Figure 1: English Sector Profitability - Farm Business Income - 2009/10 to 2018/19

Source: Defra/Andersons *real terms, 17/18 prices – Copyright © The Andersons Centre - Andersons

As such I wouldn’t hold out for anything monumentally positive happening in terms of trade relations between the UK and the world in the foreseeable future. Although we will not crash out of the EU there is still a finite time scale on our time in the customs union. Once this time is up, we will no longer have its benefits and will be expected to be trading on our own agreements. At the time of writing, there is much talk in that timeline ending in 2021. Your maths does not have to be very good to realise that that is nowhere near 7 years. The average trade deal takes around 2.5 years to complete is also longer than current proposals.

Once we are officially departed from the customs union you could see negative pressures on the prices of cereals, oilseeds and meat. As demand for feed in livestock sectors and grains for the ethanol industry create surpluses, and exports become uncompetitive, while import tariffs stay low to feed the trade deficit, this will create even more competition. It all provides a perfect recipe for eroding margins. But where the real challenge will come is when the industry loses its support payments from the EU.

The story for farmers’ support goes like this. Currently subsidies work on a basis of the larger the number or hectares, the larger the sum received and this is not set to change. What will change is the sum made per hectare is expected to erode. Currently a large proportion of this is made up of EU subsidies (BPS/SPS) with a small amount made up of the Countryside Stewardship Scheme (CSS). In 2020 the BPS/SPS will be simplified from a EUR sum to a GBP sum at an unknown conversion rate. It will then be slowly phased out from 2021. It is speculated that the reduction in 2021 could be anything from 5% to 25% depending on the size of farm.

However, CSS will continue to run as it has previously as this is a UK government lead subsidy. From 2021 new funding is set to come in known as the Environmental Land Management Scheme (ELMS) on a pilot basis with only 1250 farms being selected and building to 15,000 at the end of 2024. But there is little known about what the selection criteria will be at this point. It will then be rolled out from 2025 onwards and BPS and CSS will no longer exist. Its main criteria are set to be improved air, water and soil quality, increased biodiversity, climate change mitigation, cultural benefits and better protection of historic environments. It is important to point out though that this bill has not yet gone through parliament and could be amended or even scrapped by a new administration. Since it looks likely that we are heading for a general election again, the certainty in ELMS becomes questionable.

If that doesn’t leave you scratching your head on how the agricultural landscape will prosper once we fully divorce our EU neighbours, then please put yourself forward for Minister of Agriculture. For me the only thing that is clear is that those who are not in control of minimising their overhead costs, do not have the ability to review their business model from an unemotional distance, do not understand where their biggest profit centre is in their business and focus on this, and do not thoroughly comprehend what consumer trends or requirements are in their markets will struggle to weather the storm that is about to come. I am expecting intensive farming to continue to grow, and grazing livestock to continue to decline and with this the number of agricultural businesses. Those with bigger bank balances will wait out the problems and smaller family run enterprises are likely to be swallowed up.

Lauren Judd 17 | ADMISI - The Ghost In The Machine | November/December 2019

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