Agricultural Outlook 2016
Firstly, may I wish you a Happy New Year and a prosperous 2016. Having said that, for a lot of Yorkshire farmers, it’s started extremely badly as a result of the significant rainfall and subsequent flooding and my sympathies are extended to all those affected.
DEFRA’s Farming Recovery Fund has been extended to all those affected in Yorkshire by the floods between 4-9 and 25-26 December. Between £500 – £20,000 is available to those impacted by the flooding and claim forms must be submitted by 1st April. The fund covers items such as costs for alleviating soil compaction, grass seed cost, restoring access ways, tracks and drainage. Some elements are at standard rates such as re-seeding, fencing, walling, access ways and others such as using contractors for restoring agricultural drainage are up to 100% of eligible costs. Works need to be done and claimed for by end of 2016 and most importantly you need photographs of the flooding and the impact. In exceptional circumstances, you may also be able to claim for damage to buildings and machinery.
I would suggest anyone with flooding issues goes out straight away to take photographs of both the flood water and the land as soon as the flood water recedes. Whilst you may need some quotes from drainage contractors etc., do this while it’s still fresh in everyone’s mind, get the application completed and ready for submission.
It’s a timely reminder of the impact of El Nino on our weather system, which occurs every 2-7 years normally at the end of the calendar year and how farming is so susceptible to the elements and profitable times are needed in order to cover these cash strapped years. Conversely, historically food staples have risen by 5-10% during such events and perhaps we may see commodity prices rise over the next few months if global food production is affected in the short term.
Looking into 2016, whilst El Nino may have some effect, global production is still high. Encouraged by previously high prices and with a strong currency, our exports are not looking attractive and budgeting for significant increases in prices would seem bullish. Given this outlook, one needs to look carefully at planned capital expenditure in 2016 and the availability of surplus cash. There have been a lot waiting for the subsidy and I suspect for a number it’s already been spent. The banks are keen to lend, but credit teams are securitising serviceability a lot more and certainly long term debt looks very cheap at present and worth locking into. This may lead to some forced sales of land and property, which is likely to stem land prices. There are buyers in the market, particularly as quite a few development options are being exercised and farmers seeking to roll over gain back into farm land, but those buyers may have more of a choice and perhaps be a bit more picky and I suspect we’ll see significantly more variances in local land prices compared to the previous 3-5 years.