Farm incomes falling
INCOMES for contractors farming land under farm management agreements have fallen twice as quickly as landowners returns, according to preliminary results from Bidwells.
Although average landowner income under an FMA has fallen below £100/acre for the first time since 1994, the rate of decline is much steeper for contractors, whose revenue more than halved from 1995 to 2000. Landowners return has fallen by 25% over the same period.
A prior charge, averaging £86/acre in 2000, is payable to the landowner and the contractor receives a contracting charge, which averaged £91/acre. Any profit above the prior charge is split between the landowner and contractor, usually at a ratio of 30:70 in favour of the contractor.
This ratio has remained steady since 1995, but the amount to be split has fallen from £186/acre to just £98/acre. It is this that has caused the contractors income to fall so rapidly.
Despite this, Mr Potter expects the FMAs will continue to be a popular choice. "Landowners benefit from significant overhead cost savings and a release of capital, whilst retaining the tax advantages of remaining a trading farmer."
Bidwells was the first land agent to set up FMAs 30 years ago, and has about 60,000 acres under the agreement. *