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Although current commodity prices have pulled back, reducing the current profitability of these agreements, there continues to be a strong appetite for contract farming and share farming agreements.
Whilst the Tenant Farmers Association (TFA) has branded this current trend to enter such agreements as misguided, the Country Landowners Association (CLA) are strong advocates of share farming; equally contract farming opportunities offer an attractive alternative to more traditional tenancy arrangements.
Latest figures from Defra show that more than half of the country’s farmers are more than 55 years old. The CLA see Share Farming agreements as an opportunity to help thousands of young people get their first foot on the farming ladder, providing a mechanism for an ageing farmer, who cannot afford to retire, to start to wind-down. Equally, Contract Farming Agreements offer control to the landowner whilst enabling the contractor to spread costs over a wider acreage.
If properly drafted and managed, these agreements offer a suitable alternative to renting land, which carries its own headaches. Whilst such agreements carry a greater business risk with returns not guaranteed in the same way that a rent would be, they do return control to the landowner who can then dictate farming policy, keep on top of repairs and reinvest profits in the holding for their own benefit. There are usually tax benefits in having a trading business and farming the land, which also make these options attractive.
With commodity prices down on recent years, the returns are currently lower than they have been for these types of agreement. Short term mitigation measures may include licensing a proportion of the land for potatoes which can be lucrative, but if one is prepared to and able to ride out these low prices, then the longer term benefits are extremely attractive.
To discuss these agreements in more detail or for further information, please contact Phil Scott-Priestley in our Leyburn Office, 01969 600120 or email firstname.lastname@example.org