Responding to the recent changes in agricultural subsidies, many farmers are reassessing the structure of their operations.
Joint ventures can be an attractive option. Whether you are
looking to expand or find an alternative means of farming your
own holding, our consultants are well placed to advise on the full range of farming arrangements - some of which are listed below.
Traditional Contract Farming
Contract Farming arrangements provide the formal platform for
one farmer / contractor to undertake all the labour and
machinery work on another farmers holding. Meanwhile, it
ensures the landowner / occupier maintains working farmer status and continues to be involved in buying and selling while
having less management responsibilities. Both farmer and
contractor are paid a fixed fee with an uplift based on profit
generated. For the contractor this provides the ideal opportunity
to expand with little or no capital outlay.
Contract Option Agreement
In some situations, the Contract Option Agreement offers a more simplified structure than a formal CFA. This may suit smaller farming units that wish to use the services of a contractor.
Brown & Co's Contract Option Agreement encourages
contractors to cap or reduce their charge. With the option to
purchase crops at harvest, contractors stand to benefit from
any uplift in the sale price of the crops.
For the farmer, the agreement is simple to administer, cash flow
is more flexible and he/she can retain all single payment scheme and environmental monies. The final return is dependent on
the crop purchase option price, plus a bonus or reduction
reflecting market price.
For the contactor, this new agreement provides the opportunity
to expand, at little cost and within an agreement that is simple
to manage and administer.
Machinery Rings - members cooperate by providing labour and
machinery services at pre-agreed contract rates. Work is organised
on an operation by operated basis to suit individual requirements.
Machinery Sharing - neighbouring farmers often help each
other by loaning, or hiring, machinery and equipment on an ad hoc
basis. In some cases specific machines are purchased by two farmers
with 50% of the value sitting on each balance sheet, while repair
obligations and running costs are also shared.
Machinery Joint Ventures - generally labour and machinery is
shared and a separate business established in a bid to operate more
efficiently and perhaps provide a vehicle for future expansion into other
contracting work.
For all joint ventures to work they must be for the right reasons and
between the right people. Our consultants have a wealth of experience
advising on all such arrangements, from initial discussion through to formal agreement and then ensuring ongoing objectives are met by remaining involved.
Brown & Co is the trading name of Brown & Co Property and Business Consultants LLP
