Reasons why Farmers Diversify — Northern Midlands, Tasmania — RIRDC Publication No. 10/197
RIRDC
Innovation for rural Australia
Reasons why Farmers Diversify Northern Midlands, Tasmania
Carla Mooney, Don Defenderfer and Morag Anderson
December 2010 RIRDC Publication No. 10/197 RIRDC Project No. PRJ-002486
© 2010 Rural Industries Research and Development Corporation. All rights reserved. ISBN 978-1-74254-163-1 ISSN 1440-6845 Reasons why Farmers Diversify: Northern Midlands, Tasmania Publication No. 10/197 Project No. PRJ-002486 The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances. While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication. The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors. The Commonwealth of Australia does not necessarily endorse the views in this publication. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to the RIRDC Publications Manager on phone 02 6271 4165. Researcher Contact Details Dr Carla Mooney or Don Defenderfer Rural Development Services Level 4, 29 Elizabeth St, Hobart, TAS 7000 Phone: 03 62 31 9033 Fax: 03 62 31 1419 Email:
[email protected] or
[email protected] In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form. RIRDC Contact Details Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: Fax: Email: Web:
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[email protected]. http://www.rirdc.gov.au
Electronically published by RIRDC in December 2010 Print-on-demand by Union Offset Printing, Canberra at www.rirdc.gov.au or phone 1300 634 313
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Foreword Across Australia farm diversification has been promoted by industry and government as a fundamental way to encourage growth and build resilience into agriculture. Diversification has been adopted widely by farmers as a strategy to not only achieve economic stability but also as a way to ensure the social and environmental sustainability of family farm businesses. This report on a case study region in Tasmania examines the complex factors that influence decision making about diversification; it explores ‘how’ and ‘why’ landholders diversify and the multiple factors which influence decision making. The lessons learned from this report can be applied nationwide. Farmers, industry bodies, state and federal governments and research organisations such as the Rural Industries Research and Development Corporation have for many years invested in understanding, promoting and implementing diversification strategies, ideas and opportunities. This research will value add to the understandings of all these stakeholders. This report shows that the influence of a range of non-economic factors on decision making about diversification are significant and need to be understood by anyone involved in extending or adopting farm diversification strategies. The key ‘internal’ and ‘external’ factors influencing family farm diversification decisions are identified in this report. The research in this report will be of practical to use to both producers considering diversification strategies as well as policy makers who may be looking at ways to better understand how industry can better adopt diversification opportunities. The report also has implications for the training and education sectors, as the engagement of many diversification opportunities can involve farmers needing new skills and knowledge. Skills training areas identified include both technical production as well as new skills needed in business management and people development. The report makes valuable recommendations for government and industry. This project was funded by a grant to Rural Development Services from the Rural Industries Research and Development Corporation. This report, an addition to RIRDC’s diverse range of over 2000 research publications, forms part of our Dynamic Rural Communities R&D program, which aims to promote and sustain vibrant, resilient regional communities through targeted commissioned and collaborative R&D investments. Most of RIRDC’s publications are available for viewing, free downloading or purchasing online at www.rirdc.gov.au. Purchases can also be made by phoning 1300 634 313.
Craig Burns Managing Director Rural Industries Research and Development Corporation
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About the Author Carla, Don and Morag are all consultants with Rural Development Service. Rural Development Services is a team of rural professionals dedicated to the enhancement of human and organisational capacity in rural and regional Australia. The Rural Development Services team brings together complementary science and social research skills, and an understanding of family farm businesses and agrifood industries to facilitate change and support sustainable primary industries – both on the land and in the sea. Carla has over 20 years experience in applied social research, planning and policy analysis in the area of natural resource management and agriculture. This experience has been gained in the academic sector (University of Wollongong, Griffith University) and the public sector (NSW Department of Planning, Bureau of Rural Sciences). Don has extensive experience in working with rural communities, having worked in the areas of Landcare, sustainable farming and natural resource management for the past 15 years. Don's career has focused on the social approaches and insights that are needed to address complex natural resource management issues. Morag has a science background to which she now brings a client-focussed project management approach. In the 12 years prior to entering environmental consultancy, Morag undertook research and management roles in water quality microbiology, research in Antarctica, and retail.
Acknowledgments This work is the result of the effort and contribution of many people. Firstly, we wish to acknowledge the contribution of the farmers who participated in the interviews. Secondly, the input of the Reference Group members was very instructive and we thank them for their support. Last but of course not least – we would like to dedicate this work to the memory of Amabel Fulton. Amabel undertook the original study on which this work builds. Her passion, drive, commitment and courage have been an inspiration to us and continue to be so. Her passing earlier this year touched us all.
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Contents Foreword ............................................................................................................................................... iii About the Author.................................................................................................................................. iv Acknowledgments ................................................................................................................................. iv Executive Summary............................................................................................................................ viii Introduction ........................................................................................................................................... 1 Objectives ............................................................................................................................................... 2 Methodology........................................................................................................................................... 3 Chapter 1 - Farm Diversification ......................................................................................................... 5 Introduction ....................................................................................................................................... 5 What is diversification? .................................................................................................................... 5 Why diversify.................................................................................................................................... 6 What are the drivers and inhibitors of change?................................................................................. 7 Conclusion ........................................................................................................................................ 9 Chapter 2 - Regional Context ............................................................................................................. 10 Tasmanian Agricultural Context ..................................................................................................... 10 Profile of Region (Northern Midlands) ........................................................................................... 11 Northern Midlands Council Strategic Plan............................................................................... 12 Agriculture................................................................................................................................ 12 Employment ............................................................................................................................. 14 Environment ............................................................................................................................. 16 Weather and water .................................................................................................................... 18 Profile Summary ............................................................................................................................. 25 Results................................................................................................................................................... 26 Why have farmers diversified over the past ten years .................................................................... 26 Internal Factors ............................................................................................................................... 26 Attitude to farming, change and challenge ............................................................................... 26 Risk Management: .................................................................................................................... 27 Professionalisation of farming: from a lifestyle to a business paradigm .................................. 28 Land Capability, Stewardship and Conservation ..................................................................... 31 Intergenerational Mindset - Family Farms and Historical Land Management Patterns ........... 35 Family Farming ........................................................................................................................ 36 External Factors .............................................................................................................................. 37 Profitability............................................................................................................................... 37 Water Surety ............................................................................................................................. 39 Industry Support ....................................................................................................................... 44 Research and Extension............................................................................................................ 44 Communications and IT ........................................................................................................... 45 Governance and Increased Regulation ..................................................................................... 45 Has Diversification been a success? ............................................................................................... 47 Diversification Advisors and Decision Making .............................................................................. 48
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Diversification Decisions ................................................................................................................ 49 The Future of Diversification in the Northern Midlands ................................................................ 52 Future Opportunities for Diversification......................................................................................... 52 Discussion ............................................................................................................................................. 54 The study......................................................................................................................................... 54 Background ..................................................................................................................................... 54 Diversification activities........................................................................................................... 55 Economic viability the key driver ............................................................................................ 56 The success of diversification ......................................................................................................... 59 Diversification decision making ..................................................................................................... 59 The future of diversification in the Northern Midlands .................................................................. 60 Implications .......................................................................................................................................... 62 Recommendations ........................................................................................................................... 62 Appendix 1 – Reference Panel ............................................................................................................ 64 Appendix 2 – Reference Panel Terms of Reference ......................................................................... 65 Appendix 3 – Interview Information ................................................................................................. 66 Appendix 4 – Interviewees and Informants ...................................................................................... 68 Appendix 5 – Interview Questions ..................................................................................................... 69 References ............................................................................................................................................ 70
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Tables Table 1
Comparison of relative economic importance of agriculture to Australian states’ economies .......................................................................................................................... 10
Table 2
Agriculture in Tasmania – dollar value and employment numbers ................................... 10
Table 3
Importance of the downstream benefits of agriculture in Tasmania ................................. 11
Table 4
Agricultural Commodities in Northern Midlands for the year ended 2006 ....................... 13
Table 5
Value of Agricultural Production in the Northern Midlands in 2001 ................................ 14
Table 6
Annual Turnover of Agricultural Businesses by Region, 2007 ......................................... 15
Table 7
Numbers of Agricultural Businesses in Central Tasmania by LGA .................................. 15
Table 8
Impact of drought on the wool industry in EC declared areas for 2009 ............................ 20
Table 9
Impact of drought and frost on cereal, canola and poppy production ............................... 21
Figures Figure 1
Northern Midlands Council – municipal boundaries......................................................... 11
Figure 2
Land use in the Northern Midlands Municipality.(Source: Bureau of Rural Sciences 2003 and Private Forest Tasmania 2006, quoted in SFM, 2007) ...................................... 13
Figure 3
Trend in Annual Total Rainfall - 1970-2008 (mm/10 yrs) ................................................ 19
Figure 4
Tasmanian Annual Minimum T Anomaly (base 1961 - 90).............................................. 20
Figure 5
Decline in number of sheep farmed and shorn .................................................................. 22
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Executive Summary What the report is about This study of farm diversification in the Northern Midlands of Tasmania draws out the complex of factors that influence decision making about change. This region has been affected by the downturn in the wool industry and severe drought (now broken) over the four years preceding the study. These factors along with the recent availability of water for irrigation as a consequence of the development of a major water scheme means that not only pressure for, but opportunity to diversify, has come about. This study explores ‘how’ and ‘why’ landholders diversify and the factors which influence their decision making. Who is the report targeted at This report is targeted at farm families, regional communities, industry and government policy makers involved in diversification activities. It will help stakeholders understand the broad range of factors which drive diversification decision making and are supportive of successful outcomes. This report will assist policy makers and industry to communicate diversification options to farmers in a more holistic way by enabling them to understand not only the primary economic factors that influence farmer decision making about diversification, but also the secondary non-profit factors that also affect their decision making process. Background There is considerable structural pressure affecting farming in Australia. Farm diversification is one strategy to respond to these pressures. Farm diversification can take a wide variety of forms. For this research a broad definition has been adopted. The most important motivation for diversification is economic however there is significant evidence that other factors play an important role as well. Along with needing more income a number of studies have found other goals for diversification, for example, to reduce risk (Barbieri et al. 2009), provide opportunity for family members (Medhurst and Segrave 2007), to learn new skills or create challenge (Gertler et al. 2002) and so on. A number of features can drive or inhibit change. Most important is land capability i.e. the options that are open for farm diversification are shaped by what the land is capable of. Other factors are also important. The relationship to the land (Johnson 2004), identification with a particular industry (Webb et al. 2002), community attitudes (Barlow and Cocklin 2003), decision making processes (Pannell et al. 2006) and broader social factors in the community (Gertler et al. 2002, Woodhouse 2006) all play a role in the approach adopted to diversification and its outcomes. For the purposes of this study the broader factors are described as non-profit drivers. The Northern Midlands was chosen to be the case study for the project for several reasons: a previous study by Fulton and Weatherly in 2000 provided a baseline for the new research; the area has been subject to considerable economic and environmental pressure over the intervening 10 years; and there is now substantial government investment ($68 million) and private expenditure ($7 million) in water schemes being implemented in the area. The Northern Midlands of Tasmania is a traditional wool growing area that is going through a significant transition toward a new mix of diverse agriculture enterprises; this situation mirrors other areas across Australia where farm diversification is taking place. The Midlands is one of the oldest continually grazed areas in Australia, with many family farms proudly dating their lineage back to the 1820’s and 30’s. Wool produced from the region has been recognized as some of the finest in the country. This Region has some significant environmental issues which include fragmentation of remanent vegetation, degradation of native grasslands due to grazing, rural tree decline, salinity and weed infestation. In 2009 the Australian government listed a large area of native grasslands in the Northern viii
Midlands as critically endangered. The implications are that these areas will receive a higher level of protection and approval may have to be sought for land use change. Over the last three years the area has suffered one of the worst droughts on record and this has not only exacerbated the lack of profitability in growing wool but also acted as a catalyst for farmers to consider diversification. The drought has had significant adverse economic, social and environmental effects on the region. The seasonal drought may have ended over the 2009 winter months, but the negative effects of it will be felt for several more years. Aims/objectives The primary objective of the project was to explore the influence or role of non-profit drivers in landholder decision making about diversification. Landholders in the Northern Midlands have faced a range of significant challenges over the last 10 years. Documentation of the process of change in this traditionally wool growing area was aimed at gaining insight into how landholders manage and adapt to change. The intention was to work with landholders who had diversified and to document what they had done, why they had done it, the factors which supported change and how they had gone about making the decision to diversify. Methods used This exploration of the role of non-profit factors in landholder decision making about farm diversification has been undertaken using qualitative social research methods. The steps of the project included: 1. Background research; 2. Development of a regional profile to build a picture of the area and its key natural and human features; 3. Semi-structured interviews with 15 landholders who had diversified their farm operation over the last 10 years; 4. Presentation of the results of the interviews to the Reference Panel; 5. Discussion and analysis of the interviews and research; The project was organised so as to facilitate the input of industry and regional stakeholders into the detailed design and on-going management of the research. A reference panel made up of stakeholders and landholders guided the design of the project. As well as the interviews, discussions with the reference panel and unstructured interviews with key informants were an important part of the process of data collection. Results/key findings All of the landholders who participated in this study had undertaken some kind of diversification. Diversification activities included production changes i.e. a change to irrigation dependent activities; change to business structures, simple expansion, movement into forestry and conservation and other activities such as farm tourism. Generally speaking, the concept of diversification was seen as a progressive one. The extent of diversification and the level of risk and complexity that landholders were prepared to engage in varied considerably. Some landholders actively embraced diversification and consequentially a much higher level of complexity in managing their enterprises. For example, borrowing money to invest in irrigation infrastructure and thus developing a new farming system based on diverse and intensive crop management systems. Other landholders seemed to approach complexity with more caution and whilst diversifying doing so with less financial, social and environmental risk e.g. farm tourism. Without exception the landholders who participated in this study identified the primary motivations for diversification as economic. Fundamentally, survival as a farm business was the core driver for change. Related to the primary economic driver was a number of what we have described as ‘internal
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factors’ that could both enable and constrain a decision to diversify. Beyond these internal factors, farmers indentified ‘external factors,’ those outside the domain of farm and family which were also important in decision making about diversification. The key factors discussed in this report that influence farmer decision making include:
Internal Factors 1. 2. 3. 4. 5. 6.
Farmer attitudes to farming, change and challenges Risk management Professionalism: from a lifestyle to a business paradigm Land capability, stewardship and conservation Intergenerational factors Family farming
Attitude appears to be an important influence in the decision to diversify and possibly even its success. Management of risk was a key theme in discussions about diversification. The need to manage risk, spread risk or contain risk was seen as important to these landholders. The perceived professionalisation of farming over the last 10 years or so was identified as a key enabler of change. Perception of the capacity of the land and the landholders’ social relationship with it, were key factors raised by many of the interviewees. Land capability – soil, climate, rainfall – was seen as absolutely fundamental to the diversification options available to the farmers who were interviewed. Perhaps the most significant finding of this project was the extent to which the choices made by these landholders were influenced by their place attachment. The majority of farmers who were interviewed had long associations with the land, sometimes for many generations. This factor seemed to be an important influence on how landholders managed change. Fulton and Weatherly (2000) found that a desire to continue to focus on wool production was an inhibitor of diversification. The current study results indicated that the desire to stay on the land and to pass it on to future generations meant that landholders were willing to diversify away from wool production if that was the only route to economic viability. It can be drawn that while the preference may have been to stay with wool production the stronger desire was to maintain ownership of the property even if this meant change in production.
External Factors 1. 2. 3. 4. 5. 6. 7.
Economic factors such as decline on return for wool and increase in input costs Drought and long-term drying Midlands Water Scheme Capital to invest in water infrastructure Industry support Communication technology Regulation
The dominant reason provided by the landholders interviewed for this study for their decision to diversify was economic. In short, a key motivator for diversification was to increase- or combat a lack- of profitability that was a consequence of external factors such as low returns for wool and an increase in input costs. The severe drought over the last four years and what is perceived to be a long term drying climate has impacted on farm viability in the Northern Midlands. The drought has been a key driver of diversification in this region. The Midlands Water Scheme is an important external factor impacting on landholder decision making about diversification in the Northern Midlands. The availability of water has dramatically opened-up the range of options land managers have for their farms. Industry support was a key factor in diversification decision making. A shift from dryland farming to irrigation, for example, involves significant technological change and the support of
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industry was identified as an important enabler of change. Communication technology was identified by a number of interviewees as an impediment to farm diversification. Regulation, in particular of land clearing and for protection of native grasslands was identified by landholders as being an impediment to farm diversification. All of the interviewees in this study said that ultimately their diversification efforts had been successful. Corresponding to the complex of factors influencing a decision to diversity the definition of success was equally broad and included both economic and social aspects. Decision making by landholders in the Northern Midlands was typical of farm families across Australia. Landholders talked to their families, their peers and trusted advisors. They sought information from a wide range of sources including the internet, government advisors, field days, neighbours and professional advisors. Planning was also identified by many landholders as an important part of their process of decision making. The study by Fulton and Weatherly (2000) identified key constraints to diversification. It would appear that while they are still relevant much has changed for farmers in the Northern Midlands since this study was undertaken. The new irrigation schemes mean that water will be available for many landholders in the region. Access to finance to fund investment in required on-farm infrastructure continues to be an issue. However, this study has demonstrated that a range of external factors have compelled landholders to change while at the same time a suite of internal factors have operated to shape a significantly changed picture of farming. This has meant that landholders who had previously been unwilling to change have in many cases taken on the challenges that the current environment provides. These are the circumstances which have made the conclusion of Fulton and Weatherly (2000) that ‘a wool growing culture is likely to predominate in the region and reduce the level of interest in enterprise diversification’ not relevant in the current time. We suggest that the willingness to change, which on its surface is motivated by economic factors, in fact reflects the determination of many landholders to stay on their land – even if it means an enterprise change. The objective is to maintain the land within family ownership and keep open the possibility of inter-generational transfer. Even, in many cases when the next generation does not appear to be interested. Implications for relevant stakeholders This study has shown that there needs to be a greater recognition and understanding by government, industry and regional communities that there are major non-economic factors that influence farmer decision making regarding their investment in farm business diversification. This study has drawn out that diversification presents considerable challenges to landholders and there is a requirement for new skills in both farming and business management, access to capital to invest and a willingness to take risks and change the way things have been done for generations. However farmers are not a homogenous group – they have diverse attitudes and values, they learn, farm and live in different ways. There is therefore no one-size fits all approach to understanding, promoting or extending diversification in the region, as the family farms, their properties and locations, and the individuals involved are all as diverse as the new farming opportunities that are being opened up. There needs to be a recognition and understanding by government and industry that there are major non-profit factors that influence farmer decision making regarding their investment in farm business diversification.
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The key non-profit factors discussed in this report that needs to be understood by government, industry and rural communities include: 1. Farmers have diverse attitudes (and motivations) toward farming, change and challenges and these attitudes greatly influence their decision making about diversification 2. Risk management and analysis is a key factor influencing farmers decision making and farmers approach risk management in very different ways 3. A professionalisation of farming process is taking place in Tasmania, where farming is shifting from being a ‘lifestyle’ to more of a business paradigm 4. Farmers consider land capability, environmental sustainability and conservation issues in great variance when making decisions 5. Many farmers have an intergenerational mindset and historical land management patterns in their area can greatly influence their decision making 6. Farmers are not a homogenous group; they farm, learn and diversify in different ways and for different reasons.
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Introduction Diversification is a way to respond to loss of farm viability as a result of structural pressures and other factors such as drought. There is a considerable body of research on the economic factors which influence decisions about diversification and the economic success of these efforts. The objective of this research was to examine the role of non-profit drivers in decision making about diversification. Non-profit drivers are defined very broadly to include anything other than exclusively profit maximising motivations. The Northern Midlands of Tasmania was the case study region for the research. This region was selected for several reasons. •
It provides a unique opportunity to value add on research undertaken on the socio-economic factors that influence agricultural enterprise diversification in 2000 (Fulton & Weatherly 2000). This work was undertaken by the Tasmanian Institute for Agricultural Research as part of the Tasmanian Drought Regional Initiative (TDRI). It has provided a baseline from which to analyse the change in farm diversification over the intervening period.
•
The region, traditionally a wool growing area, has been subjected to a range of pressures including drought and a decrease in the viability of wool production due to price decline and other structural factors.
•
Recent investments by individuals and State and Federal Governments have enabled the development of irrigation infrastructure which has brought water to this otherwise relatively dry region.
In their research, Fulton and Weatherly (2000) identified a range of social, organisational and institutional factors that could facilitate or impede efforts at diversification. They found what might otherwise be described as high levels of bonding social capital, place based attachment and industry identification which appeared to inhibit farmer willingness to diversify in the Northern Midlands. How landholders have responded to the drought and downturn in the wool industry along with the possibilities provided by water is an important question. Despite the earlier reported reluctance to diversify, some landholders have taken up the opportunities afforded by the availability of water. How and why these landholders chose to diversify and the factors which enabled or constrained their decision making is the focus of this research.
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Objectives The primary objective was to explore the influence or role of non-profit drivers in landholder decision making about diversification in the Northern Midlands of Tasmania. Landholders in this region have faced a range of significant challenges over the last 10 years. Documenting the process of change in this traditionally wool growing area would provide insight into how landholders manage and adapt to change. The intention was to work with landholders who had diversified and to document what they had done, why they had done it, the factors which supported change and how they had gone about making the decision to diversify. This project was motivated by an awareness that landholders do not make decisions about their farm businesses that others might regard as the most ‘economically rational’. Delving into the motivations that drive this decision making can provide insight into how landholders who wish to stay on their farms and adapt to change can be best supported to achieve their chosen outcomes.
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Methodology This exploration of the role of non-profit factors in landholder decision making about farm diversification has been undertaken using methods typical of applied social research. A case study method was used in this project (see Yin 1992, 1994; Stake 1995). Case studies emphasise detailed analysis of the context of a limited number of events or conditions and their relationships. Researchers have used the case study research method for many years across a variety of disciplines. Social scientists, in particular, have made wide use of this qualitative research method to examine contemporary real-life situations. Researcher Robert K. Yin defines the case study research method as an empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used (Yin, 1984: 23). The basic steps in case study research are: determine and define the research questions, select the cases and determine data gathering and analysis techniques, prepare to collect the data, collect data in the field, evaluate and analyze the data, prepare the report. The project was organised so as to facilitate the input of industry and regional stakeholders into the detailed design and on-going management of the research. A reference panel was established including representatives from Natural Resource Management North, Department of Primary Industry, Parks, Water and Environment (DPIWE), Tasmanian Irrigation Development Board, Northern Midlands Council, Tasmanian Farmers & Graziers Association, Rural Alive & Well, and landholders (see Appendix 1). The reference panel met 3 times. At the initiation meeting the project was refined with key issues clarified and interviewees identified; the second meeting involved an update of progress and discussion of landholder interview design; at the third meeting there was discussion of the draft report and consideration of the implications of the research and development of recommendations. A draft final report was circulated to reference panel members 2 weeks before the final meeting to maximise the capacity of the members to comment on the report content. Terms of Reference are included in Appendix 2. A regional profile was developed in order to differentiate the range of potential factors which have contributed to the diversity in the region. The purpose of the profile was to build a picture of the region of study and the key natural and human features. Data collection methods included desktop research and unstructured interviews. Desktop data collection methods included web searches, review of grey literature, community directories and so on. In addition, discussions with the reference panel and unstructured interviews with key informants were an important part of the process of data collection. To address the research question for this project a range of qualitative data collection methods were utilized. These included unstructured interviews, semi-structured interviews and secondary data analysis. The methods used were designed to conform to the University of Tasmania Human Ethics Committee requirements. Informed consent and data management protocols are the key to ensuring both the highest ethical standards of research as well as quality assurance for the research (see Appendix 3). Unstructured interviews were undertaken with five key informants (Appendix 4) to expand on and verify the regional profile developed through desktop data collection. In the case study method triangulation is important for ensuring the robustness and validity of any finding. The regional profile provided the context for the interviews with landholders about diversification. Semi-structured interviews were conducted with 15 landholders who had diversified their farm operation over the last 10 years. Potential interviewees were identified by the Reference Group. Interviewees were contacted and asked if they were willing to participate in an interview about
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diversification. It should be noted therefore that this is a purposive sample and not a random group. A broad definition of diversification was adopted. The primary purpose of the interviews was to explore the extent to which non-profit drivers contributed to decision making about diversification. Fifteen different farming businesses were interviewed (Appendix 4). Those interviewed included husbands and wives and other family members; male farmers generally took the lead in answering questions. On two occasions the female was the sole or majority interviewee. All interviews were face to face and semi-structured with the same set of questions asked of all farmers. The interviews took place on farm (but for one interview), generally lasting 45 minutes to one hour. Notes were taken as the interviews took place and the interviews were also digitally recorded. All interviews were taken over a three week period in August 2009. The questions focussed on the nature of the diversification that had taken place, factors which had influenced decision making about diversification and what the barriers and opportunities had been (Appendix 5). The interviews also delved into who had influenced decision making and how diversification decisions were made. The average age of the farmers interviewed was approximately 48.5 years old with the youngest being 30 and the oldest 70. The interviews with landholders were analysed for their content. Each interview was written up as a case report. Cross case comparison helped to draw out the role of non-profit drivers in decisions about diversification and provided a basis for making generalisations about their importance in this region. The interviews were also examined to explore the extent to which social factors have influenced both decision making about diversification and its success. There was an iteration between the regional profile and the field work. Both aspects of the project informed the other. A synthesis of the data formed the basis for the discussion.
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Chapter 1 - Farm Diversification Introduction Farm diversification in Australia is believed to be increasing. According to an OECD study in 2008 there has been an increase in the number of Australian farms with areas of plantation forest and a rise in on-farm enterprises such as tourism, aquaculture and the processing of milk, wool and oil products. As well as this, off-farm income has become increasing importantly particularly for broad acre farmers. The most important motivation for diversification is economic, that is, the need to obtain an alternative source of income (OECD 2008). Declining terms of trade, droughts and policy reform are all drivers of change in the agricultural sector. Significant structural adjustment pressure has affected farm businesses across Australia (ABARE 2007). The rate of farm exit across the country is on average 5% per annum however this is differentially distributed (Barr, Karunaratne and Wilkinson 2005). This has resulted in farm aggregation in some instances and farm break up in others depending on a range of local economic, environmental and social conditions. There is evidence that some farm businesses resist structural adjustment pressure despite extensive governmental policy to facilitate transfer and change. Botterill (n.d.) following her review of policy approaches to farm exit, found that policy based primarily on an expectation of economically rational behaviour was not successful. Botterill found that many marginal farmers ‘remain in the industry in the face of personal hardship due to the non-economic attributes of farm life which they clearly value’ (Botterill n.d.:11). Farm diversification is a way to manage and adapt to changing social, economic and environmental conditions. Farm diversification is encouraged by both industry and government as a strategy to reduce risk and uncertainty consequent on declining terms of trade (Campbell White Assoc and Black 2002).
What is diversification? The study of farm diversification has been a topic of increasing interest during the last decade. However, farm diversification has been defined in a number of ways so that comparison of findings from different case studies is difficult. Some have defined farm diversification as the development of non-traditional farm enterprises (Slee 1986). This includes non-conventional enterprises such as organic farming, snails, herbs, adding value to traditional products through either on-farm processing and/or forms of direct marketing, and new enterprises not associated with food production, such as farm-based accommodation and recreation. Others define it even more broadly as the adoption of income-earning activities outside the range of conventional crop and livestock enterprises associated with agriculture (McInerney, Turner et al. 1989). This includes off-farm occupations. The definition used by (Ilbery 1991) classified diversification in terms of structural or agricultural diversification. It excludes the income generated from off-farm activities. Medhurst and Segrave (2007) defined diversification as the addition of another stream of farm-based income to supplement the existing sources. It excluded simple land use change (i.e. potatoes to carrots) but rather referred to the addition of an enterprise (i.e. potatoes and carrots). Campbell White Assoc and Black (RIRDC 2002) note that diversification can take a variety of forms. Two types of diversification are commonly recognised - agricultural and non-agricultural. Agricultural diversification includes the introduction of a wider range of output options within a traditional farm enterprise i.e. prime lamb production added to wool production. Non-agricultural diversification includes enterprises such as farm-based accommodation and recreation, on-farm processing and or direct marketing of food and fibre and passive diversification where land and/or buildings are leased for non-agricultural purposes (Campbell White Assoc and Black 2002). A broad definition of diversification was used in this study: a change in the number of agricultural or non-agricultural
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enterprises run either on an individual property or in a particular region. This definition builds on that used by Fulton and Weatherley (2000).
Why diversify Research on diversification supports the idea that the main motivation for change is economic however a range of other factors are also important. It is a complex picture and understanding the range of factors which influence decision making about change is important. Barbieri et al. (2009) study of Texan farmers and ranchers revealed a wide variety of diversification goals. The three highest ranked goals of diversification were: •
to generate additional farm income,
•
to continue farming, and
•
to enhance their own and families quality of life.
While the farmers and ranchers were able to identify their goals for diversification the authors commented that responses were notable for the heterogeneity of goals. Barbieri et al. (2009) further analysis of the diversification goals and farm characteristics led them to reframe these reasons in the following terms: •
reduce risks and insecurities inherent to farming, such as offsetting fluctuation in market prices;
•
expanding and retaining markets, such as providing current customers with new products or responding to market opportunities;
•
individual aspirations and pursuits and strengthening farm household ties to farming.
Medhurst and Segrave (RIRDC 2007) found that among the drivers for diversification were creating opportunity for family involvement (children, siblings and partners), lifestyle choices and spreading financial risk. Given this, their definition of successful diversification not surprisingly included a positive mix of financial and social outcomes. Campbell White Assoc and Black (RIRDC 2002) undertook 10 case studies with the specific objective of quantitative economic analysis of the impacts of diversification. It included cost-benefit analysis, cash flow analysis and a comparison of financial indicators of farm performance before and after diversification. In addition they documented the experiences of case study farmers including their reasons for diversifying, how they chose the new enterprise and issues affecting the process of diversification. They found that planning and a realistic assessment of personal objectives, skills and resources was important to success of diversification efforts. The process of choice of diversification activity was also critical. From this study it would seem that less capital investment at the start and a gradual approach to expansion are likely to contribute to economic success. Nickerson et al. (2001) research into motivations behind farm business diversification into agritourism in Montana identified social, economic and external factors as being of importance. Most farmers and ranchers were motivated to diversify for economic reasons, that is, to supplement farm income. However, an interesting finding of this research was that while the need to respond to economic pressure was the key motivation for change the fact that land had been held for several generations meant that the option to sell was not a viable one. For many of the ranchers in this study underlying the primary economic motivation was a social one that is, place attachment. The structure of the tomato growing sector in Australia has been influenced by the demands of processes to integrate farm activities into supply chains. The effect of this has been a rationalisation of the sector as well as a specialisation of it. According to Pritchard et al (2007) survival in the industry
6
has necessitated a narrowing of activities on farm and an intensification of them. However, while the productive outcomes have been less diversified the business structures which support them have become more diversified. To this extent Pritchard et al. (2007) point out that while farms remain family owned they have needed to become more entrepreneurial and adopt hybrid business structures in order to succeed with agri-industrial production chains. The range of factors that influence farmer decision making about diversification include: •
family pressures or change of life,
•
farm succession - intergenerational planning,
•
lifestyle,
•
cultural attitude,
•
family sustainability,
•
spread risk,
•
learn new skills,
•
career challenge,
•
to be part of new business and social and learning networks,
•
re-energising interest in the farm,
•
changing commodity prices,
•
family (particularly women) taking a greater role in decision making (See Fulton 2000, Medhurst 2007).
What are the drivers and inhibitors of change? According to Bureau of Rural Sciences (2001) the major drivers of land use change are market prices for potential products through its large influence on profit and productivity gain, underpinned by innovation. In their review of Land Use Change, Productivity and Diversification BRS (2001) grouped drivers of change as personal drivers (such as skills, lifestyle objectives, stewardship and orientation to change) or external drivers (such as policies, taxation, World Trade Organisation trading rules, peer pressure and the availability of specialist infrastructure). Lubowski et al. (2008) in their study of land use change in the United States identify the fundamental drivers of land use change as populations growth, consumer tastes, international trade and other factors affecting the demand for land in different uses. The underlying drivers include weather, technology, local rules and other factors determining production possibilities from different land-use alternatives. Lubowski et al. (2008) conclude that private land-use decisions have depended critically on land quality and have been steered by anticipated economic returns to alternative uses, which in some case have been affected significantly by public policies sometimes intentionally and sometimes unintentionally. There is also evidence that land use change is affected by landholder feelings about their land and or their vocation as farmers. Johnson (2004) in the study of family farming in New Zealand found that ‘a strong sense of place, ongoing consubstantial relationship with the property and love of the lifestyle kept [them] in farming’ even though the enterprise no longer provided enough income to sustain the 7
household. Webb, Cary and Geldens (2002) found that the two main factors mitigating against graziers changing their practices were a strong identification with pastoralism as an occupation and a strong place attachment to their property. It can only be concluded that factors, other than exclusively economic ones, are involved in decision making about farm business futures. Botterill suggests that recognition of the complex of values that motivate farmer behaviour will lead to better public policy. The impact of community attitudes on diversification decision making has been identified by Barlow and Cocklin (2003). This study of plantation forestry in Victoria found that a shift into plantation forestry was often accompanied by ‘concern and controversy’. Concern about loss of community and rurality were identified as key issues in communities where these changes were taking place. The motivations of landholders to diversify have been the subject of considerable inquiry particularly in respect of land conservation practices. Pannell et al. (2006) conclude that the adoption of conservation practices by rural landholders is affected by three distinct categories of factors. These include the process of learning and experience which informs the decision; social, cultural and personal factors; and characteristics of the innovation to be adopted. Chouinard et al. (2008) explore the apparent dichotomy in farmer motivation in their research on motivations for conservation behaviour. They argue that there is a continuum in farmer motivation from the purely ‘profit maximising’ to an exclusively stewardship focus. Their point is that the farm population is heterogeneous and that farm policy would be better served by recognising the multiplicity of motivations for behaviour. According to research by Greiner et al. (2009) adoption processes are affected by a range of factors other than financial benefit which include values, motivations and perceptions of risk. The role of social factors in decisions about farm retention and diversification is less well understood than other economic and organisational influences. Generally, a diversified economic base is found to be supportive of a vibrant and resilient community (Productivity Commission 1999). Woodhouse (2006) studied the relationship between economic development and social capital in two regional towns in Australia. Social capital is conceptualised as a resource available to individuals and communities based on networks of mutual support, reciprocity and trust. It is an area of considerable interest because of its links to individual and community wellbeing. Many researchers have suggested the benefits of social capital for individual outcomes in areas such as health, education, employment and family wellbeing and also in fostering community strength and resilience (ABS 2006). The research by Woodhouse (2006) found evidence that social capital can exert a positive causal influence on economic development. Higher levels of social capital, particularly cooperative and collaborative relationships, within a small regional community were found to have a positive impact on the level of economic development. Whilst using a different language, the case studies complied by Keyon and Black (2001) on Small Town Renewal, drew out the role of broader social factors in the capacity of small inland and remote regional communities to sustain populations and maintain service and economic diversity. Exploring this idea in reverse the research by Gertler, Jaffe & Swystun (2002) on ‘Organisational Innovation and Social Factors in Farm Diversification and Sustainability’ found that elements of social capital – mutual knowledge, trust, and cooperation-enhancing activities - were supportive of the formation of diversification projects. The availability of social support at the community level including both informal social networks and formal programs helped with efforts to diversify. This research found that taking the risk to invest in diversifying activity made sense if there was place based attachment and confidence in local connections and support networks. The authors concluded that ‘diversification requires co-operation and partnerships … communities of interest and of place, people who care enough about each other, and their collective future …’. At the community level, farm diversification may be influenced by elements of social capital including knowledge, trust and cooperation enhancing ties.
8
In their study of farm diversification amongst Belgian farmers, Meert et al. (2005) found several interesting characteristics of farmers who had diversified, these included: •
Evidence of strong social networks and that interaction with other farmers was a factor in their decision to start something new.
•
A higher level of professionalism in their farming approach including record keeping and activities (reading journals etc) to keep abreast of new developments in their industry.
•
A commitment to staying on the farm – change was not seen as ‘a way out’ of farming.
The study by Meert et al. (2005) identified the important role of capital in the farm diversification strategy. Less capital intensive options were elected by those landholders on smaller farms with limited capacity to raise capital. Capital was a key inhibitor or enabler of diversification strategy.
Conclusion There is considerable structural pressure of farms in Australia. Farm diversification is one strategy to respond to these pressures. Farm diversification can take a wide variety of forms. For this research a broad definition has been adopted. The most important motivation for diversification is economic however there is significant evidence that other factors play an important role as well. Along with needing more income a number of studies have found other goals for diversification for example to reduce risk (Barbieri et al. 2009), provide opportunity for family members (Medhurst and Segrave 2007), to learn new skills or create challenge (Gertler et al. 2002) and so on. A number of features can drive or inhibit change. Most important is land capability i.e. the options that are open for farm diversification are shaped by what the land is capable of. Other factors are also important. The relationship to the land (Johnson 2004), identification with a particular industry (Webb et al. 2002), community attitudes (Barlow and Cocklin 2003), decision making processes (Pannell et al. 2006) and broader social factors in the community (Gertler et al. 2002, Woodhouse 2006) all play a role in the approach adopted to diversification and its outcomes. For the purposes of this study the broader factors are described as non-profit drivers.
9
Chapter 2 - Regional Context Tasmanian Agricultural Context Tasmanian agriculture contributes 30% to gross state product and ‘in 2006/07 the gross value of landbased agriculture in Tasmania was $1.06 billion.’ (Bartlett 2008). A recent report commissioned by the Tasmanian Agriculture Productivity Group (Davey and Maynard, 2007) shows that agriculture is an important contributor to the Tasmanian economy both in its own right and because of other industries that depend on it, particularly when compared to other Australian states. In particular, the manufacturing and service sectors that utilise farm outputs are very significant contributors to gross state product and employment. Table 1
Comparison of relative economic importance of agriculture to Australian states’ economies GSP
Tasmanian employment
Farm gate (direct) contribution of agriculture
5%
5 – 6%
‘Farm-dependent economy’ contribution of agriculture
Approx.16% (manufacturing approx. 5%; services – approx. 5%)
20%
Australian employment
Range – 10 – 15% average – 12%
Source: Davey and Maynard (2007)
Table 2 illustrates the dollar value and numbers employed both at the farm gate and downstream.
Table 2
Agriculture in Tasmania – dollar value and employment numbers
Direct farm output (farm gate)
agricultural processing and manufacturing industries
Year
$
Employment
Comment
2004-05
903 million
2005-06
946 million
12,700
increases mainly from livestock slaughterings and milk
2006-07
8,900
influence of drought
2006-07
7,600
figure stable over recent years
Source: Davey and Maynard (2007) and ABS
10
Despite its ups and downs, farm output has increased at a compound rate of 4.4% per annum over the past 21 years. This represents an increase in real terms over the period. The importance of the downstream benefits of agriculture in Tasmania is highlighted by a recent DPIW analysis of the state’s food industry (including seafood) is illustrated in Table 3. Table 3
Importance of the downstream benefits of agriculture in Tasmania $ value
Farm-gate and beach-point
$ 984 million
packed or processed value
$2,103 million
total food revenue (net of imports)
$3,109 million
Comment
= 3.2 times farm-gate value
Source: Thompson, 2009
Profile of Region (Northern Midlands) The Midlands of Tasmania lie between the mountainous Central Plateau to the west and ranges to the east. The Northern Midlands as discussed in this report approximately corresponds to the Northern Midlands Council boundaries (see Figure 1). The rich agricultural river flats of the Esk, Lake and Macquarie Rivers lie in the plains of the wide north/south valley. There are extensive grazing lands renowned for fine wool production. Historic towns and villages dot the area and businesses range from small to multi-million dollar enterprises.
Figure 1
Northern Midlands Council – municipal boundaries
Map from: Northern Midlands Business Association, 2009
The Northern Midlands region has a long history in agriculture, particularly wool production. A successful shipment of wool to England is recorded in the early 1820s, stimulating pastoralism in the Midlands (Fulton, 2000). By 1835, the midlands were predominantly owned by ‘20 000 acre gentry’ (Fulton 2000) as extremely large parcels (relative to those in the South) were granted mostly along the major river systems and to existing landholders. Many of these properties are still in the hands of later generations of these historic families. The entire midlands had been alienated from the Crown by 1844, with most graziers growing wool, cereals and harvesting timber.
11
The major population centres of the area are Campbell Town, Perth, Longford, Evandale and Ross. Many of the towns and villages have distinctive heritage qualities, which make them attractive places to live. The population of the area in 2006 was approximately 12,500, up from around 12,000 in 2002 (ABS 2009). The sex distribution is approximately equal, with a slight bias towards men. The population is expected to increase by 1,000 over the next five years as development continues to occur in and around the Launceston commuter towns of Longford, Perth and Evandale (Northern Midlands Council, 2009). The current municipality was formed in 1993 from the merger of a number of much smaller council areas (Northern Midlands Council, 2001) and incorporates 27 recognised towns, 3 water catchment areas and 5 different bioregions.
Northern Midlands Council Strategic Plan The Northern Midlands Council Strategic Plan 2007-2017 identifies diversification and environmental management as fundamental to the region: •
‘Northern Midlands communities will be vibrant, sustainable and resilient, promoting their diversity and conserving the heritage values of our towns.
•
‘Our community pride will be based on cooperation and self help, evident by our care of natural and constructed assets and our leadership in environmental management.’
Within the plan key issues of concern by community members were identified for each township, with water quality and water quantity issues consistently highlighted throughout the region. Other key issues included ‘right to farm’, forestry, protection of prime agriculture land policy, urban encouragement, fettering of land, land clearing regulations and land use change. Also identified in the plan was that ‘maintaining a healthy diversified farming economy is crucial’ with the council’s approach being to ‘protect our agricultural industry and assets for production, encourage diversification and innovation in the industry, ensure secure’. According to the State of the Environment report commissioned by the Northern Midlands Council, ‘A more strategic approach is required for the Northern Midlands to ensure effective management of both water resources and overall catchment management’ (SFM, 2007).
Agriculture The Northern Midlands municipality covers an area of greater than 500,000 ha with the majority of land being free hold. Approximately 406,000ha (or 80%) of the municipality is private tenure, three quarters of this being agricultural, the remainder is predominately crown land (SFM, 2007). Both native and plantation forestry occurs in area, accounting for approximately 15% of land use (SFM, 2007). Agriculture is the dominant land use within the municipality. The Northern Midlands produces a significant percentage of the state’s meat sheep and cattle, wool and crops including peas, poppy, cereal, potatoes and onions. Sheep and wool production are the largest animal enterprises held on properties in the region and the area is seen as the state’s premier wool growing area. Dryland agriculture is the dominant land use on the plains and low hills, representing almost 40% of land use in the Municipality (Figure 2). Irrigated agriculture has increased rapidly in the last decade but currently represents less than 5 % of land use in the region (SFM, 2007).
12
Figure 2
Land use in the Northern Midlands Municipality.(Source: Bureau of Rural Sciences 2003 and Private Forest Tasmania 2006, quoted in SFM, 2007)
Agricultural Commodities in Northern Midlands for the year ended 2006 are summarized below (see Table 4). Table 4
Agricultural Commodities in Northern Midlands for the year ended 2006 Area (ha)
Value of Agricultural Production ($) (2001)
Area of holding
358 829.3
78,035,191
Cereals for grain
12 567.4
5,782,258
Vegetables for human consumption
3 615.7
13,005,864
Orchard trees (including nuts)
43.1
-
All fruit (excluding grapes)
44.2
12,856
Non-cereal broadacre crops
4 671.8
35,920,881
Sheep and lambs
886 669
5,748,241
Milk cattle (excluding house cows)
1 150
1,130,835
Meat cattle
55 395
6,997,707
Pigs
35
63,268
Number
* Agricultural commodities data is subject to relative standard error (RSE) - for further information see ABS cat no. 7125.0 (ABS 2009)
The following table (Table 5) shows the Value of Agricultural Production in the Northern Midlands in 2001.
13
Table 5
Value of Agricultural Production in the Northern Midlands in 2001 Commodity
$ value
Total Cereals
7,643,373
Total Crops
35,920,881
Livestock and Poultry
42,114,291
Total Commodities
78,035,191
Adapted from (Powell, R, 2005)
Landuse Change Since 2000 Since the Fulton 2000 study agriculture in Tasmania has been going through a period of considerable change, with 26.3% of agricultural land being sold between 2001 and 2005-06 (Crawley, 2009). In the last 10 years there has been a rapid increase in irrigated arable agriculture in the Northern Midlands, however the primary agricultural pursuit in the district still remains dryland pasture production (SFM, 2007). Approximately 24,800 ha within the municipal area are irrigated for agricultural purposes. The introduction of centre pivot irrigation systems around 2002 was one of the driving forces that has resulted in a shift to more cropping and farm dam construction within the region. The expansion of these industries has resulted in an increasing demand for water resources. The use of raised bed farming systems has also been introduced to the region over the last 10 years (SFM, 2007). Key drivers of land use change in Tasmania include fluctuating prices for commodities, productivity improvement, processing capacity and processing requirements, irrigation water availability, availability of suitable land, government policy and NRM issues such as salinity (Resource Planning and Development Commission, 2003; Davey and Maynard Agricultural Consulting, 2003). All of these drivers for change and diversification are active in the Northern Midlands, with an acceleration occurring at the moment due to the severe affects of the drought and the opportunity for an expansion of irrigation.
Employment The 2006 census recorded 5,449 Northern Midlands residents as employed (60.4% of the population aged 15-64 years). Of those employed, 58.1% were in full-time employment (working more than 35 hours/week). Approximating 5% of the workforce (271 people) was recorded as unemployed. This is a decrease from 8.8% in the 2001 census. At the 2006 census, of the 5,449 residents recorded as employed, the most common industries of employment were: 9.8% in sheep, beef, cattle and grain farming, 4.4% in school education, and around 2.5% in each of residential care services, road/freight transport and cafes, restaurants and takeaway food services. A recent report to the Northern Midlands Council by the Centre for Agricultural and Regional Economics highlighted the importance of farming to the region, ‘Primary industry is a critical industry with potential for further development and intensification using irrigation.’ (Powell 2005) Agriculture provided 890 jobs in 2001 or about 20% of employment in the Northern Midlands Similarly Powell (2005) emphasises that agriculture is an $80m industry and expanding as more intensive activities are developed, including the use of irrigation.
14
The table below shows Annual Turnover of Agricultural Businesses in the Northern Midlands compared with other central Local Government Association areas in Tasmania. Note that the Northern Midlands has the highest number of businesses (three times as many) in the region with a turnover of $2 – $5 million. Table 6
Region
Annual Turnover of Agricultural Businesses by Region, 2007 Zero to less than $25 k
$25 k to less than $50 k
$50 k to less than $75 K
$75 k to less than $10 0k
$100 k to less than $150 k
$150 k to less than $200 k
$200 k to less than $500 k
$500 k to less than $1m
$1m to less than $2m
$2m to less than $5m
$5m to less than $10 m
$10 m to less than $20 m
$20 m to less than $50 m
$50 m to less than $20 0m
$20 0m or mor e Total
no.
no.
no.
no.
no.
no.
no.
no.
no.
no.
no.
no.
no.
no.
no.
Derwent Valley
15
9
6
0
9
6
9
0
9
3
Central Highland s
30
15
21
6
18
6
36
24
6
3
Southern Midlands
60
36
42
21
51
21
33
18
12
Northern Midlands
60
33
33
33
45
18
81
42
12
9
Meander Valley
99
75
69
30
48
21
126
42
39
3
264 168 171
90
171
72
285
126
78
18
Total
0
no. 66
165 294 366 3 0
3
555 0
0
0 1 446
(Skills Tasmania, 2008)
The table below highlights the number of agricultural businesses in the Northern Midlands, relative to other local government areas in the central region of Tasmania. The data differentiates agricultural businesses with employees from those without.
Table 7
Numbers of Agricultural Businesses in Central Tasmania by LGA Local Government Area
No. of non employing businesses
No. of employing businesses
Total
Derwent Valley
39
27
66
Central Highlands
78
87
165
Southern Midlands
165
129
294
Northern Midlands
198
168
366
Meander Valley
348
207
555
TOTAL
828
618
1 446
(Adapted from Skills Tasmania, 2008)
15
Environment The 2000-2002 National Land and Water Resources Audit provides the following snapshot of environmental issues in the Northern Midlands. Generally the area is in a degraded condition and declining and is continental landscape stress class 1 as assessed by the Landscape Health report (1 is most stressed, 6 is least stressed). There are 63 ecosystems in the area, 15 of these (24%) are endangered or vulnerable and threatened ecosystems are generally in rapid decline. Threats include: •
fragmentation and loss of remnants,
•
clearing for agriculture,
•
selective and clearfell logging,
•
firewood harvesting,
•
weed invasion,
•
dieback,
•
changed fire regimes and
•
grazing.
Inundation by water storages and associated irrigation development is a threat to a range of vegetation types. There are 12 wetlands are listed in the Directory of Important Wetlands in Australia. Threatening processes for these wetlands are weed invasion (willows, Salix spp.) and changes in hydrology due to the abstraction of water for agriculture. Additionally there are 10 wetlands of subregional significance and threats to these include introduced plants and animals, changes in hydrology, and agriculture, particularly fertilizer-enriched runoff. There are 32 Commonwealth and 59 State listed endangered and threatened species in the Northern Midlands bioregion with 25 and 54 respectively being plants. Herbs and orchids are severely affected by pasture improvement (ploughing and the application of fertilizers), grazing and changed fire regimes. Other significant conservation issues affecting the Northern Midlands that have emerged over the last ten years include the Tasmanian Devil Facial Tumour Disease which has seen a 70% decline of the Tasmanian devil in Tasmania. At the same time the Tasmanian devil has been declining in the region, foxes have been illegally introduced in Tasmania and have been established in the Northern Midlands for the first time ever. If fox populations get extensively established in the region it could have potentially devastating effects on some of the area’s native biodiversity, possibly leading to extinctions, as well as adversely affecting grazing. The government has put considerable funding into eradicating foxes as well as trying to prevent the spread of the Tasmanian devil facial tumour disease. The following priorities were listed in the 2000-2002 National Land and Water Resources Audit: • conservation priorities are grassland and grassy woodland ecosystems and associated threatened plant species (particularly orchids), and reptiles
16
•
management priorities are woody weeds such as gorse (Ulex europaeus) and willows (Salix spp.), foxes and loss of native vegetation (conversion to pasture and cropping).
Agricultural land issues Rural Tree Decline A threatening process in the Northern Midlands is rural tree decline (or ‘dieback’). This is a severe land degradation issue in the area, with a major acceleration seen over the last decade in some areas (L. Gilfedder pers. com.). Mapping indicates 107,000 ha (26% of the area) to be severely to extremely affected with a further 135,900 ha (33%) moderately affected – well over half the area in total (after Grice 1995, SFM, 2007). Salinity According to the 2000-2002 National Land and Water Resources Audit, 3% of the land used in Tasmania (or 53 000 ha) is affected by dryland salinity - all in agricultural land. This is predicted to increase to 69 500 ha by 2020. The greatest threats to remnant vegetation, wetlands and fauna from dryland salinity are in the Northern Midlands and Flinders bioregions of the state. SFM (2007) in the draft State of the Environment document state that almost 25,000 ha or 5% of the Northern Midlands Municipality is affected by salinity (or 8% of agricultural land in the area). Additionally 40% of the total municipal area is at moderate to high risk of land hazards such as wind, sheet and rill erosion, and soil structure decline. The Federal Government’s National Action Plan for Salinity and Water Quality identified the area as one of 21 regions in Australia most affected by salinity and water quality problems. Conservation Programs It is estimated that the Federal Government has invested between $8 and $10 million in the region through conservation programs to conserve the area’s key environmental values. Most of these funds have been matched by landholder in-kind support – resulting in substantial combined government and community investment. Programs have included: the Midlands Biodiversity Hotspot program, the Forest Conservation Fund, Private Forest Reserve Program, Non-Forest Vegetation Program, the National Landcare Program, the Natural Heritage Trust and Caring for Our Country. These conservation programs have assisted landowners to protect conservation values on their properties while at the same time (in most instances) allowing graziers to be able to continue to use their land in same way they have in the past (grazing of native grasslands for instance). It is recognized by government that many of the conservation values that remain intact in the region today are there because of the good management techniques of generations of farmers and graziers in the area. The conservation programs have generally been supported by landholders because they are incentive based and have a non-regulatory focus in delivery and management Conservation listing In June 2009 the Australian Government listed approximately 21,600 ha of native grasslands as critically endangered in Tasmania, with the majority of this area in the Northern Midlands. The grasslands are the home for more than 20 nationally threatened species. The overwhelming majority of rare, vulnerable or endangered species are plants, many of which persist on private land (SFM. 2007).
17
Implications of conservation listing The listing of the grasslands has been controversial with some farmers fearing that their land is being ‘locked up’ for conservation and that it will impede their ability to diversify their farming activities. The peak farming body in Tasmania, the Tasmanian Farmers and Graziers Association (TFGA), has expressed concerns about the process involved in the listing, citing a lack of consultation (Saunders, 2009). Conservationists estimate that ‘there are probably only 50 farmers affected by this decision’ and that ‘the TFGA’s prime concern is that the Australian Government listing of lowland native grasslands as endangered will stop some farmers developing their land for irrigation.’ (Saunders, 2009). ‘The listing does require land owners to seek approvals from the Australian Government if they intend to change the land use significantly, for example clear it for cropping or plantations.’ (McGlone 2009). Despite this, landholders with grasslands on their property may be eligible for funding to protect and restore them through the Australian Government’s Caring for Our Country initiative.
Weather and water The Northern Midlands Municipality is one of the lowest rainfall regions of Tasmania with the annual rainfall average varying from between 500-600mm on the lowland agricultural areas (200–600 mm) to greater than 1400 mm around the Ben Lomond ranges to the east. Drought For the last seven years the Northern Midlands area has suffered extensive and severe drought with record low three-year rainfalls evident across northern and eastern Tasmania (BOM, 2008). In September 2007 the Central Midlands of Tasmania (including most of the Northern Midlands) was declared an area of Exceptional Circumstance (EC) by the federal government because of the area’s extensive drought. EC declaration allows all farmers in a declared area to be eligible to apply for a full range of drought assistance measures. The drought has been particularly severe over the past three years in the Northern Midlands and according to the Bureau of Meteorology, rainfall has been below average since 1997. International and local data show a marked rise in temperatures in the Pacific Ocean, which can precipitate a drought inducing El Nino, so the current drought will probably continue (Crawley, 2009). Climate Change The extent to which the current seven year drought is part of a longer term change in the climate of the Northern Midlands is the subject of considerable local conjecture. Anecdotal evidence is consistent, with a strong belief that the region is receiving less rainfall over a long period of time and that mean temperatures are warmer. Community perceptions are supported by BOM statistics. Figure 3 below shows that over the past 38 years the region demonstrates a consistent drying trend and rainfall is well below long term averages.
18
Figure 3
Trend in Annual Total Rainfall - 1970-2008 (mm/10 yrs)
BOM data below shows Tasmanian Annual Minimum temperatures anomalies over the past 100 years with a consistent warming trend in Tasmania since the early 1950’s and a marked increase over the past 25 years.
19
*11-year running averages shown by black curve (BOM, 2009)
Figure 4
Tasmanian Annual Minimum T Anomaly (base 1961 - 90)
Economic effects of the drought Thompson (2009) has noted that the drought has significantly reduced the Tasmanian wool flock primarily through disposal of wethers, reduced lambing percentages and reduced ewe numbers. A survey conducted in the Midlands Exceptional Circumstances area suggests wool returns have decreased by half over the last three years as the effects of the drought have intensified. Table 8 below summarises the estimated economic impacts of this scenario on the EC declared areas. Table 8
Impact of drought on the wool industry in EC declared areas for 2009 2009 Potential (2005 forecast)
2009 Actual
Loss ($m)
Sheep class
Number (000’s)
Kg greasy wool/head
$/unit
Number (000’s)
Kg greasy wool/head
$/unit
Ewes
1029
5.5
6.75
650
4.5
5.25
22.8
Wethers
823
6.5
7.75
200
5.0
5.25
36.2
Cull sales
277
30
40
40
6.7
Feed grain
10
Total
75.7
20
Total farm gate cost of drought to the wool industry in the EC declared areas is likely to be about $75.7 million in 2008. This cost suggests the Tasmanian wool industry as a whole will make a loss during 2008. Many of these providers are now struggling to survive financially so rationalisation is inevitable (Thompson, 2009). Currently there is one annual wool auction held in Tasmania but the reduced quantities are likely to result in this being abandoned and all Tasmanian wool being sold at other Australian selling centres. Losses for cereal, canola and poppy production in the EC declared area are shown below (Table 9). Table 9
Impact of drought and frost on cereal, canola and poppy production 2009 Potential (2005 forecast)
2009 Actual
Loss ($m)
Area (ha)
Gross income ($/ha)
Area (ha)
Gross income ($/ha)
Poppies
4000
3900
500
3500
13.85
Canola Total
2600
1300
1200
6 t/ha hay @$200/tonne
1.98
Barley
10000
1320
9800
269
10.56
Wheat
1500
2640
1000
1980
1.98
Total
28.37
Based on data collected from Australian Bureau of Statistics, DPIW and agribusiness sources it is estimated the continuing drought will cost farmers in the Exceptional Circumstances declared area about $135m at their farm gate. This equates to a reduction of about 20% in annual gross value of Tasmanian agricultural production. These estimates do not take into account the losses (transport, processing, inputs, services and contractors) that will inevitably occur post farm gate. Even if the drought breaks now its impact in terms of rebuilding stock numbers, replacing pastures and meeting increasing interest costs will be apparent for the next decade. To provide some perspective on the long-term costs, the following scenario is quoted from Thompson (2009). The cost of regenerating pastures post-drought is around $40 million based on about 100 000 ha of pasture needing to be replaced at an average cost of $400/ha. Unless this is done the Tasmanian livestock industries will continue to produce well below their potential. The global economic crisis is compounding the effect of drought because demand for luxury items such as wool and expensive meat cuts have reduced. This in turn has a depressing effect on farm gate prices (Thompson 2009). The graph below (Figure 5) illustrates the dramatic fall in the number of sheep over the past ten years across Australia.
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Figure 5
Decline in number of sheep farmed and shorn
Environmental Effects of the Drought The drought and associated unusual weather has seen severe damage to crops (e.g. through unseasonable heat waves and frost) – extensive crop losses occurred in the Northern Midlands in the spring of 2008 due to frost. The environment has been put under stress by the drought as well, with rural tree decline increasing, soil erosion prevalent, and many areas heavily grazed in what some would judge to be unsustainable ways. Social Effects of the Drought The drought and longer term climate change has significantly affected graziers in the area, many of whom have been forced destock, buy expensive stock feed and consider radical changes to how they manage their farms and make a living. Farming families report considerable stress and anxiety as the drought has affected not only farm incomes and the environment, but the morale and stability of families and rural communities. The drought has affected employment and the economic and social vitality of some of the regions rural townships as well. The economic ripple effect of the drought has adversely affected small businesses and the social fabric and capital of the region. Many farmers fear that ‘normal’ rainfall may never return to the area and that the sustainability of grazing activities that their families have undertaken for generations is under threat. Asked about climate change and how it was affecting them, a recent study found a wide range of emotional response from farmers, ‘They are uncertain, bemused, ambivalent, motivated, guilty, angry and worried. Climate change means different things to different people in different places. It is an emotive issue and one where clarity and leadership are needed.’ (Crawley, 2009). A 2007 report focused on the mental health effects of the drought and other significant economic issues facing the region, highlighting the hardship it has caused to farming families and local communities. For a prolonged period of time individuals and families in these communities have been struggling to cope as a result of internal and external pressures including a declining industry and local employment opportunities, ongoing drought conditions, lack of access to health and social services (including sporting clubs), agricultural pricing instability, and changing generational cultures between parents and children, to name a few.
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These pressures result in the breakdown of family units, economic and financial hardship, declining mental and physical health, domestic violence, unemployment, social exclusion, and the inability to cope. All of which systematically destroys our rural infrastructure and Community cohesion. (Rural Alive and Well, 2007). The following excerpt from an unpublished submission to government (Dunbabin et al. 2008) made by farmers just outside the Northern Midlands Council area illustrates the pressure many farm families have felt in Tasmania because of the drought and the prospect of longer term climate change: Dry times are not uncommon in our area but two consecutive years of such little rainfall is unprecedented….let alone three. The cumulative effect has meant there has been no respite. The degradation of farm land, production capabilities and morale has been continual. It is a natural disaster that has been slow and silent coming and the toll is enormous.
People are hurting We are tired, we feel isolated and we feel forgotten. Having battled for three years, working long hours, fighting to keep stock alive and well, surrounded by dust and dirt……..we now are watching years, decades and generations of hard work and investment dry up and blow away. Our pastures are being ruined, our bush is dying, many of our animals are gone and we can’t afford to keep on our employees. Our business overheads, such as interest, electricity and insurance have continued to increase. There is no money left for improvements, development or repairs. We can’t plan ahead because there is no end in sight. 50% of farmers work hours are spent feeding stock, carting water and disposing of drought effected animals. Stress levels for farming families are huge. Many wives are now working off farm, trying to cope with all the demands of children and family life, continuing to do their business administration, while trying to support their husbands. Men are left on the farm, alone and having to continue work that is demoralising, usually seven days a week. Children work alongside their parents on weekends and in their holidays. They witness firsthand the trauma this drought is causing. Many farmers have feelings of failure - to their families, friends, communities, animals and land. Production has decreased Stocking rates have been devastated, down to 40% in most cases. Wool cuts have halved and lambing percentages are down by 60%. It will take years to re-build. Cropping has been very limited as water supplies have dried up. The cost of replacing pastures that are ruined by drought will be enormous. Fertiliser, diesel and seed prices have increased dramatically and traditional pasture varieties are no longer appropriate. Most animals have been hand fed for 2 ½ years. Other stock has been away on agistment for months and even years, at great cost. Freight bills are crippling as diesel has increased by 60% in 18 months. Grain prices are now over $450/t and some farmers have spent more than $300,000 on feed/agistment. Many farmers have no water in their dams and have to cart it to each mob.
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Water Availability of water is seen as the single biggest factor affecting agricultural production in the region. Around 50% of the farm gate value of Tasmania’s agricultural production comes from the 4% of the agricultural land that is irrigated. The Tasmanian Irrigation Development Board (TIDB) was established in March 2008. The Board’s aim is to address the state’s projected irrigation water needs and to supply an extra 300,000 ML per year to underpin a doubling of agricultural production by 2015 - a 40-50% increase on existing irrigation supplies. In September 2008 the State Government announced a major milestone in the Government’s ambitious plan to ‘drought proof Tasmania’ and make Tasmania the ‘Southern Food Bowl of the nation’ with the start of the Midlands Water Scheme consultation process. The Midlands Water Scheme is the first of 11 projects to be funded out of a combined $220 million government funded focus on irrigation water development in Tasmania (the federal government is contributing $140 million and the State Government $80 million). Total capital development for the Midlands Water Scheme (MWS) is estimated to be $78.3 million, comprising $64.9 million for the Arthurs Pipeline (from the Central Plateau) and $13.4 million for the South Esk pipeline. (There is also a privately funded scheme, the Macquarie Settlement Pipeline which has just been completed and will provide up to 20,000 mega litres to irrigators. The Macquarie scheme will service 13,000 ha and has costed private investors about $7 million.) The Midlands Water Scheme is designed to put an extra 40 000 mega litres (ML) per year into the midlands region. All MWS projects are planned to have at least 95% or above water surety. To access water from the MWS, irrigators are required to buy an irrigation entitlement in conjunction with an annual water fee. Additional costs borne by the farmer are investment in irrigation infrastructure and on-farm costs. The exact amount of capital contribution needed by farmers to buy an irrigation entitlement has yet to be determined and will depend on the final costs of the development and water uptake rates. However it is expected that the cost for an entitlement is likely to be $1100 per megalitre. The amount of water farmers are likely to buy an entitlement for may vary considerably, but a figure of 200-300 ML per year per farm could be considered an average amount. The TIDB has had enquires for entitlements of up to 1,000 ML per year. Thus, a farmer that receives an entitlement of 200 ML per year will have to pay $220,000 up front for that entitlement. The additional cost of annual water fees will be determined by the cost of the water supply, current electricity prices and associated maintenance and refurbishment fees. There will be a cheaper price for winter water, which maximises the use of infrastructure. The annual cost is likely to be about $150 per ML. So a farmer that accesses 200 ML a year would pay about $30,000 per year for that water in fees. (Farmers only pay for the amount of water they use each year – thus they are not required to use their full entitlement each year.) Additional costs that farmers would incur associated with the MWS would be purchasing the irrigation infrastructure that they would need on their property (i.e. dam construction and maintenance, piping, pumps, access to electricity, and acquiring irrigation equipment such as centre pivots). A five or six span centre pivot irrigator that could irrigate an area of approximately 100 acres would cost in the order of $80 - $90,000.
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Other annual costs include on-farm electricity and pumping costs of approximately $30 - $50 per ML (thus a farmer would incur costs of approximately $6000 - $10,000 for 200 ML).
Profile Summary The Northern Midlands of Tasmania is a traditional wool growing area that is going through a significant transition toward a new mix of diverse agriculture enterprises; this situation mirrors other areas across Australia where farm diversification is taking place. The Midlands is one of the oldest continually grazed areas in Australia, with many family farms proudly dating their lineage back to the 1820’s and 30’s. Wool produced from the region has been recognized as some of the finest in the country. This Region has some significant environmental issues which include fragmentation of remanent vegetation, degradation of native grasslands due to grazing, rural tree decline, salinity and weed infestation. In 2009 the Australian government listed a large area of native grasslands in the Northern Midlands as critically endangered. The implications are that these areas will receive a higher level of protection and approval will have to be sought for a change of land use. Over the last three years the area has suffered one of the worst droughts on record and this has not only exacerbated the lack of profitability in growing wool but also acted as a catalyst for farmers to consider diversification. The drought has had significant adverse economic, social and environmental effects on the region. The seasonal drought may have ended over the 2009 winter months, but the negative effects of it will be felt for several more years. A major factor change influencing the future of the region is the advent of the Midlands Water Scheme (MWS). The $78 million scheme is designed to put an extra 40,000 ml per year of water into the Midland region and provide farmers who sign up for it with 95% water surety. The MWS has the potential to significantly influence diversification in the region, not only in terms of changing the farm enterprise mix of the region, but how family farm businesses are managed and operated.
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Results Why have farmers diversified over the past ten years All farmers were asked why they had diversified over the past ten years. The interviews focused on identifying what their past motivations were, with an emphasis on the non-economic reasons for diversifying. Farmers generally began answering the question by focusing on the economic factors, explicitly communicating that economics was the major decision maker and all other non-economic considerations were minor; however with further questioning, it clearly emerged that additional noneconomic internal factors were having as large an influence on their decision making as the external economic factors they initially identified. The key motivating factors influencing their decision making in the past are listed below and are followed by a brief discussion. The themes listed below were consistent throughout the interviews, whether discussing past or future factors influencing farmer decision making.
Internal Factors Attitude to farming, change and challenge Many farmers spoke of the importance of having a ‘positive attitude’ to farming in order to be successful with diversification, of the need to be ‘passionate’ about it and to enjoy the ‘challenge’. Indeed these internal non-economic factors were seen as fundamental to being successful with diversification activities. I’m not doing what I do for the money - I love what I do – the challenge. Chief barrier is yourself as an individual. Age has nothing to do with it. You have to keep advancing. It’s your mindset – having a ‘can-do’ approach. Passion is key, having a passion for farming and a work ethic that allows you to do a job when it needs to be done. Farmers are optimists.
Several embraced diversification because they were seeking either a change (‘to not be doing the same thing - to try something new’) or a learning challenge to do new things ‘I’m loving the challenge’ and mentioned the need for the ‘mental stimulation of trying something new.’ Some identified that diversification provided them with the ‘opportunity to get more out farming,’ to learn more, and get more ‘professional rewards for it’ (‘You get out of it what you put into it.’). Some farmers spoke of the need to be opportunistic, to have the right attitude and ability to take opportunities that came up, and this enabled them to diversify. ‘Pure Opportunism sometimes (enabled us) – opportunities came up, and we took them.’ Diversification gives you choice in the future. It’s important to feel comfortable farming – doing what you are doing.
Being ‘proactive’ and ‘aggressive’ was seen by some as necessary in order to expand their business: We’re taking a proactive and aggressive approach – we’ve invested $10 -$12 million in purchase of two farms to diversify recently.
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Some stated that one of their attitudinal drivers was to try to ‘be in control’ over their ‘own destiny’ – something they felt they had lost with the downturn of the wool market, the drought and other external negative economic factors affecting them. (Ironically some diversified into dairying where it was hoped a stable and reliable income could be made, and this was the case until 2009 when the price paid to farmers for milk fell dramatically.) Others mentioned that diversification allowed them to be exposed to new industries, new connections and new understanding of current farming issues from different perspectives. Some were motivated by the opportunity for new enterprises to build new networks and new relationships for their businesses. While some were relishing the challenge diversification presented to them, others found it harder. They also identified that these were future barriers attitudinal to diversification. Mental health in rural areas is a much bigger issue than anyone will recognise. Government doesn’t recognise the true cost of mental health – depression in rural areas. Complexity, not enough hours in the day Time – lack of Living with more stress Every situation is different – young guys need to see possible pitfalls of diversification.
One farmer commented on entering into diversification and the difficulty of fitting it in with current workloads and the effect on family lifestyles. There’s tradeoffs between lifestyle and workload – there’s inertia sometimes from having so much going on.
Other comments regarding farmer attitudes related to how they perceive themselves and the importance of having a positive attitude and to be not limited by how you define yourself as a farmer. It comes back to how you describe yourself - e.g. a wool man versus being a resource manager. I am a resource manager. It limits yourself if you just say, ‘I’m a wool producer’. Farmers don’t understand that we are a lot better off than many others in cities.
Risk Management: Farmers are not willing to shirk debt – but debt is not for everyone.
Diversifying to spread risk (economically, environmentally and socially) was seen as a major internal diversification motivator for many. Spreading risk allowed them to not be reliant on any one industry (e.g. wool) and gave them more ‘choice’. ‘As a risk management strategy you’d be crazy not to do it (re diversification); you don’t want to put all your eggs in one basket.’ However the level of risk farmers are willing to take is a very individual challenge – some farmers are very comfortable with taking increased levels of risks, of trying new enterprises, of making significant investment in new infrastructure (e.g. centre pivots, dams) and see higher levels of risk as necessary to remain in farming, while others are more reluctant to take on the risks associated with increased business and lifestyle complexity, debt and new skill and knowledge challenges. It was acknowledged that some farmers were more able as well as more willing to take on the risks associated with diversification and that the degree that they were comfortable with taking risks assisted diversification activities. Complexity with diversification – ups your risk; lifestyle of running sheep is less complex.
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Diversification was not always seen as a panacea for economic (or other) problems, it was viewed very cautiously by the farmers, due to the economic, social and environmental risks it can pose. The ability to achieve finance and take the financial risk was seen as a key first step to address to achieve future diversification ‘our only barrier is the ability to finance it’. While many were not risk averse others did not want new debt (or additional debt) or the complication that gaining additional finance would bring. We wouldn’t go into high cost, high capital diversification – don’t want the debt. More interested in gaining control of the business. Lack of capital and the huge capital costs needed to diversify
Many commented along the lines that it was ‘better to do a few things well than try to do too many things not so well’ – diversification for these farmers meant focusing on what they were good at, rather than taking on the risk of trying something outside their traditional farming enterprises (e.g. grazier entering into dairying). Completing a risk management strategy for a new diversification was seen as a commonsense way to approach diversification by farmers – however the formality and comprehensiveness of the risk management strategies appeared to vary considerably – ranging from formal advisory boards and a diversity of external advisors recommending decisions and making reports, to farmers making decisions more or less on their own. The degree to which farmers had formal training (e.g. tertiary Agriculture Science) was seen by some as a generational change that allowed them to approach risk and change on the farm in a different way than previous generations. However one farmer, who was embracing diversification aggressively said that he had had no training and that this was not a barrier for him as he simply paid for the expertise to assist him to assess risks and make decisions about diversification. Other points about risk included: Not adverse to risk – comfortable with risk – makes it easier for step changes to be made. It’s a mindset – not financial security – in fact it’s the reverse – but we had to move on. We did risk management exercise. Did an exit strategy; this gives you confidence once you’ve got it all down on paper. Your risk management strategy defines the downsides and the risk. Mentally it has a big impact if you have if figured out. The key is to get out before it’s all gone if you have to get out.
Scale has been an important risk strategy for many of the farmers interviewed - having larger farms, multiple farms or farms with multiple income streams so that a diversification is only one part of a management strategy. A general theme repeated by many farmers, stimulated by the collapse of the wool industry, has been the need to diversify to reduce risk so that ‘one does not have all their eggs in one basket.’
Professionalisation of farming: from a lifestyle to a business paradigm Farming was a lifestyle and now it’s a business. If you looked at farming here from a pure business model it wouldn’t make it – but as a family business it makes it.
The ‘professionalisation’ of farming over the past ten years has been a significant internal enabler of diversification. Whereas farming has long been seen as a ‘lifestyle’ it is now seen more as a ‘business’ that must pay for itself, especially by a new generation of farmers who have increased tertiary education levels and modern business skills. The farm is a business – it has to make a commercial rate of return.
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Other farmer’s barriers are capital and generational change. New generation wants to have more active role on the farm – they are educated.
This professionalisation has been driven by both external factors (such as lack of profitability due to commodity prices and higher costs) and internal factors (such as education levels and incorporation of new management approaches). This has led in some cases to the formation of both formal and informal management boards or advisory groups for farms that allows farmers to get outside and objective advice about their businesses. Many farmers are using external consultants and advisors much more than they have in the past and see the investment in specialist advice as key to making sound decisions about diversification. The defining moment for us [was when] we put together an advisory board for the business – this was a real catalyst to have the confidence to go forward.
Aligned with the professionalisation of farming over the past ten years has been the increased use of external advisors by farmers. Knowledge of the new area to diversify was seen as not something one necessarily needed from past experience, but was seen as something that could be acquired through either the farmer’s own research and/or by using external advisors. Having really good technical advice is the most critical thing
Having good external advisors was seen as a major enabler for diversification for the majority of famers. Most still made the final decisions ‘on their own’ (e.g. within their family) but relied heavily on external technical advice (e.g. on-ground, business, financial) and outsider perspectives to assist them to make an informed decision. Having good accountants was seen as a key for most farmers. Using lots of expertise from lots of different people was common. Agriculture is big business now and you can’t afford to do it on your own
Other enablers associated with external advisors brought up included: being part of benchmarking groups; having a good agronomist; and trials with government agricultural researchers to learn about new crops and local applicability. Good management was seen as a key enabler for successful diversification – having good managers and good staff on farm all assisted. Having the ability to be strategic about the farm decisions, having clear goals and a vision for the farm was also noted by farmers as important enabler for their diversification activities. Training, budgeting – it gives you confidence. Having a strategic approach to things - keeps you mind on the big picture.
In ‘modernising’ their farms some famers have taken the opportunity to ‘simplify’ their activities and ‘off-load labour and other inputs’ to reduce costs and refocus their activities. Gradual decline in rural communities – less people – capital has replaced people on farms – due to having too excess labour in past and enterprise changes
There were comments regarding the cost and difficulty of getting flexible labour on farms. GenY attitude to work – they want to stop work at 5 p.m. on Friday. That’s not how farming works.
While still others felt a strong motivation to bring people back onto the land and rural communities. Employment: get people back to land and create rural employment
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Some saw diversification as a way of simplifying their activities and focusing on a fewer but more lucrative enterprises which gives them great flexibility. My whole business focus has changed from short dated to long dated, i.e. trying to move away from annual contracts – the amount of labour and capital units required to grow crops on a large scale. Over the last ten years my aim was to develop but over the last few years it has been to detune and become more opportunistic – if a deal’s there and its good enough, I can turn on the irrigation, if not, I don’t have to.
Knowledge and skill sets The farmers interviewed recognised that not having the right combination of appropriate knowledge, skill set and attitude could be a barrier for future diversification. Lack of skills and knowledge about trying to new crops was highlighted as a key barrier for some. Some farmers spoke of the costs and complexity of diversification and the difficulty of their ‘Inexperience’ and the need to ‘learn to crawl before you can walk.’ Others spoke of the difficulty of ‘choosing which way to go’ given the diversity of opportunities available and their farm’s productive constraints and opportunities 'it’s incredibly hard to decide what to diversify into.’ Not everyone can achieve the same results – growing high input crops, costs high, can be very risky – timing, management must be right. Crop contracts can be scary – e.g. meeting quality standards – makes you weary of the costs if you can’t do it – meet the quality.
Those farmers wanting to diversify communicated that they either had the knowledge and skills needed to diversify or they could buy the expertise needed (e.g. through consultants) to diversify. Having the right attitude towards diversification and farming in general was seen as key, indeed as important as having the necessary skills and knowledge. Farming has moved from a lifestyle to a business over the years. But people aren’t necessarily more businesslike
Farm Business Expansion We will keep on doing it [buying farms, expanding]. Vision is to keep growing more farms.
‘Getting bigger’ and/or buying more properties was seen as an opportunity by some as a central theme to their future opportunities – for these growth oriented farmers, simply making an income from their existing property or properties was not part of their strategic vision for their enterprises – their vision was to continue to expand, to increase their capital value as well as their income. For these farmers, facing such issues as increased risk, challenge and complexity was something they embraced rather than shied away from. One expansionist farm family planned to professionalise their farming operations by ‘rolling their operations into a corporate set up.’ These farmers were looking at a vision of their operations being worth ‘$200 - $300 million’ in the future ‘there’s the need for this sort of scale and critical mass in the future here.’ (They were also concerned about constraints in Tasmania that might push them offshore and possibly overseas to countries such as Uruguay were they felt there was less barriers to farm expansion (e.g. ‘politically stable, benefit from climate change, low land prices, rapidly growing population, not government restrictions’) and more opportunities for diversifying their farming activities.)
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Additional comments on the theme of expansion included more dairy conversion of wool properties and more leveraging off big capital bases as way to fund diversification and expansion. Consolidation and Simplification Simplification is a better way to go rather than complication – better to do one or two enterprises really well.
The expansionist farmers contrasted sharply with those that were happy with the current size of their operations and were seeking stability or consolidation and did not seek higher levels of complexity, debt and risk. These farmers were actively seeking simplification (as a by-product of diversification) as a way to improve productivity and the stability of their family life. Diversification has taken place, now building on it, improving systems, getting good at it, simplifying complexity. Probably not more diversification. Will expand but not do different things. Mixed business is a strategy and is ongoing. Simplification of the three farming family business into separate ones – for risk strategy, accountability, reducing complexity, less worry. Opportunity to reduce labour costs
Land Capability, Stewardship and Conservation The environment is the biggest factor. We are all trying to make the best decisions because at the top of our agenda is sustainability – economic, environmental and social. Can’t afford to mine the land – it will come back to bite you.
Land capability can be seen as both an external and internal factor. (The individual’s views regarding the land and diversification can be regarded as an internal factor, while the actual characteristics of the land itself as an external factor. In the interviews, these were intertwined, so for simplicity, it is treated here as one.) An implicit understanding, made explicit by some, but simply assumed to be understood by the interviewer, was that diversification was either enabled or constrained by the agricultural and environmental sustainability of the land. The soil types, local climate, local rainfall, exposure to frosts, and temperature range, etc, framed decision making about diversification – the type of diversification available to farmers was largely determined by their farm’s environmental conditions (and of course the availability of water). Diversification means you don’t have to flog the land. Environmental sustainability drives you to be less intensive.
Environmental issues (e.g. soil erosion, salinity, vegetation decline, weeds, managing the land sustainably and the conservation of native species and bushland) and inherent limitations (such as soil type, frequency of frosts, frequency of inundation due to flooding, local temperature and rainfall averages) have been an influential factors on many regarding their decision to diversify or not while for others it has played a minor role. In some cases environmental values (e.g. native grasslands and forests) were seen as a constraint and a hindrance to future diversification.
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Some had multiple options to diversify if they had access to water, some had much fewer, with or without water depending upon their location. Many were uncertain of the long term sustainability of diversifications such as irrigated intensive cropping (particularly the effect on soils), but this uncertainty did not stop them from diversifying. The majority of farmers made some comments regarding the dual goal of balancing conservation and production and wanting to repair the land after the drought. Others cited the sustainability of intensive crops such as potatoes and onions on the ‘fragile’ soils of the Midlands as a constraint that would affect their choice of crop type and their income flows over the long term. Some were worried that farmers who were making big investments in water infrastructure would be forced through economic circumstances to grow high value crops initially (to increase cash returns) and that this was not a sustainable way to manage their soils. Substantial barrier is soil limitations and fertiliser costs. Some soils not sustainable for intensive cropping. Soil structure decline – intensification with cropping irrigation – traffic on soil, annual cropping, time pressure Fragile soils in the Midlands is a limitation – but you just need management to do it right. Spuds and onions are now marginal for us – we stopped growing them [as profit margins have come down].
Others pointed out that having reliable water would allow them to manage cropping with the long term in mind and they would be able to thus manage the land better (more sustainably) than they were at present where they were forced by economic circumstance to get as much production out of the farm as possible. Some who diversified their wool growing operations out of economic necessity didn’t necessarily whole heartedly embrace their new mixed farming lifestyles – remarking that cropping and irrigating were much more complex, time consuming and was harder on the environment. I miss growing wool – it’s much easier on the environment. Cropping is harder on the country. It’s physically harder on people too. It uses more chemicals, more fertilisers, and there’s more irrigators to look after.
Those that suffered water shortages during the drought spoke of the environmental cost of the drought (e.g. soil and vegetation decline) because of the pressure farmers were under to keep stock alive and get the most out of the land; they felt that if drought conditions persisted in the future, past stocking rates and past ways of managing their soils would not be sustainable in the future. The overarching nature of land capability ensured that it was a major factor in future diversification options. Largest barrier is the limitation of the farming system – its capacity, soils, etc. Sustainability is a big factor – the need to look after the land. Diversification comes at a cost – if you want to look after the ground better. Soils will be limitation, re intensity of cropping – e.g. cropping 2 or 3 out of 6 years. Looking after the farm environmentally – removing fences and trees – another cost to diversify – this could inhibit me – cash flow uncertainty – returns uncertainty.
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Sense of place Some farmers spoke of the strong ‘sense of place’ that they have developed for their farm environments, and the desire to retain that sense of space and relationship with the land, while at the same time diversifying profitably and sustainably. The land has spirit. Indigenous Australians have known this for millennia. Theirs has been a close association with the land - seeing, smelling, hearing, tasting, touching and thinking about it. For me, my everyday existence is entwined with the land and I cannot help but be powerfully affected by its spirit. It defines my sense of place, my belongings in life.
Environmentally sustainable production A new point raised in this area of questioning was how the increase in the last ten years of the power of the consumer in demanding that food products be produced in environmentally sustainable ways, yet be price competitive with imports from overseas countries who might not necessarily have the same environmental codes of practice. We are not being paid the true value of what we produce – what it is really worth and the land degradation it causes.
Many farmers brought up the issue that there is a bigger gap between rural communities and people in cities, that people in cities did not understand the pressures farmers were under and the real costs of producing quality food in an environmentally sustainable way – they felt the increase in community expectations was a barrier to them to continue farming profitably or to diversify. Difficulty is people in the city telling us how to look after our animals and farms – city people are losing touch with where food comes from. Everyone used to have a relative in the country but not anymore. There’s a huge divide between rural communities and cities – 50 years ago everyone had a relative connected to the land – not like that anymore – how do we make sure the city has empathy for the farmers but not a handout mentality? Community expectations about how farmers should manage the environment has increased – and yet they still want prices as cheap as imports from overseas. The expectation is of environmentally friendly food at low prices. The prices are unsustainable. Market place has changed – consumer has changed – higher demands on environmental care of the land but no premium paid to the farmer Environmental accreditation for wool products – niche market (is potential) - the income is not in grazing as a bulk commodity anymore. [People are] looking for specialty environmentally based products.
Some also spoke of their frustration that environmental considerations were not factored into yearly accounts – that there was no ‘triple bottom line’ to consider the environmental and social aspects of farming along with the economic profit or loss – they felt the true cost of farming was not being factored in by the community, government or bankers and that in the long term this would be an impediment to diversification. Sustainability will never go away. Everybody will be looking at how sustainable farmers are environmentally.
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Financial account figures at the end of the year give very limited picture of what’s going on on-farm e.g. affect on soils is not factored in – no social or environmental bottom line is factored in.
Environmental Services: Stewardship Payments We are providing an environmental service and like anyone, we expect to be paid for it.
Many have felt motivated by ‘pride’ to ‘do the right thing by the environment’ and have sought to sustainably manage their properties while diversifying and expanding. ‘We have the opportunity to do it ‘right’ here and that is a big motivator.’ A significant number of the farmers were keeping substantial areas of native bush and grasslands on their properties for both conservation and production values and benefits. Some have realised financial gain for conserving their native bush (e.g. covenant payments) and see this as part of their diversification and income stream. We are willing participants in wanting to preserve biodiversity. So anything that values those things - government policies, understanding the social aspects of farming - will benefit us with arguments. We would like to see on our balance sheet ecological capital and social capital – this would give us a true picture of the whole operation. Accounting for social and environmental things is something we don’t do enough.
The opportunity to conserve parts of their properties for conservation and receive environmental stewardship payments for this was seen as a strong opportunity for some farmers (indeed a passion and driving ambition) while others saw little real income possibilities in conservation and still others saw imposed conservation as a threat to their livelihoods and way of life. If native grasslands pay enough, I’d be quite happily set them aside – but they aren’t paying enough now.
A number of farmers were aiming in the long term to see ‘conservation on the balance sheet’, to receive annual stewardship payments from government or other sources for conserving significant areas on their properties. Many did not want to close off their options, and sought rolling short term agreements (e.g. 5 years) so as to ‘keep future generations’ options open for the use of the land.’ We wouldn’t sell the bush land – it couldn’t financially pay for the other values (e.g. conservation values) it provides.
For those seeking payments for environmental services (e.g. conservation of native forests and grasslands, protection of endangered species and habitats) conservation on their properties was an opportunity ‘to get some real income’ for something they already did and wanted to continue to afford to do – conserve parts of their properties in recognition of the natural endemic values that have been conserved by previous generations (often of the same family) on the property. These farmers were seeking to integrate environmental services as not an add-on to their income streams but as a regular and reliable income that sits alongside their other core traditional agricultural activities. We’re negotiating a covenant on 200 ha of lands, we already have 300ha covenanted. It will be minor income stream. We aim for up to 20% of farm being managed for conservation.
Those seeking payments for conservation were working with both government and the private sector to seek adequate payment for conserving significant areas on their properties. In one farming area three adjacent families working in partnership were seeking international support for a catchment based approach to the conservation of a large area of native bush and grasslands. We would forgo development opportunities and lower stocking rates if we can get paid for conservation. We’ve been land managers for conservation.
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Why shouldn’t we be paid for environmental stewardship activities in future? Farmers wear all the cost burdens now – they want us to be sustainable environmentally. But who’s paying?
Some farmers had been working successfully with government for years and were happy with the conservation payments they had received (e.g. for conservation covenants, protection of old-growth forests) while others had become frustrated with perceived government restrictions and red tape and were hoping to work with private sector conservation investors in the future because they thought the bureaucracy would be less. Some were sceptical about the amount of real funding that could be achieved in the future for conservation activities (‘I can’t see the community coughing-up money for environmental services’) and although there was a great deal of passion and interest in receiving conservation payments, these type of payments were still seen as secondary income streams. Additional future diversification comments focused around conservation included: Huge opportunity in conservation measures – both in government and corporate entities. Environmental services. We’re going the opposite direction of the irrigators. Environmental values on property – hoping to turn them into income. Covenants on forests – but don’t know what the income would be from 500 ha
Intergenerational Mindset - Family Farms and Historical Land Management Patterns With a sense of place it becomes who you are – we are graziers since the 1850’s – knowledge has been passed down, accumulated – to diversify [into something new] is a big deal – not just a business change, it’s changing who you are. You need to like who you are after you diversify.
A majority of the farmers interviewed came from families that had been farming on the same farm or in the same area for generations; some family/property connections linked directly back to the first settlers in the early 1820’s and 1830’s and their families have been on the same farm since this time. Having a long family link to a property, and a long family tradition of a certain type of farming (e.g. wool growing for the past 150 years) was viewed differently by different farmers. Some felt the historic imperative to not fundamentally change the way farming has been done on the property (we will not develop in future with centre pivots and dams because historically we haven’t done so ... we like the current diversification pattern – this is in the best interests of the land. Because of the long history of the property, and the environment we’ve managed for conservation, ‘we like it the way it is’) while others felt they had no constraints and that change (diversification) was inevitable and an economic, social and environmental necessity. Family history did influence past decisions to diversify, but not now – I’m not compelled to do anything for history anymore – I’m free of that. Father was influential – he always used water – so I was used to this approach. My own exposure to water decision making and irrigation thus made the transition to irrigating easier.
A significant driver for most of the farmers was to ensure that the farm could be available to the next generation should they (their children) choose to keep farming. For some it appeared that this was a key internal factor in their decision making about diversification and staying with their farm businesses through the economic and social hardships caused by the drought.
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My motivation is to hand on the farm to our kids – to the 5th generation of the family. I’m proud of my family heritage. I want my children to have what I have – the opportunity to be a farmer. There’s family history here... affinity with the property, trying to carry on a traditional family tradition here. We will hopefully be successful in bequeathing a working asset to our children. It’s a family jewel – it would be nice to keep it – but you can’t control kids.
Several farmers spoke of their desire to ensure new diversification activities were blended with the sustainable land management strategies that their families had used for generations. Being part of a long generation of family on the property gives you affinity with land; have empathy with indigenous people; you’re part of the land and the land is part of you. This very much influences your thinking about your business.
Family Farming The support of the whole family in taking on new diversification ventures was a fundamental enabler for diversification. All farmers interviewed said that all major decisions regarding diversification were discussed with their partners – how the decision would affect their finances, their family life, and the next generation were all considerations. All of the farmers had children and a major part of their diversification decision-making was what effect a major decision such as borrowing to purchase water and irrigation infrastructure and take on a different way of farming (i.e. cropping vs. grazing) would have on their children who may or may not be continuing on the farm or seek to be farmers in the future. There was a lot of unknowns involved in decision making when it came to whether the next generation would stay on the farm, so many farmers framed their decision-making regarding diversification within the context of ‘keeping their options open’ for the next generation – keeping the farm viable so that the next generation could choose whether to stay on the farm or not. Another factor that assisted many to diversify was having outside income, typically from a wife working off the farm. This enabled some to feel much more confident about taking diversification risks. Wife works off-farm so have family income – most important factor for me – diversification risk is easier.
Many spoke that although farming is a ‘business’ first and foremost, it is still different to a ‘normal’ job in the city and that their families wanted to preserve this lifestyle even though in some cases it had become extremely stressful and difficult in the past few years (due to drought, etc.). Many spoke of their ‘love’ of family farming, of working with the land as a family and their desire to preserve this ‘way of life.’ Some discussed entering into diversification and the difficulty of fitting it in with current workloads and the affect on family lifestyles: There’s tradeoffs between lifestyle and workload and there’s inertia sometimes from having so much going on.
So although farming was in most cases being ‘professionalised’ and seen as a business more than a way of life, farming was still seen as family business and the professionalisation of it was not necessary seen in conflict with it still being a family/lifestyle endeavour. Indeed professionalizing a family’s approach to the business aspects of farming was seen as a way to maintain the family business and farming lifestyle.
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Positives of family farming that assisted diversification emerged, including: •
strength of group decision making – e.g. three families working together and the skill base brought together by these families;
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children coming back to the farm with tertiary training in agriculture (and spouse with training as well); and
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the support of the family unit when there were less workers on farm was a key to surviving the downturn for some.
External Factors Profitability It all came down to economics. The only way to make money is to increase production – until that paradigm changes, people will pursue it.
The dominant reason cited to diversify was to increase, or combat a lack of profitability and achieve economic security and reliable income, with the dominant means being investment in water and water infrastructure in order to increase or establish crops and expand enterprise mixes. Ensuring their businesses were profitable was seen as fundamental to enabling them to continue farming and to be able to then consider the wider social and environmental aspects of farming. (However, the wider social and environmental aspects of farming (the non-economic factors) were a key influence on their decision making - whether they explicitly articulated or realised it or not). You can’t be an average farmer on a high cost farm - lots of irrigation can mean more staff and more knowledge needed for more variables and more intensity of farming than anticipated.
Having enough money or capital to invest in infrastructure, in additional land, in water and the time and effort to research diversification was a barrier to some. Reluctance or inability to borrow, coupled with low wool prices, falling commodity prices, higher labour and input costs (particularly in the last few years) has made diversification more difficult for some to consider (but these things have also acted as stimulus to change – with many having no choice but to invest in diversification activities or get out of farming). Comments regarding input costs included: Input prices going up [e.g. fertiliser, fuel, electricity, machinery], Can’t afford extra labour, Low wool and commodity prices, and Freight costs increase.
Falling Wool Prices We needed to leave behind old economy industries like wool – we see no future in natural fibres – Aussie wool farmers will be the peasants of Asia.
The low price for wool over the past ten years and the uncertainty of other commodity prices was strongly highlighted for many as potential hurdles to diversification. However, for many other farmers these negative factors have also been a significant external driver to diversify and access water. For many, relying on wool for economic security is no longer seen as an option.
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The wool industry is rooted. We are getting paid the same as we were 20 years ago.
Diversifying allows these farmers to increase their turnover and avoid ‘stagnating economically’ (as well as socially). Many have been looking for a stable production base for return (e.g. from cropping, dairying, meat production) to complement wool and other more marginal or unpredictable farming income streams (e.g. vegetable production). In particular growing crops that garner attractive prices, such as poppies, potatoes and peas, was a major motivator for many to change their enterprise mix from being based on dryland grazing and cropping to irrigated mixed cropping and grazing. The wool industry was dying – so we had the choice of going slowly broke or risking a quick death
Some farmers would have been happy to remain wool growers, but due to the fall in wool prices they felt that had been ‘forced’ to diversify by economic necessity and thus their diversification activities and consequent lifestyle change were driven by factors that they couldn’t influence. (‘Wool is gone; the income is not there anymore’). These farmers stressed that by diversifying they were reducing their dependence on external factors over which they had no control (e.g. the price of wool) and were gaining more choice and control in their decision making. If you make the farm lucrative, you can make choices; you can be more sustainable – diversity has enabled this. My investment in water has led to greater return, led to choices – if you’re just a wool grower, you have no choices. My decision making was driven by factors that I had no control over – wool prices, interest rates, and climate change.
While one of the most important drivers for diversification in the Northern Midlands over the past ten years has been the dramatic fall in wool prices, some still see a future in wool and are keeping their options open. These farmers see wool as a viable income stream (but one not to totally reliant on) and that creative approaches to how wool is grown, marketed and sold were needed to make wool pay (‘we need supply chain alignments’). Wool still has a future. Doomsayers haven’t looked at the numbers. Wool can be profitable. But how profitable remains to be seen.
Some were hoping for specialty niche income stream for their wool, based on its environmental values – they were aiming for their wool to be accredited as environmentally sustainable or ecologically unique: ‘We’re looking for opportunities for such things as ecologically sustainable wool – values that a growing affluent consumer culture has – outdoor market.’ But these farmers were in the minority as most farmers did not see a secure future in relying on wool for a significant part of their income. Other market factors affecting profitability The ‘control’ of the markets that farmers sell into have on a farmer’s business plays a large role in many of the decisions farmers have made about diversification. Many were seeking more financial security and predictability through diversifying, but even after diversifying some were finding that the profitability of some bulk commodities was unreliable (e.g. price of milk paid to dairy farmers) and they were still greatly at the external financial whim of national and global markets. Big companies are squeezing us tighter and tighter all the time – it gets to the point where you can’t farm any smarter no matter how good you are. Being at the whim of multinationals such as Simplot’ [regarding price setting fluctuations] Duopoly of supermarkets – farmers getting low prices
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Water Surety The best return on investment is water development.
Securing water access and storage was a major motivator for farmers as water surety was seen to give them economic security to allow them to keep farming. Having access to water was seen as a way of giving farmers the choice for economic diversity (‘it gives you choice to do more and different things’), of allowing them to have a mixture of enterprises, rather than simply being reliant on wool growing or dry land cropping for instance. Doesn’t matter how good your soil is, if you haven’t any water, you’re dead. Water is the biggest factor on this property – land is only good if you have water The old adage, ‘mud and money, dust and debt’ is pretty true.
With access to secure supplies of water farmers said they would be able to contemplate a huge range of diversification activities including such things as: intensive cropping for a large variety of crops (e.g. poppies, vegetables, cereals, fodder, essential oils and specialty horticultural crops), dairying, beef cattle and lamb meat. Water surety also gave some farmers the feeling that they could again look at the long term management of their farms ('20 – 30 year time frames’) rather than be so focused on the immediate need for water and cash flow amidst the drought. In the midst of the drought, securing surety of future water was seen by those that did not already have access to enough reliable water as the only way they could stay in farms. Water is the driving factor – water is the key Reliability of water – to have it on tap every day of the year.
Water was also seen as a way of increasing the capital value of farms – this being a driver for many as well as to increase yearly income and cash flows. When asked about future opportunities almost all farmers focused around first achieving ‘water surety’ on their properties. Selling water was also seen as a future diversification opportunity for farmers. The Drought The drought is a driver –it has forced change, forced a complete revolution of the plan for the farm. We’ve lost half of our sheep due to drought in last 3 years
The drought over the past four years and the generally drying climate over the past ten years has been a significant motivator and major external factor influencing farmers to diversify. The drought, coupled with the fall in wool prices and increased production costs has forced many farmers to make changes, to take risks, to invest in water infrastructure (where possible) and review the very fundamentals of their businesses and lifestyles. The response to the drought is ongoing and major infrastructure decisions are still being considered by many (e.g. whether to invest in the Midlands Water Scheme). The drought has been very hard on many of the farm families, affecting their finances, their family life, mental health, the environment and outlook on the sustainability of their farming enterprises. Some farmers who have been able to diversify over the past ten years (through increased access to water) have not been affected by the drought as much as those that have been solely reliant on seasonal water supplies. But by and large, the stress of the drought has accelerated decision making to diversify
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or to consider diversification in the future. Those that had made a decision felt empowered as they found ways to address external factors that they felt they had no control over. The stress of drought is on finances, environment and family. Dealing with it makes you feel better than not dealing with it.
Some self-explanatory quotes below reveal how severe the drought has been and how obviously it has been a major external barrier to diversification for some farmers, while at the same time also being a major motivator to change too. You can fight with processors and companies about prices and whatever but you cannot challenge the drought; drought is the biggest challenge of all. Drought: not travelling well through it; we’ve come through four of the tightest years in a row since 1910. Drought has been very stressful on a lot of men – there’s a lot of desperate men – people in a place they have never been before. Drought relief helped – we weren’t too proud to take it. Nature is the biggest factor of everything; if she doesn’t do what she’s meant to do, you are fighting an uphill battle. We’re spending huge amounts on fodder to keep stock alive due to lack of feed. We’ve been brow beaten by the drought. Drought – we’ve reduced sheep from 6000 sheep to 2000 Drought was very stressful because of all the decision making. Drought breaking has speeded up decision making- [and] created pressure for some The drought stretched everyone to the limit – to the max. Cash flow problems in drought years We had zero water allocation last year and 25% the year before – less crops, less income Climate change that is happening – the variability – wet and dry, lack of and then too much water – less predictive - changing springs and autumns. With the wool market decline – we looked at what can we could do – the decade of dry was starting to bite – took a long time to make decision to go ahead, I’m a reluctant irrigator.
Climate variability When in drought you get shell shocked, it becomes another stress to think about diversification.
The short and medium term effect of the drought was seen as a barrier to future diversification, with recognition that even with the return of ‘normal’ rains this year, the effects of the current drought would take at least two or three good years to get over – financially, environmentally and socially. Some also felt that the current drought was affecting their ability to make major financial and social decisions about their family business future. It’s like farmers have gone ten rounds with Muhammad Ali – they are punch drunk because of the drought. We hope not to be clouded by last three years of drought.
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People are looking for the next step, to do something to feel sense of accomplishment, but it can get too big and you can get overwhelmed (when in the midst of the drought). Drought – there’s social implications – losing people and the social fabric as people are forced to move to town for work. Social networks (e.g. sporting clubs) break down. Social networks very important in small rural communities.
Climate variability in the future was seen as an important consideration and potential barrier, and that achieving water surety could help overcome some of the risks associated with future climate variability. Climate change is in the back of my mind – climate variability will far outweigh the impacts of climate change in my lifetime. Thinks about climate change, but doesn’t agonise over it.
There was no agreement about whether human induced ‘climate change’ was happening in the Northern Midlands, only that ‘climate variability’ was something that farmers had to prepare for – with many saying that the current drought and variability (e.g. frosts, high summer temperatures, flooding) over the past ten years were not abnormal and were consistent with their understanding of local climate fluctuations over the past 160 years. Some also saw climate variability as an opportunity to take advantage of and be prepared for. Climate change is a load of crap - variability, yes. It’s not a factor that’s influencing our decision making about diversification. We see it as an opportunity. Climate change – not a barrier, but a challenge – might enable new crops. Drought not a barrier if you keep your eye on the main game.
Some were explicitly sceptical of there being a human induced climate change affecting weather patterns in the Northern Midlands while others were less sceptical: Climate change is the biggest con since the millennium bug. Government is using these things to divert attention from other things. We can’t afford to go down this path. Major problem has been the drought last few years. Our experience tells us nothing - Science tells us climate change is happening. Climate change is influencing our decision making.
With regard to climate change, some were less concerned about the weather, but more concerned about the adverse effect that a federal government ‘carbon tax’ policy on agricultural greenhouse gas emissions might have on farming or future innovations and diversification. Far greater political risk in climate change – farmers may get screwed to the wall over emissions. Carbon tax policy will impact negatively on Australia.
Other general comments on the drought and climate change included: We’re seeing drought as part of climate change - increasing variability. May mean 15% less rain – drought was 50% less. Drought is a prime determinant. Climate change could be a positive or a negative. We consider it but not sure if it’s there or not. Providing environmental services will lessen risks. Climate change – will rule out dry land cropping; uncertainty is worrying.
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Frosts [a barrier] Drought policy of government gives more and more for farmers who shouldn’t be getting it.
Access to capital Things have to add up financially.
Having access to capital to enable diversification was seen as fundamental enabling factor to farmers over the past ten years. Farmers needed cash to invest in water, irrigation infrastructure and new machinery in order to diversify. Through diversification farmers were seeking a stable production platform amidst the instability of such things as the price of wool and the influx of cheap commodities into Australia. Achieving a level of water access (and a high level of surety) was seen as the key means to achieving financial stability. Several farmers commented that once they had achieved diversification through the establishment of a new level of water infrastructure, the capital value of their property increased substantially. Having water increases the value of the property three fold probably. I have made more money out of the increase in the capital value of property than out of the enterprises. Water increases the value of the land, its capital value – we’ve made more money from the capital increase then from farming.
Aligned economic and water enabling factors included: introduction of centre pivots into the region enabling greater efficiencies, increases in productivity and viability of new crops; poppies providing regular and high levels of cash, drought relief; potatoes (initially) providing good cash income; price of milk (stable and profitable); timber production providing cash flow (when price of wool was down); low interest loans; outside income from contracting and share farming; and joint ventures to ameliorate risk. Midlands Water Scheme The Midlands Water Scheme (MWS), as discussed in the profile, is a major Federal and State government initiative to provide significant amounts of reliable water (95% surety each year) to farmers in the Northern Midlands. To invest in the Midlands Water Scheme (and subsequent investments in irrigation infrastructure and annual water fees and associated costs) is a large financial (and non-economic) decision for farmers to make. Choosing to be part of the scheme can mean a dramatic change not only in financial management on the farm, but also in the type of farming one diversifies into (from wool growing to intensive cropping) and the change of lifestyle this may predicate. Diversification and the Scheme The scheme is viewed with general support by the majority of farmers but this support is also coupled with a consistent degree of conservatism about the project, stated scepticism, suspicion, and in some cases anxiety. Many of the farmers interviewed said they would not be investing in the scheme because either they already had water surety (through previous investment in such things as the Macquarie Water Scheme or their own investments in irrigation over the past ten years) or because they did not wish to make the financial commitment to invest, or simply because they were not interested in diversifying their enterprises with intensive irrigation (due to cultural and lifestyle reasons). Those who supported the scheme speculated that although financial costs may be high in the short term, in the longer term they thought they would benefit and it was worth the risk. Many saw it as the 42
only way to ensure they had a reliable source of water and that accessing the water would not only give them cash flow from cropping income but would substantially increase the capital value of their properties. Some saw it as a means to have a predictable income over the long term thus enabling them to less intensively (and more sustainably) use their land. Other general comments included: Water will be a catalyst for change. MWS biggest challenge - issues yet to be resolved. At today’s prices it’s at the expensive end, but in 10 years time it will be cheap. Water surety will be the outcome of the MWS if we get the water. It will enable me to simplify if we get it – be less intensive as have long term surety. So can crop less.
Some felt the scheme was being ‘rushed’ by the Tasmanian Irrigation Development Board (TIDB) and that some farmers would feel ‘pressured’ to make a financial commitment to it before they understood what the ramifications would be. There was discussion on the new skill set needed to manage intensive irrigation enterprises and how dramatically different this way of farming was from sheep grazing. Others did not like the pressure for farmers to sign up for the scheme by a certain date and felt that farmers should have the time and opportunity to choose whether to participate or not. Some were worried about creating ‘a gold rush’ mentality in which decisions would be rushed and speculated that there therefore would be winners and losers. Social consequences – rushed decisions – people investing in things they don’t understand – make mistakes People have to be very wary of jumping into something that is not familiar to them or they can’t do. This worries me. What Mr Bartlett says [about turning the Tasmania into a ‘food bowl’] is all very well – but let him come out here and grow vegetables. People have to be very careful. It worries me. It’s horses for courses. People should do what’s appropriate for them, not everyone can irrigate and produce the same things.
Some felt that ‘water was part of the solution, but not the solution’ for diversification and sustainability in the Northern Midlands and that too much focus was being put onto water and cropping. Some felt that the government had not done its homework and that intensive cropping would not work well everywhere in the Northern Midlands due to climate and soil type constraints: The food bowl concept for the Northern Midlands is flawed on several fronts – late frosts, soil type, accumulated heat indexes – re overnight low temperatures – it’s giving families false hopes. The high capital requirements up your risks again. It’s unfortunate that the MWS has occurred during the drought – it gives people false hopes. Drought proofing the Midlands is absolute non-sense- it should be banned – you need to learn to swim with the seasons and roll with the punches.
A number of farmers were concerned that if a farmer was signed onto the MWS the TIDB would have too much control over how and what people farmed in the future and that this would not be good for innovation and diversification. Increasingly decision making process will be made by others and forced upon us – that will stifle innovation in agriculture.’ We don’t want the hassle, anxiety and risk of government over-controlling our business. More water equals more dams equals more permits equals more debt.
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Many speculated that because of the perceived high upfront costs to get on the MWS these farmers would be initially ‘forced’ to irrigate intensive crops that were ‘hard on the soil’ and not sustainable in the long term. If you irrigate and crop ten years in a row – you might make a good return – then it falls away and the erosion of ecological capital begins and remediation creates a cost. Fragile soils in the Midlands is a limitation – but you just need management to do it right.
Others felt that once they had surety of water from the MWS they would be able to take a longer term view to how they managed their farms and would be under less pressure to get the most out of it every year, because they knew they would have water certainty the next year and thus could let areas of the farm recover from previous drought years where the land was pushed to produce in unsustainable ways. Some highlighted the potential for salinity to increase due to future irrigation intensity in the Midlands, while others did not think this was an issue of concern. Other concerns raised about the MWS included fears of the perceived high costs to participate in the scheme; perceptions that Hydro Tasmania was driving the purchase of water and was using farmers to generate income; fears that the taxpayer was subsidising the project for the benefit of a small group of farmers (and that some farmers had already taken the risks and paid for their own water surety in the past). All of these concerns were influencing farmer decision making about whether to choose to diversify through the MWS or through other means.
Industry Support Having supportive industries and supportive companies (e.g. processors) to work with who were also seeking expansion and diversification (e.g. vegetable processors, poppy companies, dairy industry) was seen as in important and significant enabler for diversification. Joint initiatives, partnerships, leasing and contracting with industry all assisted farmers to diversify – diversification was driven by the economic opportunity to grow new crops, due to an increase in the availability of water and the efficiencies gained by the introduction and acceptance of centre pivot irrigators across the region. What enabled one farmer was not untypical of many: ‘the conjunction of the poppy industry on the rise and the acceptance of centre pivots in the region – poppies paid for all the investment costs in infrastructure in the first year. Local companies having local knowledge assisted many when trying new crops. Conversely, some spoke of the lack of local knowledge by overseas companies who were now working closely with some farmers as a barrier. Diversification is not just difficult for me but for other companies from overseas e.g. New Zealand – they don’t understand the local needs, issues, sprays, soils, weeds – their inexperience makes it difficult for me.
Research and Extension Some farmers raised the issue of the decline in research and extension services as a barrier to future diversification. Most implicitly seemed to accept that government’s role in extension and advisory services had significantly changed and that investing in specialist advisors was now an accepted part of modern farming (see discussion on diversification advisors). But some were still concerned about the
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perceived erosion in government extension, research and development and they still felt government had a key role to play in assisting diversification and innovation: Policy and research are very important and we are seeing an erosion in this – there’s a lack of respect for research in government. Researchers don’t see themselves as an industry – not represented or respected – well undersold as an industry – it continues so much to our industry. Continual decline in agriculture research in Tasmania – e.g. DPIPWE TIAR shuffle. Lack of potato research. There is a role for government beyond throwing wads of paper at you and threatening to prosecute you. The old extension officer was there to help you - we need people to help farmers to help them figure out how best to use water. Field extension officers learn from their interactions with farmers - this isn’t happening anymore.
Communications and IT Poor communications technology reception in the bush was noted by several farmers as a significant external barrier to diversification and the development of their businesses. Some farmers had very poor access to mobile phone reception and very slow internet speed. Some complained that it took three years to get connected to broadband. Those unable to connect to broadband were still using modems with an extremely slow dialup speed of 14,000 kb. Others complained that mobile phone coverage was very disruptive to their businesses: ‘Mobile phone coverage is horrendous – it’s always dropping out ... messages can take half a day to get to you.’ Slow communications and IT made diversification decisions more costly, cumbersome and slow. It also had the social effect of increasing the sense of isolation and frustration that many farmers were feeling during the drought.
Governance and Increased Regulation People in Canberra are totally out of touch with the practical things that are happening on farms.
The theme of the discussions on governance was that too many government (both state and federal) restrictions and ‘red tape’ were being imposed on farmers (e.g. native grassland legislation, restrictions on land use, protection of native bush, land use planning controls) and could stifle growth, innovation and diversification. There was also considerable fear about the level of governance that could be imposed by the Tasmanian Irrigation Development Board on farmers who participate in the Midlands Water Scheme– (see MWS discussion above). As government policy and regulations increases, this decreases motivation and the ability to be innovative. Lack of vision and mindset of policy makers.
Several farmers noted that ‘farmers make long term plans and government changes policy mid way’ and that this was very frustrating to farmers who were looking to make long term social and financial commitments to diversification investments. Governments only plan for one political term at a time, when they are in power, farmers plan for 2 or 3 terms ahead. Legislation – not now – but maybe in the future could be a significant barrier
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Some farmers mentioned that they feared more government ‘intrusion’ on their farming activities and this made farming more risky and this too would affect their ability to be innovative and diversify: As risks increase you decrease people’s ability to be innovative.
Increased influence of government on how, what and where people may farm was a major barrier for some who felt that increased governance and regulation was going to restrict their farming activities, while others did not see it as a major issue and not a barrier to their planned activities. I think diversification is very closely linked to innovation and we have to be very careful that we don’t create an environment where that is impeded. Farmers are always good at innovating, adopting, responding to climate conditions and where they farm – often its providing the means for that to be sped up or encouraged and I think that leads to diversification. Diversification is a result of innovation. Increasing barrier is government. Costs for assessments such as environmental and aboriginal. Costs for consultants and the time it takes. Concern for the future is more government overseeing us – too much interference. Government hasn’t been a problem for us – but want to keep government out of the way – never want to deal with subsidies – we have it easy compared to other countries. It’s a waste of energy to fight government.
Some were very vocal and angry about land clearing restrictions and native grassland legislation and felt government was limiting their diversification opportunities both in the past and in the future. Land clearing restrictions are completely ridiculous. Restrictions on use of grasslands/conservation areas – represents a huge loss of production – this is a barrier to work around. It has made us very angry – now we take it out on the trees. Decisions are being taken away from you. People telling you what to do. This will stifle the country. To diversify and innovate you have to get your brain on it – but when you get occupied on the system, the paperwork, you haven’t got the brain power or the space to innovative – once the system becomes your focus you can’t think broadly – your focus gets off track. When you get angry you can’t think! When you feel powerless you don’t move ahead in your life – government can do this to you. Regulatory hurdles – vegetation management agreements Restrictions by government that are restricting our decision making. Land clearing controls.
The lack of access to GM varieties was a frustration for some. GM Free Tasmania has killed potential enterprises. Zero GM tolerance unworkable - no flexibility Lack of access to GM varieties – has made companies afraid of litigation. We can’t stand outside new technologies – can’t maintain competiveness if we do. GM Free is just another market – there will be no premium for it.
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Has Diversification been a success? All farmers were asked whether their diversification efforts to date had been a success. All said that their major endeavours had ultimately been successful. Although the main criterion for success was economic, most farmers defined other important noneconomic success factors such as an improved attitude to farming, improved lifestyle, greater environmental care and increased intergenerational choice. Several mentioned that they were ‘still passionate about farming’; that their lifestyle had improved; that diversification meant they could look after the land better; and that the success of diversification meant that their children would still have the choice to stay in farming or not (because the farm was still viable economically). My benchmarks: bank income, reduced risk, become more sustainable, have a good lifestyle, still love to work.
Current diversification success was seen not as an endpoint, but as a stabilizing factor (economically, environmentally and socially) that allowed them more choice about the future and also the confidence to pursue future diversification activities. Many had tried (and plan to continue to try) different forms of diversification (e.g. traditional and non traditional crops to grow under centre pivots) and they noted that some attempts at diversification had not been totally successful (e.g. crop failure), but overall they viewed their diversifications as very successful and necessary to stay in farming. Diversification for many was not a luxury of choice, but a necessity. If we hadn’t done it, we would be in deep trouble
Some spoke of their ‘pride’ at having met the ‘challenge’ and diversified (with extensive irrigation) into to a new farming system that they thought had improved the farm substantially and this improvement allowed them to stay on the property indefinitely, rather than feeling they might have had to sell the farm due to low wool and other commodity prices. Pride – managing a farming system you are not ashamed of people seeing.
For some a success factor of their past diversification activities was stability; their past diversification meant that they were ‘prepared’ for the drought and got through it without being under pressure to make significant financial and family decisions. For others success meant that they could now step back and focus on new, modern ‘management structures’ and that this would allow ‘simplification’ and a ‘devolving’ of the complexity of the farm. Some felt that diversification was allowing them to improve their natural resource management of their farms and this was an important success factor for them. Diversification had relieved cash flow pressures and so they now could manage the land more sustainably over the long term and that they could use water more efficiently (e.g. less rotations). Other success factors mentioned included •
satisfying goals set years previously (socially and environmentally as well as economic);
•
satisfying a need to keep on learning and stay interested in farming;
•
spreading risk;
•
achieving business growth and economic robustness;
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•
a lowering risk that allowed them to meet overhead costs and to do higher risk enterprises – e.g. dairying allows us to do high end cropping.
Diversification Advisors and Decision Making To better understand the factors influencing farmers decision making about diversification, all farmers were asked who assisted them in making decisions about diversification and how they went about the decision making process. All farmers interviewed said they had used some type of external advisors, consultants, advisory boards, informal peer groups or ‘experts’ (e.g. agriculture, business, environmental) to assist them with their decision making. Some now used advisors less as they had already made their major decisions about diversification and had less need for specialist input; others who were planning on further expansion were continuing to use a range of advisors and viewed them as critical to making successful choices about diversification. Paying for external expert advice was seen as a major change in how farmers made decisions in the region over the past ten years. Purchasing knowledge, advice and skills was seen by many as part of a professionalisation of farming process and also the result of a new generation of farmers with tertiary training who were information and advisory seekers, rather than relying primarily on their own knowledge or their family’s experience on the farm. Some farmers spent considerable funds on advisors in order to assist them to diversify. One farmer said his family farm spent ‘$50 - $55,000 per year’ on advisors/consultants. He said he was not tertiary trained and so simply bought in the expertise to assist him to make a decision: We harness expertise when we need it. I don’t have the expertise so I buy what I need. If I don’t have the knowledge and need it, we go and buy it. I’m not afraid to do this. Some of the best spent money. It’s expensive to employ consultants Having really good technical advice is the most critical thing
Many used the internet extensively to assist them with information retrieval. The type of advisors that assisted with diversity decision making and information input were numerous and diverse. They can be divided into three groupings – informal, employees and formal (or consultants). The informal group included: peers, family, friends and networks, and share-farming with other families. Employees included farm managers and ‘workmen on the farm’. A wide range of what can loosely be described as consultants were quoted as sources of advice, including: •
accountants;
•
bankers - ‘Having a good relationships with bankers’
•
‘people from a commercial background’
•
industry company representatives and advisors;
•
field officers for crops– ‘would have fallen in a hole without them’;
•
an independent agronomist;
•
farm advisors;
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•
government – ‘DPIWE experiments in past on new crops- the Department is not used now – they are not very productive now.’;
•
consultant group advice;
•
engineers,
•
surveyors; and
•
irrigation design people.
Two additional sources of advice include paying for lobbyists and gaining local and international contacts through educational scholarships: •
‘Political lobbying/connection made the difference’. ‘I employ people with the skills base or who are politically well connected.’
•
Nuffield Scholarship organisation contacts.
The following comment captures a community attitude to change and success: Getting some flak from neighbours when they see you doing something different in the district.
Diversification Decisions The biggest asset I have is my partner and family.
All farmers used advisors to varying extents to assist them with decision making input but then integrated the information and made family-based decisions on their major diversification investments. Peers and informal advisory groups played a key role for many farmers in making decisions. Most spoke about the importance of talking with peers and colleagues to gain information and understanding of diversification opportunities and pitfalls and that fellow farmers greatly assisted them to make decisions. They spoke of the importance of building up relationships and trust with those in the community who were involved in their decision making. Use colleagues as sounding boards. Close network of 2 or 3 farmers that we discuss things and can be forthright with each other – wasn’t built on friendship at first – use it as an informal advisory group. Opportunities come to you as your networks grow
Rural relationships and ‘trust’ were seen as important components to decision making as many farmers discussed their diversification ideas with peers, bankers, rural consultants, merchants, etc., and relied on them for confidentially and honesty. Relationships are very important – they are trust based in rural communities, handshake based.
Some found field days useful to their decision making about diversification and the informal peer networking that occurs at field days ‘incidental information – chatting with other farmers besides the subject matter’, while others no longer found such events an efficient use of their time (‘Not field days, not government advisors’). While many used the internet for research, others found it more efficient for them to hire experts and consultants to understand and synthesise information and make recommendations to them before they and their families made the final decision.
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Some said that having external input had ‘changed the way their businesses were managed’ and gave them the ‘confidence to make decisions’ about diversification through a team approach. Some professed that although they did use consultants they didn’t always take their advice: ‘Private consultants – I usually do what they tell me not to do.’ Many had professionalised their approach to their businesses over the past ten years and now actively used both formal and informal advisory groups to assist them with diversification decisions. Some farmers used external advisory boards to assist them with decision making about diversification and felt that learning from people outside their own industry was an important influence for them when making major diversification decisions. However not all continued to use external advisors for input after they made their major diversification decisions; they felt that once the diversification was implemented successfully, they then had the necessary local farm knowledge and skills to manage their farms within their own family farm enterprise skill mix. Many farmers spoke of the importance of putting diversification activities into their business plans, and ensuring it was part of the farm business’s vision and goals and that any diversification should be economically, environmentally and socially sustainable. Ensuring that this triple bottom line was sustainable in any new diversification was a theme repeated by many farmers and that farm plans (e.g. Property Management Plans, Whole Farm Plans) were keys to ensuring that the social and environmental aspects of a diversification decision were considered in an integrated way with their economic goals and aspects. Setting goals and vision were fundamental, establishing a blue print for the business. We are all trying to make the best decisions because at the top of our agenda is sustainability – economic, environmental and social. Can’t afford to mine the land – it will come back to bite you. Five criteria for making decisions – gross margin, sustainability, simplicity, good cash flow, low risk The dynamics of change are important – people need to understand the concept of change and how to manage it, and be comfortable with it. A lot of people are scared of making mistakes. I’m not afraid of making mistakes. If you can’t cope with making a mistake you can’t afford the risk of doing something
Some farmers admitted that the drought and economic downturn in the wool industry and farming in general had made their previous farm plans obsolete and so they were revamping their plans while in the midst of the crisis. Many pointed out how thinking about diversification on their farms was part of a long term planning process. All farmers make decisions regarding the economic, social and environmental aspects – they take into account all these things – can’t make a decision on just social or just environmental or just economic. We are the most long term planning sector – we make 30 year decisions. Short term decisions are five years. Long term decisions made – 20 and 30 years, based on three legged stool of economic, environmental and social considerations.
Benchmarking was seen as an important process for many to help them not only make decisions about diversification but about monitoring its success against proven standards. We have come up with a successful farming system: I’ll benchmark against anyone.
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Intergenerational influences and historic attachment to the land have been discussed and was a significant part of decision making for many (e.g. wanting to hand the property onto the next generation, wanting to maintain a ‘way of life’ (e.g. wool growing). Historical decisions for others play a big part in their decision making. I’m not emotionally attached to the property as others in the area.
All farmers mentioned the importance of involving the family in making major decisions. These major decisions were always made in consultation with their spouses and, if the children were old enough, the whole family. The bigger the decision the more the family was involved. It’s a team effort – we are lucky we can work together Wife – bounce ideas off her. Wife does the paperwork and is involved in major decisions. All major decisions are made with my partner. But I’m in charge.
All farmers also considered the implications of major decisions on the next generation. Giving children a choice whether they want to farm or not – big influence on decisions to diversify. Considering the needs of different family members – family planning – the next generation – whether to build up the farm or not. I’m trying to manage for a period of time and hopefully will be judged as a good manager as I’m only a manager for the next generation.
Farmers also spoke of the need to talk to a wide range of stakeholders to help them make major decisions about diversification: Talk with people to understand risks - informal education – more of a collective brainstorm Talking with a whole range of people, sharing experiences with other farmers, also people from different states and countries to see what they are coping with. Use everybody and anybody Talking to people outside the square, to learn about different people’s ways of thinking. It is good to talk to people outside of farming to get new ideas. As you get older you talk more about it with others – planning and making decisions. Fellow farmers: 10%; consultants: 60%; 20% me: and 10% private company board
Many also concluded that at the end of the day they had to trust their own judgment and be prepared to take on the risk of the venture, and if they weren’t comfortable with the risk then they shouldn’t diversify. Some did their own research and admitted they had an ‘analytical approach to detail’ which they relied upon to make major decisions. Many farmers appeared to tap a diversity of advisory sources and then integrated and synthesised all the information and advice to make their own decisions, while others were more selective and specific in who they consulted and how they sought information and advice. I take a lot of information to make a decision.
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Many spoke about how they used consultants to assist them but in the end they ‘trusted the gut feeling’ of themselves and their families and felt they understood their own business better than anyone else could. After taking advice, farmers felt they themselves always made the final decisions about major diversification changes on their farms. Read a lot – not internet. Back own judgement. Feel people out. At the end of the day it’s yourself who has to make the decisions. I’m self reliant in my decision making at the end of the day
The Future of Diversification in the Northern Midlands Water is the biggest factor on this property – land is only good if you have water
Farmers in the Northern Midlands have come through a ten year period where a large amount of diversification has already occurred due to such things as increasing availability of irrigation water, use of Centre Pivots, and the incorporation of high value and intensive cropping regimes (e.g. poppies, potatoes) into areas that previously were used for dry land cropping, wool and cattle grazing or had limited irrigation use. However there is still is considerable scope for major change and diversification in the region, with the advent of the government promoted Midlands Water Scheme, the implementation of the privately funded Macquarie Water Scheme (which has just begun) and the uptake of further irrigation by farmers where possible from local water sources and the establishment of on-farm dams. The Northern Midlands is the process of what might be called a second wave of diversification activities and the economic, environmental and social changes that this may bring could be substantial if opportunities are fully capitalised on. However the extent to which farmers will take up one of the major opportunities in the region, the MWS, is still unclear, with many having very divergent views on this opportunity (see previous MWS discussion).
Future Opportunities for Diversification All farmers were asked about what opportunities they saw for diversification on their properties. Some had specific plans for core income, traditional activities (e.g. growing poppies), some speculated on potential new core and non-core income streams and some admitted that they were ‘not 100% sure about the future.’. Of those that had diversified in the past, some acknowledged that it was easier to consider doing more diversification because of the success of achieving it in the past. Once you’ve done it once - changed once - it is so much easier to do it a second time.
Discussion of future opportunities for diversification revealed that a wide range of traditional and nontraditional potential diversification activities were being considered. Many speculated about the potential for such things as leasing their land for others to crop on it, further dairy expansion, a wide range of potential crops, carbon markets, energy development, environmental stewardship payments, niche income streams based on environmentally accredited products and tourism linked to farm lifestyle and conservation. Some saw value-adding to their existing businesses as an opportunity and creating businesses inside their existing businesses. Motivations for future diversification were both economic (e.g. leasing land for secure income) and non-economic (e.g. maintaining a lifestyle, environmental sustainability, or simply keeping their property as a farm (‘biggest factor is to look after the land and not sell it for real estate in 40 acre plots).’ 52
The agricultural profitability and environmental sustainability of future enterprises were highlighted as key potential barriers to future diversification. Other comments on future diversification ideas and opportunities included: Carbon markets – diversification by doing nothing – lots of technical hurdles to sort out – but could be huge Carbon off-setting Wind farm – to offset electricity costs and sell to hydro Tourism based on conservation Hoping to tap into global context for experiential tourism - hunters, fishers Moving capital around the world is another innovation, another diversification we use. Don’t want to limit the future to just farming opportunities – might be non-agriculture based. Not all eggs in one basket – want to ensure a future, whether agriculture or not agriculture based Maybe do business outside of the region, or off-farm – maybe it’s the time of life we are at – [young] family and having done it [diversification] for a while now Businesses inside business - e.g. grain storage Leasing – e.g. to cropping companies and MIS Aim is to have a mixed business around cropping. Converting native forests into plantations – financially it’s the way to go. Lease arrangements for yearly income is good. Dairy - this will be here for the next 50 years. Increased consumption of milk globally, changes in Asian diet. Insulation from shocks of other industries. Steady income. Control other costs. Will have share farming. Producing food for the world [Environmental Sustainability] recognition of what we’re doing by the community
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Discussion The study The objective of this research was to explore the role of non-profit drivers in decision making about diversification. A case study of diversification in the Northern Midlands in Tasmania was undertaken using qualitative social research methods. The definition of diversification adopted for this study was very broad. Any activity which was a change from traditional farm activity, as defined by the landholder, was taken to be a form of diversification. Similarly, the definition of non-profit drivers was broad and included economic and social factors but excluded explicitly profit-maximising drivers. The Northern Midlands was chosen as the case study area for three reasons. Firstly, a previous study (Fulton & Weatherly 2000) provided a baseline for the research. Secondly, the region, a traditional wool growing area, had been the subject of considerable economic (wool price downturn) and environmental (severe drought) pressure over the intervening 10 years. Thirdly, considerable investment by individuals and the State and Commonwealth Governments meant that water had become available for irrigation. However, several factors need to be noted which may distinguish this region from others in Tasmania. These are that there are relatively few landholders so the properties tend to be larger (6-8,000 acres on average), a continuity of ownership and anecdotal evidence that long term viability has to some extent been underwritten by a diversified asset base (i.e. off-farm assets). While there were significant reasons to regard the Northern Midlands as an ideal region for a case study of diversification it is not asserted that it is ‘typical’ of farming in Tasmania. In-depth interviews with 15 landholders were undertaken in which they were asked a number of questions about their diversification decision making. The interviewees were identified by the project’s Reference Group as landholders who had engaged in some form of diversification. It should be noted therefore, that this is not a random group of farmers, nor should they be regarded as representative of the broader farming community. For this reason, generalising from the study should be limited and the results viewed as indicative and instructive rather than conclusive. The nature of the region, the pressure for change it was experiencing and the recent moves towards diversification did however make it an ideal place in which to undertake a study of the ‘how’ and ‘why’ of diversification.
Background In 2000 a major study was undertaken to develop strategies for overcoming barriers to agricultural enterprise diversification in the Northern Midlands (Fulton & Weatherly 2000). The report considered some of the socio-economic factors that influence agricultural enterprise diversification in the region. Key findings from this report were that there are many social and economic barriers to diversification in the Northern Midlands; three of the major factors were identified as: •
lack of access to water,
•
a lack of access to finance and
•
a desire to continue to focus on wool production
Since this study was done much has changed but much remains the same. The Fulton and Weatherly (2000) study was undertaken during a drought and a downturn in the wool industry had begun. This research was undertaken during drought and the price pressure in the wool industry continues. Broader international factors are also affecting the farm sector. Key factors influencing farmers in the Northern Midlands include:
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1. Drought and longer term climate change which have made traditional wool enterprises both economically and environmentally unsustainable. 2. Decline in wool prices and demand while at the same time input costs have increased (e.g. machinery, infrastructure, electricity, fuel, labour). 3. Increased international competiveness (e.g. cheaper commodity imports, alternative fibres). 4. The Global Financial Crisis which has affected commodity prices, demand and access to finance. At the Regional level two important factors differentiate the present circumstances from those which existed at the time of the Fulton and Weatherly study in 2000. These are: 1. Federal and State Governments commitment to invest substantial funding ($78.3 million) into schemes to make irrigation water available to farmers. 2. Passage of legislation to protect areas of high conservation value in the Northern Midlands which has been declared one of 15 national ‘Biodiversity Hotspots’.
Diversification activities All of the landholders who participated in this study had undertaken some kind of diversification. Diversification activities included production changes i.e. a change to irrigation dependent activities; change to business structures, simple expansion, movement into forestry and conservation and other activities such as farm tourism (see below). Generally speaking, the concept of diversification was seen as a progressive one. The extent of diversification and the level of risk and complexity that landholders were prepared to engage in varied considerably. Some landholders actively embraced diversification and consequentially a much higher level of complexity in managing their enterprises. For example, borrowing money to invest in irrigation infrastructure and thus developing a new farming system based on diverse and intensive crop management systems. Other landholders seemed to approach complexity with more caution and whilst diversifying doing so with less financial, social and environmental risk e.g. farm tourism. Where access to water has been available, there has been considerable investment in on-farm dams and centre pivot irrigation which has allowed for the diversification of new enterprises including crops (e.g. poppies, potatoes, peas), plantations and some dairying. There was certainly a new openness by many wool producers to diversify their enterprises. The range of activities was considerable and included: Cropping • • • •
Poppies Changed cropping mixes – e.g. broad acre horticulture, potatoes, onions, peas, beans, grass seed, wheat, barley, beans, canola, cereals, specialty fresh market products Bio-diesel Essential oils
Livestock • • •
Dairying Fat lambs Beef cattle
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Business structure • • • •
Share farming Contracting Professionalised management structure of farms Off-farm employment on advisory boards for other agricultural businesses
Property and Capital Expansion • • •
Buying additional farms to diversify grazing opportunities and expand operations Leasing or buying other land that has water for water surety, to spread risk Buying properties and developing water resources of each property to increase capital value of land and income from enterprise mix.
Forestry • •
Agro forestry: Plantations (native timber and pines) Harvesting of native timber
Conservation • • •
Conservation of native flora and fauna for intrinsic values Conservation to received environmental stewardship payments Covenants on old growth forests for economic payments.
Other • • •
Vineyards Tourist accommodation Off-farm seed business
Economic viability the key driver Without exception the landholders who participated in this study identified the primary motivations for diversification as economic. Fundamentally, survival as a farm business was the core driver for change. Related to the primary economic driver was a number of what we have described as ‘internal factors’ that could both enable and constrain a decision to diversify. Beyond these internal factors, farmers indentified ‘external factors,’ those outside the domain of farm and family which were also important in decision making about diversification. The drivers of structural change in Australian agriculture have been well document (ABARE 2007). Factors driving structural change include social factors, such as people’s preferences, policy induced factors, such as legislative change; technological factors, innovations to raise productivity; and, physical factors (ABARE 2007:5). This research on change in the Northern Midlands of Tasmania has identified a range of external and internal factors which have influenced landholder decision making about diversification. In the main they fall within the range of factors identified by ABARE. Evidence from this study suggests that while economic factors are the key driver for change, focus on this alone is a simplification of the complex motivations of landholders who were engaging in diversification. Alongside the economic factors were a range of social goals which were also very influential. Internal factors influencing decision making about diversification The focus of this research was to understand the ‘how’ and ‘why’ of diversification in the Northern Midlands of Tasmania. The reflections of landholders on their motivations and decision making processes revealed a number of common themes. The responses of landholders were grouped around these theme areas and were shown to be important internal factors which enable and constrain the
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pursuit of the primary objective of diversification. The internal factors that were relevant to a decision to diversify were grouped into six key areas as follows; •
Attitude to farming
•
Risk management
•
Professionalism
•
Land capacity
•
Intergenerational factors and
•
Family farming.
Attitude appears to be an important influence in the decision to diversify and possibly even its success. These landholders who had diversified identified themselves as optimistic, positive and willing to take on a challenge. The opportunity to learn was also indentified as being of importance to a decision to diversity. Management of risk was a key theme in discussions about diversification. The need to manage risk, spread risk or contain risk was seen as important to these landholders. Not only the way landholders perceived risk, but the extent to which they were prepared to take risks, influenced the nature and extent of their diversification activities. Completing a risk management strategy was seen to be a very important step in the planning for diversification. It was hypothesised by several landholders that the inclination to take risk and manage more flexibly was related to the level of education of the newer generation of farmers in the Northern Midlands. The perceived professionalisation of farming over the last 10 years or so was identified as a key enabler of change. These farmers seemed to be less bound by the traditional way of doing things and more aware of the need to be responsive to changing economic and social circumstances. They appeared to recognise the need to be more professional in the management of their farm business. They also accessed external expertise, in a range of forms, to support their decision making. It was clear from the interviews that many farmers saw that diversification increased knowledge and skill demands and that the capacity to respond to this complexity was an important aspect of success. The knowledge and skill needs related not only to farm based activities but also business aspects. Planning, good management and clarity of goals were perceived to be important aspects of successful diversification efforts. Perception of the capacity of the land and the landholders’ social relationship with it, were key factors raised by many of the interviewees. Land capability – soil, climate, rainfall – was seen as absolutely fundamental to the diversification options available to the farmers who were interviewed. The agricultural and environmental suitability of the land was the key factor which enabled or constrained diversification. The recent availability of water for irrigation however meant that many of the landholders had to reconsider their perceptions of the capacity of their land to support a diversity of activities. The environmental sustainability of diversification which involved irrigated agriculture was of some concern to a number of landholders. Many landholders expressed their commitment to the long term sustainability of their farm business and concern about the potential implications of intensification. In particular the impact on the ‘fragile’ soils of the Midlands was of concern. A range of interviewees expressed a desire for better recognition of the environmental services they provide to the broader community. Some landholders thought that the provision of environmental services was a diversification option for the future while other saw it as having limited economic potential. The nationally listed grasslands was seen by some as an opportunity to seek payment for stewardship of this landscape.
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Perhaps the most significant finding of this project was the extent to which the choices made by these landholders were influenced by their place attachment. The majority of farmers who were interviewed had long associations with the land, sometimes for many generations. This factor seemed to be an important influence on how landholders managed change. Fulton and Weatherly (2000) found that a desire to continue to focus on wool production was an inhibitor of diversification. The current study results indicated that the desire to stay on the land and to pass it on to future generations meant that landholders were willing to diversify away from wool production if that was the only route to economic viability. It can be drawn that while the preference may have been to stay with wool production the stronger desire was to maintain ownership of the property even if this meant change in production. In particular, the interviewees stated that the land had to be passed on to the next generation in a fit state to continue to be economically viable and this underpinned current diversification decisions. This is similar to the findings of Nickerson (2001) who found ranchers from Montana were willing to diversity into agri-tourism in order to bolster the economic viability of their property and maintain ownership. The key factor was inter-generational ownership of land which meant that farm exit was not considered an option for many. A related aspect, was the desire by some landholders to create opportunities for future generations and to ensure that they had at least the same options that had been passed to them. External factors influencing decision making about diversification In the interviews with landholders about diversification it became apparent that a range of factors were important to the way decisions were made about diversification were made. In addition to internal factors a number of external factors were also identified. These external factors relevant to a decision to diversify were: •
Economic factors such as decline on return for wool and increase in input costs
•
Drought and long-term drying
•
Midlands Water Scheme
•
Capital to invest in water infrastructure
•
Industry support
•
Communication technology
•
Regulation
The dominant reason provided by the landholders interviewed for this study for their decision to diversify was economic. Low returns for wool and the uncertainty of commodity prices were key factors. In addition to the decline in wool prices the increase in input costs were factors which had impacted significantly on profitability. In short, a key motivator for diversification was to increase- or combat a lack- of profitability. The severe drought over the last four years and what is perceived to be a long term drying climate has impacted on farm viability in the Northern Midlands. However, it would be a misrepresentation to suggest that there was any consensus on human induced climate change. The drought has been a key motivation for some farmers to diversify. In particular, the drought had been a key factor in decisions to invest in water infrastructure and exploit the potential of irrigation. The need for water security was a pressing concern for many landholders. At the same time, the impact of the drought and the effects of long term climatic variability was considered to be a barrier to diversification. This is because it has had such a profound effect on farm profitability and thus the capacity to invest. Access to capital was a key factor affecting the capacity of landholders to diversify. This is a factor affecting the ability of farmers to diversify, the kinds of diversification options that are available to them and their capacity to take up future irrigation opportunities should they so desire.
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This ability to invest was often determined by how long the farmers’ families had been on the property. Those who had a long association with land in the area often had little debt and therefore greater capacity to diversify should they so choose. The Midlands Water Scheme is a key external factor impacting on landholder decision making about diversification in the Northern Midlands. The availability of water to be provided by the Scheme has the potentially to dramatically open up the range of options land managers have for their farms. The Scheme was viewed positively by the majority of landholders interviewed as part of this study. That however is not to imply however, that they did not have reservations or concerns. The key issue in relation to the opportunities offered by the availability of water for irrigation was the financial capacity to invest in the necessary on-farm infrastructure. Several landholders identified that having industry support was a key factor in diversification decision making. A shift from dryland farming to irrigation, for example, involved significant technological change and the support of industry was identified as an important enabler of change. A number of the farmers in this study saw the decline in Government supported research and extension as a barrier to future diversification. However, as will be discussed later in this report many landholders have become skilled at obtaining professional advice from the private sector. Communication technology was identified by a number of interviewees as an impediment to farm diversification. Poor mobile phone reception and slow internet speeds were key in this regard. Regulation, in particular of land clearing and for protection of native grasslands was identified by landholders as having an impact on diversification. There seemed to be some anger about the listing for protection of native grasslands in the Northern Midlands by the Commonwealth Government. The impact this might have on farming options was of concern as was the implication of increased scrutiny of proposals as a result of the listing. These external factors identified in this study of farmers in the Northern Midlands are similar to the description of drivers of change identified by ABARE (2007) and reflect broader trends in farming across Australia. However, there are also local external factors which are of significance in this particular context. The drought has been a key factor both as a motivation to diversify and as an impediment to it. The Midlands Water Scheme opens up opportunities however the capacity to invest will be an important influence of the uptake of the Scheme. Change will be facilitated by good industry support. However, poor communication technology and environmental regulations may serve to constrain diversification in the Northern Midlands into the future.
The success of diversification By and large the concept of diversification was seen as a progressive and necessary agricultural enterprise strategy. However, the degree of diversification and perceived level of risk and complexity that farmers were prepared to engage with varied considerably. All of the interviewees in this study said that ultimately their diversification efforts had been successful. The key motivation for diversifying for these landholders was economic however the definitions of success were probably broader than a simple economic one. It has been drawn out that the economic objective is more complex than simple profit maximisation and includes layers of social objectives in various forms. Accordingly, the definition of success included perceived outcomes related to issues such as risk management and income stabilisation as well as creating challenge and a learning environment.
Diversification decision making A key objective of this study was to understand the process of decision making engaged in by landholders and the influences on it. Decision making by landholders in the Northern Midlands was typical of farm families across Australia (see Pannell et al. 2008). Landholders talked to their families, their peers and trusted 59
advisors. They sought information from a wide range of sources including the internet, government advisors, field days, neighbours and professional advisors. Planning was also identified by many landholders as an important part of their process of decision making. An interesting finding of this study was that all of participants said that they had paid for some kind of external advice. A number said that they had employed a variety of consultants including accountants, bankers, agronomists, farm advisors and so on. This was seen to be part of the professionalisation of farming. Some farmers used external advisory boards to assist with decision making. A number of farmers in this study had Whole Farm Plans or Property Management Plans and had found these to be useful in their diversification decision making. These plans appeared to provide a vehicle for holistic deliberations of future options so that economic, environmental and social aspects were all considered. Business planning and risk management were all part of the decision making process. Farmers in this study utilised a wide range of informal arrangements in their decision making process. These included discussion with family, peers, friends and other networks. They also utilized the services of a wide range of professionals. Ultimately, however final decisions were reported to be made in consultation with the family business partners.
The future of diversification in the Northern Midlands There has been considerable change over the last ten years in the farming activities undertaken by the 15 landholders from the Northern Midlands who participated in this study. While all had diversified the scope and extent of the change varied considerably. A number of external and internal factors were identified, during the interviews with landholders, as having had an impact on their decision making about diversification. Each of these factors could either enable or constrain diversification. For example, the availability of capital was identified as a key factor in diversification – its lack was a constraint its availability was an enabler. Importantly, diversification is seen as a way to manage risk. The study by Fulton and Weatherly (2000) identified key constraints to diversification. It would appear that while they are still relevant much has changed for farmers in the Northern Midlands since this study was undertaken. The new irrigation schemes mean that water will be available for many landholders in the region. Access to finance to fund investment in required on-farm infrastructure continues to be an issue. However, this study has demonstrated that a range of external factors have compelled landholders to change while at the same time a suite of internal factors have operated to shape a significantly changed picture of farming. This has meant that landholders who had previously been unwilling to change have in many cases taken on the challenges that the current environment provides. These are the circumstances which have made the conclusion of Fulton and Weatherly (2000) that ‘a wool growing culture is likely to predominate in the region and reduce the level of interest in enterprise diversification’ not relevant in the current time. We suggest that the willingness to change, which on its surface is motivated by economic factors, in fact reflects the determination of many landholders to stay on their land – even if it means an enterprise change. The objective is to maintain the land within family ownership and keep open the possibility of inter-generational transfer. Even, in many cases when the next generation does not appear to be interested. There is the potential for change to be on-going and the opportunities offered by the Midlands Water Scheme will open up a whole new range of possibilities for some farmers. However, not every farmer will be able to take advantage of the new opportunities available to them. For instance, not every property will have access to irrigation water or, importantly have the right location or land (e.g. soil type) to support and sustain intensive agriculture. This study has drawn out that diversification presents considerable challenges to landholders and there is a requirement for new skills in both farming and business management, access to capital to invest and a willingness to take risks and change the way things have been done for generations. There is therefore no one-size fits all approach 60
to understanding, promoting or extending diversification in the region, as the family farms, their properties and locations are all as diverse as the new farming opportunities that are being opened up.
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Implications This study has shown that there needs to be a greater recognition and understanding by government, industry and regional communities that there are major non-economic factors that influence farmer decision making regarding their investment in farm business diversification. This study has drawn out that diversification presents considerable challenges to landholders and there is a requirement for new skills in both farming and business management, access to capital to invest and a willingness to take risks and change the way things have been done for generations. However farmers are not a homogenous group – they have diverse attitudes and values, they learn, farm and live in different ways. There is therefore no one-size fits all approach to understanding, promoting or extending diversification in the region, as the family farms, their properties and locations, and the individuals involved are all as diverse as the new farming opportunities that are being opened up.
Recommendations It is recommended that there needs to be a recognition and understanding by government and industry that there are major non-economic factors that influence farmer decision making regarding their investment in farm business diversification. The key non-economic factors discussed in this report that needs to be understood by government, industry and rural communities include: 1. Farmers have diverse attitudes (and motivations) toward farming, change and challenges and these attitudes greatly influence their decision making about diversification 2. Risk management and analysis is a key factor influencing farmers decision making and farmers approach risk management in very different ways 3. A professionalisation of farming process is taking place in Tasmania, where farming is shifting from being a ‘lifestyle’ to more of a business paradigm 4. Farmers consider land capability, environmental sustainability and conservation issues in great variance when making decisions 5. Many farmers have an intergenerational mindset and historical land management patterns in their area can greatly influence their decision making 6. Farming in Tasmania is still a family-based enterprise 7. Farmers are not a homogenous group; they farm, learn and diversify in different ways and for different reasons. It is recommended that recognition of the social factors identified above need to be incorporated into government and industry policy, planning, communication, promotional, training and extension activities associated with diversification. Implications of this report show that to assist the uptake the uptake of future farm diversification activities in Tasmania that government and industry should assist farmers to develop skills and knowledge through training activities, courses and programmes in three key areas: 1. People Development Training: includes focusing on analysing the personal skills farmers need to successfully diversify such as communication, working in groups, networking, using advisory
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services, leadership, understanding different operating and learning styles and how to be an entrepreneur. 2. Risk Management Training: includes how to do a risk analysis, how to approach and understand complexity in decision making, understanding the economic, social and environmental aspects of risk, and integrating risk management into property management planning. 3. Business Development Training: includes farm business strategic planning/business development, goal setting, professionalisation of farming, leasing and developing business partnerships, new diversification opportunities, marketing, value adding, supply chain management, succession planning, using advisory services and training opportunities effectively, understanding and planning for climate change and climate variability, developing new technical and management skills (e.g. changing from wool growing to cropping and intensive irrigation). It is recommended that the potential barriers to future diversification identified in this report need to be considered by government and industry, namely: drought and climate variability, falling wool prices, fluctuating commodity prices and lack of profitability, increased governance and regulation, declining research and extension, poor communications and IT, land capability and local climate limitations, attitude to risk management. It is recommended that potential future diversification opportunities be further explored by government and industry with farmers, including achieving water surety, farm business expansion and potential partnerships and leasing opportunities, managing markets and supply chains, consolidation, new wool opportunities, energy development, carbon markets, niche market opportunities, entrepreneurship, provision of environmental services, climate change, ecotourism. It is recommended that the social impact that current adverse economic factors (e.g. falling commodity prices, higher input costs, importation of cheap commodities, the drought) are having on Tasmanian farmers be investigated and reported on.
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Appendix 1 – Reference Panel The Reference Group consisted of representative stakeholders including farmers, industry, government and NGOs. They include the following individuals: 1. Vyv Alones, Executive Officer: Rural Alive & Well 2. David Downie: Landowner and Deputy Mayor, Northern Midlands Council 3. Nick Flittner, Manager - Drought and Climate Change: Tasmanian Farmers & Graziers Association 4. Ray Hart, Program Manager (Water Management Planning): Department of Primary Industries, Parks, Water and Environment 5. Michael Horne: Project Leader, Drought Team: Department of Primary Industries, Parks, Water and Environment 6. Adrian James: Program Manager – Productive Landscapes: NRM North 7. Sven Meyer, Project Manager (Midlands Water Scheme): Tasmanian Irrigation Development Board
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Appendix 2 – Reference Panel Terms of Reference Northern Midlands Diversification Study Reference Panel – Terms of Reference (ToR) The role of the Reference Panel is to both guide the direction of the project and provide key information for the development of the regional profile. It is proposed that the Reference Panel will meet 3 times. The purpose of the meetings is: 1. Initiation – refinement of the project through discussion of the project logic and approach. 2. Working meeting •
Regional profile – data gathering and insight for the regional profile. An outline of the regional profile data points will be provided and elaborated on with input from key informants with local knowledge at the meeting.
•
Interview design – review of draft interview instrument and discussion of approach to analysis.
3. Closure – the project team will report back on the results of the interviews and provide a final report for comment. A draft final report will be circulated two (2) weeks before the final meeting.
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Appendix 3 – Interview Information Information Sheet Farm Diversification in the Northern Midlands: Understanding the Social Factors Influencing Farmer Decision Making Date: Invitation: We would like to invite you to participate in an interview about farm diversification. What is the purpose of this project? The purpose of this project is to identify and explore the social factors that influence farmer decision making about diversification in the Northern Midlands. The project will explore these factors at both the individual farm family level and at the regional level. Who is funding and managing this project? This project is funded by RIRDC (Rural Industries Research Development Corporation) and is being managed by the independent consulting group Rural Development Services. Where is the project taking place? The focus of the research is a case study of the Northern Midlands of Tasmania (defined as the region contained in the Northern Midlands Council). How will the research be conducted? The project has the following steps: engagement with industry and the community, literature review, development of a framework for analysis, profile of the region, data collection through in-depth interviews with landholders and other key regional stakeholders, analysis of field work, synthesis of regional profile and field work, report preparation and communication. What will be the outcome of the project? A final report will be produced including the literature review, methods, profile of the study region, results of the interviews, discussion and recommendations. Contact: Dr Carla Mooney
Mr Don Defenderfer
Rural Development Services L 4, 29 Elizabeth St, Hobart.
Phone : 03 62319033, 0423 586274
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CONSENT FORM
Farm Diversification in the Northern Midlands: Understanding the Social and Environmental Factors Influencing Farmer Decision Making 1. I have read and understood the ‘Information sheet’ about the project before the consultation. 2. The nature of the consultation has been explained to me. 3. I understand that the consultation involves a semi-structured interview, focused around understanding the social factors influencing farmer decision making about diversification in the Northern Midlands. I understand that the interview will take about an hour. 4. I understand that all interview data will be securely stored on RDS premises for five years, and will then be destroyed. 5. Any questions that I have asked have been answered to my satisfaction. 6. I understand that the researchers will keep my identity confidential and that any information I supply to the researchers will be used only for the purposes of the research. 7. I agree to participate in this investigation and understand that I may withdraw at any time without any effect, and if I so wish, may request that any data I have supplied to date may be withdrawn from the research anytime before the final report is completed. Name of Participant: _________________________________________________________________________________ Signature:
Date:
Statement by Investigator I have explained the project and the implications of participation in it to this volunteer and I believe that the consent is informed and that she/he understands the implications of participation. Name of Investigator Signature of investigator
Date
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Appendix 4 – Interviewees and Informants Farmers Interviewed 1. Rob and Jo Bradley 2. Greg Bryant 3. Andrew and Edwina Colvin 4. David Downie 5. Tom and Cynthia Dunbabin 6. Simon and Penny Foster 7. Richard Gardner 8. Bill Gibson 9. Kath Henry 10. Ian MackKinnon and Keith Pengilley 11. Rodrick O’Connor 12. Gilbert and Kate Taylor 13. Julian Von Bibra 14. James Walch 15. Frank and Millie Youl Informants: Key people that informed the formation of the project, the discussion and the results include: 1. 2. 3. 4.
Rowena Bell (Rural Development Services) Bill Chilvers (Farmer and soil specialist) Tony Clarke (Tasmanian Irrigation Development Board) Nick Flittner Manager (Manager, Drought and Climate Change, Tasmanian Farmers & Graziers Association) 5. Amabel Fulton (Rural Development Services) 6. Louise Gilfedder (Conservation Science Section, Conservation Policy and Planning DPIPWE 7. Michael Horne (Project Leader, Drought Team: Department of Primary Industries, Parks, Water and Environment) 8. Julian Johnstone (Senior Water Planning Officer, Water Policy and Planning Branch, DPIPWE) 9. John Lord (Tasmanian Irrigation Development Board) 10. Brendan McMahon (Launceston Meteorological Office, Bureau of Meteorology) 11. Robin Thompson (Manager, Extensive Agriculture Branch, DPIPWE) 12. Melanie Webb (Meteorologist Climate Services Centre Tasmania and Antarctica Regional Office, Bureau of Meteorology)
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Appendix 5 – Interview Questions Diversification Questions – past and current Have you diversified your farm business in any way over the last 10 years? • • • • • •
If so, please describe how and what you did. Why did you diversify? What factors assisted you to diversify successfully? What factors made diversification difficult? Do you consider your diversification effort has been successful (define successful broadly – not just about $)? Who has assisted your decision making and tell me about the process of making decisions.
Why didn’t you diversify? • •
What factors were barriers for diversification? What factors influenced your decision to not diversify?
Diversification Questions – future Do you have plans to diversify in the future? • • •
What opportunities do you see for diversification? What factors are influencing your decision to diversify? What factors would assist you with this endeavour (e.g. education, infrastructure, water, seed funding etc?)
What factors do you see as barriers to diversification? Who has assisted your decision making and tell me about the process of making decisions. Anything else you would like to add?
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References ABARE 2007 Drivers of Structural Change in Australian Agriculture, RIRDC Publication No 07/057. ABS, National Regional Profile: Northern Midlands, http://www.abs.gov.au/AUSSTATS/
[email protected]/Latestproducts/LGA64610Population/People120022006?opendocument&tabname=Summary&prodno=LGA64610&issue=2002-2006&num=&view= Accessed: 23/6/09. ABS, Regional Profile: Northern Midlands http://www.abs.gov.au/AUSSTATS/
[email protected]/Latestproducts/LGA64610Industry120022006?opendocument&tabname=Summary&prodno=LGA64610&issue=2002-2006 Accessed: 23/6/09. Australian Government, 2000-2002 National Land and Water Resources Audit, http://www.anra.gov.au/topics/vegetation/assessment/tas/ibra-tasmanian-northern-midlands.html Accessed: 23/6/09. Barbieri, C. and Mahoney, E. Why is diversification an attractive farm adjustment strategy? Insights from Texas farmers and ranchers Journal of Rural Studies 25 (2009) 58-66 Bartlett, D. Midlands Water Scheme Consultation, Media Release, 2009. Bartlett, D. Midlands Water Scheme Consultation, Media Release, 2009. Bartlett, D. Midlands Water Scheme, Media Release, 29 September 2008. Bastick, C. and Walker, J. 2000, Extent and impact of dryland salinity in Tasmania, BRS 2001 Land Use Change, Productivity and Diversification Final Report of Theme 5.1 to the National Land and Water Resources Audit. Bureau of Meteorology 10th October 2008, Special Climate Statement 16: Long-term rainfall deficiencies continue in southern Australia while wet conditions dominate the north. National Climate Centre, Melbourne. Bureau of Meteorology. Monthly Rainfall Ranges, York Plains, http://www.bom.gov.au/watl/rainfall/ranges.html?bookmark=tas+01+12_month+northern Accessed 23/6/09 Bureau of Meteorology. Monthly Rainfall Ranges, York Plains, http://www.bom.gov.au/watl/rainfall/ranges.html?bookmark=tas+01+12_month+northern Accessed 23/6/09. Bureau of Meteorology. Rainfall Deficiencies Map http://www.bom.gov.au/climate/drought/drought.shtml, Accessed: 23/6/09. Bureau of Meteorology. Tasmanian Annual Minimum Temperatures Anomalies. http://www.bom.gov.au/cgibin/silo/reg/cli_chg/timeseries.cgi?variable=tmin®ion=tas&season=0112 Accessed 23/6/09 Bureau of Meteorology. Tasmanian Annual Minimum Temperatures Anomalies. http://www.bom.gov.au/cgibin/silo/reg/cli_chg/timeseries.cgi?variable=tmin®ion=tas&season=0112 Accessed 23/6/09.
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Bureau of Meteorology. Trend in Annual Total Rainfall. http://www.bom.gov.au/cgibin/silo/reg/cli_chg/trendmaps.cgi?variable=rain®ion=tas&season=0112&period=1970 Accessed 23/6/09. Bureau of Meteorology. Drought Statement http://www.bom.gov.au/climate/drought/drought.shtml, Accessed: 23/6/09. Campbell White & Associates Pty Ltd., and Black. A. Costs and Benefits of Diversification. Whole Farm Case Studies. October 2002. RIRDC Publication No 02/029 RIRDC Project No ECU-7A. Chouinard, H. H., T. Paterson, P. R. Wandschneider and A. M Ohler (2008) Will Farmers Trade Profits for Stewardship? Heterogeneous Motivations for Farm Practice Selection Land Economics 84(1) 66-82. Crawley, J. 2009. “New Dry Looms” Tasmanian Country, 19 June, p. 1. Crawley, J. 2009, “Embrace a Climate of Change”, Tasmanian Country, 12 June, p. 8. Crawley, J. 2009, “Imports Hinder Local Growers” Tasmanian Country 4 September, p. 4. Davey and Maynard, 2007. The Contribution of Agriculture to the Tasmanian Economy, Tasmanian Agricultural Productivity Group, Tasmania. Dunbabin, C. 2006, ‘Sense of Place: Connections to the land’. RIPRAP River and Riparian Lands Management Newsletter 30, pp 46-47. Dunbabin, Sandy, Fergusson, Melissa, Turvey, Lona, 2008, Drought Crisis on the East Coast, Prepared for: Tasmanian State Government Community Cabinet, Bicheno - 5 October 2008. Ellis, N. E., Heal, O.W., Dent, O. W., and Firbank, L. G. (1999) Pluriactivity, farm household socioeconomics and the botanical characteristics of grass fields in the Grampian region of Scotland Agriculture, Ecosystems & Environment Volume 76, Issues 2-3, November 1999, pp 121-134. Fulton, A and Weatherly, J. March 2000, Accelerating Diversification in the Northern Midlands and Fingal Valley, A Report to the Department of Primary Industry, Water and Environment. Tasmanian Institute of Agricultural Research. Johnson, S. The redefinition of family farming: agricultural restructuring and farm adjustment in Waihemo. New Zealand Journal of Rural Studies 20 (2004) 419-432 Lubowski, R.N., A. J. Plantinga, R. N. Stavins. What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions Land Economics, November 2008 84(4):529-550. McGlone, P. 2009, ‘Grassland Cooperation Call’, Tasmanian Country, 10 July 2009, p.21. Meert, H., G. Van Huylenbroeck, T. Vernimmen, M. Bourgeois, E. Van Hecke Farm household survival strategies and diversification on marginal farms Journal of Rural Studies 21 (2005) 81- 97. Medhurst, A., and Segrave, R. Why Do Farming Families Diversify? November 2007. RIRDC Publication No 07/156 RIRDC Project No DAV-21A. National Farmers’ Federation, 2009. Farm Facts 2009-2010, NFF, Canberra. Northern Midlands Business Association, Northern Midlands Council Map, http://www.nmba.asn.au/content/view/56/1/ Accessed 23/6/09. Northern Midlands Council, 2008, Northern Midlands Tasmania: Economic and Community Profile.
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Northern Midlands Council, http://www.northernmidlands.tas.gov.au/site/page.cfm?u=191 Accessed 23/6/09 Northern Midlands Council, Northern Midlands Strategic Plan 2007-2017, Vol 1. Northern Midlands Council, Northern Midlands Strategic Plan 2007-2017, Vol 1. Northern Midlands Council. Northern Midlands Council, May 2008, Northern Midlands Tasmania: Economic and Community Profile. Powell, R and Chalmers, L. February 2005, Economic Profile and Strategy Directions, Report to the Northern Midlands Council Prepared for Centre for Agricultural and Regional Economics Pty Ltd ARMIDALE NSW. Pritchard, B., D. Burch, and G. Lawrence Neither ‘family’ nor ‘corporate’ farming: Australian tomato growers as farm family entrepreneurs Journal of Rural Studies 23 (2002) 75-87. Rural Alive & Well Tasmania, Men’s Health, October 2007, Southern Midlands & Central Highlands. Sanders, P. 2009, ‘Garrett’s Grasses Ruling Hit by Adams’, Examiner, 30 June 2009, page 17. Sanders, P. 2009, ‘Grassland ‘Secrecy’ Claims Rejected’, Examiner, 6 July, p. 10. SFM 2007, Northern Midlands Municipality, State of the Environment Draft Report, SFM Environmental Solutions Pty Ltd, Tasmania. Skills Tasmania September 2008, Central Tasmania Regional Skills Analysis, Hobart. Tasmanian Irrigation Development Board, Information Flyer, 2009. Tasmanian Irrigation Development Board, Midlands Water Scheme Information Flyer, 2009. Tasmanian Irrigation Development Board, Power Point Presentation to Tasmanian Agricultural Productivity Group AGM, 24 October 2008. Tasmanian Irrigation Development Board, Water Development Information Flyer, 2009. TFGA, 28 May 2009, ‘Farmers Oppose Grasslands Listing’, Media Release. Thompson, R (2009), Financial impact of drought/frost and economic downturn on farm gate value of agricultural produce in Tasmanian Exceptional Circumstance (EC) areas, DPIWE Unpublished paper. Thompson, R 2009, Financial Impact of Drought/Frost and Economic Downturn on Farm Gate Value of Agricultural Produce in Tasmanian Exceptional Circumstance (EC) Areas, Unpublished paper, DPIWE, Tasmania. Yin, R. K. 'The case study method as a tool for doing evaluations' 1992 40(1) Current Sociology 121137 Yin, R. K. 1994, Case Study Research: design and methods Sage, California.
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Further Reading Gilfedder, L, Kirkpatrick, J, et al. 2003, The Nature of the Midlands, Artemus Publishing, Hobart. Mason-Cox, Margaret 1994, Lifeblood of a Colony: A History of Irrigation in Tasmania, Rivers and Water Supply Commission, Hobart. Kirkpatrick, J & Bridle, K (editors) 2007, People, Sheep and Nature Conservation: The Tasmanian Experience, CSIRO Publishing, Collingwood Victoria. Rigney, Frank L, 2008, A Midland Odyssey: A Journey Through Parts of the Northern Midlands of Tasmania, Bokprint, Launceston.
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Reasons why Farmers Diversify — Northern Midlands, Tasmania — by Carla Mooney, Don Defenderfer and Morag Anderson Publication No. 10/197 This study of farm diversification in the Northern Midlands of Tasmania draws out the complex of factors that influence decision making about change. This region has been affected by the downturn in the wool industry and severe drought (now broken) over the four years preceding the study. These factors along with the recent availability of water for irrigation as a consequence of the development of a major water scheme means that not only pressure for, but opportunity to diversify, has come about. This study explores ‘how’ and ‘why’ landholders diversify and the factors which influence their decision making.
RIRDC is a partnership between government and industry to invest in R&D for more productive and sustainable rural industries. We invest in new and emerging rural industries, a suite of established rural industries and national rural issues. Most of the information we produce can be downloaded for free or purchased from our website . RIRDC books can also be purchased by phoning 1300 634 313 for a local call fee.
This report is targeted at farm families, regional communities, industry and government policy makers involved in diversification activities.
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