Look beyond Brexit for agriculture
By Robert Suss, co-founder
Given the uncertainty of the effects of Brexit on the agricultural community in the UK, there has been an increase in the rural community looking at diversification strategies as a way to buffer the potential loss of subsidies.
One of the challenges, however, is that since the financial crash, funding the agricultural sector is difficult and many traditional sources of ﬁnance have disappeared. There is a gap in funding, with most high street banks having suspended lending and lost their specialist teams, while most of the new lenders find the sector too complex.
The government has recognised that “farming requires high levels of investment and the lack of sufficient funding is a major threat to these businesses and their prospects”.
Farmers being able to access specialist business lenders will allow them to build their businesses.
The trend towards diversification was highlighted in Luke Johnson’s recent Sunday Times article ‘Old MacDonald had a farm – and now he needs to diversify’ when he pointed out that “almost two-thirds of farms derive some revenue from non-agricultural sources. The most common activity is letting spare property or developing it for sale. The second most popular form of diversification is renewable energy”.
In addition to the more traditional routes of diversification, such as renewable energy projects, property development, the buying of additional land or increasing the size of a herd to leverage greater economies of scale, UK Agricultural Finance believes that embracing technology as a way of driving improvements and yield will be one of the significant changes of a world preparing for Brexit and beyond.
Thinking differently and exploring cost-effective ways of achieving improvements should help British farmers compete through the use of the world’s most efficient agricultural technologies or by specialising in niche markets. New ways of farming that increase the financial yield per acre can bring other benefits, such as being more eco-friendly and sustainable.
Currently, British farmers are not competitive with countries like the Netherlands, which is the world’s second largest global exporter of food after the US. However, while US food exports are almost twice the value of the Netherlands’, the Dutch produce this from 0.4% of the land area of the US.
Many farmers in Britain would understandably shy away from the cost of setting themselves up in this manner, but with a post-Brexit world likely to mean British farmers having to be more competitive, it’s now a good time to start getting ahead of the curve.
Depending on the soil type, non-food crops being encouraged by the government may provide interesting niches for use in industry, pharmaceuticals, nutraceuticals, personal care products or bio-fuels, as opposed to conventional food production. Many of these crops have doubled in price over the past couple of years.
UK Agricultural Finance is an enthusiastic supporter of farm diversification and is experienced in providing farmers access to capital to diversify, sustain, grow and improve their businesses.