Testing times for arables farmers

As I pen this article I am looking out of the window at blue sky – a rare commodity this summer and with the forecast looking a little more positive, maybe the worst of the summer weather is behind us which will not come a moment too soon for our arable farmers.

Indeed, I have already seen the first crops of winter barley being harvested and if the weather was to stay fine for the next month or so this could prove to be a profitable year. This is because cereal prices have increased sharply in the last month due to warnings for poor harvests in the United States and Russia, both due to drought conditions.
As a result the spot price for old crop wheat has risen to over £210/tonne and prices for new crop wheat are up to around £180/tonne and on the futures market up to £190/tonne for delivery in November this year.

At these prices our arable farmers should be able to make a healthy profit provided of course the weather does dry up for a reasonable period. This will enable heavy machinery to get in to the currently waterlogged fields and also hopefully dry out the grain sufficiently so that it will not need to go through the time consuming and expensive process of having to be dried before storage.

However, the wet weather has been very testing and some crops have suffered from fungal diseases in particular. It has been difficult to keep such diseases under control because there have been very few opportunities to spray the crops either because it has been too wet or too windy. So even though the cereal prices may be high it remains to be seen how yields will have been affected by other factors such as disease and the generally wet weather.

The prospects for arable farmers are of course in stark contrast those of their dairy farming neighbours who are suffering badly as milk prices fall as sharply as arable prices are rising. This has driven some to direct action and as many will have seen on the news this has manifested itself in this area with farmers blockading the Robert Wiseman Dairy just of the M5 near Bridgwater.

This only goes to demonstrate how complicated the farming industry has become with droughts in the United States benefitting our arable farmers through increased cereal prices while a fall in the price of cream on the world market has stimulated the latest controversial cut in milk prices. Sadly these are all things over which our farmers have little or no influence and so all they can do is manage their own business as efficiently as they can and then just hope for the best with those things they cannot influence – such as the weather. 

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

James Stephen comments on RPA Business Plan

The Rural Payments Agency (RPA) Business Plan 2012/13 was published last week and the chief executive officer Mark Grimshaw said: “Thanks to the hard work of our people and the support of our industry partners and Defra, I believe we have now turned a corner on our way to becoming a trusted, efficient and effective organisation.

“Farmers and food producers rely on RPA support to make their businesses more competitive and, thereby, our rural communities more sustainable. For their sakes, there will be no let-up in our drive to improve performance for our customers and the tax-payer in 2012/13.”

So, at last the RPA seems to have made some substantive progress in its performance, although this is not a moment too soon following the debacle of the introduction of the Single Payment Scheme in 2005, the aftermath of which is still haunting some farmers.
For instance I am aware of applicants who still think they are owed money back to 2006 and so it must be welcomed that the RPA achieved their best performance to date in 2011 and are promising to do better next year.

Indeed their pledge is to pay 91 percent of claimants and 84 percent of value for the 2012 scheme year by the end of December 2012 but there is no doubt their next challenge will be to ensure that when the CAP is next reformed in the next couple of years they do not make the same hash of it that they achieved last time.

This was reiterated by the chief executive of the Tenant Farmer’s Association, George Dunn who said: "The performance of the Rural Payments Agency continues to improve under the leadership of its chief executive, Mark Grimshaw.

“The TFA is pleased to see that the RPA has been set tougher targets for the coming year particularly in relation to payments under the 2012 Single Payment Scheme. The big challenge ahead for the RPA will be implementation of whatever is eventually agreed within the next CAP reform.

“The TFA is in on-going discussion with the RPA and its parent department, DEFRA to ensure that the mistakes made with the implementation of the last CAP reform are not repeated this time round."

To be fair to the RPA the manner in which the scheme was introduced in England by our government was particularly complicated. So, I hope that when the next reforms are agreed at a European level, we do not decide to overcomplicate the regulations at a domestic level so as to give the RPA a fighting chance of making up for their mistakes in the past which cost both farmers and the UK tax payer millions of pounds.


James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

The Generation Game

Unable to find his name on the latest rich list rankings again this year, Will Mooney, Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, seeks solace in the wise words of one who knows.

Those of us who are parents acknowledge that we’re blessed with, in equal measure, life’s greatest treasures and the biggest drain on finances. For parents fortunate to have wealth – however meagre and diminishing - to pass on to the next generation, we fret about how to do it responsibly. We don’t want to indulge but we’d quite like to ensure we’ll be remembered fondly by successive generations.

A report published by insurer LV= earlier this year, entitled Cost of a Child:From cradle to college 2012, pegged it at around £218,000 but that is just to the child’s 21st birthday.
While my children are younger than that presently, those parents I know with post-university age children would love to have stopped subsidising their children at 21 or at the £218,000 threshold, whichever came first.

So when consoling myself that Clan Mooney had failed to make it to the Sunday Times’s rich list again this year, I came across some words of wisdom from one of the world’s richest men: Warren Buffett is quoted as saying, on the matter of inheritance, “Leave your children enough to do what they want but not enough to do nothing.”

But what’s enough? And what’s considered doing nothing? Socialite, fashion designer and heiress Petra Ecclestone - one of Formula 1 supremo Bernie Ecclestone’s daughters - has complained in a published article that she feels she isn’t recognised enough for her hard work starting with the feat of getting up in the morning.

She’s been ridiculed but she does have a point. As the owner of a 14-bedroom mansion in Los Angeles and six storey mansion in Chelsea with attendant entourage to see to her every need, why should Petra bother doing anything at all?

None of Ecclestone’s children appear in the frame to take-up the family business of running the Formula 1 circus. This is entirely in keeping with the archetype of first generation entrepreneurship.

First generation entrepreneurs who create substantial business wealth for the first time in their family’s history, tend not to pass on their business unless there is a child who shows not just ability but exceptional ability. They are very protective of the business that has created the family wealth. The same kind of protective instinct means they want to cushion offspring from having to put in the hours of hard graft that were needed to make the business the success it has become.

Apparently by the time you get to the third generation and beyond of any inherited wealth which originated from entrepreneurship, capability has been succeeded by the need for equality when it comes to divvying up the spoils among the family and also the business itself – if it’s still going.

While living among entrepreneurs in Cambridge and being in a business which benefits directly from their wealth creation locally, I make no claim to be one. Also, having never been the heir to a substantial family fortune, I don’t seek recognition for getting up in the morning to earn a living.

Apologies to my children on these two counts.

Still, I’ll never have problem of selecting which one of them, if any, is capable enough of taking over the entrepreneurial reigns from me. They, in turn, will thank me that, unlike Petra Ecclestone, they won’t have to decommission a gift-wrapping room in one of their mansions because they were useless with ribbons.

Will Mooney MRICS
Partner
Commercial Cambridge
T: 01223 558032
E: will.mooney@carterjonas.co.uk

Big news in farming

The big news in the farming world last week was the announcement of a proposed merger between Milk Link - the nation’s leading dairy farmer co-operative - and Arla Foods amba, one of the largest and most successful European dairy co-operatives, based in Denmark. This is one of the first mergers between a UK and foreign co-operative and if completed, the new business will be the biggest player in the UK dairy market.

The merger is the latest and most significant sign of the rationalisation in the dairy sector which has recently seen Robert Wiseman Dairies taken over by Muller, the collapse of Farmright and Rock Farm Dairies, being two small dairy companies based in Devon and Durham respectively and the restructuring of Dairy Crest.

Milk Link chief executive Neil Kennedy said the merger would improve returns for members and, after a three-and-a-half year transitional period, see them get the same return as Arla owners who have been paid on average 10% or 2-3p per litre more over the last five years than Milk Link members.

Information on the merger was due to arrive with Milk Link’s members at the end of last week and then there will be a series of meetings to discuss the merger proposals after which the members will vote on the proposal. If the merger is approved by the two co-operatives, it will also require the approval of the Competition Commission because of the size of the proposed new business.

The details of the merger are only just emerging but what appears to be known to date is that if successful, Milk Link’s standard litre price will rise by 1p per litre for three months from 1st July. From 1st October Milk Link’s price will be linked in a rather complicated manner to Arla’s “On-account” price and from 1st January 2016 Milk Link’s members will be entitled to receive the same price and bonuses due to full Arla amba members.

As far the capital held by existing Milk Link members is concerned, this will be transferred across to Arla Foods amba, up to a maximum level of 5p/litre. No interest payments will be made in respect of this capital during the transition period between 1 July 2012 and 31 December 2015, although each Milk Link member will receive a one-off compensatory cash payment of 57p for every £1 invested in their capital account. Any member that has invested more than 5p/litre will have the excess bought back on a £1 for £1 basis. Founder members of Milk Link with so-called "double rights" will receive a cash payment of around £1.14 per £1 of qualifying loan.

Clearly these are very early days in what looks like being a complicated merger process and as much as anything it indicates that the dairy industry is in the midst of some very significant restructuring which it is hoped will drive efficiencies out of the supply chain to the benefit of the dairy farmers in the long term.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Recession – what recession?

So we are back in recession and can confirm the ‘double-dip’ – well technically we can anyway. But should we really give this apparently depressing news anything more than a passing grimace as we get on with our job. If you look back over the last few months, GDP has been up a bit and down a bit. There is no doubt that we face some major challenges, not least where some of the property debt might come from to replace that which has to be renegotiated over the next 2-3 years, but the majority of business are getting a bit fed up with being in recession. They are keeping their heads down and just getting on with life.

The British Chamber of Commerce summed up the position succinctly in its press release which I quote below.

“The latest ONS data shows a fall in GDP of 0.2% in the first quarter of 2012, pushing the economy into technical recession. The figure is disappointing, and paints an unduly pessimistic picture of the state of the economy. Many commentators will question the accuracy of the data, particularly as it is based on only 40% of the information used for these estimates. As well as large falls in the construction sector, the estimate by the ONS that service sector output rose by only 0.1% on the quarter will be seen as too low by most analysts.

“Business surveys, including the BCC’s Quarterly Economic Survey, have shown a more positive picture, and we believe these give a more accurate indication of the underlying trends in the economy. We think it is likely that the preliminary estimate will be revised upwards when more information is available. For the time being, the main priority is to minimise any possible damage to business confidence. These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism.

“But it is clear that economic growth in the UK remains much too low. We need to see a reallocation of priorities within Plan A that will bolster business growth. That means reducing regulation, encouraging exports and improving infrastructure. While the government must persevere with plans to reduce the deficit despite these figures, it must introduce more measures to empower businesses to drive recovery.”

It would be a tragedy if we allowed the recent news to dent the vital confidence which allows business to invest in the future, because it is that investment which will drive the economy into more sustained growth.

Chris Haworth
Head of Commercial Division
Commercial, Cambridge

T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk

Brazil: a tough nut we need to crack

Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, is not the only Britain who’s nuts about the Latin American country’s economic ascendancy.

Brazil puts the ‘B’ in the mnemonic BRIC as one of the darlings of the developing economies alongside Russia, India and China.

It’s a country top of mind of this country’s elite. Not only did the third in line to the British royal throne visit Brazil with a delegation in March but it also got a mention at the dispatch box in the House of Commons when the Chancellor of the Exchequer delivered his Budget statement.

It’s no wonder. March saw this Latin American nation overtake us in becoming the sixth-biggest economy in the world - growing by 2.7 per cent last year whereas UK growth was 0.8 per cent.

In such a vast country of topographical contrast, Brazil’s economic boom is down to high food and oil prices. It’s now the world’s ninth largest oil producer and its government aims for a top five ranking.

The UK is Brazil’s fourth largest foreign investor and the George Osborne was clear in his Budget speech in saying we’re looking to create a climate for export finance which will support our smaller firms in such new markets as Brazil. He also - in contrast to previous default positions of western states of old - was pointed about not wanting ‘protectionist rhetoric’ which, in the past, would have seen a regime of tariffs and heavy protection of currencies in challenging economic times.

Much has been said of the growing gap between rich and poor in our country, with predictions that austerity measures will see this gap increase. With a growing economy, Brazil has seen a decline in absolute and relative poverty in the past ten years, during which time the poorest half of a total population of circa 190 million saw incomes grow by up to 60 per cent.

The source of that statistic tells its own story. It’s Brazil’s Getulio Vargas Foundation which some in the foreign policy field regard as one of the world’s top five policymaking think-tanks. It has links with partner educational institutions such as Harvard Law School, St Petersburg State University, London Business School and, closer to home in our region, Cranfield University.

HRH Prince Harry was in Brazil for the Rio de Janeiro launch of the GREAT campaign which is part of the Government’s drive to capitalise on the international spotlight we’re in this year in not only hosting the Olympic and Paralympic Games but it’s a year which sees the Queen’s Diamond Jubilee.

The GREAT initiative’s Rio launch was anchored around a £25 million campaign to encourage Brazilians to visit the UK. GREAT will see campaign launches in Mumbai and Shanghai too.

British brands on display at the launch included Bentley, Aston Martin, Burberry and Stella McCartney, who is both a brand and the fashion designer responsible for the Olympic wardrobes of Team GB.

Indeed, we pass on the Olympic baton from London in 2012 to Rio de Janeiro in 2016 and, in between, Brazil hosts the 2014 FIFA World Cup.

Even though Horse Guards Parade on Whitehall is the scene for the beach volleyball Olympic event, it’s a world away from Ipanema or Copacabana. But wouldn’t it be inspiring to think that, alongside some of the 2,000 plus tons of sand scattered across the London landmark for the event, some of that Brazilian economic fairydust might be mixed in so we can maximise the chance to shine that this summer will bring Team UK plc? .

Will Mooney MRICS
Partner
Commercial, Cambridge

Is buying a property as complicated as you think?

In recent times it has been difficult to escape from the general negativity surrounding the housing market whether it is a newspaper, television or radio report discussing various factors from economic uncertainty to limited finance options. There aren’t too many stories around that offer buyers and first time buyers much confidence in the current market. Through recounting my recent house-buying experience, i hope that i can offer a more positive insight.    

My family, like many others decided post Christmas that a house move was now essential. We had been putting it off for some time but the need for more space was becoming critical. Having identified the most suitable property, we submitted an offer on the 21st February and signalled our intention to complete by the 23rd March to take advantage of the first time buyer stamp duty relief scheme. We were able to exchange contracts on 13th March and we successfully completed on the 23rd.

Within those three weeks, between the offer being submitted and contracts being exchanged we had to apply for mortgage which was to be 85% of the value. Carter Jonas do have a Financial Services arm or an affiliated company so i received no specialist treatment as some may think, I merely selected a broker who came highly recommended, explained the criteria and let him advise me accordingly. The process couldn’t have been smoother; the valuation was booked in quickly, the report emailed to the lender the same day as the valuation and the mortgage offer followed 48 hours later. Furthermore I received a text update from the lender at every step.

I am not naive enough to believe that every transaction can be as straight forward as this but there is some specific advice that i believe that will benefit all buyers to help iron out any potential problems.

1. Carry out proper research, not just on the properties that you are looking at but the affordability. Research the amount of money that you are able to borrow prior to viewing properties so that once you decide to move on one you can with confidence and you’ll better know your budget and negotiating margins as a result.

2. Select a good broker and solicitor; they will save you time and money in the long run. My broker researched not only the lenders that i could go to but also the backlog of paperwork of each to ascertain who was able to perform within the timescales and the difference in the rates only amounted to a couple of pounds a month. Cheap solicitors commonly found on price comparison sites will cause you more problems and stress and eventually more money than a local, knowledgeable solicitor with experience. Pay a little more upfront and have the security that matters will be dealt with swiftly, professionally and that protect your best interests.

3.Finally, commit to the purchase. I found it strange sat with my solicitor as she told me that a large percentage of clients use the signing of the contract meeting as a way to try and re-negotiate or specifically look for a problem as justification for pulling out of the purchase. If you are unsure at the outset don’t proceed, you will save yourself and others time and money and when the right property comes along you will be certain and once it does, commit to buying, look for reasons to buy not for reasons why not too.

What this whole experience has taught me and what i am keen to share is that many of the perceived problems with buying a property currently seemed to be manufactured. Yes i appreciate not everyone has had or will have the same experience as me, however if you approach the purchase from the right angle, do your research, take time to find the right people to work with and if you are happy then buying a property can be very a very straightforward and stress-free process.

Patrick Brady
Associate
Residential, Bath