Survey Works to Highlight New Pathways to Farm Ownership

Survey Works to Highlight New Pathways to Farm Ownership

A survey of up-and-coming dairy farmers aims to highlight new career pathways for aspiring farm owners as traditional routes dry up.

AgFirst farm consulting intends to hook into social media to make contact with those farmers who may have taken the less than traditional pathway of worker-contract milker-sharemilking when it comes to building equity for their first property.

AgFirst chairman James Allen said the research was a natural extension of the company’s ongoing longitudinal study on the sharemilking sector, and particularly the 50:50 positions that underpinned progression for many.

The survey work on sharemilking has been ongoing since 2000, building from private data collected earlier and has indicated a steady decline in positions over time.

“In 1995, for example, there were 15,000 dairy farms and of them there were 5000 share milking positions, including lower-order positions. There were 3600 50:50 positions at that time,” Allen said.

“Fast-forward to today ‑ of the 12,000 dairy farms there are 4000 sharemilking positions, and only 2000 50:50 positions.”

He said as a portion, 50:50 jobs had been one in four of the jobs in the sector, was now at one in five, and was poised to tip further again.

Rather than caused by any decline in dairy land area, the drop had occurred as farms got bigger, amalgamated or were corporatised.

“Corporate operations prefer to retain ownership of all the assets, including the cows, so they have control of the entire operation.

“Debt levels in the industry have also impacted on the number of 50:50 jobs. With dairy debt at about $22/kg milksolids, it is hard for an average indebted farm to sustain a 50:50 position.

“To put it simply the owner needs all the money themselves, and selling the herd is not going to make a significant impact on the debt level,” Allen said.

To offer owners a reasonable rate of return and deliver a return to herd-owning sharemilkers, a farm’s debt level needed to be nearer $10/kg milksolids.

The affordability of land versus number of cows required to buy it had also shifted in the past 20 years to make sharemilking a more challenging pathway to farm ownership.

“Around 1992 you needed about eight cows to buy one hectare of land. That is now nearer 30 cows for a hectare,” Allen said.

But the fact there was still a high level of enthusiasm and investment in the sector by a new generation of farmers implied there must be other pathways to farm ownership this new generation was exploring.

“The industry is saying this has been the pathway in the past, and we are looking at what those alternative pathways are now.”

Allen said the company intended to contact successful operators taking alternative pathways, using social media to connect with them and pick over their methods to success.

“We as consultants also have our own ideas about what works. Once we have narrowed down any common approaches that have worked we intend to put them out as case studies.”

Some of the anecdotal examples Allen had seen included younger farmers leasing the farm.

“Another is developing a flexi-rate sharemilking model, dependent upon the level of capital invested and the payout, to deliver a fair return to everyone.

“There has also been a number of lower-order sharemilkers who have taken the pathway of off-farm investment, including shares and property which have delivered good returns in recent years.”

Allen said the primary sector sometimes risked being myopic in examining its options and AgFirst was also looking at urban business models for examples that could also apply.

“We have also looked overseas for examples, but so far have not come back with anything that seems better than what we already have here.”

The project was worked up in conjunction with DairyNZ on a time frame intended to deliver options by the end of March, with a report due out in May.

By: Richard Rennie
Source: Farmers Weekly

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