We are often taken aback in the difference in profitability between two apparently very similar farming businesses and, although the price achieved for whatever is being produced is very important, so too is a clear understanding of both the fixed and variable costs of production.
It is often the wide disparity in some of these costs which makes the difference on the bottom line between one business and another. Therefore, before any decisions are made on the future of a particular business, it is vital that the relative performance of every enterprise is properly costed.
This is particularly important in these uncertain times where farmers are likely to be faced with some significant changes as we leave the EU. These changes may lead to both opportunities or challenges and to respond to these in the most positive manner possible, it will be important to have a clear understanding of the physical and financial performance of the business.
It is all too easy to carry on doing the same thing because it apparently works but this can mask the reality of where one farming or diversification enterprise is subsidising another. This may be something a farmer is happy to tolerate at present but if things radically change then maybe adjustments will need to be made although before doing so we suggest this is best done from a position of knowledge rather than “gut feeling” alone.
In this context a change in the farm support regime post Brexit seems almost inevitable and this may have a more significant impact on beef, sheep and arable farmers in particular, who as a general rule are more reliant on the current area based payments than more intensive dairy, poultry or pig units.
There are a minority of rural enterprises that unchanged are not viable in the medium to long term, but we suspect the majority have a strong future; but these enterprises will need to understand their business in detail today and the direction they want to take in the future.
In regions where beef and sheep farming are of great importance, we believe it is prudent for these farmers to review their businesses now.
Such a review should not only include an assessment of the performance of the farming enterprises but also all property assets and the skills of the farming family members themselves.
We at Carter Jonas take the lead and work with many professional consultants to overcome challenges and maximise opportunities that face our clients. If you would like any advice or further information, please get in touch.
Harry Torrance – Rural Partner Wales & West Region