Narrowing the gap was a key focus of the Red Meat Profit Partnership (RMPP) set up after the 2011 strategy document that showed the divergence between them had doubled in the previous two decades.
The latest finding emerged in a new study by RMPP partner ANZ Bank of more measurable parts of farm performance, rather than the vision, drive and strategy aspects called the “softer attributes” of the initial programme but also including above-average execution of farm practices.
RMPP set a 2.6% annual overall industry growth rate as the path to achieving sector returns of $14 billion by 2025, from the $9.5b now, but report author Con Williams said growth had averaged only 1.6% since the strategy was announced.
Weather, currency and in-market prices were all factors in that.
For the onfarm part, the strong relationship between profit and the cash rate of return and between profit and gross revenues for all the main farming types was not a surprise, he said.
Top performance required investment but with more emphasis on the quality than quantity of that investment.
That meant investing in more important productive aspects of farming, leading to greater cost efficiencies.
Four key areas of investment that stood out were cropping, pasture renewal, genetics and infrastructure.
“The combination of better genetics, more drymatter production and best-practice farm management are really starting to push the boundaries of what many previously thought wasn’t possible,” Williams said.
The best farmers were putting in crops such as lucerne, plantain, brassicas and maize as part of pasture renewal and to diversify risk.
On the better finishing land, the group was producing meat per hectare at double the industry average and over all land types the production was 40% higher than the average.
On an operating earnings basis (before interest, tax, rent and managerial salaries) the average over the last five years was $275/ha, whereas the top 20% of farmers averaged about $580/ha, with some achieving significantly higher, Williams said.
Motivation, business goals and passion and confidence were all part of that as well as paying attention to the basics.
The study also found lower equity levels in farm ownership showed up in higher earnings as those farmers worked their businesses harder to service interest costs.
The study focused on onfarm performance because that was the basis of the RMPP.
Beyond the farm, the long-term maths of emerging markets demand, modernisation of the food chain in new markets, westernisation of consumer taste preferences, preferred access to a wide range of markets and strong business relationships with key multinational food service groups “all look pretty impressive”.
Williams noted comments by Chinese president Xi Jinping on a past visit here that his country on its own would have more demand than NZ could supply.
