Last month an article in the local paper claimed that Shropshire farmers are “hanging on by the skin of their teeth amid the continued crisis gripping the industry”. At the same time a poignant article in the Business Clinic section of the Farmers Weekly (15/01/16) rightly reports that whilst a business may not be damaged in the short term by lack of profits, lack of cash can, and probably will, have a devastating effect.
Although payments from the Basic Payment Scheme have now started to appear into the current account, in reality this money may already have been promised to creditors several times over. There are, of course, a number of ways to generate additional cash to supplement the business during such austere times, but few come without their own set of disadvantages which may not suit the business.
Perfect economic model
It would appear that for the foreseeable future, low farm-gate prices will continue to put the squeeze on the farm’s cashflow which is critical to any business. As a livestock auctioneer I have always believed in the “Sell Live & Thrive” slogan, but never more so than now. There is little doubt that a livestock market is nearer to the perfect economic model than any other business in respect of willing seller and willing buyer of a known commodity on any given day. Compared to dead weight sales, where there are often unseen deductions based on subject carcass quality, the livestock market allows total transparency and clarity on prices achieved. Furthermore, whilst direct sales to the abattoir might be more convenient, the key advantages of being in the market place are missed. The livestock market allows the seller a unique opportunity to match stock to individual buyers’ requirements thereby maximising the value of the beast and numerous buyers in the same place on the same day mean that all classes and quality of stock can be bunched together for a particular buyer. When it comes to cash, the market plays its trump card. Not only can the seller be sure of prompt payment, he can be confident of payment as all transactions are backed by an insurance policy. Few businesses can boast this claim.
Farming is a lonely business
We all know that farming can be a lonely business and the chance to meet up with like-minded people to exchange views, catch up on the latest news and trends or just ‘chew the cud’ over a cup of tea should not be undervalued. At Market Drayton Livestock Market local lady Ann Fowell has recently taken over the market café and is already reporting an increase in custom from buyers and sellers alike who are breakfasting and lunching on her home-made, locally-sourced produce and judging by the number of people sitting chatting, the café remains an important social hub for the farming community. Many auctions now let out office space to allied businesses (vets, agricultural suppliers, solicitors and insurance brokers) so that the market effectively becomes a ‘one-stop shop’ for the busy farmer.
It would seem that by selling live through the market, much needed extra cash isn’t the only benefit.
Mike Taylor is Chairman of Barbers Auctions LLP.