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UK farmers continue to diversify into areas with more certain financial returns

Bed and breakfast pigs and cattle rearing and finishing schemes were of interest as farmers look to reduce risk.

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Farmers continue to diversify into areas with more certain financial returns

Farmers have continued to diversify into areas with more certain financial returns as they look to insulate their businesses from volatility in the markets.

 

Bed and breakfast pigs and schemes for cattle rearing and cattle fattening have all proven popular, particularly with arable farmers, according to lender Asset Finance Partners (AFP).

 

Uncertainty

 

The main driver behind the demand for such schemes has been financial uncertainty, according to AFP’s Jon Hercman, with schemes providing an element of certainty to the farmer.


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In addition to the uncertainty farmers face from volatility in input prices and commodity prices, farmers are facing further uncertainty from the potential impacts of Brexit.

 

He highlighted how arable farmers are planting in October and waiting until August the following year before they get any cash from their crop.

 

“There are a few main benefits to the schemes,” he said.

 

“Farmers obtain a more regular cash flow, as typically the schemes involve farming numerous batches of animals per year which results in a fast turnover of stock.

 

“Arable farmers also benefit from the muck they generate putting it back into the farm."

 

Next generation

 

Such schemes have the added benefit of helping the next generation become involved in the family farm by increasing farm profitability.

 

“I think a lot of family farms look at the next generation joining the farm as a potential problem,” he said.

 

“The next generation are typically going to agricultural college, and then maybe spend a few years at a farm away from home. When they come back, the farm has to find the money to support their wages.

 

“As well as contributing towards paying wages, these schemes give the next generation a project to put their stamp on the business.”

 

He added farms commonly have buildings which are not being fully utilised but, with modest expenditure, could be easily converted to livestock buildings, although the schemes were also viable if new buildings were needed.

 

The schemes also provide lenders confidence given the off-take agreements.

 

Mr Herdman said: “When we are looking at the ability of the farm to service the borrowing, knowing there is an element of certainty in the cash the farm will be generating provides us with additional confidence.”

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