I don't think it is nowadays. Probably why RBS keep trying to get me to change my commercial loan which is fixed at 1% over base. No thanks.
Aren't most loans now LIBOR+ ? I haven't taken a loan out in years but I'm sure it changed as base rate was too low!
Back in the late 80's/early 90's the farm business was servicing an overdraft at 2% over base, which meant we were paying interest at around 15%.
We are now paying 3.25% over base rate, so 3.75% in total.
Trouble is, if we go back through the farm accounts we find that the business was generating a smaller turnover but a much better profit than it is now.
And we are farming more land now than we were then ?
It would be interesting to have a breakdown of the differences.
I don't understand the theory behind that. To me, you would put in so much effort bringing the new land into your system, you would fail to fully leverage the existing land you have. Or not?
People cannot continue buying land at a value which is way above its productive value as the numbers dont stack up. At some point in future im sure where the economy is more stable and interest rates rise land will return to a more reasonable value (i hope!!)
Also it worth bareing in mind that as areas in the far east and south america are begging to rapidly industrialize and the std of living increase the demand for meat etc increases meaning that prices for production here become more in line with the rest of the world and demand for our good increase.
One day if everywhere is industrialized where will your cheap goods come from, probably the nearest place as this will be the deciding factor in global trade as oil will only become more expensive, but who knows we will have to wait and see!
The way its heading,there will be a reasonable living to be made from owning a 200 acre farm,but you wont make any extra by farming it.
using the figure you have used, the only benefit in taking on extra land, is the value of stock. not so long ago, fat cattle where 500 a head, now, they 1500. same can be said for cows, sheep etc. livestock has appreciated. which is capital value and not on the p & l sheet
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it is harder to farm with smaller amounts of land, but when you do, the margins are so tight you learn to survive on *uck all. most still have to go out and do a normal job as well as farm.
its very hard farming under 100 acres and make enough to live on alone, you have to have other things up your sleeve.
a worrying thing I heard a few years ago from our great welsh labour leader in Cardiff ( he was in charge of farming then) he said I see a future in wales of larger and larger farms with the workforce coming from the redundant smaller farms!
gulp, I do worry about the people making the decisions.
Size isn't everything (according to the wife).
Personal drawings £30,000
Income tax £25,000
Buildings' investment £25,000
So that leaves £20,000 to play with. I am assuming that machinery replacements have already
been accounted for by deducting machinery depreciation before arriving at a profit figure. But the
amount and reliability of any SFP included in the profit figure will also have to be considered.
all drawings reinvestment etc come out before tax, therefore if you can make 100k net then you are really doing something right.
I'll say again. I don't think many businesses can consistently make 100k net on 500 acres. Particularly when you consider the problems with grain quality, lamb prices, cattle fertility etc that we have had over the last twelve months.
I tend to agree with lazy there. Net profit is usually the figure when total expenses including interest are deducted from gross profit, me thinks. Then it is adjusted according to depreciation (probably covers a lot of the reinvestment). This figure is taxed. After that, drawings are up to you.