28 December 2001

RIGHT STRATEGY NEEDED TO RIDE OUT THE TOUGH TIMES

There are signs, at last, that the agricultural recession may have bottomed out. Recently released provisional figures from DEFRA show total income from UK farming edged up this year to £1.8bn.

We can only hope this really does mark the beginning of a turnaround in farmings fortunes. Though how far those fortunes will eventually bounce back is unclear.

One thing is certain. Farmers should not expect a return to 1996 levels in a hurry, if ever. It is a popular benchmark for obvious reasons, but it was the best of three good years, largely due to a prolonged weakening of the £ after the UK pulled out of the exchange rate mechanism.

How distant that all now seems. The £ has trampled the k underfoot, world markets have dived and CAP support has been cut.

Looking ahead, several commentators, privately and publicly, have stated they expect little, if any, change in currency exchange rates next year.

Some markets will do better than others, but overall little movement is expected here either. And politicians may tinker around the edges, but they are unlikely to throw much meaningful help in agricultures direction.

Budgeting at current levels may seem over-pessimistic, but it probably makes sense for the next 12 months at least.

In recent years, farmers have proved what a tough breed they are. Admittedly, some producers have left, and who can blame them? More will follow in the next year.

For these leavers, help is at hand. A new NFU initiative will help them through this tough time, explaining how to tie up the loose ends and make exiting as simple as possible.

But most farmers will stay put – the resilience they have shown after years of adversity is nothing short of astounding. Some may consider selling assets to help them through another difficult year. Tax can make a big hole in any gain, but there are ways to keep this in check.

Others will look to diversify. Again, there are tax traps waiting to catch the unwary – some will affect the business immediately, some years down the line.

Many will stick with what they know, adapting their businesses to cope with changing Brussels policies and a volatile global market-place. Some will expand – lenders are hungry for business, and with base rates at 4%, money is the cheapest for 30 years. But it is vital to stick to the basic rules to avoid heartache later on.

These, and other topics covered in this special finance supplement are designed to help keep your farm business in the best shape possible in these difficult times – and hopefully, during the better times to come.