• Successful partnerships

  Successful and effective business partnerships are more likely if both parties have a clear understanding of their roles and obligations and have taken the time to ensure there is a good fit of values and farming philosophies.

  A sharemilking agreement is a binding legal document, understanding the clauses from top to bottom is essential to assess risk.

  DairyNZ’s 'Do your homework' tool helps to guide you through the process of signing an agreement. Familiarise yourself with the latest agreements and ask friends or family if you don’t have access to a copy to help speed up the process when you are presented with a contract or agreement.

  As with any relationship communication is vital in the success of a partnership. There are more tips below on communication and negotiation.

• How do we build trust in a new sharemilking agreement?

  If you are moving onto a new farm with a new business partner help them feel confident that you will share information about what’s happening on farm on a regular basis.

  This is critical in the first couple of months of moving onto a new farm but the momentum should keep going with regular farm meetings.

  It can be difficult once calving has started to keep up with weekly meetings and if this is an issue then signal to the farm owner earlier that it would be good to make it fortnightly or monthly for a bit then get back on track. How frequently you meet should be agreed with the farm owner and include staff at all or some of the meetings so they can keep up to date with what has happened and what is planned.

  View the homework process for more information on building successful sharemilking partnerships.

  How to build trust

• Communication and negotiation

  Communication is the biggest factor in the success of any relationship.

  Have regular meetings on a reasonably official basis, put together a farm report and have an agenda, by communicating in this way any problems can be identified early and both parties are well informed.

• Negotiating for a win:win situation

  There are four key things you want to keep in mind.

  1. Start off thinking about the outcomes from the other persons point of view
  2. Be motivated to get a win:win outcome where both of you benefit from what is decided. Focus on this being a business partnership.
  3. Crunch the numbers, be prepared with facts and figures which will show
  • the position you are in at present (financially, time, stress)
  • what changes you would suggest and how these will impact positively on your and the farm owners’ position and achieving your shared plan(financially, time, stress, production and other parts of the system)
  4. Know what your base position is and what you can and can’t feasibly move on – be honest about this. Now is not the time to be too proud but do this respectfully, your reputation is one of your biggest assets.

  Throughout the discussion, take time to consider the proposals and quantify the logic behind your decisions. Keep trying to look at it from the other person’s point of view and try to build your decision on facts as well as emotion/gut feel. If there’s difficulty bringing parties together is it possible to bring in a third party?

• How do we work through contracts to make money?

  Always enter negotiations with a win-win focus and think about the other person’s perspective.

  There is always a way to make a deal work if both parties are willing. In the present environment it may be a case of fairly sharing pain and gain.

  Negotiate on each clause in the contract and think about how it impacts on your business. If you are worried about risk from payout next season then you might protect yourself with a contract rate rather than going onto a variable order agreement. It all depends on how much risk you want and can handle.

  If there is a problem brewing DairyNZ have a conflict resolution guide which may help.

  Tips for negotiating

• Q&A from 'What are my options' events March 2016

  Around 500 farmers attended the six 'What Are My Options?' events in March 2016.

  The events were run by DairyNZ and Federated Farmers to provide information to help sharemilkers, contract milkers and their farm owners plan a path forward over the next year.

  Working together

  • Are farm owners able to support their sharemilker or are they struggling financially as well?

    There may be less ability for farm owners to support people through several seasons of low milk prices. Farms carry more debt now and with current milk prices many farm owners are under pressure as well. Communicating well and sharing a business plan for the farm between sharemilkers and farm owners and being honest about your financial situation can help. A joint plan can be presented to the bank which will show how you’re working together and that you have confidence in the viability of the farm.

  • How are farm owners and sharemilkers working together?

    This season has been difficult for both parties in sharemilking agreements and many people have made changes to their agreements and to farm operations. Open and honest communication is essential – any decisions or changes made to the farm system affect all parties and it is important all decisions are considered as a business partnership.

    We have been hearing stories of a range of ways farm owners and sharemilkers have made changes that result in positive outcomes for both parties.  These include:

    • Farm owners sharing a wider range of the costs
    • Some farmers last year shared the Fonterra loan with their sharemilkers.  This needed to be done carefully and with advice as the debt sits with farm owners.
    • Bringing in a farm consultant to help find the best solution for everyone.
    • Share more expenditure, such as paying for electricity or farm dairy costs.
    • Top up what the variable order sharemilker is receiving, equivalent to a salary
    • Provide farm supplies, diesel, feed or even dinner/grocery vouchers
    • Offered the option of contract milking
    • Farm owners providing time as relief milking or permanent staff
    • Farm owners sharing skills in developing, tracking and monitoring finances

  • How are people managing their contract obligations going forward?

    The best situations are where two parties are working together to ensure the obligations of the agreements can be met, and are talking to each other frequently about how things are tracking or where changes may be needed.

    Whenever parties are considering changing an agreement it is important to think, is there a win-win? Negotiating shouldn’t be adversarial by any means. In the present environment it may be a case of fairly sharing pain and gain.

  • What is important for people to remember and stay focused on while they are dealing with such a low payout?

    It is really important to have a plan, communicate that plan and focus on what you can control.  It is also important to remember why you are farming, and to focus on family, community, relationships, and to look out for one another.

  • What opportunities are people taking advantage of currently?

    Some farmers are buying cows, either to increase their herd size or make a step into herd-owning sharemilking. Cow prices are low and if you have money behind you then it may be a good time to buy. There are also people buying their first farms. Some farmers are speculating that cow prices will increase next season and there may be a shortage of heifers – so they are raising surplus stock. A lot of it comes down to your financial situation and appetite for risk.

  • How can I pay my contract milker more if the payout improves next season?

    Right now no one knows what the milk price will be for 2016-17 and we can talk optimistically that it will be better than 2015-16 but there’s not always enough money to reward a contract milker as much as you would like to. There are ways to incentivize good people for their skills. You can add clauses to their contract to increase payments if the payout goes over a certain level or look for non-financial rewards. Make sure you seek advice before making any changes to contracts.

  • Do I need to change my contract to survive?

    Not necessarily but it is critical that you understand your contract, what’s in it and your obligations. Then one approach is to put that aside for a moment and start talking with each other, sharemilking is a business partnership and both parties need to come together and make a recovery plan for the farm. Don’t get bogged down in contract changes from the start of a discussion. That might stifle creativity and ideas! Make a plan for the farm and your business survival and then see if the contract or agreement needs to change.

  • As a farm owner why would I have a herd owning sharemilker when my returns could be higher with a contract milker or variable order sharemilkers on the farm?

    There are financial and non-financial reasons to have a herd owning sharemilker on-farm, including releasing capital by not owning the herd yourself, having someone who will look after the farm as they wish to work with you for several years (or more), less farm running costs for the farm owner, more incentive to perform in areas such as reproductive performance, longer term agreements and a greater level of delegation. Helping farmers progress through the industry is often a motivator for farm owners.

  Changes on farm

  • What are other people doing in terms of practical changes on-farm and to the way they do things?

    Note – these are suggestions made at ‘What are my options?’ events held in March 2016: they do not represent an exhaustive list of options

    • Monitor what you’re doing to improve pasture grown, keep an eye on the budget and make culling decisions. Information is power.
    • Using the DairyNZ website tools for finances, feed and HR management
    • Spending time increasing my skills by reading or doing a course, the Diploma in Agribusiness is ideal
    • Talk to other farmers. What are the Sharemilkers of the Year doing in your region? What tools do they use?
    • Farm walks and focus on pasture.
    • Use best case and worst case payout figures in your budget to test it
    • Keep a calculator on the kitchen table. Handy for when running a partial budget or considering options. Stops you thinking about an idea for hours or days without checking the numbers and making a decision.
    • Before you go into a negotiation think about the other person’s perspective.
    • Monday morning meeting with farm owner, sharemilkers and farm staff about what’s happened and what’s coming up.
    • Making sure I match my feed supply and demand well by using a feed budget.
    • Keeping my eyes and ears open for opportunities to improve the way we do things and reap the benefits over the longer term
    • Once a day milking from earlier in the season
    • Moving to a higher proportion of autumn calcing cows
    • Winter milking
    • Getting advice where I need it – investing  in good advice to make good decisions

  • If the farm owner removes feed from the system, what can I do as a contract milker when this impacts on my income?

    A major change in farm policy needs goodwill and discussions between farm owners and contract milkers. If you are faced with this situation, it would be helpful if you run some numbers and are able to clearly show the farm owner the flow on effects of the decision – what impact will that have on production? How will that impact on the amount of income you receive? Are there any alternative options you could present?  Note also that the latest Federated Farmers Contract Milkers contract has feed in it – if feed is to be pulled out of the system then you may need to formally negotiate the contract.

  • Should I still be using nitrogen if we are cutting back on costs?

    There may be efficiency gains from reducing nitrogen on farm and also strategic application of nitrogen instead of a blanket application across the farm. There can be a big variance in pasture grown by paddock and this is where targeting N use can save you money and grow more pasture. If you are monitoring pastures, doing pasture walks and using that data, that is one way of improving pasture grown. Talk to your fertliser rep or farm consultant about N-use on farm to get the best value for money.

  • Should we still be herd testing?

    There are some considerations such as timing of testing and the use of the data. For many, herd testing provides important data that you can make decisions on. But you need to think carefully about when you do it.  Talk to your herd testing company or farm consultant and ensure you get the most of the results from herd testing by using it for culling decisions and improving the quality of your herd. For herd-owning sharemilkers what is the impact of not herd testing your asset? There is a difference in the value of recorded heifers versus unrecorded heifers and farm owners will want to see your records if you are moving farms.

  • What are others doing to save costs, increase income or find efficiency gains?

    Note – these are suggestions made at ‘What are my options?’ events held in March 2016: they do not represent an exhaustive list of options

    • Focus on reducing wastage – time, products, poor practices
    • Buy supplies as and when you need them so you don’t have excess stock sitting around (e.g. tail paint)
    • Focus on pasture – do regular pasture walks and make sure you are utilizing all that you can – link this to a feed budget
    • Carry forward supplementary feed on hand – don’t just feed it out because you have it
    • Share a labour unit between farms
    • Monitor electricity use
    • Look for and negotiate better deals from suppliers
    • Partner working off farm
    • Diversification, rearing more beef calves
    • Put cup removers in the shed to reduce workload and possibly reduce relief workers
    • Do jobs while you are following the cows – saves on time and petrol to go back down the farm to fix things - set up your bike or ute with tools and gear so you can do odd jobs such as fix fences and grub thistles.
    • Use 2-wheelers or push bikes instead of 4-wheel motorbikes and walkie talkies instead of mobile phones
    • Challenge costs, for example you could start from zero and think about what is needed for animal health then build you budget that way rather than revising what you have previously spent.
    • Monitor all costs and pay attention to details. Go through expenditure line by line
    • Sign up for the DairyNZ Waste Hunt Challenge
    • Ask your staff for their ideas on cost cutting or ways to make the farm more efficient.
    • Help each other out – share machinery with neighbours and chip in to help do things like cover silage stacks.
    • Bringing in a farm consultant to help find the best solution for everyone.
    • Share more expenditure, such as paying for electricity or farm dairy costs.
    • Farm owners providing time as relief milking or permanent staff
    • Discuss farm budget with farm owner and plan, together, a reduction in expenses such as feed inputs,  and improved pasture utilisation.
    • Meet with accountant to review tax payments.
    • Look for ways to increase income, e.g. pasture harvested, raising cattle or pigs.
    • Reduce personal expenditure.
    • Sell non-essential assets to support cash flow.

  The importance of communication

  • How do you improve communication between sharemilkers and farm owners?

    • Schedule regular meetings between all parties involved and prioritise time to talk to one another
    • Develop budgets and share these so everyone knows what’s going on.  Having an open and clear budget from both parties will help everyone to fully understand what options are and where changes may need to be made.
    • Have a shared business plan with farm policies for stock, feed, fertilizer and R&M.

  • As a VOSM my business has deteriorated this season. What can I do?

    Get in front of your farm owner. Be open and honest with them if your business is going backwards. Show you financial accounts and also prepare for the meeting by having some options or ideas about how you could improve things. If you are not confident having this conversation then enlist some help.

  • As a farm owner I need to make some big changes to how the farm runs as I’m losing money. How do I work with my contract milker?

    Communicate with them early and always look for a fair outcome for both parties. When you’re presenting proposed changes or negotiating remember to think about the impacts on the other party. Is there an opportunity to improve the $/kgMS rate if production will decrease significantly? Can incentives for improving the 6-week in-calf rate or reading stock losses be added to the contract as these are factors the contract milker can influence?  

    Go in with a plan and if you are making big changes remember that you may have to change the contract you have signed.

    Give the sharemilker the opportunity to consider the proposal and to table other ideas or ways to implement the change with additional benefits.

Sharemilker tips videos

Presenters summarise their tips from the ‘What Are My Options?’ events.