Golden opportunity to shape up and invest for the future
By Tim Relf
RETURNS are likely to decline after 1996, so now is a "golden opportunity" to plan and take action for the coming years, says Martin Redfearn, of Andersons. Dairy and arable farmers must take advantage of their current prosperity to get their businesses in shape for the future, he said.
"Businesses which take no action when profits allow them to, face a slow but steady decline in fortunes."
Speaking at a conference of farmers and landowners in Chippenham last week, he said that this was a good time to invest in items such as pollution control measures or forage storage facilities.
"But any investment must be made to perform", he stressed. "Any heavy expenditure, if not matched by an improvement in performance, will drag the business down."
The pattern of herds getting bigger and yields getting higher will continue – or possibly accelerate, said Mr Redfearn. In four years, 100 head may be a typical size.
Such changes would be made against a background of wheat prices at £98/t in the year 2000; barley at £96/t; and milk worth 24p/litre, he suggested.
By that time, quota may be leasing for 9p/litre and concentrate feed costing about £140/t, he added.
Michael Taylor, agricultural manager with Barclays Bank, agreed that 1995 is likely to be one of the most profitable all-round years for many dairy and arable farmers this century.
No dramatic falls in returns are likely, he predicted. But with inflation and interest rates set to rise, margins would decline from the mid-1990s.
He also warned of the potential dangers of expansion. If, for example, cow numbers are increased, rent, finance and leasing costs will account for an increasing proportion of gross output, he said.
Having made any investment, the most difficult factor to improve is often the standard of management, added Mr Taylor. *
Martin Redfearn of Andersons