The Carrigaline farmer farms two blocks of 101 hectares in partnership with another family, the Newenham’s, where together they milk 240 cows in Carrigaline and a second block of land, 36 hectares in Dunmanway where the heavy soil farm carried 60 calves and 110 in-calf heifers in 2013.
Jennings explained to the audience of 475 people that the equity partnership was formed in 2008 where they pooled their resources of land, quota and stock.
“The main difference between us is my labour input, for which I get a basic salary. Profits are then divided between each partner based on the value of assets each partner has brought to the business/partnership,” he said in his presentation.
According to Jennings, the main reason they joined both farmers was that he and Mark Newenhams saw potential to build a more profitable and efficient dairy enterprise that would be beneficial for all.
“The partnership allowed us to farm for ourselves and to increase our profits and our assets. Over the past five years, we have achieved an average return on investment of 20.6 per cent and 16.2 per cent. We feel this largely has been obtained by operating a grass-based, low-cost system with minimal capital expenditure.”
Jennings explained a number of key lessons that they have learnt from partnership farming.
“You need the right professionals to have an understanding of what we were doing. We learnt that we should have put ourselves into each other’s shoes more often and try and see things from their perspective.”
Among other advice, Jennings said key aspects were to have improvements done before cows arrived, getting the paperwork done before the partnership began and keeping herds separate for two weeks before joining worked well.
In terms of how profits are split, he explained the way it works in their current partnership.
“Assets were valued on day one, both sets of stock were valued by an auctioneer and full value was used. Opening stock value percentage for each partner will be used to determine the last day stock values to each partner. So if the opening split is 75/25, then the closing split will also be 75/25 regardless of the value.
He continued: “Both land blocks were valued at €150/adj acre. Quota was valued at six cent a litre. Both partner’s asset values were added to calculate each partner’s percentage to determine percentage profit share. Due to myself working full-time on the farm and Mark having minimal input in the day to day operations, I am paid a basic salary before farm profit is calculated. Remaining profits are split then according to our agreement. A capital account with the accountant is used to over other stocks at opening, for example fertiliser, silage, AI straws and so on.”
In addition, he said machinery was purchased by the partnership from Mark and the closing value will be split according to their percentage profit split.
In conclusion, Jennings explained to the audience at the Positive Farmers conference: “For us it is all about the right person and trust. If you have these the rest by and large will work out. There is little point in joining the two best farms in the country if the wrong team are going to be driving it forward. Two or more people working together in the right direction will multiply the success rate many times.”