Modern farming businesses: challenges and solutions

The last few years have, for most farmers in both England and Wales, been particularly challenging. There is increasing pressure on profit margins; costs have gone through the roof, with inflation for some key farming input such as fertiliser being over 100%. The price of necessary chemicals which are required have increased and, as we know, fuel is taking up an increasingly large proportion of the costs that a farming business must incur.

All these factors serve to increase the pressure on farming families and there is a real risk that the traditional family farm model will stop being viable. For many the solution has been to try and diversify which increases the pressure to work longer hours. However, this is not a sustainable solution.

Arguably farming is on the cusp of significant changes to what is required and expected by government and by large swathes of the public. There is less emphasis on sustainable food production and an increasing emphasis on environmental management, trees and the public good. The debate around these issues is not always constructive and farming is often cast as the enemy to the environment.

An increased regulatory and administrative burden for farming businesses will arise from the new agri-environment schemes, the Nitrate Vulnerable Zones regime, and base line regulatory requirements. These will bring significant challenges for farmers.

It should not be forgotten though that Wales arguably has the most sustainable form of grass-fed dairy, beef and sheep production, and the work that is done by farmers should largely be celebrated and not vilified.

What are the solutions to what looks like challenging times for the industry?

Firstly, the industry has always been well represented by its farming unions, particularly the NFU, to try and educate government and ameliorate the impact of policies on farming so those policies are workable in practice. Secondly, farming businesses need to have a clear business plan, to include succession planning. The business needs to be profitable and sustainable if it is going to survive and thrive. Benchmarking is a vital tool – the businesses that review cost and improve performance will almost certainly be profitable. Those that do not may well struggle.

A business needs the right support in place from its professional advisers. This should include:

• Regular management of accounts and discussions to assess profitability
• Putting the right documents in place to make sure that the business is secure – for example a partnership agreement and will
• A clear plan to allow the next generation to be involved and mentored in the business.

Finally, a farming business should not be resistant to change or trying out different opportunities as they arise. There may also be different diversification options. Again, these need to be considered carefully – this emphasises why a farming business needs to have trusted advisers on hand to review proposals and to ensure that the farm business is properly protected.