UK agriculture needs to build resilience to market shocks now more than ever, according to the Volatility Forum. With the UK’s decision to leave the EU bringing additional uncertainty to an already volatile marketplace, increasing the ability of farm businesses to cope with unpredictable price and cost movements is a key priority.

Jack Watts of the Agriculture and Horticulture Development Board (AHDB), which facilitates the Volatility Forum, says “volatility and 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 fertilizer, which are themselves globally-traded commodities. Longer-term, the impact of Brexit on volatility will depend on a lot of policy detail.”
New rules allowing profits to be averaged over five years for tax purposes were identified as a huge opportunity for the UK industry. By considering profitability and competitiveness over a longer time frame, short-term price and cost shocks may have less bearing on overall business performance.
However, it was recognized that this approach requires a fundamental culture shift at the farm level and that cash flow can be an immediate issue.
Over the summer, AHDB will be exploring what practical steps businesses can take to prepare for uncertainty driven by volatility, providing insight into the benefits of various management strategies.
Volatility Forum Chair, Gwyn Jones, notes “there is an argument that only looking 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 strategize for the future.
“We do realize 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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