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What are the issues surrounding 50/50 sharemilking?

Historically 50/50 sharemilking was a rapid way to own your own farm. In the early 70's, when I was with the Rural Bank and State Advances, people were coming from overseas, predominantly from Holland and Great Britain, going 50/50 sharemilking and rapidly moving up to farm ownership. This situation has changed drastically. It is quite difficult to get through the ranks to get to ownership by 50/50 sharemilking these days. Some of the issues surrounding this are as follows: The value of cow...

How to cut spending on the farm without unduly affecting production

A recent study was conducted at Lincoln College on their dairy farms. This study showed that by attacking big items of expenditure first, before trying to cut back on items of minor significance, they could rapidly increase the bottom line on those farms. This is also applicable to sheep, beef and all other forms of farming. The following are some of the lessons they have learned from the study, and also from my own experiences as a dairy farmer. (not necessarily in any order, but certainly of...

New grass, new season, new production

All top producing dairy farmers know that pasture is the cheapest feed source for dairy cows. In fact, recent research undertaken at Lincoln College's dairy farm has identified that pasture production must be a major focus if you are going to increase production and improve your bottom line. I had a client on the Hauraki Plains who had run-out pastures and average production levels. He undersowed the whole property in late March last autumn and the results were, and are, nothing short of spect...

Assessing and reducing the risks on your farm

A recent article on risk management, produced by Sandra Martin, Senior Lecturer with Lincoln College in Canterbury, was a graphic reminder of the issues facing farmers everyday. Most farmers and industry people understand risk, and your banker certainly does. A lender basically looks at the following three things: Your ability to run the farming business, and service the debt. They look closely at your history, your current ability, your budgeting, etc., and assess your ability to run the b...

A follow up to no. 231 “Success in Business”

In that article, I looked at the need for a vision, the shift that must occur, the strategy to get there and the result of knowing when you have arrived. With New Zealand's economic tide changing, there is a lot of doom and gloom out there. Even I talk about how the fundamentals of the economy are all out of line. Often, people ask me, "Will New Zealand get a soft or hard landing?" In fact, Will the landing rip the undercarriage right off the plane? It not pretty and all economic commentat...

Success in Business

I recently heard an address by Craig Wormald who is a life coach and support person for people in business and his presentation was realistic in terms of what you need to do to be more successful in business. How do you make it work? What is the process? How can you make the changes? VISION Life is a journey and a process and how do you get from A to B. It is not all fun working long hours on dairy farms for minimal wages, and trying to get ahead is not easy. You need a plan and you need to b...

Rich Farmer - Poor Farmer?

Robert Kiyosaki a well-known American writer, who originally wrote "Rich Dad" became wealthy hunting his entrepreneurial spirit and the Poor Dad, who was highly educated, but due to financial struggle because he lacked the skills to manage his financial affairs. Apparently, Kiyosaki's first book passed the milestone of five years on the New York Times best sellers list, a distinction shared only by Alex Comfort's "The Joy of Sex", Scott Peck's "The Low Road Less Travelled" and Stephen Covey's ...

Is Fear the new Pandemic?

While travelling in Thailand, I was fortunate to read an editorial in the Herald Tribune published by the New York Times by a Philip Bowring on fear vs bird flu. It made excellent reading and certainly travelling in Thailand had made me fearful of some of the issues around the bird flu. It seems that "irrational fear" is increasingly endemic in the popular and media minds. So much so, when you think about viruses and terrorism, you automatically worry. Franklin Roosevelt's dictum: "The only th...

Thinking clearly

I recently read the book of "My Property World" by Bob Jones. It was interesting to see that he had a whole chapter on Thinking Clearly, and it makes good reading for any New Zealander in terms of some of his philosophies. Despite what you might say about Bob Jones, he has been extraordinarily successful. He is very honest, and is also a very clear thinker. In one of his chapters, he speaks of wanting to rent a camel to put in the foyer of his building just to see if any of his staff noticed...

Life Style Blocks: An Asset or a Hindrance to Farmers

The proliferation of lifestyle blocks goes on unabated. Fraser Farm Finance often encourages debt laden farmers to selling off non-producing houses and pieces of land to reduce debt. Councils are allowing subdivisions of farms almost without question. Now, I believe that good agricultural land should not be cut up for lifestyle blocks. Most life stylers only want 1ha or 2.5 acres for the house perhaps a horse, a couple of dogs and cats. Why do we give them 4ha of our valuable agricultural la...

Can Kiwis Take The Agricultural Sector For Granted?

New Zealand has changed rapidly in the last generation. Previously, most of the city children spent their school holidays on relations farms soaking up the fresh air, exercising, being with animals, getting up early in the morning and enjoying those big breakfasts of porridge with fresh cream from the cows that were milked the previous day. As a result, they understood the issues farmers had to face daily and were sympathetic. Germans apparently still send their children out to farms for the s...

Separate the assets in your farm business for better understanding and ownership structures

Many farmers and non-farming people, for that matter, have all their property assets in their own personal names or in a partnership. Their perception is that they own everything, and hold it tightly with the mind-set that it is theirs forever. That may be true while you are alive, but as soon as things start to change with ill health, retirement etc the attachment to the property seems to over-run everything else. The most common thing I hear in succession planning is "I have left it too late...

Wealth creation in agriculture

This is a much talked about topic in the rural sector. Some understand it, and grow their assets rapidly, and some are left wondering what actually happened and why they missed out. I recently read an article "what I didn't learn at school, but wish I had" by Jamie McIntyre, which inspired me to write this article. Many people avoid making money because they feel guilty. If you look at the numbers, the majority of people are poor. Australian research has shown that at the age of 65, 96% of t...

Triple bottom line on the farm: what does that mean?

This is a new way of looking at business success, so let's try and apply it to our farming businesses. Triple Bottom Line looks at three factors: Economic, which is the major one in farming, but goes on to include Social issues Environmental issues Let's explore some of the factors surrounding Triple Bottom Line. Firstly, economic factors are very well known to farmers. Are you making a cash profit each year, or are you borrowing annually against your asset to fund the cash deficit? ...

Alternative options for marginally small farms

The economics of small dairy farms, even with moderate debt are really getting squeezed. This is particularly evident where there is an attempt to go into higher input farming. This may only include some maize silage and palm kernel but the economics just do not add up. Why? A number of the fixed costs cannot be spread over more kilograms. The following costs will be the same regardless of size. Drawings, say $40,000 Life insurance $5,000 Car replacement ...

Planning for the future? If you have a ‘winning formula’ - stick to it!

What do I mean by a "winning formula"? It is when things are going very well, business is good, there is adequate cash flow and debt is being serviced. Everything is running smoothly then suddenly you see an opportunity to expand the existing business. This may of course be the right thing to do, but sometimes it's not. In these instances, it's really important that you get the right advice, particularly if you are considering leasing or buying the neighbouring property. It might have been pr...

Are you using your time wisely?

'The more you do, the more you can do'. 'Ask a busy person, if you need something done'. Farming, is a high mental and physical input business. You can be busy every waking minute of the day, yet some people seem to be able to achieve more in the same allotted time. I know personally that as I have 'matured' my output has trebled. Why? I have given up procrastinating. I make decisions immediately. I try to deal with everything once only, particularly when it comes to scraps of paper. Mobile ph...

Become an active listener

Why would a farm financier and consultant want to write about listening? In my work in the rural sector, I often find people experiencing financial and emotional difficulties do not fully listen to the advice given by their professionals, in fact many do not listen at all. I was recently involved in resolving a matrimonial situation where the husband wanted to talk but not listen. As soon as his wife spoke, he talked over her without giving her a chance to be heard. When I tactfully pointed ...

Get the basics right and the rest will follow

It never ceases to amaze me how we seem to forget the basics and focus on what is not crucial to the business. Recently I have seen a number of properties where inadequate fertiliser has seen production drop drastically. You chat to the farmer and they play the "blame game" - the drought, the mother-in-law... I saw a dairy farm last week where little or no fertiliser went on and production has fallen from 70,000 kg ms to 55,000 kg ms! On my own dairy farm in the 80s we dropped our fertiliser...

No - Your view may not be the bank’s view

AgResearch wrote an interesting paper in 2010 from which I have gleaned a few points. New Zealand has been through a dairy boom with payouts of around $8. Now that Fonterra's predicted payout is less than $5 I thought it may be opportune to look at some of the issues, particularly around debt. Average term liabilities per kg milk solids are around $21. Banks competed for more market share and took on more risk, resulting in some very stretched farmers. Some budgets are stretched as a...

Is a Contract a Contract?

Times are tough and there are a lot of contracts being walked away from. I am not a Solicitor, but I have studied Contract Law and it is quite clear. Contract Law is the very basis of all New Zealand commerce. It is the basis of our rural business as well. Notwithstanding that there are a number of people walking away from signed contracts only to find that they are following them. Some of the issues are as follows: 1. Sale and purchase agreements There are a number of these contracts that ...

The devil’s in the fine print. Boy, how true is that!

Let's look at some of the issues. Sharemilking agreements Any sharemilking contract which is signed by both parties, is binding on both parties. If it says you have to leave 20,000 kg of dry feed, then that is your obligation. If you don't, it's going to cost you money to provide the feed and possibly even some very expensive solicitors and/or arbitrators. Equally if the agreement states you need to milk between 300 and 350 cows then you are bound to do so. 290 is not enough and 355 is too ma...

Is bureaucracy fighting you with your money?

It is amazing isn't it that not only do you pay rates to your local Council, but also now separately to your local Environmental Authority. They collect the money as a rate, they use it to run a business and then when you apply for a consent, they may fight you with your money. I have just attended both the Large Herds Conference at Mystery Creek and the Agri-Business Conference in Rotorua. A number of speakers at those Conferences talked about bureaucracy growing at an alarming rate, plus the...

Some of the GST implications on property transactions

I recently talked with an eminent Waikato Accountant about some of the issues around GST and property transactions. The following information provided on some of the areas that he identified is a graphic reminder of what we must do, when transacting properties. Documentation The IRD and the courts for that matter are focusing on the documentation. That means that when buying or selling property, it does not matter what your intention was, or what the parties intended, the documentation is the...

Taxation and Lifestyle Farmers – Some of the Issues

The taxation laws and requirements for a taxable activity are quite clear. You need to talk to an experienced tax advisor to take the best tax position. He will advise you on what you can and can't claim. He will look at your ownership structures, trust, companies and partnership's, and hopefully set up systems for you so you are able to keep accurate records. A taxable activity is for the purposes of making money, or likely to make money, i.e. will the income exceed the expenditure? You n...