SHAREFARMING is common in the cropping industry, but fewer agreements exist in livestock enterprises.
But Sam Pentelow is using it as a way to get into farming in the Adelaide Hills and Fleurieu Peninsula, SA, where land values are many thousands of dollars a hectare.
His new business Southern Graziers has three properties at Pages Flat and Port Elliot, running both trading and breeding cattle under his management.
He is looking for more co-operator producers with 40-hectare-plus blocks with yards and watering points, or the ability to aggregate a few neighbouring properties which have these facilites.
“Fixed rate leasing or agistment gives a guaranteed income, but it can be risky for the lessee with market or seasonal events having the potential to dramatically affect the outcome in early years,” he said.
He says a profit share farming agreement can be “win-win”, with the risk shared and the landowner also enjoying upside in good times.
They can also maintain the taxation benefits of being a primary producer.
The idea sprang to mind in spring, seeing many paddocks full of feed with no stock.
“Farmers at a certain stage in their working life may not have the appetite for risk investing at record livestock prices, so this is a way of having a seat at the table in livestock without buying themselves and being tied to the management,” he said.
He also sees it as a sustainable way for older farmers to remain on their land longer and is finding it appeals to absentee landowners and potential investors.
Mr Pentelow has undertaken considerable research on existing sharefarming agreements and come up with two preferred models – weight gain or an agreed percentage of gross margin after direct costs.
“Weight gain works well for trading young stock,” he said.
“For example it might be $1.20 a kilogram to $1.80/kg of gain depending on the market, quality of pasture base and who is managing the stock. Rates can be based on market indicators, with curfewed weight on and off the property so there is no confusion.
“If the stock are doing well, everyone is doing well.
“Or we can work out a gross margin percentage which works well for a breeding operation.
“We are prepared to share our figures in an open book approach.
“This can form the basis for a sustainable lease figure that can be paid regularly during the year.”
Mr Pentelow acknowledges flexibility is important and is looking for long-term agreements of at least three to five years, with a preference for 10 years.