This year is going to test the management skills of many farmers across the country, with cash flow potentially a major problem during these turbulent times.
Ash-flow management is a skill that is often overlooked, and the level of management required varies from farm to farm depending on a number of things, from the type of farm to the availability of non-farm income to the age of the farmer. depends on.
For many tillage and dry stock farmers, the arrival of a state pension is the first time they experience regular income, and it often has a profoundly positive impact on their lives.
When it comes to cash-flow, tillage farmers have the toughest job, earning almost all their income from September to December.
The mixed farming we do on our farm, which consists of cattle, sheep and plowing, generates some income for most of the months, but most is still in the last quarter of the year.
The first quarter is a costly time, when most of the seed, fertilizer and feed is bought or distributed.
The rise in input costs this year has led to a steep rise in merchant credit, bank overdrafts and stocking loans, all of which are front-loaded at the start of the year, while many farms will not sell grain or cattle until autumn. ,
If communication is not good the new levels of credit can test the relationship of farmers with their banks and traders.
With production prices so strong, there is confidence in the industry that, if managed properly, cash-flows should recover on their own later in the year.
Concerns about high fertilizer prices are beginning to appear, with an increasing number of hay and silage fields starving.
With fodder prices continuing to rise, fertilizer must be purchased now – despite its high price – to avoid a shortage of hay or silage later in the year, forcing the early sale of cattle or the purchase of expensive food. could.
There is a real fear of traders and banks going into debt, but with cattle and fodder prices so high, the financial risk of not spreading fertilizer and maximizing grass growth is even greater.
The financial challenges that Irish farmers are facing have been replicated around the world.
There has never been a confluence of circumstances that squeezed cash-flows so badly.
The case should be made very strongly to the European Commission and all MEPs for prompt payment of the full principal payment scheme to every farmer, regardless of whether all inspections are completed or not.
These are extraordinary circumstances, and we learned during the COVID pandemic that there is resilience within Brussels if the argument is strong enough.
Bringing forward a full payment would allow farmers to pay contractors, veterinarians, traders and many others, ensuring that rural businesses remain solvent and farmers are not forced to sell stock before it is ready.
Being forced to sell the stock prematurely will increase the level of financial and mental stress due to rapid input-price inflation.
Most quietly agree that financially, 2021 was a better than average year. The downside is that there will probably be an income tax balance to be paid for 2021 and an early tax bill for 2022 (based on 2021 profits) which will put further strain on cash-flows.
Instead of ignoring it or worrying about it, the thing to do now is to seek early advice, and make a plan now for your cash-flow for the rest of the year.
It’s important to meet with your accountant as soon as possible to establish how much money should be available for a tax bill this autumn, and if steps need to be taken later to address any potential cash flow shortfalls. the wanted.
Angus Woods is a drystock farmer in Wicklow
