Big decisions ahead as safety net falls away
Arable farmers are looking at “once-in-a-generation” decisions about the future direction of their businesses as they prepare for life without the safety net of direct payments.
The reality of what cuts to Basic Payments in England will mean to farm profitability is focusing people’s minds, particularly in the arable, mixed and lowland livestock sectors which have traditionally been heavily dependent on BPS to support profits.
We now know that reductions in payments will be implemented quite swiftly, with larger farmers facing the loss of two-thirds of their BPS by 2024.
An impact assessment carried out by Strutt & Parker suggests that for an average arable farmer, net farm profits could fall by as much as 54 per cent by 2028, even if profits from Environmental Land Management payments are double those generated under existing agri-environment schemes and assuming a three per cent per annum rise in profits from farming and diversification.
Some people are hoping that ELMs will allow them to make up for the loss of BPS. However, our calculations suggest that even if payments under ELMs were five times higher than those paid under the current Countryside Stewardship Scheme – which they won’t be – arable farmers could still face a fall of up to 20 per cent in net profits.
Despite the challenges, there will also be plenty of opportunities for the best operators to grow their businesses. But navigating the changes that lie ahead will require innovative thinking and a proactive approach.
Dan Matthews, farm consultant in the Shrewsbury office of Strutt & Parker.
