Equity partnerships get New Zealand dairy entrants started

Fonterra’s largest milk supplier, Dairy Holdings, is helping young farmers get on the ladder with equity agreements. Farmers Weekly speaks to two first-time farmers who have benefitted from the scheme.

First-time farmers Rhys and Laura Johansen are testament to the success of Dairy Holdings equity partnerships.

Dairy Holdings milk 46,000 cows across 58 dairies and while it is a powerhouse of New Zealand industry, chief executive Colin Glass refers to the firm as a “big, career progression company”.

Under the company’s career model employees can work their way up the ladder from contract milking to full farm ownership.

See also: Legal advice on forming a farming partnership

So successful is its career path in fact that one-quarter of the group’s 58 dairies are now operated by staff who own more than 50% of the herd.

Contrary to seeing this as a threat, Mr Glass believes it incentivises staff to perform.

Mr and Mrs Johansen, aged 38, are now in their fifth season milking at Daryll Developments. The couple originated from the city and had no experience in the dairy industry whatsoever.

In fact, Mr Johansen, a former factory worker, stumbled across his first job as farm assistant after seeing an advert in the local paper.

“We were living in Canterbury and Rhys saw a job advertised for help on a dairy farm and it happened to be with a couple that were managing for Dairy Holdings,” explains Mrs Johansen.

From here he progressed to managing a 1,500-cow herd and has been slowly growing his equity in the business, buying 50 cows a year.

The Johansens milk 650 Friesian-cross, spring-calving cows twice a day on the 170ha unit. As contract milkers they are paid a fixed rate of NZD1.63/kg of milk solids (MS) (5p/litre) and from this they must cover labour costs, repairs and running costs. They are also paid a lease of NZD150 a cow a year (£64 a cow a year) by Dairy Holdings.

See also: A beginner’s guide to careers in agriculture

This season they are on target to produce 240,000kg of MS in total (369kg MS a cow or the equivalent of 4,981 litres a cow a year). The more milk solids they produce the more they earn, so production is a key driver of profitability.

“You have to try to achieve as close to your target as possible and anything over and above that is money in your pocket.”

In their first season the couple did 8% over their production targets. A big part of that was down to carefully monitoring and measuring grass, says Mr Johansen.

Under the contract milking agreement they are required to cover 20% of feed costs, so grazing plays an integral part in keeping input costs down.

Rhys and Laura Johansen

Cows are split into two groups: one group of 300 consisting of lighter and younger cows and a second mob of 350.

They are rotated around 25 fields on a 20-day rotation and covers are measured weekly. Cows are given 12-hour breaks and strip grazed, with covers measured weekly to ensure there is enough grass to meet individual cow requirements.

The average target for pre-grazing covers is 3,000kg/ha of DM and cows are taken out when covers reach residuals of 1,500kg/ha of DM.

Like most farms in the region, grass is irrigated using a centre-pivot irrigator, which applies 5ml/ha of water a day through the season, without which they wouldn’t have enough grass for grazing.

Since switching from rotary irrigators to centre pivots last season, grass growth has increased by 50kg of DM a day to about 80kg of DM a day.

Each pivot has a touchscreen computer to control the speed they travel so they can cover the whole farm in 24 hours.

See also: Five top tips for a compact calving period

“Depending on what the moisture levels are I will speed the pivots up or slow them down and put water on a bit heavier,” explains Mr Johansen.

Breeding and calving

Tail paints are used to detect heats and cows are AI’d from 20 October for five weeks to Friesian-cross bulls from the Livestock Improvement Company (LIC). Usually Jersey-cross sweeper bulls are run with the herd, but for the first time this year they used two Jersey bulls from the start of breeding in an attempt to improve submission rates.

“We can no longer use inductions, but we need to hit our target of 90% submission rate within the first three weeks.

“I talked to LIC about doing it and they said 80% of the time the straw would impregnate the cow before the bull because they get to the uterus quicker,” he adds.

Bulls went in on 20 October – the same day as AI – and were left in for three weeks, before being put back in on 20 November for five weeks.

“We do a total of 10 weeks mating – five weeks AI and five weeks with the bulls,” says Mr Johansen.

After three weeks service 83% of cows have been served, just below target. However, this is an improvement on last year’s figure of 78%.

Calving starts on 25 July and a big focus is put on calf management because calves represent a significant income stream for the farm, explains Mrs Johansen, who manages calf rearing.

The Johansens must supply 25% of herd replacements and after this has been met they get offered the first chance to buy surplus heifer calves at a cost of NZD60 a head (£26).

This year they have raised 160 heifers for the company and will purchase just 13 due to low heifer numbers, but the previous season they bought 70.

“We just let them know how many we have kept and they send us an invoice for them in January,” says Mr Johansen.

Calves have to be sent away to a grazier by 15 December, so making sure they hit target weaning weights of 75-95kg, depending on breed, is essential, explains Mrs Johansen.

“If you hit the target you get NZD25 a head (£11 a head) so it gives you the incentive because it starts adding up just in time for Christmas,” she adds.

Meanwhile bulls are usually purchased by Dairy Holdings in December for NZD360 a head (£155 a head), but because of a lack of shed space the Johansens sold 400 as bobby calves and 40 were sold at two weeks old to a rearer for NZD100 a head (£43 a head).

“We didn’t have the space for extra animals because we are having a new calf shed built.”

Future

The future goal is to continue to build cow numbers and they would like to step up to a lower-order contract at some point too. But the price this season has forced them to play it safe.

“We chose to stay on a contract milking agreement when we sat down and did our budgets in February because the price was looking shaky.”

It was a wise decision as lower-order milkers are paid 25% of the milk price rather than a fixed price, so the couple would only be receiving 90c/kg of MS (3p/litre) had they switched.

But if the price improves above NZD6.40/kg of MS (20p/litre) Mr Johansen says he would give it a shot.

“I would be quite keen to move to lower order because it is definitely a whole new challenge.”