those skills in as many farmers as possible in the other 80% bringing the whole industry up as a result. It has been noted that there is a considerable gap between the top 20% of farmers and the rest.

The whole ANZ Paper is well worth reading but there were two findings that were of interest to me:

  1. There was a link between the amount of debt a farmer had and their profitability. Higher debt was linked with higher profitability. Those with a higher debt drove their farms a lot harder.
  2. There was a link between the age of a farmer and their profit for most farm types (except in the South Island Intensive sector). Younger farmers were generally more profitable than older farmers. (Perhaps it’s a young person’s game?)

It is important to point out that a ‘link’ doesn’t mean that one thing caused the other. There could be another cause, but a link suggests that there might be a causal relationship, or that there is a third factor contributing to the other two.

It seems to me that these two findings might be saying the same thing. Younger farmers, who have more debt than older farmers, are more profitable, on average, than older farmers (except in the South Island Intensive sector).

Again, it is important to note that the data is only dealing with averages, and not all farmers will fit the picture that emerges. These are only generalisations, not specific hard and fast rules.

The ANZ Paper argued that the dairy industry benefited from a number of disruptions in the early 2000’s including:

  • Consolidation
  • New investment
  • Succession

… and asked whether the red meat industry is ready for similar changes, given the aging of farmers in the red meat sector. Is there now the opportunity to blood younger farmers to drive improved performance in the sector as a whole?

And that got me thinking about helping older farmers (50 plus) to move onto their life after farming, which is another hat I wear, having just produced a book of research interviewing farming couples on their lives after farming.

If I could show farming couples in their 40’s how to prepare for their lives after farming, giving them a ten-year lead-in, might they be better prepared to find their successors in their mid-fifties, and re-invigorate the industry in the process? According to the links found in the data and reported in the ANZ Paper, bringing in younger farmers earlier than they would otherwise have been might improve overall red meat industry performance?

That conclusion is probably not as contentious as my next one. As I thought more about the succession process an old hobby horse of mine came to mind. Nepotism[1]. Why do farming couples insist on having their own children take over their farm? This could be an impediment to re-invigorating the red meat industry for several reasons:

  1. A farming couple’s children may not be the best people for the job. If excellence is what we are after in the red meat sector, then the best person for the job should be given the role and there should be a national search for that person. The national search could be conducted by independent human resource professionals so that the farmer’s children didn’t get an unfair advantage. The same suggestion should be true for all businesses, farming or not as it is true for many ordinary jobs.
  2. Too many farmers hang on till past their use-by date waiting for their kids to grow up, get educated, get outside experience, find a partner willing to live in the country and by the time they are ready to farm, poor old Mum and Dad have a Gold Card and are trying to re-invent themselves for their next lives. The farm has been put out to lease as a stop-gap.
  3. Putting children onto the family farm can be too hard in providing for both the financial security of the retiring farmers over a long retirement and fairness for their other children. Some do it very well, many struggle.
  4. There is sometimes subtle and not so subtle pressure put on children to come back to the family business and to be fair, there may be nothing parents can do about it. Children are anxious to please the adults in their lives and it may just be built into the fabric of the family life. If children were told that no, they weren’t going to automatically take over the family business and they would have to be considered alongside other applicants, that might take quite a psychological load off some young kids.
  5. Farmers tell me that farming is primarily a business, first and foremost, and a lifestyle second. Why then are some farmers so sentimental about their particular piece of dirt that they will go to hell and high water to put their children on it when anyone’s children should do? So long as the farming couple gets fair market value for their farm they then have choices about their own lives and how they might impact the lives of their children.

I can think of several arguments against this sort of a move, but none that couldn’t be surmounted:

  1. Funding. The successful applicant would have to come with a funding deal which would have to be weighted alongside the farming potential of the candidate, so that well-funded applicants didn’t automatically get the nod. There are organisations that already help here and farm partnerships spring to mind as one source of capital.
  2. Farmers are not only passing on their businesses, they are also passing on their homes. Here I acknowledge the part sentimentality plays in the succession picture. One is entitled to be sentimental about one’s home. One’s home is not a business. Townies don’t necessarily have to leave their home when they change their occupation. It can be a wrench

There is a lot more to say on this subject and I am looking forward to developing these thoughts. I have my own piece of farmland with its family history going back over 100 years. I feel the tug of sentimentality just like everyone else.

Keep asking great questions …

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[1] The practice by people in power of favouring relatives especially in jobs.