25 February 2000

MANY LIVING ON CREDIT BUT RIGHT MOVES ARE MADE

A SIGNIFICANT part of the UK farming industry is currently living off its balance sheets. But the right steps are generally also being taken to ensure a future.

Figures from accountant Hardcastle Burton show farmers are taking more money out of the business than they are making. "Using true figures from harvest management accounts, in 1997 just 15% of arable farmers in East Anglia had profits higher than their drawings, while in 1998 that figure dropped to 6%. Higher yields last harvest suggest the 1999 figure may be slightly up," says director Peter Homent.

All pig farmers, a significant proportion of dairy farmers and a smaller, but significant number of arable farmers are disposing of assets, borrowing more money, generating additional income off-farm and introducing personal capital to keep businesses going, adds HSBC head of agriculture Steve Ellwood.

But it is generally redundant assets that are being sold or land for development, explains Lloyds TSB regional agricultural manager Philip Barker.

Borrowing is largely under control, Mr Ellwood adds. "It is the farmers who are determined not to borrow any more, which is definitely the healthier way."

Other income

Those already working off farm are increasing their hours to earn more money. Personal capital in the form of life policies is also being introduced into the business.

"But if profits dont sustain a business, this can only be a temporary step," stresses Mr Ellwood. Although price rises are expected within two years, markets will remain volatile and more competitive. "Farmers must know their unit cost of production and understand just how competitive they are in producing a tonne of wheat." &#42