When to invest in equipment despite difficult conditions

By Robert Blair, Partner and ARA specialist

This year’s maize harvest has been a challenging one for livestock farmers.

With excessive rainfall, difficult ground conditions, and the late sowing of crops, many are finding it tough to maintain productivity.

Adding to the workload is the need to clean mud off agricultural vehicles and keep roads clear after travelling from waterlogged fields.

In times like these, the question arises: should you invest in new equipment to make farm operations easier, or hold off until conditions improve?

While making capital investments during tough seasons may seem risky, it can sometimes be the right move for long-term success.

When capital investment makes sense

Efficiency improvements

When weather conditions make harvesting more difficult, investing in equipment that can improve efficiency might be a smart move.

For instance, tractors and trailers that are better suited to dealing with poor ground conditions could save time and reduce the risk of costly repairs caused by getting stuck in the mud.

If investing in better equipment can help you get the job done faster and with less wear and tear, the long-term savings might outweigh the initial costs.

Reduced repair costs

Continuing to use old or unsuitable equipment in tough conditions can lead to frequent breakdowns and costly repairs.

If your current machinery isn’t up to the task, constant maintenance costs can quickly add up.

Investing in new, more reliable equipment might help you avoid these costs and reduce downtime during the harvest, keeping productivity on track even in difficult conditions.

Access to tax relief

Farmers can take advantage of the Annual Investment Allowance (AIA), which provides 100 per cent tax relief on qualifying capital investments up to £1 million per year.

By investing in new machinery or infrastructure, you may be able to claim tax relief on your purchases, reducing your overall tax bill.

This can be a smart way to offset some of the financial strain caused by a tough season and improve your farm’s productivity at the same time.

Long-term planning

While it may seem counterintuitive to invest during a difficult season, planning for the long term is key to building a sustainable farming business.

Weather patterns are unpredictable, and investing in equipment that can handle a range of conditions ensures you are better prepared for the future.

If poor harvests and challenging weather are becoming the norm, investing in equipment that can mitigate these issues could help stabilise your farm’s profitability in the long run.

When to hold off on capital investment

Cash flow concerns

While capital investments can offer long-term benefits, they require a large outlay of cash up front.

If your farm’s cash reserves are running low after a poor harvest, it may be better to hold off on major purchases until your financial position improves.

Stretching your cash flow too thin during tough seasons could put your business at greater risk, especially if conditions don’t improve as quickly as expected.

Borrowing costs

Interest rates are currently higher than in previous years, and borrowing to fund capital investments may not always be the best option.

If you need to take out a loan to purchase new equipment, carefully consider the cost of borrowing.

The interest payments on a large loan could put additional strain on your farm’s finances during an already challenging period.

Short-term focus

If the challenges you are facing this year are likely to be temporary, it might be better to delay any large investments.

For example, if you expect next year’s growing conditions to be better and you can manage with your existing equipment for the time being, holding off on new purchases could be the more prudent choice.

While there are clear benefits to upgrading machinery that can improve efficiency and reduce repair costs, cash flow concerns and borrowing costs need to be taken into account.

Ultimately, the decision to invest should be based on both your farm’s immediate needs and its long-term goals.

Contact us today for tailored advice to help you make the best decision for your farm’s future.