Category Archive: Agriculture

Public Goods: How are you going to future proof your farming business?

We have all now had an opportunity to read and process Michael Gove’s proposal for the future of agricultural support payments, public money for public goods… James Thompson, Graduate Surveyor at George F. White, discusses what it all actually means and the decisions that farmers must make to maintain profitability.

Firstly, what are public goods?

By definition, a public good is a ‘non-excludable and non-competitive’ good. A common example, used outside of agriculture, is street lighting. Having street lighting is not competitive nor is it excludable to a single consumer; when I consume that good, it doesn’t stop anyone else from consuming it at the same time.

Public Goods

DEFRA will be looking to fund the public goods under the following categories:

  1. Enhancing the environment
  2. Farming in remote areas and rural resilience
  3. Public access to countryside
  4. Improving the productivity and competitiveness of farming
  5. Animal and plant health and animal welfare

The proposed Agricultural Bill, which will shape the UK’s future Agricultural Policy, indicates that, the current Basic Payment Scheme (BPS) will be phased out and replaced by the above funding streams. It is therefore imperative that, individual businesses establish how exposed they are to the loss of the farm subsidies. As an example, according to The Farm Business Survey, the average farming business in the North East makes £71/ac profit.  This is includes £97/ac support from BPS and Ag Environmental Schemes. Farming business need to build business resilience over the transition period, reducing their reliance on support payments and understanding how best to access “public money for public goods”.

Exploring the options

Based on the five categories of funding for public goods, there is a decision to me made; a focus on delivering actual public goods (categories one to three) or in improving efficiency and competitiveness of agri-products (categories three and four).

Firstly, let’s focus delivering actual public goods. We state that these are ‘actual’ public goods as they are truly non excludable or competitive; we all enjoy the British countryside, whether that be breathing in the fresh air or enjoying family walks and activities in the outdoors.

It is likely that the replacement of current environmental schemes could be highly geared towards protecting soil, improving water quality or even the management of carbon; this could result in more productive land being withdrawn from food production enterprises. It is also entirely possible that funding for open access to the countryside (unavailable in previous environmental schemes) could be reinstated into the new Environmental Land Management schemes (ELM’s) and could be lucrative.

Secondly, you may choose to focus on improving efficiency and competitiveness, for example, improving animal health and welfare or reducing nitrogen and chemical use. In addition to this, with an aim to increase competitiveness of farm businesses, the government has already committed £30 million to the Countryside Productivity Small Grants scheme with emphasis to increase opportunities that high tech and precision farming equipment can deliver. We expect the next round of this scheme to be launched next spring and it is suggested a number of new options will be available to farmers.

There are crucial decisions to be made, but that will be entirely dependent on your business health and its financial exposure to current support payment, resulting in the magnitude of change required to provide a resilient future income to you and your family. That being said, and having conducted research on this topic, many farm businesses in the North East and Yorkshire believe that the best way to safeguard against a decrease in subsidy payments is to improve business efficiency, learn from top performing farms and explore new income streams including diversification.

I will leave you with a question to ponder: Having defined and discussed public goods – does food security constitute as a public good? Consequently, should food production be supported by government funding?

If you would like to understand in more detail how exposed your farming business is to the ceasing of direct subsidy’s payments, then contact your local Farm Consultanct:

Estate Management – are you in control of your assets?

Estate and Property Management brings to mind an agent dealing with a large house, estate cottages and land and farming matters, set in hundreds or thousands of acres.

That is something we do at George F. White on a daily, basis but actually, managing property involves a much more diverse range of assets and skill sets.

For example, an estate could comprise of a portfolio of commercial property, perhaps converted offices from traditional buildings or a series of mineral ownerships, waste licences, land with long term development potential (which is contract farmed), and even a residential buy to let portfolio.

In addition, estates are owned for varying purposes; It may have been inherited or is intended to pass on to the next generation. Maximising return on investment, tax advantages, potential future value uplift, access at short notice; the list goes on.

We see, on regular basis, landlords with the best of intentions but who lack the time to deal with their estate management aims and issues; this can lead to deadlines being missed and regulations not being complied with, resulting in lack of control and inefficient management that does not meet the landlords aims.

Considering all of this… how do you keep control of your estate?

Estate


Understanding the legislation

For example, is it the Landlord and Tenant Act 1954? Is it the Agricultural Tenancies Act 1995? This, in turn, will inform what abilities and rights a landlord has. Can part of the property be taken back in hand and sold? What is the length of any notice required to review the rent or terminate? The answer will be in the detail which must be understood and used to the best advantage.



Plan ahead

Why the estate is owned and your ultimate aims should be clearly set out and planned for; this will influence how tenancies are set up and managed when transfers are made, is a Trust needed? Any plan needs review and update on a regular basis and should be aligned with personal circumstances.

Most estates, in whatever guise, will have in place an asset plan and the owners will have an idea of what they own and probably, to some extent, what it may be worth.  However, not all estates will have in place a strategic plan and therefore struggle to understand why they own what they do, or what they intend to do with it.



Estate Management Compliance

The rules and regulations for landlords are constantly changing and updating. For example, recently there has been a change in septic tank regulation and Energy Performance Certificates for let property now must attain at least an E grade. Are both the landlord and the tenant keeping to their repair responsibilities?



Manage cash flows and budget

No matter what type of asset it is, there will be expense at some point to maintain or progress it. This could be a repair or insurance; it could be making representations to the local authority plan or a tax liability. Managing cash flow to identify any pinch points and budgeting for future plans will help to ensure smooth running of the estate and control of investment.



Take advice from trusted advisors

Having a good team of an Agent, Solicitor and Accountant on board will provide well rounded advice dealing with all practical, legal and taxation issues. This will allow you to focus on your aims, be aware of any risks and foresee and deal with any issues.

So are you in control of your estate and property assets? Being prepared, complying with regulation, understanding the detail and planning ahead are all important factors in having, or re-gaining, control… especially if something has run away from you.

At George F White we have an experienced team of expert professionals who manage a range of property on a daily basis and who deal with the myriad of issues that occur. No matter how complicated the arrangement or unusual the situation, we will be able to deal with it.

Matthew Brown
Partner
matthewbrown@georgefwhite.co.uk
07854 903631

Graduate Surveyor: Local Yorkshire Farmer James Thompson

Local farmer, James Thompson, has been welcomed back to George F. White as a Graduate Surveyor after a successful university placement year.

James re-joins our team to bolster the growing rural professional and farm consultancy services in our Shiptonthorpe and Bedale branches. James recently graduated from Newcastle University where he achieved a BSc in Agribusiness; the degree requires students to undertake a placement year, in which James carried out successfully with us back in 2016/17 and proceeded to impress the management team. Not only does James have an exceptional understanding of the business, he grew up locally to the area and boasts an outstanding level of geographical knowledge.

Graduate - James Thompson

Simon Britton, Partner and Head of Yorkshire at George F. White, said: “We are delighted to welcome James Thompson back to George F. White; he is a strong addition to our growing team here in Yorkshire. A graduate position at George F. White is a great place for James to start his career; we have a strong team of eleven, in which over 65% were recruited at graduate level and are currently working towards or sitting in management positions.  James brings a lot of energy and willingness to learn, a fantastic quality to see in a graduate and certainly the qualities that we expect to see in our employees. I am confident that James will continue to excel throughout his APC studies and over the course of his professional career, we promise to nurture his talent as we have his colleagues.”

James achieved a first class grade on his dissertation which focused on government policy in agriculture and farm diversification in the North and East of Yorkshire; in light of the current political climate, James’ research will prove extremely useful to local farmers and his agricultural background will allow him to relate to the day-to-day operation of a farming business.

On his decision to continue his studies at George F. White, James said: “Having lived locally to the Shiptonthorpe office, I knew of the strong reputation that George F. White has in the community. Whilst on my placement year I not only discovered that the employees at the firm are one big family but also have a great depth of knowledge in such a wide range of enterprises in the rural economy; I was over the moon to be offered a graduate position as I believe George F. White is the perfect place to learn and practise my knowledge to help me with my professional exams in the near future. “

The Future of Food, Farming and the Environment: the biggest shake-up for farming in a generation

The much anticipated Agricultural Bill, resulting from the government’s Health and Harmony consultation carried out earlier this year, was published on 12th September initiating the biggest shake-up of farming in a generation. The government’s ambition for a ‘green Brexit’ has now been outlined where farmers will be rewarded for the public good they provide. Michael Gove has said “the Agricultural bill will allow us to reward farmers who protect our environment, leaving the countryside in a cleaner, greener and healthier state for future generations.” We now understand the focus will be on enriching wildlife habitats, flood prevention, improving air quality, protecting soils and planning trees. Farmers will be encouraged to sign Environmental Land Management Contracts replacing direct aid and be paid to protect and preserve the natural environment helping mitigate the effects of climate change; a move praised by many environmental groups. Farmers will also be encouraged to become more resilient, more productive and more competitive and will have access to funds to help boost productivity.

Agricultural Bill

A new innovative relationship between government and land managers is proposed by DEFRA but many see the Bill falling short on addressing key subjects such as the future of food production, food security and the hugely important subject of a successful post Brexit UK trade deal. Ministers have also refused as yet to specify how much public money will be allocated for supporting these initiatives and the Agricultural Bill unfortunately lacks detail on how this will be achieved in practice.

The things we do know – the present funding mechanism will remain for the life of this parliament; and current agri-environment agreements have been given assurances, but many farmers are naturally worried about the future reductions in support payments beyond 2022. The Bill explains how the current system of direct payments will be dismantled, reducing each year over a seven year period with the final Basic Payment being received in 2027. Furthermore the Bill describes how the de-linking of payments from the requirements to farm land will help those wishing to retire or indeed invest in their businesses and still be in receipt of payments; one-off lump sums could be also offered to farmers in place of future direct annual payments.

It is hoped by many that this Bill provides the first steps towards a better future for farming and the environment, but it is clear that the transitional period from 2022 to 2027 is likely to have a negative financial impact on farm profitability. Without doubt there will be winners and losers from the new agricultural policy, the reason why planning for change in good time is essential. Assessing the options for the future is crucially important; the earlier you start planning the better the outcome will be. Regular preparation of budgets, benchmarking businesses annually and comparing key performance indicators at every opportunity is what all business should be doing. Assessing and fully utilising the key assets of the business including its people will be extremely important. Exploring potential new income streams, investigating possible diversification opportunities and understanding the impact new policies will have will be vital for business success. Of course further detail will emerge in the coming weeks and months but now is the time to start planning so farmers can prepare for change and become as resilient as possible.

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