Category: Policy & Business

Defra has released figures for English farm profits.  These show a slightly different picture to the UK figures we reported on last month (see https://abcbooks.co.uk/farm-profits-4/).  In real terms, Total Income from Farming (TIFF) fell by 23% between 2022 and 2023 – from £5.87bn to £4.54bn.  This compares to the 16% drop seen in the UK figures.  It is closer to the sort of reduction we were forecasting for 2023.  The main reason for the reduction was lower crop output.  Sales in the livestock sector were relatively unchanged with a drop in milk values being offset by an increase in poultry income.  There was a small decrease in costs – mainly driven by the lower price of fertiliser.  The full statistics can be found at – https://www.gov.uk/government/statistics/total-income-from-farming-in-england/total-income-from-farming-in-england-in-2023.

Following its landslide victory in the General Election on 4th July, the new Labour administration is starting to bed-in.

In farming terms, the Shadow Defra team have been installed into Ministerial posts – meaning there should be little need for them to get up-to-speed on policy issues.  Steve Reed has become Defra Secretary of State and Daniel Zeichner has a junior position as Minister of State.  Although roles have not yet been allocted, it seems highly likely that Mr Zeichner, MP for Cambridge, will be in charge of the farming portflio as he was in the Shadow Cabinet.  Other Defra Ministers are Emma Hardy, MP for Kingston upon Hull West and Baroness Hayman of Ullock.  Steve Barclay currently retains the Defra brief in Rishi Sunak’s new Shadow Cabinet.

The King’s Speech, where the new Government will set out its initial priorities, will take place on 17th July.  However, Mr Reed, MP for Streatham and Croydon North, has already set out his five priorities for Defra;

• to clean up rivers, lakes and seas
• to move Britain to a zero-waste economy
• to boost food security
• to ensure nature’s recovery
• to protect communities from the dangers of flooding

At present, there is little flesh on the bones of these priorities.  The Labour Manifesto was notably silent on specific commitments to farming.

In the short-term, the most important announcements for rural areas from the new Government are likely to relate to changes in Planning policy.  The Planning system has been identified as a major barrier to the economic growth that is central to Labour’s plans.  The Chancellor, Rachel Reeves, has set out a number of policy initiatives in this area (mostly relating to England);

• the end to the de facto ban on onshore wind
• reinstating mandatory housebuilding targets for Local Authorities (however, as many of these targets were never met in the past, it will be interesting to see what practical effect this has)
• the recruitment of 300 new Planning Officers to help reduce the backlog of applications
• prioritising energy infrastructure, with decisions being made in relation to the national interest (including the effect on growth) rather than just local considerations

There will be a Budget in the autumn, with the date set before Parliament rises for the summer.

Three of the main carbon calculators for farming have agreed to harmonise their methodologies.  The Farm Carbon Toolkit, Cool Farm Alliance CIC, and Agrecalc will work towards a common minimum standard.  Each calculator could still produce a different answer in terms of emissions (the companies state there is no ‘right answer’), but they will use the same sources of base data and make it easier to see why differences occur.  The move comes in response to a report undertaken by ADAS for Defra on the Harmonisation of Carbon Accounting Tools (see https://sciencesearch.defra.gov.uk/ProjectDetails?ProjectId=20967%0A).   More details on the harmonisation routemap, including a webinar in the autumn can be found at – https://farmcarbontoolkit.org.uk/2024/06/19/three-major-farm-carbon-calculators-outline-a-roadmap-to-harmonisation/ .

The Agriculture and Rural Communities (Scotland) Bill was passed into law by the Scottish Parliament on 18th June.  Royal Assent is expected shortly.  This Act provides the powers for the Scottish Government to run its new farm support system, plus some other legislative changes (see https://abcbooks.co.uk/scottish-agriculture-bill/ for more details).  As a ‘framework’ Bill, the passing of the legislation does not provide any more detail on future support plans – it merely provides the legislative base. 

The main political parties have set out their rural policies ahead of Election Day on July 4th.  Below is a brief summary of some key points.

Conservatives:

• a pledge to increase the agricultural budget for the UK by £1bn over the course of the next Parliament (given a five-year Parliamentary term, simplistically this means an extra £200m per year).  This compares with the ask of the NFU for an extra £2bn per year.
• introduce a legally-binding target to improve the nation’s food secturity – although it is not clear what this means in practice
• improve the process for granting Planning Permission for farm infrastructure (slurry stores, reservoirs etc.)
• retain capital tax benefits such as Agricultural and Business Property reliefs

The full document is at – https://public.conservatives.com/static/documents/GE2024/Conservative-Manifesto-GE2024.pdf 

Labour:

• no specific commitment on future funding for farming and the environment
• set a target that half of all food procured by the public sector should be locally-produced or have high environmental credentials
• reform the Planning system to boost housebuilding
• create three new National Forests in England and also nine new ‘River Walks’
• implement new workers’ rights legislation

See https://labour.org.uk/wp-content/uploads/2024/06/Labour-Party-manifesto-2024.pdf 

Liberal Democrats:

• an extra £1bn per year on the agricultural budget for the UK
• introducing a National Food Strategy and strengthening the role of the Groceries Adjudicator
• negotiate a new arrangements with the EU on veterinary and plant health to improve trade
• allowing Local Councils to buy land for housing at ‘agricultural’ rather than ‘development’ value

See https://www.libdems.org.uk/manifesto

The Scottish National Party is due to launch its manifesto this week (w/c 17th June).  Plaid Cymru’s manifesto can be found at https://assets.nationbuilder.com/plaid2016/pages/10962/attachments/original/1718214059/Plaid_Cymru_Maniffesto_2024_ENGLISH.pdf?1718214059 and the Green Party’s at https://greenparty.org.uk/about/our-manifesto/fairer-greener-food-and-farming/.

 

Details of the Sustainable Farming Incentive 2024 offer are now available (see earlier article for more details).  A controlled roll out via Expressions of Interest is currently taking place with the scheme expected to open to all later in the summer.  To assist farmers and their advisors with understanding what will be accessible we have produced a 4-page SFI Factsheet giving a summary of all the actions that will be available.

Click Here to access our 2024 SFI Factsheet or it can be found via the Bulletins tab at the top of the page.

UK farming made surprisingly good profits in 2023 according to Defra.  The Department has recently released figures for Total Income from Farming (TIFF) – this is the aggregate profit for the whole UK farming and horticultural sector.  The headline figure is that profits fell 16% in real terms between 2022 and 2023, but last year’s figures still came in at a very healthy £7.2bn – the third highest returns in the past 25 years.

The Defra figure for 2023 is much higher than we had been predicting.  We had estimated that profits for the year would fall to around £5bn.  Part of the reason is a sizeable upwards revision for the 2022 year (from 7.9bn to £8.6bn).  This results in the 2023 figure being higher.  There is a history of quite large revisions in the TIFF figures – we would not be surpised if those for the past year were amended in due course as well.

Both crop output and livestock output were down in 2023 compared to 2022 – by 16% and 7% respectively in real terms.  (Both of these drops were lower than we had forecasted).  Variable costs (called ‘intermediate consumption’ in these figures) showed a surpising drop of 9% year-on-year.  The fall was wholly due to a big drop in the value of animal feed consumed on farm.

The chart below shows the evolution (in real terms) of TIFF over the past 25 years.  TIFF shows the return to all entrepreneurs for their management, labour and capital invested.  In simplistic terms, it is the profit of ‘UK Agriculture Plc’.  Also shown on the chart is the contribution of direct support (BPS plus agri-environment scheme payments).  This has declined in recent years as inflation has eroded its real terms value.  However, it continues to contribute a sizeable proportion of farm profits

Given our belief the 2023 figures might be revised downwards somewhat, our estimate for the current 2024 year is for a TIFF (in real terms) around the £6bn mark.  We would expect costs to rise as inflation continues to work its way through the system.  Harvest 2024 looks set to deliver low yields and unspectacular prices.  In contrast, most livestock sectors are currently having a reasonable year.  TIFF at this level would be very much in the normal range seen over the past few years – discounting the very good returns of the past three years.

The data on farm incomes (profits) comes from Defra’s annual publication ‘Agriculture in the UK’.  This compendium of statstics includes data on all aspects of the food and farming sector.  Full details can be found at – https://www.gov.uk/government/collections/agriculture-in-the-united-kingdom

Defra has announced the SFI 2023 will close for new applications at midnight on Monday 10 June (today).  However, it will still be possible to submit any application already started within 60 days of starting it.  New applications for SFI 2024 will open later in the summer, although for those who want to get in early, it is possible to submit an expression of interest and they will be invited to make an application over the next few weeks as the system is ‘tested’ on smaller numbers and different types of businesses, before the full rollout.

 

In our previous article on 22nd May (see https://abcbooks.co.uk/expanded-sfi-offer-for-2024/) which reported on the expanded 2024 offer, we said the 23 SFI 2023 actions would be available in the SFI 2024.  This is true, but there are some (potentially significant) changes to the rules under some of the actions.  Below is a list of some of the key changes, although not exhaustive, and farmers and their advisors should check the new rules for themselves:

• CSAM3 – Herbal Leys.  This action will now be static.  It is also more prescriptive on the seed mix, which should include at least 1 grass species, 2 legume and 2 herb or wildflower species
• CIPM2 – Flower-rich grass margins, blocks, or in-field strips.  This action will be static.  In addition, it will only be possible to put ‘part of the available area in a land parcel’ into this action – it doesn’t actually give advice on what constitutes ‘part’ of a parcel
• CNUM3 – Legume Fallow.  This will be static.  Originally in SFI 2023 NUM3 was a static option and then was quickly changed to rotational.  It seems to have reverted back; this could present a problem to those who were thinking of using legume fallow as a break crop in the crop rotation
• CIPM4 – No use of insecticide on arable and permanent crops.  If the land is being used to grow arable crops (including non-permanent horticultural crops), this action must be done on one ‘cash crop’ from when it is sown until it is harvested.  Many have been advocating for this
• CAHL1 – Pollen and nectar flower mix.  This action will be static.  Furthermore, it will only be possible to put ‘part of the available area in a land parcel’ into this action
• CAHL2 – Winter bird food.  It will only be possible to put ‘part of the available area in a land parcel’ into this action
• CAHL3 – Grassy field corners and blocks.  It will only be possible to put ‘part of the available area in a land parcel’ into this action
• CIGL1 – Take improved grassland field corners & blocks out of management.  It will only be possible to put ‘part of the available area in a land parcel’ into this action
• CIGL2 – Maintain improved grassland to provide winter bird food.  It will only be possible to put ‘part of the available area in a land parcel’ into this action

There are some more ‘general changes’ which sees a slight change to the phrase ‘it is up to you how you do this action‘ which now includes ‘as long as you:

• follow this action’s requirements – these are identified by a ‘must’
• do the action in a way that could reasonably be expected to achieve this actions aims

It is our understanding that the new rules will only apply to agreements under the new expanded SFI 2024 offer, but we will endeavor to keep readers informed of any updates.

For those who like a booklet, Defra has provided a pdf version (366 pages) of the actions this can be found via https://assets.publishing.service.gov.uk/media/6655a85d0c8f88e868d33282/SFI-2024-actions-print-version.pdf. 

Further to our article of 11th April (see https://abcbooks.co.uk/flood-relief-2/), Defra has opened up the Farming Recovery Fund to more farmers.  It has been ‘significantly’ expanded to include a wider geographical area of farmers and also now includes those who have experienced damage due to extreme rainfall.  As previously, the RPA will identify farmers who are eligible – mapping data will be used to identify land close to rivers that have flooded and also rainfall data to establish areas that have received rainfall more than 70% higher than normal.  RPA will contact those that are eligible, outlining the payment due, which will be made this summer.  Support has been updated so that there will be a flat rate payment, set in bands according to farm size.  The minimum payment will be £2,895 and the maximum £25,000.  Those who have already been contacted by the RPA under the existing ‘Storm Henk’ scheme, will either receive the amount they have already been informed of or the new updated bands – which ever is the highest.