EXECUTIVE SUMMARY

  1. The sharemilking industry has been, and still is, important to New Zealand dairy farmers. It allows farm owners to discontinue milking while retaining an interest in their farm, an income, and a small return on their investment. Sharemilkers have also benefited through being able to build capital toward farm ownership, their traditional goal.
  2. The number of dairy farms has increased by 289 since 1992/93 to 14,649. This is still well below 1972/73 numbers which were 19,510.
  3. The average size of all farms has increased from 69 ha in 1972/73 to 80 ha today. In 1992/93 the average farm size was 74 ha. There has been an 11 ha (16%) increase in farm size over the last 23 years.
  4. The land area devoted to dairy farming has decreased from 1.34 million (m) hectares (ha) in 1972/73 to 1.17m ha in 1994/95.
  5. The total number of sharemilkers has dropped from 6,325 in 1972/73 to 4,932 in 1994/95. However, as a proportion of all farm operating structures sharemilkers have risen from 32% in 1972/73 to 34% in 1994/95.
  6. The number of 50% Sharemilkers as a proportion of all sharemilkers has risen from 66% in 1972/73 to 74% in 1994/95.
  7. The average size of a 50% sharemilking farm has risen from 68 ha in 1972/73 to 86 ha in 1992/93 and in 1994/95 was 90 ha. This is an increase of 22 ha (32%) over the last 23 years.
  8. Contract agreements have decreased from a high in 1984/85 of 525, to only 84 in 1994/95. This is largely due to the ambiguous taxation status.
  9. Lower order sharemilking positions have increased in number 12-fold since 1988/89. This is a greater rate of growth than for any other operating structures. Part of this gain is due to the falling numbers of contract milkers.
  10. Unorthodox agreements (those which are between 41% and 49%) only account for approximately 4% of agreements in the Waikato and nil in Canterbury. They are much less common than speculation would suggest.
  11. In approximately 30%-40% of sharemilking agreements classed as 50/50 some minor changes have been made which have resulted in sharemilkers bearing additional cost.
  12. The numbers of farm sales in the Central Waikato peaked at 310 in 1992 and had dropped to 232 in 1995. Trends in 1996 suggest this will fall further. In Canterbury a much lower volume of sales, between 3 and 25 dairy farms per year, makes it difficult to establish a trend.
  13. In 1973, existing farmers purchased 58% of all dairy farm land traded. In 1995, they purchased 83%.
  14. In 1973, first time farm buyers purchased 36% of all dairy farm land traded. In 1995, they purchased only 10%.
  15. In 1973, business interests purchased 4% of all dairy farm land traded. In 1996, this had increased to 7%.
  16. The lower number of first farm buyers means that the flow through in the sharemilking industry has been reduced. This has meant that sharemilkers are staying in jobs longer than they have in the past, resulting in a bottleneck at the top of the sharemilking system.
  17. The average age of sharemilkers in the Central Waikato is 33 and of farm owners with sharemilkers is 58. In Canterbury, they are 35 and 55 respectively.
  18. Economic analysis revealed that the sharemilker is better off in the Waikato while the average farm owner will receive a better return on investment in Canterbury, assuming that rates of capital gain are similar.
  19. A difference of 46 cents in payout between the two regions has exaggerated the findings. However, the principles reflected still apply until such time as the payout and land prices in developing areas such as Canterbury match those in well established areas, like the central Waikato.
  20. A farm owner can earn a better return through utilising a lower order sharemilker provided the production does not fall.
  21. Today, a Waikato sharemilker requires 980 cows to provide sufficient equity to purchase and stock a first farm. This is equivalent to 3.84 times the average herd size of a sharemilker. In 1972/73 and 1992/93, sharemilkers required the equivalent of only 1.9 times the average herd size.
  22. In Canterbury, larger herd sizes and lower land prices mean that 742 cows, or 1.9 times the average sharemilkers herd size, are required to purchase a first farm.
  23. Today, the average sharemilker or potential first farm purchaser is expected to be 40 years old, which is 10 years older than people in similar positions 30 years ago.
  24. Increasing farm size is increasing the equity required to enter sharemilking. This is especially so in Canterbury where there are very few 120 to 180 cow jobs available.
  25. In the future, increased farm size is likely to result in fewer sharemilking jobs being available. This will result in increased competition for positions.
  26. The increasing gap between cattle and land prices, poor beef returns, and contract terms swinging towards the farm owner are making it difficult for sharemilkers to gather the capital for farm purchase.
  27. Farm owners are likely to utilise lower order sharemilkers while they wish to be involved with the farm. Once they want to retire from the farm a 50% sharemilker is the preferred labour force as there is a perception that they will take more care of the farm and do a better job because they have money tied up in a herd.
  28. Approximately 55% of Waikato farm owners would consider altering their agreement to a variable percentage if they feel returns are not high enough.
  29. Unorthodox 50/50 agreements will become more common as farm owners try to rebalance their return on capital with that of their sharemilkers.
  30. Goals of sharemilkers have changed. In 1993, 84% of sharemilkers aimed to purchase a farm following the completion of their sharemilking career. In 1996 that has decreased to 61% in the Waikato. Only 52% of Canterbury sharemilkers aimed to purchase a farm.
  31. Wages, salary packages, and contract arrangements must be reviewed to provide incentives for people to become career "farm workers" or sharemilkers.
  32. The ability of sharemilkers to gather capital quickly provides motivation for the majority of sharemilkers, regardless of their goals.
  33. The prospect of sharemilking as a long term career appeals to only around 13% of current sharemilkers.
  34. Increased competition for sharemilking positions will mean that sharemilkers will spend longer in individual positions. Because of this, they will be unable to reinvest in cows and must therefore look more closely at investment off-farm.

Previous Page TOC Next Page

Contact for Enquiries

Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
Contact this person

 
Display a printer friendly version of this page Print friendly




Biosecurity New Zealand Web Site

New Zealand Fast Forward