Farmers are failing to invest in their future

- Published: 08 December, 2006

Farmers are depositing 9% more in the bank this year than they did last year and are not investing in the future of farming. They are looking to see what will happen to mid-term profits, said Ian Kenny, head of agricultural policy at NatWest. The recent interest rates, linked to high energy prices and inflation, and the volatility of exchange rates have contributed to this retrenching by farmers.

He called on more farmers to improve their business by using appraisal methods such as benchmarking. "It allows assessment of business performance against guidelines and assessment of enterprise performance against others of a similar size and type," he said.

At the same time, he added, net profit should cover pensions, tax, capital/borrowing repayments, business reinvestment, such as machinery replacements, and contingencies.

Kenny firmly believes that cost reductions can be made in store lamb finishing. The top third of producers are spending 26p a kilo while the bottom third are 41.1p a kilo. "It is all about quality and meeting market specifications. We found not only a differential in costs, but also in income. Around 54% prime cattle and 52% lambs are meeting market specification."

Livestock Marketing, which supplied Waitrose, had been meeting market specification by 69% in 1994, he said, and that had improved to 84% in 2006, proving that if you sell at the right time and at the right specification, you will get the right price.

Farmers, said Kenny said, were getting too bogged down by external influences and using them as an excuse to look away from their core business.