When faced with the prospect of selling off his sheep flock or taking on a full-time shepherd, Stephen Withers, 64, chose neither and instead entered into a share farming arrangement with Neil Sandilands, 36.
Five years on, the partnership has proved beneficial to both with Mr Sandilands building up capital in the hope of taking on a farm of his own in the future and Mr Withers continuing to farm in an intensive way without having to employ extra staff.
Back in 2008, Mr Withers found himself questioning whether or not to continue with his, then, 700-head sheep flock at Upper Hundalee Farm, Jedburgh in the Scottish Borders.
Mr Withers and his wife Sandra have one daughter. However, she had no interest in taking on the 405ha farm, which comprises 162ha arable cropping, a 70-head suckler herd, bought-in steer finishing enterprise, and now 1,000 head mainly Cheviot and Cheviot Mule flock with about 350 replacements coming through.
“I don’t have any family to take over so I was managing everything myself and doing a lot of the sheep work. My wife was helping me as well but she hurt her back, and I had a spell where I was employing part-time shepherds to come in and help, but still doing the main job,” explains Mr Withers.
There were four options: get rid of the sheep; employ a full-time shepherd and continue to manage the flock; take on a shepherd who would manage the flock, but manage him; or carry on using casual labour, he says.
“I thought to myself, if I had a son he would be coming in as a partner so I decided to get a young person in as a partner,” adds Mr Withers. He decided to approach Mr Sandilands about the partnership, because the two had previously worked together before Mr Sandilands went self-employed as a contract shearer.
How does it work?
Mr Withers describes the share farming agreement at Upper Hundalee as a “simple legal partnership”, with the enterprise costed separately from the rest of the farm business.
“There is a totally separate account for the sheep, but it’s still farmed as an integral part of the business. Everything is run as one unit really, but the sheep side is run by Neil,” he says.
In the beginning, Mr Withers held 100% of the partnership’s shares, having provided all the assets – sheep, feeders, lambing flakes, trailer etc – which were valued at current day rates when the partnership was formed. Now, Mr Sandilands has built up shares by reinvesting his profits and currently owns about 10% of the business.
Profits are split 50:50 up to the first £10,200 and then divided 60% to Mr Withers and 40% to Mr Sandilands thereafter. Loss liability is also split in the same ratio, with Mr Withers liable for 60% and Mr Sandilands 40%.
The arrangement includes a buy-out clause should either partner chose to retire or end the arrangement.
“If it does not work out it’s really easily broken because we have to give each other three months notice, and he has the right to buy me out,” says Mr Withers.
“Any partner can buy the other partner out, with all assets included at their current market value. But the outgoing partner has the right to have a mutually agreed value [for their share of the partnership],” says Mr Withers.
The remaining partner has to buy the other partner out of the business with 10 half-yearly instalments, including interest, commencing six months after the date of death or retirement of the other partner.
“If anything happened to me, I think my wife would still stay here and, hopefully, she’d take on my share of the partnership and I have suggested it would be a 50:50 set-up,” adds Mr Withers.
How to make it work
Flexibility and trust are the key to a successful share farming arrangement, say Messrs Withers and Sandilands.
“My advice would be, firstly, try to make sure that you find the right person. Then you have got to give the person the freedom to do what they want and you mustn’t be interfering all the time,” says Mr Withers.
Mr Sandilands adds: “It’s a huge trust thing. I have known Stephen for 15 years and there was always a lot of trust there.”
The partnership and the main farm business work closely together, coming to arrangements on how to share the use of main farm assets.
Mr Withers explains: “We talked about the partnership paying for hay and the use of the forklift and the tractor sometimes but I thought that was messy so we have come to an agreement that the partnership pays for one load of fertiliser a year and I make the hay and I use it for the cows and the sheep.”
Farmers have to work as partners and not be dogmatic about charging for every single thing, he adds. An example was the main farm business giving the sheep enterprise silage in a year when stubble turnips failed and there were a lot of lambs which would have required expensive bought-in feed.
What are the benefits?
The share farming arrangement has benefitted both parties – Mr Withers is able to continue farming intensively and Mr Sandilands is building up capital to eventually take on a farm of his own one day.
“I’m still able to have the enjoyment of building the farm, and it gives me more time to concentrate on the beef and arable. I think it’s one of the best things I have ever done,” says Mr Withers.
“It has allowed me to continue farming in a way I have always farmed, which is quite intensively, rather than having to cut back. In fact, I have even bought some more land.”
Mr Sandilands says: “The way I was, I was never going to be able to rent a farm and take on a tenancy somewhere. It’s a way to build up some capital. It has been a bit of security.
“Share farming is the only way I can see me ever having a farm of my own. My asset share is going up as we make profit.”
Mr Withers adds: “If you have a farm but no-one to take it over, even a large farm where you have two to three different enterprises, siphon one bit off and give someone a chance to have a go at it.
“To me it’s an advantage because you can focus on the other side of it [farm business], and you have a partner working for himself building up an enterprise.”
See more on career options for young farmers on our new entrants and young farmers page