To Willy Falloon the answers to several significant questions facing sheep and beef farming were blindingly obvious.
How to improve the productivity of farms and the issue of farm succession both lay in giving young farmers a chance, and to him that was by leasing.
The Wairarapa farmer said it meant a change in mindset and some lateral thinking from advisers and farmers, but a correctly structured lease meant everyone won.
“It’s a win-win and I think that’s what we have got to look at.”
The reality was that the traditional path to farm ownership through sweat and toil was increasingly difficult, but by leasing land, productivity and profits can improve, the value of the property increase and lessees can build equity.
“They’re faming for themselves, they are driven to work two hours extra every day and motivated to drive productivity and lift the performance of the farm.”
Falloon has helped two families in to lease properties and has others he was advising but says he was not alone, that others were similarly assisting young farmers into leased farms.
He was driven in part by his own leasing experience that led to farm ownership, but also the realisation the process was logical and made economic sense.
The farmers he has helped had identified themselves.
“They have gone out and separated themselves from the average person, so you can’t ignore them.
“You keep seeing their names, they are always out there.”
By their very nature, Falloon said top performers ticked all the boxes in the way they cared for the land, animals, environment and machinery and were involved in the community.
Falloon said to get real traction, leasing needed to be driven and promoted by professional advisers such as bankers, lawyers and accountants.
He believed leasing would become the sharemilking stepping stone equivalent for the sheep and beef industry.
“It’s coming. We’re on the cusp of this and the wave is building momentum.”
He believed the best leasing model had the landowner retaining some involvement.
“The best model has the owner of the land as a partner in the leasing company and sharing the rewards of a top operator.”
Not all land being leased was underperforming, but Falloon said the return on investment on deals he has been involved in was in the range of 10-20%.
The structure of each lease can differ but Falloon said one investment has an agreement in which profits were split evenly between dividend and debt repayment, with the young farmer using his dividend to buy Falloon out.
He believed the superior return on investment from leasing land could prompt some to reconsider goals of farm ownership.
Stu and Ginny Neal lease two properties near Fairlie in South Canterbury and were motivated by growing equity rather than owning land.
“For us our main motivation is to build equity through our stock,” Ginny Neal said.
Ginny works has a career as a teacher and Stu was a musterer and farm manager, but they were never going to generate enough cash to go farming.
“Farm manager wages are good but not enough to build equity. We had to find another way to do it.”
They realised they needed to grow equity outside farming and starting with a section in Darfield, they now own six rental properties, which they still own, and a small IT company which they sold.
Those investments ultimately allowed them to lease two farms, the 8500-stock Silverhill and 5000-stock unit Parkwood.
But just as importantly Neal said they surrounded themselves with mentors and advisers they consider some of the best in the industry.
“It’s about surrounding your selves with the leading agribusiness people in New Zealand,” she said.
The Neals managed Castlepoint Station for seven years and said Anders and Emily Crofoot were important mentors as were John Tavendale, Derek Daniels and Willie Falloon.
The two farms they now lease were both exceptionally well-run properties and Neal said the owners were still involved in the farms.
Neil and Lyn Campbell, on Parkwood, were the South Island Farmers of the Year and Neal said the lease agreement was a starting document and the relationship could evolve in to a joint venture or a partnership.
Ian and Adrienne Morrison, the owners of Parkhill, still do the tractor work on the property, but have moved to Timaru.
The Neals aim to have 20,000 stock units and planned to look for a third farm to lease, evidence they say the leasing model worked.
“It’s a great model, it means people get to keep their farm in the family, they release some equity by selling stock, it gives them options and it gives young couples a foot in the door.”
