Despite the rain on Tuesday, the Great Yorkshire Show delivered once again and we enjoyed welcoming clients old and new, friends and fellow professionals to our stand. It really does demonstrate what a great county we live and work in. There was quiet optimism around with all sectors of our industry seeing a slight resurgence in pricing and with hopes of a decent harvest looming, the bank managers were hopeful of some overdraft reductions.
Many discussions were had and a common theme was succession and what should we be looking at next. Brexit clearly was a hot topic; I can’t stand listening to the doom and gloom merchants, at present it could be argued that for the agricultural sector it’s just giving us a lift and yes, we are all aware that agriculture may be used as a pawn in trade negotiations, but don’t forget we are not self-sufficient in most produce and so we have a market within our own borders. Its pleasing to see that Coop are using all British fresh meat from now and we should be supporting them and working closer with the trade to ensure this is standard practice. I believe the consumers are getting more educated in provenance and locality of food but we still need to be competitive on pricing and that’s often the issue of those trying to sell direct to consumers. When asked about what to do next, my message is for farming business to look at the opportunities and sectors that are not subsidised in order to protect for the future and split the risk and reliance on brown envelope payments.
The show is a great family occasion, often with 3 generations all present and talk turned on how to pass the farm on. For those agricultural tenants, planning a transfer of a generational tenancy requires a bit of thought and time in order to satisfy the strict requirements of the AHA 86. Don’t forget it’s the one chance for a landlord to get the farm back or negotiate a better package and I can’t stress enough how vital it is to plan early; don’t wait until death when there’s often nothing that can be done.
The financial burden of succession planning is often the biggest hurdle. If you’re an owner occupier, a vast majority of farming businesses will not be able to sustain the living costs of often 3 generations and families from the farm. Unfortunately, many have been sceptical about pensions (probably justifiably) in the past and just assume that the farm will support them, but this leads to significant added financial pressures in an already tight business. I urge you all to consider how you plan for this and that starts when you leave college. If you do see an increase in profitability, instead of ringing the machinery dealer, think about your families and the farms future; it may be more prudent to put into pensions, particularly now that they are heritable and can pass down the generations.
Twelve months ago, whoever thought that we would be starting 2017 with the inauguration of Trump, Andy Murray ranked number one in the world, and of course the triggering of Article 50? The world is a very different place to what it was in January 2016. What does all this mean for British farming and what can be expected for the year ahead? Uncertainty is a given, but for those of us who are optimistic, we have a huge opportunity in our hands.
The short term Brexit boost through the sterling devaluation has been welcomed by most farmers, particularly those who are selling their goods abroad. The longer term implications will be more important, and there is no doubt that as we go forward, currency will remain highly sensitive to political announcements, decisions and even resignations. It was only this week that we heard the news of the UK Ambassador to the EU resigning over differences.
During 2016, the UK bank base rate was reduced from an historic low to an even lower level. Coupled with a significant quantitative easing programme it is clear that Mark Carney is trying to steady the ship for what is expected to be an unsettled ride ahead. UK stocks and other assets have risen also on the back of the Brexit currency effect. Recent price rises will be seen as the first signs of rising inflation, but this is not expected to be significant by any means.
It will be important for farm businesses to focus on risk management for the year ahead and to get the right business structure in place to help best cope with the uncertainly we are likely to experience during the policy vacuum that will persist during Brexit negotiations. Big projects planned for the year ahead? Money has never been so cheap to borrow with low rates offered to fix in for the medium and longer term, so shop around. But a word of caution, it will be wise to proof test and critic such plans against uncertainty and ensure that any investment has costed benefits.
But what do we know for the short term going forward? We are guaranteed to receive Basic Payment Scheme monies for the next couple of years, with the likelihood of these continuing until 2020. The Treasury has also created more certainty about Pillar 2 funding, confirming last Autumn that all grant fund projects, including agri-environmental schemes signed before the UK leaves the EU will be honoured. Both of which unfortunately rely on the RPA processing such payments, which of course adds a greater deal of unpredictability of when payments will be received!
Speculation remains as to whether it will be a hard or soft Brexit, but the following key points will need to be addressed over the coming months. Access to European markets after 2019; subsides; availability of European farm labour, and perhaps more importantly the formation of a good solid vision for British agriculture in a post Brexit world.
It was comforting to see this week that the CBI believes that the finance and the farming sectors should be equally prioritised when it comes to the Brexit negotiations, despite the financial services adding £120bn to the UK economy verses an agricultural contribution of £8.5bn. Let’s hope that Mrs May doesn’t treat UK agricultural market access as a soft concession when she gets around to trade negotiations with the EU.
For something to take all of this off your mind, we can always look forward to watching Trump take tea with the Queen or Wimbledon, with Sir Andy Murray taking to the court. An interesting year lies ahead.
For more information or to discuss further email Robert Moore or telephone 07590 230510