Risk of insolvency falls among region's agricultural businesses

The beef price is at a five-year low, one of the many price pressures facing the region's farmers today.

Figures for April show a UK-wide drop of just under two per cent in the proportion of incorporated businesses in the sector at higher than normal risk of insolvency since the previous month.

The research, by insolvency trade body R3, found that there was a month-on-month fall of almost six per cent of agricultural businesses in Yorkshire at higher risk of insolvency - 251 of the 1,595 active agricultural businesses in the region were at above normal risk.

Yorkshire is also among the regions with the lowest levels of incorporated farm businesses in the high risk band with just 15.7 per cent at higher than normal risk compared with 17 per cent across the UK.

In fact, of the ten sectors surveyed by R3, across the UK in April agriculture had the lowest level of businesses at higher than normal risk. Restaurants (40 per cent), technology and IT (36) and pubs (35) had the highest levels of businesses at above average risk.

Adrian Berry, chairman of R3 in Yorkshire and restructuring partner at financial services firm Deloitte LLP, said: “With many livelihoods in Yorkshire depending on agriculture, it is encouraging to see businesses in the region performing despite many years of under-performance as farmers suffered from falling commodity prices against a backdrop of cost pressures including introduction of the National Living Wage for over 25s from 1 April 2016.

“Growing pressure from groups lobbying for fairer prices as well as increasing demand from shoppers to buy local are helping to put the sector in a stronger position going forward although it still faces some tough challenges particularly in the dairy sub sector.”

The reality is that the pressure on farm incomes remains acute. Farmers have turned to their banks to borrow a record £17.8bn last year, leaving many with huge debts to pay.

Commodity prices remain unsustainably low. Latest AHDB Dairy figures show the average farm gate milk price to be just 22.93 pence per litre (ppl), down from 23.09ppl in January and from 25.07ppl the same time a year ago.

The National Beef Association reports that British beef prices are at a five-year low, with farmers, on average, receiving 46 per cent or less of the retail price.

Pig prices, meanwhile, are at an eight-year low, according to the National Pig Association, with farmers losing around £7 a pig.

It is a situation which has caused many tenant farmers to seek rent abatements as they are unable to meet rent payments.

What the R3 research does not measure is the level of financial distress among the vast number of smaller family-run farms that operate as sole traders or partnerships.

Dorothy Fairburn, regional director for the Country Land and Business Association, said: “In the current financial climate any good news is welcome but this research only covers a small section of Yorkshire’s farming community and must not distract us from the cases of real hardship out there.”

She added: “A combination of poor weather, depressed prices and delayed farm payments is pushing many farmers in our region to the edge.”