Andrew Watters at MyFarm has suggested a milk-price based sharemilking arrangement would better serve both the sharemilker and landowner.... so instead of a 50:50 split on the milk cheque it could be anywhere between 40:60 split (depending on the payout).
What do you all think? Given volatility is supposed to be the new norm, is this a way forward?
Andrews proposal is not a milk priced based deal but capital based. It's based on the contention returns on capital should be equitable between parties. The returns on farm land and particularly Dairy farms have been modest for decades. The real issue here is what is required to attract young people into agriculture? I would suggest 50:50 sharemilking agreements are on the rebound. It is driven by owners who understand the value of their investment and the skill of a top farm manager. I hear farm owners complain more about the getting the right farm manager than the return on their investment. Think carefully before giving away income. The current enviroment should back that up
Sharemilking is something that goes up and down, some years they do well, other years it is a struggle, that is the risk and joys of SM. I don't think we should change anything from the traditional 50/50. (how did most of the current farm owners get there? ? From 50/50 opportunities they were given! Long may it continue!)
AND another thing, I wonder how many 50/50 agreements are truly spilt 50% with expenses? Has anyone got some actual figures to go off? anything I've seen is more like 40/60. But again, it is realising the opportunity and respecting relationships that actually makes these agreements work so well for those willing to make them work.
As farm owners, we all have to think about Share milkers, we have to help the upcoming farmers still be able to enter the industry, this is a good way to start, the payout will come right again, but will fluctuate over the years, just like forestry, and kiwifruit industries. Don't let the good farmers be put off, and think they will never be able to become farm owners, we have got to keep the good ones in the industry.
@SP99 Good point! And good to hear that land owners and sharemilkers are working together and making amendments to contracts if necessary.
It is not a variations. Andrew's suggestion is looking at cost of investment for each party then splitting the revenue based on that. It will give better fairness, cost coverage and minimizing investment risk.
However, it will be cost little to work out not an average farm accountant can understand, some one has good understanding of corporate finance to do it.
We have already put variations into the existing contract here, and I would be a little surprised if most had not. There has always been the ability to vary the contract upon mutual agreement, so I am not sure a formal change is necessary?