It’s official: buying your own dairy farm may no longer be affordable but some entrepreneurial young dairy families are finding other paths to prosperity.
The answer is to farm without the farm, says John Mulvany of OnFarm Consulting. Ahead of his address to the Australian Dairy Conference on Thursday 23 February, I invited John to write a guest post especially for young farmers.
All dairy farmers at the Australian Dairy Conference will be somewhere on this dairy farmer life curve: it’s about balance between skills acquisition, growth, life style and eventually discretionary involvement.
SA – Stuffing Around
FTCF – Focus, tight cash flow
TAF – Tight arse factor
HD – High debt
HEQ – High Equity Cons – Consolidation
DI – Discretionary involvement
Many dairy farmers are asset rich and energy poor. At the same time, many young dairy farmers are energy rich and asset poor. With land prices increasing while profit margins fall, landowners will find it harder to find young farmers capable of buying their farms.
Three young dairy couples I’ll introduce at the Australian Dairy Conference have taken their cue from many successful retailers: they don’t own the farm. Instead, they lease land to operate profitable dairy businesses while investing the returns from their dairying in high growth assets beyond the farm gates.
Warren and Kerrie Redmond, for example, entered the dairy industry with no assets in 1989 on a third share of 167 cows. Today, they lease just under 1000 hectares with 486 hectares milking area for 900 cows over three farms. Off-farm investments include three houses, FMD’s and shares. Last calculated return on asset was in 2010/2011 at 22%. Lifestyle is now very much a priority.
Gems of Advice for Young People in Dairy
• Keep an eye on the big picture – it’s easy to get lost and discouraged in the daily crap.
• There will be a minimum 8 -10 years where the pressure will be on and you’ll wonder if you are going anywhere.
• Build your reputation so people seek you to rent their assets.
• Keep your bank informed; they are your best friend when investing in high-risk cows and plant at the start.
• Spending is restricted to sensible money making assets – no shiny red toys.
• Purchase off-farm capital growth assets as soon as your debt level allows.
• You will have to make some sacrifices and initially be prepared to work hard manually while balancing decisions.
• In re-working arrangements, think outside the square, keeping the interests of both parties in mind.