Sharemilking on dairy farms in Ireland has got off to a slow and rocky start. There are only a handful of sharemilking arrangements in place.

Others started but have already failed. No doubt lessons have been learned from the experience on all sides and the expectation is that sharemilking as a viable career opportunity for young people will be a real option.

In a sharemilking agreement, a land owner and a herd owner come together to run two separate businesses from the one farm. The farm owner provides the land, housing and milking facilities, while the sharemilker provides the cows, labour and any machinery or equipment needed to run the farm.

In most agreements, the milk cheque is divided equally between the two parties. Some costs, such as purchased feed, nitrogen fertiliser and vet bills, are split 50-50. Other costs, such as labour and the costs of feeding the animals over the winter (machinery or contractor), lie entirely with the sharemilker, while costs such as farm maintenance and staff housing are the responsibility of the farm owner.

Why?

For the farm owner, it allows them to take a step back from the day-to-day management of the farm. They benefit from having young, ambitious and hard-working people running their farm who have a vested interest in good performance.

Typically, land owners have less money tied up in the farm, as they no longer own the herd. Often this releases equity for farmers who were previously owner operators for retirement or other investments.

A sharemilking couple was featured in last week’s Irish Farmers Journal. For them, the benefits of sharemilking are huge. Firstly, they are doing what they love – dairy farming.

They are their own bosses, working for themselves, and have regular, structured meetings with the farm owner who is also their mentor. They don’t have the money to buy land (just yet), but sharemilking gives them the opportunity to invest in high-return areas such as cows.

Finally, they are increasing their wealth as they pay down debt on their stock loan with the ultimate ambition to be farm owners in the next 10 years.

The evidence from New Zealand says that sharemilking farms are more profitable than owner-operated farms or farms where managers are employed.

Most sharemilking arrangements last for a period of three years, after which the agreement might be renewed, or a successful sharemilker moves on to a larger farm or takes the next step and buys a farm.

Obstacles

Up to recently, the biggest obstacle in the way of sharemilking in Ireland was scale at farm level and milk quota regulations limiting growth potential of dairy businesses.

With supply constraints now removed, other obstacles have emerged. The issues around sourcing suitable farms, the attitudes of existing farm owners and the tax implications of sharemilking have surfaced. However, by and large, these are not the biggest stumbling blocks towards successful sharemilking.

We were completely naïve in thinking that milk quotas, or a lack of suitable farms or farmers willing to work with young people was holding back sharemilking

The biggest obstacle is actually a lack of young people capable of taking on herd ownership. Paidi Kelly from Teagasc Moorepark is one of a number of people working behind the scenes to make sharemilking happen:

“We were completely naïve in thinking that milk quotas, or a lack of suitable farms or farmers willing to work with young people was holding back sharemilking,” he said.

“When we think about it, a career in farming is like climbing a ladder and sharemilking is three or four steps up that ladder, but the problem at the moment is that some of the bottom steps are missing, so the pool of people with all of the skills necessary to go sharemilking is small.”

Skills

So what skills are required? Obviously, being able to manage cows and grass is very important. But generally these skills are not what young people are lacking, especially those who have gone through a couple of years of hands-on agricultural training and have experience of managing dairy farms.

Two critical skills which many young people are lacking and which are holding them back from taking the next step in their career are business and people skills.

In terms of business skills, what is needed here is the ability to assess an opportunity, the ability to read and understand a budget and cashflow forecast, but, more importantly, to have a track record of saving with a bank. This is important when looking for a loan to buy stock.

People skills are really important and are developed from 15 to 25 years of age. It involves the ability to communicate effectively with someone, to read a situation and to see things from someone else’s perspective.

These skills are needed for sharemilkers when managing staff, but also when dealing with and building up the trust of farm owners, banks and others who invest time and money into the sharemilker.

Successful sharemilkers have a positive influence on the people around them, backed up by ample ability at the basics of managing grass and cows.

People and business skills cannot all be taught in the classroom. There is an onus on existing farmers to develop sharemilkers of the future, by teaching these business and people skills to their children and to young people working on their farms through example and exposure. As the New Zealanders say of their farming neighbours, “they are training my future sharemilkers and I am training theirs”.

According to Paidi, there is a potential win-win for the current generation of farmers too, as bringing young people along in a mentoring capacity can open up opportunities for existing farm businesses to grow and expand.

Sharemilking case study

Karl Monaghan (photo, right) has a full-time job in Dublin. For the past 15 years, his 66ha farm in Clonfert, Co Galway, has been rented out to tillage farmers, but Karl has always wanted to get more out of the farm.

“When I crunched the numbers, dairy farming was going to offer the highest rate of return. I want to be involved in the business, but not to be hands-on,” he said.

“My area of expertise is not in managing cows or grass, but I do own the land and I want to have a say in how the farm operates.”

Karl converted the farm to dairy towards the end of 2014, investing in milking facilities including a 16-unit DeLaval milking parlour (photo below), reseeding, roadways, fencing and water, while new outdoor cubicles are being built this year. In total, close to €500,000 was spent converting the farm to set it up as a 200-cow unit for spring 2015.