With a mixed 2013 harvest now in, and following a combination of different factors and pressures over the past 12 months on farm businesses, a comprehensive farm budget is absolutely essential going forward.
That’s the verdict of rural property consultants Smiths Gore which has offices across the region, at Corbridge, Darlington, Berwick and Carlisle.
Duncan Winspear, head of farm management at Corbridge, said: “We have seen a mixed harvest with spring crops performing well on some farms, but poor winter crops as a result of the extreme wet weather and difficult drilling conditions through autumn 2012.
“On the upside, a better summer has kept drying costs much lower than in recent years.”
A consequent feature of the arable sector has been price volatility. Crop prices in recent weeks have fallen away, and many combinable cropping enterprises sold forward very little when higher prices were available earlier in the year, with the condition of winter crops being uncertain and yields being unclear.
Likewise, the livestock sector has been challenging. Mr Winspear said: “Livestock farmers faced a winter of very high feed prices, combined with low sheep prices.
“However, we are predicting that feed prices should fall a little going into this winter due to lower grain prices, and the good weather has allowed most farmers to make good-quality hay or silage.”
This would seem to suggest that a comprehensive farm budget is unnecessary, but Mr Winspear disagreed.
He explained: “Price volatility over the past 12 months, and difficult weather, particularly last autumn, resulted in significant reductions in margins with cash-flow difficulties emerging as a consequence.
“These are being offset in some cases by drawing down early payments from forward grain sales, or asking suppliers for extended terms, or talking to the bank.
“Considering this last option, every bank will require budgets and cash-flow forecasts for the business going forward and those that already have these in place will have a distinct advantage in terms of negotiating the funds required for the farm to continue to operate.
“Extending overdrafts or changing terms of loans are far more likely to be granted to farm businesses that have demonstrated to their bank that they are financially aware and thinking ahead.”
He said that good budgets and good cash-flow management and forecasting were absolutely crucial in maintaining good relations with the bank, minimising exposure to HMRC, and planning ahead for the future.
“In the immediacy of everything else that needs to be done on the farm it is understandable that such exercises are not always a priority,” he added, “but they must be for the future success of the farm business.”
Meanwhile, the company is beefing up its operations in Northumberland with a number of key appointments in response to an upturn in the rural economy in the North East.
Partner Michael Orde said: “Business confidence in agriculture and non-agricultural businesses rose between April and June of this year according to the Smiths Gore/CLA Rural Economy Index.
“Rural businesses are reporting higher sales and more business inquiries in the past six months and this all points to positive economic signs for the local rural economy. We have now recruited extra staff to accommodate the upturn in work.”
James Reynolds, previously agent on the Exbury Estate in Hampshire, brings knowledge in estate management to the Corbridge branch, while Laura Airton will assist with new instructions in Berwick.
Mr Orde added: “Within the Tyne Valley, the unique nature of the countryside means that there is a strong demand for farm, estate and property consultancy advice. While we have not been immune to the harsh economic climate over the last few years, it is encouraging that our client instructions have increased and the team has expanded to service these new instructions.”