agriculture worry outlook

Outlook on Agriculture for 2022/23

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It feels very much like a game of two halves within agriculture and our client base currently, with many sectors having had a reasonable last 12 months due to decent livestock prices and commodity prices. However, we should not underestimate the severe difficulties the pig industry especially is having. I look after many clients in the sector, and the losses suffered are hard and sad to see.

However, we are now into the second half of the game, with frightening rises in the two major inputs used in the farming sector being fertiliser and fuel, and we should not underestimate the major impact this has on all costs we all incur in business.

Whilst the above are massive challenges, if the correct thought processes and actions are taken, we remain confident that farmers and Agricultural businesses will be able to steer a path through.

On that note, there are three main topics amongst many, we are discussing with our clients to support them through this time of volatility:

  • Firstly, as mentioned above, we see that many of the farming sectors have had a reasonable year to 31 March 2022, which will result in higher taxable profits except for the pig and poultry sectors, and this will therefore have an impact on the tax liabilities coming due in the next 12 months. It is vital we work with our clients to plan for these and take actions to control them and the cash flow impact they have.
  • Secondly, we are spending a lot of time helping clients get the business structure and current position up-to-date and fit for purpose. This can be as simple as changing the partnership or doing succession planning to bring younger generations into the business, or more radical change of the business into limited companies or other such structures. There will undoubtedly be a number of farmers who choose to retire or sell up as their business strategy over the coming months and years, especially as the support payments from the Basic Payment Scheme start to further reduce next year, and it is important that all the ducks are in a row before this happens.
  •  Thirdly, it is absolutely vital that a business understands its gross margins from enterprises, and its cash flow position throughout the year. With these hugely volatile commodity and input prices you cannot make robust and valid decisions about the future. If you don't have the management information at your fingertips, how can you make the right decisions?

I believe we have an extremely challenging period ahead, but we must remain optimistic, as we produce a staple required for people's very existence i.e., food. There are already some encouraging signs that people's perceived value and what the retailers are prepared to pay for this are increasing, but it is only the start, and this needs to massively continue to cover the ever-rising costs.

We should not forget the environmental and sustainability issues, and I have worked with a number of clients recently who have gone down this route, not to change their way of farming, but to make it more sustainable, and many of you would be surprised that if you look after your soils and environment how much input cost can be saved, and farming in a normal manner can continue.

I'm sure there will be many more curveballs over the coming weeks and months, but I remain very optimistic for the agricultural sector continuing to adapt and produce quality products for the UK market, and when you see the atrocities in Ukraine, we really aren't in a bad place at all compared with that.


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