Gut instinct guides business

January 17, 2018

Two Lincoln University researchers have been researching the role intuition plays in farmers’ decisions and how it can be improved.

Dr Peter Nuthall and Dr Kevin Old, from the Department of Land Management and Systems, have had their analysis of farmers’ intuitive decision making published in the international rural research journal Rural Studies*.

Data was gathered from over 700 farmers.

“Farmer intuition has never been analysed to this extent before,” Dr Nuthall said.

Research has shown farmers make the majority of decisions using their intuition. They do not formally analyse each decision, but use their mental powers to decide on what action to take.

Using intuition, or gut instinct, might be unusual for academics but it isn’t peculiar to farmers, especially those brought up in the business who learned by watching and working with their parents.

“Sometimes the decision is instantaneous, but in others a range of thought levels are brought to bear before acting. Good decision intuition is not a mysterious process,” Dr Nuthall said.

“Profit and other assessments show some farmers are good intuitive decision makers, others not so good.”

Farmers with little experience, whether they have good potential intuition or not, find it difficult to make good decisions.

The handicap of inexperience won’t just be the preserve of farmers either.

I don’t know any successful business people who haven’t made mistakes. They’re more likely when they’re inexperienced and if those mistakes aren’t learning experiences.

What’s differentiates the successful from those less so, is the willingness to trust their gut, make decisions, act on them and learn from any mistakes so they don’t repeat them.

Dr Nuthall said the intuition process often uses what is called ‘pattern matching’, where the brain uses experience to match up past events with the current decision problem.

“The farmer’s intuition then comes up with what the brain believes to be the correct action.”

However, intuition is more than just pattern matching, he said.

“Intuition develops with a farmer’s thought process, self-criticism and review.”

The new research showed how farmers can improve their intuition.

“Obviously the farmers’ technical farming knowledge is important as a forerunner. But equally is the attention to carefully observing the state of the farm and the relevant markets,” Dr Nuthall said.

“Observations must be accurate and cover all the issues important to any decision. And the farmer must be good at anticipating the path ahead — looking ahead skills are critical in assessing alternative actions to solve any decision problem. These all tend to be inbuilt skills”

He said these skills can be improved with attention and practice.

“A farmer should analyse all past decisions and take on board any lessons on offer. Discussing past actions with colleagues and family helps improve mind held patterns and produce good solutions.”

I’m not disputing this reasoning but I think a lot of the analysis is unconscious.

Good farmers live and breathe their businesses, observing and thinking about what they see. They read about farming, go to field days and discussion groups and learn from their own experiences and from others.

Farming is a particularly risky business with many variables which are out of farmers’ control.

Those who succeed use their brains but, like other business people, they are also guided by gut instinct.

 

 


Rural round-up

June 24, 2015

Still more milk than market – Rabobank’s latest dairy outlook:

A recovery in global dairy prices is still on the horizon, however burgeoning stocks have pushed out any sustained upturn in the market until the first-half of 2016, according to Rabobank’s latest Dairy Quarterly report.

The global outlook, released exclusively to Rabobank’s agribusiness clients earlier this week, reaffirms the bank’s position that a recovery phase is imminent, however it has pushed out the timeframe by at least three months. . .

 The good and bad of farming with lifestyle neighbours – Kate Taylor:

The views from Philip and Robyn Holt’s farm, Maraetara, are spectacular – across the Ahuriri estuary to Hawke Bay and Napier Hill.

They’re not the only ones to appreciate it though. When Philip was growing up the only neighbours were other farmers. Now houses dot the hillsides and Maraetara has boundaries with about 70 neighbours.

This growth of lifestyle blocks has negatives and positives, says Philip. . .

NZ beekeeper plans bee sanctuary on Niue – Cheryl Norrie:

When beekeeper Andy Cory went to Niue in 1999 in search of a honey business, he had to hack his way through a jungle to find a collection of beehives which had been abandoned 30 years previously.

He remembers finding 240 hives.

“They were all rotten and had fallen on their sides. The bees were still in them and they were fine.” . . .

Too little data to pinpoint cause of NZ beehive deaths – Suze Metherell:

(BusinessDesk) – The sudden and devastating demise of honey bee hives, known overseas as colony collapse disorder, may threaten New Zealand’s $5.1 billion apiculture industry, after thousands of colonies were lost over last spring.

North Island beekeepers spanning the Coromandel, Great Barrier, Wairarapa and Taranaki suffered significant losses with some reporting up to 95 percent of adult bees disappearing from hives. However, a lack of reporting to the Ministry for Primary Industries or the Environmental Protection Agency meant there was no certainty about whether the sudden collapses were linked, the New Zealand Apiculture Conference in Taupo heard. . .

Farm debt pressures being surveyed:

Lincoln University researchers want to know how farmers and their families are dealing with being in debt and the stress it can bring.

Bruce Greig, Dr Kevin Old and Dr Peter Nuthall, from the University’s Faculty of Agribusiness and Commerce, are conducting a nationwide survey investigating farm debt and the level of anxiety experienced by farmers who incur it.

Mr Greig says they want to discover how they manage debt as it is one of the many skills farmers require. . .

NZ lambskin, sheepskin face ‘lose-lose’ with over-supply, weak demand – Tina Morrison:

(BusinessDesk) – New Zealand exports of sheepskin and lambskin, at their lowest level in more than four years, are unlikely to recover any time soon as a glut of excess stock and weak demand weigh on prices.

The value of raw sheepskin and lambskin exports fell to $128.6 million in the year through April, the 15th straight decline in annual exports and the lowest level since January 2011, according to Statistics New Zealand data. The latest figures, for May, will be published on Friday. . .

 

Settlement reached over ASB rural interest rate swaps:

The Financial Markets Authority (FMA) has reached a settlement with ASB regarding the sale, promotion and marketing of interest rate swaps to some rural customers.

The Commerce Commission (the Commission) investigated ASB for the sale of interest swaps and reached a separate settlement with ASB in December 2014.

The FMA settlement was reached based on the conclusions from the Commission’s investigation and the FMA’s engagement with ASB in relation to its processes for selling and marketing interest rate swaps to rural customers. . .

 


Environment first for farmers

September 20, 2014

Lincoln University research shows environmental stewardship is a high priority for farmers:

Farmers on properties with a net annual profit less than $50,000 list ‘minimising pollution’, ‘improving the condition of the property’ and ‘ensuring employees enjoy their job’ as more important objectives than ‘expanding the business’ or ‘making a comfortable living’.

That’s according to the latest results from research conducted by Lincoln University Senior Lecturer in Farm Management Research, Dr Kevin Old, and Research Fellow, Dr Peter Nuthall, who sought opinions and preferences with regard to farm succession and governance.

According to the researchers, the prioritised objectives of less profitable farmers may reflect a mindset which has largely dismissed the idea of achieving larger returns or expanding the business on grounds that these are essentially unobtainable. As such, job satisfaction or meaning comes from notions of environmental stewardship or quality of life.

Interestingly, farmers on properties with lower returns also placed ‘attending field days’ as one of the lowest objectives.

There could well be a link between this apparent unwillingness to learn and low returns. But it could also be that these farmers don’t feel they can afford the time off their farms.

For more profitable farms (those with a net annual profit of $100,000-$150,000) the same objectives appear as top choices, albeit in a slightly different order. These farmers put ‘it is important to make a comfortable living’ at the top of the list. However, the other top ranked objectives are in the same order with ‘minimise pollution’ fitting in after ‘ensuring employees enjoy their job’.

Of great surprise to the researchers was the objective ‘it is important to pass the farm to family’ being placed at the bottom of the list as the lowest ranked objective. . .

I think this has changed after the ag-sag of the 80s when farms couldn’t afford to have adult children come home and they got work elsewhere.

New Zealand has historically had an orientation toward the family farm: ownership systems were simple, and most farms kept one or two people fully occupied. Likewise, objectives were orientated toward farming ‘as a way of life’. The research aimed at ascertaining whether this traditional model has changed and to what degree.

It was found that the average age of farmers in New Zealand in 2006 was 50, but in 2013 this had edged up to 53. The average farm size has similarly increased, from 557 hectares in 2006 to 591 hectares in 2013.

The average number of people working on the farms has also increased. In 2006 it was 2.05, whereas the figure for 2013 sits at 2.76.

The researchers noted that changes in employment levels per farm are most pronounced in the dairy sector. This is no doubt due to growth in the sector which has seen dairy production increase from 951.5 kilograms of milksolids per hectare in 2006 to 1134.3 kilograms of milksolids per hectare in 2013 (compared with a drop in lambing productivity from 130.3 percent to 127 percent).

The South Island in particular has seen a notable increase in average farm size, which has gone some way to contribute to the fact that 3.2 percent of all farms in New Zealand – all of which are dairy operations – now have eight or more people working on them.

Across all farm types, 25 percent are run by a single person. Farms with two people make up a further 41 percent, with three person farms covering an additional 13.5 percent. As such, close to 80 percent of farms in New Zealand are still low labour operations.

Of note, 20 percent of all New Zealand farms are sheep farms and have three people or fewer working on them.

It was also found that sheep farms experience less of a problem finding sufficient labour than dairy operations.

That reflects our experience.

Along with the increasing age of farm managers, the number of years which farmers own their farms is probably increasing. Currently the average length of ownership is 25 years.

Another change is likely to be in the number of farms each farmer has an interest in. While nearly 60 percent of farmers are involved with only one farm, the average across all farm types is 1.75 farms. This number is increasing, however, largely due to the growth in dairying, with some farmers holding an interest in more than seven farms.

It was found that family farms have a variety of ownership systems. Private companies are becoming important, with 14 percent of the respondents noting they have such a company. This might be combined with various other ownership systems, of which a trust could be one. In fact, the results showed that trusts factor into 47 percent of all properties in one form or another. Of the respondents, only 1.24 percent reported a public company ownership model.

Of all partnerships, around 70 percent involve a spouse. An additional 25 percent also involve one or more family members, but partnerships with non-family members are uncommon. A farmer’s spouse is also an important person in the case of trusts.

The researchers found that, on the whole, family ownership systems are such that the farmers themselves make most of the decisions. Indeed, the farmers reported they were the main decision maker on 71 percent of the farms, although they do frequently consult other family members before acting. It is suspected that this has probably changed over the years. Overall, it is likely that family members and other ‘important people’ are increasingly consulted.

All in all, while farms are certainly getting larger and farmers are staying longer on their farms, ownership systems largely remain relatively simple, and farmers continue to make most of the decisions on their own. Likewise, farmer objectives probably haven’t changed much, although the extra emphasis on the environment and sustainability was surprising.

“If you believe all that you read you would get the impression that New Zealand farming is going corporate,” says Dr Peter Nuthall. “But, while it is true that some corporate or quasi-corporate family arrangements exist, by far the majority of farms are simple family affairs.”

Farming doesn’t provide a high return on capital so is more suited to family operations than corporate ones which generally are more focussed on the bottom line over a shorter time period.


Rural round-up

June 19, 2013

Exporter confidence is up – innovation and online offset strong dollar:

•59% of exporters confident about next 12 months orders
•Currency number 1 challenge
•Australia and China biggest opportunity and threat
•Online the key to export future

New Zealand exporter confidence is up despite the strong kiwi dollar, as exporters focus on factors they can control and deploy strategies ranging from importing to focusing on the online environment.

The ninth annual DHL Export Barometer survey found that 59% of New Zealand exporters are confident that export orders will increase in the next 12 months. This is an increase from last year where confidence was at an all-time low (51%) in the history of the survey. . .

Chase opportunities primary sector  urged– Gerald Piddock:

New Zealand businesses need to better harvest free-trade opportunities if the aim of doubling overseas trade by 2025 is to be achieved, a National Fieldays seminar has been told.

An obvious place to focus on that increase was the primary sector because more than half of New Zealand’s exports came from the sector, said a panel of experts at an international markets seminar.

The Government’s aim is for New Zealand to lift export earnings from 30 per cent to 40 per cent of GDP by 2025. That would double New Zealand’s total export value from $60 billion to $120b.

It would require sustained above-trend growth in the primary sector to achieve that, the Ministry of Foreign Affairs and Trade’s Mark Trainor said. . .

Passing on of family farms to be researched – Tim Cronshaw:

Handing over the family farm can bring out the worst in people, but it’s hoped the results of a new survey will help the process go more smoothly.

Lincoln University is about to survey 2500 farmers about ways they use to pass on farms to family.

This is part of research into succession planning by Dr Kevin Old and Dr Peter Nuthall from the university’s commerce faculty.

Old said most families looked for a fair and equitable way to hand over the family farm for all members including the exiting owners, but this could sometimes go astray. . .

Irrigation projects head Wills’ wishlist –  Tim Cronshaw:

Water will need to play a big part if the Government’s plan to double agriculture’s value to $60 billion by 2025 is to be successful, Federated Farmers president Bruce Wills says.

New Zealand had plenty of water, but in many areas there was not enough water at the right time of the year. To solve this the building of water storage facilities must be encouraged, he said.

“If farmers are going to meet the Government’s growth agenda of doubling agricultural receipts by 2025 from $30b to $60b then water must form an integral part of this success,” said Wills at National Fieldays at Mystery Creek. . .

ANZ chief –  farmers in line for China boom – Lisa Murray:

NZ Banking Group chief executive Mike Smith says China is about to do for Australian farmers what it did for the country’s miners a decade ago.

But he also added his voice to a building chorus of calls for Australia to follow New Zealand’s lead and sign a free trade agreement with China to make the most of the growing demand for agricultural goods.

While everyone is talking about the end of the minerals boom – something he disagrees with – Smith said insufficient attention had been paid to the potential surge in Chinese demand for soft commodities, such as grain and meat. . .

Farming champions meet minister – Jessica Hayes:

MEMBERS of the Farming Champions movement met with Agriculture and Food Minister Ken Baston last week to discuss the challenges facing the agricultural industry.

Kukerin farmer Mary Nenke, Varley farmer and former CWA president Margaret Sullivan and communications adviser Cate Rocchi, provided the minister with a perspective on the current shape of the agricultural industry.

All three women were heavily involved with the movement through the recent ‘Farmer on Your Plate – Getting Agriculture Back on the Political menu’ held in the Perth CBD earlier this year and the renowned Facebook group ‘Alarming Farming’. . .

 

 


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