Industry Eye: Rising energy prices may lead to problems but also opportunities

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.

Further detailed information about renewable energy can be found on www.gfwrenewables.com