Contract Farming Agreement Example

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CFAs are most often cre­ated by a per­sonal speech by sev­eral likely con­trac­tors, fol­lowed by a visit, a call for ten­ders and inter­views. In addi­tion to defining the main terms of the agree­ment, the tender doc­u­ment requires a budget from the con­tractor that usu­ally covers the first year. 2. If both par­ties are sat­is­fied with the out­come of the con­tract, it may be extended for an addi­tional season, nei­ther party being obliged to renew the con­tract. Agri­cul­tural con­tracts typ­i­cally run for three years, with each party receiving a pay­ment or first fee, though it‘s impor­tant to under­stand that the only guar­an­teed pay­ment is from the con­tractor, says advisor Richard Means of Strutt & Parker. After these and other crop pro­duc­tion costs have been cal­cu­lated, the sur­plus is allo­cated in an agreed pro­por­tion. Farm man­ager Andy Rankin is a director of the con­tracted com­pany, run by the couple Philip and Car­olyn Westrope. The prop­erty is com­posed of about a third of heavy marshy tones with the rest of the clay sand. Roy­al­ties and allo­ca­tions vary con­sid­er­ably between agree­ments, reflecting the risk for each party. A typ­ical Grade 3 com­bin­able har­vest farm would see both con­trac­tors and landowners the first fresh in a range of £80–120/acre and two stages of the excess share.

The first of these could typ­i­cally be 80:20 in favour of the con­tractor, up to a cer­tain margin per hectare, and then an action of 50:50 or 60:40 in favour of the farmer. If the agree­ment develops over the long term, the divi­sions can be rene­go­ti­ated to reflect the cap­ital invest­ments of both par­ties. More than 10 years of using a con­tract farming agree­ment allowed the Bawdsey Estate to first con­sol­i­date its agri­cul­ture and then develop a more diver­si­fied and per­haps more finan­cially prof­itable har­vest. (2) This con­tract defines the con­di­tions under which farmers grow green beans and the com­pany will market, pur­chase, process and market them. “It‘s a diverse estate, owned by the Adeane family since the 1950s, with lots of housing and other inter­ests,” says Charles Loyd, one of the estate‘s edges. “When I got involved in the late 1990s, we had to sta­bi­lize farm income to be able to take over the other areas. Where rel­e­vant, the farmer should pay par­tic­ular atten­tion to how the con­tract is drawn up and oper­ated, as well as how deci­sions are taken and recorded. “Cross-​​compliance can become a problem in which, for example, the farmer is respon­sible for the work of the ELS and the con­tractor for the rest. You have to know who does what. These agree­ments allow a farmer to reduce his phys­ical inputs while still living on the farm and run­ning the business.

Some may want to free up cap­ital to pursue other busi­ness or invest­ment ideas. I have read and under­stood the con­tent of this agree­ment and I sign it of my own free will. “There is no need to have an agent who man­ages the agree­ment on a per­ma­nent basis, but it is useful for a good advisor to review it every year and at least every two or three years to ensure that it does not have a dis­as­trous impact on cap­ital values, taxes or other legal or finan­cial implications.…

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