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Farmers urged to use boosted profits to shield businesses from volatility

Farmers have been urged to use the better returns from 2017 and 2018 and the period of calm before Brexit to set themselves up for the next decade.


Alex   Black

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Alex   Black
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Use boosted profits to shield businesses from volatility

With profit forecasts beyond 2018 currently ‘highly speculative’ as the UK leaves the EU, and any strengthening of sterling putting significant pressure on incomes, Andersons consultant Richard King urged farmers to use current profits to make changes to their businesses now.


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Andersons Outlook 2017 estimated incomes for the year could be up as much as 30 per cent year-on-year at £4.7 billion.

 

Mr King said: “While returns may reduce slightly for 2018, they are still likely to be well above those seen in 2015 and 2016.”

 

Productivity

 

He said there were opportunities for improvements in productivity in all sectors and farmers did not need to wait until the effects of Brexit ‘began to bite’.

 

He added: “Undertaking such changes now in a measured and considered manner can both boost profits in the short-term and set a business up to be resilient into the future.

 

“It is easy for the industry to become focused on external events over which it has little or no control. In fact, the biggest determinant of business profitability is how the business itself is set up and operated.”

 

Incomes in 2017 saw a boost from higher prices due to the weakness of sterling boosting farmgate prices and the Basic Payment Scheme, with favourable supply and demand in the pig and dairy sectors.

 

However, some of the inflationary impact on inputs which has not been seen in 2017 will hit in 2018, Mr King said.

 

As the UK leaves te EU, issues such as regulation, access to labour and income support will also be crucial.

He said: “While this may seem a significant threat to UK farming profits, what is evident is ‘income support’ has, in many cases, held back productivity and simply increased farmers’ costs of production.”

 

Mr King said this had been illustrated in ‘the unrealistically high short-term rents’ some UK farmers were prepared to pay for the right to farm land.

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