Rise with the cream

By Richard Jones Federated Farmers Southland sharemilkers' section chairman

It's never been easy to achieve farm ownership.

The sharemilking system was established to enable young Kiwis to build up equity to progress through to farm ownership.

Sharemilkers gradually build cow numbers, either by raising calves or buying cows, becoming what is known as a herd-owning sharemilker (HOSM). They then sell some of the herd for the deposit on a farm and stock it with their remaining cows.

However, with the rapid increase in farm sizes and the escalating price of land, making the leap up the ladder from contract milker and variable-order sharemilker to HOSM is becoming increasingly difficult.

Sharemilkers will now take longer to build up equity. This hold-up also affects farm owners wanting to exit the industry, as fewer sharemilkers have enough equity to pay a decent price. The only option available for these farm owners may be selling to a faceless multinational corporate, not an experienced and hands-on sharemilker.

Many farm owners do see HOSMs as having too good a return on investment compared with their own investment. Though this is understandable, the much greater risk of sharemilkers needs to be acknowledged.

Sharemilkers, to a degree, have made a rod for their own backs by becoming too businesslike. I know this is a generalisation, but "Gen Ys" in particular do not seem to understand they are not only running their own business but the farm owner's as well.

Far too often I hear: "It's not in my contract, so we'll get someone in to do it and the farm owner can pay the bill." Is this the right attitude to have?

There is also the difference in generational attitudes. Often Gen Ys seem to want everything today: the big business, heaps of time off and all the toys. Farm owners of today are from the previous generation and were brought up to be frugal and work long hours.

We all talk about balance in life, but your definition of balance may differ depending on your generation. The most successful farm owners who have come through the sharemilking system will tell you they got there by being patient, working hard and smart, with limited time off and delaying getting flash toys.

They have also learned how to "straighten nails". Above all, they have fully understood the farm owner's goals for the farm.

So how can we make the HOSM the management structure of choice? The HOSM is a partnership, a joint venture between two or more people. The parties are essentially in a team, and a good team works for each other.

If you were to ask any successful HOSM what it is that has set them apart, it will not be that they are any better at human resources or pasture management. It will be their willingness to go the extra mile. It is the stuff they do outside of their contract that saves the farm owner money. It is the thinking they do about what is best for the whole farm business, not just their own.

Here's an example: an HOSM has 40ha of silage to be made on the farm. The HOSM and farm owner have also bought 40ha of standing grass to be harvested for winter feed. Which do you get the chopper to do and which goes into baleage?

I'll bet most sharemilkers will say, "We'll chop the stuff at home because that's my expense and cheaper for me, and put the brought-in grass into bales because that's more expensive and the farm owner pays half and I pay the other."

Looking at the whole picture, the opposite approach gives a better result. Making the bales on-farm is more expensive but if the cost savings of chopping the brought-in grass are added, the HOSM's bill is about the same either way. The big thing is that you could save the farm owner thousands of dollars.

The other important relationship for sharemilkers is with their bank, which wants to know their client can save money. If you can, a bank is more inclined to back you. The big question you need to ask yourself before you spend coin is: "Do I need it or do I want it?"

If it is merely a want, leave it on the wish list for later.

Here is a simple rule of thumb: for every $5000 you spend on drawings, you can service $35,000 of debt. So if you live on $50,000 a year instead of $100,000, you will have $50,000 more available, which will service $350,000. Imagine what you could do in five years.

Probably the most important aspect to establishing and maintaining a happy and prosperous relationship with a farm owner is to build your name as a top operator.

The second one is to operate with strong core values of complete honesty and integrity. What goes around comes around: if your core value is greed, then watch out. If sharemilkers show the farm owners they are passionate about the success of the whole farm business, I think there will be more HOSM roles available.

If the farm you are sharemilking is a stepping-stone on your journey, you need to treat it with the greatest respect. Maximising the profit for the farm owner as well as yourself is paramount. If you remember nothing else, remember this: the only person who can bugger up your name is you.

- Hamilton News

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