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Rural Insight: Bayleys see new pathways open for farm ownership

Tags: Canterbury Hawkes Bay Rural Rural Insight Southland Waikato

Bayleys salespeople have witnessed a slide in the number of 50:50 sharemilking jobs over recent years, opening the door to new farm ownership opportunities often equally or even more appealing pathways to the ultimate goal of farm ownership.

Bayleys country manager Simon Anderson has observed the decline in traditional 50:50 sharemilking opportunities over the past decade, and estimates the number of jobs in the category would have halved in that period.

Supporting those views, Cambridge based farm employment consultant John Fegan said while typically part of the traditional ladder to farm ownership, the 50:50 option has tended to decline as farms have got bigger, returns more volatile and other ownership structures have evolved.

Bayleys Waikato rural real estate agent Karl Davis said he continued to sell farms to first time buyers who had come via the traditional share milking route, although not as many as the past and typically a couple of farms a year.

“If they are coming as first farm buyers they may have been sharemilking a large herd of about 800 cows for a few years, and they may typically settle on a 250-300 cow property.”

Further south in mid-Canterbury Bayleys rural agent Mike Preston has regular enquiry from young farmers for properties funded through equity arrangements where equity partners have included their employers.

“Those owners have seen how well these couples work, and want to help them get started. They also benefit by having skilled partners in the business, capable of running large dairy operations.”

Despite tougher times in the dairy sector, he continues to receive enquiries from capable young operators keen to step into farm ownership.

Fegan said some attractive options to 50:50 sharemilking had developed for motivated hard working individuals who could ride the rise in equity partnerships, and work in the structures that have emerged in the past decade.

Given the volatility in dairy returns over the past decade, the equitability of 50:50 sharemilking has been harder to maintain for both parties involved, as land owner and herd owner, with the extremes of payout variation falling harder on one party or the other.

“But pathways like equity partnerships can be attractive alternatives. We have recently seen the publicity around the Filipino couple who started much further back than most New Zealand dairy farmers would, and today have an equity share in a property in Hawke’s Bay.”

Similarly a Southland Filipino couple arrived in NZ to milk their first cows as farm workers eight years ago, and took advantage of the evolving options including an equity partner position to ultimately own their own property in 2010.

He has dealt with clients who have never used the 50:50 pathway but who have grown their business as the land owner has grown the farm, expanding cow numbers with the farm’s size increase, and ultimately taking a share in the entire business.

Anderson has also observed a gradual rise in equity partnerships seeking large dairy units. He said regardless of how they acquired that equity all farmers have a common trait – the ability to work hard.

“It has never been easy regardless of how you go about buying your first farm. The clients we get coming to us are generally very well equipped, are used to working with others as part of a team, and have made their own sacrifices to get to that point.”

Fegan said an equity pathway to buying a first farm may be a longer term pathway than 50:50, but does tend to smooth out the ups and downs in increasingly volatile dairy times.

The equity pathway had matured considerably in recent years as structures and management processes became more established across more farms. Many of the fish hooks that existed in earlier agreements have since been removed.

The larger farm sizes in these structures also put farmers who had share milked or managed large herds in a strong position to be part of such equity arrangements.

“If the other owners do not have a strong farming knowledge or experience, then these people are a real bonus to the business, and good to have on board.”

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