I was reading articles in Farmers Weekly about the rise in cost of farmers’ inputs such as fertiliser and diesel, and the rise in price of outputs such as grain and milk. This led me to thinking, ‘just how do farmers make short and long-term decisions on managing their businesses?
At the moment it is not helped by the lack of clarity in government policy, specifically the changeover from subsidies based on the area of land farmed (Basic Payment Scheme ‘BPS’) to grants of public money for public goods. The latter is referred to as The Environmental Land Management Scheme or ‘ELMS’ for short. The BPS is being phased out gradually until 2027 while ELMS is phased in.
There are three new schemes that will reward environmental land management: The Sustainable Farming Incentive (SFI), Local Nature Recovery (LNR) and Landscape Recovery (LR). It is very complicated and you can read all about it in www.gov.uk/guidance/funding-for-farmers.
As an example of LNR, under ‘making space for nature on farms and in the countryside’, from 2024 farmers will be able to apply for money to help the local environment. This could be managing and restoring habitats, planting trees and managing woodlands, restoring peatlands, or using natural flood management techniques.
The SFI is particularly relevant to CA-WN. Farmers will be paid to provide public goods, such as improved water quality, biodiversity, and climate change mitigation. The latter may include storing carbon in soils by increasing organic matter as in ‘regenerative farming’, but to date there is no methodology for measuring and comparing carbon sequestration in soils. A system has been worked out for forestry but not for arable land, and this is particularly important as farmers are hoping to be able to sell carbon credits on the carbon market in addition to receiving government grants. In fact, some farmers are so fed up with the complexity of government grant schemes that they will ignore them completely and rely on selling carbon credits on the open market to supplement farm income.
Going back to my initial thought on farmers’ short and long-term decision making and disregarding grant schemes, the turmoil in prices must make it very difficult. Most arable and livestock farmers have to gamble on forward markets and they follow the news carefully.
With changes in the pound following the mini- budget, in the six trading days between 10 October and 18 October, the London feed wheat futures contract lost more than £28/t, dropping from £293.20/t to £265/t. As well as volatility in outputs, farmers have suffered huge inflation in inputs. In the 12 months to September 2022, the average cost of farm inputs went up by an “eye-watering” 34%. Animal feed and medicine, fuel and power, and fertilisers saw the greatest increases at 36%, 43% and 134% respectively.
I cannot imagine how a farmer can plan ahead in these circumstances. But a farmer has many cropping options depending on his soil, topography (slopes), local climate and rainfall, markets and his expertise and capital.
In future articles, I shall explain some of the crops and options. For example, one local farmer has given up growing oil-seed rape, but another has made it his speciality. Why? I hope to find out from the horse’s mouth.