Farmers Advised to Seek Cash flow Advice In Light of Current Troubles

12th August 2015

Land and property consultancy George F White have urged farmers to seek financial guidance and support at a time of real uncertainty.

With lamb prices down 40%, grain prices struggling, finished beef on a slow burn and dairy continuing to face difficulties, it’s hard to be positive about the short term outlook for farmers across the UK. George F White works with a large number of farms, advising on cash flow and financial health issues, and over recent months has seen a number of circumstances that have detrimentally impacted the finances of farmers.

“Key factors which hugely impact farmers’ profitability are currently out of their hands,” explained Simon Britton, a Partner, at the consultancy. “The weather is the obvious contender which may have an impact on the quality and quantity of many crops; however prices are all too often impacted by the global market place, rather than just regional weather. So far, global wheat harvests are up on last year, despite droughts in several countries, however the cost is also being influenced by the price of oil, and the subsequently lower demand for bio fuels.”

Simon continued: “There is growing speculation that the Bank of England will raise interest rates at the end of this year or early next year and this will undoubtedly add extra financial burden to many farming businesses. Combined with this is the double whammy of the exchange rate, not only impacting on our exports, but potentially reducing the amount of subsidy received in Sterling later in the year. A fall from £0.77730 per Euro in September 2014 for example, to a current spot rate of £0.6925 today means that a payment of £60,000 received in 2014 would only be worth £53,800, combined with the fact that the Basic Payment is likely to be delayed.”

These factors are further compounded by the ongoing price war between the supermarkets that is affecting the dairy industry as well as the buying and pricing policies that negatively impact the lamb market. This summer of gloom within agriculture is causing protest across the country and Europe, illustrating that the problem is widespread.”

Simon added: “The UK banking sector is more than aware of all these issues and will, of course, understand the impact this has on businesses across the UK. As such, we need to encourage farmers to talk to their bank about their potential cash flow problems who will know that cash flow will be stretched, and non-existent at times, but also realise that a farmer’s ability to influence that cash flow will be restricted.

“The earlier farmers approach their farm business consultants and banks to look at their options, the better they can deal with potential cash flow issues, before it becomes an overwhelming problem. Banks want to see businesses – whether they’re urban or rural – that have an understanding of their financial position, whether this is good or bad, rather than a business that just buries its head. For most farms this year, cash flow is going to be a problem and is not going to magically improve on previous years; which is why we urge farmers to arrange a meeting with their farm business consultant before they approach their banks for additional working capital.”

 

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