Change to survive is the message from consultant
Rising costs,Brexi tu n certainties and changes to domestic farm support policies mean that cropping farms across the UK will need to make significant change store main profitable over the next decade, a leading firm of farm consultants has warned.
With Brexit remaining unresolved, Anders ons the Farm Business Consu lt ants this week said that it would be easy for grain growers to carryon doing much the same thing, especially as they predicted that prices were likely to remain firm in the short term – only to add a caution:
“But change is undoubtedly coming – and those businesses that grab a head-start in improving efficiency will be best placed to pros per in the new environment ,” the company’ s senior director, Richard King, warned this week.
Speaking ahead of one of Europe’ s largest combinable crop ping techni ca le vents, Cereals 19, King said that not only was Brexit looming over the sector, but other issues such as high costs, lack of break crops and stagnant yields would also need to be addressed by businesses hoping to weather the coming storm. He said that although the latest figures from his company’s modelling exercise – which is based on the hypothetical but typical Loam Farm– showed that while output might remain steady in the short term, increasingly there would be a nerosion of any profit margins by rising costs which were increasing at an accelerated rate:
“The interaction of yields and costs is the key determinant of profitability. High yields will reduce the cost of production per tonne – but yield increases have been far slower than cost inflation over the past decade.
“This is squeezing profitability,” he stressed.
However, King admitted that even this less than exciting budgeting exercise had been based on an “orderly” Brexit:
“Should there be a‘ No deal’ outcome, then the prospects would be sharply reduced,” he revealed.
He also highlighted the fact that the predictions for income over the next two seasons were highly dependent on the basic payment for overall profitability.
“With changes coming under a domestic agricultural policy, Loam Farm, and many businesses like it, will have to re assess their operations.”
• Andersons will be one of the many companies offering advice and information at Cereals 2019 which takes place at Boothby Graffoe in Lincolnshire on 12 and 13 June.
bhenderson@farming.co.uk