Transcript
Good afternoon, everyone.
Welcome to another Land App webinar on a Friday afternoon. My name is Dan, and I'm one of the directors of Land App. I'm delighted today to be leading a conversation all about farm diversification.
Before we get started, I just wanted to share a bit of an agenda. I'm going to spend about five minutes doing a bit of an introduction and welcome. We're then going to take five minutes just to get to know a bit more about you, so we're going to run a Slido. Hopefully, some of you are familiar with it, but I'll explain it at the time. It's just a way for us to crowdsource some answers to see who's on the call and what you're trying to get out of the webinar. We've then got about 20 minutes to meet the experts. I'm delighted to be joined by George Badger from SEZ, Christopher Kerry from Woolly and Wallace, and Emma Dennis from Proam, all of whom will introduce themselves shortly. Each of them has some ideas to bring to the table. We will then be inviting them all to come and join me for a roundtable where we will be answering any questions that you have, and I've also prepped some as well.
Throughout this webinar, if there are any questions you have, whether it's for Land App or for any of the panelists, please feel free to use the Q&A function within Zoom; it should be at the bottom of your screen. That will be covered both within the roundtable and within the Q&A section at the end.
Meet the Experts
I'd like to welcome George Badger, who's a partner at Sarah's Rural. He's been a bit of a mastermind behind some of the Clarkson's Farm mapping but is here to talk more generally about farm diversification. So George, I'd love to hear from you. Over to you.
George Badger: Great, Dan. Thank you very much. I'll just share my presentation. Hopefully, that's going to come through. Can you tell me that that's working? All right, that's good. You just need to go into slide mode again. Is it in now? Not quite yet. It should be on presentation. We can see it. I'll leave you to... We'll go with that. Um, so yeah, thanks, Dan. I just thought I'd start really before we go into too much detail of lots of different individual diversification options as to really sort of how we approach diversifications and thinking about it.
So, I'm a farm business consultant based out of Oxford, but I wouldn't necessarily think it's fair to call me a diversification expert. It's more that we visit a lot of farms and we see a lot of farms, so we can see what's working by their physical presence on a farm and also see the challenges that people come up against. We recently did 1,500 farm resilience visits with DEFRA, so we got to see a lot of sort of firsthand diversifications. I think a starting point of any diversification is identifying the need or the market around you—where are you based? And to use a pun, is there any low-hanging fruit? An example of some low-hanging fruit on one of my client's farms was just a building like the one you can see here; it wasn't particularly being well utilized. There happened to be a local startup business doing apple pressing and looking for that space, and it was a very simple license agreement and permitted development to use that space.
So you have to almost split diversifications into, are you just going to be letting your space and allowing someone else to be entrepreneurial with your farm space (be that a building, be that land) or are you going to be managing a trade yourself? Because they're two very different things. And often starting with the first and getting used to people coming onto the farm is probably a safer place to start. It's certainly much riskier, there are obviously tax implications of that, but that is where I would start with the low-hanging fruit, and buildings are probably the easiest one of those to start with.
If you are looking to manage it as a trade, you need to be starting with a business plan, thinking about cash flow, loan requirements. But the key is really then your return on investment. How much am I going to have to spend up front versus how much am I going to get back? And you really want to be targeting 10% there. So, if I've invested say £50,000, are we going to be making at least £5,000 a year from that? Grant funding may be available. The Rural England Prosperity Fund and Farming and Protected Landscapes are always worth checking out first. But then probably the most important is a marketing plan and connecting with your audience. Do not underestimate the value of a brand or just paying a third party to do some website copywriting or a professional photographer to get some photographs done. Someone helping on sort of how you word a social media post. I've seen firsthand the difference that getting someone to help on proper marketing and sort of wording of things can make.
Lastly, experience versus a product. You can often get wrapped around the axle thinking about, "Oh, I need to be selling my product for a premium item." Well, actually, a lot of people are after experiences now as much as products, or probably even more so. You know, so pumpkin picking: people are wanting to come for the experience of picking a pumpkin rather than actually buying that pumpkin. And that can be rolled out to a whole load of things. So, can you be doing on-farm experiences and people paying for that experience rather than just taking away a bag of flour with them at the end of the day?
So, moving on to investment versus returns. Here's a bit of a complicated graph, but what I'm trying to show here is the return on the left-hand axis versus the amount of investment you've had to put in at the beginning. We can see some quite simple ones down in this bottom left-hand side. And I've also done ongoing management requirements in green, with a traffic light system. So, you might have a low ongoing management, low investment, but likely low returns, starting something simple like a camping pitch or some easy wins like lending land for horse livery or grazing. That is at the opposite end of the spectrum. I would see a high investment, something like a rural office space. There's a lot of cost to convert that to get that up and running, get it to a good specification, and there's a probably a ceiling as to the returns you're going to be able to make from that. So, you could compare that then to classic car storage, again, low ongoing management, with a bit of investment to get that up to a certain storage specification, generally quite high returns for people paying to store their cars. With a lower investment but still quite high returns would be something like container storage.
If we then look at the sort of more medium-level management involvements I've seen—and I should say these are all things that I've seen successfully done on a farm—horsebox coffee or it could be a horsebox alcoholic machine, so being able to convert something, take it to shows, or even if you have a busy public right of way coming across your farm, being able to sell directly to the public. A dog-walking field, I know Chris is going to touch on that, but some good, quite high returns are coming from those. And then a newcomer into this space is something like a paddle tennis court. Again, investment is reasonably high, but returns are quite strong if you are in a space where there isn't a competing one already.
Then there's some of the sort of high ongoing management of low investment, but there is still some return. You see sort of some quite interesting people wanting to pay for farm experiences. "Can I come on a tractor-driving session?" You'd be surprised that people who want to pay to go and experience being involved on a farm or a farming business. Or it might be a workshop: "Come and learn how to do hedge laying," or "Come and learn how to do hedge planting or tree planting." Again, it's people getting out into the countryside and just paying for that experience. That can be very low investment and reasonably lucrative. The step up from that is then sort of public events, and that really then merges into cafes and farm shops. These sort of start increasing in the investment required, whether there are buildings required, you know, you're then into all the regulations and environmental health and kitchens and providing food, etc. But of the two, between a sort of cafe and something focused around children's and play areas, I've tended to see that they're bringing in slightly higher returns and slightly less investment than something like a farm shop that does require a high labor input without necessarily significant margins being able to be made just because of who you're competing with against products. So the farm shop often needs to be coupled or tacked on to something else. The last one we've mentioned here is the recent sort of rural spa, which seems quite popular, with people wanting to escape and have these spa treatments, often not for sort of high-investment infrastructure either. So something a bit more rustic in a rural location is seemingly quite popular.
So hopefully that gives you a bit of a flavor of things that we've seen. And I think it's just useful to think about how much do I need to spend to get there and how much am I going to make back from it, bearing in mind this sort of 10% rule. If you can make that even higher and get your money back in a year, in two years, in three years, in four years, or am I going to have to wait 10 years plus to get my money back?
And then just to finish, moving on to utilizing Land App. This is a bit of a plug to help you here, Dan, but I use the Land App an awful lot. This was just an example of plotting some new farm buildings. So again, new farm buildings often enable the reuse of the old farm buildings, but just things like drawing shapes and being able to color them in and rotate them. So here you have an access track in a concrete yard, some buildings. We'll plot on a lean-to, we'll plant a hedge here. We need to watch out for where those in-field trees are. We'll put a soil bund where the brown area is. And with the new mobile app, being able to view that map on your phone is particularly useful for a greenfield site. You can see yourself as the blue dot and then you can stick a peg in the ground to say, "Okay, the track needs to go about here, or the corner of the building should roughly be here." It's not going to be pinpoint accurate with your phone, but it's a useful starting place.
Being able to draw a radius around buildings: if you're planning a new livestock building, for example, and the restriction is 400 meters from a non-farm residential dwelling, you can see in this example here, we're able to draw a radius very simply, type it at 400 meters, and then you can know your almost exclusion zone of where you can't put a livestock building unless you need full planning. And then just being able to see the data layers: flood zones, ownership, gas mains, you know, is there going to be an option for an AD plant, gas to grid, or electric lines? Should I be thinking about batteries? Local habitats. A flood zone is very useful for plotting new farm buildings. Make sure you know that they should be just outside of the flood zone rather than in it and small things like that. So yeah, it's a very useful tool, and in summary, I look forward to taking some questions.
Dan: Perfect, George. Thank you so much. Plenty of food for thought there, and we will come back to George during the Q&A. So, any particular questions, I've seen some coming through, please use the Q&A. I'd like to welcome our second speaker, Chris Kerry from Woolly and Wallace, who's going to give us a bit of an overview of some of those diversification techniques that George just covered. So, George, feel free to turn your camera off and go on mute. And Chris, please come join us.
Chris Kerry: Hello. Hello. Thank you for having us. Um, thank you for having me. I'm sat here in Marlborough in Wiltshire. Just to give you a bit about me, I started life as a general practice rural surveyor, and sort of over the years, I picked up more and more rural planning jobs and almost by accident found myself specializing in rural planning, which is a bit of a minefield. So Dan's bribed me with the promise of a free year's Land App membership to run through a few examples of case studies we've got on. So I'll just run through a couple now and I'll share my screen. So I'm going to touch more on actual examples, so moving on from ideas and actually implementing them. One of the headline questions can really be planning permission for the...
Dan: Yeah, Chris, just to let you know, your Wi-Fi is a bit rubbish. If you want to turn your camera off while you're talking, it might make the sound quality a bit better.
Chris Kerry: Is that any better? Sweet. Yeah, that's much better. So, yeah. So, this is great. You can see my screen. Just running through a couple of examples. So, building on what George has said, we have very much different ends of the spectrum. So, return on investment and capital outlay at the outset is obviously a huge consideration for a lot of clients. I'm going to start on a fairly sort of grassroots-type example. In this example, we've got a 450-acre dairy farm. And if you remember back to I think it was 2020 where Boris announced the COVID lockdown, overnight their business changed dramatically. You probably remember videos of farmers tipping milk down the drain because the outlets for milk changed with restaurants and cafes being closed. Now, this business saw this as a bit of an opportunity, and they made a milk vending machine.
If you look on the screen where the blue square is, that was an existing agricultural building, and what they did was quite simply install a milk vending machine in the building and then a number of other vending machines. So, they were selling milk, bread, and the like, and that did very well during COVID. Now, this isn't the only person to have done this. I'm sure many of you would have seen milk vending machines pop up locally to you. What sets this one apart is what they did next. As you'll see, there's a lease labeled as a dog paddock. The client used that field next to the vending machine as a dog paddock. Unfortunately, being a bearer of bad news, I had to tell them that as it presented a material change of use, we had to move to working through the planning system, and we did gain permission for it. The nice thing about this one is we've done a few dog paddocks, and the general business model is you turn up, you let your dog out, it runs around like a madman for an hour, back in the car, and you go home. Whereas what we have here, we have businesses that are really complementing each other. So, on this occasion, you're turning up, you're grabbing your coffee, you're walking your dog, and then before you go home, you're grabbing your cheese, you're grabbing some steak, and then you're going home thereafter. We then further built upon that. If you see the green square next to the blue, that was a further extension. So, within that extension, we've also now included a dog groomers, so you're now going home with a pampered dog, and we've got a florist in there. So, we have two other local businesses, both of which are paying a rent and which are again diversifying the farming business that's been run for years.
Now, I'll go to another extreme. Previously, we had a small business that was diversification in terms of the actual initial investment; I think it was somewhere between £15,000 and £20,000. You can do it cheaper, but on that occasion, they put electric gates in and made it quite fancy. Now, moving to this extreme, this was a major farm diversification towards Shrewsbury. We have a pig farmer who was sick of the volatility of the market. It was pigs and arable, and it got to the point where pig farming just wasn't working for him. So we came to the site and looked at ideas. What we ended up moving forward with was a massive change of use to commercial. So if you look on the screen here, we've got a central farmyard, and we ended up changing 130,000 square feet of agricultural buildings to commercial with a brand new access leading off a main A-road right down to the farm. So, it goes without saying that the initial cost and the initial outlay with this example was significantly higher than the previous example, but with risk, you get the reward.
And one last example just to touch on another client of ours, again, at different ends of the spectrum also: Cot Marsh Farm also in Wiltshire. They bought the farm with a strong mindset of agriculture and sustainability, and they have really come on leaps and bounds with what they're doing. As you'll see here, quite a lot of the BBC and other news outlets have been reporting on them. So, we've looked at the existing buildings, and we've converted one building into a farm classroom which is teaching all about the route from farm to fiber and the creation of sustainable fashion. As you see, Kate is modeling one of our hats. They're dyed with botanical dyes produced on the farm, and they're also making a natural cow leather tannery from sustainable methods. So, it's another option that has really buffered the farming business. Alongside that, we're also doing a glamping site. So, that's just three examples to consider while you're thinking about diversification. But planning, the planning system is really a hurdle and can take quite a long time to get to where you want to get to in the end, and Land App is quite a useful tool for working out whether the site is actually a viable site for the idea. I think we're going to touch on that later. So, that's probably enough from me with some examples.
Dan: Great. Thanks, Chris. Really enjoyed that. I think one thing that did come up from that, which I know George touched on, is how do you tell your story? The fact that the news picked up something around your diversification acts as a whole new communication stream that you just can't control. But perhaps that's part of the decision-making process: how unique is this? How do we sell the story? I know many people will benefit from that, and hopefully, that helps more people be aware of what you're trying to achieve. Thank you so much.
The final quick presentation is more of a discussion. I'm going to welcome Emma Dennis from Proam to come and join me for a bit of a chat around diversification. However, rather than talking about diversification in terms of changing land use away from agriculture into these different enterprises, I'd love for you to come and introduce yourself and just talk a bit more about land-use diversification in the light of protecting existing revenue streams. We've obviously had many conversations about protecting crops, for example, where you've got lots of flooding or lots of drought. How can you diversify your land to protect your revenue streams, particularly in light of climate change? So Emma, if you could come off mute and turn your camera on, we'd love to hear a bit more of your thoughts on that.
Emma Dennis: Okay. Is anything happening there? I've turned on my video.
Dan: We can hear and see you perfectly. So do you want to introduce yourself first?
Emma Dennis: Hi, everyone, and thank you for the invitation to join this discussion. I hope everyone's enjoying using Land App as much as I do. But I certainly find it a useful tool when talking with customers and clients about how they might diversify and add more resilience to their farm businesses. Particularly as we're seeing more extremes in weather, it's putting extra pressure on our agricultural production systems, and it's making us focus more about crop resilience and drilling into more sort of ways of improving soil health and optimizing income streams which might arise from things like that. So we could be looking at valuing our soil health by adding value with carbon credits. So that's a sort of a diversification stream that's coming up the agenda at the moment. But how do we do that? In terms of how I might advise farmers is what land use changes we could use to help improve the carbon content of our soils.
We're looking at water management as well. So we all know that water quality is rising on the agenda. It's a really important issue, and land managers have a lot of influence on ways we can improve water quality and protect it. Air quality and also biodiversity. So until we've kind of got baseline data about an area of land, that provides a platform to then measure change and inform different management decisions. So yeah, any comments on that, Dan?
Dan: Yeah. Well, I think you're exactly right, which is, as a farmer or as a person advising a farmer, really understanding the context of the current business is critical. And that's both in terms of what existing assets you have, you know, what old buildings have you got or what's currently working well in terms of cropping. I think what I love about the approach that you and many of your peers take is really understanding where the yield is doing well, for example, where the profitability is coming from, and how do we really protect that. So for example, before the call started, Emma, you were talking about drought at the moment, you know, I'd love to hear a bit more about drought and the issues Somerset's facing and what impact that may have, but also tangible steps that could be considered when you're thinking about diversification of land.
Emma Dennis: So, in terms of drought, I think we're looking at our annual cropping system, which we've relied on quite heavily for many years. We might be starting to look towards perennial crops such as vineyards or agroforestry and strategic planting of woodlands. So, we are retaining our agricultural resource for crop production where it's feasible and viable. But, you know, we can also use mapping to review yield and field performance or land performance over a few years, so we can see areas of the land that might be performing less and analyze that as to what the problem might be. But if it's basically marginal land that we're trying to crop, maybe it would be better used for an alternative land use or habitat creation, which we might be able to be rewarded for with an agri-environment scheme, for example.
Dan: Yeah, I think there are so many different ways of making the thing happen, but it's understanding what you want to happen before you can implement it. So, is it a pond you want to create or a reservoir? And I think this is where the beauty of the advisory sector comes in, which is if in doubt, there are lots of people out there that can help you. So if you're a farmer on this call and you know that drought is going to be an issue and you're really struggling with working out what's next, there are lots of organizations that can help, and there are commercial entities that can help. There are government grants. I don't know how far George the future farm resilience fund is stretched, but I think that's maybe closed. But just get in touch, start speaking to people if you're out there and you're really wanting to understand diversification. There are people like Emma that can come visit and be a friendly face to help you understand what those next steps look like and whether that is about land-use diversification or crop diversification. There are so many different options. But I think the bottom line is that farming is changing, and we really need every farmer to understand that and work out how they can adapt. And that's both to climate change and to changing financial pressures, trade wars, you know, whatever else is happening in the market. We need to make sure that we're ready for it. And I really think advice and people like Emma are there to help. Great. Emma, is there anything else you wanted to add before we start?
Emma Dennis: It's just, you know, Land App has a wealth of information, so you can bring multidisciplinary teams together to consider thoughts and ideas, and you can model those ideas over a number of years as well. So for example, if it's an SFI rotational action, we want to be able to have a discussion with somebody about how that might influence their rotation, not just in the first year of the scheme, but how it might work in the second and third year, bearing in mind the crop rotation and integrated pest management and how it all comes together. So yeah, no, there's been some really fantastic discussion and some wonderful diversification ideas. I know people are looking for inspiration. I mean, here in the Southwest, we've got a lovely sheep trekking enterprise, which I thought was very novel. So you can halter a sheep and take it for a walk, which I thought was quite fun. And here around the Exmoor area, which is a designated dark sky reserve, some of the more rural businesses have a great opportunity to exploit the night sky's darkness with stargazing as a really sustainable way of agritourism.
Dan: Amazing. I have been to one of the dark sky plots in Wales called the Elan Valley, and it was beautiful. That's such a nice idea, and yeah, I guess it's back to that really key point that we keep coming back to: diversification really depends on your context. I think there are opportunities out there for everyone. Chris has really clearly articulated, you know, if you're on a public footpath or you've got perhaps "issues" with dog walkers, does that become an opportunity for you? Conversely, what Emma's just said about night sky, perhaps you're so far in the sticks that there's no light pollution. How can you start thinking about that as an opportunity as well? Emma, thank you so much. What I'd love to do is welcome Chris and George back on to the chat. Between the four of us, I'd love to just have a bit of a conversation, and we can also start picking up some of the questions that have come through on the Q&A. What I would say is there are plenty of you on the call, and we've got a great group of experts here, and although George was being a bit modest, if you have any questions for them, please do use the Q&A function.
My first question just for George was, in your experience—I really loved the chart, by the way, I think it was very visual—but I guess more generally speaking, what are the biggest financial or logistical hurdles for farmers to face when they're embarking on maybe some of those higher-value but higher-impact diversification forays, so to speak?
George Badger: Yeah, good one. I mean, planning is probably a big one. And I know Chris can probably give a bit more detail on that. Whilst there are permitted development rights available, they can be fairly limited, and so you might need a full planning application. In terms of financial hurdles, I think often financial is trumped by the time taken and that sort of management headspace. I wouldn't underestimate, you know, they can become a distraction, and you don't want it to detract from your core agricultural business. And so you do need to have enough time if you are doing something sort of in hand in order to make it a success because often I probably say I would see time and enthusiasm input almost directly proportional to success. If something is sort of started half-heartedly, it's unlikely to happen. Whereas if you have someone who's completely passionate and committed, that's what will make it a success. And so it's about the people as much as the money.
Dan: That's actually a really good point. And actually, Chris, I think we spoke a bit about this yesterday or whenever we spoke. I guess with diversification, money can be one driver, but there are other reasons that a farm may want to diversify. So you spoke about a couple of things, whether it's enthusiasm. I just wonder whether there's anything in particular that comes to mind other than financial drivers that a farm may want to diversify on.
Chris Kerry: Yeah, I suppose building on George, if you don't like people, don't invite people onto your farm. So, that's probably a quite good talking point. But what I also want to build on is planning a little bit. Ultimately, all projects and all planning is to be determined against a development plan. So, first we've got to assess, you know, is it deliverable from a planning context? Or actually, firstly, does it need planning? There are a number of projects where you can argue it's ancillary to the agricultural business you're already running. So it's still agricultural. For example, bottling your own milk or tanning your own leather and inviting people to purchase that, that wouldn't require planning because that's ancillary. And like George said, you have permitted development rights. You've got your Class R available, which is an incredibly useful tool. A lot of people think it's not available in the A1 and B, but it is. So it's a very useful tool for change of use to commercial uses.
Dan: You'll actually keep going down that thread because I think there's some more in there, which is about planning permission because we've actually got a question from the chat as well, which is around the tax implications. So I know you did the dog walking thing. Could you just elaborate? You've got the planning, but what does that mean for agricultural tax relief? I'm not sure if you can comment on that or George as well.
George Badger: Yeah, that's where you raise a flag and say, "Talk to your chartered accountant." Definitely get your own advice. But broadly speaking, something that's no longer agricultural wouldn't qualify for agricultural property relief, but there is business property relief. So, if you are running something as a trading business rather than just letting someone else rent space or land from you, that's the key difference. Because if you are running a business still, it could qualify for business property relief. But of course, the chancellor has now thrown all of this up in the air with the limits of £1 million for both agricultural and business property relief. So probably what we're starting to see now is actually people needing to carry out a diversification in order to generate cash rather than perhaps in a way almost the shackles are off. If there are limits on tax anyway and people are worrying about change of use for fear of longer-term tax implications, well actually that needs to be traded off now in terms of short-term cash generation. And does that outweigh because you're going to need a way to pay for the tax if there's going to be a tax bill anyway?
Dan: Just to elaborate on that because I'm not sure if I'm quite clear. Are you saying that because of the change in agricultural relief tax, the value of agricultural land with a tax benefit is becoming less appealing when you're comparing it to other opportunities in the short to medium term?
George Badger: No, I was more making the point that people perhaps before were wanting to maintain everything agricultural so you all got 100% relief. But if that 100% relief is now capped at a certain level, maybe the shackles are off, and if there's going to be some tax to pay anyway, we should be doing things that generate income and making the right business decisions rather than the tax tail wagging the dog. But of course, it's more complex than that because you may need to, you know, at the moment, we still have the seven-year gift, so you could still be gifting assets, although that can trigger a capital gains tax liability. And so you might pass them down a generation, perhaps, and then do your diversification. That's often quite common advice from accountants because if you pass it down now, a bare agricultural asset would qualify for agricultural property relief, whereas it's more complicated if you were to pass down a farm building, for instance, that was now let out for commercial, that wouldn't benefit from the relief. So you may have been better to have passed it down before the change of use.
Dan: Right. There we are. If anyone's really wanting to dive into the details of that, do reach out to an adviser because it's not something that we expect the average farmer to navigate. But the honest thing is—and this is where a conversation is good—it is complicated, but there are opportunities out there. So I think speaking to someone who knows is a really nice action to take. What I wanted to kind of touch on, Emma, is just taking a bit of a backwards step in terms of that long-term vision. George was, you know, we were just talking about a lot of farmers are really keen to ensure that they have something to hand down to generations. I just wondered, with climate change in mind and that changing crop demand or what grows best where, can you just talk about land use and the importance of thinking about diversifying land use to maintain that profitability and resilience into the generations of farming?
Emma Dennis: Well, I think it's... it all looks at soil health really. So I think if you are looking at any continuity in healthy production, looking after that soil asset and keeping it in good heart will help keep the options for cropping open in the future. So that's never to be neglected unless you want to turn it into a dog walking park, which the soil health is probably of less importance. So yeah, I think if there are opportunities to support changing farming practices, for example with the SFI, there was a payment available to sort of connect with a reduced tillage system, for example, but that does have an upfront cost to the customer and it carries some risk. And that's where the SFI payment helped to kind of bridge that gap to help farmers transition into a more sustainable farming system, which in turn should keep the crop production potential of the land going. So, investing in the land now to maintain future production potential. And also, with this changing climate change influence, water holding capacity, water infiltration, and nutrient holding and cycling—these are all really important things to look at here and now to protect that resource for the future.
Dan: And there are so many different ways to look at your land. But it's really understanding what the risks are. You've got farms that are facing wind erosion or flood risk, and how do we build land use to mitigate that, whether that's a shelter belt in the right place or a pond in the right place? I really think that intergenerational planning is really important if you're a farmer now, particularly if you're wanting to protect production, thinking about how nature can help you with all of that is really important. Just in terms of that, and I think this might be a question for Emma, but Chris and George, please do come in: does the land management for, and this is a question from Andrew, by the way, who's on the call, does land management for biodiversity and kind of removing it out of food production on any substantive level require land use change applications? Like if you're going down a biodiversity net gain route, for example, or a conversion of arable to a woodland, what types of applications for land use change do you need to make? Is that one for you, Emma, or do you want me to pass it around?
Emma Dennis: Please feel free to pass it around for other people to comment. But I think changing from... so for example, the question was raised with agroforestry. So, would planting trees on your land at a set density such as that through the SFI action deem that land to become woodland? So what is the land use? Is it permanent pasture or herbal lay, for example? Or is it agricultural arable land with a certain amount of trees within it? So when does an arable land use or land cover turn to a wooded land use cover? It has been established that agroforestry planting density will not change the land use. It will still be an arable land and it would still be temporary grassland or permanent grassland with an element of tree structure across that land, but it's at set densities. So yeah, it's an interesting question.
Dan: Does anyone here know what those set densities are? Like when does... what's the canopy of trees that does turn it from, I guess, an arable or grassland into woodland? Because it's related to a question that Karen's just asked around a memorial wood: if you're still grazing it, can it stay as an agricultural field, or does it turn to woodland? Does anyone know?
George Badger: I think there is a density. There was a definition under the old BPS rules. I think it might have been either 50 or 100 per hectare, but I don't know off the top of my head. I picked it up.
Dan: But we can take that as an action, Kathy and Rosie, just to work out because I know there is a threshold that they're obviously with SFI with agroforestry, but also with a lot of the woodland creation that's happening. You know, there is a defined amount of trees per hectare. I think they're working on to see land go from an agricultural use to a woodland.
George, I've got a question for you from John Richardson: "How easy is it to define exposure to business rates on any diversification idea?"
George Badger: Yeah, good one. Business rates, I wouldn't say, are an area of my expertise. But yes, clearly if you are using a building for commercial use, for example, it wouldn't be exempt from business rates. They are, however, payable by the occupier of the building. So, in the same way that council tax works on a house, it's not paid by the landlord, it's paid by the tenant. So, often if you are agreeing for someone to come and take your building and rent it and use it for a purpose for their own business, you would put a clause in there that they would be liable for the business rate, so they'd need to factor that in. But small business rates relief does exist. So, depending on the ratable value of the holding, if it's generally a small unit, they will probably fall under it. But if it's a large unit, it would be applicable. So, that does need factoring into a business plan as a cost.
Dan: Again, a bit beyond me, I think, but I think there are so many different considerations when you're thinking about diversification. One really interesting question here from an anonymous person that perhaps George, you can just respond to first, and I'll pass over to Chris, is: "There's been a lot of discussion around what to do. They really, really enjoyed your graph, for example, George, but the question is, what signals are there of when to start diversification? What needs to be considered before it's almost too late to seize the opportunity?"
George Badger: I think income into farming businesses is going to be under a lot of pressure the next 12 months. BPS payments have been capped to £7,200 this year, and so, you know, there's income starting to drop. So, that's an early warning sign. How are we going to replace that income? But that could also be coupled with the need to draw income from the business. So, is there another member of the family, another employee needing to be taken on, the next generation coming in? What are their drawing requirements from the business? So you quite often see it with a sort of son or daughter coming back, and parents saying, "Okay, well there isn't that much money spare at the moment. So if you're coming back, you're going to need to bring an idea and a diversification with you and almost create the income that you will need to draw from the business." So that's often a key time for triggering it. But it could also be just something as simple as walking around your farm with a fresh pair of eyes or with someone who's never been there before and saying, "Okay, well, yeah, actually that building there or this section of yard or that corner of a field, we're not really doing a lot with that. Is there something else we can do?" So yeah, those are, I'd say, the three sort of signals.
Dan: Chris, is there any signals you'd like to add to that?
Chris Kerry: I think George has captured quite a few important ones. What we often have a conversation with is a lot of agricultural businesses are really struggling with staff, and that can sort of force change in a farming business. You know, a number of our dairy farmers can't get herdsmen; they're looking to come out and do other things and looking at how we can use those other buildings, whether those buildings suit other uses, whether you're in the right location for other uses. There's no point looking at a commercial building if you're down a tiny track, miles from a main road. But what we often do is a review of the assets you're holding, looking for underutilized assets, looking at the cost to implement and return on investment really, and seeing what assets they have, what capital they have available to them to invest into the holding.
What it definitely feels like is that there isn't any right or wrong time to do it, but there's no time like the present to at least understand where the opportunity may come from. And speaking to people, whether it's a friend or a neighbor, just to be like, "Okay, how can we potentially utilize this extra building or this field that's not quite delivering what we need?" You know, there are families out there, farming families, who are adamant, "We shouldn't need to diversify. We are a farming family. If the farm doesn't support the business, that barn, actually, we can be growing more young stock in there and pushing the farming business." So, you know, diversification isn't for everyone, but income and the volatility of your business can be a quite good driver.
Dan: Yeah, and that's completely true. People are wedded to farming, and that's absolutely fine. But I guess the reality of the market is it's unpredictable at the moment. I think what we're talking about here is just trying to stabilize that volatility, particularly when you're thinking about your bottom line as a business. It's how do we make sure that the hungry gap that we've got in our lack of BPS payment is potentially plugged by something else? We just had a comment, I think, from Jen Man, who says, "Thanks to all the presentations today. She'd just like to highlight the minerals and energy projects as another option." No one's really spoken about energy or minerals because at Wholesim, they've successfully collaborated with farmers. So yeah, we've obviously spoken about a number of different things, but there's a huge range of opportunities out there, whether it is going down renewables or other types of energy development rights. So now, the right temple use of land. So you can look into that.
Chris Kerry: So it really does depend on the situation, but happy to have a look and give you a steer. Plenty of people are doing it.
Dan: Chris, your microphone's got a bit crackly for some reason. I'm not sure why that is. George, anything to add on planning permission for I guess transferring to certain land use types?
George Badger: Yeah, exactly. I mean, generally, a change of use away from the existing use requires planning permission if the permitted development isn't already available. You do see a lot of examples of people starting out softly on certain diversifications where it might be a relatively minor change of use, and they don't apply for planning permission at their own risk. It's probably more common than you think, but of course, I can't condone that. But there are people that sort of will then start off and then perhaps apply retrospectively. What you don't sometimes want to do is necessarily kill a project just because at the concept stage you think the planning is too difficult. It's worth probably visiting or speaking to someone who's doing something similar and seeing how they navigated that process would be my advice.
Dan: Great. So we've hit 1:00. There are a couple more questions which I can stay around and answer for, but what I want to say is thank you to everyone who's attended. And of course, thank you so much to the three speakers who've joined: Chris, George, and Emma. I really appreciate your time. What I would say is if you need to shoot now, please do. And that includes the speakers. Thank you so much for your time. But if you can stay around for two more questions, we can just keep it rolling for another three minutes just to try and wrap it up. But if you do need to shoot, no pressure.
So, just a quick question about... there's been a lot of diversification suggestions, like pick-your-own experiences, like pumpkins, etc., and they feel similar to things that have been tried in the past but we've perhaps moved away from. So the question is, "To what extent are we revisiting older models here, and what lessons can be learned from why they disappeared in the first place?" Got any opinions there, George?
George Badger: Yeah, happy to take that. I mean, pick-your-own and things... yeah, definitely, you know, there's nothing new there. What I would say is that particularly on some of the experience-based activities, I think this is a new concept where people are increasingly living digital lives, increasingly with their children glued to screens or phones, and wanting to get out. Farming has become a bit more increasingly in the media, perhaps, with Clarkson's Farm or other shows that people are watching and taking an interest in that. And so I think people wanting to connect with where their food is coming from and get their children out and about in fresh air and open spaces, that is a new concept probably from 20 years ago. So yeah, I think there's opportunity. Certainly as a parent, I very easily part with money to buy a coffee on an experience if it's something of getting the children out of the house. So yeah, I would be a prime example of, if it gets you half a day out of the house, that's worth a few quid.
Dan: Yeah, and I think you're right. There's never been such an opportunity for the public that's more interested in farming. So this feels like a really good opportunity to seize that. And yeah, you mentioned Clarkson's Farm. It's done great for, I guess, raising awareness, but that comes with a really nice opportunity. And to you, the mundane might be the really exciting for the public. You know, you mentioned tractor rides. I know some of you spend 16 hours a day sat inside a tractor, but there are going to be millions of people out there that have never been in a tractor. So I think exploring diversification through their eyes is something that I think is a really nice takeaway.
So, just a final question then, and we'll wrap up, is just a question for the advisers. So, I think over half the people on the call were advisers. "How can we encourage our clients who are a bit more stubborn to consider diversification and look at opportunities in order to remain resilient as a farming business?" So I don't know whether Emma you want to come in first. Have you got any farmers that perhaps need negotiating, and how do you overcome those conversations?
Emma Dennis: Well, I think it's about giving them confidence to change. What Chris said earlier about some families, you know, the farming asset, they have been proud to farm and produce our food for so many years and don't really feel that they should be diversifying. Although we understand now that it's a really important income stream where it works, and it's making sure that the diversification, if possible, still protects the production potential of the farm. So like the things like the night sky observation, camping, sheep trekking, slip and slides—all these things sit alongside food production because they're a temporary land use. It's when we look into more permanent land uses of diversification that we see that impact occur on our food production potential in the future.
And I think there's also a bit of a risk with diversification fatigue. Everyone has the expectation now that if you go to a farm shop, you might have an Instagram opportunity with some sunflowers. It's become a bit mundane. So it's continually having to adapt and keep it inspiring and evolving. I think one of the things I see that is a missing strength for many farm businesses is their marketing, and we've touched on this as a group. How can we help farmers market themselves better, market their products better, give them, you know, make consumers aware how special some of these products are that we produce in our rural countryside here in the UK? So yeah, it's about adding value.
Dan: Perfect. Unless anyone else has got a final point, I think we can wrap it up there unless you have anything to add on just empowering and persuading farmers to make the change.
George Badger: Yeah, I would just add, it is important. And probably the easiest way to do it is by almost hosting open days or farm walks or being able to take people to examples where they can just see firsthand what it involves. And typically some of those sort of lower-hanging fruit, easier options that have a bit less management input. Certainly if you were trying to encourage someone to do one of the more higher management input things, I think that is just unlikely to be a successful ultimate outcome because they take so much time and energy that the impetus really needs to be coming from the farmer or the client themselves. Otherwise, they're the ones that know if they've got enough time and energy to do this. But certainly on some of those easier things like, "Have you thought of putting a few shipping containers and letting them out?" or "Have you thought of just smartening up this building, and let's see who would rent it?" Those are quite easy things to show firsthand.
Chris Kerry: I'd say a good starting point is just looking at adding value to what you're already producing, in some way, shape, or form. Like I said, whether that's bottling your own milk and selling it at a premium, whether that's tanning your own leathers, or dyeing your own wool, that could be sort of, you know, putting your toe in the water before going two feet in.
Dan: Great. Thank you so much. So, really grateful, George, Emma, Chris, for your time. Thank you, everyone, who's attended. My final plug is that if you want to book in a call with one of our account execs, Rosie, whose face is on the screen at the moment, is more than happy to have a conversation about how Land App can help you with any of these things. You know, there are a couple of examples of using the buffer on a radius of a building or looking at data layers. Do get in touch. We're here to help. There's so much opportunity for the rural sector right now. If we can play any role in facilitating that, we'd love to. So, thank you all for your time. We're at thelandapp.com if you need us.