The challenges caused by food supply chain pressures, rising input costs, extreme weather
events and the changes to agricultural support will require many farmers in England to adapt their business models and carefully consider options for the future.
Support payments to farmers
The EU Common Agricultural Policy (CAP) provided the framework for farm payments in the UK until Brexit. Direct payments were made to farmers who met basic rules covering food safety, public, animal and plant health, climate change, environment and landscape. Part of the original rationale for these payments was to recognise the benefits to the landscape and environment provided by farmers but that were not recognised within the agri-food market. On average over the period 2014 - 2017, direct payments made up 9% of revenue across all farm types. The proportion of revenue from direct payments was highest on average in grazed livestock systems. Direct payments to arable farms (cereals) made up 15% of revenue on average, equivalent to 79% of average farm business income. Farmers were also able to access additional payments for actions taken to look after and improve the environment, known as Countryside Stewardship, e.g. conserving and restoring wildlife habitats, flood risk management, woodland creation.
After Brexit – what next?
The direct payments to farmers (Basic Payment Scheme, BPS) are now being phased out. From 2021, a seven-year transition away from EU-based rules began in English farming. Different rules and schemes are in place for Wales and Scotland, as agriculture is a devolved issue. As a result, farming in England is going through the biggest change in a generation. Defra’s stated aim is to develop policies that work for farm businesses, food production and the environment and that enable farming and food production to be resilient and sustainable over the long term, where farming and nature can go hand in hand. There will be one-off grants available to help farmers invest in technology equipment, and innovation. But new on-going funding to farmers will largely be contingent on the delivery
of environmental outcomes through the Sustainable Farming Incentive. The best way of staying in touch with the latest updates and information from Defra is by subscribing to the Future Farming blog (search for ‘Defra Future Farming blog’ online). Reductions in direct payments will occur more quickly for those in receipt of the largest payments and hence, given the relatively large land areas associated with arable farms, this sector will be affected quickly during the Transition. Many farmers are already looking for ways to reduce costs, improve farm efficiency and diversify (where possible). Research studies, e.g. those carried out by the RBR (Rural Business Research) and also by Andersons for AHDB, show direct benefits of increasing agricultural managerial skills for business performance (financial, technical, well-being) and environmental delivery. Where farmers take an active role in developing their own structured approach to change management, research confirms that approach is highly likely to improve farming businesses and enable on-farm delivery of wider Defra objectives. All farmers are looking for support to consider a range of new options robustly and enable them to adapt their farming systems, crop and livestock management and business structures to address the new opportunities and challenges. Hence there is a need for farmers to acquire and integrate information across a range of topics including soils, water, crop management, markets and logistics and to take both a wider (financial, technical, wellbeing) and longer-term focus to their business development. Therefore, Defra have committed £32 million to provide advice and support to farmers as they move forward through the agricultural transition through the roll-out of the Future Farming Resilience Fund which began in October 2022. The Fund is being used to support 17 advice providers to deliver information, tools, advice, and support for farming businesses across England throughout this period of change. As part of this programme, NIAB, in partnership with farm business consultants Savills and AKC, are collaborating in a new programme of support and advice for arable, mixed, dairy, beef and sheep farming businesses throughout England. A key part of farm business resilience is the personal resilience of the farmer and so we will continue to work with the Farming Community Network to ensure that we can also provide simple and accessible resources to support well-being and direct farmers to further support. This collaborative approach will provide scope for the most effective delivery to arable, mixed, dairy and beef and sheep farming businesses throughout England, giving farmers access to online tools, resources and industry expertise through a network of 30+ experienced farm business consultants. For more information go to www.niab.com/future-farming-resilience-fund
What we have learned so far – working with farmers on farming resilience
In the winter of 2021, NIAB delivered a Future Farming Resilience Fund pilot project with farmers in the Cotswolds and Wessex areas. We worked with 75 farmers through a series of workshops and on-farm visits covering the impacts of changes to direct payments, exploring options for farming system change and developing change management skills. In this project, NIAB aimed to provide each farmer with a toolkit to plan, implement then monitor changes at small-scale before acting to roll-out change across the business. Although not necessarily easy, one of the participants said,
“I found NIAB’s approach rewarding and challenging at the same time; the NIAB team supported me to reflect on my own business strengths and weaknesses, and then worked with me to help me move forward”.
At the same time Savills and AKC worked in partnership with AHDB to deliver strategic advice, business planning and performance monitoring to help farm businesses explore their options and benchmark performance. Some of the key issues for farms that have emerged from the Farm Business Reviews carried out in the pilot phase are:
Agribusiness challenges are business specific, but key areas of focus are;
enterprise and system change including diversification planning,
setting financial goals / managing risk and budgeting,
business structure change including succession, retirement planning and contract farming.
Many farms are looking to improve efficiency and manage overheads to address BPS loss. Benchmarking the full economic cost of production and enterprise gross and net margins allow quick comparisons to top and average performers so that weaknesses can be pinpointed, but these data can be difficult to find or to make sense of.
In the arable sector there is an appetite on farm to explore a range of integrated system changes to reduce input costs and improve environmental impact through farming system change towards regenerative approaches. However, farmers were looking for support to understand the options from a technical perspective and implement technical baselining (e.g. soil health, yield map analysis).
Interest in new environmental land management approaches, farming in an environmentally sustainable manner, carbon audits and relevant funding sources is high. This ranges from exploring existing countryside stewardship and the new SFI options, viability of renewable energy, tree planting; to looking at the farm infrastructure required to manage and store manures better or reduce ammonia emissions from livestock housing or a resource efficiency evaluation looking at electricity and water usage.
Workforce and people planning – labour shortages and availability of skilled labour is an issue, especially on dairy farms and in horticulture. Farm businesses are looking for support to aid recruitment and retention of staff.
A particular focus was the potential value of an annual review of the business more widely focused than an accounts-only conversation. Many businesses were already recording a range of information, from staff and external advisors, but most felt that they could use it better.
Overall, the work to date has confirmed that the future funding schemes are not going to be a direct replacement for BPS. The impacts of the loss of the BPS payments are simple to calculate but options to mitigate revenue loss will be individual to farm businesses. Therefore, a profitable future is going to be about developing a farming system that works best for that location and using all the tools at a farm’s disposal, where environmental payments will be just one of those tools.