Levels of Subsidy in Farm Income - Graph from Farm Business Survey

[Bossfarmer]

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How do people think this will change in 5 years time? What predictions do you have?

this is England where yields are higher, hows Scotland going to survive, labour/machinery and input prices are not going to drop much

 

[joe soapy]

Trump is cutting US farm support, so we can expect an increase in speed of cuts here. Life as we know it farming is going to change fast
with increasing emphasis on getting returns from the market. Going to be a rocky ride i think with a lot of marginal farmers pulling out.
Might be like the 30's over again with dog and stick farming over large areas

 

[wasted years]

Those graphs seem overly negative in the Ag production side of things.

190 acres here, grade 3 land, 50% sheep and cattle, 50% arable.

It's rude to talk about money, but here goes. For year to March16 we made a profit of £28,000 including BPS, before our drawings. When our drawings (2 working partners) and a bit of shed building are taken into account we finished the year with the same amount of money in the bank as we started it.

So the BP, which was about £14,000 wasn't all of our profit.

Sobering to consider that in 2012 we made profit of £58,000 and it's been declining slowly ever since.

Reason: increasing variable costs, particularly agchems and declining commodity price.

We aren't exactly efficient and tend to bumble along. If we paid a rent or borrowed money, I think we'd be in trouble. But on the other hand we don't have economy of scale and tend to work in a muddle at half throttle.

We could do better, maybe, and I think with a bit of diversification and work off farm, we could manage without BP. I wouldn't consider it sensible to either rent more land or borrow to buy more land. That wouldn't help us. We need enterprises and other sources of income to spread the risk.

I'm going to be honest and say that for your size of farm and amount of people on it you are doing rather well!
Just shows how people that are motivated to expand/start from scratch can do it.

 

[gone up the hill]

Trump is cutting US farm support, so we can expect an increase in speed of cuts here. Life as we know it farming is going to change fast
with increasing emphasis on getting returns from the market. Going to be a rocky ride i think with a lot of marginal farmers pulling out.
Might be like the 30's over again with dog and stick farming over large areas

Trouble is the type of dog and stick farming that happened in the 30's wont work now, take cattle for example, back then it would be common place for beef cattle to be kept alive on just enough hay for 4/5 winters the and spend another 4/5 years on grass finally being fhinshed around 5/ years old on fattening meadows, the market place doesn't want these animals now and we are forced to push them like hell as the cut off dates are getting lower and lower.

There was some 27/28 month old cattle at sedge on Sat, clearly farmed in a dog and stick way, they did manage to get a bid of £565 but the vendor wanted more so took them home, those cattle would have to be put on a very intensive fhinshing diet of grain/ maize/ cake etc to have any hope of being worth anything when they were killed before 36 months.

Reality is if subs go either input prices will have to fall 20% or farm gate prices will have to go up by 20/30% and the latter needs to be made crystal clear to the Gov when talks take place about future farm support.

 

[beefandsleep]

With the right sort of stock and good management dog and stick and grass finishing doesn't take 5 years. It is easily achievable to finish native bred cattle on grass at 30 months of age, or even less with a very small amount of corn in their second winter.
I totally agree re input costs, the cloth will have to be cut on both sides. I expect to see prices rise though because as has been said, cuts in support are not going to be unilateral and farmers all over the developed world will have to make more business decisions. Production will fall but only until the next shortage when the production based support will begin again.

 

[gone up the hill]

With the right sort of stock and good management dog and stick and grass finishing doesn't take 5 years. It is easily achievable to finish native bred cattle on grass at 30 months of age, or even less with a very small amount of corn in their second winter.
I totally agree re input costs, the cloth will have to be cut on both sides. I expect to see prices rise though because as has been said, cuts in support are not going to be unilateral and farmers all over the developed world will have to make more business decisions. Production will fall but only until the next shortage when the production based support will begin again.

Natives would work but the cut off point is 28 months for the prem and ideally 24 months is where you want to be at to get the most prem per kilo and even if you do run them on until 30 months on grass most of them will only be 300 kilos dead so wont come back to much money.

True dog and stick doesn't include grain and also with the current TB rules it makes it almost impossible to run large numbers of cattle over large areas unless you are the owner of all of the land they graze on, and then if your renting large acres it would be a nightmare when you go down with TB and are testing every 60 days!

I don't think farm gate prices are going to go up to farmers, take beef its getting dearer and dearer in the shops ( morrisons has gone up £1 kilo for steaks the last few days ) but its not being passed back to farmers but instead used to cover the supermarkets every increasing own costs.

 

[beefandsleep]

Following the obvious logic, production would fall hugely, how tight do you suppose supermarket spec will be? We have seen before how when supplies are short they get rolled back. For example, minimum weights would be dropped, suddenly beef from older cattle would be quite acceptable. Where is the current premium for sub24 months? There isn't one.

 

[gone up the hill]

Following the obvious logic, production would fall hugely, how tight do you suppose supermarket spec will be? We have seen before how when supplies are short they get rolled back. For example, minimum weights would be dropped, suddenly beef from older cattle would be quite acceptable. Where is the current premium for sub24 months? There isn't one.

Yea production should drop but im not sure it would as there is too many people keen to go farming and either don't have a real grasp on costings on will use non farm income to sub their farm business.

On named Angus cattle there is a bigger prem on cattle under 24 months than between 24/28 months.

 

[Bossfarmer]

where is the evidence to suggest trump will remove farm subs?

 

[joe soapy]

where is the evidence to suggest trump will remove farm subs?

was in one of the E news papers in the last week or so

 

[Bossfarmer]

was in one of the E news papers in the last week or so

is it just speculation or is that actually confirmed? last I heard he was going to cut taxes for farmers

 

[Cowcalf]

beef will rise in short term with the Brazil problem, as it has started to in US, but it will always be a global commodity and prices to suit

 

[Brisel]

If you took the Agriculture and Diversified income together, that is what you would have left over as income in a no subsidy system. If you were a family farm this would represent your payment for unpaid family labour.

The graph shows the only 'cropping' system actually making money from their agricultural production is horticulture.

What I was getting at with the question was, how will that 'subsidised income' be replaced in the future, if we ended up down the New Zealand route?

That's the big question, and thanks for posting the graph.

I have participated in a few of these farm business surveys, and looked deeper into how they take a representative sample. I used the results to benchmark my business so I wanted to question their validity and credibility. I can promise you that they are statistically significant.

Yes, the graph shows aggregated data so there will be some very good businesses with data from some very poor ones too. There's a BUT in here - lots of businesses don't like paying tax on profits, so make sure that lots of costs go against trading profits. That might be shiny new machinery, a pheasant shoot, the kids' ponies or study tours to foreign countries.

Yes, it is very worrying when you take BPS out of the equation! Farms with high rents or high borrowings are going to suffer unless they change quickly when BPS goes post Brexit.

Here are my questions - What will you do to financially survive without the support mechanisms? How many farms are happy enough to break even in return for a nice lifestyle, lots of living costs buried in the books and something to get out of bed for each day? How much cost (and comforts) are you prepared to strip out of the business to stay in the black???

 

[Bossfarmer]

That's the big question, and thanks for posting the graph.

I have participated in a few of these farm business surveys, and looked deeper into how they take a representative sample. I used the results to benchmark my business so I wanted to question their validity and credibility. I can promise you that they are statistically significant.

Yes, the graph shows aggregated data so there will be some very good businesses with data from some very poor ones too. There's a BUT in here - lots of businesses don't like paying tax on profits, so make sure that lots of costs go against trading profits. That might be shiny new machinery, a pheasant shoot, the kids' ponies or study tours to foreign countries.

Yes, it is very worrying when you take BPS out of the equation! Farms with high rents or high borrowings are going to suffer unless they change quickly when BPS goes post Brexit.

Here are my questions - What will you do to financially survive without the support mechanisms? How many farms are happy enough to break even in return for a nice lifestyle, lots of living costs buried in the books and something to get out of bed for each day? How much cost (and comforts) are you prepared to strip out of the business to stay in the black???

basically do you want to work hard for nothing

 

[Brisel]

basically do you want to work hard for nothing

I wouldn't put it like that but if you started with a blank sheet of paper and built up the farm with only the costs required to run it I'd bet that most people would come up with something a lot leaner than it is now. Would it leave enough to give the farmer's lifestyle or make it worth slogging your guts out for? I'll bet it won't leave enough for a £200/acre arable FBT rent!

 

[joe soapy]

I wouldn't put it like that but if you started with a blank sheet of paper and built up the farm with only the costs required to run it I'd bet that most people would come up with something a lot leaner than it is now. Would it leave enough to give the farmer's lifestyle or make it worth slogging your guts out for? I'll bet it won't leave enough for a £200/acre arable FBT rent!

An old neighbour said he lost money every day he farmed untill he sold and walked away with a fortune.
Some how work dont pay, making good decisions does

 

[bankrupt]

walked away with a fortune.

That's the benefit of the two great inflations for you, joe soapy.

Happy days!

First 15 years of the bank lending you money at up to minus 12% interest, and now 15 of ZIRP.

 

[joe soapy]

That's the benefit of the two great inflations for you, joe soapy.

Happy days!

First 15 years of the bank lending you money at up to minus 12% interest, and now 15 of ZIRP.

The boy has just been offered 5 years at 2.9. House price inflation is going to continue looks like

 

[Hilly]

Who gives these people there accounts and why ?

 

[bankrupt]

inflation is going to continue

Must keep the banks happy.

According to the FBS, the increase in the Net Worth of the farm business here since 2006 came 78% from fixed asset inflation and only 22% from trading.