Next year will see farmers filling out their last ever Basic Payment Scheme (BPS) application forms. And with Basic Payments already reducing, it’s vital that they use the transition to a no-subsidy era to their best advantage.

According to the Central Association of Agricultural Valuers (CAAV), farmers are facing huge pressures right now, with extreme market volatility, environmental demands, soaring input costs and declining subsidies.

Time of monumental change

“We’re looking at a monumental time of farming change: It’s a generation’s transformation in a decade,” says Jeremy Moody, secretary and adviser to the CAAV. BPS 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.

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With BPS 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 Mr Moody. For an arable farmer selling 3.5t/acre 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.”

Given the massive range in performance between the top and bottom quartile of producers in any sector, there are clearly gains to be made, he adds. “Good businesses will be prepared and will carry on getting better. Others will find themselves in 2028 wondering where their BPS cheque is. We fought to have the transition period and it’s time not to be wasted.”

Time for investment

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 far more varied, with 60% of food output by value coming from 30% of the land, says Mr Moody. As farm types become more varied so they might fall into five categories: Producing food under cover, efficient commodity production, added value, more extensive production with other income streams - including from environmental services - and direct environmental land management.

Grant schemes and environmental payments will help people to adapt, but ultimately the direction of travel will be decided by individual business owners, he added. “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; as trusted advisers we have a fundamental and critical role in helping businesses through this.”

For more information visit www.caav.org.uk.