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A guide to planning for the future, sponsored by Inside your Farming Fit For The Future magazine

3 6

Know your numbers and advice on how to calculate them

What to do if you get in a muddle with your accounts

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15 ways to do a ‘SWOT’ analysis on your farm

Using comparison to achieve better results

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Benefits of collaborating with other farmers How to check if your farm is environmentally fit

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‘Preparing our industry for what changes lie ahead will be critical’


ritish farming provides safe, traceable and affordable food – but the current and continued uncertainty is a reminder we must never take such food for granted. Preparing our industry for what changes lie ahead will be critical for increasing resilience in a postBrexit world. As a food and farming industry, ultimately we can have limited control over what shape government policies will take – what farmers can do, however, is focus on improving individual business performance. This means taking stock, analysing, and then working t o m a k e b u s i n e s s e s a n d enterprises as ‘fit for the future’ as possible – whatever may lie ahead. Those who remain open minded, adaptable, analytical and prepared to learn have the greatest chance of doing this effectively. We are not, after all, in the industrial era anymore, but an era of knowledge. While making our businesses fit for the future, it is also critical to remember that personal resilience, mental health and wellbeing are just as important. Key to achieving personal and business resilience, is a recognition our futures as an industry are inextricably linked to each other’s

and so collaboration, knowledge sharing, and personal support will be needed. The current era of competition and comparison often inhibits our natural sense of connection and can engender isolation. Life can feel like a battle to be won. But, we must work together to seize opportunities and strive for a future united by food. This booklet aims to set

out key things which every farmer can do to make their business stronger. Our previous booklet offers advice on personal resilience and we hope you can make use of that in tandem with this one. It can be downloaded from fginsight.com/SYFF.

Caroline Mason Head of agriculture, Co-op

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Know your numbers and how to calculate them


Data is powerful. A farmer who knows their farm data has a much better understanding of their strengths and vulnerabilities, and can make more informed management decisions towards their own objectives.

Know your numbers and how to calculate them

Understanding your farm figures allows you to compare your business to others.


ne of the key benefits of understanding farm figures, is that it allows you to compare your business to others, says Derek Carless, head of farm economics at AHDB: If you know what the average is and where the

top performers are, you can work towards the latter. There are a number of ways to compare data, including using benchmarking software, market information in the farming press, the Farm Business Survey on Defra’s website, discus-

sion groups, or talking to friends and neighbours. It is important to know what your objective is, says Mr Carless. Becoming more profitable might not be the end goal – lifestyle might be more important.

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Know your numbers and how to calculate them

Calculations given by Rachel Chamberlayne, senior manager of business tools, with comm

Important figures and calculatio ns £


Full economic net margin

Net margin is used to pay for loan repayments, tax and capital expenditure. It is the ultimate measure of the farm’s ability to reinvest, grow and attract a new generation of staff and ownership. Full economic net margin could be considered the ultimate day-to-day KPI to which all others contribute. It has to be positive, or business change may be required. Calculation: Income (sales/ transfers of what is produced, valuation changes, other production related income, but not subsidies) minus all cash costs, value of transfers in (e.g. feed, animals, muck, straw), depreciation, value of all unpaid labour and rental value of owned land.


Full economic cost of production

Full economic cost of production is a key driver of profit – knowing your business costs is vital. It allows farms of different and similar systems to be compared. By setting and achieving a low target for total costs, farmers will become more resilient to market volatility and periods of low payments. Calculation: Total of all cash costs (total livestock purchases, purchased feed and forage, short-

Whole farm return on tenant’s capital (%)

Return on capital is a useful measure of business performance and links both the performances of the balance sheet and the profit, with the loss account. It is an indicator of the business's ability to generate income. If the business struggles to meet the return on capital targets, it could indicate that it is over capitalised for its size and/or under-performing in trading. Calculation: Income minus full economic cost of production excluding unpaid labour to give the net margin, divided by tenant’s capital, multiplied by 100 to give a percentage. Tenant’s capital is the value of assets which a tenant would traditionally remove/own at the end of a tenancy (i.e. land or buildings are not included) but the calculation should be done by owner-occupiers too. term keep, fertiliser, seeds and sprays, vet and medicines, breeding, bedding, sundries, paid labour, machinery repairs, spares, tax and insurance, machinery hire and contracting, electricity and fuel, building repairs, rent, bank charges, water, telephone, general insurances, professional fees and miscellaneous) plus value of transfers in (e.g. feed, animals, muck, straw), depreciation, value of all unpaid labour and rental value of owned land. This can then be divided by a factor to suit you, e.g. per hectare, per tonne, per kg, or per litre.


Overheads as a percentage of income

Overhead costs are one of the largest sources of variation in the cost of production. Labour, power and machinery are all inter-related, and therefore it is important to measure overheads in detail and benchmark where the best farmers are, find detailed areas to focus on and set targets to lower the cost base. Collecting this data and setting SMART targets (Specific, Measurable, Attainable, Relevant and Timely) help farmers assess their business overheads and improve. Calculation: Overheads as a total of cash (paid labour, machinery repairs, spares, tax and insurance, machinery hire and contracting, electricity and fuel, building repairs, water, telephone, general insurances, professional fees and miscellaneous) and non-cash (machinery and buildings depreciation and value of unpaid labour (£30,000/full-time equivalent is a good place to start), divided by income, and then multiplied by 100 to give a percentage.

It is important to measure overheads in detail RACHEL

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Know your numbers and how to calculate them


s, with commentary from Mark Topliff, lead analyst, both in AHDB’s farm economics team.

io ns every farmer needs to know

Figures for specific enterprises DEPENDING on your enterprise(s) you will also need to be able to calculate more specific figures to get a deeper understanding of your business. Here are the main calculations AHDB’s farm economics team recommends for each enterprise. For further explanation, including calculations and what is considered ‘good’ and ‘average’, find out more about AHDB’s benchmarking scheme at fginsight.com/AHDB. Block calving dairy • Milk solids output (kg/hectare) • Milk yield from forage • Cows and heifers calved in first six weeks (%) All-year-round calving dairy herds • Pregnancy rate (%)

• Age at first calving (months) • Dairy purchased feed costs (pence per litre) Cereals and oilseeds • Seed costs (£/tonne) • Inorganic fertiliser costs (£/t) • Crop protection costs (£/t) Potatoes • Nematicides costs (£/t) • Storage costs (£/t) • Diesel usage (l/ha) Beef sucklers • 200-day weaned calf weight as percentage of cow weight • Age at first calving (months) • Cows and heifers calved in first six weeks (%) Beef finishing • Daily liveweight gain (kg/day) • Cattle hitting target spec for regular outlet (%)

Breeding flock • Lambs reared per 100 ewes put to the ram (%) • Lamb losses from scanning to rearing (%) • Average weight at weaning (kg) Lamb finishing • Daily liveweight gain (kg/day) • Lambs hitting target spec (%) Pig finishing • Mortality in the last month or last batch (%) • Vet cost per pig (last 12 months) (£/head) • Daily liveweight gain (last six months or batch) (g/day) Breeding/weaning pigs • Pigs weaned per sow and per litter • Average weaned piglet weight • Vet and med costs, including in-feed medication per sow

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There are many reasons for falling behind on your accounts and records, but what can you do to climb out of that hole, or stop it happening in the first place?

Are you in a muddle with your accounts? Here’s what to do


itting down to update accounts and records can sometimes feel like the least important thing. General time pressure is the most common reason for letting paperwork slide, but all sorts of other reasons, such as mental ill-health, a death, divorce, or big financial worries can mean things get out of hand. The consequences of falling behind can be costly, says Christine Thomson, chair of the Institute

of Agricultural Secretaries and Administrators (IAgSA). “Not submitting tax accounts on time can lead to fines from HMRC,” she warns. “There are also cross-compliance issues – if you are late reporting movements then you can get an RPA inspection and that can roll on to a penalty in your Basic Payment.” The institute has a crack-team of trained farm secretaries working with the Royal Agricultural Benevolent Institution (RABI) and The

Farming Community Network (FCN), which goes into farming businesses to help get things back under control. Communications manager at RABI, Rob Harris says: “Farming can be a volatile business with many factors beyond the farmer’s control. “Often, problems can quickly escalate, but sometimes all it takes is a small amount of assistance at the right time to get things back on track.”

How to keep accounts in order, Christine Thomson gives her top tips Stick to a routine Set yourself a routine for updating accounts and records and stick to it. Frequency will depend on the size and complexity of the business – it could be once a week or one a month. Cross-compliance should be done daily, depending on your situation. Use technology Technology can help keep things in order and save time – it is also now necessary as HMRC moves tax records over to digital submissions. General accounting software, such as Quickbooks and Xero, can be used and will help you see how much tax you owe as you go along.

For something which understands the specific nature of farming, such as three-year averaging, try agricultural software such as Farmplan, Landmark, and Sum-It. Since April 2019, VAT submission must be digital. Ensure you have a reliable and strong antivirus software package though, to guard against online fraud. Look out for a new app, currently being developed by Defra, which will allow farmers to record livestock movements at the press of a button. Employ a farm secretary Trained secretaries and administrators can be a good investment – they can do the work accurately and in half the

time, freeing you up to focus elsewhere. The cost is normally viable and sustainable. Get a folder A very simple method to keep accounts in order, is to have two folders – one for expenditure and one for income. Ask for help If you get behind, particularly by six months or more, don’t be embarrassed to reach out for professional help. Talk to your accountant first, and if things are really bad there are also farming charities which can help (see box right). Get a professional in as soon as you feel things are starting to get out of hand.

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Letting paperwork slide can mean things start to get out of hand.

Changes to tax submissions AS part of HMRC’s Making Tax Digital (MTD) plan, sometime beyond 2020 all tax information will need to be submitted digitally using approved software. It is also expected that

submission will be every quarter, although tax will still be paid annually. So it is a good idea to get used to a piece of accounting software which works with MTD.

Emergency help with accounts

Both these charities work with IAgSA: RABI: Helpline: 0808 281 9490 Email: info@rabi.org.uk FCN: Helpline: 03000 111 999 Email: chris@fcn.org.uk

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15 ways to ‘SWOT’ your farm

A ‘SWOT’ analysis looks at strengths, weaknesses, opportunities and threats facing a business. Andrew Jenkinson, partner and farm business adviser at Robinson and Hall, outlines key areas to examine.

15 ways to ‘SWOT’ your farm Labour and skills 1youPremises and equipment Are they fit for purpose? Can 3 Does your team and/or make better use of items, such family have the skills needed for as sharing machinery, contracting, or turning unused buildings into holiday cottages, events premises, offices or storage units?

Land ownership 2 and occupation Is this legally clear and docu-

mented? Who is the owner/ tenant of each enterprise and property? Have you got succession rights under tenancy and do you meet the tests for succession?

now and the future? What are people’s retirement plans? Are you doing things to retain good staff? Can you use people’s skills and interests to create a new enterprise or improve an existing one? How can you fill gaps in skills? Do you have contingency plans for sickness, absences, or staff leaving?

4 Management capability Do you have the skills

needed? If not, how can you acquire them? Do you have contingency plans for if something were to happen to you? Is your knowledge recorded to assist future generations? Is there an opportunity to channel your own skills and interests – either in the current business or a new enterprise? Succession planning 5 Have you got plans in place for handing over the farm,

and retirement (e.g. wills and partnership agreements)? Does

Examining key areas in your business highlights key opportunities and threats.

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15 ways to ‘SWOT’ your farm everyone in the family know what will happen and have they agreed to it?


Location Does your location offer opportunity? For example; is it a beauty spot which could be used for weddings, retreats or camping? Is there a need locally for housing or offices?

Capital investments 7 What are the timescales involved in any new plans and

how will you finance any investment? If investing in buildings, do you have the skills and time to build yourself?

Profits and losses 8 Do you clearly know your financial situation? Can you cut costs and improve efficiency? Do changes to investments, govern-

ment policy or anything else, threaten profits? Do you have contingency funds for things like a bad harvest, disease, or market plunges?


Work/life balance 11 Do you have balance? What is at risk if not? How can you create a better balance? (See ‘Building resilience’ at fginsight. com/SYFF).

Suppliers and customers 9 Market trends Are the supply chains for your inputs and outputs stable? 12 Where is the market for Could you put yourself in a your products heading? Are you stronger position to buy/sell? Have you shopped around for suppliers and customers? Have you looked at your contracts and considered joining a buying group or co-op?

Servicing 10 Can you afford your borrowings if interest rates rise? Do

you know how much capital and interest you are paying back each year including hire purchase? Can you make extra payments to reduce your debt?

properly plugged in to trends and prices? How can you buy and sell at the most advantageous times?

Existing enterprises 13 Is there an opportunity to expand an existing enterprise?

Would further specialism be helpful? Are there markets you haven’t thought of? Are your enterprises making money or should you focus elsewhere?

Brexit 14 Stress-test your business for changes to subsidy payments

and trading relationships with other countries. How will you remain competitive, or should you look at new market opportunities? Will you still be able to access the inputs you need? Will your customers be affected? How could you turn likely changes to farming policy and payment for public goods into opportunity?

Government policies 15 Watch changes to government policy and understand

how this might present threats or opportunities. For example, the Government plans to change the law to allow people to marry wherever they like – could this create an opportunity for a wedding business? Or, if that is already an enterprise, does this present a threat?

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Comparison to achieve

All top farmers benchmark, either formally or informally, according to AHDB’s Horizon report about what the highest achieving businesses do differently. We take a closer look at the report and the findings.

How top-performing farms use comparison to achieve


ore than half of farmers operating in the bottom quartile do not realise they are under-achieving, suggesting the benefits of benchmarking or other comparable analysis could be large. However, while all farmers might want more money, not everyone will necessarily want to become a top-performer, says the AHDB team, because that means doing things differently. But, if you do want to move up the ranks, comparison is going to be key. In fact, the Government’s Farm Business Survey suggests benchmarking is significantly related to high profitability. The Horizon report says, essentially, ‘farms with more information make more money.’

This could be through benchmarking, discussion groups, informal discussions, regular reading (not just farming press), farm walks, or a combination of these. Comparison allows a farmer to use other people’s knowledge to identify where performance is moving forwards and what the expectations for performance should be, says AHDB.


Setting KPIs is essential for measuring performance – examples include kilogram of milk solids per hectare, horsepower per hectare of arable land, or daily liveweight gain (see ‘Know your numbers and how to calculate them’ pages 3-5). The report says: “Critically, taking that information to the farm

to identify what you can do to farm more profitably is what matters. Knowledge is only useful if you change something as a response.” As The Anderson Centre pointed out in its ‘Best British Farmers’ report a few years ago: “One thing which separates the best from the rest is willingness to change…ultimately, it is down to the business manager to make the decision to change, invest, take risks, pay for top advice and grow.” The Anderson Centre added: “Top performers are often marginally better at everything rather than significantly better at anything. “Marginal progress on all aspects of the business makes a considerable improvement to the overall figures.”

Eight things top-performing farmers do WHAT differentiates the top-performing farms? While the hierarchy of importance for these factors will vary for each farm according to the system, environment, existing skills, resources and performance, AHDB’s analysis found that in the industry overall, the most important factors in priority order, are:

1. Minimise overhead costs 2. Set goals and budgets 3. Compare yourself with others and gather information 4. Understand the market 5. Focus on detail 6. Have a mindset for change and innovation 7. Continually improve people management 8. Specialise

Knowledge is only useful if you change something as a response AHDB HORIZON REPORT

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Comparison to achieve


Tips: How to use comparison to achieve AHDB recommends the following things farmers can do to improve their performance through comparison: Look for easily comparable 1others, data between your farm and such as horsepower per hectare of arable land or daily liveweight gain

Compare your staff ’s wages 2 against wages paid by others nearby. Are you paying too much or too little?

Calculate your staff turno3 ver. What should it be? How can you address that? What is your stocking rate? 4 Calculate it per unit of productivity rather than per hectare, ie, if some land is less fertile, should it have a different rate?

Calculate how much organic 5 matter you are removing from soils and identify how it is

to be replaced. Do you need to replace more to compensate for previous years’ losses? Calculate the chemical and biological value of incorporating straw into soils before baling it and exporting it off-farm

Comparison is key to ensuring your business is competitive and profitable.

Quantify what each enter6 Compare contracts for your prise adds to the farm business. Do this objectively, rather 7 outputs with other buyers in than looking for justifications for your area keeping them. AHDB’s knowledge exchange team is there to help: ahdb.org.uk/farmexcellence


Shop around for inputs. Don’t stick with the same

supplier just because you know them, it might not be the best deal Benchmark your business 9 for free, using Farmbench: farmbench.ahdb.org.uk

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Collaboration: We are stronger together

Rory Christie is a farmer on a mission – he aims to collaborate in every way he can and show others the benefits of working together.

Collaboration: We are stronger together


ory Christie is a board member of the Scottish Agricultural Organisation Society (SAOS), which provides advice on collaboration to people in food and agriculture, he says: “Most of my

time is spent collaborating now.” Back in 2013 he started his first major collaboration – the creation of a dairy co-op which now supplies 210 million litres of milk from 134 dairy farmers to Lactalis. Now, the Port William farmer,

Why farmers should collaborate Money

It helps you draw down, or pool funds


You can access expert advice and skills you would never normally be able to on your own


Mr Christie says: “Three people know more than me. It pulls intelligence together – not just brains, but actual intelligence gathering, i.e. data.”

who has 1,350 cows and 200 breeding sows, is working with two dairy farmers and Scotland’s Rural College (SRUC), developing cutting-edge technology to genetically identify the top 10 per cent best cows in their herds. Sexed embryos using eggs from these cows will then be placed into less genetically superior herd members. By working together, the three farmers are providing scientists with 4,000 cows to test. In return, they will use the technology to improve their herds. “You have to have the right mindset for collaboration,” says Mr Christie. “To collaborate regardless of differences, you have to be able to let things flow and not empirebuild, but to listen and be able to see long-term benefits.”


“It’s much more enjoyable [than working on your own] – the people I’ve met are amazing,” says Mr Christie


Mr Christie says: “As an individual, no matter how big your farm is, you are a minnow in a sea of sharks. We have to stand together if we want any chance of survival. By joining up intelligence, our combined power outweighs the sharks.”

Together we are stronger – so get in the challenge-room together RORY CHRISTIE

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Collaboration: Stronger together


Pictured left to right: Graham Armstrong, Rory Christie, Charlie Russell – the ‘Fast Breeders’ farmers working together on genetically advancing their dairy herds.

Types of collaboration IF you’re new to collaborations, where do you start? “Always concentrate on the outcome you want,” advises Mr Christie. “Understand your dreams and start to enable them.” As a first step, gather a group of farmers to go and learn something together, he suggests. Then sit down and talk about what you have learnt and what you could do differently. Research what existing groups are out there, such as marketing co-ops, benchmarking and discussion groups. Try to join a smaller co-op first, as you are likely to be closer to the decision making. Bear in mind that the value is not just in the end price you get. Consider pooling resources. For example, collectively pay

an expert to look at your milk contracts, or opt to buy machinery together.

sell oilseed rape. But if you have a plant to process it, then you sell rapeseed oil.

• Benchmarking Leave your baggage behind and go in with an open mind. Be respectful. Whatever state your business is in, bring it to the table.

• Equipment sharing See what machinery rings are around you. Go to their AGM and find out what they have and how it operates.

• Discussion groups Employ a facilitator to help generate meaningful conversations. Always maintain respectful dialogue – everyone’s opinion is valid and should be considered. Listen properly, pause, then ask. • Collaborative enterprises If you own your products end to end, you retain the value. If you just grow oilseed rape, then you

• Co-ops If you join an existing co-op, make sure you understand its power. The key thing is to understand your rights and power. • Data The biggest collaboration opportunity is on data. Data is in your soil, your beef cattle, your dairy cows, everywhere. If you own your data, everything has value.

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Is your farm environmentally fit?

How can you check that your farming unit is environmentally fit for the future? Hugh Martineau, farmer and agricultural consultant at Ricardo Energy and Environment, shares his advice.

How to check if your farm is environmentally fit


o two farms are the same, but there are some basic indicators which can help assess your unit’s environmental resilience.

Essentially, these are areas where agriculture could have an impact and where the risk needs to be minimised, or where benefits could be enhanced. Taking stock of your current

position is essential for understanding environmental benefits already being delivered, and to develop an accurate baseline from which improvements can be monitored and reviewed.


ONE way to minimise risks of soil run-off and nutrient loss is to use a nutrient management plan. This calculates surplus nutrients by reviewing total nutrients generated and brought on-farm as inputs such as feed and fertiliser, in relation to outputs.

Minimising the surplus in the nutrient balance will reduce the amount lost to the environment, which also represents an economic loss. Nutrient management planning helps use only what you need. Ask an expert to help devise a budget.


SOILS are the main asset farmers have and their health and condition is the basis of a profitable business. It is essential to ensure pH is within optimum range (6-6.5) for nutrient uptake. Basic soil analysis will also provide P, K and Mg status, which inform the nutrient management plan.

Other indicators include soil structure, organic matter, water retention and infiltration rates. Results will give a good indication of what needs to be done to improve your soil health. There are some great online resources about how to do a simple soil analysis (see resource box on the back page).


AGRICULTURAL impact on air quality is rising up the political agenda. Measuring ammonia emissions is a challenge, but we know the main sources are from housed livestock, slurry and manure stores and their applications. Reduce ammonia emissions by

covering slurry stores and by using precision application techniques. When slurry and manure is applied to land due to be cultivated it should be incorporated as soon as possible to minimise the release of ammonia. This will also ensure more nitrogen is available to the crop.

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Is your farm environmentally fit?


Reduce ammonia emissions by covering slurry stores and using precision applica on techniques HUGH MARTINEAU


Greenhouse gases (GHGs), carbon storage and sequestration are key factors for farmers to consider. The simplest and most useful metric to measure GHG emissions, is emission intensity. This is kilogram of CO2 equivalent, emitted per kg of what you are producing, such as beef, milk, or wheat. Emissions intensity is a measure of production efficiency and can help identify ways to reduce costs and also to improve profitability. This can be measured using an emissions calculator, such as the ‘AgRE Calc’ tool developed by SAC Consulting (see the

resource box on the back page). The tools to measure carbon stores and sequestration (taking carbon out of the air and locking it up in, for example, soils) are less developed, as there is significant uncertainty in calculations of rates of sequestration in soils. This means that physical measurements of soil carbon through soil analysis are needed to provide a baseline measurement from which to maintain and increase carbon stocks. In the meantime, understanding the impact of cultivation practices and protecting the carbon stock on your farm is important.


THIS is very farm-specific and can be difficult to determine what you have on-farm without help. For example, as this is not my area of expertise I asked a local ecologist to give me some guidance for my home farm, which helped develop some of our agri-environment decisions. The basic principle, is to understand what you have in terms

of the habitat and how to manage it to maintain and enhance its value. We are also increasingly looking at habitat connectivity to enhance the value at a wider scale. The best thing to do is to ask an ecologist to come and properly assess your farm, what you have on it, and what you can do to enhance habitats and improve biodiversity.

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Case study

The farmer-led Beacons Water Group in Wales, is piloting changes in agricultural practice which improve farm efficiency and/or resilience, and improve water quality above the minimum regulation.

‘I am reducing costs, saving time, and using fewer nutrients’


he Beacons Water Group evolved after farmers had attended meetings around the establishment of Welsh Water’s Brecon Beacons Mega Catchment (BBMC) project and the subsequent visit by a representative from a world-renowned group in the US, the Watershed Agricultural Council. Nigel Elgar, manager of BBMC, says the farmers and their ideas are contributing significantly to improving resilience and public goods, such as water quality, biodiversity, and forestry.

Farmers can play a key role in protecting water quality.


Farmer, Alun Thomas, from Llangorse, says he got involved having seen the benefits of improving farm infrastructure and keeping rainwater out of slurry. Mr Thomas says: “I’m reducing costs, saving time, and using


Advice can be found at: • Farming connect (Wales): businesswales.gov.wales/ farmingconnect/ • Farm Advisory Service (Scotland): fas.scot/ • Catchment Sensitive Farming (England): gov.uk/

fewer nutrients because I’m not losing it down into the water courses and rivers.” Another farmer, Keri Davies, from the Crai Valley, says the time is right to look at environ-

government/publications/ catchment-sensitive-farmingofficer-contacts • A good carbon footprinting calculator can be found at: agrecalc.com • For advice on reducing ammonia emissions:

mental improvements: “Brexit is creating a mood for change – the public wants to see more public goods coming out of our financial support from government.”

gov.uk/government/ publications/codeof-good-agriculturalpractice-for-reducingammonia-emissions/ code-of-good-agriculturalpractice-cogap-for-reducingammonia-emissions

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Profile for Agribriefing Ltd

Co-Op - September 2019 Booklet  

Co-Op - September 2019 Booklet  

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