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» UK AGRICULTURE NEEDS TO build resilience to market shocks now more than ever , according to the Volatility Forum .
Meeting at the Livestock Event in July , the group discussed current work areas and debated what Brexit means for volatility management .
With the UK ’ s decision to leave the EU bringing additional uncertainty to an already volatile marketplace , upping the ability of farm businesses to cope with unpredictable price and cost movements is a key priority .
The Agriculture and Horticulture Development Board ’ s ( AHDB ’ s ) Jack Watts , who facilitates the Volatility Forum , said : “ Volatility and
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Brexit have a common theme – uncertainty . Without wanting to speculate , it is possible that Brexit could leave UK agriculture more exposed to the opportunities and threats of global market volatility . We ’ ve seen this already in the form of a weak pound supporting farm output prices but risking an increase in cost of key inputs , such as fertiliser , which are themselves globally-traded commodities .
“ Longer term , the impact of Brexit on volatility will depend on a lot of policy detail .”
At the meeting , the forum was challenged to think about how the industry looks at price , cost and profitability .
New rules allowing profits to be averaged over five years for
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tax purposes were identified as a huge opportunity for the UK industry . By considering profitability and competiveness over a longer time frame , short term price and cost shocks may have less bearing on overall business performance .
It was recognised , however , that this approach requires a fundamental culture shift at farm level and that cash flow can be an immediate issue .
AHDB is exploring what practical steps businesses can take to prepare for uncertainty driven by volatility , providing insight into the benefit of different management strategies .
Volatility Forum Chair Gwyn Jones , said : “ There is an argument that only looking
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at business management in the here and now can turn a period of low prices into a crisis . We want to lay down a real challenge to the industry to think about how it measures performance over time and uses that information to strategise for the future .
“ We do realise this approach faces some barriers , for example for tenant farmers without security of tenure . Also , this makes profitability a longer-term measure , while cash flow remains a short-term problem and as such these two critical elements of farm business would need different management strategies . This is a key area identified by the forum for AHDB to explore on behalf of the industry .”
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