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An introduction to Pastoral Farming in Hawke’s Bay, New Zealand

Historical Background

Within the Hawke’s Bay region, orcharding, viticulture together with various other forms of cash and process food cropping have become increasingly important over the past 30 years, never the less, the pastoral industry; in particular beef and sheep farming continues to be the basis of the Hawke’s Bay rural economy, as it has done from the time of earliest permanent European settlement in the mid 19th century. The District was amongst the very first in New Zealand to be settled and developed for pastoral farming and from the middle of the 19th century a number of early settlers acquired or built up very large pastoral runs that at one time covered much of Hawke’s Bay. A break up of these properties into smaller units was initiated in the early 1890’s, a consequence of the Seddon Government’s 1891 Lands For Settlement Act of parliament together with heavy land taxes imposed on large pastoral runs. The act encouraged and enabled land settlement, initially by military and volunteer servicemen, many who had served in the Maori wars. Following world war one the break up of large pastoral runs was further accelerated as a result of government social and economic policy of the day and of course, in many instances, as sons of early settlers inherited and further subdivided properties amongst themselves. Large properties, especially in more favoured farming areas, were broken up to form smaller but economically viable units; commonly of between 900 to 1200 acres. This remains a common size for pastoral properties in Hawkes Bay, although steeper hill country farms having lower stock carrying capacity or potential were significantly larger, while high country properties bordering and within the central ranges were of necessity considerably larger.

The Influence of Sir John McKenzie KCMG (1838 – 1901)

One man more than any, before or since, influenced the ultimate nature of land settlement and the distribution of farming lands in New Zealand and by consequence; the nature of the rural economy and society which has developed through to our present time. John (Jock) McKenzie (1838-1901) was born in Ross-Shire Scotland, son of a tenant farmer. He witnessed first hand and was forever deeply influenced by the misery, suffering and deprivation inflicted by Scottish chieftains as they consolidated traditional lands through massed eviction of their own clansmen. In 1860, looking for a better future, McKenzie migrated to the New Zealand Scottish settlement of Otago. He became involved in politics entering parliament in 1891 where he championed critical land issues of the day. In 1891 was made minister for lands. His story and the affect of his life’s work on the New Zealand rural economy and society – an affect that remains largely unchanged in the 21st century, is quite remarkable – though largely forgotten. His simple philosophy was summed up in the closing couplets of a poem he quoted before the crucial parliarment division on the Lands for Settlement Bill 1894:

“Yet millions of hands want acres,
And millions of acres want hands.”

In The Encyclopaedia of New Zealand 1966; Bernard John Foster (Principal Research Officer, Department of Internal Affairs Wellington) concluded:  “It is to him in large measure that we owe the fact that New Zealand is not a land of great landowners and peasant tenant farmers.” This story (from which this information is summarised) is recommended reading.

 Farming Patterns – Climatic Influence

Local micro-climate, terrain and soil types are the major factors that dictate individual pastoral farming patterns that have developed within the different districts which together make up the wider Hawke’s Bay farming region. This region is a long narrow portion of the North Island’s east coast, lying between the Pacific Ocean as its eastern boundary and to the west the imposing Ruahine and Kaweka Mountain Ranges.

Within Hawkes Bay there are subtle but significant climatic variations to be experienced (depending on the time of year) between the significantly wetter, cooler mountains and immediately adjacent countryside, through to drier, warmer inland and coastal areas. With localized exceptions however, much of Hawke’s Bay experiences a relatively (to much of New Zealand) short, cool winter and hot dry summer. Rainfall varies from between 700 and 800 mm per annum, but with a reliable distribution only between autumn and early summer.

This potential for summer drought is the major factor influencing pastoral farming practices within much of  Hawke’s Bay. Normal limitations to summer pasture growth dictate that many hill country properties operate principally as “store” sheep and beef breeding units.  In effect, depending on the individual growing season, a varying proportion of lambs and young cattle are likely to be sold for finishing on more intensive farms. Other properties, perhaps with better terrain and better developed pasture, are able to finish most or all stock on the property and in good seasons, purchase further “store” trading lambs and cattle for fattening.

The normal seasonal cyclic pasture growth pattern of short winters followed by spring and early summer growth, a (normally)mild summer drought followed by a critical two month period of autumn grass growth, has proven over many decades in Hawke’s Bay to be ideal for healthy livestock breeding and rearing.  Seasonal climatic variations tend to disrupt the life cycle of common animal parasites and diseases and for this reason Hawke’s Bay compares favorably with other New Zealand pastoral regions having higher year round rainfall patterns.

From the equitable Mediterranean climate, most Hawke’s Bay farms experience strong healthy pasture growth from early spring through to early winter. Over broad areas grass growth slows but does not entirely stop, even in mid winter, giving the District a deserved reputation as New Zealand’s best winter livestock country. Autumn droughts are fortunately rare, but did occur in Hawke’s Bay in 2006, a first in the experience of many younger farmers. Autumn droughts are serious events for pastoral farmers who rely on autumn pasture growth to build up livestock condition before winter, especially in breeding stock, as well as provide sufficient pasture reserves through to spring.

The Pastoral Economy in Hawkes Bay

In the early 1980’s the New Zealand economy, including the farming industry, was substantially deregulated by the government of the day, a policy that caused considerable short term hardship to many farmers as well as other business sectors together with their workers throughout the country. In the long term however, deregulation together with removal of all subsidies, tariffs and all manner of bureaucratic business restriction was the impetus required to achieve and to sustain our current level of  prosperity as a viable trading nation; irrespective of seemingly inevitable, cyclical, price highs and lows affecting different primary commodities from time to time.

An immediate effect of deregulation was a reduction in the national sheep breeding flock by about 25%. The Labour Government deregulation included the removal of all farming subsidies and to a large extent the reduction in sheep numbers that followed demonstrates the extent to which farmers had been farming for subsidies to that time. What followed was a significant diversification into other forms of farming, cattle and bull beef farming, deer farming, forestry, horticulture, etc.  Just as significantly, from the 1980’s to the present time efficiency levels have increased, considerably so on a great many properties.
 
Through improved productivity based breeding programs together with better and more sustainable management practices, there have been significant ongoing increases in farm production and profitability within the remaining flocks and herds. As a result the fall in volume of lamb and mutton exports has been considerably less than the fall in breeding flocks. Beef exports have in fact increased substantially.

The immediate, short term problem affecting Hawke’s Bay farmers and common to all New Zealand pastoral farmers are low wool and lamb commodity prices. To a significant degree low lamb prices to the farmer are a result of the artificially high New Zealand dollar value relative to the currencies of our export markets, as well as the relatively short term price cycles dictated by international supply and demand. Low wool prices however have been a relatively long term phenomenon and arguably of even more concern. 

The effect of wool prices on the pastoral economy:

From earliest land settlement, wool has been a primary income source for New Zealand and Hawke’s Bay farmers and the long term sustained falls in wool prices are obviously of major concern. New Zealand is the largest cross bred wool trader in the world and like other North Island farming Districts, the Hawke’s Bay wool clip is almost entirely crossbred wool. Cross bred wools are used internationally for broadloom and hand knitted carpets, knitting yarns and textiles. Sadly, despite woollen carpets and garments having greater aesthetic appeal, wearing ability (in carpets) and even fire resistance, wool prices have fallen in real terms between 3 and 6 % per annum for the past 20 years, a result of effective competition from alternative synthetic fibres as well as, arguably, poor marketing and the inability of the New Zealand wool industry to manage its affairs effectively and gain any significant competitive advantage for a superior commodity. Never the less, a sustained fall in overall global wool production, together with an emerging world wide consumer preference for natural products, suggest that if the wool industry were to implement a united and effective global marketing strategy, the future for New Zealand cross bred wool would be promising in the long term. Increased export quotas, part of a very recent free trade agreement between New Zealand and China are very promising for the long term future of the sheep industry.

A survey of east coast hill country farms (Meat & Wool New Zealand – Economic Service) estimated an average gross wool income for 2007/8 of $36,100 as part of a total gross income projection of $266,000. Other major income sources estimated were sheep (excluding wool) at $127,200 and beef at $89,400. The total net farm profit (before tax) was estimated as a net loss of $1000.00, a serious drop from a $44,400 profit provisionally estimated for 2006/07, $57,486 in 2005/06 and $91,000 in 2004/05. The decline in net profitability is as much a reflection of severe drought that affected much of the East Coast in 2007.

 Farm Productivity in Hawke’s Bay

On farm productivity improvements have resulted not only from the introduction of new sheep and cattle breeds but also by the continuing improvement of existing traditional breeds, in particular, a move away from show bred stud herds and flocks into production recorded and selected breeding systems. Internal farm sub division and pasture improvement using new improved, high production and drought resistant pasture species and the appropriate use of fertilizers continues to benefit the productivity of most properties in the District.

The following livestock statistics demonstrate a substantial drop of stock in all categories, reflecting extended un-seasonal drought conditions between summer and early winter 2007 rather than any long term trend in Hawke’s Bay.

The following livestock statistics demonstrate a substantial drop of stock in all categories, reflecting extended un-seasonal drought conditions between summer and early winter 2007 rather than any long term trend in Hawke’s Bay.

Sheep Numbers

Sheep numbers in Hawke’s Bay at 30th June, 2007 were reported (2007 Agricultural production Census) at a little over 3.6 million which is about 10% of the national flock numbered approximately 40 million. Hawke’s Bay has the second largest sheep numbers (behind the combined Manawatu – Wanganui Regions) but 5th largest behind the South Island Regions; Canterbury, Otago and Southland.

Beef Cattle Numbers

Hawke’s Bay cattle numbers were reported as 438,000, lower than both the Waikato and combined Manawatu – Wanganui Regions. In the South Island, Canturbury had a similar total but other Regions significantly smaller numbers.

Deer Farming

Deer farming for both venison and velvet (soft, undeveloped deer antler) has been an important diversification in Hawke’s Bay where in 2007 total numbers were reported to be 88,000. Most deer farming is carried out in areas having an above average summer rainfall. About 85% of the herd is based on Red Deer breeding. The balance is largely comprised of Wapiti or Wapiti – Red Deer crosses, especially for commercial venison production. Venison farming follows a similar pattern to other forms of livestock breeding and finishing. Most properties have breeding herds but a proportion specialise in finishing weaner stags to about 18 months of age, purchased from breeding properties. 

Western Europe; principally Germany, is the principal export market, taking approximately 85% of exports. The future for deer farming looks bright with long anticipated price increases for export venison realised in 2008. Average prices in July 2008 are $7.98 per kg, compared with $4.96 the previous year and a 10 year average of $5.36 per kg. (source Deer Industry New Zealand). Over 2002/03 prices were even lower at around $2.54 kg, believed to be a flow on from the very high prices – around $10.00 per kilogram which were paid to growers in 1999. As a result our principal overseas markets sourced alternative and lower quality supply from Eastern Europe. The long-term future for venison given sensible marketing and stable price structure is likely to be significantly better.

Dairying in Hawkes Bay

Hawke’s Bay is not an important dairy farming District. Scattered areas of dairying are located in localized areas having normally reliable summer rainfall and consequently safe summer pasture growth pattern. Such areas include the Patoka District located inland west of Napier, the Tutera plateau north of Napier and western areas of southern Hawke’s Bay. There are a relatively small number of dairy farms scattered through other areas of the District which use pasture irrigation.

 Commodity Prices in Hawkes Bay

Over the 5 years up until the 2005/06 season pastoral farming in Hawke’s Bay experienced a considerable upturn in prosperity, a direct result of greatly improved commodity prices for beef, lamb and mutton from those experienced in the previous decade, although wool prices remained low. Farmer and investor confidence surged to high levels, a fact reflected in considerable increases in land prices. The combined affect of low lamb and wool prices and unseasonable drought severely has affected farm profitability from 2006/07. Net average farm profit is calculated to have dropped from $91,933 in 2004/05 to $55,542 in 2005/06, to $44,400 in 2006/07.

Future trends look considerably brighter for East Coast and Hawke’s Bay farmers. In June 2008 lamb prices are up 34% on the previous year and USA beef prices more than 20% with further increases anticipated (source Westpac Agribusiness). Westpac predict $4.39/kg average return for NZ lamb in the 2008/09 season compared with $3.83 in the current season and 20 cents kg more for beef with an average of $3.36 for the coming season.

The high value of the New Zealand dollar continues to be a significant constraint on farm profitability however recent falls in exchange rates are significant and are likely accelerate in the near future, together with internal interest rates with which they are strongly related. Most significantly Allen Bollard, Governor of the Reserve Bank of New Zealand, recently emphasised the need for interest rate cuts based on evidence of a softening New Zealand economy. Allan Bollard has considerable room to move on interest rates as The Reserve Banks bench mark interest rates have been maintained at high levels compared to our trading competitors, reflecting successive government’s obsession with maintaining a low national inflation rate. High internal interest rates have made New Zealand a natural choice for international currency investment and speculation which has been the principal driver for New Zealand’s artificially high exchange rates.

 In the long term it is anticipated that the New Zealand pastoral industry will be a major beneficiary of a reduction and hopefully even the elimination of European, Asian and North American farm subsidies.

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