A banker's perspective: Financing the future of farming - Kevin Bix - National Agri-Food Director - Produced in Kent
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A banker’s perspective: Financing the future of farming Kevin Bix – National Agri-Food Director
2 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
Fuelling the UK’s farmers and households Each year, with the support of Barclays Agriculture, our farmers provide many essential products – and some impressive statistics: Source: Barclays, DEFRA 3 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
The New Agriculture Revolution History has a habit of repeating itself • The output of the early pioneers, • the Industrial revolution – delivered by machines • The “Green” revolution of the later half of the 20th century underpinned by new genetics, pesticides and modern fertilizers. We are now at the start of the digital agricultural revolution • Biotechnology innovations, where the sequencing of DNA is becoming routine • The key advances are now in bioinformatics, the digital interpretation of masses of genetic code. • Extremely powerful computers using Big Data supporting advances in robotics and cobots. What does this mean for the average farmer? • A farmer is a frustrated engineer/business finance expert/soil scientist/chemist/vet,/environmentalist/ecologist • The new agricultural revolution means that the modern farmer must now add computer scientist and digital engineer to their list of skills 4 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
Supporting the farming industry: economic challenges, public funding and new opportunities for sustainable land management - what advantages does the industry have? •Yield and quality advantage •Assurance and uniqueness • Intellectual tradition 5 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
Challenges for the UK/global food system Population Urbanisation Growing Economies Diet and Health Climate Change Water Availability Labour Environment & Energy 6 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
Industry Headwinds
£/Euro exchange rates
- Weaker £ = Expensive imports & making UK
produce more cheaper to export
Farmgate prices
- Flat, but recovering for most produce
Customer confidence
- Farmers reluctant to invest/expand in difficult
markets
Political/PR Campaigns (incl. Brexit)
Headwinds - Uncertainty around Brexit implications
- Trade agreements
- Migrant labour
7 | A Banker's perspective – Financing the future of farming | April 2018
Unrestricted
UK Bank Lending Figures
Drawn Debt
£18.292 billion
Credit Balances
£8.312 billion
Debt Up Credit Up
2.6% 20.5%
Source: Bank of England, Dec 2017
8 | A Banker's perspective – Financing the future of farming | April 2018
Unrestricted
Non Confidential
Internal Only
Opportunities for technical and marketing collaboration • Competitive farm businesses • Long Term view on prices and costs • Diversification • Competitive and supportive supply chains • Proactive forecasting and management of cash flow at Farm level • Better cooperation and collaboration – P.Os and Buying Groups • Improve market awareness and understanding • Strong farm business governance • Assessment of risk – and risk management 9 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
Back to Banking – Lending Basics
C A M P A R I
H B E U M E N
A I A R O P S
R L N P U A U
A I S O N Y R
C T S T M A
T Y E E N
E N C
R T E
10 | A Banker's perspective – Financing the future of farming | April 2018
UnrestrictedDeeper Lending Considerations
LEPEST
Capital
structure
Legal
Economic
Debt Political
service Environmental
Operating
performance Social
Technology
Liquidity
11 | A Banker's perspective – Financing the future of farming | April 2018
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Internal OnlyFocus on Profitability
Think margin not yields
Good yield doesn’t always equal margin
What is the cost of production?
Sale Contract / Location / Succession
“Top 25% Dairy Farmers achieve a 45% higher gross margin per cow than the bottom
25%. Even with prices at the time, that’s £450 more per cow per year”
RBR Press Release, July 2015
12 | A Banker's perspective – Financing the future of farming | April 2018
Unrestricted Non confidentialSuccession: Empowerment is Vital
It demonstrates to the next generation they are trusted
It allows the current generation to step back
And the next generation to step forward
Top 25% invests (1)
74% more on machinery, equipment and technology
21% more on general improvements
60% more on buildings
Compared to the bottom 25% (1)
Source: The Farm Business Survey- Cambridge University
(1) Refers to percentage based on financial performance
13 | A Banker's perspective – Financing the future of farming | April 2018
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Non- ConfidentialThe Jobs To be Done ….
“I want to make a sustainable “ I want to pass on my land/farm to the
difference to the local rural economy next generation in a better state than I
and diversify income streams “ inherited it”
14 | A Banker's perspective – Financing the future of farming | April 2018
UnrestrictedWe’ve extended our investment in the agricultural sector Barclays launched its first £100m UK Farming Loan fund in July 2016 to support farmers after the EU referendum. One year on, we’ve doubled the fund to £200m in response to demand from farmers. Barclays Agriculture new cashflow finance and project loans for UK Farmers Barclays Input Finance offers both short and long term cashflow support, and will help crop and livestock farming businesses that are expanding rapidly to plan ahead without cashflow worries – as well as helping to purchase essentials such as seed, fertiliser or livestock when they need it. Barclays Rural Project Loan is designed to help farmers with additional income streams to support diversification or to restructure existing agricultural business. It’s repayable in two phases: a flexible interest only project phase, and a project completion phase with repayments spread across up to 25 years, 15 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
Disclaimer Please note: for mobile phone numbers calls will be charged in accordance with your mobile tariff. This document has been prepared by Barclays Business, a trading name of Barclays Bank UK PLC and is provided to you for information purposes only and may be subsequently amended, superseded or replaced. Barclays accepts no liability whatsoever for any losses arising from the use of this document or reliance on the information contained herein. The accuracy or completeness of any information herein which is stated to have been obtained from or is based upon any third-party sources is not guaranteed by Barclays. All opinions and estimates are given as of the date hereof and are subject to change. The information in this document is not intended to predict actual results and no assurances are given with respect thereto. © Barclays 2018. No part of this report may be reproduced in any manner without the prior written permission of Barclays. Some products may be available to clients of Barclays Bank UK PLC through referral to Barclays Bank PLC. Referred products will be provided and administered by Barclays Bank PLC. A portion of the revenue generated from referred products may be shared with Barclays Bank UK PLC. Alternative service providers in the market may offer similar products. Barclays Business is a trading name of Barclays Bank UK PLC. Barclays Bank UK PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 759676). Registered in England. Registered No. 9740322. Registered Office: 1 Churchill Place, London E14 5HP. Barclays Bank UK PLC adheres to The Standards of Lending Practice which is monitored and enforced by The Lending Standards Board. Further details can be found at www.lendingstandardsboard.org.uk 16 | A Banker's perspective – Financing the future of farming | April 2018 Unrestricted
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