Arable farmers and young most likely to use business tools

More farmers are preparing detailed budgets and turning to tools like benchmarking to help run their farms, according to a government survey.

The most common practice listed by respondents was producing an informal business plan, carried out by 59% of farm businesses – about the same level seen in the previous survey.

However, the proportion doing this on a formal basis has fallen. 

Defra’s Business Management Practices on Farms survey showed that more than 80% of farms used benchmarking, business planning or managed accounting practices.

See also: Need advice? Use our Business Clinic team of experts

Within that, a third of farm businesses produced budgets, gross margins, cash flows or in-depth profit and loss accounts during 2016/17.

That showed a marked increase from the 25% figure in the previous survey, taken five years earlier in 2011/12.

However, the level of formal planning fell over the five years, from 25% in 2011/12 down to fewer than one in five (19%) during 2016/17.

Farm types and age groups

The survey also examined which farm types and age groups were the most likely to be using business planning tools. The main uptake was found to be on larger units running cereal or general cropping enterprises, and there was a split in age groups involved.

Younger farmers were more likely to make use of business tools, while those farms using none of the business practices at all were more likely to be run by a farmer aged 65 and over.

These farms were smaller, more likely to be in the lowest 25% of performers and to be grazing-livestock or horticulture farms.

The main reason cited for not carrying out business management practices was lack of interest (37%). For those farms undertaking at least one practice, nearly half responded that they were already doing all that was required (45%).

Inputs and commodities

The survey also looked at which farms were trying to reduce risk by buying inputs on a contract basis or selling commodities. It found that 35-40% of businesses were attempting to reduce risks and the most likely farm types to be involved were dairy and arable units.

Cereal and general cropping farms were more likely to sell commodities on a contract basis (64% and 78%, respectively) than other farm types.

Dairy farms were most likely to purchase inputs on a contract basis (60%), together with poultry farms (67%).

Finally, the survey asked whether farms made use of business and technical advice, with more than nine out of 10 responding positively.

About 90% said they used management advice from sources such as accountants and bank managers, farming media, casual discussion and farm events. The most common was free advice given by accountants and bank managers (63%) with farming media, at 61%, the second most common source.

For technical information, farming media was used as a source on 81% of farms, with casual discussion with other farmers taking place on 74% of farms