Know some of the facts behind the debates.
Almost every article on Brexit discusses the potential impact of Brexit in its many potential guises and forms on all aspects of the economy with assumptions and speculation as to the near or distant future.
“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know”
Much remains unclear as regards the United Kingdom’s (UK) relationship with the EU after March 2019, and even less is clear about the potential impact that any changes may have in the longer term. The UK government sought to clarify matters in the Agriculture Bill the main announcements of the bill as detailed below.
The current BPS system will remain in place, largely unaltered for 2019 and for 2020. From 2021 a seven year transition period begins with the current system of direct payments removed entirely by 2028. Payment being ‘delinked’ from the requirement to farm the land.
The emphasis of policy will change to public money for public goods with a focus on environmental improvements, public enjoyment of the countryside and animal welfare standards. A new ‘Environmental Land Management’ system is expected from 2021-2025, together with a scheme to improve productivity and further higher animal welfare standard to be defined in 2020. Despite some information, much however is still to be clarified, this Bill set within the context of the wider negotiations on the UK’s future trading relationship with the EU.
Before considering what lies ahead it’s important to know how matters currently stand and the makeup of the UK Agricultural sector at present. UK farming and agriculture is the second most regulated industry at EU level, with imports and exports key to its success. Below we set out the current landscape of British farming.
Farming in the UK
The latest figures for 2017 from the Department of Environment, Food and Rural Affairs (DEFRA) detail that there are 217,000 farms in the UK at an average size of 200 acres.
Currently the industry makes up approximately 1% of the UK’s GDP employing some 1.48% of the UK workforce, 474,000 people being employed on commercial farms, with the majority employed in grazing livestock.
The relative small scale of the industry is counterbalanced by its significant control of resources primarily land and the security of food production. The food and drink sector contributed £113 billion to national Gross Value Added in 2016, of which £8.2 billion was from agri-food.
The Utilised Agricultural Area (UAA) in the UK stood at 43 million acres in 2017 covering 72% of the UK land area. The total croppable area being 15 million acres, with cereal crops covering 8 million acres. To put that in context Wales extends in total to approximately 5.1 million acres.
Of the cropped areas, wheat and barley were the predominate crops covering circa 4.5 million and 3 million acres respectively.
Provisional estimates put wheat harvest for the UK in 2018 at 14.1 million tonnes with barley estimated at 6.6 million tonnes. The five year average for wheat being 14.8 million tonnes and 7.0 million for barley. 14.1 million tonnes of wheat potentially producing 28.2 billion loafs of bread in 2018.
The total number of cattle and calves posted minimal changes between 2016 and 2017, remaining at just over 10.0 million.
The UK population of sheep and lambs increased to 34.8 million animals in 2017, largely due to a 3.0% increase in the number of lambs to 17.3 million.
The total number of pigs in the UK increased from circa 4.9 million animals in 2016 to almost 5.0 million in 2017.
Poultry numbers in the UK increased to almost 182 million birds in 2017, compared to almost 173 million in 2016. Table chickens account for 65% of the total and rose to almost 118 million birds. Laying and breeding fowl also saw an increase, rising by 4.2% between 2016 and 2017.
Farm productivity and income
Farm Business Income (FBI) varied greatly, with 20% of UK farms failing to make a positive FBI in 2016/17, while just under a quarter of UK farms had a FBI of over £50,000.
In 2017/18, average FBI has increased for all farm types except for specialist pig farms. The exchange rate was an influencing factor leading to price rises for a number of commodities and an increase in the value of the Basic Payment.
FBI represents the return to all unpaid labour (farmers, spouses and others with an entrepreneurial interest in the farm business) and to all their capital invested in the farm business, including land and farm buildings.
A summary of FBI changes in 2017/18 by Farm type is detailed below:
In 2017/18, the Basic Payment accounted for a significant proportion of average FBI for all farm types apart from horticulture and poultry farms.
These average values conceal considerable variability in incomes at the farm level between and within farm types. In 2017/18 at least 10% of each farm type except dairy failed to make a profit. For dairy farms, 4 percent failed to make a profit whilst 63% had an income of more than £75,000. The variation in incomes within farm type reflects different production costs between farms which are influenced by a number of factors such as size, location, soil type, farming operations and management etc.
A breakdown of FBI for key enterprises is detailed within the graph below:
Across all farm types, the average Basic Payment received was approximately £31,700, 13% higher than the previous year. Subsidy and diversified income making up the majority of income for most of the farm types, particularly in cereal and general cropping.
How can we help?
When considering the importance of subsidy and the current profitability of farming, challenges certainly lie ahead from Brexit and what we know from the Agricultural Bill. Are you ready for them? See our ‘Fit for the Future’ brochure here highlighting keys matters to be considered in this changing market.
Agriculture in the United Kingdom Report 2017 Produced by:
Department for Environment, Food and Rural Affairs, Department of Agriculture, Environment and Rural Affairs (Northern Ireland), Welsh Assembly Government, The Department for Rural Affairs and Heritage and The Scottish Government, Rural and Environment Science and Analytical Services
Farm Business Income by type of farm in England, 2017/18
Produced by DEFRA 31 October 2018
Table 1 and 2 Reference:
Farm Business Income by type of farm in England, 2017/18
Produced by DEFRA 31 October