What can Norfolk farms learn from 'best in class' businesses?
PUBLISHED: 12:38 27 March 2019 | UPDATED: 12:56 27 March 2019
© ARCHANT NORFOLK 2016
Norfolk farmers should learn from "best in class" businesses who are securing irrigation infrastructure, machine-sharing deals and diversified incomes to safeguard their financial futures.
That was one of the messages from rural agency Strutt and Parker’s annual land and property briefing at the John Innes Centre in Norwich.
Among the speakers was senior associate director Jason Cantrill, who said the phasing out of the EU’s direct payment subsidies after Brexit until 2028 would put greater pressure on farm incomes – particularly for cereal farms, where it has made up a high proportion of profits in recent years.
But he said there were common traits among the top 25pc of farm businesses who were best placed to ride out the “fundamental changes” ahead.
“Those proactive ‘best in class’ farm businesses have often got access to irrigation,” he said. “Whether they are farming in hand or licensing it out, they have that capacity to grow irrigated crops, but they also need the infrastructure to get that water around the estate.
“It changes the dynamic of their farm business and means they are less reliant on cereals.”
Mr Cantrill said machinery-sharing to reduce capital costs – whether an informal agreement between like-minded neighbours, or by forming a full joint venture company – was also common among the most profitable farms. But he warned against the “magpie syndrome” which could tempt people into buying unnecessary “big shiny kit”.
And he also spoke about the value of generating diverse income streams to supplement the central business – for example, by renting out vacant buildings for pig finishing or storage, or converting redundant barns for residential or holiday use.
“Every farm has a building they don’t use or is under-utilised,” he said. “There are implications to make sure you comply with planning, but there are opportunities to let these buildings out, even if it is just for storage of boats or caravans.”
Mr Cantrill left the delegates with three “take-home messages”.
“Firstly, you need a clear business principle and structure,” he said. “That could incorporate a non-executive role for someone to come in with an outside view that is not connected to the business – a third-party view with different experiences to take on board and move the business forward.
“It is also key to know how your business is performing, and to look at benchmarking against other farms. Isolate different areas of the business, including BPS (Basic Payment Scheme) and environmental schemes, to fully understand the profitability of these income streams.
“Thirdly, it is important to actively manage your business and have excellent people, who are excellently managed. They need monitoring and guidance and structure.”
FARMLAND MARKET INSIGHT
Other speakers included Strutt and Parker director Tom Goodley, who said 2018 was a mixed year in the farmland market, with non-farming investors setting the pace.
On average, arable land fell into three bands, he said, with a third fetching more than £10,000 per acre, a third fetching £8-£10,000 and a third fetching less than £8,000 per acre.
In the East of England, 31,000 acres farmland was marketed in 2018, compared to 12,000 acres the year before. But 20pc of farms marketed in the region remained unsold last year, he said.
“The overall message for Norfolk is a bit mixed,” he said. “A lot depends on location, and the infrastructure on the farm is crucial.
“There will always be parts of the county that will sell, and other parts where, even if the land is good, it won’t make much money. There is not always a rhyme or reason to what these things can achieve.”