May 2011 Archives

Many new businesses could be missing out on Class 1 National Insurance savings of up to £5,000 for each employee and for up to 10 staff members.

Under the government’s NI contributions tax break scheme, eligible new businesses can take an NI holiday for each of the first 10 employees they hire in the first year of business. This is available to those which start up between 22 June 2010 and 5 September 2013 but take up has been slow. Only about 3,000 out of the estimated 130,000 eligible new businesses have taken it up, according to HMRC.

Many business owners were unaware of this measure, which operates everywhere apart from the south-east of England, said Mike Harrison, a partner with accountant Saffery Champness.
Although diversification within existing businesses could not benefit from these provisions, new ventures which were a separate employer from the main business could use the scheme, he said. The person running the new business (ie the employer) need not own the assets of the new venture so it is possible for a family member in a farming business to set up a separate new business and benefit from the NI relief. However relief is restricted to a maximum of about £6,525 for some agriculture related businesses.

It seems British lamb producers are getting better at meeting the carcase specification required by major buyers.

EBLEX’s annual carcase classification survey sampled 121,000 lambs slaughtered in British abattoirs last year and found 58% met the R3L or better target, up 5% on the 53% five years ago.

But there remained a gap between old and new season lambs, despite some improvement across both types since 2005. Some 59% of new season lambs and 52% of old season lambs hit the target last year.

“While conformation improvement is a long-term business, it is clear that this needs to be a particular priority for the old season sector,” EBLEX said.

A £3m farm-based anaerobic digestion plant in Lancashire has been officially “switched on”.

The Carr Farm plant, near Warton, will produce biogas from silage and energy crops grown on surrounding land to generate 800kW of electricity, enough to power more than 1,000 homes.

Marks & Spencer has signed a five-year contract to buy the energy generated from the plant at a fixed price as part of its ‘Plan A’ commitment to procure more renewable energy from small-scale energy sources.

Carr Farm is the first in a series of farm-based AD plants being set up across the UK by developer Farmgen. The company is building a second plant near Silloth in Cumbria and has submitted planning applications for two others in Cumbria as part of its £30m investment programme.

Discounted loans at 0.8% lower than normal rates are available through AMC which has access to European Investment Bank funding to support small and medium sized businesses.

Typical eligible projects include buildings, grain dryers, robotic and other milking kit, poultry housing equipment, vegetable and milk processing plant.

Vehicles, renewables, slurry and water storage may also qualify as well as other projects such as farm shops, orchard establishment, dairy cows, field drainage, research and development.

The minimum loan amount is £25,500 while the maximum is about £11m. Loans are for up to 10 years and can be base rate linked or fixed interest rate, on interest only or repayment terms.

With the total fund pot limited to £250m, there has already been a high level of interest so anyone wanting access to it should act quickly, says AMC.

Sainsbury’s has increased the price paid to pig farmers in its dedicated supply group by 5p/kg in response to soaring feed costs.

The move means the 18 producers supplying some 12,000 pigs a week will receive 149p/kg deadweight until 1 August, or until the Deadweight Average Pig Price reaches 150p/kg. The DAPP this week averaged 146.5p/kg.

“It has become clear that current prices for feed are putting real pressure on our development group farmers so we have taken the right action and will keep this under review,” Simon Twigger, director of fresh and frozen food said.

Farmer supplier Derek Hall welcomed the increase, which recognised that farmers could not absorb “unprecedented” cost increases and remain sustainable.

The world’s second largest ammonium nitrate producer has become the first foreign company to join the UK’s Fertiliser Industry Assurance Scheme.

Russia-based Uralchem Trading SIA passed certification under the FIAS scheme, which aims to assure fertiliser security and traceability.

Uralchem started supplying the UK market in 2008, but GB agent Graham Dunn said the FIAS assurance would “substantially support our drive to be a leading manufacturer of plant nutrients for UK agriculture”.

The firm also said its FIAS certification would be increasingly important as the European Commission had started to define an equivalent pan-European assurance system.

In 2010 the Uralchem’s supply of fertilisers to British and Irish markets accounted for nearly one-third of its overall supplies to European markets.

The South African market is open to certain UK beef exports again following a 15 year ban. The country was the largest non-EU market for English beef before the 1996 BSE crisis.

EBLEX head of trade development Peter Hardwick described the move as a significant breakthrough and a real boost for the industry. Over recent months the organisation has secured access to markets in 30 non-EU countries which were previously not buying UK beef.
 
Only certain cuts will be taken but there is no age restriction on the beef that can be exported to South Africa. Some offal is also allowed under the arrangement.

Last year UK beef exports reached £331m, their highest level since 1996.

The Royal Bank of Scotland and NatWest have launched a £50m fund dedicated to financing farm-based renewable energy projects.

The money will initially be targeted at those looking to install wind turbines and solar panels and follows research by the banks that found 33% of agricultural businesses wanted to deploy renewable energy on their farm, and over half needed bank funding to do so.

A 200-strong renewable energy team has also been set up to provide technical, legal and financial advice to customers considering renewable energy.

Good winter and spring trading in feed and fuel is expected to contribute significantly to a record year for the Cheshire based NWF Group.

Performance in feeds will be well ahead of expectations, attributed by the firm to higher direct sales to farmers, a robust market and effective purchasing.

However the group notes in a trading statement that performance in the current financial year has benefitted from unprecedented increases in commodity markets which it does not expect to be repeated.

Fuel had a good winter but the benefit to the business of the cold spell was partly offset by a very warm April. Preliminary results for the current year to 31 May will be announced in early August.

Food producer Cranswick increased pre tax profits by 8% to £47.1m on preliminary results for the year to 31 March 2011.

Sales rose 4% to £758m on volumes which were up 6%, while net debt was reduced by £6.4m to £48.3m. The company is recommending a final dividend of 18.7p, which in turn is an increase of 10% on the previous year.

The record profit and sales performances follow big gains made in the previous year, when profit before tax jumped from £34.7m to £43.8.

The company has recently been granted rare United States Department of Agriculture accreditation, allowing it to export specific products to the USA.

The HGCA has published an interesting prediction of arable incomes this season, showing the impact of higher grain prices, but also the potential losses if there is a big drop in yields.

Its hypothetical 100ha model estimates income for the 2011/12 season will be £50,738/100ha, well up from the £39,088/100ha in 2010/11. The prediction is based on an indicative ex-farm feed wheat price of £166/t, barley at £156/t and oilseed rape at £380/t. Average wheat yield is put at 8.07t/ha.

But the HGCA acknowledges the recent dry weather is causing concern over crop condition and suggests a 20% yield reduction would knock almost £23k off the income estimate. If ever there was a year for adopting risk management when marketing grain, this is surely it.

From 1 July this year, farm buildings for commercial letting need a Commercial Energy Performance Certificate within seven days of the start of marketing.

CEPCs cost from about £190 and last for 10 years as long as no structural changes are made.  Failure to comply could result of a fine to the landlord of up to 12% of the rateable value of the unit, warns Bidwells associate Lucie Stone.

Also, from October 2011 CEPC details will have to be displayed on all marketing particulars for commercial property. Exemptions to the new requirements may apply in a limited number of farm situations.

Also following a recent court case challenging a demolition by Lancaster City Council, planning permission or an Environmental Impact Assessment may be needed in future for demolition of any non listed building.

The value of the euro recently reached about 90p, prompting more advisors to urge farmers to use currency hedging to secure the value of their single farm payment.

Fixing the exchange rate now takes the risk out of currency fluctuation, making budgeting easier for the coming season, says Andrew Vickery of rural accountant Old Mill.

“Sterling values have reached an important trigger point, and everyone should be considering their options. This is not about speculating on the currency markets, it is a tool to manage volatility.

“Although taking such a step can seem complicated, it is actually a very simple process, and is now normally done via a straightforward foreign currency contract, so there is no need for an additional euro bank account.

“Action can still be taken if you have submitted your 2011 single payment claim, irrespective of whether you have elected to take your payment in sterling or euros,” says Mr Vickery.

Road fuel supplier Greenergy has started producing biofuel using oil and fats extracted from waste food.

In partnership with edible oil recycling specialist Brocklesby, oils are extracted from unsaleable fatty food such as crisps, pies and pastries, and then purified and converted to biodiesel at Greenergy’s Immingham facility.

The firm says only food that is not fit for sale is used, either because it is misshapen, overcooked or past its sell by date. Food is sourced from a variety of manufacturers nationally and other suitable foods include taramasalata and oil from fish frying containing high quantities of breadcrumbs.

Any food solids that remain after processing are dried and either composted or fed into an anaerobic digestor.

“The quantities of biodiesel that we’re currently producing from solid food waste are small, but we’re expecting to scale up so that this soon becomes a significant proportion of our biodiesel,” Greenergy chief executive Andrew Owens said.

“We’ve always tried to find ways of reducing the environmental impact of our fuel and as oil prices continue to rise, it’s obviously important to develop alternative sources of fuel.”

Farm inputs supplier Wynnstay Group has acquired Shropshire-based Wrekin Grain as part of plans to expand its grain trading business.

From early July, all Wrekin staff will join Wynnstay’s grain trading arm, Shropshire Grain, to form GrainLink. The new business will be based at Shropshire Grain’s Shrewsbury headquarters.

The integration will also combine Wrekin’s fertiliser, seed, fuel, haulage and storage portfolio with Wynnstay’s arable services. The grain trading activity of Yorkshire-based Woodheads Seeds - acquired by Wynnstay in 2010 - is also due to become part of the new company.

“As a locally-focused business with sufficient national scale, GrainLink’s key aim will be to help farmers across our trading area make the most of their opportunities in today’s increasingly volatile and competitive commodity markets,” Wynnstay chief executive, Ken Greetham said.

“At the same time, the new business will provide us with better links to food and feed processors across the country while enhancing the national supply chain scale they require in the modern market.”

Make sure your local pub or restaurant knows that English wine week runs from 28 May to 5 June - if not, there’s still time for them to get an order in.

Almost half of total UK production is intended for sparkling wine and its share is increasing year on year as English sparkling wines pick up more international awards. 

At more than 4m bottles, UK wine production from the 2010 harvest was a record, breaking the previous 3.5m bottle record by a good margin.

Productive vineyard area has grown by almost 75% to more than 1323ha in the past five years, says English Wine Producers, with further areas planted but not yet in production.

Arable farmers selling grain forward have been urged not to over-commit on contracted tonnage for this harvest.

The driest spring for fifty years in some parts of the UK has prompted fears that yields could be reduced and this must be taken into account when committing grain forward through grain pools or physical contracts, NFU chief arable adviser Guy Gagen said.

Lessons should be learned from last year when there was a similar dry spell during the spring and summer, which had an effect on yields, he said.

“Marketing crops forward in a period of volatility can undoubtedly be a good way to help mitigate risk from downward price movements. With 2011 forward prices much higher than anticipated, many arable farmers have already secured tonnage for the 2011 harvest that enable them to improve chances of locking in a profit.

“However…when a deal has been done to secure prices, it is important not to over-commit crop, particularly in a rising market.

Grain traders advise that when a shortfall against committed or contracted tonnage is anticipated, discussing options as early as possible makes it easier to work out a mutually acceptable deal between the parties.

“Waiting until movement to discuss a shortfall on tonnage all too often results in the kind of solution that our members are very unhappy with,” Mr Gagen said.

There have already been a number of reports of slow and patchy emergence of spring crops and signs of water stress developing for oilseed rape and some cereal crops, he noted.

First Milk has increased the standard litre price paid to producers in its cheese and balancing pools by 0.6p/litre to 26.12p/litre.

In addition to the increase, which is effective from 1 May, the co-op will also pay a 3% return on members’ investment with the June milk cheque. This follows strong trading performance in the six months to March and is in addition to the 3% January payment. The co-op said the total 6% return on investment payments would be worth £1320 to a typical 1m litre producer.

The current standard litre price for producers in First Milk’s liquid pool is 26.2p/litre.