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Do farmers still do joint ventures?

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Julie Robinson, head of our agriculture team, answers a question from a client.

The short answer to our client’s question is yes. Farm businesses are engaging in a whole raft of collaborative ventures as they focus on increasing their competitiveness and preparing for the future.

Why are farmers opting for joint ventures?

Rationalising fixed costs

  • This is a consideration in most of the JVs we are advising on. Careful pooling of machinery and labour can lead to significant savings in fixed costs per hectare and a more rigorous focus on budgets.

Sourcing investment

  • A JV partner may bring investment with him (reflected in agreed profit shares).

Getting the right people in place

  • A larger operational area may provide an opportunity for the next generation to step up and allow the older generation to step back. Collaborations can mean a wider range of skills are available.

Finding a secure supply of land to fulfil contracts

  • A JV may be an alternative to a traditional farm business tenancy, particularly where there are synergies with other parts of a farming business.

Stepping back while maintaining trading status

  • For those wanting to retire but needing to maintain their trading status for tax purposes, a joint venture be a way forward, bringing in others to look after day-to-day operations while continuing to have management control.

What form do JVs take?

Machinery-sharing agreements, contract farming, share farming through to the setting up of a separate entity (limited liability partnership, company or co-operative). The right model will depend on the scope of the JV, what the parties want to achieve and tax considerations.

Where can I get advice?

Roythornes are holding an evening seminar on 22 May for those wondering whether a joint venture might be for them. With the help of our own and outside experts, we will be taking the lid off farming JVs and, in particular:-

  • The financial benefits. Do the sums add up?
  • The legal structures. Pros and cons.
  • Share farming. A flexible model?
  • People issues. How to manage change and minimise tensions.
  • Tax considerations. What to watch for.

We look forward to seeing you there!

For bespoke advice in relation to farming joint ventures, feel free to get in touch with Julie Robinson on 01480 587460 or any  other members of our commercial team.