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Funding supports AD plant diversification

Published: 17 July 2017

When price volatilities affected the potato crop at their Kirkton of Monikie farm near Carnoustie, father and son Iain and James Fairlie knew they needed to create stability and reduce risk for their farming business. Their answer was a hugely successful anaerobic digestion (AD) plant.

“We’re traditional farmers,” says James (29), “and our income can be severely affected by commodity prices. One year, we lost a fair amount of money on our potato crop and I was just not happy that our fortunes could be so up and down. There wasn’t any stability and, frankly, that can be terrifying for a business.”

Farming potatoes for major supermarket retailers as well as spring barley, oats and a small amount of wheat, James and his father looked at options to provide less volatile cash flows. After considering both a vodka distillery and a wind turbine project – the latter using experience gained from part-owning a similar scheme nearby – thorough research by James showed that an AD plant would provide the ideal solution.

Triple benefits

We had 400 acres available to make the project viable, and the AD plant offered us the reassurance of a guaranteed income linked to inflation.

James Fairlie Kirkton of Monikie farm

“We also use our agricultural skills to grow the crops needed to feed the plant."

“The farm and the plant are run as separate businesses, with the plant business paying the farm good money for the crop it needs. We also make money from selling the electricity so the whole project makes complete sense.”

The waste material from the digestion process also proves an excellent fertiliser, saving the Fairlies on input costs.

“The money that’s made in farming is through processing products,” says Iain. “Once it leaves your farm, other people make money from it. By taking land out of cereals to feed the plant, we’re doing our own processing and adding value. We get tariffs from the electricity companies we sell to, although these can change.”

Managed risk

By tying their new scheme to their existing farming enterprise, rather than diversifying into unrelated areas, James feels they’ve spread the risk without increasing complexity.

“I wanted something that required a high investment because I felt this would generate a high return. I also wanted it to be a project that was in line with our farming practices. We already had some of the supporting infrastructure, such as tractors and other machinery, so the plan fitted into the current business,” says James.

A simple process

James spent two years researching the AD plant scheme which helped smooth the installation process. While planning permission took time, there was never an issue over it being granted and no formal objections.

Organising the funding for the AD plant, slurry tanker and the original wind turbine has proven fairly simple, despite requiring substantial funds.

AMC Regional Agricultural Manager Dugald Hamilton was able to source European Investment Bank funds for the AD plant which at the time gave the Fairlies discounted and fixed rates for 10 years. This gave the Fairlies the stability they were looking for.

“We’d already worked with AMC, borrowing to finance a wind turbine,” says James.

“It has to be the easiest and most straightforward company to borrow money from. Dugald is a farmer himself and knows what farming is all about. He speaks the same language.

“I didn’t want to be running to bank managers who know nothing about what we do and what we need. It makes a pleasant change to be able to deal with people who know your business and the timeframes you work in.”

Competitive finance

The Fairlies also bought a sprayer, slurry tanker and other pieces of farming machinery on hire purchase through Lloyds Bank, via AMC.

“The HP agreement was the easiest thing I’ve ever done,” says James. “Regional Manager Craig Thomson makes my life a dream! He gets back to me when he says he will, he does what he says and costs are always competitive.”

Reviewing the whole project, Dugald Hamilton explained, “James has combined youthful enthusiasm with solid business acumen to take a very educated risk and drive the farm forward.

“Farming can be an asset-rich business but the payments come in blocks, so the AD plant is really helping James and Iain smooth their cash flow. They’ve also fixed their lending rate so know exactly how much they are paying each month which again takes risk out of the business.”

Changing mindsets

Iain says farms should always look for the opportunities and subsidies available. “You have to use your farm as a resource,” he says. “You have to change your mindset. It’s hard for my generation to see that when we’ve been used to simply growing food.”

James concludes: “Whatever you’re looking to do, if you think it has a chance, just get on and do it. Don’t wait too long, don’t panic – because, if your heart is in it, you’ll make it work.”

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