The likes of sharemilking has been around since the 1900’s in New Zealand and formally recognised through the Sharemilking Agreement Act 1937 and then evolving into contract milking towards the 1970s to what it is now, an ever evolving agreement that encompasses all areas of farming, this is extremely exciting for sharemilkers and the likes however the common rhetoric or theme seen is that the majority of new sharemilkers right through the generations find it hard to initially understand how to bridge the gap between employment and employer.
This report examines the current level of understanding of employees that are looking to make that change and learning from the people that have already made that change as well as exploring how the dairy industry is supporting employees to understand the transition and give them the tools to fully understand the implications of becoming a employer/ business owner.
In order to complete this report, two surveys were completed
- A survey of employees that are working within the dairy industry currently to measure their understanding of what it takes to make that leap
- A second survey was conducted for employers or business owners that have made that transition. In total 41 participants responded to the two surveys.
The survey was supported by a literature review of what the current climate looks like in this space as well as several interviews with representatives of industry organisations.
The key themes identified through the surveys and interviews were,
- Lack of clear progression pathways
- Financial literacy gaps when progressing for employees moving into business ownership.
- The importance of Leadership and mentorship.
- Develop structured guidance to help farm owners assess whether contract milking is the right fit for their business, while improving understanding of the support, development, and progression requirements needed for contract milkers to succeed.
Recommended actions to address the issue identified in the report were:
1. Develop a National “Bridging the Gap” Progression Framework
Develop a nationally recognised progression framework that clearly outlines the pathway from employee to business owner. The framework should define expectations of financial, operational and leadership skills requirements at each stage while linking aspiring business owners to existing industry resources such as Bizstart, BizGrow, Contract milking 101 and financial tools. This would improve visibility of existing pathways and provide greater clarity for those considering progression.
2. Introduce “subsidised” initial Financial Readiness Education Before Contract Entry
The findings strongly identified financial literacy as one of the largest capability gaps within the industry. Many individuals are entering contractual arrangements without fully understanding cashflow, taxation, budgeting, debt servicing, or profitability.
To address this, any lending bank should introduce a recommended or “subsidised” financial readiness programme prior to entering, Contract milking or Variable/ 50:50 order sharemilking.
This programme should include:
- Cashflow management
- Budget building and stress testing
- Tax obligations and ACC understanding
- Understanding debt and capital requirements
- Contract interpretation and due diligence
- Risk management and contingency planning
The programme should be practical and scenario-based rather than purely theoretical. This recommendation directly addresses interviewees and survey responses concerns around financial knowledge.
The recommendation is for a course that is available to potential first-time ag business owners that is recognised by banks, if this course has been proven to be taken by a potential business owner a higher value or less risk rating should apply to these potential contract milkers/LOSM, which helps them borrow more or at a lower interest rate. Lending business don’t have to reinvent the wheel but leverage industry courses currently in being taught.
Introduce a recognised financial readiness programme for individuals entering contracting milking, lower order sharemilking or 50:50 sharemilking. The programme should focus on practical financial management including budgeting, cashflow, Taxation, Debt management, risk assessment, and contract understanding. Industry and lending organisations should recognise completion of this programme as evidence of financial preparedness and assessing lending applications.
3. Formalise Mentorship Within Dairy Progression Systems
Establish structured mentorship programmes that connect aspiring business owners with experienced contract milkers, sharemilkers, farm owners and industry professionals. Alongside mentoring, increase the promotion and accessibility of existing industry programmes and expand the use of famer- led learning through case studies, podcasts and practical examples through short form media. These initiatives would strengthen leadership capabilities, improve preparedness and make existing support more accessible.
4. Support for Farm Owners
A recommendation is to develop guidance and decision support tools to help farm owners to determine whether contract milking is the right fit for their business and better understand their role in developing future business owners. This should encourage stronger progression and a partnership built on trust, clear expectations, effective communication and SHARED long-term success.
Practical steps to help look like,
- Develop a National “Bridging the Gap” Progression Framework
- Establish a Financial Readiness Programme with lending groups for First-Time Business Owners
- Formalise Industry Mentorship Programmes
- Improve Visibility and Accessibility of Existing Industry Resources
- Develop a Farm Owner Progression Support Framework
- Investigate an Industry Benchmark for Sustainable Contract Milking Agreements
Luke Doyle
