agricultural consultancy seminar 2016

By Your Side. On Your Sidewww.thomaswestcott.co.uk

Welcome to the Thomas Westcott

Agricultural Consultancy Seminar

BPS – CAN YOU AFFORD

TO LOSE IT?

S A L LY NI C

H O L L S

Axminster · Barnstaple · Bideford · Bridgwater · Burnham on Sea · Crediton · Exeter · Holsworthy · Honiton · Ilfracombe · Langport · Okehampton · Plymouth · Seaton · Somerton · Tiverton · Torquay · Weston super Mare


Maximising Funding Opportunities

• BPS• Countryside Stewardship• RDPE Funding


Basic Payment Scheme

• Delayed / incorrect payments• Claim statements – CHECK CAREFULLY• Check Number of entitlements brought

forward from 2015• Check eligible areas against 2015 BP5 form• Active Farmer• Young Farmer


Cross Compliance – Retaining BPS

• BPS requirements does not end at the application stage

• Support payments declining• Avoid cross compliance penalties• Penalties will depend on severity• Negligence - 3% deduction (120 ha farm based on

2015 £640)• Intentional Violation – 15% deduction (120 ha farm

based on 2015 £3,200)


Most common breaches in 2014

• Cattle TB testing• Cattle ID and registration• NVZ’s (a rise from 2013 in the number of breaches)

• Soil protection• Sheep and goat ID• Hedgerows and watercourses• No spread zones• Public rights of way• Food and feed law• Plant protection products


Cross Compliance Penalties Applied in England 2009 to 2014

2009 2010 2011 2012 2013 2014Warning Letter 413 192 158 95 156 121

1-2% 420 427 523 334 625 1,0303-4% 502 722 661 567 1,171 1,8895-15% 378 172 455 582 903 1,21316-100% 71 92 61 48 115 138Number of Penalties 1,371 1,413 1,700 1,531 2,816 4,270

Total Financial Deductions

£2,528,735

£2,072,621

£2,569,500

£1,400,000

£2,330,000

£2,490,906


Countryside Stewardship

• Mid Tier, Higher Tier and Capital Grants

• Potential to earn more out of CS than ELS

• Build a good application• Understand the rules


Example of Potential Earnings from Countryside Stewardship120 ha (300 acre) Beef and Sheep Farm

Capital Works - £21,000 (2 years)

Mid Tier Options - £87,000 (5 years)

£17,400 per year

£145/ha (£59/acre)

ELS = £30/ha (£12/acre)


Grant Funding Opportunities

• RDPE – LEADER Funding – Local Action Groups

• Countryside Productivity• Water Capital Grants (Countryside

Stewardship)• Hedgerows and Boundaries Grants

(Countryside Stewardship)• Woodland Grants (Countryside Stewardship)


THANK YOU

A TIME FOR CHANGE –

WHAT ARE THE

OPPORTUNITIES?

JACK WHITE



https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi349astYvMAhXB4w4KHWTlC_8QjRwIBw&url=https://ustr.gov/issue-areas/industry-manufacturing/non-agricultural-market-access&psig=AFQjCNEclgO3KF9RACbpdf-PW9JEtCSGTQ&ust=1460630060920683


WHY DO WE NEED CHANGE?


• Volatility is having a negative impact

• Retire/reduce work load• Spread or reduce risk• Business expansion/development• Provide for the next generation• Business performance is struggling


‘to make the form, nature, content or future course,

different from what it is or from what it would be if left alone’

CHANGE


• It’s a risk• It will be different• Must consider:

- Personal objectives- Business objectives

• Needs to be the right change – the right opportunity

CHANGE


‘a good position, chance, or prospect, as for advancement or success’

OPPORTUNITY


A GOOD OPPORTUNITY FOR CHANGE?

£0

£20,000

£40,000

£60,000

£80,000

£100,000

£120,000

£140,000

£160,000

£180,000

2010/11 2011/12 2012/13 2013/14 2014/15


• Resources available – land, capital, operational expertise

• What do you need to achieve?• What can you realistically achieve?

CRUCIAL TO UNDERSTAND YOUR BUSINESS


POTENTIAL OPPORTUNITIES


• Needs to be an improvement on what you are already doing.

• Change could simply just be getting better at what you already do.

• Consider the effects of price volatility – its here to stay!

• Capital requirement• Operational expertise?

AGRICULTURAL COMMODITY PRODUCTION


• Additional income to support existing enterprise

• Diversify from a position of strength• Utilise resources available• Develop your skills• Know your market

FARM DIVERSIFICATION


NUMBER AND PERCENTAGE OF FARMS WITH DIVERSIFIED ACTIVITIES


• Align land, capital and operational expertise.

• Beneficial for all parties• Possibly suitable for all drivers of change –

improvement, succession, development, retirement……

• Needs to be a well structured, open and flexible arrangement

SHARE OR CONTRACT FARMING


• Is agriculture the answer?• Can you afford to work on the farm?• Tenancies can be rare and expensive –

is this the opportunity?• Reduce scale and support with

additional off farm work – Dutch dairy industry

NON FARMING INCOME


1. Have you the mind-set to take control of your own destiny? Or do you feel bewildered and a hopeless victim of circumstances?

2. Is farming right for you and your family? What are your plans for inheritance? Are you doing the right thing for your non-farming family members?

3. What will you need to invest in your facilities in the next 10 years? How will you fund it and justify it?

4. Do you REALLY know your cost of production?5. What is the realistic future price you will receive? Are you looking at the evidence or living on

hope?6. Have you worked out whether you are producing what your market really wants? i.e. Are you

maximizing your returns? 7. What are you really paying yourself per hour? What can you afford to pay yourself and remain

competitive? Would you be better off paying someone else and trying to add value to other parts of the business? What are your other skills? How much could you earn off farm part-time or full-time?

8. Might there be a day when you will find yourself stranded without a market? 9. Are you buying all your inputs at best prices, and when did you last check alternatives?10. Are you ruthlessly and honestly benchmarking your performance and constantly trying to identify

ways to incrementally improve performance?11. Have you got your eyes open for niche opportunities even if they start small?12. Do you have the right skills for the technologically and market driven agricultural industry of the

future?

A GOOD STARTING POINT?


http://www.ipaquotas.com/dairyfarmer.htm


• Review the current situation• Ascertain personal and business objectives• Discuss and identify opportunities• Assess viability• Plan and budget for change• Determine and secure capital requirements• Implement and oversee contract or share farming

agreements• Provide operational expertise• Monitor success

HOW CAN WE HELP?


• Lowland beef and sheep• Struggling with poor returns• Strategic changes to sheep breed and

cattle finishing policy to ensure better returns

• Restructured finance to ease cash flow

EXAMPLES OF OUR INVOLVEMENT IN CHANGE – COMMODITY

AGRICULTURE


• Struggling dairy business in Devon• Looking at the possibility of selling

direct• Thomas Westcott Ag Services

involved with market research, financial and physical viability

EXAMPLES OF OUR INVOLVEMENT IN CHANGE - DIVERSIFICATION


• Tired dairy business in Dorset• Lack of interest in dairy farming from next

generation• Strong balance sheet• Developing plans for share farming

agreement• Utilise off lying buildings for wedding venue

to be run by next generation

EXAMPLES OF OUR INVOLVEMENT IN CHANGE – NON FARM INCOME


• Change is good• Change is necessary, but not always easy• There are opportunities out there – be open

minded and make time to find them• Any change needs thorough planning and

forecasting• Success should be quantified with ongoing

monitoring• All parties need to be involved throughout

CONCLUSIONS


THANK YOU

SUCCESSFUL FARMERS?

PETER BROWN



What does being a successful farmer mean?

• A technically excellent business with high Gross margins?

• A very well established business with all family labour?

• A business that has built up a high capital base over many years?

• A mixture of all three

Indeed is it possible to be viable without all three?


£0

£20,000

£40,000

£60,000

£80,000

£100,000

£120,000

£140,000

£160,000

£180,000

Average Farm Business Incomes

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16


SPLIT FARM BUSINESS PROFIT INTO 3 SECTIONS

• Output / Variable Costs – Technical performance

• Direct Overheads (labour, machinery running and administration) – management skill

• Structural Overheads (rent, finance and depreciation) – Capital structure


GROSS MARGIN (pence per litre)From AHDB Evidence Report December 2015

Bottom TopDifferen

ce

Litres Per Cow8,000 - 9,400

5,000 - 6,499

Milk Sales 29.6 32.7 -3.1REVENUE 31 34.4 -3.4Herd Replacement Costs 3.6 2.5 1.1Feed & forage 12.3 8.7 3.6Livestock Costs 3.5 3.1 0.4

TOTAL VARIABLES 15.7 11.8 3.9GROSS MARGIN 15.3 22.6 -7.3


FARMING ENTERPRISE Performance

Numbers

GM per Unit

Total GM

Management

Balance

Breeding ewes 1.60 lambs per ewe 1000 £43.60 £43,600 £15,000£28,600

Breeding ewes 1.75 lambs per ewe 1000 £52.20 £52,700 £15,000£37,700

Wheat 8.6t per ha (£110/t) 100 £587 £58,700 £25,000£33,700

Wheat 10.0t per ha (£110/t) 100 £607 £60,700 £25,000£35,700

Dairy7,500 l x 22ppl (0.31kg/l) 150 £494 £49,400 £53,000 -£3,600

Dairy9,000 l x 22ppl (0.38kg/l) 150 £683 £68,300 £53,000£15,300


FARMING ENTERPRISE Performance Balance

Drawings Surplus

Breeding ewes 1.60 lambs per ewe £28,600 £20,000 £8,600

Breeding ewes 1.75 lambs per ewe £37,700 £20,000 £17,700

Wheat 8.6t per ha (£110/t) £33,700 £20,000 £13,700

Wheat 10.0t per ha (£110/t) £35,700 £20,000 £15,700

Dairy 7,500 l x 22ppl (0.31kg/l) -£3,600 £20,000 -£23,600

Dairy 9,000 l x 22ppl (0.38kg/l) £15,300 £20,000 -£4,700


What is Left To Cover?

• Drawings - £20,000?!• Taxation• Structural Costs – Reinvestment,

Interest, loan capital repayments, rent, depreciation


50 acres Rent Available

Tender?


We can help:

• Identify weakest areas • Technical – benchmark look at enterprise mix,

output values / input costs, use – Introduce some regular costings

• Management – labour balance, machinery balance, cropping diversity, other uses of land

• Structural – hard something must change – seek rent reduction, sell something, give up some land?

• All the above are tricky areas but now is ‘not the time for heads in sand’


Q & A

agricultural consultancy seminar 2016

Economy & Finance