Delays and disturbances

Delayed payments of the 2015 Basic Payments means some farmers have been owed tens of thousands of pounds for over a year. And the picture for the 2016 payments doesn’t look much better.

In Scotland, a loan scheme has been launched to guarantee 80% of the payments by November, but that still leaves 20% that could be delayed till June 2017

It’s not just these funds that are missing, there are knock-on effects of the delays for suppliers and buyers who are being affected by the uncertainty around Brexit and payments.

For a lot of producers, the payments from the EU and Government have been on a bit of decline in recent years. While England has seen some improvements, Scotland is only just commencing the transition to area-based payments, and for many except the uplands, this will lead to reduced incomes.

World grain prices are also at relatively low levels compared to recent years. This combined with the delayed payments means farmers are facing a funding black hole that won’t necessarily be covered by a good yield or getting a good sale price. These are long term issues that need a more structural solution.

While there has been some good news with the low value of Sterling making British produce more attractive to overseas buyers, farmers are also being forced to pay more for machinery and fertiliser because of the changing exchange rates.

And as for the future, that’s an unknown. No one has provided solid assurances that EU funding – or equivalent sums – will be provided post-Brexit. But what is certain is that attitudes will change. In France, farming is a big deal and large part of the economy. In the UK, this is no longer the case and many are worried that once we leave Europe, farming will be pushed down the political agenda.

What can farmers do?

Cut back where you can

There’s an old saying that ‘if you can’t measure it, you can’t manage it.’ And it’s one farmers should take heed of. Take a step back and take a look at any fixed costs and see if you can make some efficiency savings. Shop around for cheaper deals on things like insurance to save some pennies.

Assume late payments

Don’t budget for your payments to be on time – instead assume they’re going to come in late and create a workable budget that can cover that gap. This might mean making your funds stretch or changing how and when you sell produce.

Speak with your banks

If you are going to be borrowing more to cover late payments or poor yields, then speak with your bank. They can be – and have been – very supportive of farmers waiting for missed payments, but their patience will last only so long. Keep them on side by providing updates and showing them that you’re taking budgeting seriously.

Budget what you can

There are a lot of variables in farming, so it can be hard to plan a budget. Put in what you can, even if only to give yourself a better idea of what you’re likely to spend on the basics. For variables, try creating upper and lower limits. These can be your best case and worst case scenario budgets. It’ll help give you a rough idea of what you should be aiming for and where you actually are with your money.

Become a trader

People have got to adjust to a more turbulent market place. Farmers will have to keep an eye on currencies so they can spot when it’s good to buy and sell. When the pound is weak, it’s the time to sell. If it improves, then that might be the time to invest in new machinery and other imported goods like fertiliser.

Bringing in a fresh pairs of eyes

Sometimes you can’t see the wood for the trees. A financial advisor or farming consultant can help you to create a budget and make some savings by spotting areas where you might not have noticed cuts could be made. They’ll remove some of the sentimentality behind your decision or could become a mediator if there are a number of owners involved.

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