Michael Piele at David Allen Accountants, looks at what the year holds for the agricultural community and how farmers are coping with rising fertiliser costs.

He writes: " 2021 was a year that has brought all sorts of challenges, as well as a few opportunities for many within the agricultural sector, whilst still having to live with the changes that Covid has brought to all our lives. There were good prices for stock, increases in milk prices coupled with the fine weather, meaning the harvesting season was one of the easiest for many years. The strong prices for stock remained buoyant during the year and milk prices continued to increase. However, as we are all aware, this has had to be the case due to the rise in costs which have eaten away any extra margin the increased prices were hoped to have brought. Many people I speak to are concerned about these costs and how their business is going to cope with a 300% fertiliser price increase, as well as substantial increases in fuel, feed, and energy costs. In the short term it does not look like these are going to reduce and businesses need to be ensuring that they are being as efficient as possible, potentially looking for alternatives or other options to reduce their usage, although I understand this is a very difficult thing to do without affecting output.

We are working with our customers to ensure that they understand the impact these rises are going to have on their business and ensuring that plans are in place to deal with the impact on their cashflow. Hopefully, as we go into the summer of 2022, some of these price spikes will have settled down.

2021 was the first year of the transition period for the Basic Payment Scheme (BPS), with all businesses seeing a reduction in their payment, which as time goes on is going to have a substantial impact. I would encourage all businesses to review the effect this will have in the next few years and plan for this change.

Looking forward into 2022 we are expecting various grants to be announced. We expect grants to be announced on slurry storage solutions and hope to have further clarity on the opportunities the ELMS scheme may create. As the BPS reduces, businesses should be looking at these grants and schemes as an opportunity to help them futureproof themselves.

Covid has obviously created many challenges for our industry, however, it has also created some fantastic opportunities to diversify. The stay-cation culture has certainly grown and during the last year I have witnessed many of my clients diversify their business with holiday cottages or pods. Those who have been able to adapt have reaped the benefits. Many have commented that they have never been busier, with back-to-back bookings.

As well as having to diversify and ensure that your business is benefitting from grant opportunities, there are also many within the agricultural sector who are developing and researching ways to be more efficient and profitable. Any company who is doing this should be reviewing if they can benefit from R & D tax credits, as well as ensuring that they are taking advantage of the 130% Super-deduction for the purchase of new plant and equipment.

2021 witnessed the COP-26 summit which has continued to heighten climate change concerns and awareness. Climate change will no doubt have an impact on how we farm, and we will all need to do our bit to help reduce the impact. There may well be opportunities created too, such as the potential to sell carbon credit, which could form a regular part of farming business incomes.

Although we are going into 2022 with the threat of heightened costs, we are also going into the year with some of the highest prices we have seen in all sectors for some time. If you consider this, alongside all the grants that are available and further ones expected, now is a very good time to assess your position and make certain that you are in the best possible position for the year. "