NO BPS NO PROBLEM?

Thinking creatively to prepare for the future

are facing some of the biggest changes in a generation. The exit from the EU prompting the end to “area based” subsidy payments, coupled with a global pandemic, a war in Ukraine and the subsequent inflation of commodity prices has presented a series of challenging issues in the last few years.

challenges are out of our hands and look here to stay. But although as an industry, we may struggle with the volume of these changes there are going to be lots of opportunities and there is no reason why a farming business from any sector cannot remain profitable and look to the future.

If we take the gradual reduction in area payments, this is likely to have the largest immediate impact on arable and stock farmers. However, the war in Ukraine has helped bolster food prices both at home and abroad and generally farm gate revenue has increased. This is of course balanced out to some degree by higher input prices such as the cost of fertiliser prices for livestock, dairy and poultry also having increased exponentially. But whilst we are unlikely to ever see a return to an area based payments system, the pot of money that this once came from is slowly being distributed through both revenue and capital grant schemes. The number of these schemes seems to be ever increasing and they offer varying levels of payments to particular target areas; productivity and innovation, fencing, hedging, traditional stewardship, water quality, air quality, the list is expansive.

By 2024 BPS payments will have been cut in half compared with 2021 and most farmers will have noticed their 2022 payment will have reduced by 20 – 40%. So with this in mind, now is the time to sit down and look at the grants available and see what is applicable for your business. There is something for everyone but you must be open minded and creative in your thinking to make the most of them.

The grants and schemes will help a lot of businesses but they are only one part of navigating this brave new world with no direct subsidy. Knowing the intricacies and nuances of your business is key to its resilience and ultimately its survival. Carrying out regular budgeting and cash flow planning has always been important but, never more so than with strained cash flow and increased variable and fixed costs. Businesses should be reviewing their purchasing plans and ability to fund not only day to day operations but also future investment projects. Build on working relationships with suppliers and banks to help manage these situations and don’t be afraid to change if you think you are not being offered a good deal or a relationship has become stale. It would also be advisable to look at drawing up a 5 and 10 year business plan and have a conversation if applicable about succession. Now more than ever, it will be important for everyone involved in a business to know the direction of travel, the goals set out along the way and how they might be achieved.

If the conclusion from these conversations about the future are startling, can a solution be sought? Is now the time to look at entering into a joint venture with a neighbour, a contract farming agreement or machinery sharing arrangement?

These are challenging times for farmers throughout the UK but England is one step ahead of the devolved nations with the grants and schemes now available and although Defra’s vision may appear hazy sometimes, we do have some hard facts in front of us. The environment is becoming a bigger piece in how we operate and this is only set to increase Fighting these changes is futile and probably damaging to any agricultural business, so embrace a new way of thinking and see opportunity where you once may have seen despair.

Against the backdrop of changes in England, the Scottish Government conducted their agriculture bill consultation in late 2022. This gave some indications of the expected direction of travel but scale and substance of future government support remains unknown.

In light of this uncertainty, farmers north of the border can focus on business efficiency and resilience and adaptability to prepare for future change.

The basic payment scheme is being phased out by 2024 and the replacement scheme is undecided. What can farmers and land managers do over the next two years to bolster their business and increased resilience?

A business review can be a good place to start when considering resilience, the health of a business over the past three to five years and the level of support from subsidy can help to demonstrate how the business will perform going forward. This forms the basis of determining a strong business plan which is able to adapt effectively to a changing policy landscape.

Many farming businesses are supported by subsidies especially on more marginal land. Reducing this reliance is critical to business sustainability and can be achieved through efficiency. Efficiencies, reducing the reliance on unstable input prices, going back to basics, curtailing unnecessary spending, and taking into account rising prices when budgeting can all help to improve the overall business position. This way of thinking is not new, but sometimes forgotten in an overly complex world of carbon credits, decoupling and offsets.

Carbon and financial efficiencies often go hand in hand with the same products being produced for less carbon input, more quickly or with lower intensity and fewer inputs. This demonstrates the importance of a creative approach to business planning, something Galbraith is able to assist with by offering whole business reviews and advice on grant funding applications and drafting farm business plans. n