Kieran Coughlan: Base your farm plan on BPS statement

Basic Payment Scheme statements have been issued to the majority of farmers over recent weeks.

These all-important documents offer projections of how each individual’s single farm payments are morphing into the Basic Payment Scheme payments, over the coming years.

A dose of dejection may be experienced by farmers whose statements show they will suffer cuts in their high value entitlements, which are converging towards the national average.

However, this black and white projection of what your future single farm payments will be offers you a positive opportunity to appraise your farming activities.

Now that you know your payments outlook, ask yourself the following questions:

Are you satisfied with your current level of farm profit?

Is your farm delivering a decent standard of living for you and your family. that is, can you clear your personal and farm bills, pay your tax, repay loan commitments, and put by savings, out of your current farm profits?

With the information on your future farm payment statement on hand, it is worthwhile taking an hour out to consider how the cuts to your entitlements (and fall-out from REPS, where applicable) will affect your income going forward.

The question that surely should be asked is whether, at a minimum, will you be still be able to maintain your standard of living out of your future farming profits.

The prospect of reduced earnings is unpleasant at best, but this should be weighed up against the freedoms granted under the scheme, which allow farmers to change their systems of farming, with great flexibility.

In the world of business, the most successful companies prepare short, medium and long term projections, backed up by goals, strategies and targets.

Bringing this approach to your own farm is easier than you think, and the benefits can begin to be realised immediately.

As a starting point, establish what your farm profit has been over the past four or five years, work out what your average farm profit has been, and if your farm profit has been growing or declining over recent years.

It’s not unusual for farm accounts to be consigned to the back of the filing cabinet, after the tax return for the year is completed, but it’s well worthwhile digging through these, to establish your financial position.

When looking at your farm accounts, one of the key measures of the underlying viability of your farm, and its capacity to generate income, is the farm profit before depreciation. Before working forwards to future years, first check to see how your farm profits compare to the amount of single farm payment you have been receiving each year.

Far too many farmers are working for nothing, or worse still, throwing good money after bad, supplementing their farming activities with their single farm payment.

By way of example, recent figures from Teagasc suggested that for the year 2013, the average suckler-to-beef farmer made just €15 per hectare, before single farm payments were received.

Worse still, the average suckler-to-weanling farmer actually lost €152 per hectare, before the single farm payment was factored in.

Similarly for tillage and sheep farmers, those farming on marginal land are all too often subsidising their enterprises.

For those who face forthcoming basic payment scheme cuts, it makes even less sense for those farmers to continue to lose money subsidising unprofitable parts of their business.

Your farm profits, together with other household income such as spouse’s income, must service all the outgoings of living costs, any taxes due, repayments and savings.

Map out, for the coming five years, how your farm profits are likely to change, as a result of the single farm payment amendments on the BPS statement which you should have received.

Match your future farm profits to your future outgoings.

Consider what the changes to your outgoings will be over the coming years, such as increased living costs due to inflation, or increased personal costs due to crèche, school or college fees.

Will expenditure on loan repayments reduce over time, due to the clearing of debt, or will new debt need to be serviced, due to machinery replacement or farm upgrades.

If your financial projections are casting a shadow over your future living standards, then maybe it’s time to take stock of where you’re at, and where you’re heading.

If farm profits are insufficient to cover all outgoings, consider your options to boost income.

Inside the farm gate, at its simplest, there are in essence only two drivers of farm profit — income and expenses.

On a positive note, our current farm payment system offers us some degree of surety over the coming years of the amount of financial support each of us can expect over the coming years.

Yet, at the same time, the payment scheme offers unrivalled flexibility for each individual farmer to chop and change their farming system to suit themselves.

Taking your existing farming system, what efficiency can you bring to increase farm income and reduce farm expenses, over the long term?

Standing at the farm gate, ask yourself can you earn the same level or indeed a higher level of farm profit, by changing enterprise.

In dairy regions, the hunger for land for expansion is also bringing new options, such as growing crops on contract, contract rearing, silage sales, not to mention the demand for leased land.

For some, the prospect of earning additional income from seasonal work, part-time employment, or a new business venture, can be explored with some certainty, now that they have a guide of what their future farm payments are likely to be.

Use the opportunity presented by your farm payment statement to kick start your own farm plan.


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