Farming likely to feel the pinch of economic recovery

Farmers should protect their businesses against the effects of the “massive” economic recovery process announced by Chancellor, Alastair Darling, in last week’s pre-Budget statement.

David Douglas, divisional director for specialist business with Clydesdale Bank and Yorkshire Bank said agriculture had proved “pretty resilient” in the face of global economic pressures, but farmers had to prepare for tougher times ahead.

“Credit has remained generally accessible for farming businesses. Interest rates are at an all-time low while the weakness of sterling has boosted exports, giving the industry a degree of home market protection against low-priced imports and adding value to farmers’ support through the single farm payment.”

But Mr Douglas warned there would be “no escaping” the pressures of the market place, such as reduced consumer spending as a result of families having lower disposable incomes, increased taxation, higher national insurance and VAT, coupled with spending cuts.

“This is the business environment in which farmers will have to operate for the next few years and it will put a premium on good forward planning and management.”

It was important farmers reviewed their plans and pension provisions, business succession and capital taxation and align their businesses with consumer requirements.

“We fully understand that farming business cannot be turned on and off according to short-term consumer requirements,” Mr Douglas added. “But longer-term shifts in the market place must be addressed and applied to the forward planning of business aims and objectives.”

However, the overall prospects for farming were sound in comparison with non-farming businesses. Beef and sheep farmers were experiencing buoyant times and there had been increased investment in this sector for the first time in several years.

Dairy and arable farmers had faced the biggest problems over the past years but there were signs of a recovery. A strengthening of the global dairy product market should result in increased ex-farm milk prices, while cereal growers would eventually benefit from the development of an alternative non-food market for wheat following the opening of new ethanol plants in England.

“There will be opportunities for fresh business growth and development,” said Mr Douglas. “Being able to take advantage of such opportunities is the key and that will depend on good management, good planning and careful preparation.”