Farmers seek off-farm income to counter rising costs

Federated Farmers meat and wool chairman Miles Anderson says the rural community is under increasing financial and regulatory pressure.

A farming leader says it is no surprise that farms are increasingly reliant on off-farm income. 


A Lincoln University survey has shown just over a quarter of farms obtained 30 per cent or more of their income from off-farm sources.

Farmers were struggling to keep up with the mainly inflation-caused price squeeze, the survey found. But the authors said some families found the rural lifestyle compensated for tight finances.

Rural living does suit many families, compensating for the low returns, say the survey authors.

Rural living does suit many families, compensating for the low returns, say the survey authors.

Federated Farmers meat and wool chairman Miles Anderson said he was not surprised, given the downturn in the sheep industry and the high debt many farmers were carrying to get into farming. Farming enterprises were increasing in size and climatic events such as drought could lead to unforseen costs. 

"Fifty years ago it was far less common for someone to be working off-farm, whereas nowadays it is a necessity in a lot of cases."

Farmers' returns are struggling to keep up with the mainly inflation-caused cost price squeeze, the survey found. (File photo).

Farmers were known for being asset-rich and cash-poor. "I can guarantee you that the bulk of the cockies with a new ute have borrowed the money to buy it," said Anderson.

The rural community was under increasing financial and regulatory pressure. "If an off-farm income can be sourced, it's an option that a lot of people are taking," he said. 

The farm survey obtained data on net capital gains and returns from 400 farmers.

Analysed by Lincoln academics Bruce Greig, Peter Nuthall and Kevin Old, it "provides food for thought and debate over the overall profitability of farming, and the consequent future of family farms which have traditionally been the cornerstone of rural society."

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Associate Professor Nuthall said off-farm income was "surprisingly high with an average across all farms of nearly 25 per cent of net income. In an increasingly uncertain world, this diversification is sound."

While the survey did not detail the source of off-farm income, some will have family members working off-farm, investments in various companies, or apartments in town being rented.

"Annual net cash returns and net capital gains provide farmers with their actual and potential monetary rewards, which respectively on average are not as high as might be imagined."

Over time, farmers need to become more efficient just to cover the cost price squeeze, which was a constant feature of contemporary agriculture and horticulture. "The Consumer Price Index indicates an annual compound change of 5.1 per cent. The survey shows the farm cash surplus is barely holding its own."

The best performers in the survey were arable, dairy support and some horticultural operations, said Nuthall.

The all-farms average showed real net capital gains have been close to zero on average, over the long term.

"Given the low level of annual return (2.5 per cent on capital), and virtually zero net real capital gains, it is clear farmers and their families must obtain many side benefits from farm life compensating for the low returns.

"Rural living does suit many families. The real issue is whether they cover their cash costs and have sufficient income left for a reasonable way of life."

There was considerable variability in returns, with 14 per cent showing a cash surplus of $200,000 or greater, while 8.1 per cent returned a cash loss.

"However, given the non-monetary benefits from primary production, farmers are most unlikely to become purely economically rational," said Nuthall.