Share Farming

Getting started in farming is incredible difficult in this day and age especially if you don’t have a farm to inherit. This is not only an issue for new entrants but also young farmers who might not be able to take on the family farm. Many non farmers would think that all farmers own their own farms however 30% of the industry rents land from land owners which has its own difficulties.

For those that want to buy not only is land availability limited but the price is not connected to agricultural output and so getting a mortgage even if you have a substantial deposit is hard to justify. If you do buy a farm you then have to stock it, improve it and buy machinery this is also capital intensive and if you have no security because you’ve maximised your mortgage and have no cash left over from the deposit the bank will not lend you the money.

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Source Savills

Land value has increased exponential in the last 10 years whilst commodity prices and yields have remained relatively flat. A fat lamb in 2016 is only worth 4.81% (Source AHDB) more than a lamb from 2006, however land prices in that same period have increased by 211%. If you weren’t on the farming ladder in the early 2000’s it is even harder to get started now.

If buying is out of the question but you do have some start up cash or a security for a bank loan (which is a rarity when you are in your 20’s and 30’s) then renting land is your next option. However the market is competitive and for the 15 farms I have applied for all have gone to existing farmers. Landowners are risk adverse and a safe pair of hands is often the preferred option when dealing with multi million pound assets, which is understandable and gaining experience by working for someone else or studying for a qualification in agriculture are wise moves if you want to rent a farm.

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In years gone by County Council owned farms provided a way for new entrants to get a foot on the ladder but with government budgets squeezed they now go to the highest bidder or are sold off when they become vacant. The exception being Devon, Cornwall and Staffordshire County Council who still see beyond monetary value.

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There is a third option that was invented in the New Zealand Dairy sector and is becoming increasingly used in the UK. Share farming is not a rental agreement or a sale, it is an agreement between a land owner and farmer to farm the land and buildings together. The land owner will provide the land, whilst the farmer provides the labour. Livestock, machinery or growing crops are paid for out of a shared account that has been contributed to by both parties. The owner draws a rent and the farmer a salary, with any profits being divided based on mutual agreement at the beginning of the year. Although each agreement is unique and there is no set formula.

The benefits of share farming are varied. It is a way for landowners who want to maintain a foot in farming for the sake of interest, for an older farmer who wants to wind down their involvement or for tax reasons. It is advantageous for the young farmer as they can share the risk with land owner, they often do not require large sums of cash up-front although they will require some investment from them and as you will be working closely although not directly for the land owner you have a wealth of knowledge at your disposal.

Having recently visited a share farm, I saw the value for both the farmer and the landowner and I hope that this could replace the role that County Council Farms once provided for those wanting to get started in agriculture. Countryside Landowners Association has an excellent introduction to the principals of share farming and that can be found here.

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