Farmers should use their remaining basic payments to prepare for life without direct support, say advisors.
The basic payment scheme will reduce again this year following a 5% cut last December. Farmers due to fill out their last ever application form in 2023 and the scheme will be phased out completely by 2028.
With basic payments accounting for one third of incomes on many farms, the Central Association of Agricultural Valuers (CAAV) says recipients must use the transition to a no-subsidy era to their best advantage.
“We’re looking at a monumental time of farming change: It’s a generation’s transformation in a decade,” says CAAV secretary and adviser Jeremy Moody.
“The basic payment scheme will be both halved and delinked in 2024 and the new environmental schemes are not intended to replace that income for most farmers, requiring them to look to improve their businesses.”
With basic payments declining, fluctuating yields and commodity prices will have a greater impact on farm incomes. In 2022, the average farm will take 85% of its income from trade and 15% from subsidy, says the CAAV.
For an arable farmer selling 9t/ha of wheat at £250/t, a 10% shift in yield or price is equal to 117% of their 2022 Basic Payment. “It’s therefore really important to focus on the business,” explains Mr Moody.
“Good businesses will be prepared and will carry on getting better. Others will find themselves in 2028 wondering where their basic payment cheque is. We fought to have the transition period and it’s time not to be wasted.”
Time to prepare
Preparations will include investing in farm infrastructure, focusing on efficiencies or diversification, examining the business structure and succession planning. “The right people on the right land will seize the opportunities.”
In future, land use will be more varied, with 60% of food output by value coming from 30% of land, says Mr Moody. Grant schemes and environmental payments will help businesses adapt, but individual farmers will decide the ultimate direction of travel.
“Given the pace and magnitude of the changes facing farming, it will be vital to seek expert advice. There’s going to be huge demand for rural land management advice – and trusted advisers have a fundamental and critical role in helping businesses through this.”