Improved herd-owning agreement

By the time the National Farming Review falls into your letterbox, Federated Farmers will have launched its revised Herd Owning Sharemilking Agreement.

This agreement is used in dairy businesses where the farm owner owns the land and the sharemilker owns the dairy herd. It is sometimes referred to as a 50:50 contract, reflecting the common split of the profit of the farm business.

The first Federated Farmers Herd Owning Agreement was launched in 2007. While we recognise that one should only fix those things which are broken, we think that the changes made to dairy company payments (notably Fonterra's), obligations around nutrient management and the higgledy-piggledy layout were sufficient reasons to review the agreement.

Our legal partners, DLA Phillips Fox, and our farming leaders have also been fielding a number of calls around pasture and feed management, especially as a result of the recent droughts.

The changes made by members of the Sharemilkers' Section and the Sharemilker Employers' Section, after industry wide consultation, will be welcomed by both farm owners and sharemilkers alike.

A new section on feed, cultivation, harvesting and grazing-off will prompt both parties to think about their expectations for the coming season, and who pays for what when the season ends and there is less or more surplus feed than expected. After all, dairy farming is all about keeping the cows in good condition, not about sticking to an agreement made 12 months prior when the weather was a forecast and not a reality.

Another new consideration is to do with the power cuts that almost seem annual events due to inclement weather, leaving farmers having to make alternative arrangements for milking the cows. We think it's fair that the farm owner supplies the generator while the sharemilker supplies the fuel and if necessary the tractor to run the generator. If you don't, you can agree to a change up front, where it matters.

Both the clauses to do with effluent and dispute management have been aligned with the Variable Order Sharemilking Agreement, which we think is sensible.

The ability of Fonterra's shareholders (and here they are the farm owners) to trade shares throughout the season may impact on sharemilkers.

We have made it clear that the opening shares and vouchers are stated at the beginning of the season, and that if the farm owner wishes to dispose of any of these shares during the season that will affect the sharemilker's income.

They must consult with the sharemilker first. If the sharemilker is financially disadvantaged, then the owner must compensate the sharemilker for loss of income from the milk.

The layout of the agreement will give some farmers a (pleasant) surprise. We have set out the things which must be filled in, altogether, referenced to the appropriate clauses further on in the agreement.

While intent of the 'old' agreement has not been lost, we do feel that grouping all the various sections that relate to the operation of the farm in a logical order is a vast improvement. The clearer language is also likely to please farmers, too.

The Federated Farmers Herd Owning Sharemilking agreement is available from Federated Farmers (phone 0800 327 646). The price for Federated Farmers members is $60 + GST; non-members $360 + GST.