Essex farmer Tom Streeter admits that he and his brother Will have some difficult decisions to make about the future of the family farming business, having looked at the details contained in the Budget and their likely impact.

Investment in infrastructure and machinery is off the table, he confirms, and thought is being given as to whether shrinking the 2,000ha arable business would be the best course of action, given the sudden reduction in the Basic Payment Scheme and low profitability.

See also: Soils improve for Northants grower after a switch to regen

Scary costs

“We are set up for economies of scale,” he explains. “That means we have some very big kit and we know what our costs are. They scare us now – something will have to change.”

With a home farm of 800ha, together with a combination of farm business tenancies and contract farming agreements (CFA) and a joint venture set up with a neighbour in 2006, the total of 2,000ha of combinable crops and grassland is farmed as a single unit.

Cropping includes winter wheat, spring beans, oats and barley, with a three-year lucerne ley coming into the rotation recently and both Countryside Stewardship and Sustainable Farming Incentive (SFI) agreements in place.

“Recent Defra decisions mean we no longer know whether the agri-environment schemes are guaranteed income or not,” says Tom.

“Many farmers have waited to see how the SFI develops before committing – now, when its needed more than ever, it’s less certain.

“The farming budget isn’t ring-fenced, so there’s very little security.

“The latest announcements seem very naive and I’m not convinced they will create the change that the government expects.”

Commercial and residential lettings, along with 5,500t of storage, are also part of the business, which stretches across 17 miles from their base at Great Hallingbury.

Close proximity to Stansted airport means higher commercial rents are achievable, but some of the older residential properties need upgrading in order to meet energy performance certificate requirements.

“These are all costs which we are having to bear, at a time when cashflows are looking very tight.”

Tom Streeter © Tom Streeter

Smaller kit

Having pooled their labour and machinery when the joint venture was formed, the Streeters invested in larger machines for covering the ground, better work rates and taking advantage of spraying and drilling windows.

“It has worked brilliantly over the years, but now we are wondering whether having two combines is a good idea financially. It might be better to reduce our acreage and operate with one.”

Wheat yields on heavy soils are declining, going from 10t/ha to 8t/ha, he reveals.

“It’s a worrying and unwelcome trend – it is making us wonder whether smaller, lighter kit might be more appropriate.

“Hitting optimum timings when the weather is changing all the time or soils are saturated is tricky,” he accepts.

“This autumn was a good example; we had three 6m drills running rather than a single bigger one.”

As with all farms, the weather is having a huge impact, he continues.

“There’s nothing we can do about that, but when you put it together with all the other challenges – rising costs of production, market volatility and political change – it is taking a toll.”

Another factor which they are aware will need to be addressed at some stage is the business’s ageing, but loyal workforce.

“We have a great team, but replacing farm staff has become much more difficult and will be more expensive soon.

“Again, would we be better off running a smaller team and operation when one of them retires?”

Contract farming

Their CFAs are also in Tom’s sights: “As the contractor, I need to see approaching £500/ha now.

“Doing it for less isn’t an option with the costs we have in order to cover the ground – it’s becoming harder to get these agreements to work.”

Where it’s not profitable, it’s another potential reason for shrinking the business and reducing their fixed costs, he points out.

Tom believes risk management will be key going forward.

“We need to be well informed and prepared to act on it. For most of us, that means engaging with professionals.

“We also need to keep any eye out for each other and look after our peers and employees.

“As a trustee of [rural mental health service] Yana, I am aware that there are more problems out there at such a time of uncertainty.”

How the dramatic reduction in BPS payments is hitting arable farms

The inheritance tax changes announced in the Budget may have stolen the headlines, but the slashing of delinked Basic Payment Scheme money is seen as an immediate threat to many arable farms.

By capping the payments at £7,200 for 2025, a significant number will have a painful cashflow experience, warn farm business consultants, who add that payments for 2026 and 2027 are yet to be confirmed.

For a 300ha farm, that means an expected total of £23,442 for the coming year has fallen to £7,200 with no warning, leaving a shortfall of more than £16,000.

No warning

“We knew it was being phased out, we were halfway through an agreed timescale and we had been planning for it,” says Richard Means, managing partner at Ceres Rural.

“But to make such a big cut halfway through the cropping year has come as a shock.”

In summary, there’s been a 76% base value reduction on the first £30,000 and no payment on any additional value, he explains, which is why larger businesses will be hit harder.

“When you consider that farm business incomes from cereals are facing a 75% reduction, there’s no way to dress up the fact that margins are going to be very tough.”

Since the Budget, capital grants have also been put on hold, with Defra citing unprecedented demand and saying that it needs to prioritise funding.

For those with applications pending, further information is expected in January.

© GNP

SFI

It means the Sustainable Farming Incentive (SFI), with its quarterly payments, is becoming increasingly attractive.

Multiple agreements may be necessary, as changes can’t be made to an existing arrangement until its anniversary.

“If you haven’t already, get going with an SFI application,” urges Richard. “The quarterly payment could be a lifeline.”

He illustrates what is possible with the SFI by giving an example of a farm adopting a wheat/fallow/wheat/spring oats rotation.

By incorporating the various SFI actions listed below, a payment of £418/ha can be achieved, with 75% of the farm still being cropped:

• 25% CSAM2 cover crop (£129/ha)
• 25% AHW10 low-input cereal (£354/ha)
• 50% CIPM4 no insecticide (£45/ha)
• 50% CIPM3 companion crop (£55/ha)
• 25% AHW7 enhanced stubble fallow (£589/ha)
• 100% PRF1 variable rate nutrients (£27/ha)
• 100% SOH1 no-till farming (£73/ha)

When coming up with an SFI plan, look at a map and pick out the fields that consistently don’t perform, continues his colleague Rachel Bush.

“Those are the whole fields to consider taking out of production and putting into an SFI action, such as wild bird food or legume fallow, to support environmental objectives.”

Then, make use of rotational actions as break crops, to bring stability and help ease cashflow pressures, she continues.

“Consult with your agronomist so that it works for the three years of the agreement.

“Remember that you can reduce your commitment to rotational actions by 50%, if need be.”