Time for Farms
Byline: By Euryn Jones
While we still await details of some important aspects of the Fischler Reforms of the Common Agricultural Policy - particularly details of the cross-compliance requirements - there is now sufficient information available for farmers to start thinking seriously about the future direction of their business.
Given the busy lives that farmers lead, it's not surprising that there are still plenty who have not really thought through the implications that the reforms will have on their business.
I've spoken to one or two farmers who still find it difficult to believe that their Single Farm Payment will be received, regardless of whether they produce anything at all, provided they keep their land in good agricultural and environmental condition.
There are many livestock rearing and arable farmers whose total support cheques exceed their net profit.
Take the example of a farm business with total revenue of pounds 70,000 and expenditure of pounds 80,000, but which also receives pounds 20,000 in support payments. A trading deficit of pounds 10,000 is only turned into a profit of pounds 10,000 as a result of receiving the subsidy cheque.
Revenue - pounds 70,000
Expenditure - pounds 80,000
Trading deficit - pounds 10,000
Support - pounds 20,000
Profit pounds 10,000
Under the current CAP arrangements, incurring a trading deficit on the farm can be justified because no support payments can be claimed without producing crops or livestock.
From next year all that will change, and while the new Single Farm Payment will inevitably be less than this year's subsidy cheques, due to modulation and other top-slicing cutbacks, it should still be more than the pounds 10,000 profit. …