It is tempting that once you have got a Contract Farming Agreement in place to forget about it especially if everyone seems happy. However with the volatility in commodity prices and the Greening requirements under the new Basic Payment Scheme now needing to be considered, what was considered suitable before may no longer be suitable for both the Farmer and Contractor now.
We have seen the traditional highest Gross Margin crop prices swing from £200/t for wheat a couple of years ago to £110 / t a couple of months ago and Oilseed Rape prices of around £400 / t a couple of years ago now fetching around £250 / t. We have also seen changeable yields and weather over the past few years. All of these have had a large impact on returns from farming and this will always be the case going forward as yield and price are the key variables in an arable situation.
Moving to more recent developments we have the potential impact on Oilseed Rape yields and plantings caused by the neonicitinoid ban and there is also the relentless march of Blackgrass causing higher herbicide bills and also leading to the potential for spring or break crops in order to use other “cultural” controls.. We are also beginning to see cropping plans be more dictated by the Crop Diversification and Ecological Focus Area requirements with more legumes, spring crops and fallow land in rotations.
Clearly nothing is the same from year to year in farming and that is always likely to be the case. However we are now finding that there is more volatility in prices and there is now the political influence through CAP Reform and the Basic Payment Scheme requirements to contend with.
For these reasons I would recommend reviewing a Contract Farming Agreement every year or two to make sure that the Contractor’s Basic Remuneration and the Farmer’s Prior Charge are fair and also to make sure that the profit share reflects these figures and what is happening in the market. This may be in the form of a quick phone call to make sure that everything is still relevant or a more in depth meeting to discuss changes that might be required.
Making sure the agreement is right for the situation might just be the most profitable decision you can take………