Share farming: A way forward for new entrant farmers

Food and farming writer, Steph Wetherell, explores the potential of share farming, an agricultural model common in the New Zealand dairy farming industry and on the rise in the UK, whereby new entrants gain access into farming through connecting with existing landowners who in turn benefit from the support they receive for succession arrangements.

In the UK, the average age of a farmer is now 60 and a staggering 40% of farmers are over the age of 65. Many do not have a succession plan for when they retire. Alongside this, we have a new generation of farmers, a significant proportion of whom do not come from a farming background. To compound these challenges, land prices are high – trebling between 2004 and 2014 and continuing to rise in the last decade – leaving the purchase of a farm out of reach to many.

This situation requires a range of solutions that includes training, land access initiatives and succession planning. One potential model is ‘share farming’, where new entrants and landowners enter into a shared risk and shared income arrangement.

Share farming in New Zealand

Share farming is common in New Zealand, especially in the dairy industry where it accounts for 29% of farm operations. ‘Sharemilking’ provides a legal framework that allows the landowner and share farmer to divide the income from an enterprise, based on a percentage calculated according to what each is contributing to the set-up. Each arrangement is different, based on the land, the infrastructure, the livestock and the labour input from each party, so it’s a flexible model that can be adapted to a multitude of situations.

The sharemilking model also provides a route of progression, where a new entrant farmer will often start out either in what’s known as a ‘lower order’ sharemilking or contract milking arrangement, where the farmer owns the land and the herd, and the sharemilker handles the labour (including employing staff). In contract milking, the sharemilker receives a set price per milk solids produced (milk solids are how the output is measured, since a majority of dairy is exported as dried milk powder). In the lower order arrangement, the sharemilker receives around 20% of the total income (known as the milk cheque), dependent on what the current milk price is. Contract milking offers lower risk, but also lower income potential, however, it still incentivises the sharemilker to increase production on the farm. It is also possible to set up a hybrid arrangement, where the core costs of the business (such as staffing and utilities) are paid for by the landowner, and in addition to their wages received as part of these core costs, the sharemilker receives 5-10% of the milk cheque.

Most sharemilkers don’t stay for long on a single farm, as they progress onto larger farms at the end of each term (usually three years in length). Some farms will also allow the sharemilkers to raise excess heifer calves from the farm in order to begin to build their own herd. When they have either been able to grow their herd sufficiently or have saved enough money to buy a herd, most sharemilkers will look for a small ‘50:50’ sharemilking arrangement, where they own the herd and are responsible for the labour on the farm, receiving approximately 50% of the milk cheque in exchange.

Over time, many sharemilkers will again look to grow their herd and progress to larger operations, often aiming to save the money (both as cash but also in the capital of their herd) allowing them to eventually buy their own farm or buy into an equity partnership. As an example, after 13 years in sharemilking, Rob and Mel Van den Brands have reached a point where they are debt free on a 750 cow, 50:50 sharemilking set up, and they are looking to scale down to around 300 cows and use the profits from the sale of the rest of their cows to buy a small farm (with a mortgage).

There are non-dairy share farming examples in New Zealand, but they are less common. On the South Island, Andy Tripp set up a share farming arrangement on his beef and lamb farm that includes a sheep stud. He wanted to step back from the day to day running of the operation and found offering a share farming agreement allowed him to attract a much more skilled, experienced and dedicated staff member than when he was looking for a farm manager. Over time, Andy is stepping back further from the business, handing over more and more responsibility to his share farmer in exchange for the share farmer receiving a larger percentage of the income.

Share farming in the UK

There are a small but growing number of share farming arrangements in operation in the UK. Stream Farm, a 250-acre farm in Somerset, was established in 2002, based around a share farming structure. The central business owns the farm and infrastructure, with a range of nine businesses operating from the land under share farming arrangements, including a beef operation, lamb operation, chickens, pigs, eggs, trout and more. The produce is all marketed, sold and distributed under a common core brand. Their sharefarmers take full responsibility for their operation, but there is also cooperation and support when one enterprise requires additional help at key times of the year. The sharefarmers usually stay for a couple of years while they learn the practical and business skills required to run their enterprise, and over 25 sharefarmers have passed through the farm since they began.

The cows at Stream Farm, Somerset

Share farming has also been on the rise in Wales, where Farming Connect have helped to set up a number of share farming arrangements as part of longer-term succession planning work. Succession facilitator Eiry Williams explains some of the benefits: “The landowner is able to take a step back from the day-to-day physical work but still has an involvement in decision making, and for many experienced farmers it can be very rewarding to see a young person developing experience in farming. For the new entrant, they are able to take a step on the farming ladder and get a share of the business whilst being able to discuss options and problems with an experienced farmer.” She sees the lack of interest from landowners as being the biggest barrier to more share farming. Eiry says, “I have more than 300 seekers on my list looking for opportunities but there are not enough providers willing to offer their farms for a joint venture opportunity.”

One new entrant who has been able to find a share farming arrangement through Farming Connect is Dafydd Owen. Growing up on a family farm, he worked on a few farms before renting a small piece of land and buying some ewes and lambs. As the flock grew, he struggled to find a rental opportunity due to the amount of competition in the area, and additionally, affording the high rents and financing the stocking of the farm was a challenge. “After looking into share farming, I found that it was possible to start with little or no capital and build from there on,” Dafydd explains.

Dafydd Owen is involved in a share farming agreement through Farming Connect

He now has a share farming agreement on 300 acres in Conwy, where he manages a flock of 2000 ewes with two partners. “Our share farming arrangement has been set up as a limited company,” he explains, pointing out how he owns 5% of the company and is responsible for the labour under a shepherding contract, receiving 5% of the profit of the operation. He sees a lot of benefits for new entrants like him; “Share farming is a gateway into farming no matter what your situation is. You can be a first-generation farmer or from a farming background; you don’t need livestock to enter an agreement, you don’t have to have equity to invest into the business, you won’t have an annual rent to pay for a farm and you don’t necessarily need any farming skills or qualifications. If you want to farm and are eager to learn, it is possible through share farming.”

Opportunities and challenges offered by the model 

The flexibility of the share farming model means that it can be adapted to each individual situation and set-up, making it applicable for a range of sectors and operations. It is most straightforward in a livestock arrangement, but there are also opportunities for it to be used to share risk in arable and horticulture operations. However, a lack of knowledge and legal framework around the model may cause challenges, especially for land agents who are used to setting up more conventional landlord-tenant relationships.

Each individual relationship is unique, and this requires management, as Dafydd explains: “Every situation is different and the need for a positive and healthy relationship between share farming partners is crucial.” In Wales, the service that Farming Connect are providing is a key part of this, and this kind of support is needed more widely if the model is to grow.

Share farming has the real potential to offer a pathway into farming for new entrants and support succession arrangements, but more support is needed for it to become more widespread.

Photos courtesy of Steph Wetherell and  Jason Taylor.