Benefit from share farming and contract farming
Published October 29th, 2019
The proposed changes in the Agriculture Bill will see the reduction of direct support of Agriculture up until 2021 when direct support will be completely phased out. The direct support of agricultural has been seen as hindering improvements in productivity whilst supporting land occupation not productive sustainable agriculture. The changes will see a reduction in profitability for many farming enterprises.
“Farmers will have to focus on return on investment and making best use of their resources to ensure they can remain on the farm,” said Ben Corbett, partner at the Hereford office of Berrys.
“There will be clearer division between farmers and landowners and in order to remain farming they will have to consider how they occupy and manage their land. Contract farming, joint ventures or share farming agreements will increasingly be more popular means of allowing farmers to make best use of their farm.
“Contract farming, share farming or joint venture agreements can bring expert knowledge and skill sets which might allow access into specialist markets which will show an improvement on enterprise returns.”
The benefits of using contract farming or a joint venture include:
- Reduced working capital tied up in the farm.
- Frees the farmer up to reduce the day-to-day involvement of all farming enterprises allowing him/her to be involved in other enterprises which he/she would not otherwise have the time to do.
- There are benefits to still being “the farmer” in terms of claiming farm support payments, environmental scheme benefits and tax relief.
- Reducing the day-to-day involvement in farming can have lifestyle benefits whilst still living on the farm.
- Employing specialist, larger-scale contractors in either a joint venture or contract farming agreement can allow access to good quality labour, better quality and modern machinery and the best available technology in production systems so the business can enjoy better returns from individual enterprises on the farm.
“As the UK comes out of the EU, there are many unknowns and the future returns of individual enterprises are uncertain and might well be reduced,” said Ben.
“Incorporating new and alternative arrangements will allow some farmers to come out of non-core enterprises and make up lost income through supplying the public goods that are going to be an increasingly important part of farmers’ income.
“Many farmers who are reaching retirement age without successors would like to continue farming but without day-to-day hands-on involvement. Contract farming or joint venture agreements offer an alternative structure to continue to farm without the stress while freeing up capital tied up within the farm for retirement or for alternative investment.”
The reduction in direct farm payments in the form of a basic payment scheme is likely to encourage expansion of professional large farmers and more marginalisation of the smaller farmer. Many smaller farmers want to remain as farmers, especially with the taxation advantages to being considered as a ‘farmer’ and not a landowner.
“A joint venture or contract farming agreement will allow them to continue as farmers while benefiting from the contract farmer’s scale of operation and specialist skills and equipment,” Ben added.
Ben Corbett can be contacted at the Hereford office of Berrys on 01432 809831 email email@example.com.