Share-farming is a relatively new concept in Ireland but it is a widely practised way of farming in other countries, particularly in New Zealand. Unlike a partnership, where two people come together to operate one business from the one farm, in share-farming there are two businesses operated out of the one farm.
The farm owner provides the land and facilities for the farm while the herd owner provides the cows, the labour and the management. Both businesses have their own income streams and they have their own costs.
Farm walk
A farm walk was held last week on one of the first share-farming arrangements in Ireland – Gurteen dairy farm in Bandon, Co Cork.
Shinagh Estates
Shinagh Estates owns Gurteen farm and, up until 2016, they were using the 34ha to contract-rear heifers for their other farm, the Shinagh demonstration farm being managed by Kevin Ahern. Shinagh Estates is owned by the four west Cork co-ops and they were keen to do more with the land than just rear heifers on it.
In 2014, the decision was made that they were going to convert Gurteen farm to dairy, but with the following goals:
Conversion began in late 2015. Prior to conversion, there was nothing on the farm only a cattle crush. New roadways, water, fencing, milking parlour and topless cubicles were built for 100 cows at a total cost of €260,528 or just over €2,600 per cow, excluding the cost of the cow. Shinagh paid for all of this.
Teagasc involvement
There was Teagasc involvement in the project from the start, both in planning the conversion and setting up the share-milking arrangement. A delay in getting planning permission meant that the development ran behind schedule so the farm was still being converted by the time the first few cows were calving in 2016.
The next step was to find a share-farmer. After getting a certificate in dairy herd management in Clonakilty Agricultural College, John Sexton went to work for William Kingston as a farm assistant. William encouraged John to travel. John worked as a farm assistant and then a herd manager in New Zealand before managing a 450-cow farm for Ed Dale in England.
Between Ireland, the UK and New Zealand John did eight calving seasons in six years so he quickly built up massive experience. John came back to Ireland in 2015 and was looking for opportunities to start farming in his own right so he applied for the share-farming job at Gurteen Farm. After a number of interviews and plenty of discussion, a share-farming agreement was signed between himself and Shinagh Estates to start milking in 2016.
The farm
At 34ha, many farmers will argue that it is too small for one decent income to be generated from the farm, never mind two. John McNamara from Teagasc is the facilitator of the monthly meetings between Shinagh and John. He says that the smaller size of the farm is made up for to some degree in the agreement between John and Shinagh, as the share-farming split between them is 60:40 in favour of John. In New Zealand, 50:50 agreements are much more common. He also said that at around 100 cows, it’s a nice size herd for a young person to start off with, as the stock required is a lot less.
Farm quality
The other thing is that the farm is excellent quality, south facing and free draining in one of the best places to farm in the country. Plus, as a supplier to Bandon Co-op, the base milk price received is one of the highest in the country before solids are added.
The agreement
The split agreed between John and Shinagh is a 60:40 split – whereby John gets 60% of the milk cheque and pays 60% of some costs and either zero or 100% of other costs. Shinagh gets 40% of the milk cheque and pays 40% of some costs and either zero or 100% of other costs. The share-farming agreement is detailed in a 70-page document drawn up by Austin Finn of the Land Mobility Service.
“Nearly all the costs involved in getting the milk into the tank is split 60:40, so that’s feed, nitrogen, maintenance P and K, contractor and parlour expenses, etc. I own all the cows so I pay 100% of the vet and AI costs and also rearing the replacement heifers but I also get all of the stock sales. Because Shinagh own the farm they pay for all major repairs, reseeding, fertiliser for building up P and K, lime and they paid for all of the conversion costs. Basically they pay for everything that will still be there when I move on,” John said.
The split
The 60:40 split is what was agreed on this farm but there are many different ways of doing the split. John said that he needed 60% to make the project work for him.
Even at that, he wasn’t shying away from the fact that last year, with a low milk price and it being the first year of milking at Gurteen, it was challenging as cash was extremely tight for him.
The farm grew 12.5tDM/ha and the herd produced 342kgMS/cow with 464kg of meal fed. John bought 40 in-calf cows and 60 in-calf heifers. Between culling and mortality, 92 cows ended up being milked in 2016. Two-thirds of the herd are crossbred and the current Economic Breeding Index (EBI) is €110.
Between milk and stock sales, John’s income for last year was €70,096. His share of the farm costs came to €32,582 so his net income was €37,514 for 2016. Out of this, he must pay back the €120,000 loan for the stock that he took out for seven years. This was interest only for the first year. He must pay for his own living expenses. He must pay any tax, however he can claim stock relief on any profits.
He also has to pay full costs of supplying replacement heifers into the herd. John inherited his fragmented home farm of 28 ha and he uses this land to rear the 36 heifer calves and 30 in-calf heifers. While these are an asset to John, there is a cash cost to rearing them.
Shinagh earned €27,871 from the farming agreement last year. When you add its Basic Payment to that the total income was €41,471.
Opportunity cost
If we put an opportunity cost on the land of €200/acre and take off depreciation of 5% on the cost of capital invested, then Shinagh made a return on investment last year of 4.6% – not bad for a low milk price year.
This year, John is milking 93 cows and is on track to produce 400kgMS/cow. He has 12.2t/ha of grass grown to date and the herd has been fed 208kg of meal per cow so far. Empty rate is 8.5% after 15 weeks of breeding. It was 12.5% after 12 weeks but, as John wants to retain as much stock as possible, he bred the herd for longer.
John would like to move to a bigger farm after three years where he could double or treble his herd size.
After John moves on, Gurteen farm will provide another opportunity for a young person to own their own herd and get on the progression ladder.