Sharemilking agreements are vital for New Zealand’s dairy industry. Learn about 50/50 and variable order agreements, key clauses, and how to protect your farming partnership legally.

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Sharemilking Agreements: What Every Farm Owner and Sharemilker Should Know

Sharemilking is at the heart of New Zealand’s dairy industry, providing opportunities for aspiring farmers to progress toward ownership while giving farm owners skilled operators to manage their land. But behind every successful partnership lies a legally binding agreement—and getting it right from the start is crucial.

At Core Legal Masterton and Wellington, we help both landowners and sharemilkers navigate the complexities of these arrangements. Here’s what you need to know.

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Types of Sharemilking Agreements

There are two main structures under the Sharemilking Agreements Act 1937:

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

2. Variable Order Sharemilking – The sharemilker earns a percentage of milk income (commonly 20–30%). Depending on the agreement, they may or may not supply the herd.

Choosing between them depends on your financial position, long-term goals, and willingness to share operational responsibilities.

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Why a Written Agreement Matters

While trust and tradition are part of rural New Zealand, handshake deals are risky. A written agreement is not only best practice but also a legal requirement under the Sharemilking Agreements Act.

Standard templates (such as the Federated Farmers Sharemilking Agreement) exist, but these should always be tailored to reflect your farm’s unique circumstances and the expectations of both parties.

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Key Clauses to Include

A strong sharemilking agreement should cover:

• Term and termination rights.

• Cost responsibilities (feed, fertiliser, animal health, maintenance).

• Stock ownership and replacement policies.

• Performance expectations (production targets, farm standards).

• Insurance requirements for stock, equipment, and liability.

• Dispute resolution mechanisms.

These details reduce the risk of misunderstandings and costly disputes later.

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Common Issues We See

• Agreements not signed before the start of the season.

• Disputes over cost-sharing and contributions.

• Lack of clarity on herd ownership or end-of-term arrangements.

• Conflicts around performance standards and early termination.

A well-drafted agreement sets clear expectations, protects both parties, and fosters a stronger business relationship.

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Protecting Your Farming Partnership

At Core Legal, we work with farmers across Wairarapa and Wellington to draft, review, and update sharemilking agreements. Whether you’re a new sharemilker climbing the ladder or a farm owner protecting your investment, clear communication and strong legal foundations are essential.

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Frequently Asked Questions (FAQs)

Do sharemilking agreements have to be in writing?
Yes. Under the Sharemilking Agreements Act 1937, all agreements must be in writing and signed before the season begins.

What’s the difference between 50/50 and variable order sharemilking?
In 50/50 agreements, the sharemilker owns the herd and receives around half the milk income. In variable order, the sharemilker earns a smaller set percentage and may not supply the herd.

When should I review my sharemilking agreement?
At least annually, and before the new season starts, to ensure terms are still fair and compliant.

What happens if disputes arise?
Agreements should outline a dispute resolution process, but legal advice may be necessary if parties cannot reach a resolution.

Can I use a template agreement?
Yes, but it should be customised to reflect your farm, finances, and business goals. Legal review is strongly recommended.