Hi, has anyone experience of the NZ share milking process that had enabled new entrants to build equity to eventually start out on their own? I understand that it’s probably not viable now due to increased land prices but I’d still like to understand the process. How long it would normally take, the steps taken to become more involved, the expected % at each step. Was the process basically a widely accepted template? Why was there such opportunity in the sector? Was that from folk exiting post subsidy removal or a change in government agri policy?
New Zealand Share milking explained?
- Thread starter Jockers84
- Start date
rusty
Member
- Location
- Buxton Derbyshire
From memory, it was 13 years ago I was over there travelling for my Nuffield scholarship
Pathway
Herd manager, salaried position.
Contract milker, paid a fixed rate of the milk price to cover their time and the wages of other staff needed.
Lower order share milker
Took between 18 and 22% of the milk cheque . Paid for all labour and 18 to 22% of the variable costs. If the share farmer provided bikes and a loader tractor they would be on the higher percentage.
50:50 share milker
owned the cows and took 50% of the milk cheque. Covered 50% of variable costs. With the rapid increase in land price in the early 2000’s Farm owners felt that the 50:50 option didn’t give them an adequate return on their asset. Some of the big corporate farm owners still had 50:50 share milkers on some of their farms to show a pathway to farm ownership for keen share milkers so they were more likely to get the better ones in first as lower order and contract milkers.
Pathway
Herd manager, salaried position.
Contract milker, paid a fixed rate of the milk price to cover their time and the wages of other staff needed.
Lower order share milker
Took between 18 and 22% of the milk cheque . Paid for all labour and 18 to 22% of the variable costs. If the share farmer provided bikes and a loader tractor they would be on the higher percentage.
50:50 share milker
owned the cows and took 50% of the milk cheque. Covered 50% of variable costs. With the rapid increase in land price in the early 2000’s Farm owners felt that the 50:50 option didn’t give them an adequate return on their asset. Some of the big corporate farm owners still had 50:50 share milkers on some of their farms to show a pathway to farm ownership for keen share milkers so they were more likely to get the better ones in first as lower order and contract milkers.
Thanks, what sort of figures would be involved in say a 400 head dairy of Holsteins?
I take grass and staff management is the share farmers responsibility? The owner is very much a silent partner?
I’m not from a dairy background, just keen to understand the business avenue that had previously exisited.
Day to day animal and pasture management is the sharemilkers responsibility, but the farm owner will always have the final say if they feel that the job is being done "wrong". It's their land after all.
Production targets and animal numbers are laid out in the sharemilking contract.
Staff management and cost is the share milkers responsibilty.
All infrastructural, land ownership and maintenance costs belong to the farm owner (although the sharemilker is expected to carry out maintenance work using the provided supplies).
The pathway to farm ownership is still there, if you work and save hard it takes about 10 years from foot in the door to to being on your own land (if you're lucky). You've got to have your eye on the prize and be prepared to take risks and opportunities when offered.
If you can't find a decent 50/50 job, you'll never reach farm ownership without another form of income (i.e. a partner working in town).
50/50 sharemilking can be extremely lucrative for the sharemilker, particularly for those that knuckle down and become debt free early on in their contract. The farm owner these days is often carrying too much debt to reap any decent financial return, which is why they are opting for contract milkers or lower order sharemilkers, which financially tend to tip the balance in the farm owners favour.
If the farm owner is, or almost is, debt free, then putting a 50/50 sharemilker on allows them to completely step away from the responsibilities of the farm, while also bringing in a fairly substantial passive income.
Production targets and animal numbers are laid out in the sharemilking contract.
Staff management and cost is the share milkers responsibilty.
All infrastructural, land ownership and maintenance costs belong to the farm owner (although the sharemilker is expected to carry out maintenance work using the provided supplies).
The pathway to farm ownership is still there, if you work and save hard it takes about 10 years from foot in the door to to being on your own land (if you're lucky). You've got to have your eye on the prize and be prepared to take risks and opportunities when offered.
If you can't find a decent 50/50 job, you'll never reach farm ownership without another form of income (i.e. a partner working in town).
50/50 sharemilking can be extremely lucrative for the sharemilker, particularly for those that knuckle down and become debt free early on in their contract. The farm owner these days is often carrying too much debt to reap any decent financial return, which is why they are opting for contract milkers or lower order sharemilkers, which financially tend to tip the balance in the farm owners favour.
If the farm owner is, or almost is, debt free, then putting a 50/50 sharemilker on allows them to completely step away from the responsibilities of the farm, while also bringing in a fairly substantial passive income.
rusty
Member
- Location
- Buxton Derbyshire
All the share farming arrangements I am aware of in the UK tend to be on block calving grazed grass based farms. Most agreements are individual to the particular circumstances of the farm. I know Anderson’s consultants have been involved in setting up the framework for some of these.
glasshouse
Member
- Location
- lothians
Sharemilkers are protected by legislation, to prevent a race to the bottom.
Its lower order
then 50:50
Then farm ownership.
The ladder can collapse if there is a big drop in cow values or disease etc.
I remember a dozen yr ago a big drought and a cow was three bales of silage.
Cheap fillipino labour has also broken thr ladder
There are so many variables, but for budgeting purposes I've always worked off 50/50/50/50 because it keeps things simple and is accurate enough for a solid, profitable system.
If you've got a 50/50 sharemilker, the sharemilker gets 50% of the milk cheque, the farm owner gets 50%.
Approximately 50% of the income for each party will go out as expenses, leaving each party with approximately 25% of the milk cheque.
For 400 cows, working off the NZ average of 400kgms per cow and the current forcast payout of $8.22 per kgms, that leaves $328,800 EBIT for each party. If it's a good season, there will be more. If it's a sh*t season, there will be less.
A couple can milk 400 cows quite comfortably on a spring calving, pasture based system, so I haven't allowed for staff or relief milkers.
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Fixed.
glasshouse
Member
- Location
- lothians
Nz used to be a socialist country with controls on who could buy land, now its a free for all like uk
kiwi pom
Member
- Location
- canterbury NZ
Box is the expert here.
The only thing I'd add is the owner is very much NOT a silent partner.
I could point you in the direction of a couple of good operators that have found that out the hard way.
I'm sure there are good owners out there (and bad share milkers) but I wouldn't assume you can do what you want because you own the cows.
@box contract milkers seem more common these days?
Financially it's often a backward step going from manager to contract milker. The smart ones skip that step and go straight to sharemilking (if they're fortunate enough to find a job), the suckers get stuck with the contract milking jobs. All the work, all the stress, a lot of the expenses and none of the money. Funnily enough, farm owners struggle to find good, reliable contract milkers
See my above comments re. the profitability of sharemilkers for the farm owner. Debt fueled greed has broken the ladder.
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- Location
- Owaka, New Zealand
Beaut. Thanks for saving me a whole heap of typing.
Either way, "the number of cows you need to milk for the number of years you milk them for, before you buy your own farm" figure has been drastically and forever altered thanks to foreign investment.
When I started out it was approx 400 cows for 8 years @50:50 and you'd have a crack
Now you'd be having a crack at a new tractor, lol
- Location
- Owaka, New Zealand
Yes the economics have driven that to a fair degree, refer my above slur of overseas investors - when a cow and an acre had roughly equal values and profit wasn't hidden behind overproduction, you wouldn't have beaten this route to farm acquisition any where, any how.
But, say your acre is now worth 6x what a cow is, you still can't put 6 cows there.
So it is a better option usually to put a paid manager / contractor on and have all the risk yourself, you can sell cows buy cows sell land buy land - off the security of that piece of paper called a title - which people take to mean ownership
Really that was incorrect to blame the foreign money as NZ has always been as watertight as a knitted condom in that respect, but overall corruption of the industry from several avenues at once.
kiwi pom
Member
- Location
- canterbury NZ
I think it's the opposite with the ones I know, they have gone from the up and down of share milking to a good contract job, less hassle and more security, a lot have been on the same farm for a while now, good units too.Financially it's often a backward step going from manager to contract milker. The smart ones skip that step and go straight to sharemilking (if they're fortunate enough to find a job), the suckers get stuck with the contract milking jobs. All the work, all the stress, a lot of the expenses and none of the money. Funnily enough, farm owners struggle to find good, reliable contract milkers
See my above comments re. the profitability of sharemilkers for the farm owner. Debt fueled greed has broken the ladder.
They're not looking to buy a farm though.
Half of the problem with the industry is that everyone seems to blow all their hard earned $$$$ trying to keep up with the Joneses. New this, new that, financed this, repayments on that, then they bitch and moan that there's no money in it.
No one seems to be able to "make do" anymore, everyone wants a new Amarok.
- Location
- Owaka, New Zealand
Yes I got out in good time, I misunderstood my role and thought I was there to make the man some serious money, he wanted to spend most of it and then have the hide to say "my manager will probably make more money than me this year" at discussion group
all he knew was short grass, 2kg of grain, and urea after every grazing.Poor sod
A whole generation is farming like that now, but it's not surprising really, considering it's what DairyNZ and AgITO preach. Long grass is bad, long silage is bad, topping means you've failed at life, but putting 190kg of N/ha on a year and being way overstocked is fine.
Oh well. The neighbours keep going on at me about my "messy" paddocks, but I'll just carry on doing what I'm doing. No N went on last season, I haven't put any on this season yet (and probably won't), my production isn't quite up to the district average but I guarantee my overall profitability (and income per hour worked) is leaps and bounds ahead of theirs.
Like you said. Poor sods.
glasshouse
Member
- Location
- lothians
- Location
- Owaka, New Zealand
Massive push on it in the early 90's, despite the research showing no economic advantage - and it was cheap then.
A few good payout years and "we got all modern", the costs went up and net profit went west