As seen in The New Zealand Herald here
Farmers understand risk better than most because they live with it every day. Every season brings variables outside their control: weather, commodity prices, interest rates, input costs, regulation and labour shortages.
But there’s one risk that doesn’t get enough attention in rural New Zealand: concentration risk.
For many farming families, almost everything is tied to the same asset. The farm is the business, the home, the source of income, the retirement plan and often the inheritance plan as well. Land values, cashflow, borrowing capacity and family wealth all move together.
That has created significant wealth over time, but it also means a huge amount depends on one sector continuing to perform well.
Most farmers would never run the business itself with all their eggs in one basket. They diversify pasture species, spread weather risk, manage stocking policies and avoid relying too heavily on one buyer or income stream. Good operators understand how quickly conditions can change.
Yet financially, many families have become heavily concentrated in a single asset class over time. In most cases, reinvesting back into the farm has been the obvious decision. It’s tangible, familiar and has historically delivered strong long term returns.
The challenge is that farming today looks different to 20 or 30 years ago. Volatility moves faster. Borrowing costs can rise sharply, regulation continues to build, global events hit local markets quickly and weather patterns are becoming less predictable.
When conditions turn, everything tends to get hit at once. Payouts fall, costs rise, land values soften and banks become more cautious at the exact moment cashflow tightens. That’s concentration risk in the real world.
The strongest farming families increasingly treat the farm as one part of the family’s asset base, not the entire financial foundation.
They still back the farm and invest in productivity and growth, but they also build assets outside the farm cycle: managed funds, shares, commercial property and fixed income investments that aren’t tied directly to milk prices, livestock markets or rainfall.
Importantly, diversification is not about losing confidence in farming. In most cases, the farm remains the cornerstone asset. Diversification is about protecting it.
Off-farm investments can provide liquidity and flexibility during difficult periods. They create retirement options beyond land appreciation, help succession planning and reduce pressure to make reactive decisions during tough seasons.
A lot of outsiders assume farming families are asset-rich and financially comfortable. In reality, much of that wealth can be illiquid, heavily geared and emotionally tied up in the property itself.
The emotional side matters too. The farm is rarely just an investment asset. It’s often generations of family history, identity and sacrifice wrapped together. That’s why diversification conversations can feel uncomfortable.
But the most financially resilient families think beyond the next season.
Season-to-season thinking asks: how do we get through this year?
Generation-to-generation thinking asks: how do we make sure the family has options 20 years from now?
The best operators do both.
They understand that bigger is not always stronger. Expanding the farm can create wealth, but only if it improves profitability, resilience and optionality. Expansion funded entirely through more debt can simply increase exposure to the same risks the family already carries.
Sometimes the smarter move after a strong year is not buying the neighbouring block. Sometimes it’s reducing debt, improving liquidity or consistently directing a portion of surplus cash into off-farm investments.
That’s usually how long term wealth is built anyway, not through one dramatic decision, but through disciplined decisions repeated over time.
Right now, after a difficult few years, many parts of the rural sector finally have some breathing room again. That creates an opportunity not just to strengthen the farm business, but to think more carefully about the bigger picture.
Because ultimately, the goal isn’t simply to have a good season.
It’s to build a financial position strong enough to withstand the tougher ones too.
The right approach will look different for every family, depending on their goals, stage of life and risk appetite.
But the important thing is starting the conversation early. Getting advice from a professional financial adviser can help farming families better understand their exposure and explore options beyond the farm gate, whether that’s improving liquidity, reducing debt or gradually building off-farm investments over time.
The families that thrive over the next 20 years are unlikely to be the ones taking the biggest risks.
They’ll be the ones managing them best.
James Paterson is the Chief Client Officer of Pie Funds. View our disclosure document here. For personalised financial advice, please speak to a financial adviser.
Information is current as at 25 May 2026. Pie Funds Management Limited (“Pie Funds”) is the issuer and manager of the funds in the Pie Funds Management Scheme and the Pie KiwiSaver Scheme (“Schemes”), the product disclosure statements of which can be found at www.piefunds.co.nz. Any advice is given by Pie Funds and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Schemes, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information.