An accountant expects hundreds of thousands of pounds due to animal feed firms and other agricultural businesses to be paid in the coming days as farm subsidies start arriving in farmers’ bank accounts.
Robin Dandie, a partner and head of agriculture at Johnston Carmichael, said scores of businesses had been acting as unofficial bankers to farmers unable to secure finance from their banks. Sources say debts could run into millions of pounds.
The arrival of the first batch of single farm payments to just under 16,000 farmers and worth about £380million was a welcome relief given the amount of money many firms had had outstanding for months.
Mr Dandie added: “A lot of that money, especially on hill farms, will be used to pay off bills resulting from the poor weather last winter and the spring and the extra feed they had to buy in during April and May.
“Feed firms and contractors will be looking for those payments to be made fairly quickly.”
Mr Dandie said the appetite among banks remained on supporting farm businesses that were profitable and asset backed. Those that were cash poor or that did not have a good track record were no longer being supported.
Mr Dandie was speaking as the Johnston Carmichael-sponsored Aberdeen Christmas Classic, staged by the Aberdeen Fatstock Association and Aberdeen and Northern Marts at Inverurie’s Thainstone Centre, got under way yesterday, with the judging of the cast sows, pedigree sheep and the Young Farmers’ classes. The event, which has an entry of 70 prime cattle, 150 prime sheep, 45 pedigree cattle, 20 dairy cattle and 185 pedigree sheep, will be in full swing today, with the judging of the main classes and sale of the primestock starting at 1pm and the pedigree cattle at 3pm.
Mr Dandie said the fall in grain prices recorded this year would have a detrimental impact on scores of cereal farmers who had, in financial terms, a much better year in 2012, despite the impact the poor weather had on crops. Cash flow on many arable units was far tighter as a result. While ex-farm prime cattle prices had hit a record high, Mr Dandie said margins had not improved because of higher production costs.
He said all eyes in the agricultural sector would be on Chancellor George Osborne’s autumn statement on Thursday, when he is likely to reveal the results of an HM Revenue and Customs review on the taxation of business partnerships.
That could well hit scores of agricultural businesses which operate on that structure because of the simplicity it provides family-run operations, with houses included in the assets and in getting cash out of them. Partnerships were also frequently simpler to break up.
Speculation is that the chancellor may well only target larger partnerships producing profits in excess of £300,000 and/or turnover more than £20million. But Mr Dandie warned that, if he decides to tackle them at all levels, it could well result in more red tape and higher administration costs for farmers, albeit with lower taxation rates if they become limited companies.
“There could be a detrimental effect on farm businesses, but we will have to wait and see,” he added.
Mr Dandie urged the restoration of capital tax allowances on agricultural buildings, which were removed.
He viewed these as important given the potential for investment on farms and the fact that any cash would be spent locally. Allowances on machinery were restored last year, but Mr Dandie said the downside of that was the tractors and combines were made abroad.
He also had fears on how the energy concessions confirmed by the UK Government and the £50 rebate being offered to consumers would be paid for. It could result in reductions in feed-in tariffs paid on renewable energy projects or more taxation elsewhere.
Cast sows
Pens of four – 1 John Rennie, Gask, Turriff; 2 Forbes McDonald, Banks, Fyvie; 3 Roderic Bruce, Logierieve, Udny.
Single sow – 1 and overall champion Karro Food Group, Mill of Brydock, Alvah; 2 and 3 Sandy Howie, Baluss, Mintlaw.