East Anglian farmers’ cash flow ‘set to be tight in 2015’

Jonathan Stiff, director at Cheffins

Jonathan Stiff, director at Cheffins - Credit: Archant

Cash flow is set to be tight for East Anglian farmers this year following a tough 2014, an expert has warned.

Jonathan Stiff, director at surveyors and estate agents Cheffins’ Cambridge office said falls in commodity prices, with wheat and oilseed prices plummeting, had taken their toll on the bottom line of the region’s farmers.

He urged them to set aside time to prepare their budgets for the year ahead and ensure they have a sound financial plan in place.

“As the festive season draws to a close for another year, thoughts will inevitably turn to 2015, with many wondering what the next 12 months will bring.

Farmers across East Anglia experienced a tough 2014 – wheat prices fell by a third and oilseed rape prices by a quarter,” he said.

“Other commodities fared no better – with potatoes and onions seeing even bigger falls. The strength of sterling also affected the Single Farm Payment for 2014, although this was offset by the reduction in modulation.”

Over the coming weeks farmers should be reviewing their budgets and identifying any potential shortfalls of income, he said.

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“Updating budget forecasts will be crucial. With produce prices remaining low there is a reluctance by arable businesses to sell – and despite some record cereal yields the predicted income still falls well short of the budgeted figures produced earlier in the year. The strategy of holding on to corn in the hope that prices will improve before next harvest inevitably puts further pressure on income,” he said.

Farmers faced important decision, including whether to sell a proportion of their 2015 crop up front to get a guaranteed price, or wait in the hope of a better return.

“This dilemma, coupled with tax payments that will be due on January 31 and rent demands in spring, could leave many farm businesses facing a serious cash flow problem,” he warned.

“Unfortunately – with the price of sugar beet likely to fall from £31.67 to £24 a tonne - the outlook still isn’t terribly good.

“It’s therefore important that farmers identify shortfalls and when they’re likely to hit. This will ensure that any action that needs to be taken is timely – approaching a bank to increase lending facilities or organising crop sales to coincide with known expenditure.”

He pointed out that the Agricultural Mortgage Corporation, for example, offers a five year flexible loan to help with short term funding which works in a similar way to an overdraft facility, with interest only charged on what you actually spend.

“The key message is to plan your budget thoroughly and in good time. That way you will be better prepared for whatever 2015 has to bring,” he said.