Buying farms too tough for young
To buy a hectare of land it took the sale of 10-12 cows 10 years ago but today it costs on average more than 20 cows, MyFarm chief executive Andrew Watters has calculated.
Watters said New Zealand had been through a ‘‘golden period’’ of rising land values, but it had left the country with too much debt, environmental problems and prices too high for young people.
He said farm ownership was an achievable goal for aspiring farmers until about 10 years ago and they could shear or sharemilk their way into buying a first farm.
‘‘Since that time, the price of an average farm versus the incomegenerating capacity of sharemilking jobs has become twice as high by our calculations.’’
The traditional pathway for someone to own a dairy farm was to start at 29 or 39 per cent sharemilking, and finally 50:50 before a sharemilker bought a farm and in turn employed a sharemilker. ‘‘But today everything is militating against sharemilkers. In 50:50 partnerships, during low milk prices the sharemilker can go broke because they cover a big percentage of the costs and their asset base is just the cows. In big payouts the owner thinks the sharemilker’s getting too big a return, and ‘there’s a great return for me if I buy the cows and put on a manager’. You get sharemilkers going broke at low prices and the landowner kicking the sharemilkers off in high prices.’’
Sharemilker numbers have fallen over the last 20 years, from 5016 to 3879, and dairy farm numbers have declined from 14,597 to 11,970. Watters said one solution to help them get there was a flexirate sharemilking agreement. ‘‘It identifies the milk price at which the income is shared 50:50, let’s say it’s $5.50, but it ‘breathes’ with the milk price so the percentage increase below $5.50 is in favour of the sharemilker but it increases in favour of the owner above $5.50.’’
He welcomed the National announcement to sell off Landcorp farms through a lease-to-buy arrangement as a good example of planned succession and vendors in some situations could leave some finance when they wanted to sell their farm. ‘‘Why not make the interest payable variable according to the milk/product price? When the product price is high, the new owner can afford to pay a high interest rate provided that the rate falls to an affordable level on low milk prices.’’
There was a need for more shared ownership models, but without the complexity of an equity partnership.