We recently gave a talk to a number of farmers at an evening seminar, including speakers from ourselves (White Avon), Old Mill accountants, Withy King solicitors, Woolley and Wallis land agents and Lloyds Bank. White Avon focused on making farm businesses aware of the cost of production including forecasting cashflow requirements. We also looked at short and long term opportunities to improve profitability. Future succession planning and business restructure were also discussed. Areas covered in more detail included the below.
Arable margins and cashflow forecasting for the next 12 months
Last year grain yields were reasonable and a number of businesses forward sold cereals enabling the average price to be better than the price that can be achieved for the 2016 harvest. This resulted in profitable margins before and after rent in many cases for 2014/15.
We stressed arable businesses should be aware this year, when including rent, it is likely an arable enterprise will be making a loss. Monthly cashflow should be assessed to measure the crunch point. It is likely cashflow may become tight for solely arable businesses through the Spring and into the Summer months when the majority of grain has been sold.
Environmental schemes
We highlighted the potential benefits of Countryside Stewardship and advised the income available from options that may fit around the current farming business. It was noted land, which is struggling to achieve sufficient yields due to black grass restraints, may be suited to a two year legume fallow. This is planted for a two year period, the aim to reduce black grass and there is a payment rate of £520/hectare (£211 acre). There is a cost element to purchasing the seed and planting the grass /clover initially, but there is the opportunity to cut this in the first year and if black grass population can be reduced, it may certainly suit some businesses. The table below shows other options we discussed. It is appreciated this is not suited to all, but it is certainly worth consideration as another form of income.
| Option | £/ac | £/ha |
| GS2 – Permanent grassland with very low inputs (outside SDAs) | 38 | 95 |
| GS17 – Lenient grazing supplement | 18 | 44 |
| GS1 – Take field corners out of management | 148 | 365 |
| HS3 – Reduced-depth, non-inversion cultivation on historic and archaeological features | 32 | 79 |
| OP2 – Wild bird seed mixture | 259 | 640 |
| AB15 – Two year sown legume fallow | 211 | 522 |
| AB7 – Wholecrop cereals | 200 | 495 |
| Average income | 130 | 320 |
Grant Funding
Under the water capital grants there is funding for a number of items. The table below shows a small selection. These items are paid at a standard fixed rate, and the remaining funds are paid by the applicant, however in many cases the grant funding would be sufficient to cover the total cost.
| RP15 – Concrete yard renewal | £27.14/m² |
| RP13 Yard – underground drainage pipework | £5.50/m |
| FG1 – Post-and-wire fencing | £4/m |
| FG2 – Sheep netting | £4.90/m |
| RP28 – Roofing (sprayer washdown area, manure storage area, livestock gathering area, slurry stores and silage stores) | £62/m² |
| RP4 – Livestock and machinery hardcore tracks | £33/m |
Hedgerow and Boundary Capital Grants
There has also been capital grant funding available for woodland boundary hedges. This has now closed for applications but is due to re-open again next Spring. Please see below the achievable income from this.
| BN5 Hedgerow Laying | £9.40/m |
| BN6 Hedgerow Coppicing | £4/m |
| BN7 Hedgerow Gapping-up | £9.50/m |
| BN8 Hedgerow supplement – casting up | £3/m |
| BN10 Hedgerow Supplement – Top Binding and Staking | £3.40/m |
| BN11 Planting new hedges | £11.60/m |
| BN12 Stone Wall Restoration | £25/m |
| BN13 Stone wall supplement – Top wiring | £3.60/m |
| BN14 Stone wall supplement – Stone from quarry | £44/m |
| TE1 Planting Standard Hedgerow Tree | £8.80/tree |
Leader Grant Funding
There is a Leader grant available now, this is available for farm diversification and productivity projects. This is a two stage process. Initially, an outline application needs to be submitted. This is then followed, if successful, by a full application, including business marketing plan. Grant funding ranges from £100,000 – £250,000 with projects funded at 40%. A range of items are included, some examples that we are involved in currently include slurry application equipment, GPS systems, robotic milking machines, milk vending machines, holiday lets, conversion of buildings to industrial and commercial units. Funding deadlines and priorities depend on your Local Action Group (LAG)
Planning
A number of clients, with our help, have obtained permitted development rights through prior notification, to convert agricultural buildings into either dwellings or commercial units. We have also helped clients successfully obtain planning for agriculturally tied dwellings. Both improve the asset value of the business and may be worth considering.
For more information please contact George at georgedrewett@fcgagric.com or your local FCG office.