Tuesday, 31 August 2010

Rising energy prices may lead to problems but also opportunities

Following one of the driest summers on record, the return of the rain has
slowed the progress of harvest across Yorkshire. Yield reports appear to
vary significantly according to land type and localised rainfall with
lighter land suffering the most. Recent crop prices are offering a decent
return compared to the spring when wheat was trading below £100. Wheat has
recently risen sharply to £170 per tonne for May delivery; albeit
temporarily, due mainly to the Russian government announcing a ban on wheat
exports making trading somewhat of a lottery. Currently, spot prices are in the region of £140 per tonne and the prospect
of fixing into £120 per tonne ex farm for November next year has tempted
many growers to take advantage of the buoyant trade.

While the rain may be a relief to livestock farmers faced with rising forage
costs and limited grass supplies, it means increased drying and energy cost
for arable farmers. This leads onto discussing energy usage, costs and new
legislation which will impact on farmers and businesses.

The prospect of rising energy costs, especially electricity, is encouraging
farmers to control or reduce energy costs through more efficient systems.
This may be through improved grain drying systems, temperature controlled
pig and poultry units, temperature controlled potato stores or cooling milk.

In addition, new legislation resulting from the UK's Carbon Reduction
Commitment will create further burdens. Part of the legislation requires all
businesses including farmers that have used half
hourly metering from 2008 to the present to register with the Carbon
Reduction Commitment and complete an information disclosure by September 30.

Half hourly meters have a 00 displayed in the profile type box in the top
left hand corner. This is also on your electricity bill, labelled
electricity supply number. Those who don't comply may be subject to a fine
of £500 per meter that is not disclosed. Further pressure to reduce energy
consumption and accurately calculate and record carbon emissions is
inevitable but there are some positives. The Carbon Trust is offering interest-free unsecured loans for between
£3,000 and £20,000 depending on the size of the overall investment and the
type of energy and this will be a big incentive for farmers struggling to
access credit and finance. Through the Enhanced Capital Allowance (ECA)
scheme any investment made for energy efficient equipment or improving the
efficiency of existing equipment is 100 per cent allowable against taxable
profit in the first year. With careful planning farmers will be able to benefit from the carbon trust
loan and ECA scheme as many investments increase energy efficiency.

The loan can be used for a wide range of projects including upgrading grain
drying systems, crop store insulation, milk cooling facilities and heat
exchange systems on poultry sheds.

One of the most effective ways of reducing energy costs and carbon emissions
is by producing renewable electricity through wind, hydro, solar biogas or
heat exchange which can provide income. http://www.yorkshirepost.co.uk/country-columnists/Industry-Eye-Rising-energy

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