Wisest choice for security is medium-term
By Tim Relf
LANDOWNERS should look to the future when negotiating contract or share-farming arrangements, says Richard Sanders of chartered surveyors, Fisher Hoggarth.
Securing a good return for three to five years is preferable to achieving an exceptionally high short-term rate, followed by the possibility of a poor level thereafter.
In this way, landowners can protect themselves from any downturn in the farming economy, says Mr Sanders.
Similarly, the stability and security provided by such agreements can also be of benefit to the farming party.
"Rental equivalents of over £150/acre are affordable now for combinable crops and these should be paid for single-year arrangements. However, operators should not tie themselves into these payments for long periods."
Controversy over how profits should be divided has increased as agricultural fortunes have improved, he says.
Two years ago, an average gross margin might have been £200/acre, he points out. Landowners could hire a contractor at, say, £110/acre and keep £90/acre. Alternatively, they could enter into a formal contract or share-farming set-up and make a margin of £70 to £80/acre reflecting the lower risk.
With higher area aid payments and favourable exchange rates, gross margins may now top £300/acre, he says.
Landowners employing a contractor now receive all the uplift as contract charges have not risen, giving them a return of, say, £190/acre. Those with a formal arrangement, however, have to share this extra return with the other party, but are less vulnerable if farming fortunes are reversed. *