Collaborative Farming: Where it can fit in for sheep farmers

There are three main collaborative farming options that can present as viable options for sheep farmers.

a) family situations

A registered farm partnership is a central step as part of any succession plan. The structure enables farmers to formally involve their successor in the farm business and in doing so facilitate the gradual transfer of responsibility and decision making on the farm. Succession farm partnerships are a new structure since 2017, where an annual income tax credit of €5,000 is available for up to five years. To avail of this credit, the partnership must complete a business plan and complete a separate succession agreement in relation to the transfer.

b) non-family

A partnership with other farmer(s) offers a superior work-life balance to operating alone through more labour availability. In some situations, it can alleviate the need to rely on hired-in labour. While the farm will be still busy, especially at peak times, the fact that there is at least two labour units making an income off the farm and available to carry out the work on the farm on a daily basis provides a superior work-life balance. A partnership can and must provide an opportunity for increased scale as the farm will have to sustain two family incomes. Working in partnership means there is often a better and broader range of knowledge and skills. This facilitates better and more informed decision making. The key challenge for any farmer considering partnership or any collaborative arrangement is to develop and nurture a strong working relationship with other people in the agreement. This must be built on values such as trust, respect, understanding and, above all, excellent communication.

Contract rearing is business structure where a dairy farmer pays an agreed monthly fee to another farmer to rear the dairy replacement heifers. In setting up the agreement, it is vital to discuss and agree all the practical issues around the management of the heifers. These include: a payment structure, a start and end date, the number of animals, a schedule of weighing, veterinary inputs and breeding management amongst others. The enterprise can be carried out in tandem to an existing sheep enterprise on the farm. An out-farm or specific area of the farm could be devoted to contract rearing. Essentially the rearing period can be broken down into five stages: calf rearing; first grazing season; first winter; second grazing season and second winter. The rearing periods need to be borne in mind when planning a rate of payment. The benefits to the rearer in contract rearing are: regular cashflow, no money tied up in stock, easy stock to manage, increased output per hectare and increased farm profit.

Long-term leasing is where a farmer or landowner leases or partially leases out land on a long-term basis. Leasing is an attractive option to established farmers as they can better justify any required investment in the land in order to get a financial return.

Benefits to lessor

The key benefit to the lessor is that the income received from a long-term land lease and the value of any Basic Payment Entitlements is tax free income subject to the limits set out in Table 1.

Benefits to lessee

The key benefit to the lessee is that the long-term lease provides security of tenure for long-term planning of the farm business.The extended term of lease allowable under the new provisions mean that the lessee can look at investment in the land in a new light.

Capital Gains Tax - restructuring relief

Capital Gains Tax relief (CGT) aims to encourage farmers with fragmented farms to consolidate their holdings. The relief is only available on the sale and purchase of qualifying lands that meet the key criteria of the scheme. This relief should be given serious consideration by farmers in parts of the country where farm fragmentation is an issue.

Collaborative farming has wide ranging benefits for the farmers who get involved. The key to long-term success is mutual benefits to all members. The challenge for most farmers in Ireland is a change of mindset and the establishment of a strong working relationship with their fellow collaborating farmers.