Brexit: What are best and worst things farmers can do this year?
- Credit: Sonya Duncan
Standing still should not be an option for Suffolk and Essex landowners and farmers who are tempted to hold out for a clear outcome from the UK’s Brexit crisis, land agents say.
Go-ahead farmers should be cushioning themselves by diversifying and innovating, and looking for opportunities while controlling the things they can control, they say.
While in exceptional cases ‘do nothing’ might be better, they can and should seek and listen to advice.
MORE – ‘UK agriculture will suffer dramatic shock post Brexit’Will Hargreaves, from the rural team at Savills Ipswich, said it was encouraging that many farmers in the East of England are seeing the current political landscape as an opportunity rather than a threat and attempting to mitigate uncertainty by listening to new ideas and embracing innovation.
“One area that we’re encouraging clients to look at for example is their use of organic fertilisers,” he said. “As well as the obvious benefits of improving soil health and drought tolerance, such applications are also invariably cheaper than imported, manufactured phosphorus (P) and potassium (K) nutrients, which may also be exposed to tariffs in the future and are subject to currency fluctuations and a general increase in energy prices.”
Farms without a livestock enterprise should consider a partnership with a local livestock producer, energy plant or utilities provider, he suggested.
He also advises establishing a good relationship with their end user, which can offer a win-win for farmers and processors looking to mitigate their own supply chain risk, and also allows for the identification of new and niche products to meet customer demand.
“One thing that farmers and landowners cannot do is nothing. It will be the farm business that evolves into a consumer-focused, environmentally friendly brand, differentiating itself in the marketplace, that is set to thrive,” he said.
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Oliver Holloway of Clarke and Simpson said UK farmers’ challenge was their low productivity growth of just 0.9%, compared to 3.5% in the Netherlands.
“It is most likely that England will have a complete break from the Common Agricultural Policy and will no longer be looking at income support. Instead there will be greater focus on soil, water and climate control,” he said.
While trade, labour and regulation were all external matters that can’t be controlled by landowners, most factors within a farming business are within their control.
“In my view, the three main ways in which our clients will look to replace subsidy will be to reduce inputs, increase output and find alternative income sources,” he said.
“Farms are becoming more of a diverse commercial environment and post Brexit, businesses will need to strengthen their financial position by segmenting markets, adding value and tapping into niche markets.”
He added: “In my view, it will be the landowners that sit tight and tread water, who will be at the greatest risk of becoming a ‘post-Brexit casualty’”
William Barton of Landbridge said a lot would be down to the personal circumstances of the farmer.
“Usually, one would say the worst thing to do is nothing, but equally that could be the right thing to do for some,” he said.
“Those that are considering a sale in the short term may wish to consider accelerating that process. We are seeing a general lack of supply of land coming to the market whereas demand, especially for better quality blocks of land or commercial farms with the ability to generate income aside from farming, has been quite buoyant, especially from those with roll over, following the more active development land market over the last 12 to 24 months and the resultant rollover proceeds looking for a home before the rollover period expires.
“Those looking to invest with their business may wish to take advantage of the annual investment allowance, which is currently very generous at £1m. There is also tax relief on agricultural buildings to consider too.
“For those considering succession, again this should be firmly on the agenda with a plan in place. We would be encouraging all of our clients to have a five or 10-year plan. As with all these things, take and listen to advice if you are diversifying, do your research and plan ahead, which if those three things can be considered best things to do then not doing them must also be the worst.”
Alex Green of Brown & Co said: “In terms of best things a farmer can do, I stress the importance of being proactive and not reactive in a highly changeable farming environment.
“Have a clear understanding of your total cost of production, including fixed costs, and compare this to your expected levels of output, both with and without a Basic Payment subsidy.”
Key management software will help with this process, as well as complying with HMRC’s new rules on making tax digital, ahead of the April 2019 start date,” he said.
“This will enable farmers to make more informed decisions going forward, whether they are looking at environmental stewardship schemes, exploring planning potential, changing machinery or taking on more land.
“The worst thing a farmer can do is to bury their head in the sand and assume everything will be OK. Uncertainty in respect of currency and market fluctuations, policy and input prices will mean that cost control is essential. Potentially challenging times on the horizon will necessitate change. It is important to remember that both social and economic support is available for those in the rural areas who are experiencing financial or personal issues.”
Jason Cantrill of Strutt and Parker said the worst thing a farmer can do in the present circumstances is nothing. The best was to understand their businesses better to make proactive and informed decisions. “Can they do more with less and make their asset work harder?” he said, but adding that employing people and managing them excellently was a good idea too.
Bury St Edmunds pig consultant Peter Crichton said a great deal hangs on the outcome of the Brexit ‘deal or no deal’ situation.
“From a pig industry perspective, with the UK importing around 45% of its pig meat mainly from the EU, the best option would be for a tariff to be applied to all pig meat imports heading towards the UK, thereby putting up the price of pork which would benefit UK pig producers who are currently receiving low prices for pig meat at a barely sustainable level,” he said.
“However, the downside is that although the UK remains heavily dependent upon imports with insufficient home production to meet demand.
“The majority of our cull sow exports go to mainland Europe where tariffs will also be applied to pig meat coming from non-EU sources. This would effectively reduce the proportion of the overall bid price being offered by European mainland cull sow processors, leading to sharp reductions in the net payments available to hard pressed UK pig farmers for their cull sows.”
The best outcome for producers would be to see falling feed prices because the cost of feed forms around 60% of the overall cost of pig meat production. However, for those pig farmers who also grow cereals this may not be such a good outcome, he said.