Protecting business from political uncertainty should be the focus for every farmer in 2018, according to an agricultural group.
Agricultural co-operative AF Group said farmers must look at how they can shock-proof their business and benchmark their operations against others in order to improve and withstand volatility.
It said the principle challenge for UK farming is how to drive certainty in an uncertain world.
2018 is the last full year that the UK will be in the EU and the single market. AF Group believes that farmers must get to grips with risk management.
“The agricultural world is changing rapidly and some of the changes that we will see post-Brexit could be seismic. By taking action now, agricultural businesses will be able to withstand, and even thrive, through such changes,” according to AF Group Chief Executive Jon Duffy.
“Therefore, 2018 should be seen as the year to plan and to take control; to put the farming business into a shape that can withstand any income shock; and be able to take full advantage of the better times that will come.
“Doing a thorough benchmarking exercise in 2018 should be a must. Asking the simple questions of ‘how do I compare to others?’ and ‘what do I need to do to improve?’ should be part of everyone’s New Year resolutions.”
'Costs under control'
Mr Duffy said that one of the first actions for farm businesses looking to reduce their financial risk was to look at their costs.
“Getting costs under control is normally a good place to start when looking at control and risk management. Non-vital costs should be removed. This is normally excess labour and machinery. Variable cost spend also needs to be rigorously examined,” explained Mr Duffy.
“I do not know a farm business that can justify a procurement resource. Buying through a professional buying group that is doing the procurement work for you has to be right.”
Changing times
In terms of the direction British farmers were being sent by Brexit, Mr Duffy said that while there will be political decisions that will change the face of the industry forever, many factors that determine the fortunes of farming will remain the same.
“The macro-agricultural world we live in is not changing because of Brexit,” he added. “The world’s population will still hit 10 billion and the trend to consuming more calories globally will continue.
“We have had four years now of relatively benign world weather and therefore production has kept up with demand. However, global stocks of the main agricultural commodities are not immune to major production issues.
“We will get bad years, stocks will decline, and prices will increase. The only difficulty is no-one knows when.”
