5. Reasons for Selling Behaviour
5.1 All Committers
Respondents were asked to rank three variables as their first, second and third reasons for choosing to commit from the following options:
• Increased information and communication (Information) • To become closer to the consumer (Consumer)
• Guaranteed processing space (Space) • Premiums (Premiums)
• Recommended by other farmers (Recom) • For the good of the industry (Industry) • To give my business set targets (Targets) • Price certainty (Price cert)
• Guaranteed minimum price (Min price) • Other (Other)
The primary reason most producers choose to commit their lamb supply is to secure processing space. This is an interesting result given that the general consensus within the industry is that there is processing plant overcapacity, and that for greater efficiencies, more plants need to close. Some producers obviously are still concerned about securing access to processing space when they need it.
“When it comes to selling lambs we have found if it gets dry you have to sell. If you are not loyal to one meat company you can’t get lambs away. They have you over a barrel. We can’t shop around.” Producer, Otago, South Island
Premiums available is the second most common primary reason, and is also the most common secondary reason with 76 (16%) ranking it most important and 131 (29%) ranking it second in importance. Price certainty was the third highest most important ranked reason. For the good of the industry was the popular as a third reason with 64 producers (18%) ranking it third.
The ‘Other’ category ranked quite high for committers as the fourth most common primary reason for commitment. Most popular answers in ‘Other’ category included being a shareholder in the company (10), for the good of the company (9), because it was considered a good company by the producer (7) and because of a good relationship with the company livestock agent (7). This represents the element of commitment that comes from a strong relationship between producers and processors or buyers.
Figure 4.20: Reasons for commitment Always Committers
Initially all three groups in the Commit set are analysed together to examine whether there is a significant difference in rankings between questions. Once this has been established then individual groups are analysed to determine what differences there are in rankings between the groups. A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are Committers. The relationship between these variables was significant X2(18, N = 479) = 305, p <.001. This means that rankings are not independent to the questions.
For the first ranking, guaranteed processing space was the variable that contributed most to the Chi- square test. For the second ranking, premiums available are significantly the most common response. For the third ranking, processing space was also the most variable that contributed most to the Chi- square test.
5.2
High Committers
The primary reason High Committers commit is also for processing space with 58 High Committers (45%) ranking this first. Price certainty is more important to High Committers than overall committers, and is the second highest reason. However premiums are also very important to High Committers, and have a higher overall ranking with a greater number of High Committers ranking premiums as second or third than price certainty. Increased information is the most popular third reason with 23 producers (22%) ranking this as third.
“I commit to build the company and to support its commitment to the linkage between supplier and consumer” Producer, Otago, South Island
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Reasons for Commitment
All committers
Figure 4.21: Reasons for Commitment High Committers
A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are High Committers. The relationship between these variables was significant X2(16, N = 129) = 75, p <.001. This means that rankings are not independent to the questions.
For the first ranking, guaranteed processing space contributes most to the Chi-squared test. For the second ranking, ‘Other’ was the response that contributes most to the Chi-squared test, although this was only because the number of observed responses in the second ranking was fewer than for first and second. For the third ranking, increased information and communication contributes most to the Chi- squared test.
5.3
Low Committers
Processing space is overwhelmingly the main reason that Low Committers commit with 112 producers (60%) ranking this the most important reason. Premiums are the second most popular first reason, and the second most important ranking overall, with 67 Low Committers (37%) ranking premiums the second most important reason. For the good of the industry is the third most popular reason overall and the most important third reason with 36 Low Committers (25%) ranking it third. This differs to the scores of all Committers and High Committers.
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Reasons for Commitment
High Committers
Figure 4.22: Reasons for Commitment Low Committers
A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are Low Committers. Due to low responses for a high number of variables in this group (greater than 20% of expected responses were less than 5); some questions were removed from the analysis for Low Committers. Closer to the consumer, recommended by others, and for a minimum price were removed due to all expected responses for each ranking being less than five. The relationship between these variables was significant X2(12, N =188) = 195, p <.001. This means that rankings are not independent to the questions.
For the first ranking, guaranteed processing space was the response that most contributed to the Chi- squared test. For the second ranking, premiums available was the response that most contributed to the Chi-squared test. For the third ranking, the provision of targets was the response that most contributed to the Chi-squared test.
“Our company operates a contract system (guaranteed) where you apply for dates and numbers and mostly they are met. We feel it works really well as you know exactly what is required well in advance.” Producer, Southland, South Island.
5.4
Sometimes Committers
An analysis of those that Sometimes Commit (SC) was carried out to see the differences in reasons behind committing for those that have attempted to commit, and subsequently stopped committing. Table 26: Sometimes Commit pricing specifications
Note: Percentages do not add to 100% as some producer’s ticked more than one option.
There are a higher proportion of producers on fixed price programmes with 50 out of the 126 (40%) that have Sometimes committed compared with 22 per cent of those that always commit. Forty-eight
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Reasons for Commitment
Low Committers
Most important Second Importance Third Importance
Pricing specification Number Proportion of people that commit
Schedule plus premiums 60 48%
Fixed price per kilogram 45 36%
Minimum price 12 10%
Schedule 9 7%
per cent of those that Sometimes Commit did so with Schedule plus premiums and the remaining small percentage were on a minimum price or plain schedule programme.
Thirty-seven per cent of those that sometimes commit were under a weight specification programme, slightly less than those that always commit. Twenty seven per cent committed to a monthly delivery, and just fewer than 16 per cent to a weekly delivery, almost identical to those that always commit. Table 27: Sometimes Commit delivery specifications
Note: Percentages do not add to 100% as some producer’s ticked more than one option.
Price certainty is the most common reason for commitment among Sometimes Committers with 39 (31%) putting this as their number one reason. While guaranteed kill space is still important with 35 (28%) ranking this number one, and second highest ranking overall, premiums available is the most popular overall ranking, due to a large proportion ranking this second most important (28%). This illustrates the greater spread of reasons why Sometimes Committers commit compared to the High and Low Committers.
Figure 4.23: Reasons for Commitment Sometimes Committers
A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are Sometimes Committers. Due to low responses for a high number of variables in this group (greater than 20% of expected responses were less than 5), some questions were removed the analysis for Sometimes Committers. Closer to the consumer, recommended by others and ‘other’ were removed due to all expected responses for each ranking being less than five. The relationship between these variables was significant X2(12, N = 119) = 53, p <.001. This means that rankings are not independent to the questions.
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Reason for Commitment
Sometimes Committers
Most important Second importance Third importance
Requirements Number Proportion of people that commit
Meet Weight specification 46 37%
Minimum number delivered 43 35%
Meet monthly delivery of specified number 34 27%
Meet Fat grade specification 24 19%
Meet annual delivery of specified number 22 18% Meet weekly delivery of specified number 20 16%
Breeding requirement 6 5%
For the first ranking, price certainty was the response that most contributed to the Chi-squared test. For the second ranking, price certainty was also the response that most contributed to the Chi-squared test. For the third ranking, for the good of the industry was the response that most contributed to the Chi-squared test.
“Although we miss the price spike by having a contracted price, we are taking a long-term view, and the industry will be better off” Producer, Otago, South Island
For those that sometimes commit, respondents were also asked the reasons why they have stopped committing. Respondents were asked to rank three variables as their first, second and third reasons for choosing to stop commitment from the following options:
• Inadequate returns for effort required (Returns) • Drought or other adverse weather event (Weather) • Didn’t suit my farming operation (Suit farm) • Too difficult to meet requirements (Requirements)
• Divergence between schedule and committed price (Sched price) • Company cancelled programme (Cancelled)
• Preferred different supply plan (Preferred)
• Natural conclusion at certain time of year (Conclusion) • Changed company (Changed)
• Other (Other)
The most common reason for stopping commitment was drought or adverse weather event with 20 (23%) out of the 87 that answered this question. Other most important reasons were related to price, specifically a divergence between the schedule and fixed price (15%) or inadequate returns for the effort required (14%). The most common second reason was that the committed programme did not suit the farming operation. This could be closely tied in to reason number one where adverse weather conditions resulted in a producer deciding that committing supply was too difficult and did not suit farming operation.
“As lamb prices were rising, guaranteed prices were not such an advantage. Difficulties with weather conditions was the major problem.” Producer, Wairarapa, North Island
A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are Sometimes Committers and have stopped committing. Due to low responses for a high number of variables in this group (greater than 20% of expected responses were less than 5), some questions were removed the analysis. Cancelled by the company and natural conclusion at certain time of year were removed due to all expected responses for each ranking being less than five. The relationship between these variables was non-significant X2(14, N = 79) = 13, p = 0.521. This means that rankings are independent from the questions, and there is no one particular reason that contributes more than expected at any ranking to the reasons for stopping commitment.
Figure 4.24: Reasons stop commitment
In summary for committers, guaranteed processing space is most important for High and Low Committers, and price certainty is the primary reason Sometimes Committers commit. There is a spread of reasons for committing beyond the most important reason, with differences between the groups in terms of order, but in general price certainty and premiums rank highly. The exception to this is that for the good of the industry has a relatively higher ranking for Low Committers than the other groups. For High Committers, increased information has a significantly higher ranking as third importance compared to other rankings, while provision of targets is significantly higher as a third ranking for Low Committers, and for the good of the industry for Sometimes Committers.
5.5
All Non-Committers
Respondents were asked to rank three variables as their first, second and third reasons for choosing not to commit from the following options:
• Risk of contracts being broken (Break) • Too complicated (Complicated) • Requirements too high (Requirements)
• Prefer to have control of selling decisions (Control) • Not offered by my company (Not offered)
• Doesn’t fit my farming operation (Doesn’t fit) • Satisfied with current supply plan (Satisfied) • Other (Other)
The primary reason producers prefer not to commit is because they prefer to have control of their own selling decisions with 119 ranking this most important (43%) from the 280 that answered this question. This may include deciding which company they sell to, how many lambs to sell, when to sell, and to what weight and fat grade. The second most common primary reason with 57 farmers (20%) ranking first is that committing does not fit with their farming operation. The most common ranking of second importance with 55 farmers (22%) and third highest ranking overall is that producers are satisfied with their current supply plan. Most popular answers in ‘Other’ category included weather restrictions such as risk of drought or summer dry country (35), and lack of relative reward for committing versus getting price on the day (10).
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Reason stopped commitment
“I’d love to sign a contract to know what I would get, but on dry country it’s too tricky to be able to say that the lambs will be that weight on that day” Producer, Otago, South Island Both groups in the Non-Commit set are analysed together first for the Chi-Square tests of independence to examine whether there is a significant difference in rankings between questions. Once this has been established then individual groups are analysed to determine what differences there are in rankings between the groups.
Figure 4.25: Reasons not to commit All Non Committers
A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are Non Committers. The relationship between these variables was significant X2(14, N = 280) = 106, p <.001. This means that rankings are not independent to the questions. Therefore it is useful to further analyse what the differences in ranking are between groups of Non Committers.
For the first ranking, preferring to have control of selling decisions contributes most to the Chi- squared test. For the second ranking being satisfied with current supply plan contributes most to the Chi-squared test. Preferring to have control of selling decisions contributes most to the Chi-squared test for the third response. However this is only because the number of observed responses for control as a third ranking is lower than would be expected, primarily because the majority of producers ranked this as a first or second ranking.
5.6
Switchers
The most important reasons for Switchers are generally in the same order as for all non committers. The main difference is the high rating of not fitting with the current farming system with 36 (30%) of Switchers rating this as the reason of second importance.
“Mostly I have been able to get prices better than contracts because of a large drop in available lambs and feel that as long as we are still supplying large numbers of lambs we should seek best price on day – we only sell once.” Producer, Hawkes Bay, North Island.
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Reasons not to Commit
All Non Committers
Figure 4.26: Reasons not to commit Switchers
A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are Switchers. The relationship between these variables was significant X2(14, N = 136) = 63, p <.001. This means that rankings are not independent to the questions.
Switchers had slightly different ranking to the overall Non Committers for the Chi-square test. For the first ranking preferring to have control of selling decisions was also the response that most contributed to the Chi-squared test. For the second ranking not fitting with farming operation was the response that most contributed to the Chi-squared test. Preferring to have control of selling decisions was the response that most contributed to the Chi-squared test for the third response. However this is only because the number of observed responses for control as a third ranking is lower than would be expected, primarily because the majority of producers ranked this as a first or second ranking.
5.7
Non Switchers
Non Switchers had a similar profile for the top three most important reasons for not committing. Non Switchers differed from Switchers with their high rating of being satisfied with current supply plan with 37 (31%) of Non Switchers rating this as their second most important reason.
Figure 4.27: Reasons not to commit Non Switchers
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Reasons not to Commit
Switchers
Most important Second importance Third Importance
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Reasons not to Commit
Non Switchers
A Pearson’s chi-square test of independence was performed to examine the relationship between each question and the rankings for producers who are Non Switchers. The relationship between these variables was significant X2(14, N = 138) = 61.37, p <.001. This means that rankings are not independent to the questions.
Non switchers had identical rankings to the overall Non Committers. For the first ranking preferring to have control of selling decisions contributes most to the Chi-squared test. For the second ranking being satisfied with current supply plan contributes most to the Chi-squared test. Preferring to have control of selling decisions contributes most to the Chi-squared test for the third ranking. However as for the other two analyses, this is only because the number of observed responses for control as a third ranking is lower than would be expected, primarily because the majority of producers ranked this as a first or second ranking.
“In this type of country weather will ruin the best laid plans hence I am uncomfortable with contracts” Producer, Otago, South Island
Preferring to have control of selling decisions is the most common main reason for both groups of Non-Committers. Non-Switchers are more likely to rank satisfaction with current selling plan as their second reason, which correlates with their desire for convenience, and the fact that while they are not commit, they are also not willing to search around for other selling options. For some producers this could largely be due to the fact they have only one option to sell too. Switchers are more likely to