CONTRACT Farming Agreements could be the way forward for some Cumbrian farmers, claims experts.

With changes to the farming landscape, Katie Proctor, chartered surveyor with H&H Land and Estates, believes that the use of CFA, particularly within the arable sector, is increasing in popularity, as joint ventures of this type offer more flexibility than a tenancy.

.“The overall aim of a CFA is to improve business efficiency through enhancing the performance of the enterprise. Even though the use of contractors in arable farming has long been established as an affective business model, by implementing a CFA both parties open themselves up to new opportunities and become fully invested in the enterprise whilst retaining their induvial identity as a business in their own right. This is the case even for new entrants wishing to expand current agricultural operations without having to finance the purchase or rent of land.

“CFA’s allow the landowner to retain full ownership and occupation of their property whilst maintaining a lifestyle close to agriculture and contractors can benefit from economies of scale plus a guaranteed payment per acre. Its success is achieved through the contractor providing the experience, expertise, skill, technology, and machinery, whilst the landowner provides the land and buildings.”

The ‘farmer’ is the landowner who has engaged the services of another, referred to as the ‘contractor’ who undertakes farming operations over a fixed period. It is an agreement which is flexible and determined by the needs of the respective parties, providing an ideal platform for a mutually beneficial joint venture. The main principals being that: the ‘farmer’ receives a first charge for the provision of the land; the ‘contractor’ receives a guaranteed fixed charge for the work involved in the production of the crop; any additional income is divided between them.

Importantly a CFA agreement also means that the landowner remains actively involved in the management of the farming operations which in turn ensures they retain their ‘farmer’ status and can continue to receive and apply for the Basic Payment Scheme and Environmental Stewardship schemes.

Later this will change, with the newly devised Agricultural Bill highlighting that financial support for farmers likely to be determined by the Environmental Land Management Scheme (ELMS).

Katie continues: “CFA’s differ from more traditional agreements such as Farm Business Tenancies which many partners may be averse to because of the more contractual constraints involved.

"We are seeing that this type of agreement is attractive to landowners who have additional enterprises such as livestock or diversification projects, as the reduced working capital, can be redirected into other areas of their business to potentially increase profitability as well as mitigate risk.”

It is essential that CFA’s are managed in the correct manner to ensure that the landowner is able to satisfy the requirements for both personal and capital taxation benefits.

While Contract Farming Agreement provides many benefits, it is strongly advised that professional advice is sought prior to the commencement of any agreement.

H&H Land & Estates is one of the North's leading Chartered Surveyors, Agricultural Land Agents and Valuers across the North of England who offer a wide range of support services in every aspect of rural property.