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.
Strutt & Parker will be using its Basic Payment Scheme (BPS) calculator at the 2021 Cereals Event to help farmers understand how phased cuts to support payments will impact their businesses.
“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,” said Jonathan Armitage, head of farming at Strutt & Parker.
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% by 2028, even if profits from Environmental Land Management (ELM) payments are double those generated under existing agri-environment schemes and assuming a 3% 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,” he added.
“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% in net profits.”
Lower net profits
Armitage continued:
“Even in the unlikely event that farmers were to secure similar levels of payments to BPS, the net profit from ELMs will be much lower than that generated by Basic Payments, due to the associated costs of carrying out environmental management work.
“At the same time all of this is happening, there has been a shift in public expectations, with farmers being told they must start operating with a greater environmental focus.
The reality is that many businesses do need to carry out a major reappraisal of their farming policy to prepare for the next chapter.”
Armitage said that now is a critical time for farmers to evaluate their options if they have not already started to do so, identify where there might be new opportunities and then turn their plans into action.
“Despite the challenges, there will also be plenty of opportunities for the best operators to grow their businesses.
“However navigating the changes that lie ahead will require innovative thinking and a proactive approach.”
