Arable profits have improved ‘sharply’ over the past year, but the continued contribution of support payments means farmers need to look carefully at the profitability of their farming businesses.
Bidwells’ analysis of contract farming agreements showed net profits rose sharply to their best performance for three years, with stronger crop prices contributing to an improvement in incomes.
Overall, the average net profit achieved across farms in the study was £470/ha, up from £293/ha in the previous year.
But direct support continued to be a major contributor to farm incomes and Ian Ashbridge, farm business consultant at Bidwells, warned farmers needed to plan for a ‘an era where farm subsidies cannot be relied on in the same way’.
He said: “This means examining business structures, business strategies and balance sheet sensitivities now, to prepare for any rationalisation or directional change.”
He added the Government had revealed enough about future plans to give farmers time to make changes to their businesses, but this would ‘soon elapse’.
He said: “One thing most people expect of the forthcoming Agriculture Bill, is that the future farming environment in the UK could be radically different to that which has been familiar for two generations.”
James Webster, AHDB market intelligence analyst, said for many over the last four years, agriculture had been loss-making, with diversification, agri-environment schemes and direct payments providing the profit for businesses.
He said: “The Common Agricultural Policy, while it is there, is supporting business. It is going to go and you have to start factoring that in now.”
He added AHDB was working with farmers on their marketing strategies.
“It is about understanding what is best for your business. It is not prescriptive,” he said.
“It is marketing to the requirements in your area, to your storage requirements and what your margin requirements are.”
This year, Mr Webster said profitability will probably be up slightly, with prices supported by crop concerns in the major exporters.
“But there is a potential impact on yields,” he said.