Falling margins herald cashflow trouble

20 October 2000

Falling margins herald cashflow trouble

POOR yields and prices could mean severe cashflow problems for arable farmers this autumn and winter as margins typically fall by £245/ha (£98/acre), warns East Anglian accountant Hardcastle Burton.

"It is essential that farmers stand back from their day-to-day operations as soon as possible and reappraise the whole way in which their farms are operated," says senior partner Peter Homent.

His comments are based on the results of a post-harvest survey on a range of arable farms and soil types in East Anglia. Yields of all crops were down on last year, with rape, beans, peas and malting barley also down on the year before. Average cereal prices, achieved and expected, are 10-15% lower than last year.

"This year, for the first time, we have translated results of the survey into forecast financial results and these make grim reading," says Mr Homent. Unless prices improve, gross margins will be £242/ha (£98/acre) down on harvest 1999 and £168/ha (£68/acre) down on harvest 1998.

"One of the immediate things growers must think about is the effect on cashflow and how this year is going to end up," says Mr Homent. "The average combinable crop farm will need an additional £50/acre borrowings to cover poor trading results and family drawings.

"Farmers should illustrate to the bank that they are one step ahead and approach them before the problem arises. Those who leave it too late may find theyre classed as higher risk and charged more interest accordingly.

"While there are many clichés about spreading fixed costs, sharing machinery ownership and minimum tillage, all savings and economies are essential in these difficult times. There is simply no room for wastage. Everything must be worked to maximum efficiency." &#42

Fax-back service

Hardcastle Burton is offering a financial forecast fax-back service to FARMERS WEEKLY readers. Simply fax details of crop yields, areas and prices secured or expected, together with a fax reply number, and a financial forecast, using average fixed costs, will be faxed back free of charge. Fax number: 01763-245521.

Arable margins survey

2000 1999 1998

£/ha (£/acre) £/ha (£/acre) £/ha (£/acre)

Output (inc AAP) 677.05 (274.00) 913.03 (369.50) 854.22 (345.70)

Inputs 213.74 (86.50) 208.06 (84.20) 223.63 (90.50)

Gross margin 463.31 (187.50) 704.97 (285.30) 630.59 (255.20)

Source: Hardcastle Burton survey of East Anglia.

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