In last weeks’ report from the sharemilking open day at Shinagh in west Cork, we outlined the arrangement between the landowners Shinagh Estates and sharemilker Kerry Desmond. Kerry described sharemilking as being the perfect option for him: “I enjoyed milking the cows on the farm that I was managing before, but I always said I’d prefer if they were my own. It’s definitely a different feeling milking my own cows now,” he says.

Kerry was commenting on the fact that he owns the 100 or so cows on the farm, and supplies all of the labour. He pays 100% of the cow-related costs, such as vet, AI and replacements, while Shinagh Estates provide all of the facilities and pays for all major repairs and capital investment. The milk payment is split 60:40 in favour of Kerry, while most other costs, such as feed, nitrogen and contractors, are also split 60:40.

In 2024, Kerry made a proft of €40,000 after taking into account his own salary and the costs of buying replacements. Based on the €148,000 he invested in stock, this equates to a 27% return on capital for Kerry. For Shinagh Estates, over the last five years sharemilking has generated significant more money for them compared to the alternative of leasing the farm out at €400/acre.

Despite the advantages of sharemilking that this demonstration farm has proved, the majority of dairy farms in Ireland continue to be leased out when the active farmer wants to step back and has no in-family successor.

It’s important to say that being a landowner in a sharemilking arrangement is not retirement. The land owner continues to run a business, with their own profit and loss and balance sheet. The difference is they are not actively farming the land, milking the cows or looking after stock and people.

Speaking on behalf of the landowner in the Shinagh case, Gus O’Brien says that you need to “get on with the sharemilker”.

“It’s like a partnership, there needs to be give and take, and you can’t be always looking for the last penny. From a profit point of view it works well. We still have an element of control, and the upgrading of the farm and the facilities is done on a long-term basis. We have an exchange of views with Kerry and we manage problems together,” he says.

Ultimately, the land owner wants to see the sharemilker do well because they benefit from their success. They benefit when farming is going well and they share the pain when farming isn’t going as well.

The experience from New Zealand is that sharemilking farms outperform owner-operator farms in terms of profitability. In order to become a sharemilker, the person needs to be hungry for success and be highly skilled – skills the landowner gets the benefit of.

Why then is it that sharemilking hasn’t taken off in Ireland? This question was discussed at the forum at the sharemilking open day. Clonakilty-based accountant Donal McCarthy said that the tax implications of sharemilking versus land leasing are very different, but said that tax should never be the only consideration.

“You need to be clear yourself on what you want and tax shouldn’t be driving the decision. It’s an influencing factor, but it shouldn’t be the only factor. People come into me [to discuss retirement] and they’re all focused on the tax implications, but they haven’t thought at all about what is really at stake. It is a big decision for any farmer and it’s a very big change so you need to make sure that you’re in the right position and the right frame of mind to make that change from active farmer to being retired,” he said.

Partnership

Someone who made that decision was Lisavaird farmer Conor Murphy who also spoke at the forum. Up to 2024, Conor was milking 140 cows and rearing 80 to 90 cattle on an outside farm six miles away.

“I was milking cows for 46/47 years. I had a very good guy working with me, but circumstances outside both of our control meant he could no longer work with me. We were running two yards and the pressure in spring got to me. I have two boys, but they’re still young and I’m not sure if they have any interest in dairy farming,” he says.

Padraig Cunnane had been working with Conor for six months eight years ago and while they discussed collaborative opportunities at the time, Conor says it was too soon for him and he wasn’t ready at the time. Padraig subsequently went on to become the sharemilker at Shinagh, a position he held from 2019 to the end of 2023.

When Conor decided he wanted to take a step back, he got back in touch with Padraig to see if he was interested. Right enough, a deal was done for Padraig to lease the dairy farm, while Conor held on to the 50ac outside farm where he continues to keep beef cattle.

“I think if anyone is thinking of getting out, they’d need to think about it and then make a plan. Don’t go from milking cows, to sitting on a chair all day. One of my sons said to his aunt recently that ‘we used to see Dad more when he was milking than we do now’. I have really enjoyed my last year and a half and have got a lot done,” Conor says.

Conor has since built a polytunnel in the garden, cycles regularly and has even taken up running. He is still farming in his own right, having retained the outside block, which he says is important. As part of the deal with Padraig, he has retained the front part of the farmyard where he parks his farm machinery and he continues to spread some of the fertiliser and do some of the mowing for Padraig.

He also continues to take the calves to the mart for Padraig, which is a big help to Padraig, but it also keeps Conor involved in farming and he meets locals and friends in the mart. Conor is also the relief milker for Padraig when he is away or on holidays, something which Padraig says is invaluable.

“I could probably have got more money if I let the farm on the open market or sold silage off it, but the place would go to wreck. It’s great to see life in the place and it makes me happy to see Padraig milking cows there. I’m happy to see him doing well and I think that’s a very important thing.

“Don’t be jealous if you lease the farm and see someone else come in and maybe do a better job than yourself. If they don’t make money they can’t pay you. You can’t be jealous, just wish them well,” he says.

Assets

The importance of looking after the farm assets was a point raised by both Donal McCarthy, the accountant and Susan Maher from Bank of Ireland. Donal says that many farmers in his view leave it too late to retire and let the farm assets in terms of buildings, facilities and soil fertility decline to the point where huge investment is required by the next generation.

Susan said that compared to even five or six years ago, the cost of farm buildings has increased massively and farms that require big investment are out of the reach of many farmers, especially young farmers looking to take a step in their career.

Padraig said that this was a huge obstacle for him when he was looking at other farms before the opportunity with Conor came up.

The prospect of him having to spend hundreds of thousands of euro to make facilities efficient and compliant was just not an option on a leased farm as a stand-alone business.

This is one of the reasons why sharemilking may be an attractive option for more landowners in the future. As business owners they will continue to get tax reliefs on investments they make in the farm and if the buildings and facilities are being used, they will be maintained and hold their value.

Comment

There was great energy and enthusiasm from the attendance at the sharemilking open day, with interest among young and old. The key point for the older farmers was to have a plan or a vision for what they want their life to be like post being a hands-on dairy farmer. This might be straightforward where a son or a daughter is taking over, but it’s less clear when it’s a third party taking over.

As Donal McCarthy says, that vision should inform the structure, whether that’s a lease or sharemilking. Conor Murphy says he wanted the farm to be leased by a young person who would use it to rear their family. That was his preference.

Sharemilking should not be off the table for those that want to take a full step back. Running the land-owning business should be very straightforward and in New Zealand the farm consultant is the facilitator and the mediator between the sharemilker and the land owner. The point being, it can be a viable option for farm families to remain farming and give opportunities to the likes of Kerry Desmond to succeed in farming.