EVENING OUT THE BUMPS IN THE ROAD IS ALL VERY WELL – BUT YOU NEED ONE EYE ON THE ROAD FAR AHEAD AS WELL

Two recent releases from DEFRA have shown just how volatile the current farming environment is – and why agricultural businesses need to be planning both to mitigate short-term bumps in the road, and to create sustainable long-term strategies.

While we have known for some time about the gradual reduction in Basic Payment Scheme (BPS) payments over coming years, the publication of a DEFRA BPS calculator has thrown this into sharp focus.  Now you can find out by how much your BPS payment will reduce between 2020 and 2024 – and for most, it doesn’t make pretty reading.

Basically, the more you currently claim, the greater proportion of that you will lose.  So a farm business claiming £30,000 in 2020 will see that payment cut to £15,000 by 2024 – a 50 per cent reduction.  A larger farm business which claimed £500,000 in 2020 will see their payment slashed to £164,000 in 2024, a two-thirds cut.

We have all know this was coming, so it shouldn’t be a surprise, but to see such stark figures in black and white does rather concentrate the mind.

Meanwhile, a DEFRA report into land rents makes for interesting reading, although your opinion will depend on whether you are a landowner or a tenant.  The figures reported show that rents for full agricultural tenancies (AHAs) have fallen by ten per cent in the Eastern region.

Some of this will have been driven by structural reasons such as cuts in subsidy payments and Brexit, but much will have been the result of more short-term factors, especially volatility in commodity prices - or at any rate, perceived volatility. 

Soaring prices for lamb (ironically driven by a lack of supply which itself stems from an earlier perception that prices were set to plummet); hugely reduced yields for cereal crops caused by the weather; and difficulties in finding seasonal labour to pick fruit are all having an effect right now on farming.

But there are bigger, more structural issues, many of which are beyond the influence of individual farmers: world events (including the Covid-19 pandemic); the wider economy; climate change; Brexit; government intervention.

So what can farmers do to plan, and to mitigate these myriad uncertainties?

Clearly the first thing to consider is having a broader range of cropping to take advantage of price highs, and even out the lows,  The old adage about not having all your eggs in one basket has never been more true.

That can be extended to non-food production diversification as well.  This might take more planning and require a longer-term view, but it will help farmers face some of those structural issues as well.

The temptation can be to react in a knee-jerk way to the most pressing challenge, which is often a short-term bump in the road.  The farming businesses which will succeed are those which can combine evening out those short-term bumps with concentrating on the road further ahead – ensuring they are planning a strategic route for the longer-term future too.

Simon Evans is agricultural partner at Arnolds Keys - Irelands Agricultural.