Sharemilking is a business that requires both parties to be engaged at contract sign-up time. Many are now multi-million dollar businesses and the focus needs to be on the business, not on the "what's in it for me" scenario. A well thought-out contract will share the risks and the benefits.
Sharemilking has changed, with larger herds, more feed being bought in and business structures changing. In herd-owning sharemilking positions, profits may be shared at something other than 50 per cent. Agreeing to increase the number of calves sharemilkers and contract milkers can raise can increase the profits of that side of the business while making little difference to the farm owner's side; it's not just about the milk cheque.
HOMEWORK
Spend the time to fully understand the agreement and seek independent advice from a respected farmer, farm consultant, lawyer or accountant. Because there are few safeguards for either party, due diligence is key. Check the other party's background to see if they are a good fit for your farming style. This will help lower the risk of being in partnership with someone who does things completely different from you. You may be excellent at pasture management, but the other party wants someone who is good at high input farming. A discussion on the type of farming system used -- is it a system 1 or a system 4 -- gives an idea of what to expect.
Find out what the herd produced over the past few seasons, how much supplement was made on-farm and how much was bought in, what the fertiliser records show, what the electricity consumption was and what type of irrigation system is used. These will give a picture of what the costs are.
Checking references is important for both parties. Talk to the previous owner, neighbours, sharemilker, anyone who may know what this person and business is like.
It may seem daunting for a young contract milker or sharemilker to think about asking strangers for information about the owner of the farm, but the prospect of being tied to someone for 365 days, who is an integral part of your business, should mean that it's best to know this sort of information up front.
PLAN BEFORE THE SEASON
Talk over what will happen when a drought happens or when the stream floods the bottom paddocks. Sort out a plan for these adverse events. Discuss what is usual on the farm. What are capital works and what is regarded as maintenance?
Set up regular business meetings. Informal information sharing on the tanker track or in the calving pen is not great because it doesn't set up a good pattern of communication. Planned meetings allow for benchmarking and progress to be measured, while working on the relationship.
SIGN
Sign the agreement (and any variations). A well thought-out agreement or contract will require no further attention. Enjoy the next 365 days together, building the business.
Ann Thompson is a Federated Farmers Dairy policy adviser.
