Agents Eye Column – September

27th September 2012

2012 Harvest just shows the risk involved in Agriculture

I suspect that most arable farmers in Yorkshire have about finished harvest and all that can be said is disappointing for most. I know many are really frustrated that having had such a good looking crop with such great yield potential, that once in the shed, there wasn’t much there. I’m amazed how many have said that their second wheats have performed as well, if not better than the first wheats. Is this down to variety, timing of chemical applications, soil or more likely, the weather. It seems inconceivable that the wet weather has had such a massive impact on yields, but highlights the significant risk that farmers are participating in.

The knock on impact for the shortages globally is rising feed prices for the livestock farmers, which if a hard winter comes in, may cause real cash flow implications if the prices don’t hold. Already there seems to be some wobble in the fat lamb trade although early trade from store lambs and breeding sheep looks to be ok.

Risk management in farming is something that many don’t consider or even factor in when doing budgets or cashflows. I know that the banks are already feeling a little nervous on some businesses knowing what may be coming in or not as the case, and whilst there is an appetite to lending to those with land as security, the importance of serviceability on the debt is more of a concern for the banks and directly impacts on the cost of funds. Make sure you speak to them early on, don’t leave it too late!

I’m always amazed that farm rents tendered are so high, the risk involved for the tenant is huge and the short term demand for land has forgotten the bad harvest years.

It’s important to recognise a good year and ensure that the driver of taxation doesn’t overtake the need to ensure reserves are left for the bad year which we all know happens on occasions. Taxation leakage is an agenda item for many and the huge extremes in profitability causes short term problems with solutions that might not be best long term. For those of you that applied for a Rural Economy Grant to get assistance in a diversification or business expansion idea up and running, should have heard from RDPE over the last few weeks either asking you to go forward to the next stage or that you weren’t successful.

For those that were, it’s going to be really important to prepare a good business plan and ensure that all the information is in order and gathered for the application, make sure you have planning consent in place if needed, match funding from your bank, market research, 3 project quotes etc. RDPE are asking you to attend a workshop to learn more and so make sure you are on top of what is needed. They are expecting at least 20% to drop out, make sure it’s not you!

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