Tendering opens new opportunities

Contract farming makes sense because most contractors want to spread their fixed costs and are therefore prepared to negotiate competitive rates to win contracts.

It is also attractive for many farmers and landowners for a number of reasons, including inheritance tax, control, or taking advantage of economies of scale.

For those who have CFAs, I wonder when you last considered an open tender? It is easy to let them roll from year to year and before you know it a surprising number of years have gone by without reviewing who can best match your CFA needs.

Now is surely the time. We know farming businesses need to tighten their belts, to be resilient to the economic vagaries post-Brexit and to the new domestic agricultural bill. Reassessing and controlling costs will be a key component of future proofing your business.

We have been party to the tendering process in various locations and I can confirm a strong contractor interest, particularly and as you would expect, in the larger units of land where access, field size and soil quality are compatible with today’s equipment.

The successful tender is likely to be a combination of competitive cost and team competence. These factors should give the farmer confidence that the job will be done well and in a timely manner. As part of that you need to know the contractor has the appropriate mechanisation and staff ability which are achieving the track record, not just to farm the land, but to farm it well.

With any contract farming agreements it is worth considering and consulting with regard to the benefits of business property relief and that HMRC won’t just consider it a rent. That means ensuring there is enough risk, exposure to commodity price and yields, being born by you, the farmer.

As with so much in life, cheapest is not always best, or right in your situation, but going through the tendering process could be an eye opener as to the possibilities financially as well as practically to a profitable farming partnership.

As the old saying goes there is more than one way to skin a cat – though I doubt that will be politically correct whichever way we proceed.

Richard Corbet is an Associate Partner with Balfours based at Oxon Business Park, Shrewsbury.