Being finalists in a high profile national business award is not a comfortable place for Colin and Dale Armer, arguably New Zealand’s biggest dairy farmers, but if it gives the industry a morale boost in a dark time, they can live with it.
While increasingly involved in industry-good activities, the Bay of Plenty couple have historically kept a low public profile, quietly going about building their businesses, which today involve close to 100 North and South Island farms and production of more than 20 million kilograms of milksolids a year.
But on October 13 the couple will step into New Zealand’s business limelight as finalists in the Ernst & Young Entrepreneur of the Year award, a national competition they had to be chivvied to enter, agreeing because of the low spirits of their farming colleagues in the dairy downturn. The couple topped entrants in the products category of the awards and are competing against four finalists in other categories.
This isn’t to say the Armers are shrinking violets. Colin Armer was a popular farmer-director of the big dairy co-operative Fonterra, making a sudden and well-publicised exit when John Wilson replaced Sir Henry van der Heyden as its chairman, and last year he drew the spotlight again when with former Fonterra deputy chairman Greg Gent he called for major reform of the company’s board structure. And then there’s the National Business Review’s Rich List which regularly mentions the couple, much to their embarrassment.
But for most part, the down-to-earth «fisherholic» Armers live and work below the radar. Owners of the big Armer Farms company in the North Island, and major shareholders in corporate South Island farmer Dairy Holdings, the couple are still hands-on farmers when not policing the books, coaching their eight adult children in business and governance skills and enjoying their 12 grandchildren.
The couple are the sole shareholders and directors of Armer Farms, which milks about 13,000 cows on 14 farms in Te Puke, Mamaku and Taupo. The farms produce about 3.7 million/kg milksolids a year, supply Fonterra and are operated by contract milkers. The company’s main farming hub is 10 farms, including a large support block, on the western side of Lake Taupo. A 15th farm is owned by a separate company in which the couple’s eight children have invested their own money.
In the South Island, the couple is a 37 per cent shareholder in Dairy Holdings. This year the company is budgeting to produce 17 million kilograms of milksolids from herds totalling 48,000 cows on 58 farms, excluding support blocks. Most of the farms are in Canterbury with some in Southland, Otago and Westland. They total 14,000ha and are operated by a mix of contract milkers, farm managers and lower-order and 50:50 sharemilkers. These farms rear 8000 heifer calves a year and carry 2500 bulls of various ages.
Dairy Holdings has a chief executive, Colin Glass, and Armer Farms, a general manager, Te Puke-based Robert McPherson. The Armers suspect their collective interests make them Fonterra’s biggest supplying shareholders.
Despite the spread and depth of their investments, the couple claim to be simple people operating a simple business philosophy. Their main driver is profitability, not cow productivity, and their way of achieving that is basic grass-fed farming with no frills but sharp attention to pasture management and productivity.
«We are well-known as operating what the industry calls a low-input model. We’re System 1, or 2 maybe, because we grow swedes or fodder beet, but for us it’s about pasture grown and pasture eaten. That’s what drives profit. And we are known to be mean and miserable in that regard,» says Colin.
Farm costs under the Armer system are $3 a kg and under, while still applying fertiliser and maintaining farms. Colin says costs have been trimmed during the milk price downturn but this was pretty much the costs figure even when times were better if capital expenditure is excluded.
What the Armers haven’t done in the squeeze is cut cow numbers. «We’ve brought some extra on. Dropping numbers is folly because less grass is eaten,» says Colin, while Dale notes they are still paying their contract milkers the same as when the milk price was a plump $8.40.
While their farms have good milking sheds which are well-placed for maximum access efficiency, you won’t find extra technology in them like cup removers or drafting systems.
«We don’t do technology. We’re a bit allergic to machinery. It’s one $10,000 tractor per farm pretty much,» says Colin.
«Our guiding principles are high pasture utilisation because it’s the cheapest feed, moderate animal performance, a sound understanding of science, and as much control of costs up and down the supply chain as possible.
«We go to the market as little as possible. We buy fertiliser off a co-op, we buy farm inputs off a co-op, we sell our milk and meat to co-ops, and we insulate ourselves from as many moving bits in the marketplace as possible. And we don’t buy in feed unless we really have to.»
It’s a system at odds with the dairy industry’s flirtation with lifting per-cow productivity through use of feed pads, cow shelters and supplementary feed, but one Colin has used since he first began farming aged 18.
«In our young days you couldn’t have losses. Now it’s accepted that farmers could make a loss. In our day you’d go broke, you’d go out of business, so you never made losses. It made you very sharp especially when pushing the envelope on equity ratios and trying to grow a business.
«So I spent a lot of time through the 80s and 90s observing applied science where research stations were doing trial work with true financial comparisons on controlled farms. You could see when you introduced certain things into a farm system what the impact of that was financially. That made us very attuned to what was profitable. I brought it home and adopted a lot of the prudent science but also adapted it to suit large herds and our model of farms with lots of people.»
The Armers say they never set out to be mega-farmers but once they starting seeing opportunities and could prove to themselves their system was profitable, they kept going.
«I enjoyed the farm management and the cows and grass side of it but I didn’t want to be tied to a dairy shed every day, so I focused on management. When you get into growth mode, it’s hard to get off it,» says Colin.
They call themselves «a cup and saucer» couple. Colin is the cup and Dale the saucer.
«When everything overflows from the cup, the saucer catches it and puts it all back into place,» they chorus.
Colin was born in Tauranga and bought his first cows as sharemilker for his parents. His father was in the army and then a butcher, and only farmed for about 10 years at Te Puke before returning to town life in 1982 and selling the farm. Colin, with 150 cows, then bought his first farm, a 43ha property outside Te Puke, with his then-wife. He sold that during the Labour government’s restructure of NZ Inc in 1984, making a loss and learning a valuable lesson. «Never rely on capital growth, focus on profitability.»
He divorced, later marrying Dale, a Wellington-born, Tauranga-raised animal lover whose closest encounter with a farm had been the neighbours’ clutch of jersey cows. Smart with sums and a bank worker on leaving school, Dale had also been previously married. She and Colin bought a 90ha farm on the outskirts of Te Puke with their matrimonial settlements. They had three children each from their first marriages and went on to have two together.
By 1993 the couple had several farms and were looking to expand towards Taupo. They bought three farms on the Napier-Taupo highway, 70km from the nearest processors Bay Milk and NZ Dairy group, which didn’t want to collect their milk. So the Armers organised their own tanker before Dairy Group changed its rules and agreed to call.
All the time they were eyeing dairy farming in the South Island.
By 2000 they had nearly a dozen North Island farms and had met Timaru accountant and businessman Allan Hubbard, chairman of South Canterbury Finance and said at the time to be the South Island’s most powerful businessman. With Hubbard and two other shareholders, the Armers formed Dairy Holdings. Today they are the only remaining original shareholders.
In August 2001 Dairy Holdings bought the majority stake in Tasman Agriculture when major shareholder Brierleys wanted out. The acquisition took Dairy Holdings farm portfolio to more than 30, including some dairy farms in Tasmania.
In 2010 South Canterbury Finance (SCF) collapsed and the Armers, with a 17 per cent shareholding in Dairy Holdings, found themselves sharing the board table with a receiver who wanted to sell all SCF’s assets, including Dairy Holdings. The Armers resisted, in 2011 filing a High Court claim against their fellow shareholders and the receivers. As Colin, at the time a Fonterra director, puts it «we hung in there and we had a big scrap». In 2012 the receivers sold SCF’s stake in Dairy Holdings to the Armers and two new shareholders introduced by the couple, for $54 million. With the new shareholding structure, the Armers’ stake became 37 per cent. Each shareholder has a director representative on the board, and there are two independent directors.
Colin says all the initial capital put into Dairy Holdings was repaid within a few years and the business has never had to be recapitalised since. That accomplishment is down to the farming system, he says.
«It’s because it’s miserable and mean and harvests grass and sticks to basics. This has been achieved with great buy-in from our people. It gets plenty of criticism – performance per cow isn’t high enough (apparently) – but it’s a sound, successful and profitable business.»
Does mean and miserable mean the Armers farm skinny cows?
No, says Colin. It just means the system is set around doing certain things at certain times.
«Our cow fertility has always been good. We just push systems and we run a very finely-tuned system. If we get a period of below average (grass) growth rate, like now with this really bad spring, we have to look at bringing in feed. We do everything we can to optimise pasture production through use of capital fertiliser and to a lesser extent, regrassing. Primarily it’s all about soil fertility.
«We have the farms set up so they’re easy to manage so our staff can really just focus on pasture production and utilisation.»
The Armers don’t farm to produce milk for the shoulders of the season. «Our preference is to stick to the grass curve. If we can’t grow enough feed to keep milking cows in autumn we progressively dry our cows off,» says Colin. «We drop all our culls early. It’s absolutely critical for us to achieve for our cow condition and pasture cover targets on the 1st of June. We are really tough on this.»
Calving on all farms is in spring. On the Taupo farms it starts on July 24. Herds range in size from 500 cows to 1200.
The Armer system, based on science, provides for long grazing rounds and relatively high stocking rates – 3.3/ha at Taupo; 3.7-3.8/ha at Te Puke; 3.5/ha on most of the South Island farms, with up to 4/ha on the best Canterbury properties. The businesses own all their support land and are self-sufficient for service bulls and heifer grazing.
The self-made couple say their education has been «the school of hard knocks». They attribute their success to regularly «resetting» goals once they’ve achieved a target, having a similar approach to investment, and being well read about emerging global trends.
«We make ourselves well-informed,» says Colin.
While the couple don’t have formal strategic or business plans, they say growth is always on their radar. Meanwhile they spend a good deal of their week these days on industry-good matters, which includes Colin advising farmers in difficulty or needing guidance.
«It’s our way of giving back to the industry,» he says.
Source: Stuff
Link: http://www.stuff.co.nz/business/farming/85013468/the-cup-and-saucer-couple-running-close-to-100-dairy-farms
