Five-point plan to navigate farming’s financial storm

Record rainfall has significantly increased financial pressures on farm businesses – but action can be taken to tackle many challenges.

Large areas of farmland remain waterlogged following the wettest 18 months on record. The wet winter and spring have left some farms facing the first season without a harvest since World War Two.

Farmers should try to embrace resilience and strategic planning to steer a way through these challenges. A five-point plan can be useful to ease the pressure on farm businesses and weather the financial storm.

1) Know your figures and production costs: Understanding the financial health of your business is crucial. Regularly analyse production costs, including fertiliser, seed, and labour. By knowing your numbers, you can make informed decisions and identify areas for cost-saving or efficiency improvements.

2) Identify your marketing and purchasing strategy: Develop a clear strategy for marketing your products and purchasing. Being proactive in your marketing and purchasing can help secure better prices and manage risk.

3) Understand the wider industry and market: Stay informed about broader agricultural trends, market conditions, and policy changes. This awareness will enable you to anticipate challenges and recognise opportunities.

4) Utilise available tools to reduce risk and volatility: Take advantage of risk management tools and government schemes such as Sustainable Farming Incentive to diversify income and reduce dependency on volatile markets.

5) Establish a diverse business model: Create a diversified business model. This could include a mix of agriculture enterprises and environmental schemes.  Whilst diversification could include services such as a farm shop or Agri-tourism, it does not have to.

It is easy at the moment to feel discouraged because of the weather but I would encourage farmers not give up hope. Try to keep sight of the bigger picture. Risk and volatility are here to stay and are probably going to become more extreme.

Tools available can help farm businesses build resilience. Realistically, we seem to be looking at a three or four year farming cycle these days. Previously it was arguably a seven to ten year cycle.

The five-point plan won’t make volatility and risk disappear – but it can help make businesses more resilient and agile.

Defra’s free Farm Business Advice Service (FBAS) can provide a useful second opinion from a different perspective.

Farmers live and breathe their businesses but that can make it hard to take a step back and find a different way of operating.  Through the FBAS scheme, many farms have had positive discussions. Finding a trusted partner to kick start change can help.

We’ve seen the highs in recent times, with wheat at almost £400/tonne. But we’ve also seen fertiliser at nearly £1000/tonne. On the livestock side, sheep prices are high but pig prices have been in the doldrums.

Different options

Schemes such as Sustainable Farming Incentive are worth looking at, particularly on the arable side. But it is important to recognise that different businesses have different options to help manage costs.

This could be using manure, muck or slurry to reduce your inorganic fertilizer inputs. When we saw fertiliser at nearly £1,000/t, we saw farmers with available slurry and manure using it in ways that they maybe hadn’t done previously.

Applying it to standing crops in the spring can help keep a lid on nitrogen costs. It’s not for everyone, there are other ways to achieve this, like straw for muck deals, for example. That’s one way of helping reduce exposure a little bit to the wider market volatility.

Another example is that we are seeing is a well-managed herbal lay that can extend a grazing season, so that should hopefully reduce the amount of time that livestock need to be inside cutting straw costs, and other costs associated with housing livestock.

Sam Dale is a farm business consultant at GSC Grays, which offers a free farm business advice service funded by Defra’s Future Farm Resilience Fund.