Last week, I reported on Will and Kim Grayling, a young New Zealand couple in equity partnership with a large dairy farmer. Rather than going down the traditional share-milking route to land ownership, they are gradually buying their way into the very large farm that they also manage.

This week, I report on another young couple who are well on track to achieving land ownership using a hybrid share-milking model.

James and Ceri Bourke are both in their early 30s and have a young family. Ceri is originally from Wales, but moved to New Zealand with her parents when she was a teenager. James is originally from Taranaki in the North Island of New Zealand but moved to the South Island when his family purchased a larger farm there in the 1990s.

James began working on dairy farms when he left school at 19, so he has been in the industry for the last 15 years. During this time he worked on some really well-run farms but also on some poorer managed farms but he made a point of learning as much as possible from each experience.

By 2009, the couple were ready for their first 50:50 share-milking job. Using their own savings, plus a NZ$45,000 (€28,000) equity guarantee from James’s parents and loans from the bank, they bought a herd of 450 cows and went share-milking on a heavy coastal farm outside Christchurch in the South Island.

During this time they began attending courses and events organised by Dairy NZ to improve their business skills and technical ability. The Biz Start course, which is facilitated by Lynaire Ryan, gave the couple exposure to like-minded people and also to successful farmers who shared their knowledge and life experiences with the attendees.

Creating a safe and happy workplace is important to us, with lots of time off for everybody. So running a simple system is paramount

James’s experience from working on farms, plus what they learned on the various courses and events that they attended, were to shape the Bourkes’ farming philosophy.

“We want to farm in such a way as to be profitable in all milk prices and to continuously grow our equity. To achieve this we need to be low-cost, as the lowest-cost operator is the last man standing in a bad milk price year. So we have to harvest as much grass as possible,” James says.

“We also need to have a good work-life balance, both for us and our staff. Creating a safe and happy workplace is important to us, with lots of time off for everybody. So running a simple system is paramount,” says Ceri.

It is these farming principles, along with good financial and business discipline during high milk price years, that has seen their equity grow. And grow it has. Figure 1 has a breakdown of their total assets, total debt and equity position for the last five years, with a prediction for 2016. Anyone in any doubt about the huge potential of share-milking as a driver of equity growth need only look at this graphic.

After three years of share-milking in Christchurch, they had almost NZ$600,000 (€365,000) in equity and were ready to invest again. At the same time, Peter and Ruth Mossman, farm owners in Culverden, 120km away from Christchurch, were advertising for new share-milkers on their 1,065-cow farm.

After a number of meetings between both partners, they settled on a plan that would see James and Ceri share-milking on half the herd (532 cows) and contract milking on the remainder. 50:50 share-milking is where labour, machinery, and some of the feed costs are covered by the share-milker in return for 50% of the milk cheque. Contract milking is where the contractor provides all the labour in return for a fixed charge for every kilo of milk solids produced. Table 2 has a breakdown of their agreement.

I asked Peter, the farm owner, what attracted him to the deal and also what attracted him to James and Ceri.

“Managing staff is not my strong point so by having a share-milker on the property means that I no longer have to worry about that side of things. It used to be a major headache. I firmly believe in the share-milking model but share-milking on 1,000 plus cows is out of reach for many young couples so the 50:50 share-milking and contract milking model offers progression opportunities but also means that the farm is being operated at top performance as the operator has a vested interest.

“As for James and Ceri, the first thing I look for in a share-milker is grassland management skills. Our farming systems have to be closely aligned or else it’s just going to cause friction. We visited James and Ceri on their previous farm so we knew they were good. After that it’s all about relationships and how you get on with people. I think you get a good feel for people early on.”

In 2012, the 1,065 cows were milked on a 290ha milking platform (3.67cows/ha) with a 230ha support block across the road – used for heifer rearing and wintering the cows on kale. In 2013, they decided to convert part of the support block to dairy for the 2014 season by building a new 54-point rotary parlour.

This gave James and Ceri an opportunity to grow their share of the herd. Today, there are 1,480 cows being milked between the two units and James and Ceri own 740 of these, with the rest contract milked.

The milking platform is now 450ha (3.28 cows/ha), with 70ha used for support. By switching to fodder beet and deferred grazing a smaller proportion of the land area is required for wintering.

James and five others work on the farm. Staff are on a five days on and two days off roster, which is much more staff friendly than the normal 11 days on and three days off roster on other farms. This means that James gets his hands dirty milking cows three or four days a week, to make the roster work.

“The way I see it, I have an obligation to Peter and Ruth and the bank manager to have the farm humming. Being on the ground and getting stuck in to work is the best way of keeping an eye on things, and it also displays to the staff how important I see their roles as being,” James says.

Today, James and Ceri have over NZ$1m (€600,000) in equity and are looking at new opportunities to continue to increase this further. With two years left in their share-milking agreement with the Mossmans, they are considering their options. One possible option is to buy a smaller farm and offer one of their herd managers a position there while they continue to manage the farm in Culverden.

With the low milk price this year, most farmers in New Zealand are making losses of around NZ$1/kgMS (€0.04 c/l). However, the Bourkes are on track to break even or make a small profit of NZ$0.04/kgMS (€0.002 c/l). Their system revolves around utilising high quantities of grass. Some palm kernel is fed to bridge the deficits, mostly in spring.

The Bourkes took advantage of the high milk price years to pay down debt so their interest levels are lower than most farmers. They have elected not to pay back capital this year.

Comment

A couple of things stood out for me on this farm. Firstly, James and Ceri are a great team – they are both driven but complement each other in different ways. Ceri is more risk-averse than James so she keeps them grounded, while James is technically strong. They both displayed excellent people skills – with staff and their farm owners. This is critical. Managing large herds is all about people. Next, they sought out opportunities and are willing to move again for their next one. Their first farm and their current farm are not in prime dairy areas. James sums it up when he says they are not entitled to anything in life – “you have to earn it and work for it”. Finally, it was heartening to see a young couple sticking to the traditional low-cost principles – focussing on utilising as much grass as possible and still making a profit when others are not. They are achieving this while striking a good work/life balance for them and for their staff. There was a really good atmosphere on the farm, with a good rapport between the farm owners, the share-milkers and the farm staff.