Contract farming provides a unique opportunity for a landowner to step back from active farming and release working capital, whilst retaining full involvement in the farming policy and land management.
This is achieved by selecting a contractor who provides all the labour and machinery and is remunerated with a fixed contract fee, plus a share of the profits.
Laurence Gould have been at the forefront of setting up this type of Joint Venture. Our aim is to ensure the maximum amount of flexibility for the landowner whilst ensuring a fair level of return for the contractor's time and effort.
Contract farming is possible across all agricultural enterprises and is particularly effective where the landowner does not wish to fully cease active farming and commit his land to a tenancy agreement.
Benefits to the landowner
• Reduction in day-to-day management leaving time for other activities
• Retains the trading status of a "Working Farmer" together with the income and inheritance tax benefits
• Vacant possession value of the land is maintained
• Releases the capital tied up in machinery and stock
• Reduces the working capital requirement
• Retains the overall control together with some continued involvement in policy
Benefits to the contractor
• An opportunity to expand without any long term commitments
• Much of the working capital is underwritten by the farmer
• May provide scope to involve the next generation in the business
• Should lead to a longer term commitment between the parties
• Allows spreading of fixed costs over a larger enterprise
• Improves marketing position for inputs and farm sales
Therefore, if you are considering a collaboration, it is important that some time is spent beforehand establishing the requirements and the motives behind such a venture to ensure that the members are pulling in one direction.
Laurence Gould are ideally placed to perform the role of facilitator and will bring to the group knowledge of the sector and an unbiased view so that answers can be found to the issues before they become problems. Typical issues include:
• Do all parties have the same objectives?
• What are the skill sets within the group and who is best placed to perform certain roles?
• Who stands to benefit and how?
• What is the most suitable structure for the arrangement?
• Can the individuals work within this structure?
• What are the potential areas of conflict and how can these be managed?
• Are there legal, financial or technical issues that need to be addressed?
Collaboration between farmers and growers can be extended to form groups such as co-operative grain storage, potato storage, onion storage, fruit storage, milk processing, livestock marketing, renewable energy projects. We are able to provide support to these ventures on the structure, management systems and modus operandi
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