Ploughing your own furrow


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Unearthing a blueprint for new entrants striving to establish their own farm business in the UK

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Ploughing your own furrow

  1. 1.        PLOUGHING  YOUR  OWN  FURROW:   Unearthing  the  blueprint  for  new  entrants  striving   to  establish  their  own  farm  business  in  the  UK.             G e o r g e   B r o w n                                 A p r i l   2 0 1 2  
  2. 2.             ACKNOWLEDGEMENTS   I   am   grateful   to   a   number   of   individuals   who   have   been   incredibly   patient   in   answering   my   many   and   varied   questions.     While   the   views   presented   here   do   not   necessarily   reflect   their   own,  they  have  been  invaluable  in  shaping  arguments  in  this  study.    They  include:     • Ruth  Layton  of  FAI  Farms,     • Mike  Gooding  of  FAI  Farms,  Chairman  of  the  Oxford  Farming  Conference  Council  2012   • Charles  Baines  of  Laurence  Gould   • Alison  Rickett,  National  Fresh  Start  Coordinator   • Richard  Gooding  of  BQP   • Martin  Law  of  Hardcastle  Burton   • Jim  Baird,  Nuffield  Scholar  2011   • George  Dunn,  Chief  Executive  of  the  TFA   • Oliver  Hardwood,  Chief  Surveyor  at  the  CLA   • Rupert  Clark,  Partner  and  Head  of  Rural  Estate  Management  at  Smiths  Gore   • Ian  Pigott,  Nuffield  Scholar  2002  and  Founder  of  Open  Farm  Sunday   • Sarah  Palmer,  NFYFC  Agriculture  and  Rural  Affairs  Officer   I   am   also   extremely   grateful   to   the   farmers   who   agreed   to   be   case   studies   in   this   project.     They   provided   me   with   a   fantastic   array   of   information   and   are   some   of   the   most   inspirational   people  I  have  ever  met.    They  are  listed  in  the  appendices  at  the  end  of  this  study.   Finally   I   would   like   to   thank   my   college   for   their   support   in   funding   some   of   the   travel   expenses   incurred   in   undertaking   this   research,   and   Mary   Young,   my   long   suffering   dissertation  supervisor,  for  all  of  her  help  in  developing  this  report.     2  
  3. 3.         CONTENTS   Introduction   4   Literature  Review   5   Methodology   11   Data  Presentation   12   The  Blueprint  –  Land   15   The  Blueprint  –  Capital   24   The  Blueprint  –  Output   29   The  Blueprint  –  Labour   34   Conclusion   38   Endnote   42   Bibliography   43   Appendices   49         3  
  4. 4.   INTRODUCTION  Concern   over   the   number   of   young   people   pursuing   careers   in   agriculture   has   recently  received   much   attention   in   the   farming   press.     A   number   of   factors   have   been   highlighted   as  contributing  towards  the  aging  agricultural  workforce,  but  to  date  the  literature  available  has  offered  little  in  the  way  of  practical  guidance  for  new  entrants  striving  to  establish  their  own  farm  business.    Two  quotations  succinctly  contextualise  this  issue,  and  consequently  clarify  the  aim  of  this  dissertation.   “Encouraging   the   next   generation   to   be   motivated   about   starting   their   own   business   is   vital   to   building   a   stronger   future   for   British   farming.     We   need   young  people  with  ideas,  ambition,  commercial  acumen,  skills  and  drive,  if  the   challenge  of  producing  more  food  and  impacting  on  the  environment  less  is  to   be  realised.”  (King,  2011)     “This  winter  [2011/2012],  CAP  reform  aside,  I  have  heard  more  presentations   on   ‘new   entrants’   than   anything   else.     The   subject   is   hugely   important,   but   I   have  been  disappointed  by  the  array  of  papers  I  have  heard.    None  have  offered   any  substance  beyond  rhetoric  and  utopian  wishes.”  (Pigott,  2011)    This  paper  seeks  to  look  beyond  the  “rhetoric  and  utopian  wishes”  and  uncover  the  practical  means  by  which  new  entrants  to  agriculture  to  establish  a  thriving  farm  business?  Definitions   “There   are   three   recognised   routes   to   farm   ownership:   patrimony,   matrimony   and     parsimony.”  (Shadbolt  and  Martin,  2005,  p270)    The   terms   ‘new   entrant’   and   ‘young   farmer’   shall   be   used   interchangeably   throughout   this  analysis.    Art.  8  Council  Regulation  Ec  1257/1999  defines  a  young  farmer  as  someone  under  40  years  of  age,  possessing  adequate  occupational  skills,  setting  up  as  the  established  head  on  an  economically  viable1  agricultural  holding  for  the  first  time.    While  this  definition  is  not  without  fault2,  it  nonetheless  serves  as  an  adequate  guideline  in  defining  the  type  of  person  described  as   being   a   ‘new   entrant’   in   this   paper.     Nevertheless,   more   simply,   how   can   ambitious   young                                                                                                                  1  ‘Economically  viable’  is  defined  as  fulfuling  one  of  the  thresholds  given  in  Regulation  (EC)  No  1166/2008  ANNEX  II,  namely  that  the  holding  consists  of  more  than  5  hectares  of  agricultural  land,  one  hectare  of  orchards,  0.5  hectares  of  vegetables  or  0.1  hectares  of  protected  crops,  or  more  than  10  cows,  50  pigs,  20  sheep,  20  goats,  or  1,000  poultry.    The  same  criteria  are  also  used  by  DEFRA  (2010)  to  define  the  minimum  threshold  deemed  to  be  ‘commercial’.  2  For  example,  a  ‘new  entrant’  may  not  be  establishing  themselves  as  the  head  of  the  holding  straight  away,  or  may  have  already  gained  a  delicate  foothold  in  the  industry  but  still  face  a  number  of  obstacles  that  are  the  same  as  those  faced  by  someone  deemed  to  be  a  ‘new  entrant’  (TFF,  2008),     4  
  5. 5.  people  with  little  prospect  of  acquiring  a  farming  enterprise  through  patrimony  or  matrimony,  assist  themselves  in  developing  a  farm  business?    A  health  warning     “[T]he  first  rule  of  first  generation  farming  is  you  don’t  whinge  –  it’s  up  to  you  and  no   one  else.”  (Blanche,  2011,  p11)      While   it   will   be   demonstrated   that   a   number   of   factors   currently   make   it   difficult   for   new  entrants   to   establish   a   farm   business,   it   is   not   the   intention   of   this   paper   to   criticise   current  policy  or  campaign  for  reform.    Instead  the  aim  is  to  analyse  solutions  to  the  barriers  to  entry  as   they   currently   exist.     To   many   these   metaphorical   hurdles   seem   insurmountable,   and   it   is  therefore   hoped   this   dissertation   will   examine   some   of   the   ways   in   which   successful   new  entrants  have,  and  can,  overcome  them.  This  analysis  will  not  seek  to  unearth  a  single  ‘best’  solution;  farming  is  an  incredibly  diverse  industry  therefore  a  one-­‐size-­‐fits-­‐all  answer  is  unlikely  to  exist.    That  said,  there  are  a  number  of   common   issues   facing   new   entrants,   thus   it   is   not   unreasonable   to   suggest   that   there   may  also  be  a  number  of  common  solutions.         LITERATURE  REVIEW    Agriculture’s  labour  force   “[T]he   industry   is   facing   a   recruitment   and   succession   crisis   with   the   average   age   of     farmers  in  the  UK  at  58  and  rising.”  (The  National  Trust,  2001,  p2)  In  England,  52%  of  farmers  are  aged  over  55,  compared  to  just  22%  of  the  self-­‐employed  urban  workforce   (ADAS,   2004).     Nationally,   the   median   age   of   farm   holders3   varies   from   55   to   60  years  across  all   farm   types   (DEFRA,   2011),  and  almost  half  of  National  Trust  tenant  famers   are  past  retirement  age  or  within  10  years  of  it  (The  National  Trust,  2008).      The  problem  extends  beyond  just  the  age  of  farm  holders.    In  the  UK  a  quarter  of  the  sector’s  workforce  is  55  or  older4  (LANTRA,  2011a).    Across  Europe  this  figure  is  higher  still,  with  47%  of  agricultural  workers  in  the  EU-­‐15  being  55  years  or  older  (DGARD,  2010),  and  while  there  has   been   a   decrease   in   the   total   number   of   farmers   by   9%   from   2000-­‐2007,   the   number   of  farmers  under  the  age  of  35  has  fallen  by  42%  in  this  same  period  (DGARD,  2010).                                                                                                                  3  The  ‘holder’  being  defined  as  the  person  in  whose  name  the  holding  is  operated  (DEFRA,  2011)  4  Compared  to  a  UK  average  of  17%     5  
  6. 6.  British   further   and   higher   education   institutions   have   been   producing   just   50-­‐70%   of   the  recruits   that   UK   employers   need5   (Spedding,   2009),   and   the   National   Employer   Skills   Survey  2009   revealed   that   8%   of   UK   agricultural   industry   employers   had   a   vacancy   at   the   time  (LANTRA,  2011b).  Farming   is   ‘crying   out’   for   new   entrants   (Tasker,   2011).       Forecasts   suggest   that   the   UK  agricultural   industry   will   need   approximately   60,000   new   entrants   coming   into   the   sector  between  2010  and  2020  (LANTRA,  2009;  Spedding,  2009;  LANTRA,  2011a),  and  it  is  apparent  that   even   if   overall   employment   in   agriculture   does   continue   to   decline6,   there   will   still   be   a  significant  demand  to  replace  those  who  are  exiting  from  the  sector  (Spedding,  2009).      The  significance  of  an  aging  agricultural  workforce     “The  key  to  developing  an  agricultural  industry  we  can  be  truly  proud  of  in  a  worldwide   context   is   innovation.     They   key   to   innovation   is   new   ideas   and   individuals   willing   to     develop  these  ideas  with  dynamism.    Innovation  is  a  dish  best  served  by  the  desperate   and   the   different,   those   with   little   to   lose   but   a   massive   need   to   succeed.”   (Blanche,   2011,  p7)    Dwindling   entry   of   such   magnitude   normally   characterises   an   industry   in   decline   (Gale,   1993),  however   as   agriculture   and   food   are   strategic   sectors   impacting   significantly   upon   rural  communities  and  the  British  economy  (ADAS,  2004;  Williams,  2006;  Price’s  Trust,  2008;  CEJA,  2011),   this   degeneration   cannot   be   allowed   to   occur   unchecked.     Farming   needs   to   attract  progressive   and   entrepreneurial   individuals   with   outstanding   business   management   skills,  who  embrace  change  and  steer  the  political  agenda  (Spedding,  2006,  2009).  Studies   have   identified   age   as   a   barrier   to   the   introduction   of   more   effective   and   efficient  management  practices  (Foskey,  2005  cited  in  Owen,  2009)  and  it  is  noted  that  the  innovative,  entrepreneurial   and   risk   taking   abilities   of   new   entrants   are   beneficial   to   the   industry  (Shadbolt   and   Martin,   2005;   Owen,   2009).     Younger   farmers   have   been   shown   to   be   better  trained   than   their   older   counterparts7   (DGARD,   2010),   and   new   entrants   are   also   considered  more  adaptable  and  more  focussed  on  longer-­‐term  success  (Williams,  2006).    Farmers  below  35  years  old  also  show  40%  more  economic  potential  than  their  superiors  (DGARD,  2010).                                                                                                                      5  Although  is  should  be  noted  that  enrollment  on  agriculture  and  related  courses  has  recently  increased,  and  in  fact  saw  the  greatest  percentage  increase  across  undergraduate  courses  between  2009/10  and  1010/11  (HESA,  2012)  6  Which  would  seem  likely  given  that  it  is  a  near-­‐universal  feature  that  the  percentage  of  the  population  involved  in  agriculture  declines  with  a  nation’s  increasing  economic  development  (ADAS,  2004)  7  “The  share  of  farmers  with  full  agricultural  training  decreases  with  increasing  age  of  the  farmer”  (DGARD,  2010  p.21)     6  
  7. 7.  Moreover,   Lobley   et   al.   (2002)   categorised   farmers   into   3   groups:   those   who   ‘embrace’   change  (31%   of   respondents),   those   who   change   in   response   to   new   pressures   and   opportunities  (‘reactors/adaptors’,  51%)  and  those  who  ‘resist’  change  (18%).    While  every  age  group  could  be   found   in   each   category,   ‘embracers’   were   generally   shown   to   be   better   educated8,  “somewhat   younger”   and   on   bigger   farms9.     This   goes   some   way   towards   explaining   why,  despite  the  fall  in  number  of  young  farmers  across  the  EU-­‐12,  there  has  been  an  increase  in  the  area  farmed  by  them,  implying  that  those  few  who  have  stayed  in  business  have  increased  the  size   of   their   holdings   (DGARD,   2010)   and   that   it   is   they   who   are   therefore   achieving   the  economies   of   scale   required   to   keep   many   farm   businesses   viable.     Lobley   et   al.,   (2002)   also  found  that  ‘static’  businesses  were  far  less  likely  to  be  operated  by  young  farmers10,  suggesting  that  an  ambitious  young  workforce  could  strengthen  a  dynamic  agricultural  industry.  Thus,  the  main  reason  that  the  aging  agricultural  workforce  is  an  area  of  policy  concern  is  the  association   of   young   farmers   with   increased   efficiency,   adaptability   and   ultimately  competitiveness   (ADAS,   2004).   “Young   people   matter   for   farming;   we   need   their   vitality   and  new   ideas   to   help   meet   the   challenges   of   increasing   food   production   and   climate   change”  (Princes  Trust,  2008,  p.2).      Of  course  there  remains  a  place  for  the  older  generation  in  farming;  their  wealth  of  skills  and  experience   is   undoubtedly   beneficial.     Nevertheless,   there   is   a   strong   body   of   evidence  suggesting   that   it   would   be   advantageous   for   the   average   age   of   the   industry   to   be   reduced.    After   all,   what   looks   like   a   daunting   future   to   a   60-­‐year-­‐old   farmer   may   represent   a   golden  opportunity  to  a  driven  30-­‐year-­‐old  (Chamberlain,  2006;  Spedding  2006).  Factors  discouraging  entry  to  agriculture   “Most  people  imagine  farmers  to  be  dull,  conventional,  conservative  and  Conservative.”     (Naylor,  2011)    A   number   of   negative   stereotypes   discourage   prospective   new   entrants   from   considering  careers  in  farming.    There  is  a  perception  that  agricultural  employment  involves  working  long                                                                                                                  8  71%  of  embracers  had  some  post-­‐school  education  or  training,  and  44%  were  educated  to  diploma  or  degree  level  (compared  to  11%  of    ‘resistors’)  (Lobley  et  al.,  2002)  9  Embracers  represented  31%  of  the  respondents,  but  were  responsible  for  45%  of  the  area  surveyed  (Lobley  et  al.,  2002)  10  Only  18%  of  operators  of  static  businesses  were  aged  under  45,  while  73%  of  static  businesses  had  been  in  the  hands  of  their  current  operator  for  20  years  or  more  (Lobley,  et  al.,  2002).     7  
  8. 8.  hours11   for   low   wages   (Padwick,   2010;   IGD,   2008   cited   in   DEFRA,   2010),   and   that   it   is   a   low  skilled   industry12   (Curry,   et   al.,   2002;   Kyle,   2006),   needing   to   become   more   professional  (Spedding,  2006).    The  result  is  that  potential  new  entrants  don’t  believe  farming  offers  them  a  future  (The  National  Trust,  2008),  and  there  is  strong  consensus  that  the  industry  is  struggling  with  an  out-­‐dated  image  (Spedding,  2009).  Nonetheless,   although   beneficial   in   understanding   the   context,   combating   the   stereotypes  surrounding   agricultural   employment   is   an   entire   issue   in   itself,   beyond   the   scope   of   this  evaluation.     Of   greater   relevance   to   this   study   are   the   practical   problems   facing   prospective  farmers   that   have   served   to   discourage   entry   into   the   industry   and   therefore   encourage   an  aging  workforce.    There  are  two  key  problems  in  this  area:  the  poor  availability  of  land  and  the  high  start  up  costs  of  establishing  a  farm  business  (Williams,  2006;  Ilbery,  2009;  DGARD,  2010;  Blanche,  2011),  the  two  issues  being  closely  linked.  UK  farmland  supply  in  relation  to  new  entrants   “Without   doubt,   access   to   land   remains   the   single   greatest   structural   obstacle   facing     the  new  generations  of  farmers  and  growers.”  (Payne,  2012)    Older   farmers   in   the   industry   who   don’t   want   to   retire   restrict   the   ‘room’   available   for   new  entrants  (Owen  and  Cowap,  2009).    Retirement  from  farming  is  often  a  progressive,  drawn-­‐out  affair,  different  from  the  dramatic  change  in  lifestyle  often  experienced,  for  example,  by  blue-­‐collar   workers   (ADAS,   2004).     Indeed,   Errington   (2002)   identified   a   “succession   ladder”   within  farm  businesses,  where  retirement  of  the  older  party  is  protracted  over  5  stages13.                                                                                                                  11  ONS  statistics  show  the  average  working  week  in  the  agriculture  and  fishing  sector  is  46.4  hours,  (compared  to  a  national  average  of  31.7  hours  per  week  in  the  period  April-­‐Jun  2011)  and  rises  to  50.8  hours  when  only  the  hours  worked  by  men    (who,  after  all,  account  for  77%  of  the  workforce  in  agriculture  (LANTRA,  2011b))  are  considered  (ONS,  2011b).    The  average  number  of  hours  worked  by  employees  in  agriculture  climbs  further  still  when  farm  workers  specifically  are  calculated,  rising  to  52  hours  per  week.    On  top  of  this,  during  peak  times  the  average  number  of  hours  in  a  farm  worker’s  week  escalates  to  80  hours,  with  23%  of  them  working  100+  hours  in  their  peak  week  (Padwick,  2010)  12  In  spite  of  the  considerable  skill  level  within  the  industry,  only  20%  of  the  workforce  are  qualified  to  level  4  and  above,  and  24%  have  no  qualifications.    This  is  compared  with  36%  and  7%  respectively  across  all  sectors  in  the  UK.  (Higher  Education  Statistics  Agency  cited  in  LANTRA,  2011b)  13  First  technical  and  tactical  decisions  are  shared,  such  as  day  to  day  planning  and  organisation  of  work.    Secondly  the  successor  becomes  involved  in  strategic  planning  of  the  business  and  in  long  term  decision  making.    Then  employment  and  staff  management  decisions  are  shared,  before  fourthly  the  successor  becomes  directly  involved  in  financial  matters  such  as  negotiating  sales  and  loans.    The  fifth  and  final  stage  in  completing  succession  of  the  farm     8  
  9. 9.  Personal   reasons   that   discourage   the   retirement   of   older   partners   from   farms   include   their  enjoyment   of   farming,   a   desire   to   maintain   control,   general   inertia,   their   ability   to   work   to   a  greater   age   and   emotional   ties   to   the   business   (ADAS,   2004;   Baird,   2011;   Hanson,   2011).    Financial   issues   such   as   being   unable   to   afford   to   retire,   an   inadequate   pension,   subsidies  cushioning   risk   (Mishra   and   El-­‐Osta,   2008,)   and   inheritance   tax   advantages   are   seen   to   further  delay   retirement,   as   do   practical   problems   such   as   the   lack   of   a   successor14   (Williams,   2006;  Ilbery,   et   al.,   2009).     Thus,   for   many   reasons   farmers   may   avoid   retirement,   restricting   the  supply  of  land  for  new  entrants.  Combined  with  this  is  the  difficulty  new  entrants  face  in  obtaining  tenancies  from  traditional  sources.    While  the  National  Trust  owns  245,000  hectares  of  countryside15  (The  National  Trust,  2001),   turnover   of   Trust   farms   is   slow16   (The   National   Trust,   2008).   County   Council  Smallholdings   (county   farms)   are   also   hard   to   come   by,   with   the   number   having   fallen   by  72.5%  from  1964-­‐2007  (Ilbery,  et  al.,  2009)  as  holdings  were  sold  off  or  amalgamated  to  create  bigger  units17  (Gemmill,  2005;  Ilbery,  et  al.,  2009;  LANTRA,  2009;  TFA,  2010;  RICS,  2011a).  The  options   open   to   new   entrants   to   acquire   land   through   these   two   traditional   routes   are  therefore  negligible.  Simultaneously,  land  values  have  been  climbing.    It  is  generally  accepted  that  farmland  prices  are   high   in   relation   to   their   potential   productive   agricultural   return   (ADAS,   2004;   Gemmill,  2005;   Shadbolt   and   Martin,   2005),   and   they   reached   record   highs   in   the   first   half   of   201118  fuelled  by  increasing  demand  from  commercial  buyers  (RICS,  2011b).    Referred  to  as  being  like  “gold  with  a  cash  flow”  (Farming  Today,  2012),  land  remains  a  prime  asset  class  in  turbulent  markets  (RICS,  2011b)  and  commercial  buyers  continue  to  invest  in  order  to  increase  output  and  capitalise  upon  strong  commodity  prices.    Residential  demand  also  remains  firm,  with  the                                                                                                                                                                                                                                                                                                                                                                                      business  occurs  when  the  successor  is  finally  given  control  of  the  purse  strings,  and  control  of  the  cheque  book  is  relinquished  (Errington,  2002).  14  Due  to  children  from  farming  families  electing  other  career  paths,  there  being  no  other  family  members  wanting  to  take  up  the  reigns,  or  the  business  being  unable  to  sustain  the  involvement  of  another  partner  (Williams,  2006).  15  60%  of  which  is  let  out  as  whole  farms  to  700  tenants  (The  National  Trust,  2001)  16  Only  ten  to  fifteen  National  Trust  farms  become  available  to  let  each  year  (The  National  Trust  2008)  17  Currently  the  national  estate  stands  at  less  than  125,000  hectares,  with  Cambrigeshire  Country  Council  owning  more  than  10%  of  this;  holding  an  estate  of  13,500  hectares    (Cambridgeshire  County  Council,  2011a).    However  even  in  Cambridgeshire,  just  3  new  tenants  were  taken  onto  County  Council  farms  during  2011,  illustrating  how  few  holdings  are  available  (Cambridgeshire  County  Council,  2011b).  18  At  £7,479  per  acre  for  land  which  includes  a  residential  component,  and  a  hypothetical  £6,115  per  acre  for  pure  bare  land  values  (RICS,  2011b)     9  
  10. 10.  ‘lifestyle   value’   of   land   being   high   (Ingram   and   Kirwan,   2011)   particularly   in   areas   close   to  large   conurbations.     Thus   it   is   apparent   that   the   demand   for   farmland   from   commercial   and  lifestyle   buyers   contributes   to   higher   land   values   that   price   many   young   farmers   out   of   the  market.  A  remaining  option  for  new  entrants  is  to  rent  land  under  Farm  Business  Tenancies19  (FBTs).    Created  to  reduce  tenant  immobility  and  thus  encourage  the  letting  of  agricultural  land  (ADAS,  2004),   FBTs   theoretically   offer   new   entrants   the   opportunity   to   farm.     However,   in   helping  young  farmers  the  effects  of  the  ATA  1995  have  been  ‘disappointing’  (Whitehead,  et  al.,  2002;  TRIG,  2003).    When  FBTs  do  become  available,  demand  for  land  from  neighbouring  farmers  is  often  high  as  they  anticipate  being  able  to  increase  output  without  much  increase  in  fixed  costs  (ADAS,  2004)  thus  meaning  they  can  outbid  new  entrants.    The  result  is  that  new  entrants  “feel  barred  to  a  great  extent  from  taking  up  such  opportunities  because  of  the  high  rents  and  stiff  competition   from   established   farmers   for   the   FBTs   available”(Whitehead,   et   al.,   2002,   p60).    Furthermore,   the   short   duration   of   many   FBTs20   (Ingram   and   Kirwan,   2011;   Walker,   2011)  prevents  tenants  from  planning  for  the  long  term.  Capital  costs  of  farm  business  establishment   ‘For  the  group  of  former  students  not  brought  up  on  a  farm  but  who  had     intended  to  enter  farming,  lack  of  capital  was  the  main  constraint”  (ADAS,   2004)    There  are  large  capital  costs  associated  with  building  many  farm  businesses,  and  it  is  generally  the  excessive  fixed  costs  rather  than  high  variable  costs  that  are  problematic  for  new  entrants  (Shadbolt   and   Martin,   2005).     For   example,   to   purchase   11721   freshly   calved   dairy   cows   at   July  2011  prices22,  would  cost  £151,398  and  that  is  before  any  of  the  infrastructure  necessary  for  their   management   has   been   purchased.   Put   in   perspective,   this   figure   is   almost   7   times   the  average   annual   salary   of   a   farm   worker   (Padwick,   2010),   reinforcing   how   large   this   capital  threshold   is   likely   to   seem   to   prospective   young   farmers   seeking   to   develop   their   own   farming  enterprise.      Additionally,  new  entrants  suffer  from  diseconomies  of  scale  in  establishing  their  businesses,  meaning   that   their   capital   costs   are   comparatively   higher   than   those   of   larger   producers                                                                                                                  19  Introduced  by  the  Agricultural  Tenancies  Act  1995  (ATA  1995)  20  The  average  length  of  FBTs  is  now  consistently  under  four  years  (TFA,  2010;  RICS,  2011a)  21  The  UK  average  dairy  herd  size  in  the  2010  June  Census  was  117  cows  (DairyCo,  2011)  22  The  average  price  of  freshly  calved  dairy  cows  in  July  2011  was  £1,294/head  (AHDB,  2011)     10  
  11. 11.  (ADAS,   2004;   Shadbolt   and   Martin,   2005).     The   capital   costs   in   starting   a   farm   business   are  therefore  a  significant  ‘barrier  to  entry’  faced  by  new  entrants.  Agricultural  subsidisation   “I   have   never   been   comfortable   with   agricultural   subsidies…   They   diminish   the     impetus   to   innovate,   they   protect   inefficiency   and   therefore   reduce   business   fluidity.”  (Baird,  2011,  p8)    Currently   the   Common   Agricultural   Policy   (CAP)   presents   new   entrants   with   a   number   of  problems,  not  least  that  subsidies  are  capitalised  in  land  and  asset  values,  increasing  the  cost  of  farm   business   establishment   and   expansion   (Baird,   2011).     In   recognition   of   the   difficulties  faced  by  new  entrants,  it  is  expected  that  the  forthcoming  CAP  reforms  will  offer  more  support  for   young   farmers,   most   likely   under   Pillar   2.     However,   while   any   such   measures   will   be  beneficial,   the   current   playing   field   is   so   far   from   being   level   that   any   changes   to   the  subsidisation  scheme  are  unlikely  to  make  it  easy  for  new  entrants.    Thus,  the  ultimate  success  of  any  new  entrant  will  still  depend  more  on  the  “skills,  vision,  determination  and  budgetary  controls”  of  the  young  farmer  than  the  particular  subsidy  on  offer  (Gemmill,  2005,  p4).      This  being  the  case,  what  are  the  options  for  new  entrants  looking  to  overcome  these  barriers  and  establish  their  own  farm  business?           METHODOLOGY     “The  problems  that  are  studied  are  real  ones  to  farmers,  and  so  must  be  studied  in  the     context  of  a  real  world  situation.    Therefore,  the  case-­‐study  approach  cannot  easily  be     divorced  from  the  study  of  farm  management.”  (Shadbolt  and  Martin,  2005,  p11)    The   ‘transdisciplinary’   nature   of   farming23   makes   case-­‐study   based   analysis   essential   in  understanding   farm   business   decision   making   (Shadbolt   and   Martin,   2005),   and   solutions   to  the  practical  difficulties  that  face  young  farmers  today  are  best  identified  through  analysing  the  means   by   which   previous   new   entrants   have   overcome   similar   hurdles.     A   number   of  exceptional   individuals   have   managed   to   develop   farm   businesses,   and   so   it   is   hoped   that  through   interviewing   these   new   entrants   and   understanding   the   variables   that   have  contributed  towards  their  success,  a  number  of  common  factors  have  been  identified  that  could  be  replicated  by  future  young  farmers  looking  to  emulate  their  achievements.                                                                                                                      23  Describing  how  successful  farm  management  draws  upon  many  different  disciplines  to  resolve  a  variety  of  problems  (Shadbolt  and  Martin,  2005)     11  
  12. 12.  Such   exceptional   individuals   are   often   highlighted   in   the   farming   press   so   some   have   been  identified   by   this   means.     However,   further   case   studies   were   sourced   through   contacting  prominent   individuals   within   the   industry   and   seeking   recommendations   from   them,   in   the  process  also  drawing  on  their  own  expertise  in  relation  to  this  topic.  It  remains  the  proximal  aim  of  this  study  to  ‘unearth  a  blueprint’  for  young  farmers  seeking  to  develop  their  own  farm  businesses.    While  in  reality  it  may  not  be  possible  to  establish  a  single  ‘best’   template   for   prospective   new   entrants,   to   attempt   to   base   such   a   blueprint   of   the  experiences   of   suboptimal   businesses   would   seem   somewhat   futile.     Accordingly   this   study  remains   focused   on   an   exceptional   minority   of   successful   young   farmers   in   the   hope   that  identifiable  common  factors  can  be  replicated  by  a  wider  majority  of  new  entrants.  Biophysical,  financial  and  human  resources  are  all  employed  in  a  farm  business  (Shadbolt  and  Martin,   2005)   and   conventional   economic   terminology   suggests   these   can   be   classified   as   land,  capital   and   labour.   This   analysis   therefore   evaluates   the   options   available   to   new   entrants  looking  to  resolve  issues  relating  to  land  and  capital  before  discussing  the  output  options  best  suited   to   young   farmers   and   addressing   how   human   factors   influence   the   success   of   new  entrants  to  agriculture.    There  is  currently  a  dearth  of  literature  on  this  topic.    It  is  relatively  easy  to  find  information  on  the  problems  faced  by  new  entrants  and  the  need  for  young  farmers;  it  is  even  relatively  easy  to   find   examples   of   new   entrants   who   are   establishing   their   own   farm   business.       However,  there  is  a  shortage  of  literature  that  coherently  breaks  down  the  issues  and  offers  supported  solutions  (Pigott,  2011),  and  as  such  it  is  hoped  that  this  study  does  just  that.     Data  Presentation  Having   undertaken   the   semi-­‐structured   interviews   and   compiled   a   range   of   case   studies,   it   has  been   necessary   to   categorise   and   retrofit   the   data   into   workable   groups.     Primarily   for  analytical  reasons,  the  data  has  been  collated  into  tables.    The  process  has  enabled  quantitative  comparisons   of   the   case   studies,   with   repeatable   trends   being   identified.     Unfortunately   the  process  resulted  in  the  loss  of  certain  nuances  of  the  data,  and  so  where  appropriate  they  will  be  highlighted  in  the  latter  sections  of  this  study.    That  said,  the  more  direct  analysis  enabled  by  the  grouping  of  the  case  studies  in  this  way,  offsets  the  regrettable  loss  of  some  of  the  data  specifics.         12  
  13. 13.  For   a   number   of   case   studies   being   involved   in   a   joint   venture   was   fundamental   in   shaping  their   business,   making   this   a   logical   initial   distinction   with   which   to   group   the   data.     Four   case  studies  fell  into  this  category  (Group  2),  and  common  variables  within  this  grouping  have  been  identified.    Although  there  were  a  number  of  other  new  entrants  whose  businesses  contained  aspects  of  ‘jointness’,  they  have  remained  in  Group  1  as  it  has  been  held  that  being  involved  in  a  joint   venture   was   not   as   fundamental   in   contributing   towards   their   successful   business  development.      Those  enterprises  left  in  Group  1  have  been  sub-­‐divided  into  2  further  groups.    Almost  all  the  businesses  in  Group  1  had  an  initial  part  time  labour  requirement  but  it  could  be  seen  that  a  number  of  the  enterprises  required  a  lower  time  commitment,  had  a  lower  capital  threshold,  were   generally   less   intensive   in   their   land   use   and   were   less   predisposed   to   offering   a  consistent   cash   flow.     These   businesses   have   been   summarised   in   Group   1(b),   while   the   others  have  remained  in  Group  1(a).  One   significant   anomaly   is   apparent   amongst   the   case   studies.     While   characteristics   of  Charlotte  and  Ben  Hollins’  farm  business  are  comparable  with  case  studies  within  Group  1(a)24,  it   would   mask   anomalous   features   of   their   accomplishments   to   include   them.     However,  aspects   of   their   success   are   undoubtedly   replicable   by   other   new   entrants   and   so   will   be  mentioned  where  appropriate  in  latter  sections.    Nevertheless,  in  being  anomalous  in  relation  to   the   groupings   in   this   study,   they   ultimately   serve   to   reinforce   that   there   is   no   single   best  means  by  which  young  farmers  can  develop  their  own  farm  enterprise.      The  grouped  data  is  presented  overleaf.                                                                                                                  24  For  example,  they  have  followed  CSA  principles,  have  utilised  rare  breeds  and  direct  marketing,  and  have  developed  customer  relations  while  employing  extensive  media  coverage     13  
  14. 14.   Group   Group  1(a)   Group  1(b)   Group   Group  2     (JV’s)   Core  Enterprise   Dairy,   Pigs,   Poultry   or   4/5  sheep     Vegetable   -­‐   higher     Core   3/4  dairy     output/better   cash     flow   Enterprise   First  Generation?   5/6  first  generation   3/5  first  generation     First   2/4/       Generation?   Formal  Agricultural   5/6  formal  agricultural   4/5   formal   agricultural   Formal   All   possessed   qualification   qualification   Qualification   Agricultural   formal     agricultural   Relevant  skills  develop-­‐ Generally  had  practical   Generally   had   practical   Qualification   qualification     ment  prior  to  enterprise   track  record   track  record   Practical   All   developed     significant   establishment   experience     practical   Sourcing  Land   4/6   prior   contacts   to   4/5   prior   contacts   to   experience,   and   Stakeholder   secure  land   secure  land   Relations   all   had   worked     abroad   Landlord  Size   All   smaller   part   of   Mixed,   often   with   land   Development   All   utilised   landlords   larger   spread   across   a   of  JV  relations   networking   portfolio/  estate   number  of  areas.   contacts   -­‐   this   is     very  important.   Under-­‐ 5/6   made   partial   or   Mixed.     Predominantly   Capital   Land   Personal   capital   Principles  of   Utilised  Land   full   use   of   previously   made   use   of   small   is   essential   –   the   land  use     underutilised  land   grazing  blocks   provision   young   farmer     "needs   to   bring   Initial  Land   Small   -­‐   5/6   on   10   acres   2/5   under   10   acres,   something   to   the   or  less   2/5  10-­‐30  acres.       Area   party"   Required   Business   Mixed   -­‐   contract   Structure   farming   Tenure   Rented,   many   short   Rented,   many   short   agreements   are   term   with   little   term  with  little  security   security  of  tenure   of  tenure   favourable,   and   partnerships   to   Sources  of  Start-­‐up   Varied,   but   some   Varied,   but   some   help   develop   Finance   personal  finance  is  key.     personal  finance  is  key.     farming   business   CSAs   and   private   Private   investors   provide   investors   appear   to   be   appear   to   be   a   good   opportunities   to   good  options   option,   plus   bank   loans   leverage   debt   if  needed   against   other   Initial   4/6   commenced   with   2/5   commenced   with   people’s  capital   Applicable  to  New  Entrants   an   enterprise   that   was   an   enterprise   that   was   Enterprise   Business   Enables   below   the   threshold   below   the   threshold   Capital   Principles  of  Finance   Size   economies   of   deemed   to   be   deemed   to   be   Development   scale   to   be   commercial   commercial   reached   much   Investment   Investment   reflects   Investment   reflects   more   quickly   tenure   security   tenure   security   and   Priorities   (these   4   are   (greater   security   relatively   low   capital   definitely   in   the   enabled   investment   in   threshold   required   to   biggest   5   assets   that   were   more   enter   the   sheep   enterprises   in   fixed  in  nature)   industry   this  study)   Cost  Control   Second   hand   Fairly   low   cost   Key  Messages   Network,   find   a   equipment,   DIY,   low   production  systems   good   system,   be   capital  production     knowledgeable,   Cash  Flow   Relatively   consistent   Relatively   seasonal   accumulate   cash   flow   (for   farming   cash  flow   capital   and   a   anyway)     Product   proven   track   Secondary   5/6   initially   had   5/5   initially   had   record,   be   good   secondary   secondary  employment   at   negotiating   Employment   employment   and   have   Rare  Breeds   4/6   made   part   or   full   2/5   made   part   or   full   exceptional   use  of  rare  breeds   use  of  rare  breeds     communicative   Direct   5/6   utilised   direct   3/5   utilised   direct   ability.     Also   be   Output   marketing   marketing   excellent   at   Marketing   Marketing   enthusing  others,   Customer   5/6   heavily   engaged   2/5   heavily   engaged   and   telling   them   Relations   with   developing   with   developing   how   great   your   consumer  relations   consumer  relations   business   idea   is.     Media   4/6   used/benefited   2/5   used/benefited   Personal   from   national   media   from   national   media   Coverage   characteristics   coverage   coverage     (labour)   are   very   Niche   6/6  in  Niches   2/5   (although   other   3   significant   in   producers   businesses   determining   the   contained   niche   success   of   a   joint   elements)   venture.         14  
  15. 15.   THE  BLUEPRINT  -­‐  LAND  Agricultural  production  is  inherently  linked  to  land  management.    Even  if  large  tracts  of  land  are   not   required   in   order   to   establish   an   agricultural   enterprise,   some   ‘space’   is   still   necessary.    Yet  acquiring  land  is  a  significant  barrier  to  entry  for  new  entrants  (Payne,  2012).    Accordingly,  this  section  will  discuss  possible  solutions  to  some  of  these  challenges.      Principles  of  Land  Use  Applicable  to  New  Entrants  1)  Making  use  of  unwanted  land   “New  entrants  are  using  marginal  land  that  no-­‐one  else  wants  to  farm.”  (Amiss,     2011,  p7)    In  order  to  establish  a  new  farm  enterprise,  young  farmers  may  initially  need  to  make  use  of  land   that   is   currently   under-­‐employed   by   existing   industry   operators.     The   majority   of   the  Group   1(a)   new   entrants   made   use   of   under-­‐utilised   plots25   and   80%   of   Group   1(b)   new  entrants   grew   or   are   growing   their   enterprises   on   relatively   small   parcels   of   often   widely  distributed  land26.    Even   the   most   efficient   farms   are   likely   to   have   a   corner   that   is   under-­‐utilised;   these   are   the  areas   on   which   new   entrants   can   grow   their   businesses,   finding   more   profitable   uses   for  otherwise   unexploited   land   parcels.     Landowners   invariably   embrace   the   additional   revenue  presented   by   utilizing   vacant   plots,   and   established   operators   in   a   given   sector   will   welcome  the   opportunity   to   diversify   income   streams.     There   are   opportunities   for   environmentally  sensitive   farming   in   woodland27   and   many   traditional   farm   buildings   are   incompatible   with  modern  agricultural  machinery  so  consequently  sit  unused28.  While   it   may   seem   counter   intuitive   to   suggest   that   a   new   entrant   who   is   already   at   a  disadvantage  because  of  their  small  size  and  lack  of  capital,  attempt  to  establish  a  business  on  a  sub-­‐optimal   plot   of   land,   it   must   be   remembered   that   there   is   likely   to   be   little   alternative.    Furthermore,  the  proposed  enterprise  needn’t  be  based  on  this  plot  forever;  initially  the  aim  is                                                                                                                  25  Ranging  from  unmanaged  areas  of  woodland  to  unused  farm  buildings  26  For  example,  one  new  entrant  is  taking  on  additional  grazing  60  miles  from  his  base,  and  another  estimates  that  in  the  last  5  years  he  has  spent  1100  hours  driving  to  and  from  his  sheep,  in  the  process  covering  a  distance  equivalent  to  twice  the  circumference  of  the  globe!  27  Pigs  and  poultry  are  obvious  examples,  but  there  is  also  scope  for  silvopasture  enterprises  28  Shifting  economic  pressures  and  agricultural  practices  have  resulted  in  many  traditional  farm  buildings  loosing  their  origincal  purpose  (HELM,  2011)     15