KEY POINTS:
The rising cost of both land and livestock is putting the squeeze on sharemilking as a viable route to dairy farm ownership, a farm leader has warned.
A forecast rise in this year's dairy payout may have improved the outlook for a group that barely broke even last
season, but it had also lifted the cost of cows and rural property, threatening to put the dream of owning a farm beyond their reach.
"As land prices have gone up the ability to step into farm ownership has got harder for sharemilkers without a doubt," said Dairy Farmers of New Zealand executive member Dean Bailey, former chair of the group' sharemilkers section.
Sharemilkers, who typically own the cows and split profits with the farm owner, are responsible for 40 per cent of New Zealand's dairy production - and the occupation is considered an integral step on the road to owning your own farm.
However, the median price of dairy farms rose 18 per cent from $2,684,092 in June to $3,162,500 last month, according to latest figures from the Real Institute of New Zealand, and the cost of cows has risen to between $1400 and $1500 each, up from $1000 last season.
"Traditionally you started out as a farm worker, then you went into a 29 per cent sharemilking agreement, stepped [that] up to 39 per cent and then moved into your 50/50 [share] as you started purchasing cows. Then moved onto farm ownership. But that transition has become harder and harder," Bailey said.
He said a growing trend among the country's corporate farmers to engage farm managers instead of sharemilkers was putting productivity at risk.
"As an industry it is a hugely important part because it attracts motivated people that are going to drive the industry forward in terms of productivity."
With tight margins having driven up on-farm costs, the current season's payout forecast of $5.53 had managed to stop some people getting out of the industry.
"There's been a lot of sharemilkers questioning whether the profits have been there. On last season's payout of $4.10 a kilogram of milksolids, sharemilkers were making no profit at all".
Although this seasons' returns were an improvement, he said the funds would not appear for another 12 months and "there's plenty of backlog that needs to be paid off".
"Most sharemilkers are currently operating in overdraft - between $20,000 and $100,000. And that needs to be cleared before any profit's made."
The dairy boom was a "double-edged sword" in that it had driven up cow values, he said.
"While the equity of the ones that have already got cows has gone up, the ones getting in - the younger generation - taking that step from farm employee to self-employed as a sharemilker has got harder because the values of cows is that much dearer for them to buy.
"We're only as strong as the people who are entering because the [current] generation New Zealand farmers are getting older and older."
However, Dairy Farmers of New Zealand chairman Frank Brenmuhl said it had never been easy for sharemilkers to gain their own farm, and now there were fewer farms and a similar number of people wanting them.
He said it was much more common today to find "permanent sharemilkers" who did not want to progress beyond that.