Farm Ireland
Independent.ie

Tuesday 17 October 2017

Detailing pros and cons of the approach

The Dairy Development Centre for Wales as part of the Improving the Welsh Dairy Supply Chain Project have put together a booklet listing the strength of the contract farming arrangement as follows :

Strengths

•Regulated by a formal contract;

•Flexible arrangement where virtually all terms can be negotiated;

•Clearly defined roles and responsibilities;

•Can be structured to be self-regulatory;

•Farmer provides working capital facility for the business;

•Farmer has no employment liabilities;

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•Allows capital to be released for the farmer due to reduced machinery and livestock ownership;

•Brings in specialist skills. Reward depends on ability to deliver a surplus;

•Greater returns compared with renting out the farm but with an increased risk;

•Economies of scale for the contractor can be gained by having more than one agreement;

•A relatively quick way for the contractor to grow a business. Entrepreneurial contractors can use skills to achieve a good income without needing large amounts of capital.

Weaknesses

•Capital investment (land, milk quota, etc) has to be carried out by the farmer -- age can be a constraint for longevity;

•Administration hassle and complications;

•The volatility of the dairy markets needs to be taken into account when budgeting and agreeing surplus distribution. Provisions and arrangements need to be agreed for years when the dairy market is depressed.

Indo Farming

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