Investing capital wisely and waiting for the right farm to buy important

• Published date: 27 April 2022

Financially, they’re almost at this stage, but are resisting the urge to jump into the first farm they see. The target is simple: A 600-cow property that’s in tune with his pasture-focused farming and ‘‘wealth creation’’ philosophy

‘‘If the milk price possibly does what I think it’s going to do next year, I will be about 18 months, to two years away from having 1100 cows, debt-free,’’ he says.

‘‘I’m not quite going to be able to buy a 600-cow farm and the main thing with the intermediate step is I don’t do anything that jeopardises my sharemilking position here as to get a sharemilking job in irrigated Canterbury you basically have to win the lottery, so that’s number one.’’

Possibly the direction could involve passive investments such as building his lease stock portfolio with Dairy Holdings.

The lower order sharemilker owns 34% of the milk cheque and pays the same proportion for most of the costs at the 270ha DHL Propad farm. The fully owned subsidiary of Dairy Holdings, in Hinds, milks 1060 cows.

He owns 40% of the herd and also has 290 lease cows as well as young stock.

Next season he will have 90% ownership of the herd and receive 47% of milk revenue in an agreement with Dairy Holdings, with the plan to push this out to full herd ownership the following year.

Future options could also involve him leasing a farm short term, maybe within a five-year timeframe. Or possibly he could become an off-farm or silent partner with up-and-coming farmers for another 50:50 sharemilking job.

The passive-income target is to provide a 15%-plus return to grow their equity base and reduce debt.

Last year he bought lease cows for $1600 a head, leveraged them at 50% and with 5% interest payments this left him with about an 11% return.

Below the 15% target, but still a good low-risk return and guaranteed income with little energy expended on his part.

‘‘There’s a lot of exciting opportunities, you just have to think a little bit differently and have not necessarily the finances, but the skill set and the mindset to want to add value.’’

A good test of his discipline will be to avoid buying a farm before they’re ready.

‘‘Farm ownership’s something I want so bad ... There’s a lot of farms on the West Coast or the North Island and they are actually within reach now. The discipline is to sit tight and keep investing money wisely so we can get to that 600-700 cow property.

‘‘It’s going to give us good returns in an area we would like to live in and also give us scale to employ...