Seeking optimal performance from each cow within a herd is not the ‘holy grail’ of milk production, according to Oliver Hall, a joint venture specialist with Andersons’ Farm Business Consultancy.
“But knowing all the costs associated with the business is,” he added. Hall spoke at the recent Land Mobility Road Show, hosted by the Young Farmers Clubs of Ulster (YFCU) at CAFRE Greenmount.
He confirmed that joint venture businesses have become increasing popular within the farming sector in GB. “They are based on agreements that last for a minimum of five years and represent viable options when it comes to young producers securing a worthwhile career within agriculture.
Their relevance and potential sustainability is reflected in the fact that most banks will now actively consider lending money to those involved, provided the business plan is right. At the heart of each agreement is a strong element of trust between the parties involved.”
Hall said that several business models can be looked at, where the development of joint ventures is concerned. These include contract farming arrangements, share farming through to the development of full-blown partnerships and companies limited by guarantee.
“In each case a formal agreement will be required, which will take account of labour, return on capital and land,” he added. “It’s also important to have an exit strategy included, in the case of death or changing personal circumstances.”
He added: “Driving each agreement is a mutual understanding of the vision for the business moving forward. But joint ventures work best when a mix of skills and experiences are brought to the table.
Young farmers starting out on their careers will have lots of energy. However, an older partner will bring to bear the experience that knits the entire project together.”
Hall also explained that a professional approach to any joint venture must be displayed at all times.
“Time must be set aside on a weekly or monthly business for those involved to review the work that has been undertaken and to agree future action points.
“Young people seeking to enter a joint venture with an older landowner must bring some capital to the proposed business.
“I would strongly urge young farmers seeking to go down the road of a joint venture as they advance their careers to save from as early an age as possible.
Participants in any joint venture must also have a positive credit rating.”
Source: Farming Life