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Agricultural Consultancy Seminar 2016

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Agricultural Consultancy Seminar 2016

  1. 1. By Your Side. On Your Sidewww.thomaswestcott.co.uk Welcome to the Thomas Westcott Agricultural Consultancy Seminar
  2. 2. Axminster · Barnstaple · Bideford · Bridgwater · Burnham on Sea · Crediton · Exeter · Holsworthy · Honiton · Ilfracombe · Langport · Okehampton · Plymouth · Seaton · Somerton · Tiverton · Torquay · Weston super Mare
  3. 3. By Your Side. On Your Sidewww.thomaswestcott.co.uk Maximising Funding Opportunities • BPS • Countryside Stewardship • RDPE Funding
  4. 4. By Your Side. On Your Sidewww.thomaswestcott.co.uk Basic Payment Scheme • Delayed / incorrect payments • Claim statements – CHECK CAREFULLY • Check Number of entitlements brought forward from 2015 • Check eligible areas against 2015 BP5 form • Active Farmer • Young Farmer
  5. 5. By Your Side. On Your Sidewww.thomaswestcott.co.uk Cross Compliance – Retaining BPS • BPS requirements does not end at the application stage • Support payments declining • Avoid cross compliance penalties • Penalties will depend on severity • Negligence - 3% deduction (120 ha farm based on 2015 £640) • Intentional Violation – 15% deduction (120 ha farm based on 2015 £3,200)
  6. 6. By Your Side. On Your Sidewww.thomaswestcott.co.uk Most common breaches in 2014 • Cattle TB testing • Cattle ID and registration • NVZ’s (a rise from 2013 in the number of breaches) • Soil protection • Sheep and goat ID • Hedgerows and watercourses • No spread zones • Public rights of way • Food and feed law • Plant protection products
  7. 7. By Your Side. On Your Sidewww.thomaswestcott.co.uk Cross Compliance Penalties Applied in England 2009 to 2014 2009 2010 2011 2012 2013 2014 Warning Letter 413 192 158 95 156 121 1-2% 420 427 523 334 625 1,030 3-4% 502 722 661 567 1,171 1,889 5-15% 378 172 455 582 903 1,213 16-100% 71 92 61 48 115 138 Number of Penalties 1,371 1,413 1,700 1,531 2,816 4,270 Total Financial Deductions £2,528,735 £2,072,621 £2,569,500 £1,400,000 £2,330,000 £2,490,906
  8. 8. By Your Side. On Your Sidewww.thomaswestcott.co.uk Countryside Stewardship • Mid Tier, Higher Tier and Capital Grants • Potential to earn more out of CS than ELS • Build a good application • Understand the rules
  9. 9. By Your Side. On Your Sidewww.thomaswestcott.co.uk Example of Potential Earnings from Countryside Stewardship 120 ha (300 acre) Beef and Sheep Farm Capital Works - £21,000 (2 years) Mid Tier Options - £87,000 (5 years) £17,400 per year £145/ha (£59/acre) ELS = £30/ha (£12/acre)
  10. 10. By Your Side. On Your Sidewww.thomaswestcott.co.uk Grant Funding Opportunities • RDPE – LEADER Funding – Local Action Groups • Countryside Productivity • Water Capital Grants (Countryside Stewardship) • Hedgerows and Boundaries Grants (Countryside Stewardship) • Woodland Grants (Countryside Stewardship)
  11. 11. By Your Side. On Your Sidewww.thomaswestcott.co.uk THANK YOU
  12. 12. Axminster · Barnstaple · Bideford · Bridgwater · Burnham on Sea · Crediton · Exeter · Holsworthy · Honiton · Ilfracombe · Langport · Okehampton · Plymouth · Seaton · Somerton · Tiverton · Torquay · Weston super Mare
  13. 13. By Your Side. On Your Sidewww.thomaswestcott.co.uk
  14. 14. By Your Side. On Your Sidewww.thomaswestcott.co.uk WHY DO WE NEED CHANGE?
  15. 15. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Volatility is having a negative impact • Retire/reduce work load • Spread or reduce risk • Business expansion/development • Provide for the next generation • Business performance is struggling
  16. 16. By Your Side. On Your Sidewww.thomaswestcott.co.uk ‘to make the form, nature, content or future course, different from what it is or from what it would be if left alone’ CHANGE
  17. 17. By Your Side. On Your Sidewww.thomaswestcott.co.uk • It’s a risk • It will be different • Must consider: - Personal objectives - Business objectives • Needs to be the right change – the right opportunity CHANGE
  18. 18. By Your Side. On Your Sidewww.thomaswestcott.co.uk ‘a good position, chance, or prospect, as for advancement or success’ OPPORTUNITY
  19. 19. By Your Side. On Your Sidewww.thomaswestcott.co.uk A GOOD OPPORTUNITY FOR CHANGE? £0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 £160,000 £180,000 Cereals General Cropping Dairy Lowland Grazing Upland Grazing Pigs Poultry Mixed 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
  20. 20. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Resources available – land, capital, operational expertise • What do you need to achieve? • What can you realistically achieve? CRUCIAL TO UNDERSTAND YOUR BUSINESS
  21. 21. By Your Side. On Your Sidewww.thomaswestcott.co.uk POTENTIAL OPPORTUNITIES
  22. 22. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Needs to be an improvement on what you are already doing. • Change could simply just be getting better at what you already do. • Consider the effects of price volatility – its here to stay! • Capital requirement • Operational expertise? AGRICULTURAL COMMODITY PRODUCTION
  23. 23. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Additional income to support existing enterprise • Diversify from a position of strength • Utilise resources available • Develop your skills • Know your market FARM DIVERSIFICATION
  24. 24. By Your Side. On Your Sidewww.thomaswestcott.co.uk NUMBER AND PERCENTAGE OF FARMS WITH DIVERSIFIED ACTIVITIES
  25. 25. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Align land, capital and operational expertise. • Beneficial for all parties • Possibly suitable for all drivers of change – improvement, succession, development, retirement…… • Needs to be a well structured, open and flexible arrangement SHARE OR CONTRACT FARMING
  26. 26. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Is agriculture the answer? • Can you afford to work on the farm? • Tenancies can be rare and expensive – is this the opportunity? • Reduce scale and support with additional off farm work – Dutch dairy industry NON FARMING INCOME
  27. 27. By Your Side. On Your Sidewww.thomaswestcott.co.uk 1. Have you the mind-set to take control of your own destiny? Or do you feel bewildered and a hopeless victim of circumstances? 2. Is farming right for you and your family? What are your plans for inheritance? Are you doing the right thing for your non-farming family members? 3. What will you need to invest in your facilities in the next 10 years? How will you fund it and justify it? 4. Do you REALLY know your cost of production? 5. What is the realistic future price you will receive? Are you looking at the evidence or living on hope? 6. Have you worked out whether you are producing what your market really wants? i.e. Are you maximizing your returns? 7. What are you really paying yourself per hour? What can you afford to pay yourself and remain competitive? Would you be better off paying someone else and trying to add value to other parts of the business? What are your other skills? How much could you earn off farm part-time or full-time? 8. Might there be a day when you will find yourself stranded without a market? 9. Are you buying all your inputs at best prices, and when did you last check alternatives? 10. Are you ruthlessly and honestly benchmarking your performance and constantly trying to identify ways to incrementally improve performance? 11. Have you got your eyes open for niche opportunities even if they start small? 12. Do you have the right skills for the technologically and market driven agricultural industry of the future? A GOOD STARTING POINT?
  28. 28. By Your Side. On Your Sidewww.thomaswestcott.co.uk http://www.ipaquotas.com/dairyfarmer.htm
  29. 29. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Review the current situation • Ascertain personal and business objectives • Discuss and identify opportunities • Assess viability • Plan and budget for change • Determine and secure capital requirements • Implement and oversee contract or share farming agreements • Provide operational expertise • Monitor success HOW CAN WE HELP?
  30. 30. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Lowland beef and sheep • Struggling with poor returns • Strategic changes to sheep breed and cattle finishing policy to ensure better returns • Restructured finance to ease cash flow EXAMPLES OF OUR INVOLVEMENT IN CHANGE – COMMODITY AGRICULTURE
  31. 31. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Struggling dairy business in Devon • Looking at the possibility of selling direct • Thomas Westcott Ag Services involved with market research, financial and physical viability EXAMPLES OF OUR INVOLVEMENT IN CHANGE - DIVERSIFICATION
  32. 32. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Tired dairy business in Dorset • Lack of interest in dairy farming from next generation • Strong balance sheet • Developing plans for share farming agreement • Utilise off lying buildings for wedding venue to be run by next generation EXAMPLES OF OUR INVOLVEMENT IN CHANGE – NON FARM INCOME
  33. 33. By Your Side. On Your Sidewww.thomaswestcott.co.uk • Change is good • Change is necessary, but not always easy • There are opportunities out there – be open minded and make time to find them • Any change needs thorough planning and forecasting • Success should be quantified with ongoing monitoring • All parties need to be involved throughout CONCLUSIONS
  34. 34. By Your Side. On Your Sidewww.thomaswestcott.co.uk THANK YOU
  35. 35. Axminster · Barnstaple · Bideford · Bridgwater · Burnham on Sea · Crediton · Exeter · Holsworthy · Honiton · Ilfracombe · Langport · Okehampton · Plymouth · Seaton · Somerton · Tiverton · Torquay · Weston super Mare
  36. 36. By Your Side. On Your Sidewww.thomaswestcott.co.uk What does being a successful farmer mean? • A technically excellent business with high Gross margins? • A very well established business with all family labour? • A business that has built up a high capital base over many years? • A mixture of all three Indeed is it possible to be viable without all three?
  37. 37. By Your Side. On Your Sidewww.thomaswestcott.co.uk £0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 £160,000 £180,000 Cereals General Cropping Dairy Lowland Grazing Upland Grazing Pigs Poultry Mixed Average Farm Business Incomes 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
  38. 38. By Your Side. On Your Sidewww.thomaswestcott.co.uk SPLIT FARM BUSINESS PROFIT INTO 3 SECTIONS • Output / Variable Costs – Technical performance • Direct Overheads (labour, machinery running and administration) – management skill • Structural Overheads (rent, finance and depreciation) – Capital structure
  39. 39. By Your Side. On Your Sidewww.thomaswestcott.co.uk GROSS MARGIN (pence per litre) From AHDB Evidence Report December 2015 Bottom Top Difference Litres Per Cow 8,000 - 9,400 5,000 - 6,499 Milk Sales 29.6 32.7 -3.1 REVENUE 31 34.4 -3.4 Herd Replacement Costs 3.6 2.5 1.1 Feed & forage 12.3 8.7 3.6 Livestock Costs 3.5 3.1 0.4 TOTAL VARIABLES 15.7 11.8 3.9 GROSS MARGIN 15.3 22.6 -7.3
  40. 40. By Your Side. On Your Sidewww.thomaswestcott.co.uk FARMING ENTERPRISE Performance Numbers GM per Unit Total GM Management Balance Breeding ewes 1.60 lambs per ewe 1000 £43.60 £43,600 £15,000 £28,600 Breeding ewes 1.75 lambs per ewe 1000 £52.20 £52,700 £15,000 £37,700 Wheat 8.6t per ha (£110/t) 100 £587 £58,700 £25,000 £33,700 Wheat 10.0t per ha (£110/t) 100 £607 £60,700 £25,000 £35,700 Dairy 7,500 l x 22ppl (0.31kg/l) 150 £494 £49,400 £53,000 -£3,600 Dairy 9,000 l x 22ppl (0.38kg/l) 150 £683 £68,300 £53,000 £15,300
  41. 41. By Your Side. On Your Sidewww.thomaswestcott.co.uk FARMING ENTERPRISE Performance Balance Drawings Surplus Breeding ewes 1.60 lambs per ewe £28,600 £20,000 £8,600 Breeding ewes 1.75 lambs per ewe £37,700 £20,000 £17,700 Wheat 8.6t per ha (£110/t) £33,700 £20,000 £13,700 Wheat 10.0t per ha (£110/t) £35,700 £20,000 £15,700 Dairy 7,500 l x 22ppl (0.31kg/l) -£3,600 £20,000 -£23,600 Dairy 9,000 l x 22ppl (0.38kg/l) £15,300 £20,000 -£4,700
  42. 42. By Your Side. On Your Sidewww.thomaswestcott.co.uk What is Left To Cover? • Drawings - £20,000?! • Taxation • Structural Costs – Reinvestment, Interest, loan capital repayments, rent, depreciation
  43. 43. By Your Side. On Your Sidewww.thomaswestcott.co.uk 50 acres Rent Available Tender?
  44. 44. By Your Side. On Your Sidewww.thomaswestcott.co.uk We can help: • Identify weakest areas • Technical – benchmark look at enterprise mix, output values / input costs, use – Introduce some regular costings • Management – labour balance, machinery balance, cropping diversity, other uses of land • Structural – hard something must change – seek rent reduction, sell something, give up some land? • All the above are tricky areas but now is ‘not the time for heads in sand’
  45. 45. By Your Side. On Your Sidewww.thomaswestcott.co.uk Q & A

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