and what does this mean for the future of Agriculture?
Farming businesses and farmers are often said to be asset rich and cash poor, and we all know that it is difficult for young people to start farming businesses without significant financial assistance. So how much capital do farmers have tied up in their businesses?
Taking figures produced for the Farm Business Survey, we have summarised the capital that a tenant would require to allow them to farm. The table below shows the capital required per hectare, and poultry farms over £6,000 per hectare.
Breakdown of working capital required per type of farm (excluding land and buildings).
In total, tenant’s capital for an average farm varies from around £150,000 for beef and sheep farms, to about £500,000 for dairy farms.
Assuming that a tenant would borrow half of the capital required from a bank, then the minimum capital needed to start sheep or beef farming is about £75,000, and for a dairy farm this is £250,000. Given the capital required and the lack of available land, it is little wonder that there are few people starting up farming businesses without significant assistance.
For a healthy farming industry in the future, it would be great is established farmers could enter into some sort of share farming agreement, or tenancy, or joint venture to assist the young and the keen to get started.
For more information on “how much capital is tied up in farming business and what does this mean for the future of agriculture”, please get in touch with Iain McVicar or any of our expert Agricultural Team.