Whilst our future relationship with Europe is uncertain, we are certain that the Basic Farm Payment will be gone in 6 years. To many this is a critical part of their farm income and replacing it will be a challenge.
Whilst there will be a new environmental scheme to replace the Basic Payment Scheme, the income from this is likely to be considerably less and historic environmental schemes have not suited every farm. We believe that environmental stewardship schemes will gain in popularity and so inside this issue we look at the current grant schemes available and how they are working in practise.
We are having more discussions with farmers about how they replace this loss in income and I thought it would be interesting to share some common themes we come across.
Increasing production and scale
Some businesses are gearing up to farm more land or increase stock numbers. They are taking the view that they should invest in new buildings and machinery now whilst interest rates are low and there is still a payment to help finance this. It is also likely that the change to support payments will create more opportunities for those looking for additional land.
There is a notable increase in farmers looking at their business costs and ways of making cost savings. A good starting point is bench marking production costs against other businesses and getting a good idea of the true cost of production. This can lead to decisions including reducing machinery levels and making more use of contractors or entering whole farm contract agreements and machinery share agreements with neighbours.
New Income streams
With planning policy strongly supporting the change of use for farm buildings many are looking at changing buildings to storage or light industrial to provide rental income. Buildings that are under-utilised can often be easily adapted and the monthly return provides a regular injection of cash into the business.
Low key used such as caravan storage or providing a base for a small rural business often work well alongside an existing farm business. With National and Local planning policy being more supportive than previously and lending rates being low now does seem a good time to make changes and the capital investment.
The next few years gives family farms time to deal with succession and restructuring in an organised and tax efficient manner. For most, there is no need to give up completely as there are different ways of reducing investment and day to day involvement whilst maintaining control. Commonly contract and share farming agreements are used but FBT’s can be simpler for some where there are no tax issues.
So whilst it may feel like the uncertainties are causing some paralysis in the industry, we believe that now is a good time to plan for a life without support payments and increase farm resilience by taking positive action.
If any of the above issues are of interest do not hesitate to give us a call to discuss them further.