Is selling some land an option in 2016?
Land prices in the South East may be at a peak for now?
There appears to be very little confidence of an improvement in outlook for the agricultural sector in the short term.
So, is selling an option for some in 2016?
The controversial option is to sell off some land. Many will see this as representing failure, however, the land market is strong and a significant capital introduction can potentially be generated from selling a relatively small proportion of the farm.
Consider the percentage ratio of your total borrowings to property value. Agricultural lenders will lend at 60-70% loan to value. If your debt to equity is high, then your business is more at risk and your relative borrowing costs are higher. Reducing part of this debt will release pressure on your business.
Given the continued volatility, businesses also need to develop more robust models. Non-farming income could be increased or introduced. Also, consider converting a building on the farm and letting it.
We are increasingly advising farming businesses on how to develop a business structure that can sustain low price periods and make good returns when prices improve. We cannot make the price better, but we can help your business become more resilient during this time of low and fluctuating returns.
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