Farm machinery syndicates : A case study of their potential role on the light land farms of the Canterbury Plains, N.Z : a dissertation submitted in partial fulfilment of the requirements for the degree of Bachelor of Agricultural Science with Honours in the University of Canterbury [Lincoln College]

Abstract

Historically Western agriculture has been dominated by small individually owned farm units which have relied heavily on internally generated funds for capital investment. With the increasing substitution of capital for labour, and a currently accelerating rate of inflation, individual farmers have found it progressively more difficult to replace and upgrade their capital equipment. A major item of capital expenditure on many farms, especially those involved with cropping, is farm machinery. An examination of data from the New Zealand and Wool Board's Economic Service Survey shows that although the proportion of Total Farm Capital (T.F.C.) involved in plant and machinery over the last decade has not increased, the absolute capital cost to the farmer this plant and machinery has increased by nearly 50%. Currently therefore the capital cost of plant replacement has become one of the major problems confronting the individual farmer. Ideally a farmer should replace his machines so as to minimise costs, both of operation and of obsolescence. Regardless of the optimum replacement period, the purchase of a new machine requires considerable capital outlay. Conventionally the average New Zealand farmer has based his financing decision on one of three alternatives: cash purchase, borrowing against existing equity or hire purchase. An existing alternative to purchase is the use of contractors. This however is an expensive method of obtaining machinery services and many farmers dislike relying too heavily on an outside organisation for critical operations. A second alternative to purchase, which is gaining popularity overseas, is that of machinery syndication. Due to low usage rates and consequent high overhead cost, many large items of agricultural equipment are beyond the resources of the small farmer. If however, a group of small farmers can combine to purchase a large machine they can often effectively reduce overhead costs to a reasonable level. This enables the small farmer to have the benefits of a new and technologically advanced machine at a reduced capital outlay and operating cost. This study attempts to evaluate the practicability of plant syndication as a method of minimising the cost of machinery services to a group of farmers. In subsequent sections the development of overseas syndicates, the possible methods of finance and a case study application in Canterbury are reviewed in greater depth. In order to meet the terms of reference of the project the scope of the study has been confined within quite narrow boundaries.