We hear that the Financial Services Authority has issued a fresh warning to investors in certain Connaught funds series, after Connaught failed to pay the quarterly interest payment. The funds affected are income series 1 and 2.

The regulator has said that these funds are advertised as low risk, which could be misleading to investors and that on 13th April 2012, Connaught contacted its investors to inform them that the fund was unable to pay the quarterly interest which was due. We have seen a report suggesting that the FSA expressed some concerns earlier this year, saying that in some of the literature it had seen, the Connaught funds are described as very low risk and low risk and that it makes comparisons between investing in them and putting money in high street bank and building society accounts, which the FSA believes is misleading. Connaught’s marketing material apparently compares the returns on its funds with fixed rate notice bank and building society accounts. The FSA says that customers need to be aware that the bank accounts have stronger investor protections should anything go wrong and offer lower risks to investor money than there is investing in the Connaught funds. The FSA also said Connaught offers an additional guarantee on the income within the funds, but suggested that it is not clear whether investors would be able to understand what this is. It has apparently expressed the view that, whilst the probability of investors receiving payments depends significantly on the performance of the investments within the funds, they believe this is not explained well enough to investors.

As far as we are aware, the Connaught funds invest in short term bridging lenders, which in turn lend to consumers and businesses secured on property. It would follow then that the funds are dependant upon cash flows from the lenders who are in turn dependant upon cash flows from their borrowers. The only reasons we can think of, for these funds being in trouble, are borrowers not making payments but more especially being unable get out of their bridging loans. 

We understand this well, for we get enquiries from borrowers for farm finance, who are stuck in farm bridging loans and have no chance of getting out of them. Many of them believe that their broker was going to get their farm bridging loans refinanced for them and some of these people are those we talked to before they went somewhere else and were ‘sold’ a bridging loan, despite our telling them that refinance would not be available. We would not be glib enough to say that we told them so, but what we would say is that it definitely pays to deal with a firm that actually does care about its customers and where risks are properly disclosed.

We are not aware of any problems with Connaught’s series 3 fund, though this funds one of our ‘competitors’ which offers ‘opportunity’ finance. We can only quote the English proverb from the investor prospectus for that fund “Let every man praise the bridge that carries him over.” How quaint – just as long as we know what’s at the end of the bridge and whether it can actually carry us over in the first place.

The moral in the story is to deal with a firm that actually will tell you whether your farm bridge will carry you over and where the end of the bridge may actually be. 

Dave and Kerry travelled down to Birmingham to meet up with other winners for a networking event.  This was followed by a talk from Theo and then a chance to meet him.

Theo decided to host his very first SBS event, and invited every SBS winner to an event in Birmingham. This gave all winners the chance to meet one another and offer each other business advice. The event was sponsored by Ryman; one of the companies which Theo owns.

Small Business Sunday (shortened to SBS) was created by Theo about a year and a half ago, to give small businesses the chance to tell Theo, very briefly, about your business. Every Sunday he chooses his 6 favourite businesses from thousands of applicants, and then re-tweets your business to nearly a quarter of a million people, who follow Theo on Twitter.

Dave & Kerry were one of the very first winners of SBS and said “when we first heard that we were an SBS winner, it was in the early days of SBS, and we didn’t really know much about Twitter or SBS at the time, but it soon became clear, by the Tweets we were receiving from other Tweeters who follow Theo, that this was a big deal. The event was brilliant. Theo and his team from Rymans were so friendly and down to earth. The speeches were inspirational and they all made time to speak us. Theo was very entertaining, even when being bombarded with an intensive question and answer session. We are very proud to have won this award and extremely pleased to have been invited along to this event and to have the opportunity to meet Theo.”

Pinewood is a Wild West themed Holiday Park in Scarborough, and has a number of different types of accommodation; from handmade Tipis, modern Tipis, Cowboy Camping Shacks and Chuck Wagons. Couples and families can spend quality time together, staying somewhere memorable and unique. The Scarborough born couple created the ‘themed’ park over 6 years ago, and continue to add and improve the fun concept.

 At the event Theo said that “he had never imagined how successful SBS had become. He believed Small businesses also have the advantage of being able to offer great customer service. No one enjoys dealing with call centres. Small businesses have an advantage over big business – they can respond, move and change so much faster. Play to this and lead the way!”

Theo has now launched a special SBS website, which has been built by one of his other SBS winners; Chris Wheeler. The main website is open for everyone to benefit from, with a section exclusively for SBS winners to log into.

Winners were also given a Ryman goody bag and a £50 credit on opening a Ryman stationery business account.

Theo is best known for this role on BBC’s Dragon’s Den, and has invested in a number of businesses from the series, some of which attended this event.

Dave & Kerry Woodhead

Pinewood Holiday Park, Racecourse Road, Scarborough, North Yorkshire. YO12 5TG. 01723 367278 / 07787378111

We are delighted for Dave and Kerry who thoroughly deserve their award. This is what Dave and Kerry have said about Farm and Country Finance:

‘Farm & Country Finance has helped us to fulfil one of our life long ambitions. We had always wanted to buy a caravan park, and when one in our area came up for sale, we knew we had to buy it. We just presumed our regular bank, with which we had been customers with for twenty years, would lend us the money. Our own bank wouldn’t, and neither would any other high street bank.

It was at this point that we looked at alternative ways to raise the money. We did find a number of companies that would give us a mortgage, but at huge interest rates, and also with huge fees – far too high for us to be able to pay.

We were told about a man, Mark Bracegirdle, running a company called Farm & Country Finance. Within a few days of speaking to him, and giving him some information about ourselves, he had travelled up to see us, we filled in a few simple forms, and our mortgage application was up and running.

Mark did more in a week, than any other bank or company had done for us in over a month. His straightforward way of dealing with our application, and keeping us informed, made the whole process very easy for us. Mark was full of knowledge, and dealt with our application very professionally – but also with a great sense of humour; he turned, what had been an extremely stressful experience, into a very enjoyable one. We also learnt a great deal along the way.’

Happy New Year!

If you would like to discuss any of the issues in this month’s news, please contact us at Farm and Country Finance

Beef

In terms of total cow numbers, the milk herd is in decline and has been for some years and there is a stable or even slightly larger specialist suckler herd. As over half of UK beef is derived from the dairy herd, total supply in the UK is more likely to decline than increase. This is exacerbated by the cost of production with feed prices unlikely to fall significantly, at least until next harvest. Accordingly, beef finishers are unlikely to grow beasts to big weights to compensate for lower numbers in the system.

This is Olympic year with an influx of likely visitors wanting to sample the national fayre be it in fast or traditional guise. The demand cannot be met from domestic supply, so imports will be required to fill the gap. A deal with the so-called Mercosur trading block in South America would open the EU market to greater supplies from that continent, but it looks unlikely to be agreed in 2012. While supplies of cheap beef may eventually arrive in the UK, production costs in South America are rising and, by the time any deal is agreed, world prices may rise closer to EU prices which would limit the impact of cheap imports.

 Dairy

At least for the first several months of the New Year, prospects for ex-farm milk prices appear reasonable. Whilst butter and skimmed milk powder prices fell towards the end of last year, cheese and cream values are currently stable.

There is a relatively short supply of milk, at least until the spring when cows are turned out onto plentiful new grass.

Through 2011, farm gate milk prices rose from around 24p per litre to 27p. As retailers maintained their margins, it was inevitable that processors took the brunt with processor margins expected to fall further in the first half of 2012, due to the retailers’ battle for market share, while processors are unable to force down raw prices because of strong commodity markets.

Pigs

Spot values decreased by around 10 pence per kilogram early in 2012 as demand dropped off after Christmas and the Euro weakened against sterling, making access to the UK market easier for EU producers. Given that sheep and beef prices are likely to remain high this could play into the hands of the pig industry in the medium term. Unit costs of sow production have been reducing in the last few months. The ban on dry sow stalls is already in place over here and will come into force across the remainder of the EU in 2013. As usual, there will be those of our continental ‘friends’ that will be less willing to comply than we are, but this should still reduce the number of producers and hence supply.

Pork remains a staple in the Chinese diet and China has agreed to open its doors to British exports, which is good news if we can meet their inspection criteria. Promotion of British pigs and meat is set to increase by the British Pig Executive using the Olympic Games and its alleged party mood to create a global shop window.

 Sheep

There seems to be plenty of good news, at least as far as prices go, for sheep farmers.

Generally prices for sheep meat were high throughout 2011. Encouraged by good prices for cull ewes, some producers took out not just the older ones, without lambs, but some that might have been kept for the following year, for another chance to produce. This increased total meat supply but conversely some flock owners have decided, because of the continuing high prices, to keep more ewe lambs back for breeding down the line, thus reducing lamb supply through autumn.

Over all EBLEX is forecasting sheep meat production in the UK to be broadly similar in 2012 to that in 2011. Much now depends on conditions at lambing time.

Global demand for sheep meat remains strong and supplies limited. All pretty good news but in the medium term the UK industry should be careful not to shoot itself in the foot by scaling up production too quickly. Production costs and the likelihood of lower payments from the Single Payment Scheme should be taken into account.

 Eggs

The British Egg Industry Council has estimated that British egg producers have invested £400 million to meet EU legislation which came into force on 1 January 2012. It also suggests that in at least ten other EU countries the ban has not been fully complied with, claiming that around 25% of EU cage egg production will be illegal. HM Government has refused to impose a ban on the import of illegal battery eggs suggesting that to do so would be an illegal act under EU law – no surprises there then.

It is the case, however, that British producers are not facing new competition since eggs from the now errant sources have been available historically. But there is the usual moral wrong in this case, that being that our compliant producers are faced with a lack of protection where they have made the investment required and look to their egg sales to pay for it. It would seem that the BEIC has embarked on the first stage towards launching Judicial Review proceedings by formally writing to Defra to challenge the UK Government on its refusal to ban imports of illegally produced battery eggs and egg products.

It is understood that The British Free Range Egg Producers Association suggests that chick placements to produce poults, for egg production in the UK, were down by around 7 percent in July 2011, compared with the prior year, which should result in the number of young birds available to replenish the laying flock reducing through into 2012. Whilst in overall flock numbers this may not be high, it is hoped that it might translate into a significant drop in the number of laying birds and contribute to a rebalancing of egg supply and demand and helping to restore prices.

Wheat

The continuing drought in South America is likely to reduce maize (corn) and soya bean crops in Argentina and Brazil.  Consequently, USA corn prices jumped £25 per tonne at one stage, pushing feed wheat values higher, resulting in UK feed wheat rising back to around £150 per tonne from £140 in early to mid December. Prices are now sliding back, as some traders take profits.

 Oilseed Rape

 Crop values have resisted downward pressure from Australian imports which was a feature of the pre-Christmas market. Values jumped in the early days of the New Year close to £360 per tonne but profit-taking by commodity traders has since taken these down hence the spot market is again towards the mid £340s per tonne

The continuing problems in the Eurozone continue to weaken values for next harvest, which have now slipped under £320 per tonne.

Barley

Barley prices remain firm. Feed barley is no longer selling at a premium over wheat, though it is still tracking at wheat levels in most parts of the country. The malting barley market remains tight across Europe, resulting in buying scrambles where loads a rejected on quality.

World supply and demand of malting barley is close in a ‘usual’ year; whilst beer consumption in western Europe is in decline, it is increasing in the rest of the World and with increasing affluence comes greater demand. The tight supply and higher prices in Europe have attracted interest from abroad and it is rumoured that as much as half a million tonnes may be coming from South America, despite the drought. When it arrives it could take the spike off UK prices, so farmers may well decide to sell their remaining crop, not contracted forward, rather than taking the risk of storing a perishable commodity.

Beet

The sugar beet harvest continues in the seasonally wet field conditions, and yields of both raw roots and sugar remain pleasing. Despite the recent monsoon, parts of eastern England are experiencing the most arid year for almost a century and water replenishment is not yet at a rate sufficient to maintain supplies for irrigation in the summer.   

Growers of roots may yet have to think about cropping plans to match thirsty plants with available water supplies.

Potatoes

Spot sales values appear similar to a month ago at circa £90 per tonne, while the Weekly Average Price is likely also to be similar to last month at circa £105, compared with values closer to £170 per tonne a year ago.

The mild weather continues to affect storage conditions. The balance between the suppression of tuber sprouting with cold temperatures, without adversity in sugar content and fry colour of potatoes destined for crisps or chips, remains a real issue for some. According to the Potato Council’s December report, crisps and frozen chips account for almost twenty percent of potato consumption in the UK. There is an indication that we continue to pay more for convenience rather than peeling and cooking.

If joining a gym is on your New Year resolutions list, make sure you read the small print of the contract before signing up.

In March this year, the Office of Fair Trading (OFT) commenced proceedings against a company called AMS, which draws up membership contracts and collects payments for several hundred smaller gyms. The contracts had minimum membership terms of 1-3 years but many members stopped using the gym after only a short time, some finding that their circumstances had changed meaning they couldn’t continue their membership. However, AMS would not allow contracts to be cancelled before the end of the minimum period and if a member defaulted on payment, they faced the reality of their credit rating being damaged. Cases referred to the credit reference agencies have apparently run into several thousand.

This action went to the High Court, which has  found that, in some gym memberships, the terms are unfair and therefore unenforceable. The contracts were ruled unfair in several respects and some cases should not have been referred to credit reference agencies.

So think twice before signing a gym membership contract ; read the small print on the contract and if in doubt, seek legal advice. Or use a gym that offers services where you pay as you go, which would avoid any nasty surprises. Bear in mind that contract disputes can be expensive.

It is very important to keep your credit file tip top if raising farm finance is on your agenda and it might be surprising how a little blip can make a difference.

 The importance of the financial viability, of a renewable energy project, cannot be over emphasised. It is with this in mind that anyone considering a renewable energy project should carefully consider the government’s Comprehensive Feed in Tariff review, which has started with Solar PV technology. The Department of Environment and Climate Change has announced the first phase of this review which relates only to Solar PV.  No announcements for other technologies has been made, but they will come.

 With a consultation response date of 23rd December, after the proposed tariff eligibility cut-off date of 12 December 2011, it is felt unlikely that any responses will change the government’s position on the revised rates. 

The main things to consider are:

• A proposed reduction of more than 50% in Solar PV generation tariffs from 1st April 2012, for schemes installed and commissioned on or after the 12th December 2011. This will mean that schemes installed and commissioned before the 12th December 2011 will receive the existing FIT rates for the scheme’s duration, 25 years. Schemes installed and commissioned after 12th December 2011 will receive existing FIT rates until the 1st April 2012 and thereafter the revised tariff
• A proposed new multi-installation tariff rate structure for aggregated solar PV schemes from 1st April 2012 for installations commissioned on or after the 1st April 2012. This might affect companies or individuals looking to benefit from the installation of multiple Solar PV installations on separate buildings or sites, as they will no longer benefit from the FIT rate being determined by the total installed capacity at each site. Rather the FIT rate will be determined on the aggregate capacity installed across their portfolio.
•  It is proposed that eligibility for Solar PV FIT  is to be dependent on energy efficiency performance criteria on or after the 1st April 2012. Applicants will need to demonstrate they meet certain energy efficiency criteria.  For example the property where the scheme is installed must have a Energy Performance Certificate (EPC) rating at level C or above.

 As said, the review should be carefully considered by any person or organisation considering a renewable energy project.

 The views in this article are those of the writer and should not be taken as advice or a substitute for advice. We recommend that specialist advice should be obtained before entering into a renewable energy project. For a copy of the review please click the following link.

http://www.decc.gov.uk/assets/decc/11/consultation/fits-comp-review-p1/3364-fits-scheme-consultation-doc.pdf

Land banking is where an area of land is acquired, by alleged ‘developers’, which is then sub-divided into smaller plots . These are then sold, often under the false pretext that planning consent for development will be granted. Needless to say, prices are grossly inflated above true values.

I am pleased to say that we have not had many enquiries for land finance for this type of thing, though we had a recent enquiry, for farm finance, where the customer was trying to refinance land that apparently had huge hope value. He had a valuation report to back it up but we were not convinced.

These scams first reared their ugly heads several years ago, but over the last three years, The Insolvency Service has seen an increasing amount of activity and an increase in the number of complaints it has accepted for investigation. Seven cases were accepted for investigation in 2009, rising to 11  in 2010 and 16 in 2011 to date. Since 2007, that part of the Insolvency Service called Company Investigations has shut down forty-nine land banking companies, in England and Wales, that have caused collective losses to the  public of over £30m. It has warned that land banking scams are increasing, with a 33 per cent rise in the number of complaints it has received during 2009 to 2011 and it is estimated that total losses from all land banking scams exceed £200m nationwide.  Thirty-nine  companies, that caused losses of over £13m, have been wound up since 2009.  To date, nine directors of land banking companies have been disqualified.

The land marketed in these schemes is nearly always sold without planning permission but promises that it is likely or in place and this should act as a warning. A check with the local planners should provide a quick answer on the prospects of planning consent. Apparently, many buyers especially those targeted offshore may not be aware of this.

Remember – if it’s too good to be true it probably it probably is not true.

However, the mission is fraught with danger unless you deal with a firm that handles things ethically. What we find is that often our potential customers have made similar enquiries of one of our competitors, who says it is the market leader in the provision of ‘opportunity’ finance and makes out that, because we are brokers, their service is better when our evidence shows just how much money we saved one of our customers, Mr and Mrs R of Ceredigion who had been to our competitor to begin with and did not feel comfortable. What people tell us is that they are told, by this competitor, that they should take a bridging loan for six months after which they will have found replacement long-term finance for them. When we examine some of these cases, it is patently obvious that the farm often cannot sustain the loan in the longer-term and that the customer should never be told that such finance is available.  Whislt it is likely that the ultimate paperwork, from the competitor, will say that finance is not guaranteed (doubtless to avoid liability), often this will come when the customer has been hooked. After all, if long-term finance is what is required, why have a bridging loan to begin with? Just because the perception is one that a bridging loan is faster does not justify this and if our competitor is as good as it says it is, it should be able to demonstrate long-term availability on day one, or at least quickly thereafter, and in any event before customers are committed.

We know that we lose business on the basis of the fundamental need to tell the truth by not indulging in misrepresentation. Often, a bridging loan is the right solution on the basis that the farm can be bought at a discount and then sold off in part or full, which realises the potential gain to the customer, but by knowing the truth, our customers can get on with marketing their property rather than hanging around waiting for long-term finance that is never going to materialise. We would never tell a customer that replacement farm finance is available when we know or ought to know that it is not. We are aware that this is sometimes not what our customers want to hear. But if the truth hurts then the pain will be far less than it will be than if our customers get to the end of the bridging loan and have no replacement finance. We know, for we are sometimes asked to tidy the mess up, often without success because the only option is a full or part sale that should have been evident and obvious right from the start. As a result, these customers suffer the stress and the hassle of dealing with our competitor that is only interested in its own coffers. Often customers have not started any marketing, under some false impression that replacement finance was being arranged for them. Now we wonder how that might have formed that impression?

Please have a look at our case study in relation to a Mr and Mrs R of Ceredigion at  www.farmandcountryfinance.co.uk/case_studies.html#22 where our competitor had been initially involved. From this you will see that the customer was told precisely what their position was by us, could make sale arrangements accordingly and successfully sold and realised their profit. Not only that, we saved them a bucket load of cash and arranged the loan over a longer period which would have given them greater flexibility had they not sold earlier. The result was happiness all ways round which is just the way it should be.

So, the message is simply - beware of Greeks bearing gifts. The regulators don’t seem too keen to get involved in helping business people who ought to know better – and indeed they ought to if they are told the truth. That is what you’ll get from Farm and Country Finance.

A recent  announcement by the Department for Energy and Climate Change (DECC)  could spell progress for some on-farm anaerobic digestion projects, but the news might not be so good for small to medium solar electricty schemes.

The promised uplift to small-scale biogas tariffs, which resulted from the 2011 ’fast-track’ Feed-In Tariffs review, should have been implemented on August 1st, however, the increase was conditional on EU state aid approval. Accordingly, progress was held up for two months by the European Commission, which has now approved the new tariffs.

 The changes to the generation tariffs take effect automatically, and will apply to  installations with an eligibility date from 30 September 2011. These are as follows:

• Anaerobic digestion plants up to 250 kilowatts – 14p/kWh, representing a 16% increase over the previous 2011-12 tariff of 12.1p/kWh.
• Anaerobic digestion plants 250-500 kilowatts – 13p/kWh, representing a 7% increase over the previous 2011-12 tariff of 12.1p/kWh.

Whilst this announcement will help to progress some marginal on-farm projects a spokeman from the National Farmers Union has suggested that the new tariffs alone are not likely to result in the rapid growth needed to deliver multiple environmental benefits. The spokeman went on to say that the NFU has heard about the possibility of another big cut to the future levels of solar PV tariffs, to take place sooner than the anticipated reduction FITs planned for April 2012. The uptake of solar electricity this year has exceeded previous government predictions and budget pressures could result in drastic reductions to tariff rates earlier than expected. It is anticipated that this might hit the small to medium scale projects i.e. under 50 kilowatts.

It is therefore important to seek professional advice before emabarking on this type of project.

This explained a lot about farm finance and especially bridging finance for a farm. We compared the way we handled this case with the way another company handled it and the savings we created. We said that the other company had changed the term bridging finance to opportunity finance – there are opportunities out there, that’s for sure, though we believe that our customers should take advantage of the opportunities they find and not the arrangers of finance. This means ensuring that any finance is truly in their best interests, which comes about by being honest and trustworthy served with a dollop of integrity.

We can now happily report the start of a happy end to the story. Our customers, who bought the farm hugely discounted because of their tenancy, have realised their profit by selling the farm for more than they thought possible at the best part of £1.4m realising their profit and some. What we had told them, in all honesty, was that refinance was not possible and that they should enter into the short-term farm finance on a presumption that the farm must be sold. As a consequence, they acted with complete enthusiasm in the sale and did not hang around on some false promise that refinance might be available. They knew what they needed to do and got on with it in exactly the straightforward way we knew they would, because they needed to know exactly what their options were, without embellishment, which is precisely part of the service they received from us.

It was great to get back from a staycation to find this news on the desk – to add value to another’s lot, to create something for them and earn our corn at the same time gives us a great buzz.

Choices are often not simple but one thing is certain – when arranging farm finance of any kind it is important to talk to someone who you can trust. The proof of the pudding is, as ever, in the eating. Are our customers happy? - we don’t need to answer the question.

Demand is far outsripping supply – 50% of respondents to the survey reported increases in demand largely driven by commercial farmers looking to expand their production because of high commodity prices. Land availability increased for the first time in three years, although these increases were not enough to keep pace with the growing level of demand. 

 All areas of the UK experienced rising farmland prices, with the exception of the North West and Wales, where prices dropped a little, though farmland in these areas was also the most expensive, with  prices of almost £7,000 an acre in the North West and £6,500 per acre in Wales.

Given that demand outsrips supply, it is expected that the rising trend will continue into 2012 with the strongest growth being in the commercial farmland market, as opposed to the residential sector where there is also keen demand for amenity land.

This evidence is supported by our own enquiries from prospective buyers; enquiries for mortgages for land and loans for land have increased and the asking prices for land are also increasing. We are seeing increases in enquiries across the whole of our range which includes farm mortgages, farm finance, farm loans through to equestrian finance. On top of this, many of our enquiries are from potental buyers for small amounts of land where the property has an agricultural tie. Demand for farms, farmland and rural property is set to increase and the prices are likely to reflect this increased demand.