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Agriculture • Strategy & Business Development

ConnectingAutumn Newsletter 2011

Feed Prices - Carrs Billington AgriculturePeter Gorst

The Agricultural Wages Board

Jill Hetherington

New Satellite Office in Southern ScotlandSandra Gowling

A brie ing for farmers and land agents

Agriculture

www.david-allen.co.uk

Welcome to the Autumn edition of our Connecting Agriculture Newsletter.

Once again we have some great

articles to share with you including a

news update on our Agri team.

Kevin Batty looks at Benchmarking

and why it is important to take a

closer look at your business.

Our guest professional article comes

from Peter Gorst of Carrs Billington Agriculture who takes a look at feed

prices and what drives these.

Earlier in the year I met up with

Ross Pattinson who at only 28, has

followed his dream of running his

own small holding and the highs and

lows of how he and his wife Elaine

have achieved this. We also have

our business round up and FAQ’s

providing further information.

Show round-upWe have enjoyed seeing a lot of you

over the last couple of months out and

about at the shows, and have enjoyed

a real mixture of weather.

Skelton Show kicked off the show

season with a fantastic hot sunny day

teamed with bumper crowds. This was

the first year we had participated in

this show - we had a wonderful day

and the turnout was fantastic.

The Cumberland Show came next.

We were proud to be a sponsor of the

Cumberland Show for the fourth year

and although we did not have a stand

we did see a number of you brave the

very inclement weather on the day.

Well done to the Cumberland Show

committee for still ensuring the day

went ahead as scheduled despite the

downpour.

Cockermouth Show saw a return to

the summer weather and again the

team on our stand enjoyed seeing

such a fantastic turnout. This is only

the second year we have attended the

show with a stand and we have been

really impressed so far.

Dalston Show was the finale of the

season and our ‘home’ show. With

the weather conditions looking earlier

in the week like they were going

to replicate the Cumberland Show

day, we were thankful that the day

itself remained fair and the crowds

still appeared to show their support,

however we didn’t take any chances

and performed our duties in wellies!

We enjoyed a fantastic day and were

so pleased with number of you who

enjoyed our hospitality. We were

delighted to also welcome onto our

stand The Mayor of Carlisle, Councillor

Barry Earp and his Consort, wife

Kay, John Stevenson MP and Mr Ted

Haste, President of the British Blue

Cattle Society who had travelled from

Devon. There were a good number of

entries in the livestock classes which

was repeated in the equestrian sectors

and a great entertainment itinerary

throughout the day.

Sandra Gowling

Agricultural & Business Development

Partner

Skelton Show

Cockermouth Show

Dalston Show

Sandra GowlingAgricultural & Business Development [email protected]

Editorial


I am delighted to announce we have a new location for one of our key members of the team.

Emma Pigg has recently re-located to

Garlieston, near Newton Stewart in

Southern Scotland, to live with her

partner James who farms in the local

area. This isn’t goodbye – far from

it – Emma will be working from her

new home to build new contacts and

introduce the David Allen brand to

new faces.

You can however, still contact

Emma at our Dalston office on a

regular basis.

We all wish Emma good luck in

her new home.

I would also like to announce the

arrival of a new member of staff to our

team, Dan Foster, who joins us as a

trainee accountant.

Dan has recently left Nelson

Thomlinson School after successfully

completing his A-levels and is looking

forward to beginning his AAT training.

Dan is keen to develop relationships

with our clients throughout his work.

As a farmer’s son, Dan is an excellent

addition to our team. He currently

lives on the family farm at Newton

Arlosh and in his spare time he

helps out on his grandad’s farm at

Saltcoates, Newton Arlosh.

His other interests include football and

cricket and he is also a member of the

Team Red Force tractor pulling team in

which his dad owns both tractors.

Dan comments “I wanted to join

David Allen because I had heard lots

of postive things about the firm and

liked that it is growing. I wanted more

than a job - I wanted a career where I

could do on the job training to develop

my understanding and knowledge of

accountancy”.

We are extremely pleased to have Dan

on board and know that as his skills

develop he will be a key member of

our team going forward.

Sandra GowlingAgricultural & Business Development

Partner

Your Agriculture [email protected]

Strength in our people


David Allen branches out into Southern Scotland

Key dates for your diary 1 October New minimum pay rates from the Agricultural Wages Board 28 October Agri Expo Borderway Mart 1 December Window opens for Single Farm Payment receipts 31 January Tax Return deadline


How do I compare?

The David Allen Farm Business Survey has data which enable us to understand what drives the results and performance of the Top 25% and Top 10% of farming businesses.

As a farmer seeking to improve your

business, benchmarking should be the

starting point.

If you look at any other industry, you

will find that unit costs of production

and returns on equity and capital

are critical measures which form part

of a working business plan. In other

words, success is something planned

and measured, rather than something

hoped for.

At David Allen our accounts are

produced in detail to individual

enterprises and gross margins. This

provides an excellent tool to compare

similar businesses and help us to

ensure your farm is as profitable as

possible.

However, finding out what your costs

are is meaningless unless you plan

to actually do something about it.

We can provide the practical ideas

to assess the strengths, weaknesses,

opportunities and threats to your

business.

Some of the key drivers of farm

profit for dairy farmers are cost

control – feed, labour and machinery

as a % of the turnover. Looking

at collaborations with buying

and Vet groups or neighbours

to achieve optimum net costs is

worth investigating. Implementing

new technology may be worth

consideration, including Heat Time to

improve fertility, cow signs to observe

cow behaviour and integrated cow

management software

Our main agricultural clients are dairy

and livestock producers. Therefore in

addition to dairy performance we also

have local comprehensive data relating

to lowland and upland livestock farm

businesses, which play an important

role in the Cumbrian economy.

Want to know more?

If you would like further information

on knowing how your farm compares

against similar dairy, beef or sheep

farms in the region we are more than

happy to provide you with a review

against the David Allen Farm Business

Survey. Please contact me.

Kevin BattyAgricultural [email protected]

AgricultureThe David Allen Farm Business Survey

If you don’t have the cash to make the necessary investments in your farm, whether it is to buy herd replacement cows, purchase new machinery or update your farm buildings there are various ways to finance these.

However in the current economic

climate, borrowing money can be

difficult - business lending interest

rates are normally between 3% and

5% over base rate.

Therefore we suggest that initially,

you should research any potential

grant funding which may be available

depending on the area you live in. For

example, there are grants available

to cover silage clamps and collecting

yards to stop water run off or grants

to update cubicles and mattresses to

enhance animal welfare. Kevin Batty,

our agricultural consultant will be able

to advise further if there are any

grants available for the project you

have in mind.

Next, if you still need further funding

for larger projects the best option will

be to consult your bank manager to

work closely with them to tailor a loan

to suit your specific needs.

Some banks offer flexible business

loans where you can vary repayments

depending on your cash flow with the

option to overpay during profitable

periods and redraw funds later. They

may also be able to offer fixed interest

rates to provide protection against rate

increases in the future.

For smaller amounts of finance for

machinery or plant, there are various

options including hire purchase,

finance lease, operating lease or sale

and lease back of owned machinery.

All of these options have different VAT

and Tax implications so to ensure they

are the correct option for your specific

circumstances, contact us for an initial

consultation.

If you require any further information

or perhaps need cash flow reports

prepared to support your finance

application please feel free to contact

me.

“Business lending interest rates are

normally between 3% and 5% over

base rate”


Michael PeileAgricultural & Business Specialist

[email protected]

AgricultureFinance

www.david-allen.co.ukwww.david-allen.co.uk

Should I buy a vehicle on hire purchase or lease it?

This is very much an individual decision as it depends on not only cash flow available, but what you are buying. However do note the following:

• hire purchased items are seen as ‘owned’ by you the purchaser from point of sale and you will normally have to pay a deposit which can vary• lease agreements can vary (lease purchase, finance lease or operating lease) each having slightly varying ownership rights. However the asset is not deemed to be ‘owned’ by you during the duration of the lease agreement and monthly payments are subject to VAT

Do seek advice on this subject prior to entering into a written agreement.

Low Longthwaite Blues”

Elaine with ‘Flash’, a heifer sold in May 2011


Farming is a tough business to be in with an ever increasing demand on resources and increased legislation.

Ross and Elaine Pattinson are a young

couple finding out the hard way how

farming can be a harsh environment,

but their passion and enthusiasm for

the sector is easy to see.

Both Ross and Elaine come from

agricultural backgrounds and have

years of experience (even though they

are still under 30), but neither had an

inherited or family farm to work from.

I caught up with Ross to find out how

he pursued his dream and where the

future lies.

“My Grandad had a farm and from

the age of 10 years old I was always

interested in helping out. He had

beef, sheep and a dairy herd - I loved

helping out on his and friends farms

lambing... anything really, just doing

what I could”. It took a number of

years and after continued ‘nagging’

to his dad Bob, a haulier with a local

firm, Ross aged 14 managed to get a

small piece of rough land and fenced

this off to put 5 ewes and 10 lambs

on.

“After a couple of years of selling off

the lambs and increasing my ewe

numbers plus getting little pockets of

land and fencing these off, I managed

to invest in some machinery. I spent

everything I had and with a little help

from my Dad and Mam, I started to

build my own small holding”.

In 1999 Ross went to Newton Rigg

College and undertook a part time

Agricultural Course whilst working full

time for John Harrison of Dundraw

to help fund his course and small

flock. Unfortunately like many others

in 2001 the Foot & Mouth outbreak

meant Ross lost all his flock in the

cull. As a result he moved in with his

Granddad to work full time to re-stock

and took on another 7 acres of land.

“I met Elaine (Gill) around 2006. Her

family were very much into the British

Blues and I was also very interested

in this breed. In fact I bought Elaine

a cow for her 21st , which has since

produced a few great calves. We got

the opportunity to rent a property at

Low Longthwaite and took on some

extra land - at this point our sheep

numbers were up to 300 plus we

invested in 5 sucklers with calves.”

Elaine was developing her own

business at this point and building a

successful client base as a hairdresser

Ross & Elaine PattinsonLow LongthwaiteWigton

Supporting our Clients

“Farming is a tough business

to be in”

Ross and Elaine with their wedding day guests

with her own salon in Cockermouth,

when she became one of the many

victims of the floods in 2009. Elaine

was quickly offered a position with

one the leading hairdressers in the

North of England - Jibe - and now

runs the Workington salon as Senior

Style Director.

During this difficult time, Ross’s dad

became ill and needed a heart bypass.

“Dad has always been a big part of

the farm and helped out as much as

possible, so when he became ill it was

difficult. He has since made a good

recovery”.

In April 2010 there was an

opportunity to take an additional 220

acres at Sandale near Ireby. They gave

up land at Caldbeck, increasing their

ground to 305 acres, but this was

the first time they required financial

backing to move forward. However,

only a few months later Ross needed

a back operation and was laid up for a

number of months, whilst at the same

time planning his wedding.

Today they have 550 ewes, 30 cows

and calves with 5 pure British Blues

and are flushing Elaine’s cow which

has produced 5 calves plus 2 of its

own. To supplement their income,

Ross still does relief milking and some

contracting and also takes in 100

cattle for wintering and summer keep.

“It hasn’t been easy, but we are

getting there. Meeting Elaine and

marrying her last September has

been one of my best achievements,

this along with competing in national

clipping competitions and being an

active member of my local YFC group.

I hope we can continue to improve our

Pedigree Herd along with reaching our

goal of having a long term tenancy

or even owning our own farm and

running a successful enterprise.

I enjoy being my own boss, being at

home with our stock and taking part

in cattle shows. But I do hate losing

livestock, especially calves, I find

this really hard. The future may be

uncertain in this sector but we have

always had the support of our family

and friends to which we owe a huge

gratitude”.


“The future may be uncertain... but we

have always had the support of our

family”

British Blues

-where stockmanship and technology join forces for the future

to read more visit www.britishbluecattle.org

Low Longthwaite Blues”

Elaine with ‘Flash’, a heifer sold in May 2011

Ross and Elaine with their wedding day guests


As with many businesses, the animal feed market has become much more global in its outlook in recent years.

Gone are the days when the weather

in the UK was the main determining

factor of our cereals markets and

therefore the prices paid for feed. Now

we have to weigh the impact of the

weather in all the major grain growing

areas, plus the impact of political issues

like biofuel subsidies and then try

to second guess whether commodity

speculators will swing into or out of

agri commodities.

A necessary evil?With food prices rising over the last

year, food commodity markets have

been the subject of political scrutiny

with some, not least President Sarkozy

in France, suggesting that the amount

of trade by non-end-users should

be limited. The implication is that

speculators are bad for markets. With

10 times the world soya crop already

having been traded on the Chicago

markets in the first six months of 2011,

he may have a point.

However, that’s a very simplistic view.

It is true that those who ‘play the

markets’ tend to increase the volatility,

ie, make the highs higher and the lows

lower. However, they also provide

liquidity - when markets are low,

end-users like feed companies and

flour millers want to buy but growers

don’t want to sell. Similarly, when

prices are high, growers want to sell

but few end-users want to buy. That’s

when speculators are extremely useful

and help both growers and feed-users

manage their risk. To my mind, the

money men might be described as a

necessary evil.

Fuelling pricesThe impact of biofuels has been huge

in the last few years. The US is the

largest producer of maize (corn) yet

38% of their annual production now

finds its way into biofuels. As a result,

the price of maize has risen and the

prices of the main competing crops in

the US, wheat and soya, have also risen

to ensure they continue to be grown

in sufficient numbers. That’s great for

the US farming and industrial lobbies

but not so great for poorer people right

around the world already struggling

with increasing food prices.

In the UK, the economics of biofuel

production are debatable. The first

world-scale plant opened last year on

Teesside, Ensus, taking 100,000 tonnes

of wheat a month when it runs at

capacity. A second plant of equal size

should come on stream in early summer

2012 - Vivergo at Hull. However, after

six months of intermittent running,

Ensus has been shut down for most of

the summer due to low ethanol prices

and the high price of wheat. They

are campaigning for better UK/EU

subsidies to keep them solvent.

Peter GorstRaw Materials ManagerCarrs Billington Agriculture

Our Guest EditorialFeed Prices

“Food commodity markets have been

the subject of political scrutiny”


Weather or not?

The dramatic rise in cereal prices in

2011 began when Russia realised its

harvest was poor and they could not

afford to export without jeopardising

domestic supplies. With other Former

Soviet Union countries also suffering

from poor harvests, Europe had a

bumper export campaign in the crop

year just ended. However, that pushed

EU stocks to low levels and with the

exceptionally dry Spring in the main

arable areas of the EU, markets got

very jittery.

The rain has begun to fall now but too

late for many rape and barley crops

with very variable yields reported.

Wheat may have had time to recover

somewhat but even larger crop areas

look unlikely to produce crops as large

as last year.

So, with key areas in the US and

Canada struggling against drought and

floods, rumours of poor crops in China

fuelling their import requirements

and the uncertainty around yields

across most of the major exporting

nations, it is a very uncertain picture.

A price crash like that of 2008 seems

unlikely but the nightmare scenario of

very poor crops across the Northern

Hemisphere seems to have receded for

now.

Curved ball

But for all the fundamental factors

in our markets, there’s always the

unexpected event that can send

markets rising or falling overnight.

Back in March with both the tsunami

in Japan and concerns about Libya,

the London wheat market dropped

more than £20 in 3 days, then rose

back beyond where it had started

by the end of the week. We’ve been

teetering on the brink for months now

but if we do see the Euro collapse, our

markets could easily get caught in the

crossfire - and it’s difficult to know

which way they would be pushed.

So, predicting feed prices is by no

means a precise science. As I write this

at the end of July, it looks unlikely

we will see a significant reduction in

prices going into the winter. But as I

always say, events change rapidly and

I could change my mind tomorrow.

“Predicting food prices is by no means a precise

science”

The AWB has started the process of agreeing the new rates for the Ag-ricultural Wages Order (AWO) that come into effect from 1 October 2011.

The following rates have been pro-

posed but have still to be confirmed

and may be subject to some change:

• Grade 1 will increase from £5.95 to

£6.10


£6.77


£7.45


£7.99


£8.46


£9.14

There is no proposed increase to holi-

day entitlements in the AWO 2011.

The AWO due to be issued in Septem-

ber 2011 may be the last, however it

is possible that there may be one more

issue in September 2012.

Elimination of Agricultural Wages

Order – Good news for farmers?

With the elimination of the AWO on

the horizon, the enhanced pay and

employment rights for Farm workers

could be a thing of the past and in

theory, make the employment of fu-

ture farm workers more cost efficient

for the employer.

What does this mean for existing

employees?

Existing employees who receive the

enhanced rights of the AWO such as

holiday entitlements and payments

of overtime rates for working bank

holidays, will generally remain as they

are, as these will be deemed as custom

and practice.

David Allen at H&H Borderway Mart

Visit our booth in the main concourse. Call in for a

chat or make an appointment and we’ll meet you there

For more information contact Sandra Gowling

However now is a good time to start

reviewing your Contracts of Employ-

ment to reduce the chances of future

employment issues.

What will happen for new em-

ployees taken on after September

2012?

It is thought that new employees

taken on after September 2012 will

fall under the National Minimum

Wage regulations. This will mean that

employees and employers will have

to agree on any enhanced rates above

the statutory amounts, for example

overtime rates, holiday entitlements

and sick pay.


Jill HetheringtonEmployer Services [email protected]

Employer ServicesThe Agricultural Wages Board (AWB)


Sandra Gowling Agricultural & Business Development Partner

[email protected]

Your Questions Answered

www.david-allen.co.ukwww.david-allen.co.uk

How do I know if I should be

buying an asset before my year

end if I want to save tax? There is not a generalised reply to this one as it is dependant on how ‘profitable’ your year has been, plus compared to the previous year, has this been more or less? If you prepare your own VAT records then I would certainly suggest you keep talking with your advisor throughout the year, to keep them in the picture of how the business is going. Please get in touch if you wish to discuss this further as the Annual Investment Allowance is changing from 1 April 2012 from £100,000 to £25,000.

“ The deadline for registering to submit your VAT online is April

2012”

I have heard about a new licence required for the farm’s septic tank,

does this affect me? Yes, homes that are not connected to a public sewer (most farms) need to apply for the correct licence. Very basically you will need to either apply for an exemption or for a permit. You may be eligible for exemption if discharges to ground (soakaways) are <2m3 per day (approx 9 occupants) or discharges to a surface water (from a private sewage treatment unit not a septic tank) are under <5m3 per day.

Commonly the Environment Agency will only register septic tanks as exempt if they dis-charge to soakaway. Septic tanks that discharge straight to a water course are not generally acceptable and improvements to the system are likely to be required. Please contact your local environment agency for further information.

Does expenditure on Solar

Energy equipment qualify

for tax relief? Most Solar Energy Equipment will qualify as plant and machinery for capital allowances purposes. Therefore if the asset is used in business the expenditure will qualify for tax relief under Annual Investment Allowance. In addition to this the expenditure may also qualify under Enhanced Capital Allowances which are specific to energy saving equipment.

Business round-up

I am interested in Solar

Renewable Energy; how can I

find out more? Solar Photo Voltaic units are really ‘hot’ news at the moment as the interest in renewable energy increases. There are many firms selling the panels but firstly you need to seek professional advice from a renewable energy expert. Also if you are looking at commercial usage, 3 phase electricity is a normal requirement.

Is the income generated

taxable? The answer to this question does depend on a number of factors, each case will need to be reviewed individually, therefore if you would like further information on the taxation or renewable energy in general and clarification, please do not hesitate to contact us.

Should I be registered for VAT?

If so when do I need to register? The compulsive limit to register is turnover exceeding £73,000 (in any rolling 12 month period), however you may have a turnover below this and it is still beneficial for you to register. If this is the case you can voluntarily register for VAT.

When is it compulsory to submit the VAT online and how do I enrol? The deadline for registering to submit your VAT online is April 2012. This is quite straight forward but you do need the effective date of registration. This is the date when you first registered for VAT, for many this was several years ago so if you cannot lay your hands on the certificate of registration then you can call the VAT office to ask for this date so you can register. Once you have this date, log on to the HMRC website (www.hmrc.gov.uk) and click on register (new users), then choose one of the options, either Individual if you are a sole trader or Organisation if you are a Partnership or Limited Company. Once you have picked one of these then pick the option VAT (submit return or change details) and keep following the screen options by clicking the ‘Next’ tab. You will need to fill in your name, email address and create a password. Please make a note of your password and your user id - this will be issued once you have chosen a password. After this, complete the questions asked about your business and last submitted return. You will receive an activation code from Government gateway after about 7-10 days. Please follow the instructions on the letter asap before the code expires.

“Solar Photo Voltaic units are really ‘hot’ news at the moment”

[email protected]

www.david-allen.co.ukThis newsletter is for guidance only and professional advice should be obtained before acting on any information contained herein.

ContactsDalstonDalmar HouseBarras Lane EstateDalstonCarlisleCA5 7NY

Tel: 01228 711 888

Penrith3 Hobson CourtPenrith 40 Business ParkPenrithCA11 9GQ

Tel: 01768 877 000

WorkingtonProsper HouseRegents CourtGuard StreetWorkingtonCA14 4EW

Tel: 01900 878 000

TaxCarrie [email protected]

Sarah Seavor [email protected]

VATGraeme [email protected]

Employer ServicesJill [email protected]

Business Software Rachael [email protected]

Julie [email protected]

IT ConsultancyAndrew [email protected]

Bart [email protected]

Iain [email protected]

AgricultureMichael [email protected]

Kevin [email protected]

Emma [email protected]

Strategy & Business DevelopmentDavid [email protected]

Alison [email protected]

Sandra [email protected]

AccountancyKirstie [email protected]

Fiona [email protected]

Julie [email protected]

Corporate ServicesMark [email protected]

Sarah [email protected]

Robert [email protected]

Sam [email protected]

Ricky [email protected]

Wealth ManagementKevin [email protected]

Jonathan [email protected]

Joanne [email protected]

connecting - david allen · emma at our dalston office on a regular basis. we all wish emma good...

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