Dairy farmers will face further a further cash squeeze in 2012 as low milk prices and rising costs combine with big tax bills from last year.
“Farmers need to budget very carefully this year,” said Paul Dennison of land agent Strutt & Parker.
“With the current backdrop of falling farmgate prices, dairy farmers will soon be feeling the effects of lower milk prices and seeing the squeeze on cashflow as feed prices and other input costs go up.
Compounding the difficulty is the fact that in the year to March 2012, the average farmgate milk price was 28.15p/litre – the highest it has been in 20 years. As a result, profits for the year ending 2012 could be significantly higher than previous years and lead to a much higher tax bill,” said Mr Dennison, from the firm’s Northallerton office.
“As the tax is payable in the January following the 5 April year-end, this could hit farmers with a double whammy as they try to juggle the falling milk price, high feed and other input prices with a hefty tax bill on top.”
“Planning the cashflow is always difficult and when the milk price drops with less than a month’s notice, or even backdated, it is even trickier.”
Mr Dennison advised farmers to get year-end accounts prepared well in advance to give a better idea of the pending tax bill.
“This year is going to be a tough one for dairy farmers and it has never been more important to budget as accurately as possible and look at the business structure and the efficiency of your system.”
For more on the milk price cuts
See our dedicated page on the milk price crisis
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