Struggling farms run out of options as cash flow crisis spreads to wider rural economy

Stark research into the cash flow pressures faced by farmers is released by The Prince’s Countryside Fund today.  The report was commissioned following growing concerns in the sector about serious cash flow issues affecting an increasing number of farm businesses. This is putting a huge strain on suppliers, affecting the health and wellbeing of farmers and affecting the prospects of the wider rural economy.

Levels of farm borrowing have almost doubled in the past 10 years. This trend is set to continue as farms across all sectors are affected by the continued decline in commodity prices.  The worst affected sectors are cereals, milk and pigs where incomes are dropping sharply    

17 per cent of farms face major financial problems as their liquidity ratio demonstrates they do not have the ability to pay off their short term debt.

Half of UK farms are no longer making a living from farming alone, and 20 per cent of farms generated a loss even before accounting for family labour and capital      

The businesses surveyed identified that on average more than half the proportion of their farming customers were currently experiencing cash flow issues.                                                                                  

The volatility of output prices does not just negatively affect farming businesses but the decreased cash flow filters through the wider agricultural sector.  This negatively impacts other businesses from input suppliers, vets, auction marts to consultants.  Its effects include reduction in available work, decreasing income and potential staff redundancies although the full extent is not completely understood.

Lord Curry, Chairman of The Prince’s Countryside Fund said, “The research presents a very bleak picture not only for farmers; but also for the wider rural economy.   Volatile commodity markets are not just affecting farmers; decreased cash flow is affecting the industry as a whole, from vets to feed and machinery suppliers to auction marts.  The full extent of the crisis is not yet fully understood.

 “As a result we are witnessing a trend towards increased and sometimes risky borrowing by farmers. Distressingly the outlook does not look set to change in the short-term and the degree of uncertainty about the future is affecting everyone. This in turn is causing suppliers to consider making job redundancies and think about coming out of agriculture. 'It is essential that farm businesses seek professional advice, have all the support they need to cope and that they are equipped with risk and business management tools. Confidence, better cooperation and communication throughout the supply chain are needed if they are to survive.”

 The Prince’s Countryside Fund commissioned The Andersons Centre in March 2016 to complete snapshot research to gain a greater understanding of the cash flow pressures at farm level and their impact on the wider agricultural sector. Through an analysis of recent data and a series of telephone interviews with 21 agricultural businesses an overview of the current situation resulting from the cash flow challenges in farming and its knock on effect to with wider rural economy has been identified and evaluated.