For Cork farmer Kerry Desmond, becoming a sharemilker on Shinagh’s Gurteen Farm was the next logical step in his career.

Hailing from a beef farm near Bandon, when Kerry left school he didn’t really know what he wanted to do next, but knew he liked farming, so began working on a dairy farm.

Two years after, he started his formal agricultural training in Clonakilty and four years later, he qualified as a trained farm manager.

For the following four years he worked on the Sexton farm at Kilbrittain where he honed his skills as a farm manager.

At the end of 2023, the opportunity arose at Gurteen Farm for a new sharemilker. Gurteen is a 37ha dairy farm owned by Shinagh Estates, which in turn is owned jointly by the four west Cork co-ops.

Shinagh Estates owns land and property at Shinagh near Bandon. The main Shinagh dairy farm was set up in 2012 and currently demonstrates low-carbon farming through the Zero C project, while the Gurteen Farm was set up in 2015 to demonstrate sharemilking and collaborative farming opportunities. Both are commercial dairy farms and are operated in conjunction with Teagasc.

Entry to sharemilking

Kerry applied, and was successful in his bid, to be the next sharemilker at Gurteen Farm. The opportunity arose when then sharemilker Padraig Cunnane got the chance to lease his own farm near Clonakilty (more on this next week).

At last week’s open day, Gus O’Brien from Shinagh said that the model is for the sharemilker to stay for three years and then to progress as either a sharemilker on a bigger farm or to lease a bigger farm.

However, he said that the written agreement is for seven years, which he says is important if the sharemilker is borrowing money as the banks require a seven-year agreement.

The model

Sharemilking agreements differ from a partnership or a lease because there are two separate businesses operating from a sharemilking farm.

The land owner has their business while the sharemilker also has their own business. The only things that are split are the milk payments and some of the costs.

All other income and expenditure is the full responsibility of each business.

In other words: sharemilking is not a profit split.

In New Zealand where sharemilking is a long-established system, the milk cheque and cost split is usually 50:50, but on Gurteen Farm the split is 60:40 in favour of the sharemilker.

Gus says that this split is fairer for the sharemilker given the farm size is on the lower end for sharemilking.

Costs

Starting with the costs that are not split, it is the responsibility of Shinagh to provide all facilities such as milking parlour, cubicles, roadways, bulk tank, etc and all major repairs of these facilities is the responsibility of Shinagh Estates.

Shinagh Estates is 100% responsible for insurance and any land rent that may accrue. It also pays for soil fertility build-up (not maintenance fertiliser) and reseeding. That is to say: all long-term investments are covered by the land owner.

The advantage of this is that the herd owner is not investing in areas they may not get a long-term return from.

The flip side is that the land owner is not spending money on the herd, so AI, vet costs and replacement costs are 100% the responsibility of the herd owner.

Similarly, all labour and machinery costs are 100% the responsibility of the herd owner.

Some of the major costs are split along the 60:40 line. This includes feed costs such as meal and any purchased silage. Fertiliser costs are split 60:40 with the exception of build-up phosphorus, potash and lime which are the responsibility of Shinagh.

Parlour chemicals and maintenance of the milking parlour are split 60:40. Contracting costs are also split 60:40 and this includes winter feeding of cows and spreading fertiliser, meaning the sharemilker doesn’t need to own any heavy machinery.

Costs outside of these are the responsibility of each business.

For example, Kerry will be paying his own phone bill and accountancy costs along with running his own car and vice versa for Shinagh Estates.

Income split

In terms of income, 100% of the Basic Income Support Scheme (BISS) payment is going to Shinagh while 100% of stock sales are going to Kerry.

The milk payment is split along the 60:40 line although 100% of any somatic cell count (SCC) bonus paid by Bandon Co-Op goes to Kerry.

Equally, if there was a deduction for milk quality this would be deducted from Kerry.

Performance

Excellent technical performance and a good milk price meant that 2024 was a very good year for both sharemilker Kerry Desmond and land owner Shinagh Estates.

In 2024, the 102 cows delivered 467kg milk solids (MS) per cow from 705kg of meal per cow. The farm grew just over 13t dry matter per hectare (DM/ha) from 191kg of chemical nitrogen (N) per hectare.

Like most farms, it was a year of two halves with a difficult start to the year but an excellent back-end. The empty rate was 16% which Kerry was disappointed by. These empties were sold in September and 20 in-calf cows were purchased instead.

These were milked through to drying off.

Financial performance was strong, with the Teagasc Profit Monitor results showing a net profit of €4,387/ha or €1,770/cow for the farm as a whole. This is before any labour, principal repayments and tax are deducted.

On an individual basis, Kerry’s return was €102,956. This is what is left after Kerry retains the stock sales, gets 60% of the milk sales and pays his share of the costs including relief milkers. From this, Kerry has to pay his own salary and purchase the replacement cows which brings his net profit down to €40,000 for 2024.

In terms of capital invested, he purchased 105 Jersey-crossbred cows at the end of 2023 for €148,000. These were all mature cows in lactation two to five. He opted not to buy heifers so as to increase milk output and for ease of management.

He had €50,000 built up in savings so needed to borrow €98,000 from the bank.

Based on the net profit of €40,000, the return on capital for 2024 is therefore 27%, which is a high return. For Shinagh, their return for 2024 was €62,157.

This is based on their share of the milk income, the entire BISS payment less their share of the costs plus depreciation on investments.

Based on an estimated land value of €18,000/ac, this works out at a return of 3.8% for Shinagh Estates, which exceeds the return that they would get from leasing the farm out.