The combination of reduced grain prices and the prospect of the new BPS payment taking a while to reach bank accounts could easily add £150,000 to end-of-year cash flow requirements for a 650-hectare arable farm.

That’s the calculation done by Norfolk-based farm finance consultant, David Hughes, following discussions with farmers and bankers at Cereals 2015.

“With the deadline for BPS submission now past, it’s tempting for producers to think their work is done in relation to the new payment process,” said Mr Hughes. “In reality, however, it would be worth taking an early look at the ‘what if’ scenario of payment arriving anything up to three months later than has been the case with SPS in recent years.

“For a 650-ha arable unit, for example, a difference in cash shortfall in the region of £150,000 is certainly a possibility in December this year, compared to December 2014.  That’s taking account both of a potential BPS payment delay, coming on top of a year-on-year fall in grain values.

“A lot will depend, of course, on crop yields, production costs, grain prices and exchange rates, all of which could change between now and the end of the year.

“It would be prudent, however, for producers to spend some time now getting their cash flow requirements defined and covered with their lending providers.  At least two of the major banks have already said they will provide fee-free bridging loans during any BPS waiting period which may arise and I’m sure others will have packages available.

“Despite this welcome show of support for the industry, all banks will require as much notice as possible if they are to cover all reasonable requests. That means preparing up-to-date cash flow budgets now, including clear indications of when extra funds may be needed and how much might be required.”

Mr Hughes also said that by moving early on the cash flow issue, producers might also have the chance to negotiate better terms than those who leave things until the last minute.