English dairy farmers are in the middle of a farm policy revolution, with new environmental payments not filling the gap in direct support. Cedric Porter reports.
The UKs exit from the EU included departure from its Common Agricultural Policy (CAP). The UK government has committed to continue spending 3.5 billion on agriculture and the rural economy across England, Scotland, Wales and Northern Ireland at least until the next general election.
England has gone the furthest and fastest in reform of its agricultural policies. English payments have been guaranteed at a total of 2.4 billion until the election.
The last full England payments based on previous CAP support was in 2020. Since then, funding has been reduced every year. In 2023 there will at least a 35% drop in support compared to 2020. The rate of reduction is larger for larger payments with larger historical payments. Those farms that received 150,000 or more in 2020 will see a 55% reduction in funding this year. The last direct payments are in 2027. Half of the annual payment is now made in the summer.
The summer payments are helping cashflow, but you have to remember that inflation has also eaten away at the value of the funding since 2020, says Richard King, partner at Andersons 51AV视频Business Consultants.
Another major change is taking place in 2024 when delinking will take place; breaking the link between land occupation and support. After that there will be no environmental cross-compliance requirements and the entitlements to support end.
Andersons calculates that English Basic Payment Scheme was worth 1.9 pence per litre on its model 200-cow plus followers, 130-hectare (321-acre) part-rented farm in the 2020/21 milk year, the last year of full payments. That fell to 1.8ppl in 2021/22, was down to 1.5ppl in 2022/23 and will be 1.2ppl in 2023/24, with further reductions to nothing by 2028/29.
Mr King says profits are expected to fall in the 2023/24 milk year as falling milk prices and continued high costs bite. The figures estimate a 5.9ppl business surplus in 2021, with the basic payment making up 30% of that figure. That falls to 5.5ppl in 2022/23, with support at 27% and to just 2.4ppl in 2023/24 when funding will make up half of profit.
Our forecast for 2023/24 is for a significant fall in milk prices on average. Costs will not fall as fast and this squeezes margins. Profits are below where they were in 2020/21 but at least there is a return from production. Without the buffer of support there is a danger in future years that the farm goes into a loss.
New payments are a long way off matching the reduction in direct support. Analysis by The Observer newspaper shows that the reduction in funding to all English farmers in 2022 was 22%. However, new funding under the Sustainable Farming Incentive was at 10.7 million, just 0.4% of the governments total spending commitment of 2.4 billion.
It is worth remembering that new environmental payments are not a like-for-like replacement of direct support; they require cost and effort to access, said Mr King.
Much of the first tranche of SFIs introduced last year apply to dairy farmers. A 28/ha payment is available for farmers who test their grassland soils organic matter and ensure that 95% of their land is covered with vegetation over winter. That rises to 58/ha if 15% of the land is also put into herbal lays. Separate payments for arable land and moorland are made.
Carrying out integrated pest management, including a review and plan and removing insecticides from a spray regime can also attract funding.
Funding for an annual animal health and welfare review designed to reduce disease and increase productivity is also available.
Additional incentives have been launched this year, including a 333/ha payment for taking field corners out of production and 474/ha to manage grass for winter bird food.
Using very low volumes of crop nutrients can earn up to 151/ha in non-severely disadvantage areas, while there are payments for hedgerow management.
Agro-forestry, water management, farm woodland and organic payments are expected to be announced in 2024. Meanwhile the existing Countryside Stewardship scheme has been retained. Unlike the BPS, which required an annual application every May, farmers can apply to join SFI schemes whenever they want.
A series of English farming grants has been introduced. The Farming Equipment and Technology Fund gives fixed payments for 120 specified items with grants between 2,000 and 25,000. Water management, productivity and adding value initiatives can attract between 35,000 and 500,000, with the Slurry Investment Scheme paying out 25,000 to 250,000 for projects that allow the storage of six months worth of slurry.
Inevitably the new payments are political, with their future dependent on the actions of a new government after the probable 2024 general election, and whatever government is in power, Mr King warns there is no guarantee money will remain available.
With pressures on government spending, if farmers do not claim the new sources of funding then there is the danger that it will be removed.
Devolved farm support
Scotland
Initially the Scottish Government had wanted its farm policy to mirror that of the EU. But it now plans to introduce a four-tiered system in 2025, with half of support conditional on reducing greenhouse gas emissions, manging plant nutrients and improving biodiversity, soil health and animal health and welfare. The four tiers are base and enhanced level direct payments, elective payments for specific aims such as developing food businesses, organic farming, innovation and enhancing habitats. Advice, career development and specific support for woodlands, less favoured areas, peatland and beef and lamb makes up the fourth tier.
Andersons says that BPS payments were worth 1.8ppl to its model 130ha Scottish dairy farm in the 2022/23 milk year or 35% of the 5.1ppl margin. The payment will remain the same in 2023/24 but a squeeze on profitability may mean that direct support is responsible for 75% of the margin, with just an extra 0.6ppl coming from production itself.
A Sustainable Farming Scheme (SFS) is set to replace BPS at the start of 2025. There are three layers to the SFS. The universal actions layer is compulsory for all farmers in the scheme and will include baseline environmental standards, which may mean a requirement for 10% of the farm to be devoted to semi-natural habitats or woodland. There may be some flexibility and exemptions based on specific farm types and locations.
A targeted farm approach will be taken in the optional action layer. Farmers will be able to choose which action they undertake and receive payment upon delivery in addition to their universal action payment. This could include devoting more than 10% of the farm to wildlife habitats or woodland; actions to improving grazing; growing crops to replace bought-in feed and actions to improve productivity.
A complimentary action layer to encourage collaboration to improve landscapes, develop food-chain businesses and share knowledge is the third element. The SFS may be phased, with additional support from small grants.
Northern Ireland
A tiered approach is being proposed with an area-based capped and conditional 51AV视频Sustainability Payment.
Farming for Carbon will encourage more general carbon reduction through peatland reduction, efficient feed and fertiliser use and generating energy from waste.
There will be a fourth Farming With Nature tier.
Extra support for innovation, supply chain development and encouraging new generations of farmers will be offered.
