Growers and livestock producers are being urged to adjust quickly to a brave new world which includes the phasing out of direct support.
The coming year will see a step-change for UK agriculture – and a new business environment which is likely to be more testing, according to an Outlook 2021 report by Andersons farm business consultants.
“The hope is that 2021 will see life return to the ‘old normal’ after the upheaval of Covid-19 – however the farming sector faces a further set of challenges,” said Richard King, Andersons partner and head of business research.
“The end of the transition period marks the start of the real Brexit. The friction in trade between ourselves and our trading partner will be much greater – leading to higher costs which may well be passed back down the supply chain.”
Independent trade deals with other countries could be on the horizon said Mr King. While this might be good for some sectors, it could be bad for others – and it could pose a special challenge for farmers.
“The danger here is that access to our agricultural market is granted in return for concessions elsewhere. UK farmers could be faced with low-cost competition, possibly produced to different standards.”
This year will also see direct payments start to be phased out. Payments to farmers will be halved by 2024 and gone altogether by the end of 2027. This means some farmers will have to increase their productivity to stay in business.
Recouping any lost money will take time and effort, said Mr King. “There will be less support as of right – and land managers will be expected to deliver something to society in return for the funds they receive.”
This should not necessarily be something to be feared. There were still great opportunities to improve financial performance in all sectors of the farming industry, said Mr King.
“Without the distorting effects of direct support, there can be a greater focus on the areas of activity on farm that actually make a profit. Over time, a stronger, more resilient industry should be able to meet many of the challenges that lie ahead.”
Tenant Farmers Association chairman Mark Coulman said 2021 would be a year for big decisions. Individual farmers needed to decide if the future was one within which they could see their businesses thrive.
“There has been a significant amount of interest in the Basic Payment Scheme lump sum exit proposals, particularly among farm tenants who are towards the end of farming careers and without clear routes for the succession of those businesses.
“Further details about how that scheme will run should be available in the early part of the year and I fully expect a significant number of individuals to see that as a viable option to take when it becomes available in 2022.”