We all enjoyed a delightfully long and hot Summer, but what followed was one of the wettest Autumns we had experienced for some time. Farming was incredibly testing during this time with difficulties in drilling and crop establishment. Many farmers had conceded that the 2020 harvest results would be poor and severely affect their cash flow come harvest time.
The Spring and Summer of 2020 brought long periods of sustained dry and humid weather, that inevitably impacted further on yields for 2020. All of this on top of continuing battles against pests, such as the flea beetle, due to the restrictions on effective chemicals that are available for farmers.
During harvest of 2020, the realisation of poorer yields had set in and the thought of reinvestment in the farm would have to be delayed!
Following yet another very wet Autumn, we have steadily seen rises in commodity prices and for some farmers that are able to hold onto their grain in storage for longer, could be locking into some prices for feed wheat in excess of £200 a tonne.
From a review of some of my own clients’ management information, it was apparent that a fall in yields had been outweighed by an increase in prices, thus leading to profitability for some being higher than that of the 2019 harvest!
Having forecast a harvest where yields would be poor and a potential financial strain to stay within their overdraft facilities, it is not surprising that most farmers had decided not to invest heavily in new machinery. The Chancellor has extended the annual investment allowance of £1,000,000 through to December 2021, which does bring opportunity for some to make investments on the farm with good tax incentives.
If you have not done so already, I would strongly recommend you speak with your adviser about your likely results from the 2020 harvest and also to review your capital expenditure plans over the next 12 months. It could well be an opportunity for some to bring forward their investment or look at other end of year tax planning such as pension contributions to potentially reduce large tax liabilities arising in January 2022!
The Chancellor will be addressing the nation on the 3rd March to give his budget update speech. If you’d like to hear the key points and highlights from his budget then why not sign up to our webinar which is being held on Friday 5th March.