Bringing the farm and investors together

10 Nov, 2016 01:54 PM
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Control is good but trust is better.

MANY will recall this extraordinary sequence of events: In July 2015 record frosts were followed by the biggest August snowfall in years and subsequently soils were colder and wetter for longer than usual in early spring.

Between September and the following January there was no rain.

At the end of January there was

minor flooding and then for 50 days in autumn this year there was no rain. In late April the major milk companies unexpectedly cut the milk price by an average 15 per cent.

In June there were major floods.

This is an unusual sequence of events but that was the full gamut of extreme experiences for dairy farmers on Tasmania's North West coast, the major dairy region in the state, over a 12-month period.

In that July when this sequence of extremes began, Wolfie Wagner was two and a half years into his role as livestock manager for AgCAP, the Sustainable Agricultural Fund's four dairy farms along the North West coast and four beef farms on King Island.

As an experienced dairy farm manager who had spent some years out of the industry in commercial real estate and also working at the Gardiner Foundation, the Victorian dairy industry's melting pot for investments in a range of projects centred around emerging leadership and good practice, Mr Wagner had assembled a breadth and depth of skills and experience to complement his practical dairying experience.

When the major processors, Murray Goulburn and Fonterra, announced the price drop in April the AgCAP dairy operation, which had been happily contemplating a $500,000 annual profit despite the tough season, was suddenly staring at a loss of $400,000.

While many dairy farms dried off their cows immediately the AgCAP group had to consider its share farmers' incomes.

Under the guaranteed milk payment arrangement they have with their team, the share farmers stood to make money milking through autumn.

A guaranteed milk price

Under AgCAP's payment system the share farmers' incomes are set at a guaranteed price for milk solids irrespective of what the processor pays.

Fluctuations in milk price are absorbed by the investors who have the benefit of balancing their returns across the range of commodities within the group which also include cropping, cotton and beef.

"Under traditional share farming arrangements the share farmer's share of the milk income is affected by a change in the milk price," Mr Wagner said.

"Because most share farmers have few assets or are building up their assets, when something like this happens they face the risk of going broke and may leave.

"This way both parties get a guarantee of stability. AgCAP gets a stable workforce and longevity and the share farmers get a guaranteed income based on a fixed price for milk solids."

As luck would have it a week after announcing the price cut, their processor, Fonterra announced an offset payment, which took some of the pain out of their losses.

When he was considering taking the management job Mr Wagner visited Tasmania and met the share farmers. He decided, although it was not a requirement, that he would have to be based in Tasmania.

His office is now less than half an hour from three of the dairy farms and less than an hour from the fourth. He flies across to the beef aggregation on King Island regularly.

Trust is better

His approach to changing the relationship between operators and management under his leadership is summed up in a simple aphorism: "Control is good but trust is better."

"As much as anything I wanted them to have trust in and respect for each other as much as in me," Mr Wagner said.

"From the early days I encouraged them to talk to one another. Now they talk to each other more than they talk to me."

From this the relationship between the farm staff and AgCAP management was re-built.

"Honesty and respect. You can write it but you have to do it," he said.

On the four dairy farms there are two share farmers each with 20 plus years experience.

On the others the share farmers have 10 or more years experience.

"We have to trust them with the farm asset," Mr Wagner said.

"We have to respect their knowledge and experience.

"They spend more than 50 hours a week working on their farms. Management spends less than an hour."

There are very few corporate policies and procedures; no rules sent from up high; no 'how to's' in the dairy shed.

"That is their business. We employ farm advisor, John Mulvany, to work with them. With his help they have all become very good managers of their farms and their own farming system.

"We delegate the management, training and employing of staff to the share farmers.

"That is a big difference between our share farming approach and corporate farms with managers and employees appointed by the corporation.

"It means our share farmers have direct responsibility for the staff who work alongside them.

"They can and do employ family members, where a corporate might consider that an undesirable practice.

"We think it is more in keeping with our Australian family farming tradition."

Share farmers in control

Share farmer, Mark Streets has more than 20 years share farming

experience.

He describes the arrangement as "fair and equitable".

"It comes back to Wolfie. As a former share farmer himself he understands what we face," he said.

"He passes on any concerns we have to the next level and makes it all work.

"We've got three very experienced share farmers all going into their fourth season. That'd be hard to find among share farmers, I reckon.

"It would be very easy with big operations like Sustainable Ag for management to get out of touch."

Mr Streets operates Springvale farm milking 620 cows and was proud to see his eldest son Ji take over as share farmer at Midlothian in 2014.

Midlothian is another AgCAP dairy farm milking 540 cows, just along the road.

"Ji is doing a great job. I don't have to worry about him. It takes many years to get to this level but now he's running it well and getting very good figures," Mr Streets said.

While each of the farms operates differently according to the management style and methods of the share farmer, there are certain non-negotiables required by AgCAP, particularly around animal welfare.

There is no tail docking, induction is minimal and will be completely phased out by 2018; cow body condition must be maintained and vigilance in managing animal diseases and illnesses is mandatory.

"One of the benefits of running a larger farming system with external management support is when a crisis occurs," Mr Wagner said.

"Two years ago we had a sudden outbreak of mycoplasma bovis, a highly contagious disease that went through one of our farms.

"We were able to support the share farmer by researching and finding an expert at Sydney University who quickly set up protocols for the farm to follow," he said.

"We were able to manage the disease and minimise losses."

Rules, where they exist, are at a fairly high level.

Farming system

The favoured farming system involves a stocking rate of about three milking cows per effective grazing hectare.

All cows calve annually in August and September with production targets of approximately 480 kgMS/cow and 1400 to 1600 kgMS/ha. Feeding is focused on maximizing home grown pasture intake (3 to 3.5t DM/cow).

Supplementary feeding per cow per annum includes approximately 1.62t DM grain (fed as pellets) and 0.6t DM fodder (fed as silage and hay).

Pasture consumption targets are >12t DM/ha on irrigated pasture and > 7t DM/ha on dry land pasture.

"We run a three-way rotational cross breeding system combining Holstein, Jersey and Red breed sires," Mr Wagner said.

The system and the AI work is all planned by Leo Bydevaate in consultation with the share farmers.

He sets up the timetable and they implement it.

"Across the four dairy farms we have a greater than 80 per cent six-week in calf rate and 65 per cent of our herds calving within 14 days because our farm managers follow the schedules," he said.

"There is a significant amount of trust between the parties. They believe in it. They're enthusiastic."

There is also a bi-monthly teleconference covering Work Health and Safety issues.

"We do have procedures and policies for work health and safety which must be followed," Mr Wagner said.

"We want to be sure everyone returns home safely.

"We want to make sure there is no rush, we're well organised and have good plans in place for everything."

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