- Groundwork
- Market Engagement
- Groundwork
- Market Engagement
Will I need to partner with other farmers, and if so, how?
Once you have a vision for your farm, the environmental enhancements or changes you want to make and a sense of the related income opportunities, you may want to consider joining up with other farmers in your area to implement your outcomes at scale to attract buyers.
Aggregation models, often started among farmer clusters or as farmer cooperatives, bring together multiple farmers or landowners to collectively participate in nature markets. These models aim to harness the combined efforts and resources of farmers to maximise environmental benefits and economic opportunities. This section will introduce the factors that may influence your decision to join up with other farmers and some of the key considerations to keep in mind when setting up and participating in such a group.
This milestone contains five subsets of considerations that farmers may want to explore at this stage. Click on each of these to the right to read more.
You can also read case studies of farmers that have addressed the activities set out in this Milestone, along with other useful resources and a checklist summary of the considerations covered for ease.
Why and When to Work with Other Farmers
For some environmental projects, taking a larger scale approach with multiple farmers working together can both increase the potential environmental impact and improve access to and benefits from nature market deals. This section will help you decide whether it makes sense to engage with other farmers at this stage, either through an existing cluster group or by creating your own.
Whether you want to work alone or with others will depend on the size of your land and your vision for the environmental outcomes you hope to achieve. If the aim is to improve water quality in a local river, this may require a joined-up approach with farmers and land managers participating from across the catchment to generate sufficient impact – and to meet a beneficiary’s needs.
Carbon markets, however, typically allow for even small-scale carbon projects to be bought and sold, which may allow you to make these trades independently – although partnering with other landholders could be desirable to achieve economies of scale, like through connecting up woodlands to maximise benefits to biodiversity. Some woodland carbon projects are fewer than five acres in size and wetlands between one and three hectares can deliver nitrate reductions which can be sold on nutrient markets.
Working with other farmers to deliver your environmental outcomes can help you overcome individual limitations, such as being too small to make enough income to justify the upfront costs. Working together can also provide a collective framework for collaboration and negotiation with buyers.
Buyers, particularly large companies, prefer purchasing credits on a larger scale rather than through numerous smaller transactions to reach the scale of environmental benefit they hope to access. For instance, a large company looking to offset the CO2 emissions that they cannot reduce themselves, may want to purchase a larger amount of carbon credits than you would be able to generate on your farm. Joining up with other farmers would allow you to bring a larger number of credits to market and negotiate prices as a group, rather than as many individual farms.
By aggregating their efforts, farmers can also enhance their bargaining power, negotiate better prices, and reduce individual risk exposure. They can also benefit from knowledge sharing, capacity building, and learning from each other’s experiences in implementing sustainable land management practices and navigating the complexities of nature markets.
As an example, the Environmental Farmers Group (EFG) offers a model where member farmers share the cost of approaching buyers and share knowledge and experience. They also share the benefits of nature market deals. See EFG’s case study for this milestone below.
You can certainly start with your own farm and consider joining up with others later on, however you should be aware that your project may have developed complexities that don’t work with other farmers. It may be beneficial to join up with a small number of other farmers to begin with, to hammer out the legal and technical details of the group before expanding it.
What does an Aggregation Model Look Like?
This section will walk you through how aggregation models typically work and help you determine if you would like to join an existing group or create your own.
Aggregation models allow farmers to pool their land or resources to maximise environmental benefits and economic opportunities. Farmers interested in creating an aggregation group would first identify common interests and goals among farmers in their area, as well as ensure each farmer has the capacity and ability to carry out the necessary land use changes or land management practices. Interested farmers would then form a collective entity which could take the form of a land trust, a community interest company (a CIC), a cooperative or a limited liability company. These different collective entities are explored in detail below.
The farmers within the collective entity would then pool their land, resources and/or ecosystem services into a collective offering to be marketed to potential buyers. The collective entity representing the farmers negotiates contracts and pricing terms with buyers and ensures proper monitoring and reporting of the delivered ecosystem services. The benefits generated from the sale of ecosystem services are then distributed among the participating farmers according to predetermined arrangements. For example, the Environmental Farmers Group uses and equalisation mechanism whereby profits from deals are split:
- 88% to the farmer that engages in the trade
- 9% to other farmers in the group
- 3% to the EFG
Costs associated with project implementation, monitoring and administrative functions are also shared among the members of the collective entity.
There are over 100 farmer clusters across England, Wales and Scotland that may offer opportunities to join them. These are established groups of local farmers that are working towards a common set of objectives, whether they are commercial, environmental or otherwise. The opportunity to join one would depend on your location, farm type, current state of land and your goals for engaging in nature markets, as well as the group’s ability and willingness to add additional members. You can find clusters that are active in your area here.
If there is not a farmer cluster in your area, you may consider starting one. If so, you will have several questions you will want to ask. See the next book end, Creating an Aggregation Model.
Creating an Aggregation Model
If you are choosing to create your own aggregation model, there are several attributes of potential member farmers which should be taken into consideration including their appetite to engage, their ability to commit the necessary time and resources, and the current state and tenancy structure of their land.
Given the nascent state of nature markets, farmers you approach may have very different levels of knowledge and differing opinions. Consider gauging farmers’ existing thoughts and experiences in this space before you pitch your ideas and be prepared with resources farmers might need ahead of more detailed discussions. The Introduction to Nature Markets section of this Toolkit could be useful in providing high level information about nature markets and how farmers might engage.
The ability to transact in nature markets can be different for landlord farmers versus tenant farmers – although there are many examples of successful aggregation models where both landlord and tenant farmers take part.
In any case, you should be prepared in initial conversations to answer or acknowledge questions from farmers relating to the land tenure. For example, what the division of financial benefits will be from the project, who will be legally responsible for maintaining the change in land use or management practices and how the project may affect the underlying property value. If you don’t know the answer to these questions, you could suggest working together with the other farmers to find answers. This could be through inviting experts to speak at your meetings or engaging with initiatives like the Tenant Farmers Association.
You can find underlying ownership of a site on the UK’s Land Registry, or, more easily, ask the farmers directly. Local organisations, such as Rivers Trusts and Wildlife Trusts, may also have this information to hand. More information about tenancy and ownership can be found here.
In Milestone 1, you will have already determined whether you have existing environmental obligations on your own land such as site classifications (SSSIs for example) or agri-environment schemes. You will need to ask these same questions to farmers you are considering working with to identify any potential blockers to your collective project. If the farmers are unsure, you can both consult the relevant regulatory body such as the Rural Payments Agency or the Environment Agency.
Differences across farms may impact project delivery or the potential for different farms to contribute. For instance, if you are developing a nutrient mitigation scheme, dairy farmers, poultry farmers and arable farmers will all have different capacities for reducing their nitrate run-off. There is the potential for any of these practical differences to also affect the cost and benefit distribution to sellers, and so this merits careful consideration.
Farmers likely have a range of options in terms of land use, like using the site for traditional agricultural production or leasing it to a solar farm company to host solar panels. You might ask the prospective farmers what alternatives they have considered for their land in order to assess their opportunity costs.
This is important as farmers with high opportunity costs may not be willing to engage with the project, and basing the project on such sites may not be sustainable over several years. Note: Farmers may be happy to accept some financial opportunity costs, depending on their overall goals. For example, some farmers might value nature restoration on their land holding and thus, accept the opportunity cost of participating.
You will need to be clear with potential farmer partners how much input and engagement you need from them to develop the project. If you are unsure, then you will also need to be honest about this uncertainty.
If you are working with a large group of farmers, you may consider having a ‘steering group’ formed of a smaller sub-group of farmers, who have both the capacity and the trust of the wider seller group to undertake this work and represent their best interests. As an example, the Glenderamackin Natural Flood Management Group which is composed of 60 different farm holdings, has a core group of 10-15 farmers who have time and resources to engage more often and who engage more actively in the planning decisions for the group.
Formal Structures for Collaboration and Cost and Revenue Sharing
Groups of farmers working together to deliver environmental improvement can take multiple forms with the costs, responsibilities and benefits shared in different ways. This section will explore the different formal structures aggregation models can take if you are creating your own group or better understand the legal structure of an existing group you are considering joining.
| Legal Structure | |
| Cooperative | A cooperative (co-op) is a business or organisation that’s owned and controlled by its members to meet their shared needs. A co-op is a democratic structure in which all members have equal say in how it is run and how profits are used.
Co-ops have different levels of formality but it is typically suggested to incorporate a co-op if you anticipate entering into significant contracts or undertaking substantial trades. Incorporating can limit the liability of members and will set out the rights and duties of the business.
More information on co-ops and guidance on how to set one up can be found here. |
| Land Trust | A Land Trust is a legal entity which takes ownership control over a piece of property at the request of the landowner(s). These entities are typically used for land involved in conservation or wildlife purposes, or for real estate development purposes.
Land Trusts have three main parts:
A Conservation Land Trust is a particular form of land trust which focuses on managing undeveloped land to maintain or improve natural resources, historical sites or public recreation sites.
See here for more information on Land Trusts and how to set one up. |
| Community Interest Company (CIC) | A Community Interest Company is a special type of Limited Company which exists to benefit the community rather than private shareholders. Surpluses generated from the CIC’s activities are primarily reinvested for the purposes of maximising social objectives rather than distributed as dividends.
In the UK, to set up a CIC, you will need:
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| Limited Company | In a Limited Company, the liability of the company’s shareholders is limited. The company can be limited ‘by shares’ or ‘by guarantee’, depending on it’s use of profits.
Limited by shares These are typically for profit companies and means the company is:
Limited by guarantee These are typically not for profit companies which means the company is:
A guarantor guarantees to pay a borrower’s debt if the company defaults on a loan
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| Limited Liability Partnership | A Limited Liability Partnership (LLP) is similar to a Limited Company in terms of liability but offers more flexibility in the structuring of the business.
In an LLP, partners have limited liability similar to shareholders in a limited company. However, in an LLP, partners have more say in how the business is run, compared to a Limited Company where directors oversee the general management of the company with shareholders voting only on major decisions.
Guidance on how to set up a LLP can be found here. |
| Demand-side Aggregation Model | In demand-side aggregation models, an existing company such as a food retailer sets up an aggregation model to deliver environmental outcomes aligned with their strategic priorities.
In these models, the processor or retailer supports farms within their supply chain to deliver on an environmental outcome to demonstrate to consumers their products meet a certain standard. |
You’ll learn more about each of these legal structures including pros and cons of each in Milestone 6.
Depending on your own and your potential partners’ capabilities in organising and administering the farm aggregation model, you might consider collaborating with a third-party facilitator. Facilitators possess expertise in the legal and accounting aspects of aggregation models and can offer valuable assistance during the group’s establishment phase. Some facilitators are also skilled in providing guidance for environmental initiatives, aiding in project planning and implementation.
Cost sharing:
There are several ways that farmer groups can fund their activities. Most aggregation models which focus on nature market participation aim to have their activities funded by the sale of nature market credits, but there are costs that will be incurred that need to be paid for upfront. Setting out how these will be paid for will be important in attracting potential members.
Most aggregation models require members to pay an annual fee to support the administration of the group. This is typically done on a per hectare basis to ensure farms are contributing proportionally to the land they manage.
There are also external funding options for farmers who are setting up an aggregation model. The Natural Environment Investment Readiness Fund (NEIRF) Round Three was aimed specifically at farmers working together to develop revenue streams for delivering environmental benefits. The applications for this round of the fund are currently being assessed. Some other funding options can be found on the UK Farmer Cluster website.
Revenue Sharing
In working with multiple farmers, you will need to have a clear compensation strategy to incentivise involvement and maintain fair outcomes for all farmers. For example, having each farmer receive identical payments may not be a fair outcome if some farmers are facing higher costs or are contributing more land.
Conversely, to achieve catchment scale, you will want to make sure that smaller farmers are sufficiently compensated (equalisation) to encourage their participation, as they may face fixed costs that are not proportionate to the potential benefits from their landholding.
Different models for revenue sharing are presented in the case studies for this milestone. You may want to engage an external facilitator or advisor to help you design a revenue sharing structure that is appropriate and fair for your projects.
Resolving challenges
When working with multiple farmers, disagreements or challenges can crop up. It would be wise to have a formal plan in place to address these challenges before they arise to make resolving challenges go as smoothly as possible.
It is normal for some disagreements to come up between farmers when working together as a group. Having a plan for how decisions are made and processes in place to deal with disagreements can ease periods of challenge. You will want to decide whether decisions will be made by consensus, by majority vote or through a smaller steering group if you have a particularly large group.
You will also want to think about what to do if this process breaks down. You may consider engaging an external mediator to help deal with disagreements or have a process or forum for negotiation between parties who are disagreeing. Planning for this up front will help guide decision making during challenging times as it will allow members of the group to follow an already agreed upon process for dealing with internal challenges.
Farmers who are committing to projects over several years may also want to have options to exit the project or group at certain points. This may be more or less complex depending on the number of farmers in your group but having a transparent process would be generally appreciated.
Depending on the structure of cost and benefit sharing, you may consider clauses in the legal agreements that require farmers to return payments made to them over certain time intervals to compensate for the loss of the ecosystem services generated from their land (which may have been paid for by buyers already). A similar structure is employed in agri-environmental subsidy schemes, such as the Countryside Stewardship scheme.
