Agents Eye Column – December

31st December 2012

2012: Great entertainment – But huge farming risk

2012 has certainly been a year to remember, a mixed bag full of highs, lows and surprises. As a nation, we rallied together to celebrate the Queens Diamond Jubilee, absorbed the contagious Olympic fever and the commitment and skill of our amazing athletes and witnessed an exceptionally good James Bond film at the cinema, but the farming calendar was certainly less of an exciting bag.

The words ‘wet’, ‘rain’ and ‘water’ were sticking to everyone’s lips and from memory our summer period was that single hot week back in early March and the spring drought. It’s definitely easier to pick out the lows and unfortunately, as usual, they revolve around the weather.

The figures speak for themselves and only endorse some stark memories; 2012 UK wheat crop down 13%, with recorded yields of 2.8 tonnes/acre and very low bushel weights commonplace. Average lamb prices were 7.5% lower when compared to the April highs of 2011 and unsurprisingly feed costs are well over £300 per tonne.

The record cereal prices will have been the saving grace for many wheat growers, however those who sold forward too much may face substantial claims from merchants who themselves may have sold a little too much forward. If a wet harvest wasn’t enough, an invasion of super human slugs and endless deluges are making seedbeds ugly and spring planting (if you can get the seed) the only option.

Cereal prices look to be well supported going into 2013’s harvest as the expectations from poor crop establishment will have placed a base in the market. On the global front, much of the US has been experiencing drought conditions and their predicted 2013 harvest yields are being progressively cut. Farmers need to look carefully at the damage to soil structure and look at measures to rectify any damage done. The wet has also highlighted the need to keep on top of annual drainage maintenance, something that is often overlooked when things are going well.

Livestock farmers need to be very careful about the cost of inputs and really ensure that feeding expensive concentrate is going to deliver value for money, I’m not convinced that everyone really assesses the cost benefit of finishing stock compared to store sales.

For all farmers, cashflow is going to be key. Most bank managers are being asked for significant increases in overdraft facilities and that discussion is far easier with a well thought out cash flow projection for a 12 – 24 month period. Don’t underestimate the huge risk that farmers participate in, either growing a tonne of wheat or a fat beast and you need to ensure that you are fully rewarded for such risk.

2013 looks set to be a challenging year with most buttoning down on new projects and capital expenditure. Everyone needs to understand what threats lie ahead for their business in the next 12 months and how these can be accounted for or overcome to best effect. From all at George F White, our best wishes for a prosperous new year.

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