Cash flow challenges shouldn't dampen arable optimism

Cereal growers who anticipate a need for additional short term finance to overcome the impact of drought-restricted yields and high input prices should discuss their requirements with their bank manager sooner rather than later.

That was the message at this week’s Cereals Event in Lincolnshire from Gareth Oakley, Agriculture Director at Lloyds TSB, who anticipates cash flow challenges for some arable businesses this year but remains optimistic for the sector.

"The long term prospects for UK cereals growers are still positive," he said.

"There is pressure on grain stocks. Demand is strong and increasing in the UK and across the world, but higher input prices and the effects of drought earlier this year may put short term pressure on cashflows."

Next year’s fertiliser prices are expected to be in excess of £300/tonne for ammonium nitrate and many cereal yields in the east and south of the country could be more than 10% down.

"There may be particular problems for growers who committed to sell large volumes of their crops forward," he added. "If they do not grow enough grain then they may be forced to buy in expensive stocks to cover their commitments.

"These are short term issues that can be addressed either by early discussions with your cereal buyer to agree a strategy to deal with any problems, or managed through cash flow if your bank manager is involved early enough and understands you have an action plan in place.

"Having the support of a bank whose managers understand the implications of the challenging weather conditions and the cereal production market place is very important. They can put affordable support in place quickly allowing the business to overcome any temporary difficulties."

Lloyds TSB has more than 160 managers throughout England and Wales who focus purely on agricultural businesses. With increased volatility in the grain market, Lloyds TSB expected to discuss risk management with a large number of visitors to their stand at Cereals. Lloyds TSB also focused on asset finance for machinery and highlighted the potential advantages of hedging Single Farm Payments at the event.