SCOTCH CORNER FARMING BREAKFAST
AGENDA
08:20 Welcome and introduction 08:25 NFU policy and political overview 08:35 Industry Overview 09:05 09:30
Environmental Schemes and Markets Farm Business Advice Service 09:45 Questions 10:00 Summary and thoughts
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE
INDUSTRY OVERVIEW
GSC GRAYS FARM BUSINESS ADVICE SERVICE
KEY CONSIDERATIONS FOR
FARM BUSINESS ADVICE SERVICE • Output prices. • Input costs. • Investment costs. • Labour. • Further legislation. • Sustainability targets. • Buyer expectations. • Cost of living increase.
ALL
SECTORS
ARABLE
HARVEST 2022
• National average was up.
• Better in our region.
• Minimal effect from the drought.
Commodity
Provisional Ave. (t/ha) 5 Year Ave. (t/ha)
Winter Wheat 9.10 8.10
Winter Barley 7.80 7.10
Winter Oilseed Rape 4.10 3.60
GSC GRAYS FARM BUSINESS ADVICE SERVICE
HARVEST 2023 OUTLOOK
FARM BUSINESS ADVICE SERVICE
Prices
• Most crops established early. • Positive start for winter crops. • Pest pressures from BYDV, slugs & flea beetle. •
declining?
FARM BUSINESS ADVICE SERVICE • Key issues in 2022. • Unrelenting drought. • Irrigation demand and costs. • Storage and energy costs. • Modest contract improvements for 2023. • Land availability an issue.
POTATOES
Photo by Jonathan Kemper on Unsplash
FARM BUSINESS ADVICE SERVICE • 250 hectares (617 acres). • Traditional rotation – WW, WW, WB, OSR. • Incorporating Stewardship and Introductory SFI. • Arable operations in-house. ARABLE MODEL FARM ASSUMPTIONS
GSC GRAYS FARM BUSINESS ADVICE SERVICE £/ha Actual Budget H 22 H 23 Gross Income from Production 2,288 2,281 Variable Costs 880 1,066 Fixed Costs 928 983 Margin from Production 480 232 Basic Payment Scheme 213 178 Countryside Stewardship 20 31 Management Profit/Loss 713 440 Drawings 168 184 Business Surplus/(Deficit) After Drawings 545 257 ARABLE MODEL FARM
GSC GRAYS FARM BUSINESS ADVICE SERVICE MACHINERY MARKETS Bateman Spray 24m self propelled • 2017 - £185,000 • 2022 - £235,000 Increase + 27% Claas Lexion 20ft cut – walker • 2017 - £285,000 • 2022 - £370,000 Increase + 30% Fendt 516 Standard spec. tractor • 2017 - £70,000 • 2022 - £110,000 Increase + 57%
FARM BUSINESS ADVICE SERVICE • Cashflow forecast assess overdraft requirements. • Input-use efficiency and farming systems. • Sharing resources. LOOKING AHEAD
DAIRY
MILK PRICE
HISTORIC TRENDS & FUTURE PROSPECTS
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE COST OF PRODUCTION (2018-2022) Agro Business Consultants (2018-22) 0 5 10 15 20 25 30 35 40 45 2018 2019 2020 2021 2022 Pence per litre Rent and finance charges General overheads Power and machinery Labour Sundry variables Cow depreciation Forage Concentrates
DAIRY MODEL FARM
• 165 hectares – 110ha owned, 55ha tenanted under FBT.
• 260 cows.
• Home-bred replacements.
• Grazing-focussed system with summer buffer feeding (housed late-Oct to early March):
− Ave. yield of 8,480l Milk from forage of 2,750l
• 3.0 FTE plus contractors.
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE DAIRY MODEL FARM Pence Per Litre Actual Budget Budget 21/22 22/23 23/24 Milk Price Gross Income From Production Variable Costs Fixed Costs 30.43 33.38 17.11 13.38 43.16 46.20 23.82 15.53 42.06 45.10 23.63 16.77 Margin From Production 2.89 6.86 4.71 Support Payments 1.66 1.38 1.10 Management Profit/Loss 4.55 8.24 5.81 Drawings 2.13 2.19 2.25 Business Surplus/(Deficit) After Drawings 2.42 6.04 3.57
BEEF & SHEEP
KEY MARKET DRIVERS
• EU/domestic supply.
• Ukraine conflict.
• Specification.
• Consumption trends.
• Environment & sustainability criteria.
Source: AHDB
GSC GRAYS FARM BUSINESS ADVICE SERVICE
LOWLAND MODEL FARM
• 160 hectares part-rented lowland farm.
• High input - high output system.
• 120hd continental suckler cows, home bred replacements and finishing steers at 18 months.
• 450hd breeding ewes, home bred replacements and the balance finished.
• 20ha of feed barley grown for home use.
• 2.5 FTE plus lambing assistant and contractors.
• £86K OD and £140K of loans/HP.
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE £/ha Budget Projection 22/23 23/24 Gross Income from Production 1,348 1,315 Variable Costs 937 883 Fixed Costs 640 656 Margin from Production (229) (225) Basic Payment Scheme 184 149 Countryside Stewardship 85 85 Management Profit/Loss 41 10 Drawings 94 103 Business Surplus/(Deficit) After Drawings (53) (93) LOWLAND MIXED MODEL FARM
GSC GRAYS FARM BUSINESS ADVICE SERVICE
objectives 1. Maximise DLWG from grazed forage 2. Minimise use of artificial fertilisers 3. Reduce machinery input & costs
SOLUTIONS? Opportunities 1. Develop new grazing strategy 2. Incorporate multi-species swards 3. Target application of FYM 4. Minimise housing period 5. Integrate stewardship into the system
Key
REGENERATIVE
REGENERATIVE SOLUTIONS?
GSC GRAYS FARM BUSINESS ADVICE SERVICE
Actions Taken 1. Transition to smaller, native breed cow 2. Mob-grazing strategy & infrastructure developed 3. Permanent pasture oversown with white clover 4. Red clover & high sugar ryegrass introduced to silage leys 5. Winter barley replaced with GS4 herbal leys 6. Purchased fodder beet introduced to finishing ration 7. FYM store constructed Effects 1. Stocking capacity increased from 1.30LU/ha to 1.39LU/ha.
retained for finishing
2. Fertiliser use reduced by 50% 3. Revised CSS agreement
GS4. 4. FYM store allows targeted
of
Opportunities for funding through FBAS, FETF, FIPL & CSS
• Heifers
• Cattle finishing period extended to 24 months.
inc. 20ha of
application
manure.
GSC GRAYS FARM BUSINESS ADVICE SERVICE £/ha 23/24 Current New System Gross Income from Production 1,315 1,315 Variable Costs 883 635 Fixed Costs 656 692 Margin from Production (225) (12) Basic Payment Scheme 149 149 Countryside Stewardship 85 132 Management Profit/Loss 10 269 Business Surplus/(Deficit) After Drawings (93) 166 Business Surplus/(Deficit) (14,880) 26,560 LOWLAND MIXED MODEL FARM – REVISED SYSTEM
POULTRY & PIGS
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supplies.
Feed
FREE RANGE LAYERS
p/Doz % Egg Sales
Feed Flock Depreciation Vet & Med Other VC's
Total Variable Costs
Gross Margin
Total Overheads
Net Margin
Cost of Production
Source: BFREPA • Producers voting with their feet. • Markets now responding to short
•
costs falling. • Indications of energy costs reducing. • More positive outlook.
£/Bird
29.68 106.32 79%
20.91 5.13 0.31 1.02 74.90 18.38 1.11 3.65 55% 14% 1% 3%
27.37 98.04 72%
2.31 8.27 6%
10.43 37.36 28%
(8.12) (29.09) (21%)
37.80 135.40 100%
BROILERS
• Two tiers of producers - integrated and independent.
• Price increases restricted for integrated.
• Suppliers to independents seeing price increases sooner.
• Feed costs dropping
• Early signs of energy costs cooling slightly
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PIGS
• Significant pressure last 18-24 months.
• Legacy of Covid supply chain issues plus feed costs.
• Feed costs starting to ease.
• Price rising but still 20-25ppk required to break-even.
Source: AHDB
GSC GRAYS FARM BUSINESS ADVICE SERVICE
CHARACTERISTICS OF TOP PERFORMING FARM BUSINESSES
GSC GRAYS FARM BUSINESS ADVICE SERVICE
UK FARM OUTPUT PRICES NEXT 15 YEARS
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Average Price Cost of Production 2022 2037
CHARACTERISTICS
FARM BUSINESS ADVICE SERVICE 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.
OF TOP PERFORMING FARMS AHDB Horizon Report (September 2018)
1. MINIMISE OVERHEAD COSTS
G Redman, The Andersons Centre AHDB Horizon Report (September 2018)
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"Higher output accounts for just 10 to 30 per cent of higher profits in top
q ”
2. SET GOALS & BUDGETS
• Farms that intentionally carry out farm business management practices are considerably more profitable, particularly at the individual business level.
• High performing businesses are likely to:
− Set ambitions and long-term goals.
− Undertake management accounting, including budgeting.
− Use comparative data, including benchmarking.
Seek information and advice through means including farm visits and paid advisors.
Langton (2012) Defra Agricultural Change & Environment Observatory Report No.30
GSC GRAYS FARM BUSINESS ADVICE SERVICE
5. FOCUS ON DETAIL
GSC GRAYS FARM BUSINESS ADVICE SERVICE
“I ”
• Not only did he examine wheel size, bike weight, training schedules etc, but also hand cleanliness and sleeping patterns of the racers in question.
Sir David Brailsford CBE Team GB cycle team 2012
GSC GRAYS FARM BUSINESS ADVICE SERVICE • Make quality forage and utilise it efficiently. Kingshay Dairy Costings Focus (2022) Top 25% Bottom 25% Dif. Yield (l/cow) 8,573 8,568 +5 Milk From Forage 3,983 1,487 +2,496 Total Purchased Feed (ppl) 7.85 11.13 -3.28 MOPF (ppl) 24.48 20.64 +3.84 MOPF (£/cow) 2,098 1,768 +330 HOW CAN DAIRY BUSINESSES BE MORE PROFITABLE?
GSC GRAYS FARM BUSINESS ADVICE SERVICE DAIRY MODEL FARM Forage Utilisation (Cost Variation Implications) 21/22 Bottom 25% Budget Top 25% MOPF Change Margin Over Purchased Feed (MOPF) Purchased Feed Cost -2.06 19.20 11.13 21.26 9.07 +1.22 22.48 7.85 Total Income (Incl. Support Payments) 35.04 35.04 35.04 Total Costs (Incl. Variable, Fixed & Drawings) 34.68 32.62 31.40 Business Surplus/(Deficit) After Drawings Business Surplus £ Total 0.36 7,851 2.42 52,776 3.64 79,382
THE NEXT 5 YEARS
GSC GRAYS FARM BUSINESS ADVICE SERVICE
HAPPY FARMER
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SAD FARMER
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THRIVING FARMER
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STRUGGLING FARMER
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FARMER WHO HAS JUST RECEIVED OUR BILL
GSC GRAYS FARM BUSINESS ADVICE SERVICE
FARMER IN DENIAL OF CHANGE
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FARMER OF THE FUTURE
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ENVIRONMENTAL SCHEMES & MARKETS
Holly Story
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GSC GRAYS FARM BUSINESS ADVICE SERVICE WHAT’S GOING ON? Global Environmental Crises National & international policy Financial risk Consumer demand Food production challenges ESG Net Zero Targets TNFD Your Bank Major retailers & supply chains Your Customer Food Security Public Money for Public Goods Regulation Your Bottom Line Your Land
GSC GRAYS FARM BUSINESS ADVICE SERVICE PRIVATE SECTOR • Adding value. • Securing finance. • Selling environmental benefits. WHERE IS THE MONEY GOING TO COME FROM? BLENDED FINANCE? PUBLIC SECTOR • Sustainable Farming Incentive. • Countryside Stewardship. • Landscape Recovery.
NET ZERO
Adding value. Getting ahead of the curve.
FARM BUSINESS ADVICE SERVICE •
•
•
−
−
Net zero targets are driving public and private policy.
Agriculture is responsible for significant emissions and sequestration.
Targeting net zero may have benefits for your farm business. Increasing efficiency.
Reducing risk.
REGENERATIVE SOLUTIONS?
GSC GRAYS FARM BUSINESS ADVICE SERVICE
Actions Taken 1. Transition to smaller, native breed cow 2. Mob-grazing strategy & infrastructure developed 3. Permanent pasture oversown with white clover 4. Red clover & high sugar ryegrass introduced to silage leys 5. Winter barley replaced with GS4 herbal leys 6. Purchased fodder beet introduced to finishing ration 7. FYM store constructed Effects 1. Stocking capacity increased from 1.30LU/ha to 1.39LU/ha.
retained for finishing
2. Fertiliser use reduced by 50% 3. Revised CSS agreement
GS4. 4. FYM store allows targeted
of
Opportunities for funding through FBAS, FETF, FIPL & CSS
• Heifers
• Cattle finishing period extended to 24 months.
inc. 20ha of
application
manure.
CARBON
GSC GRAYS FARM BUSINESS ADVICE SERVICE
“ -fold by 2030 to cut net man-made greenhouse- ” THE TASKFORCE ON SCALING VOLUNTARY CARBON MARKETS
SOIL CARBON
FARM CARBON TOOLKIT
FARM BUSINESS ADVICE SERVICE
Every hectare of land that raises its soil organic matter levels by just 0.1% can sequester approximately 8.9 tonnes of CO2 per year.
BIODIVERSITY NET GAIN
• Developments must deliver a 10% gain in biodiversity value compared to the predevelopment baseline.
• Developers may need to identify and fund offsite habitat creation/enhancement projects.
• Funding models and legal terms currently being tested.
• Agreement length 30+ years.
GSC GRAYS FARM BUSINESS ADVICE SERVICE
NUTRIENT NEUTRALITY
GSC GRAYS FARM BUSINESS ADVICE SERVICE
• New development of overnight accommodation of any kind in relevant catchments must be ‘ ’ • Includes Eden, Holy Island, Cleveland & Tees catchments.
KEY PRINCIPLES
FARM BUSINESS ADVICE SERVICE • j ‘ ’ •
• T ’ • ‘ ’ •
•
Changes are likely to be long term/permanent.
We can be price setters, rather than price takers.
Collaboration and aggregation may be required to create investable projects.
ELM COUNTRYSIDE STEWARDSHIP
SUSTAINABLE FARMING
INCENTIVE
• Early roll out 2022
• New payment announced.
• More standards to come.
• Payments will remain under review.
LOCAL NATURE RECOVERY
• Similar to CSS but with wider scope and simpler administration.
LANDSCAPE RECOVERY
• First projects awarded development funding in 2022.
• Second round 2023.
• EWCO to be incorporated from 2024.
• Regional targeting.
• Small numbers of large-scale ambitious projects.
• Agricultural land can be included but must be delivering strong environmental benefits.
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE • Greater flexibility to enter new agreements: Can move to a new agreement provided it offers equivalent or greater environmental benefits.
May also continue with existing agreement and enter a new agreement on the same land (provided no conflicts or double funding). − Applies to ELS/HLS and CSS. • New 3-year Higher Tier Capital Grant Scheme • Water Quality Capital Items more widely available • Scope to be expanded in 23/24 • Higher Payment Rates (for some options and capital items) CSS UPDATES
−
Free
FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE
E
R
and independent consultancy for farmers in the North of England.
R ’
FARM BUSINESS ADVICE SERVICE • Free and independent farm business consultancy. • Covering the North of England. • Flexible and bespoke to the needs of the individual farm business. • Confidential service. • Other providers are available under FFRF.
IN BRIEF
FBAS
WHAT ARE YOUR PRIORITIES?
GSC GRAYS FARM BUSINESS ADVICE SERVICE EXAMPLES OF PRIORITIES SEEN Succession planning Business structure Enterprise performance Tenancy discussions Diversification Renewable energy Debt re-structuring Budgeting and cashflows Cost of production Regenerative farming principles Carbon auditing ELMs and Countryside Stewardship Joint Ventures/Contract Farming Retirement
WHAT'S ON OFFER?
GSC GRAYS FARM BUSINESS ADVICE SERVICE
STAGE 1 ON-FARM BUSINESS REVIEW
• A half-day review of the farm business with a GSC Grays Farm Business Consultant evaluating: Introduction and background.
T
− BPS reduction calculator. Basic financial overview.
SWOT analysis. • Conclusion with consultant's recommendations and an action plan agreed with the farmer.
GSC GRAYS FARM BUSINESS ADVICE SERVICE
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’ j
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STAGE 2
FURTHER REFERRALS
Following the initial half-day review, businesses in need of additional assistance can be referred on to one of two further support packages.
Mentoring
• Two half-day sessions.
• Technical consultancy input:
• Agronomy.
• Livestock production.
• Grassland management.
• Business review/progress check.
• Environmental Stewardship review.
In-Depth Support
• Two days of consultancy input.
• Business review:
• Business strategy and restructuring review.
• Financial planning and budgeting.
• Environmental management review.
• Diversification review.
• Technical farming review.
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE Businesses not in need of in-depth one-to-one support can be referred to other provisions including: STAGE 2 FURTHER REFERRALS • Business discussion groups • Farm walks • Workshop events • On-farm events • Webinars • Podcasts Plus • Our information hub / resource center
OUR FBAS CONSULTANTS
GSC GRAYS FARM BUSINESS ADVICE SERVICE
QUESTIONS & DISCUSSION
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE
• If we have ONE key message from today it is -
U
E H GE”
APPRAISE PLAN IMPLEMENT
• This journey of change NEED NOT be embarked on alone. • Farm Business Advice Service is here, specifically to … “
T I
CLOSING SUMMARY
OPTIONAL SLIDES DEPENDING ON LOCATION
GSC GRAYS FARM BUSINESS ADVICE SERVICE
GSC GRAYS FARM BUSINESS ADVICE SERVICE DAIRY MODEL FARM Pence Per Litre (Price Variation Implications) 23/24 Negative Budget Positive Milk Price Change Milk Price Gross Income From Production -2.50 39.56 42.60 0 42.06 45.10 +2.50 44.56 47.60 Total Income (Incl. Support Payments) 43.70 46.20 48.70 Total Costs (Incl. Variable, Fixed & Drawings) 42.65 42.65 42.65 Business Surplus/(Deficit) After Drawings Business Surplus £ Total 1.06 23,622 3.57 79,560 6.06 135,052
FARM BUSINESS ADVICE SERVICE Driffield Highfield Farm, Garton on the Wolds, Driffield, YO25 3AL OUR NEW OFFICES
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Blencowe Quarry Offices, Blencowe Quarry,
OUR NEW OFFICES
Penrith
Quarry Lane, Penrith, CA11 0DE Kirkby Lonsdale Unit 9, Underley Business Centre, Keartswick, Kirkby Lonsdale, LA6 2DY
FARMING IN 2030
WHAT CHANGES MIGHT WE SEE ?
Arable
• Fewer passes - less cultivation.
• Use of cover crops.
• Regenerative Farming.
• Soil health – organic matter.
• Less artificial fertiliser.
• Integrated pest management.
For both
• Restructuring/retirements.
• Sharing resources – people/machines.
• Diversification.
Livestock
• Rotational/mob grazing.
• Species and legume rich swards.
• Again, less artificial fertiliser.
• Reduced concentrate use.
• Lower stocking rates.
• Breed changes.
• More contract/share farming.
• Production better integrated with environment.
GSC GRAYS FARM BUSINESS ADVICE SERVICE