Centre for Rural Research Annual Review 2004 - College of Social ...

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Centre for Rural Research Annual Review 2004 - College of Social ...

farming companies. Some other arrangements have sometimes been called jointventures, for example farm business tenancies, machinery sharing, and sharemilking, but these seem to us to be distinct because they do not generateimmediate economies of scale for the whole combined farming enterprise nornecessarily involve the degree of skills sharing possible under a true joint venture.Figure 1: Simple model for a joint venture1. Two or more dairy farmers set up a company2. Most dairy farms have 1 profit and 2 cost centres3. Cost centres of ‘young stock’ and ‘forage production’ become profit centres4. Company Directors plan work schedule5. Company contracts work via purchase orders to provide income to the farmer directors6. Instead of 1 profit centre and 2 cost centres, company structure provides 3 profit centres7. Result is the farm is more profitable through achieving economies of scale, and betteruse of resources.8. Three layered agreements needed, comprising management and purchasing rulesFarmingCompanyDry cows, calving, and therearing of young stockOne larger milking unitexploiting economies of scaleSynchronised growing andharvesting of forage cropsFigure 2: Types of models to use as a basis for joint venturingPartnershipor FBTShare farmingor FBTServicecompanyContractfarmingLtd LiabilitypartnershipVariations Variations VariationsFarmbusinesspartnershipPurchasemilk fromneighbours?Cow leasing95

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