Budgeting for SFP

[Pan mixer]

I am sitting here trying to decide what rent to tender for some land that has come up locally.

I am happy to budget the costs and outcome of yield, output prices, input costs, machinery costs and so on even if it means wetting the finger and sticking it in the air.

Where I am absolutely clueless is the future subsidy thing - I know that SFP is reducing, will it vanish before ELMS?, since this is a 5 year fbt starting this autumn the 'hungry gap' between the predicted (currently) demise of SFP and the arrival (predicted) of ELMS is quite a significant proportion of the projected budget.

What does anyone else think?

 

[Formatted]

ELMs is not due to be available till 2023 and BPS starts reducing from next year, it will be gone by 2027.

They are reducing the £3.2 billion paid to farmers per annum to £2.7 billion so Tier 1 of ELMs will not be at the same value as BPS.

I would tender your rent with a 10% reduction in BPS and ask for a rent review in 2023 when we'll know what ELMs looks like.

 

[4course]

if you can budget 5 years ahead your inputs and outputs you are a better man than me ,I struggle to do it with any real accuracy 5 months nay should have said 5 weeks in advance and with any margin being purely speculative . In view of the scheme reduction the only sensible thing to do is structure the rent offer based on what it is as of now with the rent reducing by the amount that the payments do. You will be unlikely to be successful but at least you wont loose money

 

[Pan mixer]

if you can budget 5 years ahead your inputs and outputs you are a better man than me ,I struggle to do it with any real accuracy 5 months nay should have said 5 weeks in advance and with any margin being purely speculative . In view of the scheme reduction the only sensible thing to do is structure the rent offer based on what it is as of now with the rent reducing by the amount that the payments do. You will be unlikely to be successful but at least you wont loose money

I agree that budgeting on the inputs and outputs is fraught with difficulty, I have been operating budgets since 1982 and considerable changes gave happened in that time of course however they tend to average out a bit in a 5 year view.

 

[Brisel]

Have a look on t'interweb under BPS proposals. It tails off from next year, along with capping. Create a rent formula in that matches the tapering off. For every £1 less BPS each year, offer 50p less rent.

Since you're talking about rent, it implies a FBT which will be part of your holding, so allow for some of the capping in your own background calculations - it will affect different sized holdings differently but I don't quite see how a 3,000 acre farmer tendering can compete with a 300 acre farmer when the bigger one will lose much more to capping.

 

[Steevo]

I don't quite see how a 3,000 acre farmer tendering can compete with a 300 acre farmer when the bigger one will lose much more to capping.

It's been a while since someone has said such a thing I would think.

There has always been a situation where larger farmers can swallow up a block of land easier than a smaller farmer because it's a smaller proportion of their acreage. i..e extra 300ac to 3000ac farm is only 10% increase in workload, capital needed etc. whereas to a 300ac farmer it could be double.

 

[4course]

Have a look on t'interweb under BPS proposals. It tails off from next year, along with capping. Create a rent formula in that matches the tapering off. For every £1 less BPS each year, offer 50p less rent.

Since you're talking about rent, it implies a FBT which will be part of your holding, so allow for some of the capping in your own background calculations - it will affect different sized holdings differently but I don't quite see how a 3,000 acre farmer tendering can compete with a 300 acre farmer when the bigger one will lose much more to capping.

not worked that one out so thanks for the pointer thats the first bit of positive thinking ive come across for guys of our size , oh hang fire the rest of similar size to us will now be looking for a bit extra with the big guy being not so keen though it will make a change from trying to fathom how the multi acre man can make the near£200/acre and plus rents that are bandied about pay

 

[Pan mixer]

not worked that one out so thanks for the pointer thats the first bit of positive thinking ive come across for guys of our size , oh hang fire the rest of similar size to us will now be looking for a bit extra with the big guy being not so keen though it will make a change from trying to fathom how the multi acre man can make the near£200/acre and plus rents that are bandied about pay

In this case there won't be anything like 200 an acre offered, nearly half the land is in various environmental schemes for a start and, as @Brisel points out it would take me over a threshold for sfp reduction although I realise that it is only the acres over the threshold that knock the payment.

Plenty of good thoughts above, I hope that none of my competitors read this.

 

[Case290]

Block of arable up for rent 200 acres small fields with wet spots ie poor drainage / Black grass. 5yr fbt but got to buy the bps 2. I do like farming .. and a challenge and have plenty of capacity. What’s the going rate ? Last yr some similar made £175 but that included the bps.

 

[Steevo]

Block of arable up for rent 200 acres small fields with wet spots ie poor drainage / Black grass. 5yr fbt but got to buy the bps 2. I do like farming .. and a challenge and have plenty of capacity. What’s the going rate ? Last yr some similar made £175 but that included the bps.

BPS takes up the £75 of that so that leaves about £100/ac actual ground rent then.

 

[milkmate]

When you put in a tender were the BPS is included do you automatically assume that its BPS for the land lord and then a value for the land, for example £75 + £50 for poor land, £75 + £100 for good land, I am talking livestock land and so how do you pitch a price for a 500 acre farm with both good and bad. If the above is so and when BPS goes is the land lord understand the loss.

 

[Flat 10]

There’s a question. Depends on the landlord I guess....

 

[Flat 10]

Block of arable up for rent 200 acres small fields with wet spots ie poor drainage / Black grass. 5yr fbt but got to buy the bps 2. I do like farming .. and a challenge and have plenty of capacity. What’s the going rate ? Last yr some similar made £175 but that included the bps.

Depends who wants it. I wouldn’t want to pay anywhere near 175. Hopefully rents will be coming down.....

 

[Case290]

Arables not worth any where near £175 in my view. Think it’s more £40 £50 acre ground then buy the bps if you want to. I could do it easy enough along with every one else, big kits makes doing more easy enough.

 

[Steevo]

When you put in a tender were the BPS is included do you automatically assume that its BPS for the land lord and then a value for the land, for example £75 + £50 for poor land, £75 + £100 for good land, I am talking livestock land and so how do you pitch a price for a 500 acre farm with both good and bad. If the above is so and when BPS goes is the land lord understand the loss.

Sounds a fair idea of figures to me - makes sense to work it out that way for simplicity imo. You can bet the landlord/agent will be using a similar calculation.

 

[Tim G]

What did you do in the end @Pan mixer and how did you get on with it?

 

[Pan mixer]

What did you do in the end @Pan mixer and how did you get on with it?