Anglia Rural Consultants Coping with Tomorrows Challenges by Jamie - - PowerPoint PPT Presentation

Anglia Rural Consultants

Coping with Tomorrow’s Challenges

by Jamie Gwatkin

NFU Regional Offices, Newmarket

Thursday 6th December 2018

Contents

• 1. Introduction
• 3. Recipe for the Future
• 6. Succession
• 5. Skills
• 2. Brexit Challenges
• 4. New Crop Outlets
• 7. Farm Rents -v- Land Keepers
• 8. Balance Sheet Gearing & Rent Equivalent

32 years experience Strategy Appraisals J V Specialist FW Farm Advisor of the Year 2016

Brexit Challenge (1)

Financial Impact

❖ Implications of Brexit Not Known ❖ Agriculture Bill - Government framework for the future ❖ Reductions in Direct Support from 2021 and replaced with ELM – Current BPS & Stewardship income est. 50% by 2027 ❖ Export Tariff - possible 5% reductions wheat price ❖ Import Tariff - possible 5% increase in fertiliser & sprays ❖ Capping of Support on larger businesses

Brexit Challenge (2)

Post Brexit Agriculture Policy (NFU)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

• nwards

B P S Business as Usual B P S Business as Usual B P S Business as Usual No direct payments To build farm capability to manage risk, improve productivity and deliver public goods including: Enabling on-farm investment and technology to deliver public goods Support new entrants into farming Improve Resilience by preventing plant pests and diseases Countrysde Stewradship (CS) CS agreements continue to be signed

agreements will continue

but numbers will be dependent on the development of the new

Higher Level Stewardship (HLS)

Land Management Scheme (ELM)

agreements extended as required

HLS agreements extended as required Tests and trials for new Land Management Scheme (ELM) including first pilots in 2021 2025 ELM fully up and running Measures to promote animal health

and welfare fully up and running

UK Shared Prosperity Fund starts in 2021

Trageted investment in R & D and innovation (up to 2029)

Agricultural Transition Period Aim to phase out Direct Payments (2027 last year of Direct Payments)

Transitional support schemes

Source NFU

Brexit Challenge (3)

ELM (Environmental Land Management Scheme)

❖ Gavin Ross – head of delivery of ELM Scheme ❖ Farmers and Land Managers will secure income by providing environmental services and benefits that society relies upon, for which Government will pay – “Public Money for Public Goods” ❖ Multi-Annual Agreements based on Outcomes based Payments via simple online application process & paid on a monthly basis. ❖ Principles

Recipe for the Future (Arable) (1)

AHDB Report – Characteristics of Good Farms

Source AHDB

Recipe for the Future (Arable) (2)

Vision - Well Balanced Business

❖ Business split into its component parts

❖ Benchmark Overheads & Understand COP ❖ Stable well skilled workforce with good machinery ❖ 30% turnover from Non Farming enterprises ❖ Arable Gross Margin benchmark of £700 - £950 / Ha ❖ Overhead Costs & Gearing under control

Recipe for the Future (Arable) (3)

The right attitude

❖ A desire to farm

❖ Determination to make it work ❖ Glass half full

Recipe for the Future (Arable) (4)

Getting The Basics Right

❖ Sound Rotation which keeps Blackgrass under control

❖ Review drainage, pests, PH, P & K, buildings/ Infrastructure ❖ Good advice from Agronomist/ NIAB/ AHDB etc ❖ Accept that not all land should be farmed - ELM ❖ Attention to detail and Timeliness ❖ Look over the hedge!!!!

New Crop Outlets

Non Food Use

❖ The consumer will not support UK Farming ❖ Crops can be grown for industrial use ❖ AD sector presents opportunities – Health warning ❖ Pharmaceutical Use & Human Nutrition (Probiotics) ❖ Industrial Use

Business Skills (1)

Goals & Plans ❖ Set clear aims & objectives ❖ Monitor performance with Budgets/ Benchmarks/ KPIs ❖ Computer skills essential to work out & analyse COP ❖ Collaboration can help skills ❖ Managing / Motivating staff

Business Skills (2)

Assistance with Mentoring

❖ Mentoring to get Farmer to learn business skill Inc. ➢ Budgeting, departmental analysis, COP, benchmarking, sensitivity analysis, partial budgeting, performance monitoring, cashflow management, machinery planning

Business Skills (3)

Managing Labour

❖ Staff can be a businesses most valuable asset ❖ Skills Training & Progression important (appraisals) ❖ Look to share with your neighbour (pooling with Machinery) ❖ Stable workforce will be critical ❖ Building Teams / Encouraging Questions / Social Responsibility

Succession

New Era New Broom ❖ Brexit Offers Opportunity to tackle Succession ❖ DEFRA considering one-off lump sum payment ❖ Tenants will need to review Tenancy Agreements

Farm Rent -v- Land Keeper

The Pot is Smaller ❖ Rents propped up by Direct Subsidy but consider the value

• f the house

❖ Contract Farming Agreements need to share the risk ❖ Share Farming or Joint Ventures may become more popular ❖ Base Rents will be equivalent to payments via ELM for

being a Land Keeper

Balance Sheet Gearing

Bank Risk ❖ Future bound to impact of EBITDA calculations ❖ Banks not exposed to security risk ❖ Businesses will need to demonstration their ability to fund

interest and capital repayments on existing and future debt

❖ Look at Development Opportunities to reduce debt

Conclusion

David Jones Presentation

Addition To Bottom Line

Barley- Increase actual price of poor quality barley by £5,000 in 2016. HOLL OSR- increase sale value £25/ha on 80ha is £4,250. Wheat sale £4 premium on 300t is £1,200. £10,450 is 1.1% of arable turnover.