- Trust and respect between the farmer and contractor are vital to ensure the continued success of any agreement.
- Negotiation is very important when setting up an agreement – always consider the risk and reward factor.
- The most successful agreements are where there was a previous relationship or connection i.e. both parties knew each other somehow – don’t be scared to approach someone about an opportunity, if you don’t ask you don’t get!
- Make the most of every opportunity and ensure that every investment works to its full potential.
- Always agree the contractor’s fee and farmer’s retention upfront and never use the word ‘rent’.
Twelve delegates from the Lanark and Stirling groups attended the fifth FAS New Entrant Programme workshop held on 9th January at Garfield Hotel in Stepps. The group were joined by Sandy Ramsay from SAC Consulting and local contract farmer and new entrant, William Boyd.
Sandy Ramsay is an expert in this topic delivering advice to many businesses and new entrants throughout his career, he kicked off the meeting by delivering a presentation entitled ‘Joint Venture Farming – An Opportunity’.
Sandy provided an overview of all the joint farming options and how they operate including the mechanics of setting them up and what negotiations should be considered, what documents should be kept by both parties and how the financial aspect works including when a separate bank account is required and what is expected from both parties. He then focused on the most popular venture for new entrants – contract farming and went into specific detail on the fundamentals of such an agreement. He provided examples of these venture across different farming types i.e. arable and livestock and explained what costs are allocated to both the farmer and the contractor and services paid. The group discussed the pros and cons.
Sandy relayed the importance of trust between both parties, trust is vital to the continued success of the contract and will have an impact on any future business relationships. Negotiations will be necessary at the start to ensure the contract is attractive to both parties – if you don’t ask you don’t get!
William Boyd, originally from Dechmont Farm in Lanarkshire then gave a very informative talk on his own experience, where he farms 420 acres on a Contract Farming agreement at Overburns Farm, Biggar. Originally set up as a 12 month agreement in November 2013 William is now commencing his fifth year at Overburns, starting off with 650 ewes and 25 cows he has now expanded to 750 ewes and 35 cows. He also secured the purchase of a further 24 acres at Strathaven in 2014 which allowed him to set up a new business in his own right and provided access to SRDP New Entrant funding.
William was very open about how the agreement works, he explained that the farmer provides all the land and buildings and he, as the contractor, provides all the labour and machinery. William owns all of the breeding stock, however any income from their progeny belongs to the contract and the contract pays for all of the variable costs. The farmer retains the Basic Payment Scheme payment with the Less Favoured Area and SSBSS (calf claim) payments going into the contract. At the end of the year both parties receive a minimum payment classed as a wage with William then receiving 80% of the profit after costs and the farmer receiving the remaining 20%. This clears the account ready to start again.
Aside from the agreement William also contract rears 50 dairy heifers for his brother’s dairy farm and undertakes additional work such as gritting, relief milking and general farm work. William informed the group that he had planned to expand however he does have concerns post Brexit, what if subsidy disappears and the farmer wants more out of the contract? If this was the case he feels more investment in infrastructure would be required to make the unit more efficient. William ended by explaining this contract is not viewed as a long term option, his goal is to build capital and own his own farm one day.
The aim of tonight’s meeting was to provide further information on what joint farming ventures are available and what to consider if the opportunity arises. If anyone would like more information or assistance on any of the topics covered please do not hesitate to contact Hazel or Hilary.
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