Calculating whether you can manage without

[Goffer]

In the current climate of all the conversation and moaning about removal of subs, how many have actually worked out if they can manage without ? I mean realistically too. We have just sat down this week and while we are fixing the roof while the sun is shining having had a little better year with spuds and wheat we are still yet to receive bps and it has been budgeted to be part of an investment plan for the next 3 years . In highlight of the recent small gains in wheat osr etc our landlord on 40% off which we rent has kept reasonably within common sense relating rent to what is possible to produce at a profit . But hard fact we claim on best part of 220 ha of mixed soil from sand , clay to silt and you can work out quickly what our claimed value roughly is . I'm old enough to remember days ( just) without direct subs when the mcsharry reforms were to be introduced and what trouble it was going to cause , within 18 months a cheque came from maff and wheat was £147 ton . Quickly it dropped in value £70 and aap were a must to keep going . We have resigned ourselves to accept that the status quo will not prevail and prepare for a new regime .History has a tendancy to repeat itself and reverse trends . My point to this do we remember the lessons from the past , make on in the good to prepare for the bad as best we can . Money was made round to go around . We have calculated and we could manage without - just. But we will spend less on reinvestment , make do and get on with it . Donald trump love him or hate him when the chips are down charity really does begin at home .

 

[Tim W]

No subs here and making it (just)
Seems to me there are bigger things than subs to worry about though?
Trade deals and £ value could make any UK ag policy irrelevant

 

[opininionated]

In the current climate of all the conversation and moaning about removal of subs, how many have actually worked out if they can manage without ? I mean realistically too. We have just sat down this week and while we are fixing the roof while the sun is shining having had a little better year with spuds and wheat we are still yet to receive bps and it has been budgeted to be part of an investment plan for the next 3 years . In highlight of the recent small gains in wheat osr etc our landlord on 40% off which we rent has kept reasonably within common sense relating rent to what is possible to produce at a profit . But hard fact we claim on best part of 220 ha of mixed soil from sand , clay to silt and you can work out quickly what our claimed value roughly is . I'm old enough to remember days ( just) without direct subs when the mcsharry reforms were to be introduced and what trouble it was going to cause , within 18 months a cheque came from maff and wheat was £147 ton . Quickly it dropped in value £70 and aap were a must to keep going . We have resigned ourselves to accept that the status quo will not prevail and prepare for a new regime .History has a tendancy to repeat itself and reverse trends . My point to this do we remember the lessons from the past , make on in the good to prepare for the bad as best we can . Money was made round to go around . We have calculated and we could manage without - just. But we will spend less on reinvestment , make do and get on with it . Donald trump love him or hate him when the chips are down charity really does begin at home .

The outsider looking in will wonder why you need subsidy if you can manage without? What you are saying is that you are happy to receive 220 ha worth of sub as a bonus! is it any wonder that some commentators think that this is wrong?

 

[MrNoo]

Yes it is possible but you won't get fat on it certainly on lower grades of soil. We are a similar size to you and we do receive the sfp (42k) but also have a mortgage of 52k/yr, so in effect farm without the sfp. My thoughts when I took over the farm many moons ago was to cut away as many costs as possible, slowly get the kit up together when and if I could afford it/pay off the OD and carry on, diversification in various areas help the bottom line too. So currently it's just me that does all the work, ploughing/drilling/spraying etc etc, I have an old boy who comes and sits on the combine, he costs circa 2-3k each summer depending how many acres we cut (we do contract cut for 1 other)
I have got all the kit up together and this is the last year of my mortgage, although the OD is still as large as when I started. I have managed to get my diversified income up to 40k/yr so I think as a business we are in a pretty good place going forward, we also have a 100 ac solar park that may or may not get built, if that happens life will be much easier and less stressful.
But signing cheques to the chem companies is probably the most depressing aspect of my business, a necessary evil but the numbers just get larger and larger and I sometimes question who I in fact work for.

 

[David.]

Whether or not you "need it" would not be relevant if it were to stop coming.
Goffer makes a valid point surely, and wonders how we shall all cut our cloth if that day arrives.

 

[neilo]

No subs here and making it (just)
Seems to me there are bigger things than subs to worry about though?
Trade deals and £ value could make any UK ag policy irrelevant

As a grazier, I assume you will not be having the infrastructure and land management costs that a lot of farms, rented or owned, have to find each year. Those costs of property ownership/management are quite considerable. I could make a small profit without sub, if I didn't have a lot of those costs, or very cheap land rental so that I could use acres rather than fertiliser, lime, etc.

 

[Goffer]

we have a mortgage on what we own and works to a similar value to what we rent but my point is we have a system that is manipulated to keep control and its far easier to dagle a carrot than beat with a stick. give most farmers money and most will spend- wisely or not. but cant spend what you haven't got and the circle of cost and spend decreases.

The outsider looking in will wonder why you need subsidy if you can manage without? What you are saying is that you are happy to receive 220 ha worth of sub as a bonus! is it any wonder that some commentators think that this is wrong?

 

[opininionated]

we have a mortgage on what we own and works to a similar value to what we rent but my point is we have a system that is manipulated to keep control and its far easier to dagle a carrot than beat with a stick. give most farmers money and most will spend- wisely or not. but cant spend what you haven't got and the circle of cost and spend decreases.

I agree, farmers will tend to invest / spend surplus funds, thus passing 'the sub' on down the line, unfortunately, this means farmers get the adverse press coverage of being the recipients of public funds, when in fact the true benefactors are the ag supply industries.

 

[Feldspar]

Good question.

First thought that comes to mind: it's the nature of the trade deal rather than the removal of subsidies that has the biggest potential negative effect. However, given the range of possible outcomes in that area, it's very difficult to perform any robustness calculations.

Secondly, within the realm of subsidy removal, one unknown is the extent of the 'dynamic effects' -- i.e. if / when subsidies are removed, what knock-on effects will that have? For example, input suppliers may change their pricing, landlords may adjust their rent, and machinery prices may adjust. If those dynamic effects are negligible, then it is a simpler task to work out whether or not a business can cope, because you just blank out the subsidy section in the P&L bit of the accounts and see how the bottom line looks averaged over a few years. If those dynamic effects end up being large, it is much more difficult to forecast.

 

[DRC]

No two years are the same. That's where the sub is a lifesaver. Some years we could just about manage without it, other years have definitely needed it.

 

[The Son]

I have done the same as many others and looked at how I will manage without the sub in three years time.

For me once HLS and SFP is tallied up I will receive approx £50k this year. I have a diversified business, but do not want to be in the situation where other parts of the business are having to prop the loss of the SFP and HLS

The main business is beef cattle, so I am also concerned how I would compete if the trade deal includes tariff free imported beef from South America.

The decision that has been made is to cut costs and become more efficient, rented land and buildings will be given up, and more building built on the home farm over the next three years, (using the sfp) this will reduce time, travel costs, and cattle at home always perform better, numbers will be increased slightly, and I am working much closer with one main customer to supply what they need for their markets, even looking to a COP contract.

I don't think I will save the lost £50k by the above measures so the luxuries will have to give, machinery will have to work harder, I will have to work harder, and the cattle will have to perform better.

I do not think the bonfire of regulations is a good thing, we need to be able to demonstrate to our consumer that we produce food to the highest standard, which inevitably means independent assessors visiting our farm and inspecting our methods and produce, maybe this will be our point of difference over cheap south American beef to allow us to maintain some sort of premium.

 

[YorkshireAndrew]

More folk will be forced to diversify even if they don't want to & would rather just farm . According to some on a different thread 'If you can't farm without diversifying , then you should pack in & do another job ' , this sort of tosh annoys me intensely . A large proportion of farmers have diversified businesses , at least around here .

 

[hindmaist]

With subsidy,my farm gives me a modest living.Without subsidy it won't because it's too small.Same as the vast majority of farms.
How best to maintain my modest living,doing work I quite enjoy,whilst protecting my capital? I am currently looking at various options and alternatives.

 

[Feldspar]

I spend most of my time thinking about the crop growing part of the business. Sadly, it is the time spent pursuing energy and housing development opportunities that has given by far and away the highest differences to the bottom line. With tightening margins land values would even more increasingly reflect real estate and tax avoidance potential rather than agricultural productive capacity (assuming they do not fall dramatically), we would end up spending more time making sure that we were investigating all of these other areas. For example, we have been too slow to pick up on the residential development opportunities that are presented with the absence of local plans in some areas. Had more attention been paid in this direction, we would probably be mid-way through a planning application rather that just starting a few.

On the arable side, I see Mid-Tier as a good hedge against a turbulent transition period. Depending on the speed with which subsidies may or may not be removed, it will act as a bridge. It will also allow the most marginal land (far away from main base, high black-grass burden, or awkward areas / small fields) to be taken out of production in a profitable way.

 

[BELOWAVERAGE]

As a grazier, I assume you will not be having the infrastructure and land management costs that a lot of farms, rented or owned, have to find each year. Those costs of property ownership/management are quite considerable. I could make a small profit without sub, if I didn't have a lot of those costs, or very cheap land rental so that I could use acres rather than fertiliser, lime, etc.

Not looking for an argument(makes a change) but that reads as your not making any money, and surviving purely on hand outs, the sheep job has been not too bad and that really surprises me, you appear very biased as to the breeds and systems, people should run, do you think you are running the right breeds and system to make the most of your farm, this is a genuine question.

 

[multi power]

When the sub stops it won't be farmers that will suffer the most

 

[David.]

Maybe eventually, but the transition will have to be financed.

 

[Farma Parma]

When the sub stops it won't be farmers that will suffer the most

Thats the best reply so far...
Joe Public are gonna be in for a much bigger shock id say..
when bread is £2 a loaf or £3 even & everything else likewise up say what 40% ??? wild guessing.
Tech my LL will have to reduce the RENT buy the amount the BPS was previously set at if my 1986 tenancy Agreement rules
are followed by the book.
We all wont need as much working capital neither.
I'll bet alot of the rest of the variable inputs will fall.
Maybes iam wide of the mark but is it such a bad thing?

.....The transitional period will be rough thats the only snag......

 

[DRC]

Thats the best reply so far...
Joe Public are gonna be in for a much bigger shock id say..
when bread is £2 a loaf or £3 even & everything else likewise up say what 40% ??? wild guessing.
Tech my LL will have to reduce the RENT buy the amount the BPS was previously set at if my 1986 tenancy Agreement rules
are followed by the book.
We all wont need as much working capital neither.
I'll bet alot of the rest of the variable inputs will fall.
Maybes iam wide of the mark but is it such a bad thing?

I agree that there will be some interesting rent revues, as AHA tenancy rents are supposed to reflect the earning capacity of the farm. As a tenant I'm finding it hard to diversify.

 

[Farma Parma]

I agree that there will be some interesting rent revues, as AHA tenancy rents are supposed to reflect the earning capacity of the farm. As a tenant I'm finding it hard to diversify.

Yeah agree 100% we cant really do much else here as its gotta be Agriculture Related.
Any major change to whats been done in the past requires big lumps of cash & who takes them risks....when its not there place