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LANDSCAPE
Ideas and insight to support your business
FUTURE OF FOOD • 06
FARM FINANCE • 08
ADAM HENSON • 13
AUTUMN 2014
consumer trends
changing the focus
of agriculture
1 • LANDSCAPE • Autumn 2014

SUPPORTING UK
BUSINESS
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tailored to suit your business needs.
Available from 1 December – 19 December 2014, our new
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0.75% gross interest † (0.8% AER # ). It matures on 19 March 2015
and has a minimum investment of £10,000.
To find out how we can support your business, contact your local
Agriculture Relationship Manager (found on page 15) or visit
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CONTENTS
LANDSCAPE – AUTUMN 2014
WELCOME
A DYNAMIC
LANDSCAPE
t Lloyds Bank, we understand the unique challenges,
A
workload and rewards you face in the farming sector.
We have over 100 specialist agriculture managers who
enjoy getting their boots dirty on the farm, to really understand
your ambitions and support you through all the challenges the
agriculture sector throws at you.
Within this magazine, Landscape, we share some of their stories.
You’ll also find news and views (p4-5) of what’s happening in areas
such as CAP reform, business funding (p8) and diversification (p6).
We hope Landscape will help you step back to take a fresh look
at your business and its potential.
Lloyds Bank has a strong and proud heritage within the farming
community and is part of one of the country’s biggest lenders* to
the agricultural sector, through our specialist teams and managers.
Our understanding and support has allowed businesses such as
Balmakewan Farm (p7) and Ireby Green (p12) to consolidate
and diversify in line with changing trends.
We’re fully committed to helping British farming prosper (p11)
and support the Prince’s Countryside Fund and charities such as RABI.
We know that money isn’t everything, though, and that’s why we also
support a farming mentoring scheme for newcomers to the sector
to learn from those with more experience. It’s our way of ensuring the
next generation of farmers face fewer of the challenges and enjoy
more of the rewards of farming.
Meanwhile, we hope you enjoy your first issue of Landscape. •
* The Lloyds Banking Group includes companies using brands including Lloyds Bank, Halifax and Bank of Scotland and
their associated companies.
LANDSCAPE
AUTUMN 2014
Industry Review
CAP reform, the rise of organic, milk
protests and AIMS conference review.
04
feature
06
Future of Food
Food futurologist Dr Morgaine Gaye
discusses changing consumer needs;
Balmakewan Farm responds to changing
consumer behaviour.
FEATURE
Farm finance
Business opportunities
of BPS implementation.
financial support
The benefits of Hire Purchase
for asset purchase.
Investing in People
How Lloyds Bank is supporting
rural community empowerment.
Innovation &
Diversification
The importance of diversified revenue
streams to Ireby Green.
In the Field
Lloyds Bank Agriculture
Ambassador Adam Henson
discusses diversification.
13
ECONOMIC Outlook 14
Lloyds Bank Chief Economist
Trevor Williams provides an outlook for 2015.
Key Agriculture Contacts
Contact details for the
Lloyds Bank Agriculture team.
08
10
11
12
15
ANDREW NAYLOR
HEAD OF AGRICULTURE
Lloyds Bank
Autumn 2014 • LANDSCAPE • 3

INDUSTRY REVIEW
CAP REFORM | ORGANIC PRODUCE
big picture
ORGANIC PRODUCE
CAP REFORM
‘GREENING’
RULES EXPLAINED
New rules announced on permanent
grassland, the ‘three-crop rule’ and
Ecological Focus Areas.
The UK Government has announced
an update on what last year’s Common
Agricultural Policy reforms will mean to
the UK’s farming industry. Their release in
August 2014 focussed on the ‘greening’ rules.
Greening
The Single Farm Payment, through the
current Single Payment Scheme, is changing
to the Basic Payment Scheme in 2015, which
includes three rules that must be followed
to qualify for a ‘greening’ payment – around
30% of the total income.
Permanent grassland:
The ruling is dependent upon grassland levels
across England – if it falls below 5%, then any
permanent grassland will need to be
reinstated. Other permanent grassland
covered by the Wild Birds and/or Habitats
Directives (Natura 2000) must not be
ploughed, and it is thought the majority
of farmers already adhere to the ruling.
Crop diversification or ‘the three-crop rule’:
There is a requirement to grow two or more
diverse crops for farmers with 10-30 hectares
of arable land, with the main crop not covering
more than 75% of the land. For farmers with
more than 30 hectares, three or more
different crops must be grown, with the
main crop again not covering more than
75% of the arable land.
Ecological Focus Areas (EFAs):
Farmers with more than 15 hectares
of arable land will be required to have at
least 5% of this land dedicated as an area
of ecological focus.
There will, naturally, be exceptions to the
rules for greening. We strongly recommend
that all farmers take the time to read the
new rules online by visiting:
www.gov.uk/government/collections/
Improvement in sales of organic products
have been widely felt as the UK emerges
from recession.
The popularity of organic products
is again on the rise, according to figures
recently released by the Soil Association 1 .
The numbers show a growth in the organic
grocery market of 2.8% in 2014, reversing
a previous decline in organic food sales.
In the four weeks to 16 August, the
organic grocery market grew by 3.2%,
while the non-organic market fell by 0.9%.
It marks a change in attitudes towards
organic food since the recession, with
83% of the UK’s households now buying
organic products of some description.
The growing popularity of organic
products may be a consumer response
to a Newcastle University report 2 which
found that some organic crops may be
60% higher in antioxidants.
Better for farmers
As well as consumers wanting to enjoy the
benefits associated with organic farming,
a recent Soil Association report 3 found that
organic farms sometimes outperform their
non-organic counterparts by almost £80
per hectare, per year.
The study highlighted that ‘a small
increase in organic yields of just 10%,
through innovation and management,
has the potential to increase net margins
by as much as 20%’.
What is clear is that confidence in
this sector is currently high, and as more
shoppers look to be returning to organic,
the sector could present a compelling
proposition for farmers. •
1
Soil Association news report, September 2014
2
Newcastle University press release, July 2014
3
Soil Association, Organic farming: how it stacks up, March 2014
common-agricultural-policy-reform. •
DEMAND RISES
4 • LANDSCAPE • Autumn 2014

INDUSTRY REVIEW
milk protests | aims conference
AIMS CONFERENCE
GROWING
OPPORTUNITIES
FOR MEAT
INDEPENDENTS
MILK PROTESTS
MILK PROTESTS REFLECT
PRICING UNCERTAINTY
Wholesale milk prices continue to divide the sector,
with protests across the country mirroring the SOS Dairy
campaign of 2012.
Many farmgate prices have fallen by 20-30% since
January, and all four major UK dairy companies announced
further price cuts in October. This has placed a large strain
on profitability for the sector’s farmers.
Led by lobby group Farmers for Action, protests were
held in early October at the distribution centres of Morrisons,
Dairy Crest and the Co-operative in Somerset, Derbyshire
and Hampshire respectively. At the time of writing, further
protests were planned for the latter part of the month.
“There is a serious issue here and we need to make
people aware,” said Farmers for Action Chairman
David Handley.
In reply, many farmers believe milk processors have no
choice but to reduce prices, citing a fall in global commodity
prices, a consumer demand which has provoked
a supermarket milk price battle, and the banning
of all Western exports, including dairy, into Russia.
Meurig Raymond, President of the National Farmers,
Union commented: “These are extremely turbulent times.
That is why it is absolutely vital everyone in the dairy supply
chain shows commitment at this time.
“Milk processors, retailers and dairy farmers must work
together to minimise the impact of the current price falls
on dairy farmers and look to the future by opening up new
markets for milk and creating new products.”
Despite this, many sector commentators expect a
further two years of unpredictability to affect the industry,
and farmers are advised to consider this when making
business and forecast plans for the next couple of years. •
85%
Amount of milk produced
by the country’s dairy sector
which is used within the UK
Source: FFA figures quoted in
Farmers Weekly, October 2014
30p
Estimated cost of
production for 1 litre of milk
Source: BBC, October 2014
27.04p
Purchasing rate paid by
Dairy Crest per litre of milk
in November 2014
Source: Dairy Crest announcement,
September 2014
27.10p
Purchasing rate paid by Muller
Wiseman per litre of milk
in November 2014
Source: Farmers Weekly, October 2014
Growth in the catering industry is
providing great opportunities for
independent meat suppliers, said
Norman Bagley, Chief Executive
of the Association of Independent
Meat Suppliers (AIMS), at their
annual conference.
Norman pointed out the
flexibility of supply that independent
providers can offer, explaining: “The
catering sector is thriving and that
has to be supplied by a part of the
industry which is flexible. Our part
of the industry is in a strong place.”
Norman’s words followed further
positive news for independent meat
suppliers from Dominic Morrey, a
Director of Trading at Booker Group.
Dominic explained that: “There
has been unprecedented change
for food suppliers in the past five
years and I see that continuing.”
He pointed out the fading
dominance of supermarkets, with
an expected growth of just 8% over
the coming five years, compared
to smaller retailers and discounters
who are set to grow their market
share considerably.
He added that certain sectors
were likely to see huge growth
over the coming years, with
eating out increasing by
18%, discount retailers growing
by 65% and online food retail
seeing a growth of 100%.
Dominic concluded by
highlighting the growing popularity
of farm shops and farmers markets.
His words should prove positive
news for farmers seeking additional
sources of revenue, as these outlets
give them greater control of pricing.
For more information about
regulations affecting farmers
markets and farm shops, visit
www.gov.uk/farm-shops-andfarmers-markets.
•
Autumn 2014 • LANDSCAPE • 5

FEATURE
FUTURE OF FOOD
‘Simplicity’
the food of the future
Could consumers demand even more from their food retailers
According to food futurologist Dr Morgaine Gaye, there’s an emerging
trend focused on truth and transparency, which calls
for simplicity rather than clever marketing.
T
he rising consumption of local
produce further highlights
that consumers increasingly
understand the need to take ownership of
their diet, says Dr Gaye. “For too long, people
have put their well-being in the hands of
doctors and hoped they could be healed from
everything. However, they now understand
the need to take ownership of what they put
on their skin and put inside of their bodies.”
Consumers have lost trust, adds Dr Gaye.
Mad cow disease, the horsemeat scandal,
health scares and even constant exposés
unrelated to food have made consumers
wary and suspicious. Brands, especially those
in the retail food market, have to earn trust
like never before, she says.
Moving towards the “authentic”
“I see the move towards anti-packaging and
quiet branding,” says Dr Gaye. “People are
wising up. Marketing, social media sites and
TV ads have done a great job in constructing
a sense of provenance and ‘home-made’, but
we’re moving beyond the power of that sepia
photo of a supposed grandfather making
whisky. It’s starting to feel over branded.”
The reaction to this, she predicts, is an
ever-more discerning consumer looking for
true authenticity and willing to be educated
and informed.
“This is something farms and food
producers need to embrace. It is timeconsuming
enough dealing with immediate
supply issues, especially with the demands
placed on them by the large supermarket
chains, but responding to the consumer
demand for authenticity is vital,” adds
Suddenly there is much
more awareness that we
need to grow our own
produce, whether as
individuals or a nation.
Dr Gaye. “It may start small, with a few
farmers, just as the move to organic did,
but there are already some powerful changes
happening through farm shops, which
are gaining in popularity and are providing
a self-sustaining outlet for farmers.”
Future demand
So won’t it take the big retailers to adapt to
customer demands first Dr Gaye believes
the current price wars between supermarkets
are a temporary phenomenon. What she
expects to see is a wider gap between
cheapness and quality, but the two will
not be mutually exclusive.
“There’s no shopping ‘experience’ in
going to an austere Aldi or Lidl, so consumers
will be just as inclined to buy cheaper bulk
pantry items online and then pay more for
quality where it matters, such as with the
local butcher or farmers market, for example,”
she says.
Some supermarkets are already reacting
to this change by embedding the high street
or market experience in their stores, with
greengrocer ‘stalls’, and this will increase.
Consumer trends
One specific example of this drive for
simplicity and authenticity is what she
calls an ‘uprising against pasteurisation’.
“There are waiting lists for unpasteurised
goat’s butter,” she says. “People are becoming
more aware and they want dairy products
from animals that are pastured or grass-fed,
a diet natural to them. We’ll start to see more
diversity in the grains used and, rather than
highly-bred wheat, we’ll see Ethiopian teff,
6 • LANDSCAPE • Autumn 2014

FEATURE
FUTURE OF FOOD
case study
Responding to the
consumer demand for
authenticity is vital.
red wheat and winter wheat, because these
are easier for us to digest and also because
they create new consumer interest. And
organic will no longer be enough as people
will realise their organic seedless grapes or
Rainbow Trout have been modified to be
that way.”
For farmers, Dr Gaye predicts new
markets for niche and unusual products
and an increased awareness and respect
that farming will have “value and meaning”
to consumers. There is also a need to
reflect the consumers’ growing focus
on sustainable food produce.
“Consumers previously knew that if they
had the money, they could buy whatever
product they wanted. However, incidents like
the Icelandic volcano eruption a few years
ago showed how reliant we are on imports.
“Suddenly there is much more
awareness that we need to grow our own
produce, whether as individuals or a nation.
We must be able to ‘survive’ without external
reliance, and the farming community has the
ideal opportunity to respond to that demand,
and even lead the way.” •
Dr Morgaine Gaye is a food futurologist
who runs a consultancy and trend
forecasting bureau. Her work researches
future global trends, ideas, products
and media, with food as the main focus.
Her words and voice provide frequent
insight through a range of media and
public lectures, and she works on product
development with a variety of major
global clients.
Love of local
means business
for Balmakewan
A beautiful setting and the hunger for local food have
brought farmer Phil Swire success. Having recognised
his arable farm couldn’t sustain a future for his family,
Phil noted the growing trend towards trusted, quality
farm shop produce as an opportunity to grow.
f
ormerly dairy farmers, Phil
and his family moved to his
Balmakewan Farm in 1992,
growing oilseed rape, barley and wheat
on its 350-acres.
“We saw that the size of our holding
didn’t offer a long-term future for us and
the opportunity arose to buy an old coach
house on the property,” explains Phil.
“It needed a lot of work but it made sense
to do something with the building, and
we decided on a farm shop, a tea-room
and two holiday cottages.”
Phil carried out his own research,
but also took advice from a firm of
agricultural consultants with wide
experience in diversification. They
helped him with the feasibility study
and his cashflow forecasting.
“That was back in 2005,” says Phil.
“People were just starting to be interested
in eating local food and supporting local
businesses and we wanted to tap into
that change in the market.
“Three years later – when we were
in the building stage – along came the
crash. We were lucky that we had a buffer
in that we’re in the catchment area for the
Aberdeen oil industry. The fact that our
bank stuck with us and didn’t dither about
lending was invaluable.”
Opened in 2012 after a lengthy
planning and build process, the farm shop
sells produce from other local, trusted
suppliers and Phil found that, as a farmer
talking to other farmers, it was easier to
source top-quality products at the right
price. The feedback from his customers
has been fantastic and Phil has gradually
increased the range of Balmakewan’s own
products on sale in the shop.
“We’ve had great support from our
bank. There’s always been a real human
being at the end of the phone with a
wealth of experience to share,” says Phil.
“We are just in the process of adding
a biomass boiler and solar panels and we
have a lot of consolidation to do after so
much capital expenditure,” concludes Phil.
“But we’re always looking for new things
to add value to the farm, having already
developed a nursery business selling
rhododendrons and azaleas, while
also using our grounds as a venue
for marquee weddings.” •
Autumn 2014 • LANDSCAPE • 7

feature
farm finance
The shifting landscape
of farm finance
Fundamental changes to farm support payments come into play
next year. The imminent arrival of the new Basic Payment Scheme
(BPS) to replace the Single Payment Scheme is an opportunity
to stand back and take stock of wider farm finances.
8 • LANDSCAPE • Autumn 2014

feature
farm finance
There’s no doubt
the BPS is a
fundamental
change and should
be a reason for
farm businesses to
stand back and take
stock of their aims
and objectives.
hile some of the details of the BPS
scheme are still to be finalised, key
W
components around greening and
the three-crop rule, for example, are already
being taken into account. Arable farmers
in particular have been working with the
new guidelines to plan their autumn drilling
programmes. But while the headline news
may be putting the focus on the BPS, there’s
more to the story.
There’s no doubt the BPS is a fundamental
change and should be a reason for farm
businesses to stand back and take stock
of their aims and objectives and how these
fit with the new support structure.
The BPS is an important part of farm
income, but let’s not forget that what the
farmer actually produces is usually the
largest element of farm income. The arrival
of BPS could be the trigger for businesses
to look at what they are producing, how
they’re producing it and who it’s destined
for. It’s critical for farmers to make sure that
any decisions they take to maximise their
BPS eligibility fit with their overall farming
enterprise and the market as a whole.
Every farming business should keep
a weather eye on costs as well as income
streams. All farmers know that one of the
biggest influences on the funding landscape
is the volatility of commodity prices.
This makes it far from easy to plan cashflow
and budgets, which is vital information the
farm business needs when looking to raise
additional finance.
Whilst farming businesses can’t control
all their income, it’s important to know
production costs inside-out. And, when
making a change to any systems or
enterprises, it’s also wise to make sure these
are in line with the medium- to long-term
strategic plan for the business rather than
simply reacting to short-term changes
in market conditions.
That strategy also needs to take into
account risk management and analysis of
what costs can be controlled. Forward markets,
for example, can be used to purchase some
inputs, while the current historic period of low
interest rates means it is worth considering
fixing interest costs on any loans or finance
agreements. If dealing with foreign currency
receipts or payments, it is also worth managing
the exchange rate exposure effectively.
The support of a strong banking partner
which understands the changing demands
of the agricultural industry and responds with
the right products and knowledge is key.
At Lloyds Bank, investment in our
agricultural sector team has put more people
on the ground to help with farming businesses’
propositions, planning and risk management.
Their access to specialists and products in the
risk management sphere is providing farmers
with a further level of control over certain key
costs, helping support the Bank’s aim to help
British farmers keep putting British food on
British tables. •
ALICK JONES
AGRICULTURE RELATIONSHIP DIRECTOR
Lloyds Bank
special
offer *
Making the most of your
CAP payments
How do you make your CAP payments
work harder for you When you know
you have a bill to pay at a certain date,
investing the money in a high interest
deposit account can be the answer.
Often, farm businesses have specific
plans for their Single Payment Scheme or
Basic Payment Scheme income. These are
often linked to a definite future date, such
as a tax bill that’s due in six months or
a deposit to be paid on new machinery.
It makes sense to separate the money
that will pay for these and earn interest
on it until it’s needed without distorting
everyday cashflow.
For a short period only, Lloyds Bank
is offering you the opportunity to invest
your money into our new Special Fixed
Term Deposit – specially designed for
agriculture customers. If you have a
minimum of £10,000 to invest, we are
offering a competitive fixed rate of
interest for a minimum of 90 days.
This Special Fixed Term Deposit offer is
open from 1 December 2014 and closes
on 19 December 2014, and the deposit
matures on 19 March 2015.
To make the most of your money,
speak to your local Agriculture Relationship
Manager on how to take advantage of this
special offer or to discuss any of our other
savings products. •
*Terms and conditions apply.
Autumn 2014 • LANDSCAPE • 9

FINANCIAL SUPPORT
HIRE PURCHASE
Funding support:
Safeguarding cashflow
Managing working capital is fundamental for most
businesses, especially in the agricultural sector.
T
he price most farmers
receive for their produce is
set by wider commodity markets
– making it difficult to control income.
This means keeping a sensible amount
of working capital available is paramount
to protect against unexpected events.
Using that cash or a working capital
facility to buy equipment or vehicles
rarely makes financial sense.
A farm’s overdraft should cover
day-to-day cashflow and working
capital, but too often the facility is
used to support the purchase of new
assets. However, using an asset finance
or hire purchase agreement can usually
prove a better long-term decision as it
matches the finance term to the life
of the asset and supports increased
productivity and growth, whilst
safeguarding cashflow. These
agreements also use the actual asset
being financed as security, so keeping
the farm’s core assets available
to support day-to-day trading
or longer term strategic projects.
A £60,000 second-hand combine
purchased using an overdraft may
seem like a saving, because loan interest
rates are not being paid, but taking that
much cash out of the working capital
can put a business in a vulnerable
position – especially given today’s
volatile commodity prices. That cash
may be needed further down the line,
and it takes the flexibility for other
capital expenses out of the business.
Hire Purchase
Hire purchase spreads the cost of a major
purchase over a set term, with a one-off
payment at the end to transfer ownership
to the business. At the end of the
agreement title and ownership of the asset
will transfer to your business. The initial
deposit is often flexible, allowing for the
negotiation of the best agreement for each
farming business, while the costs of the
asset can be spread over a suitable period.
The asset itself acts as the security for the
agreement, and the goods are reflected in
accounts as a business asset, with normal
tax and writing down allowances claimed.
At Lloyds Bank, we work with
farmers to make sure they get the most
appropriate and cost-effective way of
funding major asset purchases – whether
through Lloyds Bank directly, through
our Commercial Finance business or
through a hire purchase provider.
We understand the importance of
cashflow to agricultural businesses. Farmers
are price takers rather than price makers,
meaning prices can’t just be put up to raise
more cash. Getting smart about using the
most appropriate type of finance keeps
vital working capital within the business;
hire purchase is one way of achieving
this while safeguarding cashflow. •
SIMON ABDILLA
AGRICULTURE BUSINESS MANAGER
Lloyds Bank
Asset Finance
products at a glance
Assets funded include:
Tractors, trailers and other farm
equipment including: combines, balers,
peaviners, sprayers, robotic milking
machines, telehandlers.
Cars
Commercial vehicles
Service features:
Hire purchase
Borrow from £7,500
Flexible initial deposit
Funding periods between
one and five years
Flexible repayment profile
10 • LANDSCAPE • Autumn 2014

investing in people
supporting empowerment
Investing in the
future generation
The importance of the farming sector can only be maintained by investing in the skills
of the next generation of farmers. Lloyds Banking Group understands that need and
is supporting two key initiatives which will empower farmers to grow their business
and respond to changing demands and business practices within the sector.
Get Mentoring in
Farming initiative
begins recruitment
The UK-wide Get Mentoring in Farming
initiative to support 300 small farming-related
businesses has begun its mentor recruitment
process. The scheme promotes the
development of business and management
skills amongst those employed in the farming
sector by pairing them with mentors from
across the farming and business community.
Mentors receive some training, but it’s
their ‘been there, done that’ experience
which is set to prove a vital component of the
scheme. They’ll be sharing their knowledge
on topics including improving the core
business, diversification, business growth
and resilience, technology and planning
to help farming businesses succeed.
The initiative was established following
The Future of Farming Review (2013) report
which highlighted the need for mentors to
help develop business and management
skills among new entrants and smaller
enterprises within the farming sector. It’s
backed by Government funding and the
project is supported by organisations such
as the NFU and businesses in the sector
such as Lloyds Banking Group.
Tim Sowerby, a Lloyds Bank Agriculture
Relationship Manager, is among the first
wave of mentors to volunteer their skills and
experience. He will provide two days mentoring
per month supported by Lloyds Bank.
“I feel it is important to help farmers
help themselves as they often just need a
bit of direction and a sounding board to help
them get back on track,” says Tim. “I chose
to embark on the mentoring programme as
I consider my long experience within the
Bank’s agriculture team should enable me
to offer the right level of skills and knowledge
to support a farming business seeking help.”
If you would like to act as a farming
mentor, or wish to use the Get Mentoring
in Farming programme to help support
your business plans, please visit
www.getmentoringinfarming.org.uk •
The Prince’s
Countryside Fund
The latest round of funding for The Princes
Countryside Fund closed at the end of
October, with news of the projects it will
support being announced soon.
The fund was set up to support a
sustainable future for British agriculture
and the wider rural community, and seeks
to tackle three key issues: maintaining
and creating thriving rural communities,
developing stronger rural livelihoods and
improving the skills and opportunities for
the next generation of farmers.
By supporting fledgling rural businesses,
assisting farmers to improve business
performance and encouraging the next
generation to take up rural business, the
fund is tackling issues such as isolation
and the decline in rural communities.
Lloyds Banking Group will continue to
support the fund for at least another three
years. Andrew Naylor, Head of Agriculture,
said: “We have a strong heritage with the
farming community and are one of the
country’s biggest lenders* to the agricultural
sector. We recognise that for the farming
sector to prosper, it needs to be supported
by thriving rural communities.” •
£4.4M
grants given by the Prince’s
Countryside Fund since
its launch in 2010
3,400
farm businesses supported
140
local communities supported
4,380
young people have
benefitted from the fund
18,000
children educated about food
production and sustainable farming
Source: Princes Countryside Fund, August 2014
* The Lloyds Banking Group includes companies using
brands including Lloyds Bank, Halifax and Bank of Scotland
and their associated companies.
Autumn 2014 • LANDSCAPE • 11

innovation & diversification
how ireby green has embraced diverse funding revenues
Diversification
potential counts for
farming business
Looking for their first farm, John and Sylvia Welbank knew the potential
to diversify would be a deciding factor. Following two years of hard work,
they now own a 75-acre livestock farm with a café, shop and caravan park.
I
reby Green was outside the
Welbanks’ original price range, but it
offered a number of possibilities for
additional revenue streams. The farm already
featured a small caravan site and a good range
of buildings, including a large modern cattle
shed, while its location on the main route
between the Lake District and Yorkshire Dales
National Park offered opportunities to provide
for the tourism industry.
“It was clear that as a working farm it was
uneconomic, but as a diversified farm business,
it had potential,” says John.
After major repairs to buildings, the slurry
system and water and electrics, the Welbank’s
initial focus was bringing in livestock to provide
critical guaranteed income. This included using
their land as a “B&B” for a local organic dairy
farm run by Sylvia’s father and brother.
With that in place, their priority shifted to
developing a café and farm shop. With a DEFRA
grant, and after a seven-month battle for
planning permission, the venture opened in
September 2013 and was an instant hit. “We’re
trying to meet a specific niche for really high
quality home cooking and baking with a
modern twist,” says Sylvia. “We intentionally
restrict the menu and concentrate on daily
specials based around local, seasonal produce.”
This year, the couple expanded the caravan
site, making the most of demand for seasonal
touring pitches. “Guests rent a pitch for the
full year and come and go as they please. This
means we have a regular income stream and
less management burden,” explains John.
“We actually sold all the new pitches before
we’d even completed the new site and we
now have a waiting list.”
The Welbanks now have plans to develop
a craft shop and will be testing the idea with a
pop-up gift shop in the run-up to Christmas.
New menus and one-off specials will expand
the café’s repertoire and they’ll be taking on more
staff. Wild food foraging for children and baking
courses are on the cards too.
Throughout their diversification process,
the couple have learned vital lessons. “Fully cost
everything,” says John. “Regularly review the
business plans to ensure you are where you
are meant to be and try to have a contingency
budget, because diversification costs can
quickly escalate.”
He also recommends working with a banking
partner which understands the sector. “Being
able to sit down with our local Lloyds Bank
agriculture relationship manager to go through
our ideas, capital costs and detailed business
plans meant they had confidence in our plans,”
concludes John. “They could also think outside
the box. Yes, it is a farm, but the main income
sources lie outside the agricultural enterprise.
The Bank could see this and supported us with
the extra funding needed to develop our ideas.” •
12 • LANDSCAPE • Autumn 2014

ADAM HENSON
LLOYDS BANK AMBASSADOR
in the field
with ADAM HENSON
Recognised by millions across the UK for his work
as a rural TV presenter, Adam Henson is the
Farming Ambassador for Lloyds Bank.
R
unning a 650-hectare arable,
sheep and rare breed farm near
Cheltenham, Adam is a champion
for traditional British farming. His farming
business also includes the Cotswold Farm
Park which features a camping/caravan site,
farm shop and café, and hosts a variety of
seasonal activities. In this first column for
Landscape, Adam discusses diversifying
revenue streams.
“Over the last ten years, the unyielding
variance in commodity prices and the
increase in labour, machinery and input
costs has put severe pressure on how we,
as farmers, can make a profit.
Every farmer has the opportunity to
assess their business to see if additional
revenue streams can be found, such as a
bed and breakfast, DIY livery and farm shop.
The old adage of not having all your eggs in
one basket can often prove advantageous,
especially if the chosen diversification is not
related to traditional agricultural income. It is
well worth seeing what other farms are doing
then considering how this can fit within your
own business. Market research, planning
and the effect on resources like water, power
and labour all need careful consideration.
You should also consider your own interests,
especially if you plan to be personally
involved. If you aim to welcome the public
onto the farm then customer service, health
and safety, toilets and parking all need to
be considered.
Rare breeds
Rare breed conservation is very close
to my heart. My father, Joe Henson,
founded the Rare Breeds Survival Trust
in 1973 and the country has lost no
further British breeds since then. Although
not necessarily commercially viable, our
rare breeds have a national reputation for
quality and so command good prices for
Every farmer has
the opportunity to
assess their business
to see if additional
revenue streams
can be found.
pedigree stock. There is also a growing
demand from spinners and weavers for
our rare breed wool, and customers will
pay a premium for local rare breed beef,
pork and lamb.
Carrying on my father’s legacy of rare
breed conservation is an important part of
our work at the Cotswold Farm Park. Due to
the number and diversity of breeds on the
farm, we rely on the entrance fee to help
support their upkeep.
Adding value
Before taking the plunge with any new
venture we find that taking professional
advice and drawing up detailed business
plans is essential.
There are a number of organisations like
FARMA, National Farm Attractions Network
and the Federation of Small Businesses, as
well as land agents and farm consultants,
such as Andersons, who are useful sources of
information if you are considering some form
of diversification. We are often investigating
ways to add value to our products, but decisions
aren’t made without careful planning, market
research and business models. We also think
carefully about how a potential product fits
with our brand values and long term goals.
My business partner, Duncan Andrews,
has worked with a number of suitable
associates over the past three years, drawing
up licensing agreements to expand our
brand. We work with Butcombe Brewery
who produce a real ale called “Adam
Henson’s Rare Breed” using Maris Otter
malting barley, a variety we grow on the
farm. Another associate, DLF, have created
wildflower pollinator, conservation and wild
bird attraction seed mixes for people to grow
in their gardens with the “Adam Henson
At Home with Nature” range. This is an
extension of what we do on a large scale
on the farm to encourage bio-diversity.
Creating good quality working
relationships with like-minded businesses
can provide a useful revenue stream and
help the business grow.” •
For more information about Adam’s commercial
enterprises, visit:
www.cotswoldfarmpark.co.uk
Twitter @AdamHenson
Facebook: Cotswold Farm Park
Autumn 2014 • LANDSCAPE • 13

Economic forecast
TREVOR WILLIAMS
economic outlook
There is some positivity in a volatile sector, says Professor Trevor Williams,
Chief Economist at Lloyds Bank Commercial Banking, as he reviews the
current economic situation for agriculture and provides an outlook for 2015.
Continued
growth in global
population levels
and a competitive
currency provide
opportunities for
a competitive UK
agriculture sector.
O
verall Gross Domestic Product
(GDP) in the UK is currently
2.7% above its Q1 2008 peak,
but output in agriculture is 9.2% lower than
its peak. This clearly demonstrates the
volatility of the sector – it showed a decline
in 2008 and 2009, saw modest recovery in
2011 before a further decline in 2012-13
(see Figure 1). In fact, the sector is only just
now beginning to emerge from the downturn
that began in 2012.
Sector challenges
There are many reasons behind this
volatility. Developed economies, such as the
UK, have seen agriculture decline as a share
of global output, as countries such as
Argentina, Brazil and even Ukraine are
seeing a larger share as they are more
competitive. What does this mean They are
able to produce more cheaply as they have
more land, labour costs are cheaper and
better global supply chains means they can
get goods to market more rapidly. All of this
result in them taking a greater share of the
total global market in agriculture production.
A bumper harvest in the US, meanwhile,
has meant grain stores are bulging, driving
down global grain prices. This is positive
news for farmers whose inputs include
livestock feed, as this will be cheaper. At
the same time, other input prices, such as
fuel and fertiliser, will also reduce as global
oil and gas prices fall. But, overall, lower
wheat prices will have a significant and
damaging effect on the incomes of those
farmers that are primary producers of
wheat. This means revising profit forecasts
lower within the sector.
Pressure on incomes
Other external pressures on agriculture are
squeezing the incomes of those in the sector
further. The supermarket ‘price wars’, for
Figure 1 – Price volatility in agriculture sector
22.5
15.0
7.5
0.0
-7.5
-15.0
08 09 10 11 12 13 14
UK: GVA at 2011 Prices: Total Production SA, Y/Y %Chg
UK: GVA at 2011 Prices: Agriculture, Forestry & Fishing SA, Y/Y %Chg
Sources: Office for National Statistics/Haver Analytics
example, are encouraging major buyers to
put increasing pressure on their suppliers.
Additionally, on the demand side,
Eurozone economic weakness continues.
Anticipated growth for the area is 0.5% next
year compared with predictions of 2.5-3% for
the UK. This means Sterling is likely to further
strengthen against the Euro. This not only
makes UK exports less attractive to the
Eurozone, but also has a negative impact
on the exchange rate of Euro-denominated
subsidy payments into Sterling. Some
protection against this can be found by
discussing risk management solutions
with a banking partner.
A positive outlook
Looking ahead, we can see positive growth
for the sector in the year as a whole. Quarteron-quarter
output volume growth in Q2 2014
is up 1.4% compared to the same period last
year and, despite continued slow growth in
Europe, the UK economy has shown seven
consecutive quarters of growth.
The US market also continues to show
recovery, which is good news for exports.
Continued growth in global population
levels and in the global economy also
provide opportunities for a competitive
UK agriculture sector. Indeed, there is clear
evidence that UK agriculture exporters are
finding new markets further afield. •
14 • LANDSCAPE • Autumn 2014

LLOYDS BANK AGRICULTURE
KEY CONTACTS
Twitter @lloydsbankbusiness LinkedIn: Lloyds Bank Commercial Banking
North West
Senior Manager Agriculture
Dave Knight – 07740 699968
David.Knight1@lloydsbanking.com
Cheshire & Staffordshire
Relationship Director
Colin Manton – 07739 817913
Colin.Manton@lloydsbanking.com
Relationship Managers
Angela Kirkland – 07834 946435
Angela.Kirkland@lloydsbanking.com
David Langridge – 07764 287887
Dave.Langridge@lloydsbanking.com
Paul Simon – 07725 068737
Paul.Simon@lloydsbanking.com
Cumbria
Relationship Director
Howard Bruce – 07764 287726
Howard.Bruce@lloydsbanking.com
Relationship Manager
Stephen Heywood – 07725 426460
Stephen.Heywood@lloydsbanking.com
Lancashire
Relationship Managers
Mark Westcott – 07920 210553
Mark.Westcott@lloydsbank.co.uk
David Elliott – 07764 287184
David.Elliott@lloydsbanking.com
North east
Senior Manager Agriculture
Geoff Hall – 07836 249680
Geoff.Hall@lloydsbanking.com
Relationship Directors
Felicity Hails – 07725 427923
Felicity.Hails@lloydsbanking.com
James Thornton – 07912 805688
James.Thornton@lloydsbanking.com
Relationship Managers
Tony Cornell – 07764 625064
Tony.Cornell@lloydsbanking.com
Paul Danforth – 07766 423359
Paul.Danforth@lloydsbanking.com
Sam Davies – 07725 427120
Samantha.Davies@lloydsbanking.com
Chris Redfearn – 07793 670459
Christopher.Redfearn@lloydsbanking.com
east midlands and south yorkshire
Senior Manager Agriculture
Steve Thomas – 07525 239513
Steve.Thomas2@lloydsbanking.com
Relationship Directors
Simon Sill – 07966 287412
Simon.Sill@lloydsbanking.com
Alan McNeil – 07734 973057
Alan.McNeil@lloydsbanking.com
Relationship Managers
Mike Buckby – 07793 670542
Mike.Buckby@lloydsbanking.com
Darren Franklin – 07793 670402
Darren.Franklin@lloydsbanking.com
John Oakley – 07725 068739
John.Oakley@lloydsbanking.com
Clive Patchett – 07725 068745
Clive.Patchett@lloydsbanking.com
Steve Roper – 07901 104106
Steven.Roper@lloydsbanking.com
east england
Senior Manager Agriculture
Paul Sullivan – 07801 472565
Paul.Sullivan2@lloydsbanking.com
Relationship Directors
Mark Berry – 07860 318469
Mark.Berry@lloydsbanking.com
David West – 07764 625072
David.West3@lloydsbanking.com
Relationship Managers
Mike Churcher – 07793 670512
Mike.Churcher@lloydsbanking.com
Stephen Cook – 07702 749283
Stephen.Cook@lloydsbanking.com
Camilla Darling – 07585 981122
Camilla.Darling@lloydsbanking.com
Mike Kay – 07725 068804
Mike.Kay@lloydsbanking.com
Richard Penford – 07725 068743
Richard.Penford@lloydsbanking.com
wales and borders
North Wales & Borders
Senior Manager Agriculture
Jonathan Jenkins – 07802 321355
Jonathan.Jenkins@lloydsbanking.com
Relationship Director
Mark Lord – 07767 207561
Mark.Lord2@lloydsbanking.com
Relationship Managers
Jamie Hollyhead – 07921 548502
Jamie.Hollyhead@lloydsbanking.com
Catherine Howell – 07841 490299
Catherine.Howell@lloydsbanking.com
John McGrath – 07793 670344
John.McGrath2@lloydsbanking.com
Andy Powis – 07921 548592
Andrew.Powis@lloydsbanking.com
Di Preece – 07725 068740
Di.Preece@lloydsbanking.com
Mark Williams – 07793 670460
Mark.Williams@lloydsbanking.com
South Wales & Borders
Senior Manager Agriculture
Gwilym Francis – 07788 438780
Gwilym.Francis@lloydsbanking.com
Relationship Directors
Gwyndaf Williams – 07793 670443
Gwyndaf.Williams@lloydsbanking.com
Arthur Thomas – 07841 741365
Arthur.Thomas@lloydsbanking.com
Relationship Managers
Wyn Hinds – 07793 670442
Wyn.Hinds@lloydsbanking.com
Alan Jenkins – 07793 670441
Alan.Jenkins@LloydsBanking.com
Neale Lewis – 07921 548428
Neale.Lewis@lloydsbanking.com
Bryan Morgan – 07764 287664
Bryan.Morgan@lloydsbanking.com
Ian Richards – 07793 670440
Ian.Richards@lloydsbanking.com
Tim Sowerby – 07725 427460
Tim.Sowerby@lloydsbanking.com
south central
Senior Manager Agriculture
Paul Baker – 07595 125362
Paul.Baker@lloydsbanking.com
Relationship Directors
Andy Sheate – 07860 703245
Andrew.Sheate@lloydsbanking.com
Paul Blundell – 07771 815895
Paul.Blundell@lloydsbanking.com
Relationship Managers
Julian Arthurs – 07725 068734
Julian.Arthurs@lloydsbanking.com
Paul Baker – 07834 946095
Paul.Baker2@lloydsbanking.com
Jenny Brimble – 07725 068733
Jenny.Brimble@lloydsbank.co.uk
John Fear – 07515 096943
Jonathan.Fear@lloydsbanking.com
David Stunt – 07834 946313
David.Stunt@lloydsbanking.com
Ed Warren – 07764 287953
Eddie.Warren@lloydsbanking.com
central england
Senior Manager Agriculture
Carl Woodwards – 07725 426551
Carl.Woodwards@lloydsbanking.com
Relationship Director
Alick Jones – 07771 886102
Alick.Jones@lloydsbanking.com
Relationship Managers
Lyndon Brown – 07793 670458
Lyndon.Brown@lloydsbanking.com
Sally Everest – 07900 706189
Sally.Everest@lloydsbanking.com
Colin Humphrey – 07921 548458
Colin.Humphrey2@lloydsbanking.com
Neil Phillips – 07793 670282
Neil.Phillips@lloydsbanking.com
Neil Richardson – 07901 512765
Neil.Richardson@lloydsbanking.com
John Unsworth – 07771 886093
John.Unsworth@lloydsbanking.com
south west
Devon & Somerset
Senior Manager Agriculture
Humphrey Richards – 07711 239667
Humphrey.Richards@lloydsbanking.com
Relationship Director
David Fowler – 07802 655897
David.Fowler3@lloydsbanking.com
Relationship Managers
Simon Abdilla – 07771 810223
Simon.Abdilla@lloydsbanking.com
Lee Baker – 07793 670715
Lee.Baker@lloydsbanking.com
Roger Griffin – 07725 068731
Roger.Griffin@lloydsbanking.com
Simon Rowbottom – 07764 625730
Simon.Rowbottom@lloydsbanking.com
Andy Ruth – 07793 670319
Andrew.Ruth3@lloydsbank.co.uk
Neil Wright – 07793 670253
Neil.Wright2@lloydsbanking.com
Devon & Cornwall
Senior Manager Agriculture
Steve Thompson – 07710 663111
Steve.Thompson1@lloydsbanking.com
Relationship Director
Michael Johns – 07710 030553
Michael.Johns@lloydsbanking.com
Relationship Managers
Tim Burston – 07841 780395
Timothy.Burston@lloydsbanking.com
Craig Cox – 07793 670566
Craig.Cox@lloydsbanking.com
Martin Dyer – 07872 032390
Martin.Dyer@lloydsbanking.com
Nigel Pearce – 07764 288015
Nigel.Pearce@lloydsbanking.com
John Perry – 07595 123764
John.Perry@lloydsbanking.com
south East
Senior Manager Agriculture
Steve Turner – 07801 472627
Steve.Turner2@lloydsbanking.com
Relationship Director
Simon Collier – 07867 500912
Simon.Collier@lloydsbanking.com
Relationship Managers
Alan Chilvers – 07725 068946
Alan.Chilvers@lloydsbanking.com
Graham Marshall – 07739 817878
Graham.Marshall@lloydsbanking.com
All lending is subject to a satisfactory credit assessment. There is always
a possibility that interest rates may go down leaving a fixed rate loan at a
higher level compared to a variable rate loan. However, if interest rates rise,
a fixed rate loan will remain at the same rate.
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The Lloyds Banking Group includes companies using brands including Lloyds Bank,
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Autumn 2014 • LANDSCAPE • 15

SUPPORTING UK
BUSINESS
WE’LL HELP YOU
FLOURISH
WITH AFFORDABLE EQUIPMENT FINANCE
We understand how important it is to maintain
a healthy cash flow when you’re investing
in equipment for the year ahead.
Our Hire Purchase loans can help by allowing you to
spread the payment over a period of up to 60 months.
Plus, as an added incentive, all our rates have been
reduced by 1% for the life of the deal*, thanks to
the Funding for Lending Scheme.
To find out how we can support your businesses,
contact your local Agriculture Relationship Manager
(found on page 15) or visit lloydsbank.com/flourish
*This offer is only available to businesses with an annual turnover of up to £25m.
Autumn 2014 • LANDSCAPE • 16
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