What kind of farmers set up Joint Venture farming?
Forward thinking farmers with a lot in common start joint ventures.Each joint venture is unique but all JVFG member businesses share similar goals.
For example, Manor Farms LLP was started by two neighbouring family farms of 370 and 501 arable hectares of combinable crops.
Joint Venture benefits
Joint venture farming reduces costs and management time, makes field operations efficient and aims to drive costs down and profitability up. Hear firsthand about the business benefits to JVFG members L. Symington Farms, Pelham Farming Ltd and others in our news section.
How Joint Ventures work
Each parent business in the joint venture can be separate but shared varying amounts of machinery. A separate legal entity, sometimes a limited company or limited liability partnership (LLP), offer the best framework with a formal partnership agreement.
The operational basis of the joint venture can vary from a contracting farming business to a shared gross margin basis. In each case the undertaken is financed by parent businesses in proportion to area or similar measure. Elements to consider include:
- terms of a formal agreement
- exit strategies and area changes
- value of assets transferred to the LLP
- harvest order and grain storage
- insurance, fuel and labour
- management and administration time
- good match of personalities and financial goals
Results of Joint Venture farming
The many business and professional benefits of joint venture farming include:
- supportive colleagues
- reduced capital investment
- lower costs
- better use of skills
- investment in new technology affordable
- better planning and budgets
- management continuity
- regular updates through the JFVG on performance benchmarked against others
A word of caution
Joint ventures are not without challenges. Problems can be avoided from the outset with thorough discussion and planning.
Possible issues could involve how to exit a partnership (most are for a 5 year term), coping with surrendering control, change in availability of finance and the impact on tax structure and capital allowances. Cross compliance, record keeping and crop assurance all need to be co-ordinated.
The importance of matching personalities cannot be understated. If parties do not get on, running a business together will not make the situation better!