‘Embrace skills and technology to ensure successful future’

The phase-out of the Basic Payment Scheme makes it increasingly important that farm businesses are more adaptable, embracing new technology and a wider range of skills.

War in Ukraine, the challenge of climate change and Brexit mean farmers face huge challenges – both now and in the years ahead, delegates were told at last month’s annual conference organised by the Central Association of Agricultural Valuers (CAAV).

“These factors are well and truly playing out in our industry, economy and the world economy, in a period of accelerated change,” said outgoing CAAV president Simon Alden. “As an industry and profession, we are all on a steep learning curve to meet these challenges and changes.

“In doing this, both agricultural and rural businesses can become more adaptable and seek out greater efficiencies and new markets. With new technology and a wider range of skills, we can face this new period with excitement, as we identify new opportunities and returns.”

The government’s new Environmental Land Management Scheme will only partially offset lost BPS income. Defra farm minister Mark Spencer said the government was determined to ensure the ELMs and the Sustainable Farming Incentive works for farmers.

More opportunity

“They work alongside and support food production. Food is the primary purpose of farming and always will be. But sustainable food production in the long term is also dependent on healthy soils, water quality and abundant pollinators.

“There is something for everyone, including different farms, sizes and locations. We are accelerating roll-out of the sustainable farming incentive (SFI) with 19 more actions. The schemes are straightforward to apply for with minimal paperwork. For example, a free vet visit under SFI takes eight minutes to apply for.”

But NFU president Minette Batters was much more sceptical.

“I think we’ll see a lot more bureaucracy than under the Common Agricultural Policy. Also, we have a massive job to level up on food production with the environment. We have the Environment Act, environment improvement plan, have lost cross compliance and have the law of the land.”

Game changer

“This is a big game changer. Is the budget enough, is ELMs enough to deliver on the requirements of the environment improvement plan? And what will be the impact of ELMs on food security? It won’t benefit it – we’re growing crops for the environment.”

CAAV adviser Jeremy Moody said alternative income sources – such as carbon trading – also  had downsides. “Farming overestimates its role for others but underestimates what it will need to do. There is little value in offsetting – the farm level quantum is too small and value too low.

“Supply chains will expect farmers to move towards net zero, so why should they give away the easy gains? There could also be unforeseen risks, like woodland which has been sold for carbon credits being eaten by beavers or destroyed by storms.””

Carbon assets

When selling carbon assets, farmers should look at the facts of the deal, said Mr Moody. This includes what is being sold and at what price, how fettered the landowner is, and what the terms are. Landowners should also consider the tax consequences and associated costs. “Is it worth it?”

One area causing concern is agricultural property relief and how it might apply to environmental use of land. The CAAV and see the simplest answer is to extend it, as in 1995 for tenancies, based on the model of the Inheritance Tax Act’s s.124C for Habitats Regulations.

The tenanted sector faces its own challenges as area payments disappear, explained Mr Moody. “Many landlords and tenants may find this daunting – but it also offers opportunities for proficient future farmers.

“Consider terms and lengths of lettings – for example, a new slurry store scheme may need forward security. There may be opportunities for contract farming and joint ventures.”

The recent Rock Report aimed to help tenants by encouraging longer lettings. But Mr Moody said its proposal to limit agricultural property relief from inheritance tax to lettings of at least eight years would have the opposite effect.

“Using our CAAV land occupation survey data, we see little or no gain in eight-year lets. Longer lets would shorten to eight years and other lets would tend to go much shorter, hollowing out the middle ground.

“We estimate that some 200,000ha would be lost from the sector in the short term and then a longer term reduction from a third of farmland to a fifth. Yet, the proposal cannot achieve its goal without an even more extreme reduction in the let sector.”