SURVEY SUMMARY
10.1 KEY FARM PARAMETERS
The average size, stocking rate and production of the 50/50 sharemilking properties
which were surveyed in the Waikato and Canterbury are detailed in Tables 18 and 19.
TABLE 18: Farm Parameters for Sharemilkers
| Herd size (cows wintered) |
245 |
490 |
| Production (kgMS) |
69,230 |
160,353 |
| Production (kgMF) |
39,787 |
92,156 |
| Stocking rate (cows/ha) |
2.85 |
2.77 |
| Production per hectare (kgMS) |
805 |
905 |
| Production per hectare (kgMF) |
463 |
520 |
| Production per cow (kgMS) |
283 |
327 |
| Production per cow (kgMF) |
162 |
188 |
TABLE 19: Farm Parameters of Farm Owners with 50/50 Sharemilkers
| Herd size (cows wintered) |
268 |
278 |
| Production (kgMS) |
75,959 |
82,131 |
| Production (kgMF) |
43,654 |
47,201 |
| Stocking rate (cows/ha) |
2.79 |
2.55 |
| Production per hectare (kgMS) |
790 |
753 |
| Production per hectare (kgMF) |
454 |
433 |
| Production per cow (kgMS) |
283 |
295 |
| Production per cow (kgMF) |
163 |
170 |
Central Waikato Region
Results from the two sets of data for the sharemilker and the farm owner, match up well
in most areas. Per hectare and per cow production are on a par with each other. Farm size
however, does not match up very well with farm owners showing an average size of 10 ha
larger than sharemilkers.
When both groups are averaged the farm size becomes 91 ha. This is similar to Livestock
Improvement data which gives the average farm size of a 50% sharemilking job as 90 ha.
Using confidence interval analysis and a sample mean of 91 ha, we can be 95% sure that the
actual population mean is between 84 ha and 96 ha.
Canterbury Region
For respondents in the Canterbury area there is huge variation between the two data
sets. This is primarily due to the low number of valid respondents to the farm owners
survey. The reasons for this were discussed earlier.
Those sharemilkers sampled in this region are performing better than their Waikato
counterparts. Per hectare production is 100 kgMS/ha ahead while per cow production is
ahead by 44 kgMS/cow. It is the view of one Canterbury consultant that this increase in
production can largely be attributed to the investment owners who are pushing production
along on their farms presumably in order to increase their value and thus returns. This
situation has probably pulled other sharemilkers along into similar management systems.
For example the use of off-farm grazing over the winter is very common throughout
Canterbury. This, in conjunction with irrigation over the summer, means more grass grown
on the farm is directed toward milk production.
For further analysis of the survey data the averages detailed in Table 4 have been
used.
TABLE 20: Average Farm Parameters for Waikato and Canterbury 50/50 Sharemilking
| Herd size (cows wintered) |
256 |
490 |
| Production (kgMS) |
73,068 |
16,0353 |
| Production (kgMF) |
41,993 |
92,156 |
| Stocking rate (cows/ha) |
2.8 |
2.8 |
| Production per hectare (kgMS) |
803 |
905 |
| Production per hectare (kgMF) |
461 |
520 |
| Production per cow (kgMS) |
285 |
327 |
| Production per cow (kgMF) |
164 |
188 |
When compared to Livestock Improvement Corporation (LIC) data, the farm sizes derived
from the survey are significantly higher. Average farm size in the Waikato is 76 ha and in
Canterbury is 115 ha according to LIC data. However, this only provides an average farm
size over all operational structures. From the survey information it appears that farms
with sharemilkers on are approximately 15 ha larger than the average in Waikato and 62 ha
larger than the average Canterbury farm when compared across all operational structures.
10.2 AGE OF FARMERS
The average age of farm owners and sharemilkers who participated in the survey are
shown in Table 21.
TABLE 21: Average Age of Sharemilkers and Farm Owners
Sharemilkers in Canterbury are slightly older than those in Waikato. This may be due to
the higher capital requirement of sharemilking in Canterbury because of the larger average
herd size in the area. However, farm owners are marginally younger in Canterbury. Once
again this must be regarded with caution due to the low number of valid replies by
Canterbury farm owners.
10.3 INVOLVEMENT IN THE DAIRY INDUSTRY
Both sharemilkers and farm owners were asked to identify how long they had spent in the
dairy industry in various capacities from farm worker through to owner. The outcomes are
detailed below in Tables 22 and 23.
TABLE 22: Sharemilkers - Time Spent in Farming Positions (Years) and Proportion of
Respondents who have Occupied the Position
| 50/50 Sharemilking |
6 |
100% |
6 |
100% |
| Lower order/contract |
3 |
57% |
3 |
76% |
| Married couple |
2 |
11% |
2 |
28% |
TABLE 23: Farm Owners - Time Spent in Farming Positions (Years) and Proportion of
Respondents who have Occupied the Position
| 50/50 Sharemilking |
7 |
53% |
6 |
|
| Lower order/contract |
3 |
23% |
- |
|
| Married couple [ "Married couple" is used to refer
to a farm workers' position where both partners are required to work on the farm to some
degree and are both covered by one salary.] |
22 |
5% |
- |
|
Sharemilkers
Sharemilkers in the Waikato and Canterbury have both spent approximately six years in
the industry as sharemilkers and a total of 16 and 17 years in the dairy industry
respectively.
Proportionately more sharemilkers in Canterbury have spent time in lower order or
contract milking jobs, while more Waikato sharemilkers seem to have spent time as farm
workers.
Both groups have taken approximately the same amount of time to become 50/50
sharemilkers, 10 years in the Waikato and 11 years in Canterbury. The slightly longer
period in Canterbury may be accounted for by sharemilkers having larger herds on average
and it is therefore taking longer to gather the capital to purchase a herd.
Farm Owners
Farm owners in both parts of the country have spent 26 years in this position. Due to
small numbers of respondents in Canterbury it is difficult to draw further conclusions.
In the Waikato, farm owners spent most of their time, prior to becoming a farm owner,
as 50/50 sharemilkers, farm managers and farm workers. Comparatively few spent time as
lower order or contract milkers or as married couples. Married couple statistics are
distorted by a few people spending large amounts of time in this position.
10.4 TIME SPENT SHAREMILKING
From the data obtained in the previous section, the average duration of sharemilking
careers can be calculated.
TABLE 24: Average Duration of Sharemilking Careers
| Expected for sharemilkers [ Derived from actual survey data.]
|
13 |
10 |
Sharemilkers today have been in the industry on average six years in both areas. The
survey indicated they expected to spend a further seven years as a sharemilker in the
Waikato and in Canterbury a further four years, making the expected duration of their
sharemilking careers 13 years and 10 years respectively.
Sharemilkers in the Waikato today will most likely spend six years longer as
sharemilkers than their current farm owners did. In Canterbury they will spend four years
longer than their farm owners did. The difference between the two centres is probably a
reflection of the higher capital requirement of purchasing a farm in the Waikato region.
11.5 AVERAGE AGE OF TODAY'S FARM OWNERS AS SHAREMILKERS
Approximately 30 years ago, today's farm owners were in the middle of their
sharemilking careers. In the following table their average age at that time has been
compared to today's sharemilkers.
TABLE 25: Average age of sharemilkers 30 years ago and today
Thirty years ago, the sharemilkers= average age would have been approximately 28 in the
Waikato and 26 in Canterbury. This is five years younger than today's sharemilkers in the
Waikato, and nine years younger than today's Canterbury sharemilkers.
This is not a vast difference but is an indication that it is taking sharemilkers
longer to progress through the sharemilking system compared to 30 years ago. The generally
higher level of education today may also influence the average age of sharemilkers through
raising the average entry age into the farming industry.
10.6 NUMBER OF JOBS HELD BY SHAREMILKERS
There has been much speculation in the dairy industry in recent times that sharemilkers
are holding more than one job and thus causing congestion at the top of the system. The
sharemilkers surveyed were asked how many sharemilking jobs they currently held. The data
is summarised below.
TABLE 26: Number of Positions Held by Sharemilkers
|
AVERAGE |
MORE THAN 1 JOB (%) |
This suggests that the speculation is unfounded, with only 3% of sharemilkers in the
Waikato and less than 1% in Canterbury having more than one job. This is consistent with
farm owner desires to see that their sharemilker is fully focused on the one job.
10.7 EDUCATION
From the survey, it can be derived that the number of farmers with post secondary
school qualifications has more than doubled over the past 30 years. This is outlined in
Table 27.
TABLE 27: Post Secondary School Qualifications of Farm Owners and Sharemilkers
|
WAIKATO (%) |
CANTERBURY (%) |
Table 28 summarises the types of qualifications gained by the different groups. The
predominant qualifications of farm owners were a Certificate in farming or a University
Diploma. With the expansion of Polytechnic services throughout the country, Certificates
and Trade Certificates in farming have become the more common qualifications. University
Diplomas have fallen out of favour.
University qualifications are more common among sharemilkers in Canterbury, perhaps
reflecting the proximity of Lincoln University.
TABLE 28: Post Secondary School Education of Farm Owners and Sharemilkers
|
Sharemilkers (%) |
Farm Owners (%) |
|
Waikato |
Canterbury |
Waikato |
Canterbury [ Data was excluded
due to low number of returns .] |
| Certificate in farming |
34 |
24 |
40 |
NA |
| Trade Certificate |
36 |
28 |
15 |
NA |
| Polytechnic Diploma |
9 |
10 |
5 |
NA |
| University Diploma |
9 |
14 |
30 |
NA |
| University Degree |
9 |
19 |
0 |
NA |
10.8 TYPES OF AGREEMENTS
There has been much speculation that among 50/50 type agreements there has been an
emergence of variable order agreements of 55/45 or even 60/40 in favour of the farm owner.
This has been seen as an attempt on the part of the farm owner to increase their return on
capital relative to that of the sharemilker.
The incidence of these types of agreement among the groups of farmers surveyed is
outlined in the table below.
TABLE 29: Variations on the Sharemilking Agreements
|
WAIKATO (%) |
CANTERBURY (%) |
The 50/50 agreement is by far the most widely used. Variable order 50/50 type
agreements are much less common than speculation in the industry would indicate, with only
4% of agreements falling into this category in the Waikato and none in Canterbury. Other
agreements are those which generally involve family arrangements.
As the 50/50 agreement is not "set in concrete", there is room for farm
owners and sharemilkers to negotiate contracts to suit the circumstance. In some cases
this is used to disadvantage the sharemilker through increasing their cost structure.
Both sharemilkers and owners were asked if they had any clauses in their agreements
which were not standard. Their responses are outlined in Table 30.
TABLE 30: Variations in 50/50 Agreements
|
WAIKATO (%) |
CANTERBURY (%) |
The majority of those variations were based on the sharemilker receiving all the bobby
calf cheque in return for paying all animal health and all the grazing costs. In effect,
these clauses alter the agreement to a point where it is a 55/45 agreement, or worse, in
favour of the farm owner, but still under the guise of a 50/50 agreement.
The problem is noticed more by the sharemilkers who are on the receiving end of the
higher costs. It is possible that such a clause is now regarded as standard and, as such,
other farm owners and sharemilkers may not recognise it as a non standard arrangement.
The effect of these clauses is exacerbated by the current low bobby calf and cull cow
prices, which may change, and the higher incidence of grazing young stock off compared
with five years ago. (These influences are more fully discussed in section 7.1 on page 21)
10.9 FUTURE CHANGES IN SHAREMILKING AGREEMENTS
Farm owners were asked whether or not they expected to change their current farm
management arrangement. In the Waikato, 34% of farm owners indicated that their agreement
was likely to change, and 20% in Canterbury thought likewise. The types of management
structure they would be likely to adopt is shown below.
TABLE 31: Likely Management Structure if 50/50 Agreement is Discontinued
|
WAIKATO (%) |
CANTERBURY (%) |
| Varied percentage 50/50 type agreement |
55 |
0 |
| Lower order sharemilker |
9 |
0 |
| Lease to other operation |
6 |
0 |
Farmers in the Waikato who are likely to change their management structure, prefer the
varied percentage 50/50 agreement, with contract milkers and farm managers as their next
most preferred options. The preference for contract milkers, over lower order
sharemilkers, suggests that many farm owners either do not differentiate between the two,
or are not aware of the disadvantages of contract agreement with regards to taxation.
The low response rate of farm owners in Canterbury makes it difficult to establish what
sort of arrangement would be most preferred. With the advent of the Tasman Agriculture
varied share agreement, where sharemilkers receive a varied percentage of the payout
depending on the payout level for that season, it is likely that many farm owners will
follow this lead. The advantage of such a move from the farm owners point of view would be
to retain the more motivated and skilled labour input represented by the sharemilker,
while increasing the return to the farm owner.
10.10 GOALS OF THE SHAREMILKER
Sharemilkers were asked to define their goals in light of the changing balance in the
industry between farm owners and sharemilkers. The results of this can be seen in Table
32.
TABLE 32: Goals of 50/50 Sharemilkers
|
WAIKATO (%) |
CANTERBURY (%) |
| Purchase of dairy farm |
53 |
39 |
| Purchase of drystock farm |
8 |
13 |
| Purchase of small lifestyle block |
6 |
13 |
| To continue sharemilking as a career |
12 |
13 |
| Accumulate capital for other ventures |
21 |
18 |
To purchase a dairy farm is still the predominant goal of 53% of sharemilkers in the
Waikato and 39% of sharemilkers in the Canterbury region. Those wishing to purchase any
type of farm accounted for 61% and 52% of respondents in the Waikato and Canterbury
respectively. This compares with 84% of Waikato sharemilkers having farm ownership as
their goal in 1993 (Hall and Martyn, 1993).
The second most popular goal of sharemilkers is to accumulate capital for use in
ventures outside farm ownership. Only about 12% in both regions considered continuing
sharemilking as a career to be a goal. However, when asked directly if sharemilking would
be considered as a career option, 22% in the Waikato and 30% in Canterbury indicated that
it would be. This suggests that although not the ideal choice, sharemilkers are at least
willing to consider sharemilking as a career if the goal of farm ownership proves to be
unobtainable.
In general, sharemilkers in both regions only expected to remain in this part of the
industry for a further 7-8 years. This would make their average age on completion of the
sharemilking phase of their career 41 in the Waikato and 42 in Canterbury. In table 33
this is compared to the same milestone for 50/50 sharemilkers 30 years ago, who are farm
owners in 1996.
TABLE 33: Average Age of Sharemilkers Completing the Sharemilking Phase of their
Career Today and 30 Years Ago
| 30 years ago [ Derived from actual survey data .] |
32 |
29 |
The average age of sharemilkers completing their sharemilking careers in the Waikato
has increased to 41 from 32. This is a difference of 9 years. The average difference in
age for Canterbury sharemilkers is 13 years but once again this should only be used as an
indication due to the low numbers of valid responses to the survey.
Sharemilkers are now older before they finish sharemilking compared with 26 years ago.
The reasons for this are likely to be a combination of a longer period of education,
resulting in later entry into the industry, and a slower progression through the industry
as a result of the requirement to accumulate so much more capital for farm purchase than
was necessary 26 years ago.
Sharemilkers were asked what they expected to do following completion of the
sharemilking phase of their career. Their responses are outlined in Table 34.
TABLE 34: Intentions of Sharemilkers on Completion of Sharemilking Career
|
WAIKATO (%) |
CANTERBURY (%) |
| Leave dairy industry |
15 |
8 |
| Take up another job in the dairy industry |
4 |
13 |
By far the majority of those exiting the sharemilking industry expect to purchase a
farm. This contradicts the goals of the sharemilkers which suggest only 53% of
sharemilkers wish to purchase a farm in the Waikato and only 39% wish to do so in
Canterbury.
This may be a reflection on sharemilkers not really knowing what they would do with
themselves if they finished their sharemilking career without being able to first purchase
a farm. It is likely that this question reflects a default answer.
10.11 SHAREMILKERS AS FARM PURCHASERS
Purchasing a farm has been the traditional end point of an individual's climb through
the sharemilking system. Some sharemilkers have even come to believe it is a right. Having
established in previous sections that not all current sharemilkers will be able to
purchase a farm it is prudent to take a closer look at those who will be able to do so.
Sharemilkers were asked what age they expect to be when they will be able to purchase
their first farm. This is compared with the age of current farm owners when they purchased
their farms.
FIGURE 35: Age of Sharemilkers and Farm Owners when they Purchased their First Farm
| Expected for sharemilkers |
40 |
39 |
Sharemilkers in the Waikato today are likely to take 10 years longer to purchase their
first farms than did their counterparts 28 years ago in 1968. The factors most likely to
influence this are the land price in the area, the payout, and the way the payout is
divided between the farm owner and sharemilker. The apparent 13 year difference in
Canterbury also indicates that sharemilkers are taking a longer time to purchase a first
farm in that region.
This concurs with sharemilker opinion on how long it takes them to purchase a farm now
compared with 10 years ago. When asked for their opinion, the consensus was that it now
took a longer time to purchase a first farm.
EQUITY REQUIRED TO PURCHASE A FARM
Expressing the equity required to purchase a farm in terms of the number of cows
required, provides a useful barometer for the sharemilker of how their asset in the form
of cows is keeping track with inflation in land prices. In the survey, sharemilkers were
asked to estimate how much equity they will require, expressed as a number of cows, to
purchase a first farm. In the Waikato, sharemilkers considered 660 cows would be
sufficient to provide purchase equity on a first farm. In Canterbury the estimated figure
was 744 cows.
The Canterbury farmers are not far off the mark with their estimate. However, Waikato
farmers estimates are about 320 cows lower than the analysis in this paper would suggest
(refer to Table 14).
As there are insufficient large sharemilking jobs available, it becomes necessary for
sharemilkers to build or gather equity in areas outside of their immediate sharemilking
position. Traditionally, it is believed that equity has come from cows and family
assistance. To get some insight into where sharemilkers expect their equity will come from
to purchase their farm, they were asked to indicate their expected sources. Their
responses are outlined below.
TABLE 36: Sources of Equity for Farm Purchase
|
WAIKATO (%) |
CANTERBURY (%) |
| Assets accumulated as cows |
45 |
56 |
The majority of sharemilkers, around 50% of respondents, still expect to accumulate
equity as cow numbers. Other investments also rated highly as a source of equity. Family
investment was rated relatively lowly in Canterbury (8%) but climbed to 19% in the
Waikato. Investment partners or equity ventures [ An equity venture is where two or more
partners contribute equity towards the partnerships operation and are rewarded with a
proportionate share income from the venture.] will possibly be entered into by about 10%
of sharemilkers. This is a real possibility with high numbers of dairy conversions in
fringe areas where sheep and beef farmers do not currently have the skills necessary to
make a successful transition into dairy farming.
10.12 INVESTMENT OUTSIDE THE DAIRY INDUSTRY
With 26% of respondents expecting to build equity in investments outside of dairy
farming, the forms of investment sharemilkers are making is also of interest.
Currently only 22% of sharemilkers in Canterbury and the Waikato have any investment
off the farm. Current off-farm investment falls into the following categories.
TABLE 37: Areas of Off-farm Investment for the Sharemilker
|
WAIKATO (%) |
CANTERBURY (%) |
Urban property is the most popular form of off farm investment for sharemilkers.
Company shares and forestry were also used as off farm investments. "Other"
investments were usually bank savings. This form of investment accounted for 20% of
investors.
10.13 SHAREMILKERS WHO OWN FARMS
The goal of more than half of the sharemilkers surveyed was to purchase their own farm.
A number of sharemilkers have managed to do this while maintaining their sharemilking
position. This situation has also been blamed for the slowing of progress through the
sharemilking industry.
In the Waikato, 9% of sharemilkers own a farm in addition to their sharemilking job,
while 17% of sharemilkers have their own farm in Canterbury. The reason for the difference
between areas is likely to be the lower land price in Canterbury and a greater
availability of medium sized blocks. The type of farm, size and management arrangement
vary markedly between owners. These are outlined in Tables 38 and 39.
TABLE 38: Type of Farms Owned by Current Sharemilkers
| FARM TYPE |
WAIKATO (%) |
CANTERBURY (%) |
TABLE 39: Operating Structure of Farms Owned by Sharemilkers
|
WAIKATO (%) |
CANTERBURY (%) |
| Lower order/contract milker |
0 |
0 |
As can be seen in Tables 38 and 39, the preferred farm type for purchase by
sharemilkers is dairy. The average size is 50 ha in the Waikato and 90 ha in Canterbury,
which represents a reasonably sized owner operator property for each district.
The management arrangements vary widely depending on circumstance and locality of farms
relative to the owner=s sharemilking position.
Having purchased their first farms it is difficult to know how long it will take
today's sharemilkers to put on their own sharemilker and retire. For today's farm owners,
survey results suggest that this period was approximately 15 years.
10.14 WHY EMPLOY A SHAREMILKER?
The reasons why farm owners employ sharemilkers are shown in Table 40.
TABLE 40: Reasons for Employing a 50/50 Sharemilker
|
WAIKATO (%) |
CANTERBURY (%) |
| Provide retirement income |
35 |
29 |
| Stopgap until family takeover |
15 |
14 |
| To free time for other activities |
42 |
57 |
| To run the investment property |
3 |
0 |
The two major reasons for employing a sharemilker are to provide retirement income and
to free the farm owners' time (for either other employment or other activities.) All of
these reasons can be roughly translated to mean they no longer want to milk cows.
Surprisingly only 10-15% of farm owners in either region indicated that the sharemilker
was on the property until such time as family could take over the farm. This indicates
properties will not become firmly held within families, as is the situation in Europe, at
least in the medium term.
Approximately 3% of respondents indicated that they employed a sharemilker to run their
investment property. These respondents included both farm owners who had milked cows
themselves and owners who had never milked cows before. No direct question was asked
regarding the incidence of business investors so no frequency can be estimated.
Despite the drop in income incurred through putting a sharemilker on the property, farm
owners in both regions indicated that they were either not worried by, or satisfied with,
the current return they are gaining from their farm.
Farm owners also considered that there is no shortage of sharemilkers in either region
to fill the positions they were offering. This correlates well with sharemilkers finding
it difficult to find sharemilking jobs, and even more so to find "good"
sharemilking jobs. Unfortunately "good" was not defined. However in the
experience of the author this is usually meant as a reasonable sized, well developed, well
set up farm with adequate inputs and a farm owner who is happy to let the sharemilker have
free rein.
The current surplus of sharemilkers available to fill jobs suggests that there is a
high demand for such positions due to the rewards and the merit of the job. While this is
true to some extent, the surplus of sharemilkers evident is also a symptom of a back
logged system where fewer sharemilkers are moving onto land ownership. As a result, large
jobs are not as readily available as they have been in the past, meaning increased
competition all the way back down the line especially in the 200 to 300 cow sized job. The
sharemilkers available to fill positions were considered by farm owners to be of good
quality.
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
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