Cash flow woes mount as stock numbers swell
Cash flow woes mount as stock numbers swell
By Robert Harris
CASH flow problems are building on farms around the country as stock numbers swell after the foot-and-mouth outbreak.
Prices are also likely to slip once markets reopen, says David Turner of accountant Pricewaterhouse-Coopers.
Pig farmers face immediate losses due to the current movement restrictions, he says. The problem on beef and sheep farms is less acute, but could escalate if restrictions remain in place for longer than the three weeks already announced by farm minister Nick Brown.
"The government hopes to put some form of limited marketing scheme into place, but I cannot see how it can work on any scale. My gut feeling is that most farmers will be unable to move stock for at least two more weeks. Probably longer."
Pig numbers will build quickly, he says. "A traditional, family-run 600-sow unit would normally sell £54,000-worth of pigs over three weeks. Add on extra feed, housing and veterinary costs and you could be looking at £65,000."
Once selling resumes, many pigs will be too heavy and numbers will also drive prices down. "Producers may only get two-thirds of the prime value," says Mr Turner.
Beef prices are likely to stick at or near pre-foot-and-mouth levels, but lamb prices, much influenced by exports, are vulnerable. "The export ban is likely to be in place a lot longer. Sheep prices could be depressed for a very long time."
Government plans to pay £152m of agrimoney compensation and bring forward pig restructuring scheme cash will not alleviate cash problems, says Mr Turner. "It is a drop in the ocean, and we are talking months before it hits individual farmers accounts."
How badly beef and sheep farmers are affected depends on the individual business, says Gary Markham, agricultural partner with accountant Grant Thornton. "Some farmers will have sold beef animals and heavy lambs right up to the ban, so will have few problems yet." And beef animals are less likely to go over-fat, he adds.
"But early lamb producers will be very vulnerable if tight restrictions persist through March."
Brian Clothier from Stoneaston, near Bath, has 2500 hoggets left to sell. One-fifth of these would have been sold this week. "Our biggest worry is the market value when we start trading again. We were receiving a net income of £50/sheep. If prices drop by £10, we stand to lose £25,000 – or more.
"We have about a month to sell remaining hoggs, or they will develop teeth. Carcasses will have to be split and they will be worth less money."
Cattle farmers with animals nearing 30 months old are also at risk. About 1000 prime beef animals have been entering the scheme each week, and it could build, says Duncan Sinclair of the Meat and Livestock Commission.
Tenants could be especially hard hit by lack of cash, says Reg Haydon, chairman of the Tenant Farmers Association. "This will have obvious implications as spring rent payments become due and we would ask landlords and the banks to be particularly patient."