Time to bunker down and ride out the storm? - PKF Francis Clark
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Time to bunker down and ride out the storm?

This article was originally published in the Western Morning News on Wednesday 20 October 2021.

I have spoken on many occasions of farmers not worrying about the things they cannot control and to focus their attention on controlling the controllable. For the most part, I was talking about managing your inputs, noting that most farmers have little or no influence over the price they might receive for their products.

In fact, for many farmers the output prices have held up very well over the last twelve months. At present, we are still seeing the farm gate price of milk, wheat, rape, beef and lamb remaining well above that seen in 2020. Despite this, I am not expecting to see the sector generating bumper profits for the current year as, in terms of inputs, we are currently seeing what can only be described as a perfect storm.

At present, the cost of fertiliser and sprays, red diesel, seed, livestock feed, farm machinery, types, wire, plastic, wood are all costing more, and in certain cases considerably more than ever before. This is clearly denting the farmers hard earned margin and this is on the assumption that the farmer can get hold of it in the first place.

The same argument holds in relation to labour in the industry. I am having too many conversations with farmers from across the various sectors whose current primary issue is labour or, to be more precisely, the lack of it and the direct impact on their business.

It causes me great concern when I hear senior politicians saying the issue should be solved by mechanisation or simply paying the worker more. If only it were that easy.

As far as I am aware, there is currently no equipment to cut cauliflower, pick fruit or daffodils or to cut carcasses. In addition, I believe it is a simple fallacy that by raising wages new farm workers will be found.

My experience is that the rates of pay for this work are often structured in such a way that significant sums can be earned for a goods days’ work. Unfortunately, this type of work does not seem to appeal to a local prospective worker such that despite high levels of unemployment, farm work vacancies remain unfilled and there is a real risk of crops remaining unharvested in the field over the coming months, which is a tragedy.

I believe that the answer remains in controlled immigration and an extension of the Seasonal Agricultural Workers Scheme (SAWs) to allow more, much needed foreign workers and expanded to cover horticultural workers. Whilst this would seem to be common sense, the same can be said for other sectors with chronic shortages which is damaging our economy. Sadly a common sense approach is not something that the Government seems to be interested in at the moment.

It is a surreal time when you are having conversations with some farmers who are considering not planting crops due to the price of fertiliser and others who do not know if or how their crops are going to be harvested. All at the same time as direct support receipts are beginning to be cut.

Hopefully, the high commodity prices will be here for a while. There is no doubt that everything in the economy seems to be inflationary, but it will be interesting to what extent this impacts the price of our food.

Either way, this is beyond the farmers control and for me there is no simple answer other than farmers looking to bunker down and manage the storm. This will require carefully considering costs of production and managing them wisely, focussing attention on staff retention (which seems easier than recruitment) and producing timely management accounts and information, looking to take control over what the next few months might have in store.

As always, we at PKF Francis Clark are here to help. If you have any questions, please do not hesitate to contact myself or your usual PKF Francis Clark contact.

FEATURING: Brian Harvey
As head of PKF Francis Clark’s agricultural sector group, Brian manages a dedicated team of agricultural accountants and tax advisers. He hails from a Cornish… read more
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