For the vast majority of individuals who seek to be farmers in their own account, but come from non-farming backgrounds, agricultural tenancies provide the main opportunity for routes into the industry.
Whilst share farming, share partnerships, and contract farming arrangements are all helpful at the margin, it is only within the security of an agricultural tenancy that farm businesses without access to owned land can become established, remain sustainable, progress and improve. Of course, prior to stepping into their tenancies it will be vitally important for these new entrant farmers to have gained necessary experience before taking on their own businesses.
In its intrinsic separation of the functions of land ownership and land management, the landlord/tenant system in agriculture allows individuals to focus on their specific expertise. Landowners concerned about long-term capital values and sustainable land use can articulate those aspirations through the terms of the tenancy agreements they seek to put in place with farm tenants.
Tenants can use their business acumen and farming skills to invest in and use the land to create an annual profit from which they are able to pay a sustainable rent. Tenancy arrangements have worked well for major institutional landowners such as the National Trust, Crown Estate, Duchy of Cornwall and Duchy of Lancaster. They also offer a great way for retiring owner occupier farmers to stay connected with their land whilst offering opportunity to others to start and progress their farming businesses.
The landlord/tenant system also provides liquidity to the most fixed factor of production in agriculture – land.
Farm businesses looking to expand or contract can use the flexibility of the landlord/tenant system to meet their objectives without having to be concerned about issues of land ownership. You don’t have to own the asset to farm the asset. There are many individuals who wish to retain a long-term interest in owning land without wanting to have the responsibility to farm and manage it on a day-to-day basis. There are also many who lack the necessary capital to acquire land outright to allow their businesses to expand. The landlord/tenant system provides the fluidity for the best economic outcomes to be achieved.
Landlord/tenant relationships in agriculture work best if the parties involved choose to take a partnership approach. Those seeking opportunities must have grit, determination, perseverance and demonstratable practical and business skills. They need to be met by landowners who are prepared to offer genuine opportunity with long-term flexibility so that both gain from the relationship as it progresses.
Perhaps there will be an opportunity, at least in England, from the forthcoming DEFRA Basic Payment Lump Sum Exit Scheme which could encourage some owner occupiers, without potential successors, to exit the industry but hold on to the ownership of their farms. If DEFRA was to allow owner occupiers to participate in the scheme on the basis that they were prepared to offer at least 10-year opportunities for new and progressing farm tenants, this would help to assuage the mismatch between the demand for and supply of opportunities that currently exist.