Losses on mixed lowland stock farms set to force changes

Mixed lowland livestock farms in England, Scotland and Wales share many of the same challenges, with losses and policy changes likely to sharpen the focus on addressing these.

Higher beef cattle and sheep prices in recent years mask many of the longer-term issues that mixed lowland livestock businesses face, says consultant Andersons.

See also: How upland farmers are pooling resources to plug funding gap

The double-edged impact of inflation on the one hand pushes up almost all input costs.

On the other, it seriously erodes the value of the support on which so many of these farms rely for their profit and, in some cases, to minimise losses.  

With policy diverging among the devolved nations, differences in outlook are emerging and these are highlighted by the firm’s latest model farm budgets.

Losses are set to rise for its Meadow Farm model next year in England, Scotland and Wales but by varying degrees.

The same enterprise model is used in all three nations. It is a 154ha suckler beef, sheep and cereal unit, which also finishes dairy bulls. The purpose of the arable enterprise is usually to supply the livestock side with feed.

Typically these are reactive rather than proactive businesses, says Michael Haverty, partner and senior research consultant with Andersons, with structural change evidently needed but difficult to achieve.

Regardless of where they are based, the farms face lower direct support, although at differing paces and with differing compliance requirements.

The emissions challenge cannot be ignored and in the longer term, new trade deals will bring more competition.

In some cases, these farms are too self-sufficient, with too many enterprises, says the firm.

For example, many grow cereals for feed use but for the amount grown, the yields achieved and the cost of production, some would be better off buying this in, suggests Mr Haverty.

In others, outside income, typically through a spouse or partner working away from the holding, helps maintain the farm but may have the effect of delaying decisions on the structural changes that are often needed.

However, with elevated costs likely to be sustained for some time, the pressure for structural change will grow, says Andersons.

“Look at your assets, look again,” says Mr Haverty. While diversification should not be held up as the answer on all farms, he suggests that in some cases collaboration on an alternative enterprise can be helpful.

For example, if the required skills are not there on the farm, is there someone local who might want to join with the business in a new venture?

A further pressure will come as customers further along the supply chain increasingly examine what is known as Scope 3 greenhouse gas (GHG) emissions.

Among these are the emissions associated with the goods and services they buy.

England

The English Meadow Farm, like the Scottish one, made a margin before subsidy in 2021/22 for the first time in many years.

However, the current year is forecast to make a loss before subsidy of £210/ha, with the losses rising to £338/ha before subsidy in 2023/24 because of further cuts to the basic payment and rising costs.

The farm is in the Countryside Stewardship scheme and is considering only the Sustainable Farming Incentive Improved Grassland Soils Standard Introductory Level at this stage.

The cost of meeting this, Andersons estimates, would take up about half of the £28/ha SFI payment, leaving the farm about £14/ha better off, or £11/ha across the whole acreage.

Other SFI standards of interest are hedgerows, nutrient management, integrated pest management and improved grassland. No SFI income is included in the table.

Scotland

As on some similar farms elsewhere in the UK, the assets on this farm are not being used to their potential.

No collaboration has been undertaken and the farm needs a fundamental review of its enterprise mix to be viable in the long term, says Andersons.

The support system has not yet changed in Scotland, but the business should prepare for cuts, with a four-tiered policy proposal with a base level payment subject to meeting conditions including cross compliance, being an active farmer and greening.

Further tiers will reward those opting to improve efficiency, cut GHG emissions, improve biodiversity for organic production, innovation, woodlands, peatland and coupled support for beef and sheep.

The need to meet conditions is expected to apply to half of the payments.

Wales

Unlike its Scottish and English counterparts, Meadow Farm in Wales did not trade profitably before support payments in 2021/22.

Even larger losses are envisaged in the current year and in 2023/24, which is unsustainable.

The farm is not in Glastir, the Welsh sustainable land management scheme, but must consider joining it, says Andersons.

Welsh Basic Payment Scheme (BPS) amounts are lower than in England and Scotland.

From 2025, BPS and Glastir will begin to be replaced by the Sustainable Farming Scheme, when public goods will have to be provided in order to qualify for payments.

Under the current proposal, Welsh farmers will have to have at least 10% woodland and 10% in semi-natural habitats, although many anticipate this requirement will be reduced.

The Welsh Meadow Farm will have to look closely at taking the least-productive and most loss-making land out of production, advises Andersons.

“Analyse the trade off between taking land out and continuing to produce on it,” says Mr Haverty. 

While the enterprise mix on this farm already needs examination, these percentage requirements will further challenge some farms of this type, he says.

Trade deals

“While the Australia and New Zealand trade deals will be the first to kick in, they will not immediately affect farms like Meadow Farm as they are being phased in,” says Mr Haverty.

“However, they set a dangerous precedent. Other countries will view them and also want tariff-free quotas for exports to the UK.”  

Help with farm business challenges

England – free advice is available through the Future Farming Resilience Fund to help manage the move from BPS support to the new environmental land management regime.

This is offered through a wide range of firms including Andersons with Ricardo, details by county are on the Defra website.

Scotland – The Farm Advisory Service offers free telephone advice on a wide range of topics on 0300 323 0161 or email advice@fas.scot.

There are also grants to cover bespoke advice to help improve profitability and sustainability.

For example, a grant worth up to £1,200 can pay for farm business consultancy to help draw up an Integrated Land Management Plan to identify opportunities and cost savings.

Wales – Free farm business advice has been available in Wales through Farming Connect, which has just been awarded a further two-year project.

Details are to be confirmed but it is expected that further free advice will be offered. For support or business advice call 03456 000 813.