What is a Contract Farming Agreement?
A contract farming agreement is a joint venture between a landowner or occupier and a contractor. The landowner or occupier provides land and the contractor provides labour, power and machinery and often other services including crop marketing (in discussion with the farmer) and agronomy.
Who does it suit?
CFAs are more flexible than tenancies and appeal to many, including:
* Those wanting to expand without requirement for large amounts of extra capital
* Those wanting to reduce capital tied up in machinery or cut down on physical farm work
* New investors wanting some involvement and the tax advantages of land ownership, but who often do not have farming experience
* Those seeking to achieve active farmer status in the run up to CAP reform
* Specialist field scale vegetable businesses
What are the benefits for the farmer?
The immediate benefit for most is a reduction in capital employed on the farm, as most of the machinery becomes surplus and is sold, reducing cost of production significantly.
These agreements allow a farmer to reduce his physical input while still living in the farmhouse and running the business. Some may want to release capital to pursue other business or investment ideas.