Can you Find it – Business © 2017 THE FULL STORY…WE’RE ALL GLAD TO SEE THE BACK OF THE SFP YEAR…Published in Can you find it Business Edition on Thursday, January 5th 2016
Not sparkling, but… Sheep have been better than beef this yearIt is perhaps a good time to look both forward and back and try to take stock of the current situation.
Looking at last year, it was one where the Single Farm Payment system rather overshadowed everything. With the recent agreement on the sugar regime (which might have broken down between the time I write this and you read it, but life is like that) it means that there are no more subsidies on food production in the UK.
If you want to produce something, you have to decide whether you can produce it at the world market price, and if not, why bother?
From early reports, it looks as if a proportion of cereal growers have decided, “why bother?” Cereal acreage is down, perhaps by 5 per cent – the estimates vary.
The general feeling is that if it had not been such a good “open” back end on the arable side of the country, the drop would have been larger.
Matters are harder to get a feel for in the world of livestock farming. Talking to knackers and similar, it looks as if unprecedented numbers of calves are being shot on farm.
It seems that no one wants black-and-white bull calves, at least not at a price that makes it worth putting in ear tags.
This is a state of mind I can agree with, as I must have more than 100 black-and-white bullocks of various ages, and under current conditions there is no profit in them at all.
Yes, it is possible if you take various advisers’ figures – and ignore family labour and similar – to show some sort of profit per animal, but more than one person pointed out to me that they could replace their beef enterprise by spending one evening a week shelf-stacking in a supermarket. They would make more money for far less work and no investment whatsoever.
Sheep have been better than beef this year. Not sparkling, but it is still possible to make a living of sorts. Will this continue?
Dairy is not looking good; the big, well-managed, businesslike units all seem to be getting out. The optimum dairy unit now seems to have about 200 cows – father and son, or two brothers working together, with lots of children, all keen to farm, to work as free labour.
So with 2015 written off, what about 2016? I would suggest that this winter you sit down with your nearest and dearest and take a careful look at the future. Do your best to get your accounts as up-to-date as possible, perhaps even get in a decent consultant or an accountant who understands agriculture. Sit down and honestly look at how your business is working.
Produce a budget for next year. Ignore any Single Farm Payment. Can you make the business pay? What are you doing that loses money? Why are you doing it?
Try and look at the business from a different perspective. I know one chap who almost by accident found himself earning nearly £100 a week just storing caravans outside in the yard. So, if you were in the habit of buying 30 store bullocks and fattening them in an open-fronted building, would you make more money if you didn’t buy the stores and instead just stored five caravans or boats in the same building?
The other option is Entry Level Stewardship; even one of the higher-level schemes. Look at them as you would any other business venture. How much will it cost to get into it? How much will it cost to run? Include in this income foregone, and how much a year it will earn. If it looks viable, fine, if it doesn’t then look at some other venture instead.
It is one thing asking your wife to go out to work so you can sell people food at less than the cost of production, but I don’t see why you should ask her to go out to work so you can subsidise people’s views.
Looking at New Zealand, where they lost all subsidies overnight, it is commonly held that many companies got through it by locking the cheque-book away.
This attitude, in moderation, is probably reasonable. I don’t think that it is going to be possible for most of us to invest our way out of this crisis. Yes, you have to speculate to accumulate, and paying your bills on time is always a positive move. Remember that we are at world market prices.
It is unlikely that we are going to be able to get prices up, so we have to keep costs down.
All in all, I suspect that the shake-up will do the industry good. A number of people will get a chance to take early or semi-retirement with their Single Farm Payment. Some will use it to make useful investments, while others will change the direction of their businesses.
As for those who just want to produce food, take heart from the nuclear industry. A few years ago it was doomed; now the politicians have realised that they cannot rely on imported energy.
Personally, I have every confidence that in the next 20 years governments will be so keen on increasing food production that they will be paying grants to rip out the hedges that they paid grants to have you plant.
Happy New Year!