ARABLE FARMS in New Zealand are generally owner occupied, over 200ha (494 acres), and have a history of low overheads.

However, that low cost base is not because growers have been ruthless in cutting costs, or made massive economies of scale in recent years. I

t is simply that a high cost structure has never been allowed to develop by growers who still remember having the comfort rug of subsidies unceremoniously ripped from underneath them in the 1980s.

“Not that there was ever much of a comfort rug for arable farmers – wheat was the only supported crop,” notes New Zealand Ministry of Agriculture and Forestry senior policy adviser Murray Doak.

He heads the arable monitoring teams for the Ministry which produce annual budgets for representative model farms in the arable, and processing and fresh vegetable sectors.

Farms in those sectors are becoming fewer, larger, and increasingly specialised, he says.

“A few years ago the trend was to try to do a bit of everything. Now growers are starting to specialise in the things they are good at, or perhaps enjoy most.”

The monitoring teams” figures also indicate that the cost base of the industry is creeping up as growers equip to produce generally higher value crops, with investment in irrigation to ensure consistent output a key part of that. Labour costs are also rising sharply (see table).

“There is strong demand for labour across the whole economy. Farm salaries have to compete if they are to keep staff,” notes Mr Doak.

The MAF model shows growers and industry analysts anticipate an average 12% increase in costs for the 2004/2005 growing season.

That is supported by reports of difficulty finding good seasonal staff and increased irrigation workload.

“We are cultivating and drilling just about every week of the autumn and winter. Basically the machinery follows the livestock round the farm,” says John Wright, from Methven.

His comments are echoed by world record wheat grower Chris Dennison. He farms 210ha (519 acres) in partnership with his wife near Oamaru, north Otago and employs one full-time man, but no seasonal labour.

“Some would say we are a bit over supplied [with labour], but with five irrigators to shift and crops to harvest we are all pretty busy from September through to April.”

Increasing specialisation is leading to more short-term leases for potato or processed vegetable production. Rents for such land range from $1200/ha (446/ha), or more with irrigation supplied, to $500-$600/ha (186-223/ha) for non-irrigated, combinable arable land.

Pumping for irrigation can be a significant cost – the deeper the borehole, the higher the cost.

Ashburton-based grower Eric Watson reckons water costs him $1/mm/ha to apply, and he only pumps from 40m. Many irrigators draw from substantially deeper.

Overall, while overhead costs on NZ arable farms are creeping up, they still significantly undercut UK figures for similar-sized farms.