Agricultural Consultancy Seminar 2016

By Your Side. On Your Sidewww.thomaswestcott.co.uk
Welcome to the
Thomas Westcott
Agricultural Consultancy
Seminar

Axminster · Barnstaple · Bideford · Bridgwater · Burnham on Sea · Crediton · Exeter · Holsworthy · Honiton · Ilfracombe
· Langport · Okehampton · Plymouth · Seaton · Somerton · Tiverton · Torquay · Weston super Mare

Maximising Funding Opportunities
• BPS
• Countryside Stewardship
• RDPE Funding

Basic Payment Scheme
• Delayed / incorrect payments
• Claim statements – CHECK CAREFULLY
• Check Number of entitlements brought forward
from 2015
• Check eligible areas against 2015 BP5 form
• Active Farmer
• Young Farmer

Cross Compliance – Retaining BPS
• BPS requirements does not end at the application stage
• Support payments declining
• Avoid cross compliance penalties
• Penalties will depend on severity
• Negligence - 3% deduction (120 ha farm based on 2015
£640)
• Intentional Violation – 15% deduction (120 ha farm based on
2015 £3,200)

Most common breaches in 2014
• Cattle TB testing
• Cattle ID and registration
• NVZ’s (a rise from 2013 in the number of breaches)
• Soil protection
• Sheep and goat ID
• Hedgerows and watercourses
• No spread zones
• Public rights of way
• Food and feed law
• Plant protection products

Cross Compliance Penalties Applied in England 2009 to 2014
2009 2010 2011 2012 2013 2014
Warning
Letter
413 192 158 95 156 121
1-2% 420 427 523 334 625 1,030
3-4% 502 722 661 567 1,171 1,889
5-15% 378 172 455 582 903 1,213
16-100% 71 92 61 48 115 138
Number of
Penalties
1,371 1,413 1,700 1,531 2,816 4,270
Total
Financial
Deductions
£2,528,735 £2,072,621 £2,569,500 £1,400,000 £2,330,000 £2,490,906

Countryside Stewardship
• Mid Tier, Higher Tier and Capital Grants
• Potential to earn more out of CS than ELS
• Build a good application
• Understand the rules

Example of Potential Earnings from Countryside Stewardship
120 ha (300 acre) Beef and Sheep Farm
Capital Works - £21,000 (2 years)
Mid Tier Options - £87,000 (5 years)
£17,400 per year
£145/ha (£59/acre)
ELS = £30/ha (£12/acre)

Grant Funding Opportunities
• RDPE – LEADER Funding – Local Action Groups
• Countryside Productivity
• Water Capital Grants (Countryside Stewardship)
• Hedgerows and Boundaries Grants (Countryside
Stewardship)
• Woodland Grants (Countryside Stewardship)

THANK
YOU

WHY DO WE NEED CHANGE?

• Volatility is having a negative impact
• Retire/reduce work load
• Spread or reduce risk
• Business expansion/development
• Provide for the next generation
• Business performance is struggling

‘to make the form, nature, content
or future course, different from what
it is or from what it would be if left
alone’
CHANGE

• It’s a risk
• It will be different
• Must consider:
- Personal objectives
- Business objectives
• Needs to be the right change – the right
opportunity
CHANGE

‘a good position, chance, or prospect, as for
advancement or success’
OPPORTUNITY

A GOOD OPPORTUNITY FOR CHANGE?
£0
£20,000
£40,000
£60,000
£80,000
£100,000
£120,000
£140,000
£160,000
£180,000
Cereals General
Cropping
Dairy Lowland Grazing Upland Grazing Pigs Poultry Mixed
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

• Resources available – land, capital,
operational expertise
• What do you need to achieve?
• What can you realistically achieve?
CRUCIAL TO UNDERSTAND YOUR
BUSINESS

POTENTIAL OPPORTUNITIES

• Needs to be an improvement on what you are
already doing.
• Change could simply just be getting better at what
you already do.
• Consider the effects of price volatility – its here to
stay!
• Capital requirement
• Operational expertise?
AGRICULTURAL COMMODITY
PRODUCTION

• Additional income to support existing
enterprise
• Diversify from a position of strength
• Utilise resources available
• Develop your skills
• Know your market
FARM DIVERSIFICATION

NUMBER AND PERCENTAGE OF FARMS WITH
DIVERSIFIED ACTIVITIES

• Align land, capital and operational expertise.
• Beneficial for all parties
• Possibly suitable for all drivers of change –
improvement, succession, development,
retirement……
• Needs to be a well structured, open and
flexible arrangement
SHARE OR CONTRACT FARMING

• Is agriculture the answer?
• Can you afford to work on the farm?
• Tenancies can be rare and expensive – is
this the opportunity?
• Reduce scale and support with additional
off farm work – Dutch dairy industry
NON FARMING INCOME

1. Have you the mind-set to take control of your own destiny? Or do you feel bewildered and a hopeless
victim of circumstances?
2. Is farming right for you and your family? What are your plans for inheritance? Are you doing the right
thing for your non-farming family members?
3. What will you need to invest in your facilities in the next 10 years? How will you fund it and justify it?
4. Do you REALLY know your cost of production?
5. What is the realistic future price you will receive? Are you looking at the evidence or living on hope?
6. Have you worked out whether you are producing what your market really wants? i.e. Are you
maximizing your returns?
7. What are you really paying yourself per hour? What can you afford to pay yourself and remain
competitive? Would you be better off paying someone else and trying to add value to other parts of the
business? What are your other skills? How much could you earn off farm part-time or full-time?
8. Might there be a day when you will find yourself stranded without a market?
9. Are you buying all your inputs at best prices, and when did you last check alternatives?
10. Are you ruthlessly and honestly benchmarking your performance and constantly trying to identify ways
to incrementally improve performance?
11. Have you got your eyes open for niche opportunities even if they start small?
12. Do you have the right skills for the technologically and market driven agricultural industry of the future?
A GOOD STARTING POINT?

http://www.ipaquotas.com/dairyfarmer.htm

• Review the current situation
• Ascertain personal and business objectives
• Discuss and identify opportunities
• Assess viability
• Plan and budget for change
• Determine and secure capital requirements
• Implement and oversee contract or share farming
agreements
• Provide operational expertise
• Monitor success
HOW CAN WE HELP?

• Lowland beef and sheep
• Struggling with poor returns
• Strategic changes to sheep breed and
cattle finishing policy to ensure better
returns
• Restructured finance to ease cash flow
EXAMPLES OF OUR INVOLVEMENT IN
CHANGE – COMMODITY AGRICULTURE

• Struggling dairy business in Devon
• Looking at the possibility of selling direct
• Thomas Westcott Ag Services involved with
market research, financial and physical
viability
CHANGE - DIVERSIFICATION

• Tired dairy business in Dorset
• Lack of interest in dairy farming from next
generation
• Strong balance sheet
• Developing plans for share farming agreement
• Utilise off lying buildings for wedding venue to be
run by next generation
CHANGE – NON FARM INCOME

• Change is good
• Change is necessary, but not always easy
• There are opportunities out there – be open
minded and make time to find them
• Any change needs thorough planning and
forecasting
• Success should be quantified with ongoing
monitoring
• All parties need to be involved throughout
CONCLUSIONS

What does being a successful farmer mean?
• A technically excellent business with high Gross margins?
• A very well established business with all family labour?
• A business that has built up a high capital base over many
years?
• A mixture of all three
Indeed is it possible to be viable without all three?

£0
£20,000
£40,000
£60,000
£80,000
£100,000
£120,000
£140,000
£160,000
£180,000
Cereals General
Cropping
Dairy Lowland Grazing Upland Grazing Pigs Poultry Mixed
Average Farm Business Incomes
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

SPLIT FARM BUSINESS PROFIT INTO 3 SECTIONS
• Output / Variable Costs – Technical performance
• Direct Overheads (labour, machinery running and
administration) – management skill
• Structural Overheads (rent, finance and
depreciation) – Capital structure

GROSS MARGIN (pence per litre)
From AHDB Evidence Report December 2015
Bottom Top Difference
Litres Per Cow
8,000 -
9,400
5,000 -
6,499
Milk Sales 29.6 32.7 -3.1
REVENUE 31 34.4 -3.4
Herd Replacement
Costs 3.6 2.5 1.1
Feed & forage 12.3 8.7 3.6
Livestock Costs 3.5 3.1 0.4
TOTAL VARIABLES 15.7 11.8 3.9
GROSS MARGIN 15.3 22.6 -7.3

FARMING
ENTERPRISE Performance Numbers GM per Unit Total GM Management Balance
Breeding ewes 1.60 lambs per ewe 1000 £43.60 £43,600 £15,000 £28,600
Breeding ewes 1.75 lambs per ewe 1000 £52.20 £52,700 £15,000 £37,700
Wheat 8.6t per ha (£110/t) 100 £587 £58,700 £25,000 £33,700
Wheat 10.0t per ha (£110/t) 100 £607 £60,700 £25,000 £35,700
Dairy 7,500 l x 22ppl (0.31kg/l) 150 £494 £49,400 £53,000 -£3,600
Dairy 9,000 l x 22ppl (0.38kg/l) 150 £683 £68,300 £53,000 £15,300

FARMING ENTERPRISE Performance Balance Drawings Surplus
Breeding ewes 1.60 lambs per ewe £28,600 £20,000 £8,600
Breeding ewes 1.75 lambs per ewe £37,700 £20,000 £17,700
Wheat 8.6t per ha (£110/t) £33,700 £20,000 £13,700
Wheat 10.0t per ha (£110/t) £35,700 £20,000 £15,700
Dairy 7,500 l x 22ppl (0.31kg/l) -£3,600 £20,000 -£23,600
Dairy 9,000 l x 22ppl (0.38kg/l) £15,300 £20,000 -£4,700

What is Left To Cover?
• Drawings - £20,000?!
• Taxation
• Structural Costs – Reinvestment,
Interest, loan capital repayments,
rent, depreciation

50 acres Rent Available
Tender?

We can help:
• Identify weakest areas
• Technical – benchmark look at enterprise mix, output
values / input costs, use – Introduce some regular
costings
• Management – labour balance, machinery balance,
cropping diversity, other uses of land
• Structural – hard something must change – seek rent
reduction, sell something, give up some land?
• All the above are tricky areas but now is ‘not the time for
heads in sand’

Q & A

Agricultural Consultancy Seminar 2016

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