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7. TRENDS IN FARMING AND BUSINESS IN WAIROA

___________________________________________________________________________

Key points

• Detailed questionaries were mailed to all farms and businesses in the District.
• Ninety- seven businesses (36.5%)and ninety-five farmers (33.2%) responded.
• Although employment levels in farming improved from 1989 to 1994, neither farmers nor businesses believed that further increases in employment were likely.
• Forestry-related employment increased rapidly in 1993 and 1994. In the 15 years 1995-2010 over 200 new FTE jobs will be created through forests that have already been planted.
• Critical factors affecting business viability identified by farmers and businesses centred on farm incomes (product prices, climatic events, economic policy), unemployment and national economic performance.
• Businesses perceived a high level of threat from conversion of pasture to forest. The major impacts were expected to be loss of farm expenditure, declining employment levels at the meat processing works, redirected capital expenditure and the export of profits from primary production.
• The impacts of afforestation most commonly noted by farmers were an increase in land values, restrictions on farming activities, the potential for further decline in rural services, an increase in road maintenance costs, increasing isolation and loss of the present community structure.
• There was strong agreement across both sectors that the key community issues were
  1. unemployment,
  2. crime,
  3. the future of health services,
  4. a lack of motivation and confidence and
  5. the need for well targeted, effective training and education.
• Perceptions and concerns on environmental issues varied. Erosion and forestry were of concern to both sectors. Effluent disposal, drainage and water quality were also of concern.

Introduction

The response of the Wairoa community to the land-use change at present occurring will not be clear for a number of years. In the future, looking back, it will probably be possible to identify some changes which are clearly attributable to a change in land-use. We expect that mostly, however, change will be in ways that cannot be solely attributed to any one of the raft of political and economic pressures and the personal and social motivations that impact on the District. The rationale for the business and economic surveys was to document, at a fixed point in time, the structure of two parts of the community, the issues that impact on people's livelihood and people's perceptions and concerns for the future. It is only from an understanding of the present, however limited that may be, that forecasts for the future can be made and then tested in years to come against actual outcomes. The present, of course, is also a function of the past. In the surveys questions were asked about the recent past, to provide some context for information about the present.

The surveys asked respondents to comment on issues affecting their business and livelihoods over the past five years, in the present, and their expectations of the five years to come. In this context they were asked to comment on the impacts of land-use change to date and issues of potential concern for the future. The survey responses are not intended to be a definitive description of the farming and business sectors. They provide general descriptions of the two sectors and a guide to some of the key issues facing Wairoa District at present, with particular emphasis on a change in rural land-use.

Sources of Data

Statistics describing the structure, constraints, intentions and opinions of the Wairoa business and farming sectors are derived from mail surveys conducted by the authors in September 1994 and from official employment and industry data which has been supplied by Napier City Council from the Statistics New Zealand database. The farming and business sectors were selected as the parts of the Wairoa community that would most immediately be influenced by a significant change in land-use.

We acknowledge that there are other sectors of the community (e.g. Maori, unemployed workers) that have an important stake in the future of land-use and employment in the District. For this reason this document, and this chapter in particular, should be considered only as a resource document prepared at the beginning of a process. We envisage that the process this document begins will include information gathering, community debate, action planning and implementation of a community strategy.

Questionnaires were sent to businesses identified by the Wairoa District Council from rating records and the mailing list of the Wairoa Business Development Association, and to farmers identified by the MAFQUAL Farmtrak database. Response rates were 36.5% for the business surveys (97 of 265) and 33.2% for the farmer surveys (95 of 286). These rates are reasonable for mail surveys. Not all questionnaires contained valid responses to all questions, so the data set for any particular question will vary from the total number of returns.

It is possible that respondents, recognising the purpose of the surveys, biased answers to a particular perspective. Where possible, multiple questions with slightly different approaches to the same issue were used to elicit information about important matters. In some instances the responses to such questions corroborated each other, in others divergent responses were identified. These are noted where necessary.

The distribution of the responses by business sector (Table 7.1) indicates that lower than representative returns were received from community service organisations and public administration, and a larger than representative number of returns from retail businesses. Where possible, data is therefore presented by sector, and it is acknowledged that conclusions about social services and public administration activity are imprecise.

Table 7.1 Representativeness of business returns

Business sector		NZSIC codes (details in Appendix 4)	1994 survey		Statistics NZ (1992)
			Returns	%	Number	%
Primary sector (excl farmss)		1 (excl 111), 2	8	8	36	9
Manufacturing		3 (excl. AFFCO)	4	4	16	4
Commercial services
	Trades	5, 95	11	11	57	14
	Retail	62	33	34	72	18
	Hospitality	63,94	9	9	34	9
	Business	8	10	10	27	7
	Other	4, 61, 7	15	16	63	16
Social / community services		93	3	3	63	16
Public administration			91	3	3	31
TOTAL			96	100	399	100

The average size of enterprises sampled within each sector, calculated as the number of employees, was generally consistent with 1992 business sector census data. The exceptions were the public administration sector, where sampled businesses were smaller than the sector average. This bias reflects the very small sample in this sector.

Analysis of farming factors in this report uses the large and small farm categories defined in the MAF Farm Monitoring programme (large farms > 800 ha, small farms < 800 ha). Distribution of the farmer responses by farm size class suggests a slightly lower than representative return for small farm properties (Table 7.2). Within the small farm class, however, the average farm size was very close to the average size of properties in the MAF database in that class. Responses are therefore expected to be representative. The number of returns from larger properties was larger than their proportion of total farms in the MAF database. Within the class very large farms were under-represented relative to moderately large farms.

Table 7.2 Representativeness of farmer returns

The effect of this bias has been reduced by further subdividing the two major farm size classes (Table 7.3). Small farms have been split into those larger and smaller than 400 ha (28 and 37 returns) and larger farms into those larger and smaller than 1500 ha (6 and 19 returns). The relatively small number of properties greater than 1500 ha may lead to some bias or imprecision in responses from that class. The number of responses in each of the remaining classes provides confidence in the representativeness of responses in each.

Table 7.3 Farm Classes by Area Derived from Survey Responses

Our analysis of the two community surveys compares and contrasts the two sectors by structure, employment, key factors influencing their profitability, trends in employment, income and expenditure, the expected impact of the change in land-use from farming to forestry, and by their perception of community and environmental issues.

This data provides a description of the perceptions of forestry as a land-use vis-a-vis farming and of the major concerns a potential change in land-use generates. Information gaps can then be identified and a community strategy developed to respond to expected land-use change.

7.3 The Structure of the Wairoa Business Sector

7.3.1 Employment

The business sector in Wairoa is dominated by service industries (commercial 64%, community 16%, public administration 8%) (1992 data). A total of 347 businesses employ 1543 people in this category (Table 7.4). The major employers in the category are the retail trade (335 workers), education institutions (260 workers), health (133 workers), public administration (203 workers), construction (150 workers) and hotels/food providers (117 workers).

Although there are a much small number of businesses in manufacturing, it contributes substantially to local employment. Sixteen businesses employ 543 people directly. This is dominated by the AFFCO freezing works, but the two sawmills, two other meat processing plants, the Wairoa Star printery and a number of other enterprises in the baking, leather and vinyl and engineering industries together contribute 102 jobs. Of these, only the Frasertown and Venex meat processing plants are outside the former Wairoa Borough.

The primary sector census statistics are dominated by farm owner operators and workers. A small number of other businesses (agricultural services, fishing, quarrying and forestry) also contribute. It is only these latter businesses that were included in the business survey.

Census data shows substantial declines in employment in the manufacturing and parts of the service sector between 1987 and 1991, largely as a result of competition in the meat processing industry, a sharp decline in construction and restructuring of State-owned utilities. The primary sector was not as seriously affected, although there were losses in agricultural and forestry labour, the latter largely as a result of the corporatisation and subsequent sale of the State forest resource.

Table 7.4 Wairoa District employment, 1992 (FTEs)

The business questionnaire asked employers to provide information on staff numbers by employment class. There is a relatively low level of part-time employment available in most industries in the District, with the exception of the hospitality and community service industries. There is also a very low level of business-based trainee positions. As a result only five school leavers had been employed in the past 12 months by businesses responding to the questionnaire.

Table 7.5 Average employment levels by business and sector

Seventy-five percent of surveyed businesses are locally owned and operated and only 25% are owned by larger firms. The latter are dominated by nationally based retail or financial institutions and by Government-funded services. As a result most businesses are very sensitive to local expenditure patterns. Arguably branches of larger organisations have greater flexibility in their response to business fluctuations.

7.3.2 Manager tenure

The distribution of businesses by length of operation is bimodal. Many businesses are long established, but there are also a significant number of relatively new ones, reflecting an improvement in economic confidence since 1990 (Table 7.6).

Table 7.6 Age of business and length of tenure of manager

Age of business (years)	Number of businesses by manager tenure (years)				Total businesses surveyed
	0-4	5- 9	10-19	20-49
0-4 5-9 10-19 20-49 50 +	22 4 2 12 6	6 3 4	6 7 5	14 3	22 10 8 36 19

The size and location of Wairoa contribute to it being a "stepping stone" post for managers of branches of some nationally linked companies. A significant number of managers who were relatively new to Wairoa worked for firms that were older and well established. New or newly purchased businesses were concentrated in the commercial service sector and, while dominated by new retail businesses, included new companies involved in tourism and repairs and maintenance. Businesses with recently new managers were spread across all sectors.

7.3.3 Intersectoral dependence, links and leakages

Businesses were asked what proportion of their income was derived from different sectors of the community. Although proportions are imprecise and varied quite widely between businesses, they provide an approximate analysis of the degree to which businesses believe they are dependent on particular parts of the local economy (Table 7.5). Of particular note is the relatively high significance given to the travelling public, visitors and tourists. This reflects the high proportion of retail businesses in the survey.

Central Government is a major source of revenue for administration and community service programmes. There is also a perceived heavy dependence by businesses of all types on farming and meat processing. For the retail trade, the meat processing industry and the salaries it generates are perceived as being just as important as the farming sector. In contrast, agricultural services, manufacturing and other commercial service industries are more dependent on the business of farming.

Table 7.7 Business revenue sources by sector

Local business sectors		Sources of income for local businesses (% of total income as estimated by managers)
		Farming	Meat Processing	Forestry		Timber Processing	Visitors/ Tourists	Residential	Other Commercial	Other	Total Income
Agricultural services		0.37	0	0.29		0	0.25	0	0.09	0	1.00
Manufacturing (excl. AFFCO)		0.39	0.26	0.00		0.22	0.05	0	0.08	0	1.00
Commercial services
	Trades	0.31	0.13	0.01		0.04	0.08	0.28	0.14	0	1.00
	Retail	0.22	0.21	0.01		0.05	0.20	0.23	0.03	0.06	1.00
	Hospitality	0.14	0.07	0.01		0.01	0.63	0.12	0.01	0.01	1.00
	Business	0.33	0.16	0.05		0.02	0.02	0.27	0.04	0.11	1.00
	Other	0.32	0.19	0.02		0.07	0.17	0.04	0.14	0	1.00
Social / Community services		0	0	0		0	0	0.67	0	0.33	1.00
Public administration		0	0	0		0	0	0	0	1.00	1.00

The high dependence of the retail sector on meat processing relative to residential customers illustrates that the data reflects managers' perceptions rather than precise accounting. It suggests that respondents did not distinguish between direct expenditure from, for example, the AFFCO freezing works and the indirect household expenditure of people they believed to be employed at the works. Similarly the social and community services sector has recorded all its demand from the residential and other sectors and records no demand from the farming sector. For those services, it would appear that farm families have been included in the residential category.

Business expenditure in Wairoa can be split into two types:

• items that are predominantly sourced from within the District, i.e. labour and repairs and maintenance, and
• those which are largely purchased outside the District (goods for resale, materials for manufacturing).

Table 7.8 summarises the proportions of business expenditure an average Wairoa business spends inside and outside the District (AFFCO excluded).

Table 7.8 Expenditure by destination (all sectors aggregated)

Expenditure Type	Expenditure destination (%)
	Within Wairoa	Outside Wairoa
Wages	0.90	0.10
Goods	0.35	0.65
Freight	0.43	0.57
Materials	0.47	0.53
Rent	0.69	0.31
Repairs and Maintenance	0.74	0.26
Other	0.57	0.43

In common with other small rural town economies there are significant imports of consumer and industrial goods and materials. There is a higher proportion of local supply of services and of local ownership of business premises.

Businesses were asked a detailed question about the purchase of services or labour outside the District, and whether such purchases were by choice or necessity. While they generally expressed a preference for services provided locally, a range of specialist and technical services had to be purchased from larger centres or head offices elsewhere. A notable exception were accountancy services, for which 20% of respondents used accountants outside the District as a matter of preference. Some of these commented that they did so for reasons of commercial confidentiality.

7.4 The Structure of the Wairoa Farming Sector

7.4.1 Employment

The survey asked farmers to quantify the labour (including partners where appropriate) used in the farm business over the past year in numbers of weeks. The results suggest that farms under 800 ha in size are mostly owner operated and use contract labour for labour-intensive tasks such as docking. As the size of properties increases over 800 ha the number of full-time staff increases. The use of contract crews also increases for shearing and for specialist tasks, e.g. forestry. The use of casual labour, fencing contractors and scrub cutters declines, however, on properties over 1500 ha, and these jobs are performed by full-time staff.

Table 7.9 Employment on farms (average by farm class)

Employment Class	Employment generated by farm class (FTEs)
	Under 400 ha	400-800 ha	800-1500 ha	Over 1500 ha
Full-time	1.58	1.55	2.21	3.44
Casual workers	0.23	0.30	0.38	0.19
Shearers	0.15	0.19	0.42	0.54
Fencers	0.01	0.03	0.16	0.08
Machine operators	0.01	0.01	0.04	0.07
Consultants	<0.01	<0.01	< 0.01	<0.01
Scrub Cutters	0.01	0.03	0.13	0.09
Forestry workers	0.01	0.02	0.20	0.18
Other	<0.01	<0.01	0.01	0.02
TOTAL	2.01	2.13	3.54	4.61

An analysis of the geographical source of labour indicates strong support for locally based workers, although a number of the larger properties indicated that it was necessary to use shearing crews from outside the District. Consultants and forestry workers were the categories of contractors most likely to be sourced from outside the District. These services are specialised and used infrequently, so tend to be provided from larger centres where there is a critical mass of such work available.

Table 7.10 Source of farm workers

Employment class	Proportional source of farm workers
	Wairoa District	Elsewhere	Total
Full-time	0.97	0.03	1.00
Casual workers	0.94	0.06	1.00
Shearers	0.83	0.17	1.00
Fencers	0.96	0.04	1.00
Machine operators	0.95	0.05	1.00
Consultants	0.54	0.46	1.00
Scrub Cutters	0.92	0.08	1.00
Forestry workers	0.70	0.30	1.00
Other	0.89	0.11	1.00

7.4.2 Manager tenure and age

Eighty-two percent of surveyed farms are family owned and operated. A further 11% are privately owned and managed by staff. The latter tend to be the larger farms managed on behalf of absentee or Maori owners, and make up a substantial proportion by area and stock numbers of the District. Maori Trust or Incorporation-owned properties are a more significant proportion of total farms in Wairoa than is the case nationally. An analysis of farm manager age, as one measure of a farm's possible availability for sale, identifies a considerable proportion of managers older than 50 years, particularly in the smaller farm classes. This suggests that the constant trend of smaller farms coming to market will continue as owner operators retire and leave the property. This is less true of larger properties where ownership rests with corporate organisations and where fewer managers are in the senior age category.

Table 7.11 Age of farm manager by farm class

7.4.3 Land-use on Farms

Much of the Wairoa hill country is steep and susceptible to reversion. Survey returns included data about the different land-uses on each property. On an average property 82% of land is in managed pasture, with an additional 5% in grazed scrub. This latter category is largest in the large farm category. In the very large farm category proportionately less area of grazed scrub is recorded, and larger areas of retired land. Potentially, some of these areas might be cleared and redeveloped as pasture under favourable economic conditions. Alternatively they may be put to productive use in exotic forestry. Such a change in land-use would have little environmental benefit because reverting scrub provides an effective vegetative cover, thus reducing erosion, and can lead to redevelopment of canopy forest over time, improving biodiversity.

Woodlots (2% of area on average) make up a very small proportion of land area. Diversification into other productive uses is limited to the smallest farm class and is relatively small in area, although potentially significant in revenue for those properties. Retired and other areas make up 8% of the total area but are concentrated on the very large properties. Other unproductive areas may be included in some returns with retired area, but average 2% to 5% for most properties. These include gullies, cliffs, tracks, buildings, yards etc.

Table 7.12 Farm land use by class (% of area)

Land use	Under 400 ha	400 ha to 800 ha	800 ha to 1500 ha	Over 1500 ha	Total
Improved pasture Reverting pasture Woodlots Other productive Retired Other nonproductive	91 1 2 2 2 2	87 1 1 0 6 5	81 11 2 0 3 3	71 2 2 0 25 0	82 5 2 0 8 3
Total	100	100	100	100	100

7.4.4 Income and expenditure by source and destination

Revenue and expenditure patterns for farm businesses were also surveyed. The surveys were completed before the 1994 Weddell New Zealand closures, and so provide only a general indication of current stock flows. Less than 5% of store stock are estimated to return to grazing in the District, despite close to 50% being sold through the Wairoa saleyards. A significant proportion go straight to the meat processing works. Small farms are more likely to sell stock for slaughter outside the District than other farm classes, and the largest farms more strongly support the local freezing works than other classes. The largest properties also sell a high proportion of store stock directly to buyers outside the District, i.e. not through the saleyards.

Table 7.13 Stock sales by farm class and destination

Stock type	Annual Stock Sales for an Average Farm in each Farm Class
	Under 400 ha		400-800 ha		800-1500 ha		Over 1500 ha		% of total
	Wairoa	Other	Wairoa	Other	Wairoa	Other	Wairoa	Other	Wairoa	Other
Fat lambs Store lambs	227 100	377 267	503 137	369 267	820 258	851 187	1022 552	386 1259	50 44	50 56
Sheep killed Store sheep	110 53	102 33	185 144	102 122	177 325	117 107	551 628	97 354	64 65	36 35
Fat cattle Store cattle	31 28	47 10	50 39	32 25	87 70	95 44	59 126	14 82	50 64	50 36
Deer killed Store Deer	9 0	0 1	6 11	9 0	0 5	0 0	30 0	0 0	72 90	28 10
Goats killed Store goats	20 8	30 0	51 13	20 4	950 0	20 7	110 0	0 0	95 66	5 34

Sixty-five percent of farm families in the survey earned off-farm income in the 1993/94 year. Families on farms in the largest and smallest size classes earned the largest amounts. In the smallest farm class 39% of farm families earned between $10 000 and $25 000 off-farm and 36% earned over $25 000. In comparison, although 40% of farmers in the 400 ha to 1500 ha range earned off-farm income, only 16% earned more than $10 000.At current gross margin levels a farm of 4000 stock units (400 ha to 500 ha) is considered to be a viable one-family unit in the Wairoa District (i.e. is not dependent on outside income sources) (H. Collier pers. comm.). On this basis, farms in the smallest size class appear to be remaining viable by being in a stronger-than-average equity position (i.e. little or no debt) or by earning off-farm income.

Survey results confirm that the farming sector strongly supports local businesses with farm expenditure. Expenditure on a number of major inputs, e.g. fertiliser, fuel and vehicles, contributes only a local handling profit margin, however, because local suppliers are agents of importers or manufacturers. Table 7.14 uses simple averages over all responses to demonstrate the relative proportions of external and internal expenditure.

Table 7.14 Expenditure by destination (all farm classes aggregated)

Expenditure type	Expenditure by destination
	In Wairoa	Outside Wairoa
Fertiliser	0.81	0.19
Shearing	0.89	0.11
Livestock	0.66	0.34
Wages	0.91	0.09
Vehicles	0.77	0.23
Repairs and Maintenance	0.86	0.14
Animal health	0.83	0.17
Freight	0.76	0.24

7.5 Trends in Farming and Business in Wairoa

7.5.1 Employment and Output Expectations of Survey Respondents

There was no significant change in total employment or volume of business across all industries from 1989 to 1994, although the last 18 months of the period saw an upward trend. This result masks a range of movements between industries. There were net declines in public administration, retailing and business service industries but gains in manufacturing, agricultural servicing and construction. Within industries also there have been both increases and declines.

Continuing improvement in business volume over the coming five years was forecast by the primary, manufacturing, construction, hospitality and business service industries, but in total no major changes in employment levels were expected. Twenty-seven percent of businesses expected to increase staff numbers, 53% expected to remain steady and 20% expected to reduce staffing. The retail trade in particular was less optimistic than most. A number of businesses indicated that closure was possible, and only a small number forecast increased trade. When questioned about skill requirements for new employees the four highest-ranking responses (between 25% and 45% support) were

1. specific trade skills (varied with industry),
2. personal skills (grooming, manners, public relations),
3. general literacy and numeracy and
4. an appropriate work ethic.

The farming sector has seen an improvement in employment over the past five years. This is reflected most strongly on the 400 ha to 1500 ha properties as both full-time and casual employment, where average employment increases have ranged between 0.2 and 0.4 FTEs.

Farmers indicated that this improvement was a structural adjustment after a period of low stock numbers and very low farm expenditure. With an improvement in net returns and increased fertiliser application, stock numbers increased and the demand for labour increased. A number of farmers commented that stock levels were now back up to "normal", and that further increases in stock numbers and employment would be more gradual.A significant number of farmers said that they had difficulty in finding experienced farm contractors in the District, e.g. fencers. The decline in availability of work during the late 1980s and early 1990s appears to have resulted in a loss of local experienced agricultural labourers, who are now difficult to replace.

Some future employment opportunities in forestry can already be determined from the area of land that has been planted. Labour needs were calculated from average indices of labour demand for each forest operation supplied by forest companies in their questionnaire responses.

The labour needs assuming no new planting are summarised in Table 7.15. Tending employment will increase rapidly in the next five years following increases in recent new planting, and will then follow the trend in the harvesting rate as replanting occurs. Harvesting is already a significant generator of employment, and will continue to expand as stands planted in the early 1970s mature. It is likely to be the most stable and sustainable area of employment because both major forest owners are investing in processing capacity that will demand sustainable or increasing wood flows.

Table 7.15 Forecast contract employment in Wairoa District, 1995-2024

Work type	Work available (FTEs)
	1994	1995/99	2000/04	2005/10	2010/14	2015/19	2020/24
TENDING	30	47	45	24	39	50	45
Logging/loading	28	33	71	130	169	161	131
Transport	12	12	16	35	63	83	77
Roading	4	4	3	6	10	12	10
HARVESTING	44	49	90	171	242	256	218
Other	2	2	2	2	2	2	2
TOTAL	76	98	137	197	283	308	265

Full-time forest management staff positions within the major forest companies are expected to increase proportionately as a result of increased harvesting. For example, the number of logging supervisors currently working in the District is three and this is forecast to increase to six over the coming five years.

7.5.2 Changes in business and farming strategies

Low disposable incomes across all households, a period of high unemployment and high interest rates over the period 1989-1994 have seen both the farming sector and the business sector respond using a range of strategies.

Almost 60% of businesses had made significant changes to the way the business was managed. The three most common strategies were to substantially alter their product or service range, to change their operating hours and to restructure their debt position. Over 30% of businesses had implemented one or more of those three changes. Two other strategies received were also popular, over 25% of businesses responding that they had increased debt collection efforts or changed their capital investment strategy.

In the 1989-94 period 12-18% of businesses had invested in land or buildings and over 60% had purchased new equipment. Those most commonly investing in land and buildings were manufacturers, the construction sector, retailers, public administration and business service organisations. Investment in equipment was evident across all industries, with the exception of the primary sector. Most capital purchases had occurred since 1992, when interest rates declined significantly, and some respondents commented that purchases were replacement decisions that had previously been on hold and were now essential to remain competitive.

Business responses suggested that this adjustment would continue into the next five-year period. Eleven percent said that they were considering capital investment in building, and 32% are likely to invest in equipment.

Investment in farming is also increasing. Substantial additional investment has been made across all farm classes in the past five years. This has been particularly in fertiliser applications, repairs and maintenance expenditure and in replacing farm equipment, e.g. farm bikes. Fifty percent of farmers have increased fertiliser applications, 40% have increased maintenance expenditure and 65% have increased expenditure on equipment. Less than 11% have reduced these expenses. On some farms expenditure in these areas has increased by over 100%. This trend is similar to that demonstrated by the businesses. It is largely "catch-up" expenditure in areas which were constrained during the late 1980s and early 1990s.Forty percent of farmers indicated possible additional investment in new or replacement equipment over the next 5 years, and one-half would be likely to invest in additional subdivision fencing.

Over the past 5 years 25% of farmers have purchased land, 25% have invested in scrub clearance and pasture development, and 23% in woodlot forestry. In each category over 50% of those investing have been farmers in the 800 ha to 1500 ha range. Fewer than 15% of farmers in the small farm class indicated significant investment in expanding their land base or changing land-use. Farmers expect these trends to continue, but only if farming returns continue to improve. Twelve percent of farmers indicated a desire to buy additional land, and 36% indicated that they would invest in pasture development on scrubland.

Forty-five percent of farmers indicated an intent to increase poplar pole planting, and 41% indicated that they would like to invest in production forestry on scrub or low-producing pasture areas. Potential planting areas ranged from 1 ha to 150 ha on small farms (< 800 ha) and from 40 ha to 700 ha on large farms. Of those intending to invest in forestry, 75% indicated they would do so from income and 23% would look for joint venture partners.

Thirteen percent of farmers sold land over the past five years. Eighty percent of these were farmers in the less than 800 ha category. A number of these farmers gave ill health or age as the reason for selling land. A similar proportion of farmers indicated a desire to sell land in the coming five years, in blocks of 100 to 300 ha from mid-sized farms and a small number of blocks over 1000 ha from very large properties. Sales of the first type are more likely to be by private negotiation with neighbours than they are to go to the open market. The land is therefore more likely to remain in farming than are properties that are sold publicly.

Livestock policy is also an area where farmers are continually making adjustments. The past five years have seen strong beef returns because of disruptions in North American production, indifferent returns for lamb and sheep meat and poor wool prices. As a result there has been a strong trend towards cattle from sheep in much of New Zealand's pastoral hill country. This is also true of Wairoa District. With recent improvements in wool prices and fall in beef prices some Wairoa farmers are indicating that a shift back towards sheep is likely.

The drought in Wairoa in 1991/92 and a prolonged period of poor returns and low fertiliser applications substantially reduced the stock carried in the District. Improved returns over the past 18 months have seen farmers building up stock numbers again and this readjustment is expected to continue into the first part of the next five-year period.

Farmer strategies for optimising farm returns over the next five years vary. Some respondents indicated that they would be attempting to improve profitability by intensifying stocking rates and production. Other farmers have indicated an intention to hold stocking rates at current lower levels and focus on optimising per-head production. A small number of farmers indicated a likely drop in total stock numbers to allow diversification into woodlot forestry.

7.6 Critical factors impacting on Wairoa Businesses

Respondents were asked to list the six most important factors affecting their business viability in the past five years, at present, and in the coming five years. There were consistent trends in the business responses through time and across industry types. Key factors were the influence of local unemployment, of farm income levels and of farm expenditure. Each of these was ranked as one of the six most important factors by over 35% of respondents. Other factors which were frequently ranked in the top six were related to these three, e.g. storms and droughts (14% of all businesses), AFFCO employment levels (17% of all businesses) and Government policy (average inclusion rates by industry ranged from 11% to 27%).

Forestry development, although recognised as a potential future source of revenue, was primarily seen as a threat to farm expenditure and therefore also ranked highly as a concern to many businesses (average inclusion rates by industry ranged from 17% to 27%).Of secondary concern, with inclusion rates averaging 22% to 33% across industries, were the limited size of the Wairoa market and competition both from other Wairoa businesses and from Napier and Gisborne. It is commonly believed that a significant proportion of household expenditure is made outside the District. When this issue was pursued with farmers in a random telephone survey, reasons given for shopping outside the District included the variety, selection and price of goods in the larger centres relative to Wairoa. A number of farmers talked of taking the opportunity of shopping while in Napier/Gisborne for other reasons. Conversely a number recognised the benefits of service supplied by local retailers and purchased large ticket items in Wairoa.

The third key factor impacting on businesses was the cost and availability of finance. Although interest rates fell significantly over the past five years, a significant number of businesses still scored the risk of a return to high interest rates highly (15-20%).

Issues also of concern but at slightly lower levels of support included the cost of needed replacement equipment and the lack of suitably qualified employees in the labour market. Factors that were not considered to be particularly important to business viability included the availability of commercial services and the impact of District Council decisions.

Changes in product range, services offered and marketing strategies as well as reduced interest rates, increased visitor numbers and town promotion activities were factors that were considered to have contributed positively to business development over the past five years.

Farmers across the different farm size classes were also consistent in their assessment of the key factors impacting on their livelihoods. The factors highlighted were also consistent across the three time periods (past, present, future). Product prices were the preeminent concern, over 45% of all farmers including it as a significant factor.

Drought was almost as important, approximately 45% of farmers including it in the top six factors, and it was the most significant factor over the period 1989-94. Input costs in general and interest rates in particular were next in importance, approximately 25-30 % of farmers including them in the top six factors across the four farm size classes. Government polices ranked fifth most highly, and although few respondents elaborated, the likely key issues influenced by Government policy were the exchange rate, the inflation rate and interest rates. Storm events ranked sixth most highly, approximately 20% of farmers including them in the top six issues. The immediate cash costs of cleaning up and reinstatement of tracks, fences and bridges were mentioned as being the major effects of storms. Forestry development ranked seventh, with 15-18% inclusion. The specific issues raised by forestry expansion were explored separately, and are discussed in the next section. A range of factors including schooling, transport and retail services achieved lower but consistent inclusion.

Farmers were asked specifically about community structure changes over the past five years and the significance of these. A high proportion (over 85%) indicated that no changes had occurred that had significantly affected them. Where changes were noted they included declining rural school rolls (noted by 12% of farmers) and diminishing rural school bus services (10% of farmers), with reduction in rural retail outlets (stores, hotels, post offices), changes in the frequency and quality of freight services and a decline in agricultural services also significant.

7.7 Business Confidence

Respondents' perceptions of the health of the business sector in Wairoa was measured using a five-point scale from "awful" to "excellent". A second five-point scale measured the trend in business health from "plummeting" to "sky-rocketing". In general terms, across both the farming and business sectors, business health is judged to be mediocre to good and the trend is consistently between stable and improving. Farmers are consistently more positive than business people, in their assessment of both past, present and future economic health and the rate of improvement.

There are, however, considerable variations between farm classes and between business classes. The very large farms are consistently the most positive about the current business climate, and are generally the most positive about the rate of improvement. Farmers in the 800 ha to 1500 ha class are the least positive about the present economic health of farming but still maintain an optimistic outlook for the future. One could speculate that owner operator farmers in this category are those who expanded or purchased larger properties in the 1980s and are carrying the largest debt burden. This would affect their perception of the present, but also illustrates their positive future outlook.

Manufacturing, construction and hospitality/tourism are the most positive of the industry classes. The agricultural servicing sector is less positive about its current position, but is optimistic about the opportunities for improvement. In contrast, the public administration sector is consistently the least positive, and continues to expect an ongoing decline in business health. Businesses in the community service sector vary in their assessments, but generally recognise the past five years as a difficult period. They are, however, among the most optimistic about the future. The retail sector saw itself as being in a difficult position at present, and generally expected that things would get worse before they got better.

The industries business managers believed would grow in the coming five years included tourism services, forestry services, horticulture, manufacturing and restaurant and food supply. Those expected to struggle included small retail outlets, meat processing, agricultural services and sawmilling.

7.8 Perceptions of the Impact of Recent and Potential Forestry Development

Respondents were asked to identify the impacts of recent afforestation on their business to date and the likelihood and type of impact they expected in future. Distinctly different responses were received from the two sectors.

7.8.1 Impacts of Afforestation on Local businesses

Thirty percent of businesses identified an impact of afforestation on their business over the past five years. This is a little surprising given that recent afforestation (approx. 10 000 ha) is only 4% of the farmed area in the District. When asked the likely impact on business revenue for set changes in land-use (50% decline in farming or a 50% increase in forestry) responses were given that were in excess of the total current dependence of business on farming recorded in section 6.3. Industries indicating the strongest responses were the agricultural servicing sector, wholesale trade (e.g. stock and station agents), utility suppliers and retailers. The level of response suggests deep concern, but also lack of certainty about the impact of land-use changes.

Most, but not all, of the types of impact recorded were negative. In the service sectors they related to decline in farm spending, the decline in the rural population and the decline in the number of farm clients. In manufacturing the responses mostly referred to the decline in livestock numbers. Five percent of respondents recognised an increase in business from forestry industry expenditure.

Table 7.16 Impacts of land-use change on businesses to date

Responses by industry	Some impact (+ve or -ve)	Don't know	No impact
Primary	6	1	1
Manufacturing	2	0	2
Trades	4	4	3
Retail	4	14	15
Hospitality	2	1	6
Finance	5	1	4
Other services	5	2	8
Social / Community services	0	0	3
Public administration	1	1	1
% of total	30	25	45

An increased proportion of businesses expected some impact in the future (47%), but a significant proportion also expressed uncertainty (32%). The major concern again was reduction in farm spending (16%). New issues that were raised included the potential threat to AFFCO and the export of profit and capital expenditure out of the District. An increased number of businesses (12%) also identified opportunities in increasing afforestation, including new business expenditure and potential new manufacturing employment.

7.8.2 Impacts of forest development on the farming community

Farmers were, in general, more certain or more aware of recent impacts and potential future impacts of afforestation, only 6% responding with "don't know". Forty percent identified an impact to date, of which almost half referred to the increase in land values. Some identified this as positive in terms of improved equity and the opportunity to sell some land and reduce debt. Others referred to the increase in rates which resulted from higher valuations as a negative, or forecast a long-term decline in value as forestry became a dominant land-use. The other area of impact which received a reasonable amount of agreement was problems related to being a neighbour of a forest owner. Of most concern were the restrictions on certain activities, e.g. fire, and the perception that the farmers' liability risk increased greatly. It was also widely perceived by farmers that forests harbour weeds and pests, and that forest owners are more lax than farmers about meeting statutory obligations in that regard.

Seventy-three percent of farmers expected to be affected by forest development in the future. Three concerns received consistent support across all farm classes:

1. a potential decline in rural services,
2. an increase in road damage and maintenance costs and
3. a breaking down of the rural community structure and increasing isolation.

Increasing land values and restrictions on some activities ranked next. Not all of the remaining impacts that were raised were negative. Investment and employment opportunities were both recognised as potential positive impacts.

Table 7.17 Farmers Expected Impacts of Forest Development

Some of the critical issues that have been identified, e.g. community breakdown and isolation, need to be explored further to define precisely the values that underlie them, e.g. a healthy community structure, and which specific changes threaten those values. It would also be useful to quantify the level of use of rural and other services by those living rurally.

In conclusion, the primary issues which concern farmers are social - the reduction in rural school rolls, declining rural bus services, loss of local retail outlets and clubs, community breakdown, isolation and declining quality of road access with frequent heavy truck use. A smaller number could be described as strictly economic and relate to land values, restriction of some farm practices, increasing liability risk and reduced store stock markets.

A number of positive economic outcomes were also identified - investment, employment and contract grazing opportunities. Only one environmental concern received more than one response and that was the potential for local climate change as a result of plantation establishment.

Farming, however, is an industry in which the social and economic are inextricably intertwined because of the community structure that develops around a group of resident owner operators. Any economic analysis of the impacts of land-use change must consider the very real social costs of change. The difficulty, of course, is to place an economic value on the human cost of community change. It is just as difficult to identify the social benefits that forestry employment could bring to the District's current underemployed as it is to quantify the social cost of land-use change in farming communities.

A large number of farmers took the opportunity to provide other comments. These varied widely, but an attempt has been made to interpret the responses that related to forestry development and the desirability of planning controls. The result was an even split between those who strongly objected to forestry development and those who supported it.

The majority of those who commented were primarily concerned that both industries should be sustained, with an appropriate allocation of land between them. In general, farmers have a perception that, for the national good, the preferable use of stable, improved, pastureland is pastoral agriculture. As a result the areas suitable for forestry, from a farmer's perspective, are those that are less productive under grass or that are at risk from erosion or reversion. By definition these are also likely to be less productive under commercial forestry.

In general, this view receives widespread public support but generates debate as to exactly where the break point between the sectors should be and how a control mechanism to ensure "appropriate" land-use should be implemented. Needless to say, from an economic viewpoint, and from that of investors in forestry, the most appropriate value and use of any land, within environmental constraints, is best determined by the market price. The difficulty in this argument, farmers point out, is that the result is intense competition for a finite resource, underutilisation of poorer pastoral hill country and significant social disruption.

This dilemma is reflected in many survey respondents' comments. Of the majority, who supported a distribution of land use, there was a relatively even split between those who favoured planning controls of some sort to regulate the use particular land was put to, and those who opposed intervention. Those who support planning controls tended to acknowledge the distortion in the land market that this would create but believed it was warranted because of the market's failure to reflect what they believe to be in the "national good". In discussion with a number of key farmers the possible reasons for this market failure that have been raised include the impact of taxation deductibility for some aspects of forestry development and the lack of understanding of significant elements of risk in forestry development by investors. In addition it was considered unreasonable that city-based equity investors should be able to influence rural land prices, land-use and community future. All these issues can be vigorously debated.

Table 7.18 Analysis of free comments

7.9 Community and Environmental Issues

In order to put into context the concern over changes in land-use, survey respondents were asked to list the three most important community and environmental issues from their perspective. There was strong agreement across both sectors that the key community issues were unemployment, crime, the future of health services, a lack of motivation and confidence and the need for well targeted, effective training and education opportunities. These five issues received greater than 10% support from both sectors, unemployment received over 50% support from both sectors.

Each sector had one or two other issues it felt more strongly about than the other sector. A significant number of businesses were concerned over the cost of electricity. Farmers were particularly concerned over the impact of forestry development, the future structure of farming communities and the volatility and uncertainty of pastoral farming in the current economic climate.

The range of issues that received lower but common support included the level of rates and Government charges, the future of AFFCO, lack of new investment in the District, bicultural issues, the condition of road access to and within the District and the lack of entertainment or events to occupy young people.

Clearly there needs to be further work in defining precisely how people define the issue of concern, e.g. crime, demoralised community and sustainability of farming communities. The unemployment issue could reflect a lack of job opportunities for youth and/or the inability to operationalise new enterprise opportunities (i.e. job market expansion). The strategies for tackling these are quite different, and may be dependent on national economic parameters (interest rates, exchange rates, commodity prices etc.).

Table 7.19 Perceptions of community issues (% of respondents including issue, multiple responses included)

Issue	Businesses	Farmers
Unemployment	70	53
Crime	31	22
Health / Hospital	18	33
Demoralised community	10	13
Education and training	11	11
Forestry expansion	6	24
Sustainability of the farm communities	8	20
Rates/Govt charges	8	12
AFFCOs survival	6	13
Volatility in key factors affecting viability	0	14
Lack of investment	6	5
Cost of power	10	0
Bicultural issues	6	2
Isolation/road access	4	3
Lack of local entertainment	4