You’ll go bust most likely

What will happen to farmers like me when Brexit turns our industry upside down?

But the laddie’s still not understanding, is he?

The other biggest impact will come from trade deals. We are blessed to live in an era of accessible and cheap food. Outside the single market, with no trade deals, it is hard to see how there can be no knock-on effect to the price of food – either imported or home-grown. Though higher food prices would appear a good thing for us farmers, input costs would rise for currently tariff-free items such as feed, fertiliser, pesticides and agricultural machinery.

Why would we impose import tariffs?

44 comments on “You’ll go bust most likely

  1. Will be interesting to see how he thinks that there will be higher food costs too; exit the protectionism of the EU and the UK will be open to import from the world – where food is considerably cheaper to produce than it is in the UK!

  2. The depressing thing is that our leaders probably will impose import tariffs and other barriers.

  3. Tomsmith – yes… Theresa’s energy price cap and industrial strategy have shown she’s all for market interventions which will mean subsidies rather than tariffs i fear, In any case with a big majority she’ll do what she wants

  4. HB,

    Lets hope the financial markets become an effective opposition because it doesn’t look like anyone else will be.

    It used to be we could rely on the HoL who were at least objective in Maggie’s time and did oppose her, now its lost all credibility since Major, Blair and the rest politicised it with all those “working” Peers.

  5. Yiu stopped too early Tim. After complaining about high costs he doesn’t actually know are.going to be posed he says: “Not to mention that governments usually do not like increased food prices, and I fear it could bring about a cheap food agenda that sacrifices basic standards.”

    Which is possibly nearer his real objection: my gravy train, oh my darling gravy train!

  6. He shouldn’t worry. Britain will have more money once it stops paying French farmers. The UK is a net contributor. Farmers vote Tory. Much of that money, maybe even more money than before, will be p!ssed away in their general direction.

  7. Farmer Shite is worried about his handouts– full stop.

    Were I PM I would make sure that he lost every penny as a reward for being willing to help out Remainiacs with their propaganda.

  8. If we leave the EU and then all repeatedly punch ourselves in the face how is that a good thing? Better to have stayed in the EU and not repeatedly punch ourselves in the face. The logic is surely undeniable.

  9. The burden will be borne by the landowner. If that farmer is the landowner he’ll be worse off. If he’s a tenant then his next rent review will lead to a much lower rent.

    P.S. I don’t know anything much about agricultural tenancies: how often are rents reviewed, typically?

    P.P.S. Gov.uk speaks:

    Landlords and tenants can negotiate their own rent levels and decide whether or not they want to have rent reviews. Either the landlord or tenant can demand a rent review every 3 years by law.

    However, landlords and tenants can agree on how often a rent review should take place – this agreement replaces the law. For example, you can agree on a rent review every 4 years.

    You must not preclude a reduction in rent in your rent review agreements.

  10. I would defer to others (are Jim or Tractor Gent farmers? JuliaM is the resident animal expert) but I’d say that the accompanying picture tells its own story.

    The beast depicted (a Hereford?) seems to lack an udder and on this basis the UK dairy industry is surely doomed.

  11. “You must not preclude a reduction in rent in your rent review agreements.”

    Doesn’t mean you’ve got a cat in hell’s chance of getting one.

  12. Bison
    I think Herefords are mostly raised for beef, not milk.

    But what do I know? My ancestors left the farm. Seems only the really dim part of the population is still there.

  13. And another illustration that the Left really are the most conservative, hide-bound people in the country. NOTHING MUST EVER CHANGE! GAHHH!

  14. “The beast depicted (a Hereford?) seems to lack an udder and on this basis the UK dairy industry is surely doomed.”

    Picture now shows a Friesian dairy cow, with what looks like a calf behind it. Didn’t see any previous versions.

    The article is utter bilge of the usual Guardian type. Most farmers have the common sense to realise that post Brexit food prices will fall due to cheaper imports currently kept out by the EU tariff barriers. They don’t like this fact but they do understand which way things are going. The author of this article is either an idiot or playing to the Guardian gallery in order to get his writers fee.

  15. Edward is a farm manager in Northamptonshire and a consultant for Cheffins

    In other words, he’s a fake farmer.

    Anyway,

    I fear it could bring about a cheap food agenda that sacrifices basic standards.

    Who will save us from New Zealand lamb?

    Another concern is employment. The vote to leave the EU centred heavily on immigration, and migrant labour from the EU, and we have to be mindful of that. However if there are restrictions placed on foreign workers it will have huge knock-on effects

    If your business model relies on importing cheap foreign serfs while passing on their healthcare costs, education for their kids, housing benefits, etc. to British taxpayers, you’re a fake business and should go bust.

    BTW, we have hundreds of thousands of unemployed young people already living in rural Britain, and plenty more in urban areas.

  16. If your business model relies on importing cheap foreign serfs while passing on their healthcare costs, education for their kids, housing benefits, etc. to British taxpayers, you’re a fake business and should go bust.

    Don’t farms just import seasonal workers? Get a van full of Latvians, put them up in a caravan in the fields, then send them home at the end of the seaon. Wife / kids / illnesses stay in Latvia.

  17. “consultant for Cheffins”

    Didn’t see that. Yes, thats the shorter way of saying ‘Stupid but well connected twat who went to the Royal Agricultural College Cirencester, and hardly knows the back end of a cow from the front’.

  18. BiND: “Doesn’t mean you’ve got a cat in hell’s chance of getting one.”

    You don’t seem to understand how markets work. Clearly Tim has lived in vain.

  19. Andrew – According to the estate agent farmer, rely on a mix of seasonal and permanent workers from abroad.

    The genuinely seasonal workers who don’t overstay, get sick, or commit crimes while in the UK will certainly create fewer externalities.

    But we have 1.6m unemployed people in this country already, many of them long-term benefits recipients, ex-prisoners and the like, many of whom would benefit from hard work. Or how about paying our less violent and insane convicts to do a bit of seasonal work? It’d do them good.

    It seems crazy to me that we pay our own people not to work while importing foreigners.

    Time we picked our own damn lettuce.

  20. @ dearieme
    More than one in ten shops is empty (and many are boarded up) because no-one can make a living/profit after interest costs (depending upon whether the shopkeeper would be a person or a company) at the rent demanded but the landlord/letting agent refuses to reduce the rent to a level where that would be feasible.
    BiND is commenting on letting agents, not markets.

  21. The Inimitable Steve,

    It’s ideal work for prisoners or ex-cons. Doesn’t need much education, can’t steal much. I mean, how much can they fence a few handfuls of lettuce for?

    But you have to change the benefit system. Means-tested benefits are a disaster for flexible working. People won’t go off and do a month’s seasonal work because their dole will get stopped. Or they’ll get so little money for their work that they’d rather just stay home and watch Jeremy Kyle.

  22. “It seems crazy to me that we pay our own people not to work while importing foreigners. Time we picked our own damn lettuce.”

    The only trouble is that there’s a decent chunk of the UK populace that are functionally useless. In the ‘cannot get up and go to work for 9am, do a simple job, and come back 5 days a week’ sense. This is why the foreign workers took over, because they actually worked.

    Its all the fault of the State of course as such people have had 11-13 years of State provided ‘education’, and after that the State has provided a roof over their heads and money in their pocket without having to work. So they don’t.

    The only way to solve the problem would be to a) reduce immigration and b) cut welfare so if you didn’t get a job you starved. Then such people would work.

    There was a very good BBC documentary a few years ago about this very issue – they took unemployed Brits in Wisbech, Lincs, set them up with a job of the sort that was being done by foreign workers, and recorded the results. Of half a dozen of so people they placed, I think one stuck at it or ended up in full time employment. The rest gave up. Some didn’t even show up at all for work, the others did a few days or a week, then jacked it in.

    It can be watched here: https://www.liveleak.com/view?i=ae2_1267106610

  23. TMB: No, not a farmer. Was an engineer. The name is a very oblique reference to the area where I live, which is largely arable farming.

  24. @john77: the landlord/letting agent refuses to reduce the rent to a level where that would be feasible

    When my better half was working in commercial property (20 years ago), the problem was that the book value was based on a multiple of the rent. If you reduced the rent, the value dropped, and the Investment Managers would show a loss; but if they kept it ‘temporarily’ empty, they could continue to ‘book it’ at the old value.

    Don’t know if that’s still the case.

  25. …500 hectare farm in Northamptonshire growing cereals*, and supporting a beef and sheep enterprise…

    @Jim,
    “supporting” cows & sheep? Is this some PC speak for “growing”?

    …It will help us to ask the public what they want their farmers to be. [1] Business people? [2] Food providers? [3] Environmentalists?…

    Questions I can answer:

    1. Yes
    2. Almost; Food growers/producers is yes
    3. No

    * Lots of Gruniard readers visualise fields with Granola plants, Muesli vines, Honey Nut Cornflake cobs and Weetabix beets growing,

  26. “When my better half was working in commercial property (20 years ago), the problem was that the book value was based on a multiple of the rent. If you reduced the rent, the value dropped, and the Investment Managers would show a loss; but if they kept it ‘temporarily’ empty, they could continue to ‘book it’ at the old value.”

    Sounds odd to me. The investment managers would have to pay the investors a return on their investment, paid for out of the rent. With no rent coming in, the returns to investors would be lower and – book value or no book value – they’d quickly lose their attractiveness as an investment.

    I’m not saying it’s impossible – they could maybe get the money from somewhere else, like raising rents on the remaining properties, or selling some off elsewhere. Or they could maybe report it as a temporary blip, and reduce interest paid with a promise to make it up later without their investors fleeing. But it sounds odd.

  27. ““supporting” cows & sheep? Is this some PC speak for “growing”?”

    Sort of. It may be that its predominantly an arable farm growing crops, but has created business relationships with other farmers locally to supply straw for the livestock in return for the manure so produced. Straw for muck deals are common, as they help both parties, the arable farmer reduces fertiliser costs (a big cost in growing crops) and the livestock farmer gets free straw (a big cost of keeping cattle in sheds over the winter, or maybe all year round). The arable side might also sell grains to the livestock side, again a mutual benefit scenario. The sheep will probably be grazing on cover crops over the winter, a time when the land would otherwise be unused. The people who own the cattle and the sheep may not be the same ones who own the arable farm, hence the idea of ‘supporting’ the livestock businesses rather than being in that business themselves.

  28. J77 / CM / NiV

    90% or whatever appropriate rate may be quite rational? Equilibrium following supply and demand.

    Due to demand, rental rates have (say) climbed to £50/sq ft. That’s the going rate (forget front retail, back, prime, other etc and all that for a second) in that location.

    If occupancy was 100% there would still be excess demand pushing rates up. At (say) 90%, if you start offering space at £40/sq ft, simply to achieve that final 10%, your 20% price reduction might get you up to say 95% or better. But those discounts will affect future deals in the same location. So any wider portfolio risks being affected by those discounted deals (in the future). A (theoretical) 20% price reduction for a 5% increase in volume may in the longer term lose you money. Holding out for a period (the expected hold out time is obviously important) may be expected to cost you less.

    At lower occupancy levels in an area, letting at £40/sq ft (or whatever) is exactly what you may do because the economics makes better sense. Supply and demand with a revised equilibrium. Also impacted by lots of owners all with different requirements / occupancy levels etc, as per CM above for example.

    Whether 90% is a good equilibrium point (per J77 above) or not is a different matter, and may be influenced to some extent by whether the market is static/falling (lower occupancy %) or growing (higher %), and lots more.

    What will also be true is that that 90% will not all be at full normal lease terms/rate. That part will comprise a lower % than the headline, and on top of which there will be differential deals (that will less directly affect that £50/sq ft headline rate), whether licenses or other variable terms, that then takes the total occupancy up to a higher number. And bear in mind that 10% will presumably include those in the process of being refurbished or otherwise in transition between tenants, hence, 100% is never achievable.

    Ie, simply because there is some available occupancy – and I’m not “defending” 90% in this instance – an owner’s main focus is not necessarily occupying that space (at whatever lower rent is required), it’s making the most profit overall, and which can be more complex. And not least because it’s not just his P&L he is focusing on, capital value is a major part of that equation.

  29. An obvious aside, but far more likely than offering at £40/sq ft, would be to offer at £50/sq ft (or more) but with a rent free/cash back/whatever, anything rather than adversely affect that £50/sq ft headline rate. Capital value (rent and yield)…

  30. “it’s making the most profit overall, and which can be more complex. And not least because it’s not just his P&L he is focusing on, capital value is a major part of that equation.”

    I don’t see how capital value affects your profits unless you sell it. The capital value of my house has no effect on my income.

  31. Dearieme

    I don’t see how capital value affects your profits unless you sell it.

    It doesn’t have to be purely at the time of sale. Regular revaluations of the property portfolio are included in the increase in balance sheet net asset value, on which such companies are assessed.

  32. @Jim, May 10, 2017 at 8:43 pm

    Thanks for explanation on supporting vs growing. Informative as always.

    “Manure”? Did you mean slurry? /wink

  33. Yes all those unemployed. Who do not want to get up early, cannot travel, have kids to look after, cannot manage on xx wages etc – whatever the excuse.

    If they don’t work then nanny state rewards them with free this and free that. Even some free money.
    If they go to work they have to get up, work hard and nanny state punishes them by refusing to give so much free stuff and even takes part of their money off them.

    If a farmer cannot get people to come in and harvest the food then no point the farmer planting that food. Paying £8, £9, £10 an hour won’t help if he can only get so much per weight from the buyers.

    Can quite imagine some farmers simply not planting if they cannot harvest for enough. No one wants to run a business to spend money.

  34. @ PF
    Your argument assumes that a single landlord owns the whole of the High Street. That is very very unusual. For each individual landlord the individual empty shop is likely to be a higher %age of his portfolio *in that immediate vicinity* than the average vacancy rate in that vicinity. So it makes sense for him/her/it to accept a market rent (and not pay rates on the empty property). It is the interest of *the letting agents*, who usually form a local duopoly or oligopoly, *not* of the landlords to keep properties empty.

    As to valuations, that depends on the honestly and/or competence and/or sophistication of the landlord/valuer. I have in the fairly recent past done some work for a company which annually adjusted valuations as interest rates and “going-rate” yields changed and wrote down valuations when it had a weak covenant or the market level of rents had fallen so that it could foresee the risk of a fall (or even a smaller-than-anticipated rise) in rental income after the next rent review. So it is not *necessarily* the case that unrealistic valuations will trump reality.

  35. John77

    I agree. I sort of alluded to different owners/occupancy but perhaps I wasn’t clear, and yes, which makes it complex. And I completely agree – reality will always trump “unrealistic” valuations (one way or another!).

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