Paul and Kate Manion have managed to purchase their first dairy farm in the Waikato this year with breathing space to buy Fonterra shares over coming years thanks to the co-operative’s MyMilk initiative being extended to the North Island. Sheryl Haitana reports.
In today’s tricky banking market Paul and Kate Manion have managed to sign up their first dairy farm with 50% equity.
Requiring more equity in the farm meant they didn’t have enough deposit to buy Fonterra shares on top, but as staunch Fonterra supporters, there was no doubt who they wanted to supply.
They initially would have had six years to share up with Fonterra, but with MyMilk they’ve been given another five years grace.
“Needing this equity closed the door on us buying shares, this is why we’ve gone with MyMilk,” Paul says.
“It effectively gives us 11 years to share up, which at today’s prices is another $500,000. It mitigates our risk.”
The plan will be to buy dry shares when they can to later convert to wet shares.
Joining MyMilk gives them all the benefits and support of a Fonterra shareholder, with 5c held back off their milk price, which is held back for them and given back to them when they buy shares.
It’s effectively an enforced saving scheme.
“The number one reason I wanted to supply Fonterra is because I’m really big on the co-operative model,” Paul says.
He has milked cows in the United Kingdom and seen what happens when the co-op breaks up and farmers’ only option is to picket for a better milk price. He doesn’t want to see everyone leaving Fonterra and the co-op being under-supplied and their milk price goes down.
“Everyone sets their benchmarks off Fonterra.
“I think in the long term the only way forward is for farmers to stick together. We have a perishable product that needs to be picked up every day.”
During his dairy career he has always insisted on only working on farms supplying Fonterra.
“I wouldn’t have gone sharemilking on a farm that didn’t supply Fonterra. I don’t want to be someone’s biggest cost.”
Paul and Kate bought their farm for $3.45 million with $1.2m of their own money plus their 365-cow herd as collateral. Their parents have both loaned them another $250,000 each. Paul’s parents have come in as investors with a plan for Paul and Kate to sharemilk for their joint company and to buy them out within 5-10 years.
“We could have taken a loan off them but it helps spreads the risk for us, with the milk price volatility.”
Kate’s parents have lent them the money with an interest rate set and Paul and Kate to pay them back when they can.
The couple, both 34, have made successful onfarm and off-farm property investments in the last decade to help them progress faster to farm ownership.
“More than half our money has been made off-farm. Any money left over after a season we put into property,” Kate says.
They bought their first rental property in Cambridge 10 years ago. A second rental property in Cambridge followed in 2015 and almost doubled their money over two years when they sold it in 2017. The $400,000 profit was invested in an Auckland development company and made a good return.
“It was a 50% return, or a 25% return per annum.”
They still have $50,000 invested in the development company which is building more apartments in Auckland, but the rest is now tied up in the farm.
“We are all in and down the rabbit hole, our diversity has taken a hit,” Kate says.
The couple also made a little bit in buying and selling Dry Shares. They bought their first shares at $4 and sold them for $7, and then bought some for $5.50, selling them for $7.80.
Neither Paul or Kate are from a farming background. Paul was born in Sydney and moved to Cambridge when he was 13. He saw early on the success that could be obtained by people working their way up in the dairy industry.
“A lot of my friends’ parents were farmers and were very successful – and a lot of them had come from nothing.”
He was keen to enter the agricultural industry in some capacity and studied a Bachelor of Commerce in Agriculture from Lincoln University before travelling for almost three years driving tractors and milking cows.
Kate was born and raised in Christchurch and studied a Bachelor of Science at Canterbury University before getting a job at GeneMark for LIC in Hamilton.
The pair met briefly while travelling and working in London and got together when they were back in New Zealand.
After nine months working for an irrigation company, Paul got offered a job milking cows in Arohena and progressed from 2IC to farm manager.
Kate returned to work at GeneMark and then obtained a post graduate diploma in teaching from Waikato University.
The couple went contract milking 470 cows for three years at Parawera. Kate taught agriculture and science at St Peters in Cambridge for a year before she fell pregnant with their first son, Rupert. The couple now have four children, Rupert, 6, William, 5, Ameilia, 2, and James, 1.
The couple went contract milking 485 cows at Cambridge for four years before shifting to their current sharemilking position.
They are two years into this sharemilking job and didn’t think farm ownership would happen so quickly, but an opportunity came up and you have to grab them when you can, Kate says.
“We weren’t looking for a farm, we were always being nosy, but not seriously looking.”
Paul saw the farm listed and did some numbers on it. They rang their bank manager and went to look at it, and put an offer in.
Their current farm owners Rayden and Irene Smith have been extremely supportive of their decision to buy the farm and discontinue their three-year sharemilking contract.
“We had a chat about putting a manager on our new farm and staying on here for the last year, or putting a manager on here, but they wanted us to do what we needed to and they wanted another sharemilker on instead of a manager. We couldn’t ask for better farm owners who are supportive of young people in the industry.”
The farm which boundaries Lake Arapuni produced 145,000kg milksolids (MS) with 365 cows last season and will be similar this year, Paul says.
“We have had two really tough summers. The system has more in it than that. We run six months all grass, but at the moment we are feeding 7kg of palm kernel, DDG and soy hull mix.”
Paul made 250 bales of grass silage which has almost all gone.
He planted 8ha of chicory this season which has been their saving grace up until the end of February.
“It’s held on really well until now, that’s helped us through a lot better than if we didn’t have it.
“It also dilutes the FEI (fat evaluation index) as well, which helps because palm kernel works really well as a supplementary feed.”
Their new farm at Kiwitahi is 113ha. It is north-facing and is a third flat, a third rolling and a third steep land.
It has good infrastructure, including a sound farm dairy, calf shed, effluent storage, a new woolshed, good races and fencing.
The only capital they will have to invest straight away will be to install automatic cup removers and Protrack.
Their other motivation with buying a farm was to find good schooling for their children. They knew they didn’t want to keep shifting around sharemilking and taking their kids out of schools. Kiwitahi is a great location, close to lots of good primary and secondary schools.
WHY MYMILK?
- A no-shares way to help farmers grow their business and keep their options open.
- MyMilk offers one-year contracts up to five seasons.
- Access to Fonterra onfarm sevices.
- Vat supplied.
- Farm Source benefits.
- Competitive milk price.
- Contract fee (5c) is used to acquire units in the Fonterra Shareholders Fund, which is held back on trust and distributed to the farmer when they become a Fonterra supplier and are required to buy shares.
KEY FACTS:
- Farm owners: Paul and Kate Manion
- Location: Kiwitahi, Waikato
- Area: 113ha
- Average production: 110,000kg milksolids
- Cows: 300
- Farm dairy: 26-aside herringbone
- Farm Purchase Budget Figures:
- Cost/ha $30,500/ha
- Average farm production: 110,000kg milksolids
- Potential income at $7/kg MS
- Farm working expenses: $3.80/kg MS
