Is the contract farming business model finished without sfp? poll

Is the contract farming business model finished without sfp?

  • yes

    Votes: 41 37.3%
  • no

    Votes: 69 62.7%

  • Total voters
    110

Brisel

Member
Arable Farmer
Location
Midlands
If there is £94/acre [BPS] less in the pot that is divided between farmer and contractor then both parties will have to live on less. Perhaps with less money there will be less spent on advisors/agents.

IMO with less guaranteed income I.e. no annual lump sum from Brussels, there will be more land available needing specialist management to establish and manage ELMS options with some smaller area of agricultural production. I think this will be an exciting time to be looking to collaborate with others.

Anyone trying to eke a living from marginal land is going to have to seriously reconsider how they achieve this. Maybe they will just cease food production and provide natural capital instead? Plant trees, impound flood water and provide habitat for pollinators may well provide a better more reliable income, as long as they are prepared to have poor cash flow if the RPA run further in arrears. Someone has to manage these options.

The 2005 Mid Term Review was seen as a topper farmers charter but never actually worked out that way. Is this a possibility again now?
 
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glasshouse

Member
Location
lothians
If there is £94/acre less in the pot that is divided between farmer and contractor then both parties will have to live on less. Perhaps with less money there will be less spent on advisors/agents.

IMO with less guaranteed income I.e. no annual lump sum from Brussels, there will be more land available needing specialist management to establish and manage ELMS options with some smaller area of agricultural production. I think this will be an exciting time to be looking to collaborate with others.

Anyone trying to eke a living from marginal land is going to have to seriously reconsider how they achieve this. Maybe they will just cease food production and provide natural capital instead? Plant trees, impound flood water and provide habitat for pollinators may well provide a better more reliable income, as long as they are prepared to have poor cash flow if the RPA run further in arrears. Someone has to manage these options.

The 2005 Mid Term Review was seen as a topper farmers charter but never actually worked out that way. Is this a possibility again now?
The 2005 review was a toppers charter
But economics and a Russian drought changed the game.
Tripling grain prices overnight back to their trajectory before russia opened up
 
An aside comment not really to do with the thread. Looking at the devastating wet land around here and pondering government support over the past thirty years since the end of FHDS which effectively ended field drainage. What a complete waste of taxpayers money direct payments in effect funding rents and sucked out of practical Agriculture. The taxpayers money could have and should have been spent on infrastructure such as drainage and grain stores that would have benefited the taxpayer. That and the introduction of the Farm Business Tenancy legislation in 1995 with no provision within it the legislation for longer term arrangements to ensure ongoing long term investment. Rant over. As you were.

Now THAT kind of funding would have maintained the productive capacity of the country AND could have aided drainage/flood alleviation efforts. Let farmers do their own drainage works.
 
Last edited:

Kiwi Pete

Member
Livestock Farmer
i dont personally do any contract farming i just wondered how it will stack up, seems to be a lot of differing opinions
It's an interesting one though (y)

I think the real big players are
1. Land value/cost
vs
2. Earnings after expenses

SFP loss will be rather inconsequential compared to these two...?

NZ used to be full of 50/50 sharefarming opportunities in the dairy sector when an acre was worth as much as a good BW cow - both sides bought about the same to the table and it was mutually beneficial

But when land value climbed and cow value didn't, then it reduced that.
Made more sense for the landowners to buy a herd, and put a manager or contractor on, and keep a bigger slice of the profit (or loss!!) but it often resulted in much lower herd performance as the 50:50 guy had more reason to push on.
 

NLF

Member
Agree should be 50:50 and simple
Does that include the subsidy? i.e. the subsidy effectively pays the farmers first take, then contractor then gets a similar payment which goes a long way to cover their fixed costs, then the surplus is split 50/50. Is that normal these days?
 

Brisel

Member
Arable Farmer
Location
Midlands
Does that include the subsidy? i.e. the subsidy effectively pays the farmers first take, then contractor then gets a similar payment which goes a long way to cover their fixed costs, then the surplus is split 50/50. Is that normal these days?

Usually the BPS goes into the pot, though most CFAs are unique. In theory, the contractor gets paid a fixed fee below the cost of operations, then the farmer gets a fixed fee, then the surplus is split according to the agreed shares. 50:50 is common, but it can go 70:30 to the contractor for the first tier of say the next £50/acre, then reversed for anything above that - this became more common after the bonanza year of 2007. Other proportions are available. You're just trying to share risk and reward if it's a proper collaborative venture, not a sham FBT with extra tax benefits for the farmer.

Where the farmer has a fixed charge, that needs to be reviewed in light of the reducing BPS. You could argue that this is the bulk of the rental equivalent.
 
Usually the BPS goes into the pot, though most CFAs are unique. In theory, the contractor gets paid a fixed fee below the cost of operations, then the farmer gets a fixed fee, then the surplus is split according to the agreed shares. 50:50 is common, but it can go 70:30 to the contractor for the first tier of say the next £50/acre, then reversed for anything above that - this became more common after the bonanza year of 2007. Other proportions are available. You're just trying to share risk and reward if it's a proper collaborative venture, not a sham FBT with extra tax benefits for the farmer.

Where the farmer has a fixed charge, that needs to be reviewed in light of the reducing BPS. You could argue that this is the bulk of the rental equivalent.

Basically, both parties will decide what they are willing to accept going forward. It will be a lot clearer without so much funny money involved.
 

westwood

Member
Location
West Sussex
If you took the bps payment out of a contract farming agreement and tried to keep things simple, what should the cost per acre be for all operations.
How could you put an incentive payment in?
 

Brisel

Member
Arable Farmer
Location
Midlands
If you took the bps payment out of a contract farming agreement and tried to keep things simple, what should the cost per acre be for all operations.
How could you put an incentive payment in?

That's a big question! If the landowner current gets £80-120/acre as a charge after the contractor's fixed fee then that landowner's charge needs looking at as it is a base rent underwritten by BPS. Drop £95/acre of BPS out and see what that does to the surplus for sharing when the landowner still wants their charge!

What does it cost you to do the operations? Does that include agronomy, procurement, cashflow of inputs, managing grain driers, stores, hedges, ditches, game covers, stewardship, filling in forms - this can really add up. Basic operations are £120-150/acre - this really varies too if you're ploughing + power harrows vs no till vs min till vs strip till. Is fuel separate? So many variables. I'd take it back to the contractor losing £20+/acre on the fee then incentivised to make a decent divisible surplus.

Do some sensitivity analysis in the spread sheets you discuss with the farmer/landowner where you remove the BPS and play around with grain prices. It goes back to sharing risk and reward for a proper partnership. Knock together a package with full BPS and £200/t for wheat and you'll be broken quickly when grain prices drop back with no safety net of BPS.

Working out how you cater for ELMS management has a different cost structure but someone needs to manage it is also going to need looking into.
 

SFI - What % were you taking out of production?

  • 0 %

    Votes: 79 42.9%
  • Up to 25%

    Votes: 63 34.2%
  • 25-50%

    Votes: 30 16.3%
  • 50-75%

    Votes: 3 1.6%
  • 75-100%

    Votes: 3 1.6%
  • 100% I’ve had enough of farming!

    Votes: 6 3.3%

Red Tractor drops launch of green farming scheme amid anger from farmers

  • 1,287
  • 1
As reported in Independent


quote: “Red Tractor has confirmed it is dropping plans to launch its green farming assurance standard in April“

read the TFF thread here: https://thefarmingforum.co.uk/index.php?threads/gfc-was-to-go-ahead-now-not-going-ahead.405234/
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