Flexible loans tiding sector over in tough times
During the recent tough economic times, the agricultural sector has held its own while others have struggled, writes chartered surveyor Mike Taylor.
We have seen land prices shoot up over the last five years and rents have risen to match. Land prices of £10,000 per acre are now common and many arable and maize rents are more than £250 per acre.
However, this is only part of the story and the last 18 months have not been easy for many farming businesses. The summer of 2012 left many licking their wounds and mired in the mud. And, while 2013 has been kinder, so many crops went in poorly last autumn that they have not yielded as much as was hoped.
As agents for the Agricultural Mortgage Corporation, we have been able to help many farming businesses with additional funds through the AMC flexible loan facility to tide them over.
We have helped others with strategic reviews with their banks to secure further short-term funding while things improve. While some have managed to maintain output, for the most we have seen profits shrink this year and large tax bills from earlier years arrive at a time when cashflow is tight.
Nevertheless, I see this only as a temporary setback; milk prices have improved, not only due to the efforts of protestors, but also due to market imperatives. Supply was becoming tight and wholesalers and supermarkets were getting increasingly worried about security of supply. With modest increases, they feel that they have won this back, but I suspect the discussion is not over yet.
The long-term prospects for agriculture look good with a growing and steadily wealthier world population. However, what has become clear is that only the most efficient businesses will benefit from future growth in the agricultural sector. Some of those efficiencies will arise through capital investment and use of the latest technology.
In the arable sector this may involve precision field mapping and the most accurate use of inputs or adopting the best storage and handling techniques. In the dairy and livestock sector that might involve updating of animal housing, muck handling and storage or the latest technology in milking equipment. Whichever, obtaining the best finance deal for capital investments is imperative.
The best terms are not only about headline rates, they include flexibility and transparency. In some cases fixed interest rates may be appropriate and sound advice on the right options for all these factors is vital to get the very best, and above all the most suitable, finance package.
* Mike Taylor is a chartered surveyor and the senior partner of Barbers Rural Consultancy, Market Drayton. He is an agent for The Agricultural Mortgage Corporation (AMC).
