Concern for future of dairy farming

James Allen, of AgFirst, Waikato, says the most vulnerable are new variable or lower order sharemilkers just starting in the industry. Allen did a study some years ago for DairyNZ on the state of sharemilking and is widely regarded as an expert in this area.

He says variable order sharemilkers in the 2013-14 season would have had the benefit of the higher $8.40 payout and the resulting retrospective payments. But he says those starting out in the past year and this new season wouldn’t have had the benefit of a good year.

“I feel very sorry for them because they have started out with an extremely low profit and in some cases a cash loss this year. My concern is how those guys are going to manage their cashflows to survive. We don’t want to lose good prospective farm owners,” he told Rural News.

Allen says the key issue with a variable order sharemilker agreement is that it’s a percentage based agreement and many of these were negotiated well in advance of the season when payout expectations were very good. He says the option of re-negotiating a contract is limited.

 “There is no harm in bringing the situation up with the farm owner and seeing what capacity there is to renegotiate the contract. Of course, the farm owner is going through the same issues in terms of a drop in payout so they are going to be equally affected,” he explains. 

“So at issue is the capacity and willingness of the other party to look at some sort of contract renegotiation but there are no guarantees or legal requirements to renegotiate.” 

Allen says people who go sharemilking need to understand that by doing so they are accepting risk. He says the only alternative to mitigate such risk is to go to contract milking where people are not caught out by the low prices.

“Last year many of the contract milkers were feeling quite aggrieved about missing out on the $8.40 payout, but this year they are pretty happy about life.” 

Allen says the key message is expect more volatility.