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The next few years are undoubtedly going to be some of the most turbulent the farming industry has seen in a generation.
With the introduction of the Agricultural Bill and Environment Bill and new trade deals following the Brexit negotiations, the industry will have to undergo a period of rapid change. To prepare, farmers are well-advised to review their options whilst the safety net of the Basic Payment Scheme is still in place.
As we enter this period of change it is important more than ever that the advice and services GSC Grays provides continues to be informed, relevant, and focussed on the challenges our clients face.
In July this year, we conducted a survey of farm businesses in our region, covering a range of topics such as COVID-19, land prices, efficiencies and environmental issues. We asked land managers and business owners about their attitudes to key issues and their concerns for the future. Above all, we wanted to understand if/how our clients were starting to prepare for the forthcoming reduction and ultimate removal of the Basic Payment Scheme subsidy.
The survey was distributed to clients via email or post, and to the farming community more widely via social media. More than 150 respondents completed the survey and we would like to thank everyone who took the time to submit their contributions.
We have set out some of the most important findings here and over the coming months, we will be exploring some of these topics in more detail in our ‘Changing Landscape’ programme – a carefully curated series of virtual events, podcasts, and short guides that will address some of the key questions, concerns, and opportunities that we have drawn from the survey results.
When we asked our respondents whether their business would be profitable today without BPS – 49% said it would not and 31% said it would (rising to 50% amongst 20-30 year olds). Perhaps more concerning, was that a further 20% of respondents said they were not sure whether they would turn a profit without subsidy.
Although there is much we don’t know about the future of farm support in England, we know that BPS will not be paid beyond 2027. It is essential that businesses prepare for this change and a critical first step is to understand exactly what proportion of your profit margin is provided by subsidy.
It was also interesting to see that businesses that were undertaking benchmarking were more confident about their profitability after BPS, compared to those who aren’t benchmarking. While we saw a correlation there, it does not mean that there is a causal relationship between benchmarking and dependence on subsidy; however it does suggest that businesses who are keeping a close eye on their efficiency and performance are more positive about their future. This chimes with existing reports by the AHDB and others that identify benchmarking as a key characteristic of top-performing farms.
Some of our most interesting findings related to forward planning and business development.
The majority of our respondents had considered expanding their farm business and by far the most popular option for expansion was taking on more land, whether rented or purchased. We were surprised to find that, although contract and share farming have increased in popularity over recent years, relatively few farmers said they had considered these arrangements. Is this because they are still not well understood, or are there not enough opportunities readily available?
Our survey was first sent out in July 2020, when the COVID-19 pandemic had not long passed its first peak.
We suspected that for many in the farming community business had continued largely as normal, with the exception of those whose businesses were more directly entwined with the catering and hospitality industries, but the results of the survey still held some surprises.
More than a third of respondents said that COVID-19 had a negative effect on their business income, with many citing the impact on diversified farm enterprises as a key area of concern. A smaller proportion, only 28% had applied for a bounce-back loan.
We were encouraged to find that 29% of respondents thought the pandemic could also bring opportunities for their business. Some observed that the pandemic had drawn attention to the importance of domestic food security and had generated opportunities for selling products direct as people became more interested in local food. Interestingly, when respondents were asked later about options for diversification, only 11% said they were currently making direct sales of their produce or running a farm shop, and of those that did not only 6% said they would be interested in doing so in the future.
For more information on the survey results and to be included in our Changing Landscape Campaign mailouts, please send your email address to email@example.com