an increase in cow numbers would probably require an investment in housing which would be covered under AIA
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Paying down debt....
- Thread starter Happy at it
- Start date
Will Blackburn
Member
- Location
- Cheshire
How does that dilute the debt?
ok lets say
farmer has 400 cows has borrowed 2million to buy farm and made a taxable profit of 200k
he could:
A. pay tax and reduce borrowings to 1.88 mill (debt £4700 per cow)
B spend 100k on 100 cows and 100k on infrastructure (debt £4000 per cow). this would also reduce interest charge (@4%) per cow by £40.
I would say some people have got far to carried away with B. and have too many cows which leads to higher COP
Princess Pooper
Member
- Location
- East Mids
Cubicles and internal fittings would be but the shed itself is not eligible for any capital allowances.Have you never heard the expression 'do not let the tax tail wag the dog? ' The cows of course for the expansion, and the working capital to feed them, on top of the shed, would be using yet more borrowed money..., yeah really sensible!
I have edited this post
You don't approve then!!
The number in My post were not related to my business.
I wouldn't recommend spending money to reduce tax. but of the conditions were right one could spend money to reduce debt per cow.
As to your other points if I was sensible I wouldn't be farming.
I knew my plan was slightly flawed even before a posted.
There a various ways of dealing with the cost of putting up shed
.introducing cows at the right time of year requires very little working capital and she will pay her way as she goes
yes cows are capital items - employ a decent accountant
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Princess Pooper
Member
- Location
- East Mids
As a farm business consultant with 30 years experience and a qualified accountant I see so many families who are completely stressed out by debt when if they farmed better rather than chasing cow numbers and more sheds all the time they would have a much easier and probably happier life.I have edited this post
You don't approve then!!
The number in My post were not related to my business.
I wouldn't recommend spending money to reduce tax. but of the conditions were right one could spend money to reduce debt per cow.
As to your other points if I was sensible I wouldn't be farming.
I knew my plan was slightly flawed even before a posted.
There a various ways of dealing with the cost of putting up shed
introducing cows at the right time of year requires very little working capital and she will pay her way as she goes
yes cows are capital items - employ a decent accountant
I completely agree with that. From your previous posts my judgment would be you are a very good consultant and accountant.
A managed approach to business growth is always advisable rather than trying to keep up with the neighbours.
I have seen friend who have had some very difficult years due debt stress. On the other hand I have seen farms grow to an extent that each sibling to have there own farm.
frederick
Member
- Location
- south west
How many years was the fix?
dinderleat
Member
- Location
- Wells
First five years
I am a danish dairy farmer. I have bought the farm about 2 years ago at marked value and built a new stable since then.
My debt is considerably above 10k per cow. The average around here is about 20k. The pound has weakened considerably since the brexit vote!
This is the conditions if you want to start. Just land is about 18k/ha and 10 years ago it was twice that. You need a ha per cow. I think the average dairy farmer own about 0,5 ha/cow. Most banks look at the production price per liter. My bank wants it under 27ppl.
You are not missing anything. When you buy a dairy farm in denmark, you milk cows! My fixed costs are so high, just stop milking because of low prices, is not a viable option. And no, they are not just lending money because the farmer want or need them! You need a realistic plan that will show a considerable profit within the lifetime of the asset, to just make them consider looking at it.
Happy or not, the capital is already tied up in farming in denmark, the banks just try to find the best farmers to service the debt, so they don't loose any money.
Happy at it
Member
- Location
- NI
Fair play to you @Serup, would it be fair to assume at levels of 20k a cow your banks wouldn't be pushing hard to get loans repaid in a hurry. I wouldn't earn enough from my cows to be able to pay the interest, never mind even reduce the borrowed amount. I.e 100k interest on each year just to milk 100 cows ....mental.
A normal setup would be about 60-80% of money tied in land would be interest-only, and the rest would be repaid in 15-30 years. Older loans is 30 years and new ones usually 15-20. If you can't repay at that pace, either they refinance so you start again on 15 years with the remaining dept or the farm is put up for sale, depending on if the bank believe in you or they think they can get their money faster in another way.
Last year 8,2% of dairyfarms in Denmark stoped milking cows. The average farm went from 169 to 189 cows in just one year.
So years with low prices is not so much fun.
Banks keps demanding plans on how to lower cost of production, and if you can't satisfy them that you can reach their goal fast enough, you have problems.
I am part-owner of Arla. In Denmark, over 95% of conventional farms don't have an alternative buyer.
I believe they are in a process of making terms the same for owners in all countries, so i make about the same as everyone else, except those who have contracts instead of ownership, which is only done in other countries and not here to my knowledge.
I always want a better price. That said, allmost all other conventional milkprocessors have given up or been bought by Arla in the last 10 years. They could not give the same price as Arla, and everybody expect that to be lowest possible price. The organic marked is another story.
So long term, i don't believe anyone can offer me a better average price than Arla.
So long term, i don't believe anyone can offer me a better average price than Arla.
supercow
Member
- Location
- Dumfriesshire
Most farmers own most of their land. I think about 40% of land in Denmark are rented, the rest are farmed by the owner.
Sharemilking and other setups where the owner of the cows don't own everything, is not common at all. It is starting, because it is difficult for young farmers to borrow enouth money to buy a farm that will provide for them.
Yes, thats is also an explanation of the situation here.
Mostly only older farmers have dept below 70% of total value of farm. Many, especially those who expand, are around the 80-100+% mark. thats why faling landprices are a big problem everytime they occur.
- Location
- Northern Ireland
I know in Denmark you have a problem with inheritance tax, so that is the main reason for borrowing on land.
But would you say that, by chasing land up and up, farmers have actually taken their industry into a precarious position in your country?
Do many dairy farmers save for retirement by means of pension, or personal holdings of stocks and bonds funds and cash, or do they expect the sale of the farm to leave them enough for retirement? If the latter, then has this plan failed for those that have been forced to exit the industry?
The size of average herd has risen in the last year due to retirements. Does that imply that smaller farms are more likely to go out of business in Denmark, or is some of this natural retirements by older farmers?
But would you say that, by chasing land up and up, farmers have actually taken their industry into a precarious position in your country?
Do many dairy farmers save for retirement by means of pension, or personal holdings of stocks and bonds funds and cash, or do they expect the sale of the farm to leave them enough for retirement? If the latter, then has this plan failed for those that have been forced to exit the industry?
The size of average herd has risen in the last year due to retirements. Does that imply that smaller farms are more likely to go out of business in Denmark, or is some of this natural retirements by older farmers?