Takes steps now to prepare for chill winds of Brexit

Published March 8th, 2018

Farmers face a more challenging and commercial future under Brexit and the earlier they take steps to get their businesses in order, the better.

This is the view of Jeremy Moody, Secretary and Adviser to the Central Association of Agricultural Valuers (CAAV) who says Brexit gives that sense of historic moment for farmers to create the destiny of their own businesses because that is what they control.

“It’s what is under the farmer s boot and taking a firm look at that and looking at how families and businesses can reposition themselves to take full advantage of what’s coming, whether it is as an active commodity producer, as a specialist supplier or whether it’s in doing something in a differentiated way,”  Mr Moody told nearly 300 farmers and guests  at Shropshire Chamber of Agriculture’s annual luncheon at Tern Hill Hotel earlier this month.

Mr Moody said there is a danger that parts of the industry think change is something that will happen to others: “I feels its wiser to assume that significant change is coming and the six- or seven-year time window in which you can contemplate doing that is quite short in terms of the life cycle of the family business so earlier endeavours and reviews appear to be advantageous for those who intend to be part of farming tomorrow,” he said.

The year 2024 is likely when basic payment will end and more significantly  when third world trade deals start to fall into place.

March 2019 is the crystalline moment for Brexit when the UK steps out of the European Union and then there will be a period of implementation. European funding levels will remain in the UK for 21 months, maybe two years, as at the European end there an enormous amount of practicality of that running to the end of 2020, the end of the current CAP budget period.

“Come the end of 2020 you can see an English agricultural policy emerge,” he said.  “We are looking at a UK policy with very much devolved freedom for Wales, Scotland and Northern Ireland.

He said Michael Gove is one of the most interesting secretaries of sates for a long time and Defra is distinctively in the lead at the moment in its engagement with Brexit.

“Some 25 per cent of the government’s European business goes through Defra, and 90 per cent of Defra’s business and more is European.”

The core message in the recent ‘Health and Harmony: the future for food, farming and the environment’  government consultation is public money for public goods. The principal public good is that of environmental enhancement, which means soil ,water, climate change and biodiversity.

“The government clearly does not think that basic payment is any value to tax payers money at this point,” he said.

The consultation document is flagging 2021 as the first removal of part of the basic payment , with the objective of creating £150m to fund pilot projects of what the new environmental schemes will look like.  Payments will be phased out until 2025, then BP is gone.

“A significant amount of money moves into the environmental land management scheme and the point I am making to government at the moment is  that they must understand that it’s not gross expenditure that matters its net profit so for many people particular outside arable farming Basic Payment is pretty much 95 per cent profit,” he said.

On money, government has pledged that the same amount of money remains available until 2022 but the commitment doesn’t say how it is to be spent.

“What is interesting is watching the discussions taking place in Europe at the moment, slightly fuelled by us taking our money away,  the working paper coming out Brussels the other week was playing with options cutting the CAP budgets by 30 per cent so it’s not impossible that we might have more money in agriculture than they might,” he said.

So how do you protect yourselves from the chill winds of commodity competition?

“Building something that is special that someone will pay more for, locking into a higher value supply chain, doing a bit of processing or looking at selling land or machinery, all or some of these answers will work,” he said.

“We are looking at a much more diverse rural economy, a much more diverse countryside and agriculture coming out of this as we learn to differentiate products and markets the way in which the rest of the economy has been doing for decades,” Mr Moody added.

For advice on preparing your business for Brexit contact your local Berrys office.

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Visit our relevant website page: Farm Business Management