Just before the election the National party announced the carve up of Landcorp.
The policy announcement started me thinking about the importance of young farmers and farm ownership. The question of who will own our farmland in 20 – 30 years is one I ponder a lot; if we don’t do something about it we will end up with land owners and farmers being different people.
Farm ownership was a readily achievable goal for aspiring farmers up until probably 10 years ago; one could shear or sharemilk one’s way into buying a first farm.
Since that time, the price of an average farm versus the income generating capacity of sharemilking jobs has become twice as high by our calculations. In ‘the good old days’ it took the sale of 10 – 12 cows to buy a hectare of land; today it is on average more than 20 cows to buy a hectare. Sharemilking jobs also used to be on bigger than average farms; today 50/50 sharemilkers tend to populate the 200 – 350 cow farm which is now smaller than average. There are also some societal changes; young farmers were prepared to buy smaller C or B class property and living expenses were a lot lower (frugality was expected). But if we go far enough back, there were also some different approaches taken in the market; vendor finance was quite a common provision which gave young farmers a leg up.
The importance of ownership succession
The work to lease then buy proposal for Landcorp is a great example of a planned succession of ownership. There will need to be some invention in just how it will work, but there is the odd example of this in the private sector; friends of ours have recently entered into an arrangement of progressive purchase of their farm owner’s property.
It is my pick that we have been through a golden period of land value appreciation but at the end of this last bull run we have left ourselves with too much debt, with some learning to do on farming profitably within environmental limits and with prices too high for young farmers to afford. It is possible that there will be fewer farm buyers out there and in order to get a fair sale vendors and purchasers may need to be more inventive.
Some solutions to high land prices
There is probably no silver bullet but here are a few ideas.
Firstly, we need more flexibility with our share farming systems. The herd owning sharemilking system needs to be bought up to date with the ‘flexi-rate sharemilking agreement concept’ (google will show some detail) an example of making the partnership between sharemilker and landowner fairer and more sustainable, particularly for large scale positions.
Secondly, vendors in some situations might consider leaving in some vendor finance to achieve a sale. Why not make the interest payable variable according to the milk/product price? When the product price is high, the new owner can afford to pay a high interest rate provided that the rate falls to an affordable level on low milk prices. Perhaps rates could vary between 3% and 8%?
Thirdly, we need more shared ownership models, but perhaps without the complexity of an equity partnership. At MyFarm we will have investors prepared to own part of a farm provided they have clear title over that portion and perhaps a lease mechanism for simplicities sake.
Hats off to National for taking this approach with Landcorp; depending on negotiations over the next few days we may be able to watch and learn.
Andrew and Alison Watters bought a small farm following 4 years 50/50 sharemilking in 2004.
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