How to add value to your farm
PUBLISHED: 16:43 17 July 2019 | UPDATED: 08:52 18 July 2019
East Anglian farmers are faced with a prolonged period of political and economic uncertainty, but that shouldn’t stop them from unlocking the full potential of their farms, experts say.
While the future direction of the country hangs in the balance, it's easy to leave aside big decisions and shy away from committing to action, but the region's land agents urge them to take a long term view, and see what possibilities their assets offer up to them - from glamping destinations, holiday lets to 'bed and breakfast' pig farming and machinery sharing schemes.
William Hosegood of Brown & Co said farmers should adopt a long term management approach to their farmland through careful consideration of cultivations, cropping rotations and habitat preservation.
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"Value can be perceived in more than monetary terms especially in respect to soil health and a farm's natural capital," he says.
For those farmers who don't own land on urban fringes offering opportunities for residential development, it can be hard to see what options are out there to add value to your farm, he admits, but the first step might to be to look carefully at the farming business and family members involved.
"Can valued be added to the goods produced on the farm that would enable you to access more valuable markets? Is there a family member who has a particular interest outside of agriculture that could complement the farming business through re-use of buildings or land?"
He cites a number of examples, including glamping, a fitness centre, cookery school, holiday lets or commercial space - all of which are helped by a relaxation in planning rules which make it easier to turn redundant agricultural buildings to commercial or residential use under Permitted Development rules.
The Countryside Stewardship Scheme may offer up some alternative and less cash heavy opportunities, with capital options including concrete yard renewal, new tracks for livestock and machinery, sprayer wash down areas and fencing - all of which add value to a farm.
William Hargreaves, from the rural team at Savills Ipswich, says as financial support is withdrawn, every farmer and landowner will need to have a "much stronger focus" on how to add value to their business.
Collaboration with neighbours
"Greater collaboration with neighbouring farms will be key. From sharing a piece of machinery, through to joint ventures and opening up fresh markets by working together to trial and develop establishment and husbandry practices for new or novel crops - there are plenty of opportunities to improve and diversify income streams," he says.
"This also includes looking at different types of land management. The new Environment Bill, for example, will make it compulsory for all new developments to deliver a net environmental gain.
"Where the developer is unable to compensate on-site they will be encouraged to partner with a local landowner and pay them a tariff to fund habitat creation to mitigate any impact their schemes may have on the area.
"This could be as straightforward as converting bare arable land to semi-improved grassland, or more complex habitat restoration schemes."
Farmers will need to work with local ecology or wildlife experts to create an environmental gain plan and careful brokerage with the developers will be needed, he says.
"It's this type of innovative thinking that will be vital for farmers who want to add value to their business. By acting now and embracing new ideas they can futureproof their operation and ensure the best chance of success."
Converting farm buildings
Martin Freeman, head of Fenn Wright Rural Division, and a specialist in water and leisure, says value is normally added by planning permission for schemes which enhance capital gain or by increasing the profitability of the farm business by diversification. Turning a relatively low asset value building into homes is one example.
"Those farms which have water on them in the form of reservoirs, lakes or ponds are often at an advantage in adding value," he points out.
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"Farms which have land suitable for vegetable growing and who do not already have an irrigation reservoir potentially have the ability to increase the value of their farm through the storage of water, assuming a winter abstraction licence can be obtained."
His firm recently acted for two Essex farmers with existing irrigation reservoirs and let these for specimen carp fishing at attractive rents, he says, increasing the farm income, while enhancing the capital value of the farm.
Holiday and tourism diversifications
Glamping and holiday accommodation are popular forms of diversification, he says, and often such schemes generated a considerably higher return than the core farm business.
"In some cases farmers have the benefit of obtaining planning permission for a leisure enterprise on part of the holding which is possibly surplus to requirements and can be sold off at a higher value than the land being used for farming," he says.
But adding value often involves spending capital, and farmers need to take account of the base value of the land, cost of development and manhours involved to assess whether value is truly being added, he warns.
"A simple example could be the creation of a two acre fishing lake where the costs, taking into account the bare land value, planning permission, earth moving, providing infrastructure and services, landscaping and fish stocking, could add up to considerably more than what the open market value of a comparable established fishery would be valued at."
Richard Means, a director in the farming department at Strutt & Parker, says the message from government is it wants farm businesses to become more self-reliant, so farmers should be looking to improve the performance of their core business, and exploiting opportunities to add new income streams and reduce costs.
"Benchmarking figures show that the total labour and power costs on the top-performing units is under £300/ha, while it can be almost double that on the highest-cost farms. This suggests that there is scope to reduce fixed costs on many holdings by £100/ha or more," he says.
"Sharing machinery with a neighbour is becoming increasingly common among top-performing farmers to reduce capital costs and doesn't have to involve a complicated joint venture.
"Contract Farming Agreements (CFAs) are another option for farmers seeking to adjust their business structure to adapt to reduced levels of direct subsidy. The incentivised nature of CFAs is such that it rewards innovation and better performance, which will be key to maintaining profitable farm businesses in the short to medium term."
Benchmarking can also be useful in helping to growers to increase yields through informed decision-making around rotations, variety selection, cultivation strategies and spray programmes, he adds.
Bury St Edmunds pig consultant Peter Crichton says with arable returns at a fairly low level, farmers have been looking at alternative sources of income, including holiday lets and other accommodation through Permitted Development Consent, as well as establishing farm shops and other links between the farm gate and consumers.
Farmers with buildings could also look at the potential for converting these for rearing and finishing pigs on a 'bed and breakfast' basis, he suggests. Large pig breeders supply weaners at either 7kg or 30kg for the farmer to rear and finish at a pre-agreed payment rate, which for pigs from 7-110kg can be in the region of 65-75p per pig per week.
The payments are on a flat rate basis, rather than tied to profits, and provide farmers with a use for straw which can then be returned to the land as well rotted and highly fertile farmyard manure.
"Provided that arrangements between the farmer and his pig supplier work out satisfactorily, this can be expanded and provide the whole farm income with a very useful financial contribution," he says.
"Higher rates can also be achieved where pig units are run to high health and welfare standards as promoted by the RSPCA and are becoming more popular with discerning consumers throughout the country."
Alternatively, farmers with light land can use this as an ideal base for setting up extensive outdoor pig herds managed according to RSPCA assured standards, providing a break in the arable rotation and organic manure.
"Another advantage of outdoor production is that planning consent is not normally required for the use of outdoor farrowing and dry sow arcs which can rotate around the farm on a two year cycle," he says.
"These systems of production are now providing farmers throughout the eastern region with sources of regular funding and the opportunity to use this to expand their existing enterprises."