FOR RETIRING FARMERS AND THEIR FAMILIES

How is a share farm split? The usual shares, and what changes them

The split follows the risk. Whoever carries more of the costs carries more of the risk, and takes more of the income.

In the usual arrangement the owner brings the land and the major infrastructure, and the sharefarmer brings the labour, management and usually the machinery. Inputs like seed, fertiliser and chemical are shared in agreed proportions. What the farm produces is split on an agreed share, and that share follows who carries the cost and the risk.

The right split depends on your country, your season, your enterprise and what each of you brings. Copy a figure from another farm and you're guessing about yours.

If a proposed split doesn't reflect who is actually carrying the cost, one of you is being asked to subsidise the other.

Here's a made up example

Picture one cropping and livestock farm. The owners want to stay on the place, and they can't do the work any more, so a farming couple from nearby takes it on.

Both sides pay for the seed, the fertiliser and the herbicide. The couple bring all the labour and pay for the machinery. They agree an even split of the profit, the share those two sides struck for this place.

The irrigation needs an upgrade. The owners pay for it up front, and the couple offset part of that cost for each year the agreement runs, up to an agreed cap.

Yours has to fit what the two of you are carrying.

What changes the split

• Who pays for the inputs. The side that funds more of the seed, fertiliser, chemical and fuel carries more of the risk, and takes more of the income.
• Who owns the machinery. A sharefarmer who brings a full set of gear is carrying a real cost, and the split should show it.
• The reverse version. Some owners fund all the inputs, and the operator brings only machinery and labour and takes a smaller share. It costs the owner less than paying full contract rates, and it lets an operator farm at scale without the input risk.
• Livestock, and a pathway. The sharefarmer can start with a smaller share of the herd and build it by putting profit back into stock. Once they own around half the herd, the agreement can move to an even split of costs and income. More risk, more return, earned over time, and only if that pathway is written into the agreement at the start.
• Improvements. Soil work, weed control and infrastructure upgrades can lift the land's value past the life of the agreement. If the sharefarmer pays for them, they're building the owner's capital without the long term benefit, so settle it at the start.

Check the farm can carry two incomes

This is the hard limit, and it's arithmetic. There has to be enough income to split, and plenty of farms can't carry a sharefarmer and an owner. Work the numbers before you talk terms.

The full guide, Ageing on Farm, is free at cultivatefarms.com/resources.

You can build your own plan at cultivatefarms.com/plan.