For many farmers, the past year has been a particularly difficult one. Farming is a notoriously unpredictable and changeable industry, as so many diverse factors affect a range of agribusiness inputs. Whether it’s an unexpected increase in the price of feed, a decrease in demand for a particular produced item or a disappointing harvest, farmers really do work against the elements to make a success of their businesses. Changes in regulation, legislation and political environments also have a big impact – with grants sometimes available and sometimes not – and some governments strongly in favour of supporting the UK farm industry and others less so. Many farmers would argue that their industry is one of the most challenging in the UK’s entire economy and that argument would be a powerful one.

The Past Year of Challenges

The last twelve months has been particularly challenging for the UK farming industry. The prolonged bad weather has been a factor since last summer and has meant that many farmers have had to re-sow their crops or see early crops fail. The costs of inputs, such as feed and fertilisers, have also gone up as a result of various factors. These include the weather, global challenges and uncertainty, changing legislation about fertilisers and consumer patterns of organic purchasing and local food schemes. Cattle and sheep diseases have been a concern and the wider challenges in the economy have been felt in the pockets of farmers too. Additionally, supermarket power and consolidating supply chains have posed a threat and continue to drive prices down. However, many farms are successfully fighting back through organic and local food schemes, selling directly to the consumer.

Cash Flow Concerns

Farm cash flow will always be a concern for farmers, particularly those without healthy reserves to fall back upon after the past year’s difficulties. However, the good news is that there are various finance schemes in place to specifically help those working in the agricultural sector and provide them with lending, leasing and overdraft products to help cushion a variable cash flow.

These range from farm leasing products through to long-term agricultural loans, designed specifically for farmers and with flexible terms relating to the needs and realities of agricultural business. These can include a quarterly repayment cycle rather than a monthly one and the option to have variable repayments rather than a consistent schedule. Speak to your Nationwide farm finance advisor to find out what’s available and to discuss your particular needs.

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Most arable farmers will consider purchasing a grain store at some point, particularly after the past few difficult years, when bad weather has damaged crops and required expensive re-sowing. Grain storage has been commonly practised in the UK for some years and can have several benefits. For example, the price of grain is often higher later on in the year than it is at harvest. This is because of the economic forces of supply and demand and by having the right storage facilities, farmers can time their sales to maximise income.

The grain store also offers flexibility over where, when and how the grain is eventually sold and allows the farmer to remain in control of this decision. The existence of purpose-built storage also reduces pressure on the harvest, as grain will not immediately need to be delivered to off-farm locations. This allows for a faster harvest.

Other reasons concern security of supply and certainty of availability. On-site grain storage means that the supplies can be used throughout the year as needed to provide livestock with feed.

Business Opportunities

A final factor is the growing market for ethanol and other biofuels. Companies will generally elect to buy their grain inputs during the year, rather than pay for the cost of stocking large reserves of grain on-site. Again, by having access to good grain storage capacity on the farm, the farmer has options to benefit and participate in this interesting growth market.

How to Finance the Grain Store

The problem for most farmers, however, is how they can finance grain store purchases without needing to take out a mortgage or put their farm up as collateral.

The good news is that it is possible to finance grain store purchases directly, without the need for any additional security to be put down. This offers real flexibility to farmers and the peace of mind that they can finance the storage facilities that they need to grow their farming business. They don’t have to risk their business assets directly, or take out a large and long-term mortgage.

To find out more, get in touch with one of our experienced agricultural-finance advisors, who really understand the ins and outs of your business, including the cyclical nature of agriculture and the varied nature of farm income. They will help to identify the best financial or lease products for your needs and ensure that you are satisfied with the service and advice provided. Speak to the trusted experts for a good, reliable service.

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If you are in need of business finance to grow your farm, then it’s good to know that you can raise cash from existing equipment by taking out an asset finance agreement. Asset finance is a popular and effective way of raising cash from existing farm equipment, or for financing new equipment purchases. Unlike traditional methods, no overdraft or bank loan is needed. This benefits farmers, particularly in the current climate of tight lending controls.

The Benefits of Asset Finance

This type of finance offers a range of benefits. Firstly, it reduces the amount of working capital that your farm will need and it also allows you to buy plant, equipment or vehicles without using up your capital by having to pay the whole price at the start.

You can also retain any current loan arrangements and overdraft with asset finance and you don’t need to ask your bank or financial provider to make any changes to those existing financial arrangements. This is attractive to many farmers who don’t wish to restructure or alter existing loans.

When you raise cash from existing equipment, you may also be able to benefit from tax efficiency, as many asset finance schemes allow the offsetting of finance payments against any taxable profits.

Furthermore, your farm can benefit from predictable and planned budgets. Every month, you know exactly how much you will need to pay – whether that’s on the first day of the month according to your own schedule or arranged for quarterly payment throughout the agreement’s lifespan.

Tailored Schemes

If you take your asset finance scheme from a specialist farm finance lender, you will also be able to tailor your loan to fit your requirements. You can take out this type of finance for a range of purposes, including direct farm investment, equity release, diversification or simplification and consolidation of existing borrowings. You can also enjoy repayment holidays, interest-only loans, flexible terms for repayment and more.

If you want to repay the finance more quickly, then you can arrange to pay a one-off lump sum and reduce the principal outstanding. Equally, if you need a little financial breathing space whilst you wait for a customer payment to clear, then you can arrange a payment holiday. Your provider should be able to offer you flexibility which is designed specifically for the needs of the farming industry. Speak to your advisor to find out which scheme is right for you and to discuss your specific needs.

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This is admittedly a slightly tongue-in-cheek guide, but for new farmers or those expanding into smallholdings, here are some tips on livestock purchasing at auction.

Firstly, know what type if animal you want. It’s all too easy to leave with a mixed menagerie of animals and a confused and dazed look on your face if you’re not careful. Not actually looking for a dozen alpacas and a donkey? Work out why you’re buying and for what purpose. Livestock auctions sell a wide range of animals, including cattle, horses, chickens, donkeys, goats, sheep and other farm animals.

Check the times and dates of the auction, as these might differ depending on the type of animal you are buying. This prevents you accidentally buying a herd of crazed goats in the twilight, thinking they are sheep.

Bring a trailer to the auction unless you plan for a long and arduous walk home with a tethered farm animal. Most livestock purchasing schemes mean that you need to take your animal home immediately, so make sure you’re set up and ready to go. Remember that a horse will not squeeze into your Land Rover, so borrow a truck if necessary.

Get to the event early so you can check out the best-looking animals. You can wander freely around the pens and see which animals interest you. Write down the number carefully, so you can recognise your preferred animals when they appear in the ring. Now comes the scary bit: when you want to bid, get the attention of the auctioneer. This means standing up or waving your arm. Some auction bidders will do little more than raise a finger or waggle an eyebrow, so be very careful in case you get an itchy nose during the proceedings. Some auctioneers will hand out cards which you can wave frantically when necessary. Try to be restrained as much as possible, though. You’ll find that the auction is tense, atmospheric and oddly muted.

You buy your animal by putting in the highest bid for it. Remember that before you get too swept away by the adrenaline of it all, you must go and pay for your purchase immediately at the counter afterwards. You’ll be given a ticket to take to the auction loading area and then your animal can be loaded on to your trailer. At this point, rejoice in your achievements and take your new animal or flock home!

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The government has released details of a new set of measures designed to facilitate wind farm development, with greater say for communities on how on-shore wind farms are developed.

The current policy will be changed to allow a greater weighting for the visual impact of new wind farm developments and the surrounding landscape. Alongside this is a measure that will increase the benefits that developers of these wind farms provide to surrounding communities.

The government had previously maintained the view that offering greater benefits to those communities directly affected by local wind farm developments will help to raise levels of support and facilitate local planning consents.

In reality, the majority of on-shore wind farm developments are already offering key benefits to surrounding communities, typically through local funding streams. These are calculated according to annual installed capacity, spread over the wind farm’s life span. The resulting funding is funnelled through a community organisation to benefit local infrastructure, good causes or sustainable-energy developments. The government has proposed that this wind power funding will increase to  5,000 per year, from the current minimum of  1000.

However, a number of companies already offer higher levels of wind power funding, particularly in Scotland and Wales, where sites are naturally larger and windier than in most of England.

Critics have pointed out that despite increased funding levels for local communities, it is not proven that this additional money will help to change opinions towards local wind farm developments. There is likely to be real variance among projects and places and only improved communication, education and awareness are likely to fundamentally change attitudes. There may always be places where local people feel that the damage caused to the local landscape by large turbines simply cannot be offset by local payments. It may be that some particularly beautiful areas should be protected from big developments.

However, this doesn’t rule out the types of small-scale wind turbines that farmers can use to raise income on their own land. Individual turbines, field turbines and roof-mounted turbines can be used to provide valuable business benefits. A feed-in tariff payment to that farm provides an income and a turbine can help to reducing carbon emissions. Perhaps one interesting prospect for farmers is an increase in funding levels for small domestic projects and less reliance on large-scale developments. Smaller projects are much less likely to attract opposition from those concerned about the visual impact of wind turbines.

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The Ardingly Show in the South of England opened this week, with attendees grateful for sunshine and warm temperatures after a prolonged, cold spring which cost growers dearly in terms of lost income.

The Impact of a Prolonged Bad Season

Flower growers lost thousands as a result of the bad weather and farmers are still recouping after the difficult lambing season, with many early lambs lost in the snowy conditions. Farmers were already reeling from the long wet summer and autumn of 2012, which resulted in many of the crops sown in the autumn failing to germinate or survive the winter. As a result, many of these crops had to be re-sown in the spring and then there was another long cold season, resulting in a second crop failing for many thanks to non-germination of seeds.

Signs of Optimism

However, optimism prevailed at the show this week, with exhibiting farmers saying that they hoped for warmer temperatures now that the summer had arrived and a decent dry spell had begun in June. Certainly, they will need this warm and sunny weather to help boost their crop yields after the cold, wet spring. Temperatures on the first day of the West Sussex show – the largest in the South East – reached a pleasant 20C.

Many thousands of visitors are expected at the Ardingly Show, which showcases farmers’ work from around the region   particularly Sussex and Surrey. The event’s organisers recorded over 760 entries for livestock and seventy-eight pigs were entered for prize categories. The good weather is a boon for organisers too. Around twenty such exhibition shows had to be cancelled in 2012 because of the weather. This means that challenging weather conditions affect show organisers as well as event planners, due to the vast amounts of advance preparations that are required. Income levels have been put under real pressure across the agricultural community and not all farmers, or associated supply-chain businesses, have made it through the lean patch successfully.

The farming industry is now united in hoping for a warm summer and to seeing crops finally grow. Those with an entrepreneurial edge are already looking at alternative income streams, however, in case another bad year occurs. Income streams such as tourism, renewable energies and local organic vegetable box schemes are all providing hope for struggling farmers who are looking to grow their businesses.

This post was from Nationwide Corporate Finance

The cost of living is an everyday topic of concern in the media today. For farmers, the costs of simply doing business are becoming more and more pressing. Market fluctuations, prolonged bad weather spells, cattle disease fears, worries about GM-produced farming inputs and the infancy of futures markets for certain raw materials such as animal feed mean that the financial health of a farming business can become a preoccupation.

However, there are plenty of ways to keep farm costs under control, particularly if you run your farm as an efficient business. Speak to a business advisor and establish a support package that will help you to maximise your success. You will need to build a business plan, cash-flow forecast and investment strategy. You must also keep accurate records for accounting purposes. A good business advisor will also be able to help you to cut operational costs by introducing efficiencies.

Such cost-cutting schemes might include the implementation of a renewable energy technology such as wind or solar power on to your land. These technologies can reduce the cost of energy for your farm and give you options for an income via the feed-in tariff. Other schemes include adjusting the size of your labour force – if applicable – so that your people-related farm costs match what your business needs. You can also buy grain, feed, fertilisers and other inputs via a group-buying scheme to make savings. You could consider leasing arrangements rather than outright purchases for machinery and equipment such as harvesters and tractors.

As well as managing costs, it is also important to maximise income so that the balance between efficiency and profitable gain is maintained. Think creatively about schemes to grow your business in a sustainable and manageable way. Two of the biggest income-generating trends in the agricultural sector today are tourism and alternative energy schemes. Many farmers are opening up tracts of land to campers and holiday-home guests and earning a good income in the process. Others are turning farm buildings and even their homes into bed-and-breakfast facilities. Some are building studios or eco-pods on their land to capitalise on the rise of the ‘staycation’. Good money can be made from these schemes, although they do require serious investment, particularly in terms of time and effort.

Think broadly and seek professional business help to ensure that you manage your costs and maximise your income. Our agriculture team are very experienced in helping farmers arrive at the correct solution vased on circumstances, gives us a call and see how we can help.

This post was from Nationwide Corporate Finance

This last year has been incredibly difficult for farmers, with a combination of a poor summer, extended wet period and cold winter which culminated in a long, cold spring this year. This has had a variety of knock-on effects for farming communities, impacting on crops, animal populations and the cost of farming inputs such as animal feed.

Difficulties for Farmers

The spring’s ongoing chilly conditions meant that farmers with sheep were dealt a particularly devastating blow, with many lambs failing to survive the  snowy conditions. As a result, many farmers’ livelihoods were affected, with animal numbers drastically cut and the price of animal feed increasing through extra demand. The late arrival of spring meant that many farmers were forced to keep their animals in barns and feed them commercial feed preparations for a far greater period of time, rather than allowing them to graze in pasture fields.

Happily, summer is now finally approaching and input costs are stabilising once again. But the cost of feed does remain a concern for the agricultural community, particularly when extreme and unforeseen factors such as extended periods of bad weather come into play.

Changing Customer Demands

Equally, many farming businesses are now seeking diverse types of feed to attain organic or specialist-provider status, with customers increasingly keen to avoid genetically modified products and chemically sprayed or non-organic feeds. Movements such as the Paleo way of eating mean that demand is growing for cattle, lamb, pigs and poultry that have been allowed to graze freely on land and eat a natural diet, without additives. Grass-fed beef is a particular growth market, but farmers may still need to supplement with non-corn diets for this market.

Routes to Obtaining the Right Feed

For farmers needing to invest in feed, but lacking the requisite working capital, there are various options available. Some grants and charitable funds were set up to help farming communities meet the escalating costs of animal feeds this winter and some of these are still operating. For those who are keen to access funding to safeguard and secure their business, there is a range of well-priced financial products available specifically with the feed and grain market in mind. These are flexibly designed to suit the needs of the agricultural community. There are also group-buying schemes which allow the power of collective purchasing to drive down costs. These routes all offer options to farmers and ensure that access to the right kind of feed, at the right price, needn’t be a problem this winter.

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Farmers have been hit in recent years with a difficult combination: poor access to fertiliser finance and the rising cost of this vital product.

As a result, buying groups and unions are fighting back, with group-buying schemes or ‘pools’ now being used to obtain better prices and financial providers launching new products designed specifically for the purchasing of fertilisers.

The Challenges of the Futures Market

Part of the difficulty lies with the futures market and the way that the stock market works. In a notoriously changeable industry such as agriculture, factors such as bad weather, crop and animal disease and world commodity prices can affect the price of farming inputs and outputs. However, for fertilisers there is currently no advanced futures market in existence, which means that prices cannot be fixed well in advance through hedging mechanisms. For farmers, this can lead to serious financial difficulties.

Purchasing-Pool Power

Fertiliser purchasing pools can help, by allowing those within the pool to purchase bulk amounts of fertiliser steadily across the year. They allow farmers to take into account fluctuations or hold out for low prices to obtain an attractive cost per tonne. This is useful in an increasingly unpredictable market and offers peace of mind to farmers worried about unexpected weather problems, particularly after last year’s terrible conditions.

Access to the Right Finance

Alternatively, specialist fertiliser finance products are providing a lifeline to those needing to buy the right product for their crops. Loans can be spread over flexible time schemes starting from 12 months. Schemes such as this can tie in much more favourably to the farmer’s business and income cycles. It gives farmers the ability to buy sufficient fertilisers on credit, rather than being unable to afford these products and seeing their crops fail.

Nationwide specialist agricultural finance offer a range of these loans and other flexible finance solutions, with various types of credit terms. Our financial advisors will generally come from agricultural finance backgrounds and have plenty of industry-specific and specialist knowledge about their customers and their businesses. This can be a huge relief to farmers who would prefer not to deal with large banks, which don’t have the sector knowledge required to give good financial advice or extend flexible lending products. Call one of agricultual account managers and see what options we can offer you.

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For farmers, access to the right kind of finance can often be the difference between business success and failure. With opportunities to diversify into growth areas such as renewable energy and rural tourism, finance becomes even more critical to allow opportunities to be capitalised upon and to drive the business forward.

Working Capital or Finance?

Many farmers will weigh up the question of whether to use their own working capital to grow the business or to take out a loan. There are advantages and disadvantages to each approach. The benefit of using working capital is that no interest is payable on the loan taken out, although there is an opportunity cost if funds are withdrawn from an interest-bearing account or investment vehicle. By using the farm’s own funds, there is no impact on credit scoring, no debt taken on and the farmer remains in control of his or her investment level rather than being constricted by lending availability.

However, by using up working capital the farmer will take on an element of risk. Working capital or accumulated assets are usually required to provide a financial buffer in this notoriously difficult industry, where events such as bad weather, failed crops or cattle disease can wipe out the profits of a year. Most farmers will want to retain a healthy buffer of cash, just in case.

Additionally, by removing working capital from the farm, other opportunities that later come along may need to be put on the back burner until more funds can be raised. This can lead to a loss of opportunity, particularly if the competition invests first and takes a lead in the market.

The fact is that when used correctly and via the right provider, business finance is a valuable tool for growing a business and safeguarding its financial future. The trick is to use a specialist farm-focused business finance provider that truly understands the agricultural sector and its challenges, demands, threats and opportunities. A business advisor working in this sector will be able to demonstrate clear knowledge of the customer’s industry and the factors which influence it and this will help them to recommend suitable finance products.

A loan is not the only option nowadays either. There are flexible products to suit cyclical incomes, overdrafts to provide greater flexibility, flexible loans where repayments vary, long-term loans where repayments are kept deliberately low and leasing agreements. Some of these arrangements are also provide tax benefits to the business.

This post was from Nationwide Corporate Finance