Big slog, small gain

DONNA WALSH/Waikato Times

LITTLE HEADWAY: Tihiroa 50/50 sharemilker Mark Foster during evening milking. The past two years have been a struggle for him.

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Two years into a 50/50 sharemilking contract at Tihiroa, Mark Foster is questioning the traditional route to farm ownership.

Mark, 36, says he made only a $9000 profit last season, milking 200 cows on 63ha belonging to Cowley Properties Ltd, and he wouldn't be able to afford to stay sharemilking if it was not for the job his wife, Nicole, holds at CRV Ambreed NZ.

''If we did not have Nic's income we would not be able to do this,'' Mark says candidly. ''Last year, profit was $9000 before tax and take-home cash was zero. We struggle for money.'' Mark, who managed half a dozen farms before he went sharemilking, says most joining the dairy industry now are going down the farm management route where a set salary and holidays are part of the package.

''The last time I had a day off was 700 days ago. If you can get a good wage for a reasonable number of cows there's a lot less stress in it than sharemilking. The idea has pretty much gone for the majority of young farmers.'' Mark says lower order sharemilking will soon disappear from the options for people wanting a career in dairying but he thinks 50/50 sharemilking will probably carry on.

''There's a certain amount of people who don't want the hassle of their own cows. Cows are a liability more than an asset because the bloody things turn around and die on you.'' Mark and Nicole will remain sharemilking in the hope things get better, with Fonterra's forecast of a payout this season of $5.20 per kg of milksolids, 10 cents more than originally forecast.

''We went sharemilking because we still hope to get somewhere,'' Mark says. ''We have put a lot of effort into it.'' Mark, who was born in the UK and moved to New Zealand with his parents when he was 10, came to the Waikato in 1992 when he enrolled on a herd management course at Waikato Polytechnic, now Wintec, in Hamilton.

Waikato Times Farmer columnist Don Fraser, of Fraser Farm Finance, says there is a noticeable drop in the number of people going lower order sharemilking and believes farm management is the way of the future. ''As we have got into higher input farming, the farm owner has seen sharemilking as an opportunity to shift some of his costs, like palm kernel, silage, irrigation and even nitrogen, on to the lower order sharemilker. The lower order sharemilkers are not doing as well as they were.

''It's all about fairness. If these guys just keep losing money, they are just going to leave the industry.'' Don says sharemilking was set up in the days of all-grass farming but many farmers had turned their backs on that in favour of feeding supplements in a bid to get more milk out of their cows and meet Fonterra's demand to lift production.

''Some spend $300,000 to get their milk production above 100,000 kg of milksolids and it doesn't always work,'' Don says. ''My strongest recommendation to all who want to go lower order sharemilking is to get a salaried position, where all overheads are met by the farm owner.There's less opportunity for conflict.

''Managers are there to milk the cows and owners are not going to start arguing with them over all that nitrogen they have put on, for example.'' Jim Keir, a former farm business lecturer at Waikato Polytechnic, saw the writing on the wall before his retirement in 1997 when he was advising people to steer clear of climbing the sharemilking ladder to pursue farm ownership. ''I used to advise my students to get a manager's job as it's a career from which you can retire at 55 and go fishing,'' Jim, 81, says. ''Farm ownership is a dead duck.

''With land and stock prices so high, you are subjecting yourself to a life of misery if you want to own a farm. Lower order sharemilking won't be gone by lunchtime but will be gone in 10 years.'' Jim says farm owners could be more transparent when advertising for lower order sharemilkers.

''A lot of the ads don't state the per centage, so you can't tell what your income might be  they are usually between 20 per cent and 30 per cent.'' Jim says the drought last year would have made farming for most lower order sharemilkers uneconomical as there are also a lot of hidden costs. ''Lower order sharemilkers have to pay all the power and there's a very murky line between capital works and maintenance.'' Jim thinks the current system is not beneficial to the farm. ''A dairy farm manager that stays on a farm a long time is extremely useful  they get to know the farm.'' However, Jim, too, thinks 50:50 sharemilking will continue.

Meanwhile, Morrinsville farm consultant John Dawson is upbeat about sharemilking.

''There has been no move away from lower order arrangements this year,'' John says. His firm had dealt with a dozen lower order sharemilkers this season, with similar numbers every year over the past decade. John says Fonterra's record payout of $7.90 per kg of milksolids, last season, had absorbed the blow of the drought for most.

Sue Hagenson, FarmWise manager for LIC, says the career path sharemilking offers is envied all over the world.

''It is a win-win arrangement that allows growth, progression and farm ownership for new farmers, and fills the need of many farm owners. For entrants into the industry, variable order sharemilking is an effective pathway to herd ownership and learning how to run a business effectively. Managerial, financial and administrative skills are developed which are not necessarily gained in a salaried situation.'' Like in any industry, Sue says, there will be examples of serious business errors occurring or naive people being taken advantage of.

Greg Maughan, chairman of the New Zealand Dairy Industry Awards, also has no concerns for the future of sharemilking.

''We continue to be amazed at what some people are achieving in our dairy industry  in times of high land and cow prices, flood, drought and even economic slowdown.

''None of these factors appears to dampen their enthusiasm to progress or their ability to achieve their goals.'' Greg says all 12 regional sharemilker winners have farm ownership as their goal and all believe it is attainable. Some have already achieved it.

''Our farm manager winners and dairy trainee winners are also focused on farm ownership or moving into equity partnerships with the ultimate goal to be the majority shareholder or to buy the other partners out.
''These people are aged from their teens to mid-30s and they are excited about their prospects and opportunities to become farm owners in the dairy industry.''

The winners of the 2009 New Zealand Dairy Industry Awards will be announced in Wellington on Saturday.

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