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8 THE RURAL VOICE
Robert Mercer
Sharemilking as a route to
intergenerational transfer
At a recent forage field day I
attended, the topic switched from
grazing to the potential for inter-
generational farm asset transfer by
using the
sharemilking
approach.
Much of the
information was
based on the
extensive
experience
gained in New
Zealand where
these types of
agreements
have been used
for 100 years.
With modern
dairy farm
assets now well
over $1 million (with quota), a
method of transfer over time within
or outside the family members, is
worthy of investigation. Tax
problems would be a major concern
in any approach, and once again
professional advice is suggested.
Sharemilking is a means whereby
new farmers can buy into a dairy
business with labour, allowing the
owner to retire with income and
retain some ownership until final
settlement.
The most common agreement is a
50/50 split of the milk cheque, with
the sharemilker providing the labour
and livestock. The other major
components of the split are that the
owner pays for the fertilizer, 50 per
cent of the purchased feed, property
taxes, materials for repairs and
maintenance, and capital
improvements. The sharemilker picks
up the other half of the feed bill, all
livestock expenses, all parlour related
costs and harvesting costs. As the
milk cheque is split 50/50 the
sharemilker retains all income from
the sale of livestock.
This concept allows younger
people with Tess assets to enter the
business while older people retire
gradually and in comfort. The
sharemilkers enter the industry by
building equity in steps. First the
cows, then the equipment and finally
the land.
In any agreement of this sort it
was advised that flexibility be a key
component of the package. And
whether needed or not, there should
be a conflict -resolution process build
into the contract. This flexibility
would allow for changes should there
be natural disasters, drought. flood,
injury or fire.
Farmers on the field day were told
that the income splits can vary
depending on the input of the
individuals. The income from the
milk cheque for the sharemilker can
be as low as 20 per cent should the
landowner also supply the cows and
quota. There would be many other
conditions and a few that were
discussed at the meeting concerned
land use, housing, buildings,
machinery, environmental impacts,
and animal welfare.
The point of interest for these
agreements in the BC meeting was
that the need for cattle housing and
field equipment could be reduced to a
minimum in cases where it was
possible to institute a form of
intensive grazing management over a
season that might be as long as 260
days. In this type of management
program all field work would be
custom contracted and the major
equipment expense would be
irrigation and the power to operate it.
As in Ontario, the average age of
dairy farmers in BC is getting older,
and the younger generation is less
willing to take over based on hours
and effort. Sharemilking gives
another avenue for those wishing to
retire gradually. Also another means
for those who need capital, guidance
and help to get a foot in the door of
the dairy barn.0 •
Robert Mercer was editor of the
Broadwater Market Letter and a farm
commentator in Ontario for 25 years.