Changes in land use are coming
Serious problem with a lack of productivity means that farmers need to rethink the way they work
The farming column and Country Matters articles are written by Andrew Davis, who welcomes suggested topics for coverage. He can be contacted on (01635) 564526, or email: editor@ newbury news.co.uk
IT may be brave or foolhardy to predict changes in rural land use over the next decade considering the huge uncertainties that surround many of the elements.
The Agriculture Act may have received royal assent but we still have no details of the Environmental Land Management and other schemes to be introduced in the next few years.
Perhaps even more critical is the fact that we still have no idea of future trading relations with the European Union, little more than a month before the end of the transition period.
Yet that was the theme of the recent meeting of the Countryside Forum held remotely via Zoom.
Jeremy Moody of the CAAV (Central Association of Agricultural Valuers) spoke of the pressures on farming in the coming years and the need for a generation’s change in a decade, much of it structural. It is a historic moment, the first time since 1947 that we have designed a new policy for rural land use and the first time since 1972 that the UK Government is entirely responsible for that policy.
We have a serious problem of lack of productivity in this country.
Since 1964, we have only managed to increase productivity by an average of 0.9 per cent a year – the Dutch have achieved 3.5 per cent, a phenomenal difference.
If we had matched the US since 2000, British farming would have been better off
by £4.3bn by 2013.
One of our biggest challenges is to improve productivity dramatically to catch up with other countries or we will be at an increasing competitive disadvantage.
The Basic Payment will be phased out, starting next year and complete in 2027. The loss of that direct subsidy will have a significant impact, but more on some sectors than others.
Eighty five per cent of the income of an average farm comes from selling produce and 15 per cent from subsidy, but that subsidy represents 34 per cent of sales for grazing livestock and 22 per cent for cereals.
Another third is made up of dairy and final third is made up of pigs, poultry and horticulture.
Jeremy Moody used the parable of the talents as a graphic analogy.
If a farmer of grazing livestock starts with £100 of inputs, what is he left with at the end of the year?
The top 25 per cent turned this into £112, but those in the bottom quartile were down to £47.
Even after adding in subsidy and income from other sources, only 53 per cent
achieved more than £100, the top quartile £134, the bottom £73.
This throws up two points. The first is the significant difference in performance between the best and worst farmers.
This is dramatically borne out by the fact that, over the four years from 2013 to 2017, the best combinable crops farmers made a return of over £200 per hectare, while the worst lost over £300.
Even the average made a loss of around £80 per ha.
And yet, many of the poorer performers are not aware their returns are below average and that they need to up their game.
The second point is one of land use.
The third of farmers most dependent on subsidy, combinable crops and grazing livestock, occupy the majority of the land. Grazing livestock comprises beef and sheep as dairy is taken as a separate category.
While dramatic change may not have too much impact on overall food production, it will have much more on land use and thus landscape.
How will farmers adapt? The former NFU chief economist Sean Rickard has said that, if there is no comprehensive trade deal with the EU, one third of all farmers will go out of business within five years. This would be the cliff-edge experienced by New Zealand when it abolished public support for farming in 1985.
We have to hope this will be avoided and that we have the seven years of transition to adapt to changing circumstances. Large-scale arable operators are already shedding land on which they cannot make a margin – this is likely to continue and accelerate.
Units are getting bigger to gain economies of scale and spread fixed costs, but that will not be a universal answer. Of course, individual objectives have a large influence and not all farmers are dependent on profit from farming.
They may have income from diversified enterprises or other sources but, for the majority, performance will have to improve if they are to survive.
Adding value is one option, investing in technology is another.
It is likely that many older farmers will retire and make way for those who can embrace change, perhaps with novel land management arrangements.
It seems inevitable that some land currently used to grow combinable crops or raise cattle and sheep will be taken out of conventional farming.
It remains to be seen what options and grants will make up ELMS, but it might be reasonable to assume that excess arable land will be used to grow energy or industrial crops while most will be put into nature conservation schemes. Grassland, too, is likely to be turned over to nature with a big expansion of woodland. There will also be emphasis on public recreation, health and wellbeing.
We will be more exposed to international trade so, if farmers are unable to improve productivity to compete, we may produce even less of our own food, especially commodity products such as cereals and red meat.
It is not only farmers who will be facing change – if policy makers and the general public are unhappy with the impact on our landscape, they need to think through the consequences before it is too late.