Sustainable, while a buzzword, is an increasingly critical one. For farmers and growers, and NZ’s primary industries more broadly, sustainability is a necessity, an asset and way of living to embrace, not something to run from.
While it has green connotations, which are becoming even more important, there are other facets of sustainability in business and on the farm to invest thought and resource into, too.
Financial sustainability
Like any business, farms and orchards should be profitable businesses. If your business is consistently in the red, start asking questions about why that might be – what do you need to do to turn it around?
For those who are enjoying profits – and for many farmers and growers it’s been a couple of strong years – how are you going to best use your profits, keeping the future in mind?
In a prosperous season it’s imperative to think about the best use of any profits you make. Weigh up the benefits of investing back into your farm, which could be anything from developing parts of the farm to buying new machinery or irrigation, to paying down debt. The key is to strive for the sweet spot between maximising production and minimising cost.
Business sustainability
We continue to see diversification on NZ farms, with increased collaboration across the agriculture and horticulture sectors. Some rural customers are divesting sections of land traditionally used for grazing to horticulture, while others are seizing the opportunity to minimise their carbon footprint by planting trees on land that can’t be grazed or planted, for example. Diversifying, while it comes at a cost, can help with enduring business sustainability.
And, like any good business owner, food and fibre producers must also have a plan for the future of their business. Whether that’s passing the farm on to the next generation, introducing an equity partner, or selling it to an entirely independent third party. It’s not too early to start thinking about what’s next for your farm. As a nation reliant on quality food production and exports, we need to ensure that as the current cohort of farmers retire or move on, the transitions that follow are successful.
If you’re the one passing on the baton, ask yourself if the successor knows how to be successful, do they know what is involved in both the farm and business’ daily requirements? If not, are they willing to put in the effort to learn?
If you’re the successor, treat the financial modelling as if you were buying a new business. Would you invest based on the numbers? With interest rates at historic lows, buying into or adding to an existing portfolio within the primary industries can be an attractive option to help grow the business. We’ve also seen examples of customers leasing parts of the farm or the whole farm.
There’s no blueprint for how long it should or will take for a farm to transfer hands. Don’t rush it, take your time and do it right.
Environmental sustainability
We can’t deny climate change is one of the most critical issues facing our economy and communities. As a lender, ASB is committed to meaningful climate action, working with our customers to build our cumulative climate resilience.
New research shows NZ on-farm dairy emissions is not only the most efficient in the world, but already at almost half the emissions of other global producers. These findings sit alongside the rest of our primary industries, with many local food and fibre producers already good custodians of the land and among the most environmentally-advanced in the world.
This is encouraging but we know we mustn’t be complacent or rest on our laurels.
Dealing with the impacts of climate change and minimising our environmental footprint are key challenges for NZ as highlighted in the recent Climate Change Commission’s (CCC) first report back to the Government.
With regulatory change on the horizon and new standards which may impact freshwater management, emissions standards and resource management, some farmers and growers seeking to meet these new obligations could expect higher compliance costs. We have not restricted our lending to the rural sector. In fact, we’re committed to working closely with the sector to provide support to make sure food and fibre producers are prepared for the level of investment needed going forward to maintain appropriate environmental standards.
While it’s true many of the compliance changes are being driven by legislative change, there’s also a changing tide of customer expectations. Through our environmental compliance loans (low interest loans targeted specifically to help fund on-farm environmental improvements) more than 700 customers have already invested more than $120 million back into their farms to plant native trees or seedlings, install more environmentally-friendly effluent systems and fence off waterways and native bush.
Through hard work and ingenuity, NZ’s rural sector proved remarkably resilient through the covid-19 pandemic and fed the world. Heading into the remainder of 2021, we will continue to work alongside our farmers to help ensure they stay on the right side of history through business, financial and environmental sustainability.
