Ensuring a Viable Progression Path for Dairy

NEW ZEALAND - A report released by Federated Farmers Sharemilkers’ and Sharemilker Employers’ Sections, with the assistance of DairyNZ, looks at the progression from sharemilking to farm ownership.

8 June 2012

2 minute read

Oceania

“Sharemilking represents a third of our industry and we want to ensure it has a rich future,” says Ciarán Tully, Federated Farmers Sharemilkers’ Section chairperson.

“While herds have become larger in size their overall number has fallen and with it, the number of sharemilking positions.

“With many commenting on the rise of contract milking and equity partnership arrangements, Federated Farmers, with funding from DairyNZ, commissioned AgFirst’s James Allen and Nicola Waugh to provide a snapshot of career pathways.

“First up, we found the legal environment we operate in is sound but there’s greater need for herd owning sharemilkers to become flexible in their approach to negotiating agreements.

“Newer structures, such as leasing farms or buying stock and leasing them back to the farm owner, could enable the next generation to stay in the job while building their equity.

“A level of annual variability aside, sharemilkers generate something like a 16 per cent return on assets. This compares with a farm owner’s 3-7 per cent return on assets, plus 5-10 per cent annual capital gain. I must add in recent years businesses have been more cash focussed.

“Questions were also asked around the ability of equity managers to grow their share of the partnership.

“If you compare a career as a waged farm manager versus sharemilking in today’s dollars, it reveals something like a million dollar difference over fifteen years. That’s huge if people intend to move into farm ownership.

“Sharemilkers need to be seen as an integral part of farm succession.

“For those planning their retirement, sharemilking could be seen as part of a farmer’s ‘exit strategy’.

“It’s clear to us sharemilkers need to enhance their business skill set across the board and as an industry. Life-long learning and mentoring needs to become a firm part of our culture.

“The report specifically highlights the need for all parties to carry out due diligence and to learn about negotiating key parts of their agreements.

“While the report contains decision trees, tables and even a wealth creation spreadsheet, it highlights the amount of information out there but it’s dispersed. There’s need for a one-stop shop and arguably that’s a role for Federated Farmers,” Mr Tully concluded.