Farmers need to find out if their business is braced for Brexit, advisers have urged.
Speaking on an AHDB webinar, experts warned that drawn out Brexit negotiations, with little certainty about what comes afterwards, should not be an excuse to focus only on the day job.
Jack Watts, AHDB’s lead analyst, said producers in all sectors had to look at the bigger picture for their own business.
He said they need to work out their long-term goals, such as hitting a specific profit, supporting a particular lifestyle, or setting up the next generation.
Then they have to determine if the business can realistically earn enough profit to meet those goals and what effect it will have if their farm’s direct payments are cut in half, by 75% or completely following Brexit.
“I can’t emphasise enough the importance of taking stock of where you are,” Mr Watts said. “Ask fundamental questions. What does that business have to do to survive, to try and continue to achieve its objectives?”
The webinar panel discussed how the ways to plan for Brexit are similar to another growing problem for British farms – volatility.
Mr Watts added that the best businesses did not just know their production costs, but knew those of their competitors and where improvements could be made.
He also suggested that UK farmers had to shift their perspective: they should worry less about cashflow and more about overall profit, and focus on broader goals, not just year-by-year performance.
“We have become quite annualised about how we look at profitability,” Mr Watts said. “But that does not fit with agriculture very snugly. Agriculture is a long-term business. Yes, this year’s performance is important, but how has the business performed over the past five years. Our markets go in multi-year cycles.”
AHDB knowledge exchange manager Philip Dolbear said farmers should not see Brexit and volatility as issues for further up the food chain.
He said farmers should not see their neighbours as competitors – they should share information and best practice, such as choosing varieties or cultivation strategies.
In the hunt for competitiveness, to get fit for Brexit, they should drill down on every part of their profit and loss sheet.
“There are no quick fixes, so it is [about] looking for the marginal gains, that combine to make larger differences to the bottom line,” Mr Dolbear said.
Brexit bucket list
AHDB has written 10 questions to ask of your farming business. The more you answer “yes”, the more Brexit-ready your business might be. Do you…
- Have a firm grasp of production costs and know if they are competitive?
- Know if the business is generating sufficient profit (on a five-year rolling average basis, before direct payment)?
- Consider how viable the business would be under various direct payment scenarios?
- Conduct a hands-off business review (every three to six months)?
- Set targets and objectives to measure and improve business performance?
- Invest in skills to secure the people your business needs?
- Collaborate with others – farming businesses or processors?
- Innovate, perhaps by trying new ideas through on-farm trials and group discussions?
- Explore additional opportunities, like alternative farming and non-farming enterprises?
- Have robust and communicated succession plans?