Farming without subsidies

yellow belly · Jan 7, 2019

ollie989898 said:
I disagree that land will magically drop in value when subsides disappear. Two reasons:

1. The people who are buying land in the UK with money outside of agriculture do it because they see it as a long term investment and more importantly inheritance tax relief. Neither of those things involves £200 of monopoly money landing on the mat on the 31st December. To them, subsidies make no sense and don't figure in their equations.

2. The genuine farmers who have bought land in recent times and borrowed money to do it will have had to produce a detailed justification for their lender in order to do it. I highly doubt the potential to claim subsidy on additional land is anything like enough to show a lender a viable business case for the purchase. On the contrary, the few people I know who have bought land in recent times have done so to expand their operation and were able to satisfy their lender their existing business was sound and making money. Another bought land because he had to do something with the capital he had gained from the sale of some farming assets elsewhere.

I do not see the demand for farmland on a buying basis radically falling any time soon, irrespective of subsidy policy changing or not.

Most land is bought by farmers who already farm even dyson was a farmer befor he invested in the last 10 years
Farmers who have had spare cash have pushed the price of land up it take the underbidder to set the price more spin a falling market

The lenders will look at the earning capacity of land and the business a 500 acre farmer will be £ 45000 less profitable over 15 years that is a lot less cash available for land

Most larger farmers I know who fbt and contract farm will stop if it becomes uneconomic some land owners my also decide they cannot continue farming

In the early 1990s farm land halved in value from the mid 1980s because the subsidy plan was to restrict it to 180 acres the outside buyer and the bank supported farmer buyers dried up overnight cash buyers could get
Land for under £ 1000 an acre At the time the rental value of interest was less than £100 an acre half what it is now
Although this was only a 5 year hiccup for land prices we did not know that at the time

Hilly · Jan 7, 2019

Its happening already , land abandoned or planted with sitca spruce as only viable alternative, communities villages spoilt forever School 1 mile from my house closed in the 60`s school 6 miles closed few years ago along with other schools, very few farm workers only farmers left, whole villages built for forestry workers maybe have 1 that works in the woods the rest benefit brigade the list is endless its pretty grim picture acctually when i think about it. Heap of marts shut as well or live under the threat of closure givve me 10 mins i think of more things to add to the list.

egbert · Jan 7, 2019

ollie989898 said:
I disagree that land will magically drop in value when subsides disappear. Two reasons:

1. The people who are buying land in the UK with money outside of agriculture do it because they see it as a long term investment and more importantly inheritance tax relief. Neither of those things involves £200 of monopoly money landing on the mat on the 31st December. To them, subsidies make no sense and don't figure in their equations.

2. The genuine farmers who have bought land in recent times and borrowed money to do it will have had to produce a detailed justification for their lender in order to do it. I highly doubt the potential to claim subsidy on additional land is anything like enough to show a lender a viable business case for the purchase. On the contrary, the few people I know who have bought land in recent times have done so to expand their operation and were able to satisfy their lender their existing business was sound and making money. Another bought land because he had to do something with the capital he had gained from the sale of some farming assets elsewhere.

I do not see the demand for farmland on a buying basis radically falling any time soon, irrespective of subsidy policy changing or not.

subs not affecting values?
hmmm, if land is £8k/acre, and borrowed interest is 2.5%, land needs to yield £200 annually to service the loan. Subs are +/- half of that.
Wouldn't that push values?
Sure as sh*t came into my sums when buying land.

Bury the Trash · Jan 7, 2019

egbert said:
subs not affecting values?
hmmm, if land is £8k/acre, and borrowed interest is 2.5%, land needs to yield £200 annually to service the loan. Subs are +/- half of that.
Wouldn't that push values?
Sure as sh*t came into my sums when buying land.

maybe opportunity for some then. farms that have healthy diversification/other income streams and their small/medium sized estate ( whose value is relatively unaffected because of residental value keeping it up ) to borrow against will be able to buy some cheaper land.
well yes as long as interest rates stay sensible.

egbert · Jan 7, 2019

Hilly said:
Its happening already , land abandoned or planted with sitca spruce as only viable alternative, communities villages spoilt forever School 1 mile from my house closed in the 60`s school 6 miles closed few years ago along with other schools, very few farm workers only farmers left, whole villages built for forestry workers maybe have 1 that works in the woods the rest benefit brigade the list is endless its pretty grim picture acctually when i think about it. Heap of marts shut as well or live under the threat of closure givve me 10 mins i think of more things to add to the list.

Straying off topic....do we have any sums regarding the difference in employment for landscape under Sitka agin blackies?
It seems so different because so many of the jobs are remote - the 2 lads driving in to drive the harvester and forwarder are here for a month, then on another site, while the haulier/forester are both living away, and the mills are huge centralised units even further away.

I've observed before there's a curious difference between how we view this , and how it works some places on the continent...where most farmers have some wooded ground, and run the 2 as part of their overall operation.
We seem to have been out of that loop for various historic reasons.
(I'm perfectly happy doing both...one crop takes a bit longer, but rarely strays!)

egbert · Jan 7, 2019

Bury the Trash said:
maybe opportunity for some then. farms that have healthy diversification/other income streams and their small/medium sized estate ( whose value is relatively unaffected because of residental value keeping it up ) to borrow against will be able to buy some cheaper land.
well yes as long as interest rates stay sensible.

It's caution about interest rates which holds me back...too long a memory.
Mind, I think i'm past wanting to expand farming operations now...we're firmly looking at non agri stuff now...residential letting, other processing/secondary stuff, or when the knees really ache, just putting it in a fund somewhere, and let some other sap worry. (which is great right up til the sap loses his shirt, and mine)

Hilly · Jan 7, 2019

egbert said:
It's caution about interest rates which holds me back...too long a memory.
Mind, I think i'm past wanting to expand farming operations now...we're firmly looking at non agri stuff now...residential letting, other processing/secondary stuff, or when the knees really ache, just putting it in a fund somewhere, and let some other sap worry. (which is great right up til the sap loses his shirt, and mine)

Ive spent alot of my life growing expanding farming thinking how to do more make more etc in farming , recently find myself giving up on growing farming and going into other things farming returns are pish poor for level of investment and the for the work involved.

ollie989898 · Jan 7, 2019

jackrussell101 said:
I reckon... in fact I know some dairy farmers or AD plants would still give you £200 an acre...

Ok, so what are people complaining about, exactly?

ollie989898 · Jan 7, 2019

egbert said:
subs not affecting values?
hmmm, if land is £8k/acre, and borrowed interest is 2.5%, land needs to yield £200 annually to service the loan. Subs are +/- half of that.
Wouldn't that push values?
Sure as sh*t came into my sums when buying land.

And there you are using subsidy money to support a farming business!

egbert · Jan 7, 2019

ollie989898 said:
And there you are using subsidy money to support a farming business!

Yes, absolutely, as I've been perfectly happy to admit. Why wouldn't I?
I've used these 'good times' to acquire chunks of ploughable freehold elsewhere, starting from poor ass hill tenant.
If some of my peers have failed to secure long term gain while the going has been so good, ....well, the world is a tough ole place.

I'm quite prepared to drive my own life forward without subs...sorry, i've forgotten where you are on this.... and i think we've established that i can see how many beans makes 5.
But I regret the fallout that such a change would bring.
My suppliers/subbies/staff will not be benefiting from the % of the subs which I currently allow to leak through my fingers. People would lose their jobs.

And unless there's significant enviro sub, large tracts around me will either be involuntarily rewilded (although until all of my generation are dead, they'll mysteriously burn every 5-6 years out of spite), or be under sitka forest.

jendan · Jan 7, 2019

lazy farmer said:
I do think it is realistic as a long term avg. this yr is looking much more optimistic than a few months ago. Demand appears to be
Stronger than supply as the SMP mountain is currently disappearing fast and northern European production is
Being held
Back by last yrs drought.

I note you will not divulge your milk buyer.Which is fair enough,but i think it may be one of the highest payers.It could be argued that you are profiting out of some of your fellow milk producers misfortune.

jackrussell101 · Jan 7, 2019

ollie989898 said:
Ok, so what are people complaining about, exactly?

It's folk on poorer quality land that will suffer

jackrussell101 · Jan 7, 2019

egbert said:
subs not affecting values?
hmmm, if land is £8k/acre, and borrowed interest is 2.5%, land needs to yield £200 annually to service the loan. Subs are +/- half of that.
Wouldn't that push values?
Sure as sh*t came into my sums when buying land.

Banks would not allow you to buy land with 0% down

Hilly · Jan 7, 2019

jackrussell101 said:
It's folk on poorer quality land that will suffer

They always do they are used to it.

ollie989898 · Jan 7, 2019

jendan said:
I note you will not divulge your milk buyer.Which is fair enough,but i think it may be one of the highest payers.It could be argued that you are profiting out of some of your fellow milk producers misfortune.

I know who his milk buyer is. It is not some mythical or magic niche buyer, there are many many people running many different systems who sell tothem. The difference is, what the buyer is paying LF will be radically different to average joe because of his constituents.

jackrussell101 · Jan 7, 2019

There will still be some sort of support though to keep it farmed and looking how it looks so no one will be worse off

Gatorman · Jan 7, 2019

When a large enough portion of the population find their food too expensive it becomes an undercurrent for unrest and no government will let this happen. Some form of subsidy will always be around. Is this not the real reason behind the European wide subsidies or am I reading too much into things???

farmerm · Jan 7, 2019

Clive said:
there is no brainwashing me !

I know profitable food production without subs is possible ................. because i'm doing it !

If you want to exist in the future then frankly you simply need to up your game and start running your business rather than just being a good farmer !

It is not so hard to be profitable growing cereals without subs when feed wheat is £170/t+....

Exclude the "Brexit" effect on prices from the past year and the average for the previous 5 years was closer to £130/t...

Clive does your cereals enterprise still deliver a worthwhile level of profit without subs when prices are closer to the more normal £130/t values?

sexy lexy · Jan 7, 2019

farmerm said:
It is not so hard to be profitable growing cereals without subs when feed wheat is £170/t+.... Exclude the "Brexit" effect on prices from the past year and the average for the previous 5 years was closer to £130/t... Clive does your cereals enterprise still deliver a worthwhile level of profit without subs when prices are closer to the more normal £130/t values?

Correct, arable/dairy farming can easily survive without the sub, if you can't, pull your socks up or do something else, stock or hill is different they do need sub, brexit shouldn't affect anything other than currency, if wheat is £185 a ton in France, it'll be off nd on the same here, the sooner they cut the sub the better.

ollie989898 · Jan 7, 2019

farmerm said:
It is not so hard to be profitable growing cereals without subs when feed wheat is £170/t+.... Exclude the "Brexit" effect on prices from the past year and the average for the previous 5 years was closer to £130/t... Clive does your cereals enterprise still deliver a worthwhile level of profit without subs when prices are closer to the more normal £130/t values?

The profit from agriculture waves up and down and certainly has for as long as I can remember. Some years it is not worthwhile, others it certainly is? What odds does it make?

Why should farming sit in some kind of protective make-believe world that never changes? Businesses nor industries never thrive with that mindset.

Farming without subsidies

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