The Farmers’ Union of Wales has emphasised the importance of maintaining agricultural support to the rural economy and agricultural production after publishing a report highlighting the role of direct support to Wales’ livestock supply chains.

The report, entitled‘The role of farm support in Wales’ livestock supply chains’uses five years of Welsh Farm Business Survey figures to investigate what increases in profits or reductions in selected input costs would be needed to maintain average livestock farm profits if direct support was cut by 50% and 100%.

FUW President Ian Rickman said:

“Wales has already lost more than £200 million as a result of UK Treasury cuts to our agriculture budget, and the Welsh Government has recently cut this year’s rural affairs budget by a further £37 million.

“This means there will be less money not only for farms, but also for the tens of thousands of Welsh non-farming businesses that provide services and goods to our farms.”

Mr Rickman said it was essential for politicians and policy makers to fully understand the economic role played by farm support in supply chains and the dangers of cuts and changes proposed by some, but that few analyses had been undertaken by governments ahead of proposing or implementing policy changes.

“We calculate that without direct support, expenditure by Welsh livestock farms would be vulnerable to cuts of £38.87 million for feed, £12.15 million for veterinary treatments and medicines, £9.83 million for paid labour, £10.56 million for contracting and £26.34 million for fuel and repairs.

“Such figures are estimated by reducing expenditure in each of the farm business survey expenditure categories by a fixed percentage in order to ‘balance the books’. But in reality farms would decide to focus cuts in some areas more than others based upon business decisions. That means the cuts in receipts for some kinds of non-farming businesses could be far higher in such a scenario.”

Mr Rickman said that any cuts, however large, would have a knock on effect on many Welsh non-farming businesses, and in the worst case scenario some non-farming business sectors would lose tens of millions in income, with inevitable impacts for business viability and employment.

| “We naturally hope that budgets and policies would never be changed in a way that resulted in such horrendous impacts for our farms and those who rely on them, but we are all aware of the pressures to make sweeping changes.

“Concerningly, the trend in both London and Cardiff has been to move forward with proposals and changes without undertaking the detailed investigations and financial analyses such massive changes warrant,” he added.

The report also highlights the significant increases in profit from livestock rearing and sales that would be required to make up for cuts to support.

For a scenario where direct support is reduced by 50%, a required increased profit per ewe of between £18.09 (hill cattle and sheep farms) and £24.06 (lowland cattle and sheep farms) coupled with an increased profit per cow of between £120.63 (hill cattle and sheep farms) and £160.39 (lowland cattle and sheep farms) is required to maintain overall farm profits in the scenario investigated - figures that are doubled for the scenario where direct support falls to zero.

“These are vast increases that look difficult or impossible to attain without major changes to what consumers pay for food and how money is distributed along the supply chain, emphasise the dangers that changes to support represent for Welsh food production,” said Mr Rickman.

The report also emphasises the limited scope there is for diversification to fill any gaps left by government cuts, stating that while some may be able to change to what have over recent years been more profitable agricultural sectors, such as dairy or poultry production, while others may successfully diversify into tourism or other sectors, as well as being limited for many by affordability, legal restrictions and land topography and fertility, diversification into any area is also limited by ceilings relating to market saturation.

“It should also be noted that the skillset of a vast proportion of those who may attempt to diversify their income by working off-farm will be primarily in agriculture - a sector that, by definition, would be far less able to afford the services of those with such a skillset in the advent of such cuts to support.

“As such, policy makers and others must be sober and realistic about the limited scope for diversification to make up significantly for losses imposed as a result of such changes,” said Mr Rickman.

However, he emphasised that the results represented a necessarily simplistic analysis of the impacts of cuts to the BPS or equivalent funding to Welsh agriculture, and are therefore not a precise prediction of what would happen in the event of such cuts. Rather, they illustrate and attempt to quantify the role of direct support in livestock supply chains and various pressures that such cuts would bring for farms and other businesses, and ultimately the wider Welsh population.

“Nevertheless, this work demonstrates the need for the UK and Welsh Governments to maintain and protect overall agriculture and rural development funding, as well as the need to carefully investigate how policies may impact not only farms but also the businesses and food production that relies on them.

“At a UK Government level, we expect them to honour their commitments to guarantee annual CAP replacement funding at 2019 levels for the next financial year.

“However, we should not forget that the total Welsh CAP budget should now total around £500 million in comparison to when the 2014-20 CAP budget was allocated in 2013 given levels of inflation, and that, had we remained in the EU and accessed all available funding, our agricultural budget would now be far higher than it currently is.”

Mr Rickman emphasised that the FUW had never advocated keeping the status quo and had put forward proposals for a new scheme that it was confident would maintain the role of Wales’ family farms in supporting other businesses and producing top quality food, while bringing major environmental benefits for Wales.

“The Welsh Government needs to ensure its design and implementation of the new Sustainable Farming Scheme is thoroughly investigated in terms of the type of impacts revealed in our report and takes our concerns and proposals into account,” added Mr Rickman.