Bob Edlin
Tony Wilding, farming near Tirau, and Richard McIntyre, farming near Foxton, late last month were focused on finalising a new variable order sharemilking agreement that will give sharemilkers a guaranteed minimum return.
They were also combining variable order sharemilking and contract milking agreements, although giving statutory weight to this will take more time because of the wording of the governing legislation, the Sharemilking Agreements Act 1937.
Wilding, chairman of Federated Farmers Sharemilkers Owners Section, said he thought it would be a struggle to have a new variable order agreement ready in time for the 2020/21 season – “but that’s our aim”.
Interviewed the previous day, McIntyre said the main changes had been settled and lawyers were finalising the draft. “We expect to start the consultation phase very soon.”
The extensive consultation, to inform farmers of the proposed changes and generate feedback from sharemilkers and farm owners, would involve the Ministry of Business, Innovation and Employment.
McIntyre hoped the new variable order sharemilking agreement would be given legislative authority through an Order in Council early next year.
The agreement then would become the minimum standard for variable order agreements.
“No sharemilking agreement where the sharemilker does not provide the herd may operate less favourably to the sharemilker than specified in the Sharemilking Agreements Act 1937 and its 2001 Order,” McIntyre explained.
The federation’s “Non-Herd Owning Sharemilking Agreement” has two fundamental aims.
- To encourage better outcomes from variable order sharemilking and contract milking arrangements; and
- To protect variable order sharemilkers and contract milkers of all sizes from events that would cause them significant hardship.
Variable order sharemilkers and contract milkers basically do the same job, McIntyre said. The only difference is the way they are paid.
“It doesn’t make sense to have two different contracts,” he said.
“We might as well have the same clauses in the one contract and two ways of getting paid.
But legal technicalities require a change to the Act for the agreement to become the minimum standard for contract milking. This could take up to three years.
“We have had good support from government on it – they are keen to help,” McIntyre said.
“It’s a matter of finding the time to do it and getting it high enough up on the list of legislative priorities.”
Wilding said: “We think we will go ahead and make the changes to the variable order – we wouldn’t want the whole thing slowed down for three years trying to get contract milking in there.
“We will put our own contract milking agreement out there in the market and if people don’t want to use the feds’ one, they can use another one, but I think a sharemilker would question why someone wouldn’t want to use the federation one.
“It should ring an alarm bell and raise the question: ‘why wouldn’t an owner want to provide some certainty of an outcome?’
“And it’s not that the certainty is too generous – it’s 75% of a planned outcome.”
Extending an element of financial assurance to all sharemilkers is less challenging.
A clause in the current agreement assures sharemilkers with fewer than 300 cows of a certain percentage of farm revenue after expenses. But it protects a small number of people.
The new agreement will provide some to all sharemilkers through a formula based on projected production, income and costs and is intended to cover a sharemilker’s core costs.
Two things can go wrong – a shortfall in production, perhaps because of drought, or a collapse in the milk price.
Sharemilkers “will always know they will get 75% of their production for whatever unforeseen reasons”, Wilding said.
“We’ve seen a lot of carnage in this sector with people signing bad agreements not properly thought through and the sharemilkers are the ones who are vulnerable – they have no assets to borrow against and can go broke.”
The two sections of Federated Farmers had canvassed the proposed new agreement with politicians on both sides of Parliament, Wilding said, “and they are keen with this approach so I think we will have no trouble getting support”.
