Sharemilking Agreements: What Every Farm Owner and Sharemilker Should Know

Sharemilking has long been a key part of New Zealand’s dairy sector, providing a pathway to farm ownership for new entrants while allowing land owners to benefit from skilled, motivated operators. But behind the handshake and herd stands a legally complex relationship - and getting the agreement right from the start is essential.

Whether you're a farm owner or a sharemilker, here’s what you need to know:

Types of Sharemilking Agreements

There are two main types:

1.     50/50 Sharemilking -The sharemilker owns the herd and typically receives 50% of the milk income, while covering many operational costs.

2.     Variable Order Sharemilking -The sharemilker is paid a set percentage (often 20-30%) and may or may not supply the herd, depending on the arrangement.

Choosing the right structure depends on your financial position,business goals, and the level of responsibility you're willing to take on.

Why a Written Agreement Matters

While many in the industry still rely on trust and tradition,sharemilking arrangements should always be formalised in writing. A clear contract helps avoid misunderstandings, protects both parties, and is legally required under the Sharemilking Agreements Act 1937.

Standard templates exist (such as the Federated Farmers SharemilkingAgreement), but these should be tailored to the specific farm, parties,and expectations.

Key Clauses to Include

Some of the most important areas to cover include:

·        Term and termination rights (how and when the agreement can end)

·        Responsibilities for costs (feed, fertiliser, animal health, repairs)

·        Stock ownership and replacement policies

·        Performance expectations (minimum production targets or farm standards)

·        Insurance requirements for stock, plant, and liability

·        Dispute resolution process if things go wrong

Getting these right up front can save a lot of trouble - and legal fees - later on.

Common Issues We See

·        Agreements not signed before the season starts

·        Confusion over cost-sharing and capital contributions

·        Disputes over poor performance or early termination

·        Lack of clarity around what happens at the end of the term

A sharemilking agreement is more than just a contract - it’s a business partnership. Whether you’re a new sharemilker climbing the ladder or a landowner looking to protect your investment, the key is clarity, communication,and getting good legal advice.

Need help drafting or reviewing your sharemilking agreement?Get in touch with us - our local team understands the industry and can help you protect what matters most.

‍