Farming in the UK
Harry Morshead, Northumbrian, sheep farmer and rural surveyor with youngsRPS, shares his thoughts on the rising costs of farming and food production in the UK.
July has now been and gone, and with it, the deadline date for Countryside Stewardship Submissions, and whilst we have been busy with submissions, I was slightly surprised that there was not more of an uptake, especially with the improved payment rates.
Whilst these agreements are certainly not for everyone and do, in many aspects, go against the grain in terms of farmers wanting to produce food, they do represent an opportunity to generate an income and, in many cases, with little input.
The principles behind many of the options do not sit that comfortably with me; however, I can see their worth in terms of secure income generated.
Agricultural inflation
Although I am a huge advocate of the need to produce food, I am very conscious of the huge battles that farmers are facing in terms of rising costs and volatility.
Agricultural inflation is, according to Andersons Consultants, up 25.3% on the year, and this is in conjunction with a 20% drop in BPS in 2022 and 35% in 2023.
The result of this will see farm budgets for 2022 some 45% “out” from what could be considered, a normal year, and in theory, they will be 60% out for 2023 budgets, (if agricultural inflation remains at 25%). All of this is before considerations are given to the much-publicised cost of living crisis.
The argument that produce prices will have to rise because of the increased costs etc., is hope rather than fact, and even if they do, are we expecting to see a 60% increase in prices?
I do not think we should be forecasting anything with a degree of certainty given the volatility of the marketplace, only exacerbated by the political climate we are currently in, both at home and abroad, and this is before we factor in this summer’s drought.
Whilst the sector has always been volatile, much of this has been ridden by the BPS (support) payments. We are, without question, in unchartered waters.
Input costs
Volatility such as this makes it impossible to plan, and whilst cereal prices and end figures may look attractive from this year’s budgets when factoring in last year’s input costs, I suspect the opposite may be true for next year when factoring what this year’s input costs will be.
For livestock farmers, they are now or soon will be experiencing this as they’ve paid the input prices as of 2022 and are now selling their “harvest”. Stock prices are up; however, nothing like the 45% required to simply be the same as last year.
Farm schemes
I write with much gloom; however, this is not the intention. I do feel that the current schemes available aside from BPS are wholly inadequate.
However, they do provide at least some sort of guaranteed income. No, they will not make up the 45% or 60% difference required, but they may well help and when considered in conjunction with the “hoped” rises in produce prices, the shortfall may get smaller still.
Yes, the window has closed for CS revenue applications; however, it remains open for capital works.
If you need such works doing, these should be considered as clearly farm budgets, as things stand, would not justify, say, fencing, hedging, or walling works; a capital grant could help alleviate some of the cost.
Equally, there is also the option to apply for the Sustainable Farming Incentive. I, like many farmers, have dismissed this as simply being not worth it, but I am going to look at it, purely on the basis that every little helps.
If it is manageable without changing my farming practice dramatically, then it, plus the small sums I receive from an existing CS agreement and my “hoped” price rises in the lambs I am soon to market, will eat a little bit into the 45% deficit in my budget.
More flexibility and discretion
To end on a positive and some hopeful thinking, the government have announced that HLS schemes will be rolled on for a further five years, provided the agreement holder is happy, whilst the same is the case for CS agreements which may be nearing an end and started pre-2021.
One of the reasons cited was that post leaving the EU. The treasury is able to exercise much more flexibility and discretion; a further example is the bringing forward of 50% of the 2022 BPS payment.
The cynic in me thinks that they have not got an alternative scheme ready yet. The optimist in me hopes that they won’t get one in place, and they will have to revert back to the tried and tested one of BPS.
All the while, however, the realist in me will try and obtain any funding possible to help ride the extreme volatility we are now facing.
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