Working for milk price only a farmer's nightmare
Go to any Trading Among Farmers (TAF) meeting and hint that dairy farmers might accidentally sell out to outside investment and end up receiving the milk price only, while corporate speculators reap the dividend and the farmers curdle.
Co-operative history shows overseas farmers falling into that trap, ultimately struggling to survive as milk returns were held down at the expense of profit-dividend to investors.
Fonterra farmer shareholders are scared of this happening and so they are dilly-dallying around the final decision on TAF and all its confusing implications.
So why then do I, as a 50-50 sharemilker, suddenly find myself working as hard as ever for half the milk price?
The very thing that keeps the farmer shareholders awake at night has already happened to me, and I don't think it's fair.
When I went sharemilking, the idea was if I owned the cows and someone else owned the farm, we'd split the cheque 50-50.
Each parties' obligations are specified in a contract. The milk cheque was made up of two components - milk price or return on basic commodities and value added, which was the bit extra we shared if the milk ended up in a higher-value product than just plain old powder.
The value added was a reflection of investment made by shareholders in the technology and equipment needed to make milk into something more exciting. I think I deserved a cut of that. Because a vital component is the milk that I milked out of my cows, the expensive stainless steel is lost without it. In reality, sharemilking should be a joint effort with the rewards split fairly.
In the buildup to TAF, some wit decided to call the value-added component a dividend and whether the farmer shareholder wanted to still split the dividend (ex-value added) with the sharemilker suddenly became at the farmers' discretion.
Upon moving to the Coromandel and starting a new 50-50 contract, I was suddenly denied any share of the dividend and subsequently delayed signing the contract, and as a result of that, I have actually lost my job. Working for milk price only is the pits.
Arguably, the milk price is looking healthy or was, but the latest from the pundits has the future milk price dropping. It is also under intense scrutiny from the powers that be, with the Commerce Commission wasting time examining it with a fine toothcomb. But basically when you are working for the milk price only, any interest you have in the doings of Fonterra just disappears.
Who cares what they invest in next when you are only a milk-price taker. Any enthusiasm for the company vanishes.
I asked a consultant: why have sharemilkers lost out on a share of the dividend?
He more or less said that's how it is in the Waikato now. All new contracts for sharemilkers are milk price only.
I don't know if that is the truth or not, but I do know that if I was one of two applicants for a job and the other guy said he would do it for milk price only, who would get the job? Not me.
So now I lease a farm, and because I am only leasing the shares, I am working for milk price only.
I have decided to concentrate on increasing production and buying my own shares, so I can get the dividend, but that is only me being falsely positive. In reality, it's the farmer shareholders' worst nightmare - being a milk-price taker - a nightmare they've inflicted on me without a care.