Integral to farming success

To get an overview of some of the options available to farmers, we spoke to AIB Agri Advisor Patrick O’Meara about the current landscape and its effects on cash flow. He also provided us with some useful methods for cash flow planning and dealing with common cash flow concerns. Read on to find out more.

 

The Current Landscape

For all farmers, the outlook for 2017 depends on the specific sector you are working in. “Pig and dairy sectors are going through a positive period at the moment in terms of increases in market prices,” Patrick notes. “Both those sectors have come through a difficult period so it’s encouraging to see. In the beef and tillage sectors, there’s some frustration at farmer-level with prices and also concern around Brexit.”

Brexit will continue to throw up challenges for farmers and add a level of uncertainty, but there are some aspects of the changing economic climate you can plan for. “It’s difficult to know exactly what the effects of Brexit might be,” Patrick explains. “But in the short-term, you’ll need to consider the impact of exchange rates on output prices when planning.” In the medium term, he says, legislative changes will come into play: “You’re looking at the potential impact of CAP reform and you’re also considering tariffs and trade agreements that may be developed between the UK and Europe.”

While there are many uncertainties that are outside of the control of farmers, it is important to control what is inside the farm gate. “Improving on-farm efficiency and competitiveness is essential to managing risk and sustaining your business through any future potential challenges” according to Patrick.

There are positives to consider also. An increase in global population and the expansion of new markets offer opportunities for the industry. “There’s growing demand for protein foods in terms of meat and dairy products” Patrick says. “Ireland is among the most efficient producers of dairy globally and up there in the top five in terms of beef when it comes to carbon footprint.”

When it comes to cash flow planning and concerns, Patrick’s biggest piece of advice is to address them sooner rather than later. “The earlier someone comes in, the more options that they have,” he explains. “Those options can include increases in working capital and overdraft facilities. Other options to address cash flow issues include short-term loans and extending the term of a loan*.”

Again, Patrick notes, time is of the essence: “If someone thinks that they have impending cash flow pressure coming up, look at it early. First, consider what the root cause of it is. Ask yourself how much cash flow pressure there will be or how much will be needed to get you over that pressure. Then put a cash flow plan in place. We can offer support and there are more options the earlier you look at addressing it.”

If you want help right now, our cash flow planning tool offers a simple way to forecast and manage your cash flow.