Why is the reform of food systems so difficult?

Professor Alan Matthews gave the presidential address at the 100th conference of the Society of Agricultural Economics held in Oxford earlier this year.  The Princess Royal, Princess Anne, was present for the address and commended the concept of academics as 'honest brokers'.   I had the privilege of reading this and commenting on it in draft form.   The revised version has now been made available on an early view basis in the Journal of Agricultural Economics.   

I found the concept of ideal type policy ontologies particularly helpful.

Here is the abstract: 

Agricultural and food policy is increasingly shaped by geopolitical instability, ecological constraints, technological disruption, political polarisation and declining trust in expertise. At the same time, calls for food system transformation have gained prominence as evidence accumulates on the environmental, health and social shortcomings of current food systems. Yet reform has frequently stalled despite extensive scientific analysis and broad recognition of the need for change. This paper examines why. 

After reviewing some traditional explanations for policy persistence, the paper introduces the concept of policy ontologies: underlying ways of understanding what the food system is, how it functions, what it is ultimately for and how change occurs. Three ideal-type ontologies are identified: a productivity ontology, a power-focused ontology and an ecological ontology. These ontologies shape the definition of policy problems and the selection of preferred policy responses, helping to explain why stakeholders often appear to talk past one another. 

As the Society begins its second century in a more turbulent and contested policy environment, the profession's central role remains the production of rigorous evidence. That contribution will be strengthened by a greater awareness of the different ways in which food systems are understood and of how these perspectives shape both policy debates and the interpretation of evidence. Recognising these underlying assumptions can help agricultural economists contribute more effectively to policy debate as honest brokers of policy alternatives.

Labour's rural MPs concerned about Burnham's urban bias

Andy Burnham has been urged to stop rural voters “drifting away” from Labour by a group of MPs cautioning against too much urban bias.  The ’King of the North’ was told by those representing countryside seats won by the party for the first time in 2024 not to treat their areas as peripheral.

A policy blueprint by the Labour Rural Research Group (LRRG), which has 40 MPs — about 10 per cent of the parliamentary party — said any devolution drive should not only benefit major urban centres.  The comments came in a report, due to be published on Tuesday, that criticised successive governments for treating rural areas as “economically marginal”.

James Naish, vice-chair of the LRRG, wrote: “The purpose of devolution shouldn’t simply be to shift power from Whitehall to major urban centres.  It should go much further and ensure that communities with different geographies, economies and needs are properly understood within national policy. Rural Britain cannot be treated as an afterthought, nor can urban policy simply be retrofitted to rural communities.”

He added that these communities “shouldn’t be seen as peripheral to national renewal” and that the next phase of Labour in government should not see them as areas requiring financial support.

Figures cited by the LRRG showed just 27 per cent of voters surveyed for its report were confident the government would strengthen its rural policy, while 40 per cent were not confident.

Although concern was voiced over the scale of the challenge Labour will face in rural seats at the next election, the LRRG said there was still a chance for Burnham to change the party’s fortunes.   Among the policies he was encouraged to consider were a business rates taper for rural and farm-based firms, as well as making it easier for farmers to diversify their property to boost income.

Burnham was urged to make rural Britain a separate part of the government’s tourism strategy and give communities more perks for hosting renewable energy infrastructure.

English farmers exit industry

More English farms are up for sale than at any time in the past two decades, as rising costs, falling incomes and inheritance tax reforms hit small farms, accelerating consolidation of the sector.  In the first half of the year the number of farms put up for sale rose to 177, the highest number in any six-month period since 2007 and 16 per cent higher than the five-year average, according to land agent Strutt & Parker. 

“It’s generally smaller farms coming to the market,” Sam Holt, head of estates at the firm told the Financial Times. “It’s been a really challenging few years for the farming industry.” Rising fuel, fertiliser and machinery costs, heavy rain and drought, and tapering subsidies for farmers had slashed income.  Downward pressure on farm incomes and rising input costs make you start to question how sustainable it is to run a [small] farm,” he added.

Arable farmers have been particularly hard hit by high fertiliser costs, as well as weak wheat prices. This was reflected in land values, with arable land priced 6 per cent lower in the first half of the year compared with last year. Pasture land values also fell, down 3 per cent. The average size of farms put up for sale so far this year was 330 acres.

Strutt & Parker categorises anything under 500 acres as a small farm. The number of farms in the UK has been falling steadily for decades, as large farms swallow smaller farms in financial difficulty. According to farm consultancy the Anderson Centre, the number of full-time farms has fallen from 66,510 in 2000 to 55,980 in 2010 and 51,350 in 2025.

The direct payments farmers received under the EU’s Common Agricultural Policy were replaced from 2021 by a new scheme that made farmers apply for funds in exchange for environmentally friendly practices, such as reducing pesticide use and planting diverse crops to improve soil health.

A government-commissioned review of the farming sector last year found that food production was no longer profitable for the average English farm, and that nearly a third of farms in Great Britain were lossmaking, in part due to the transition to the new subsidy scheme.

Changes to inheritance tax rules for farmers have also weighed on sentiment. The government announced in 2024 it was scrapping inheritance tax relief for farmers with assets of more than £1mn from April 2026. After intense lobbying by the industry, the government raised the threshold to £2.5mn. 

As a result, fewer non-farmers have been buying agricultural land. The proportion of farms bought by farmers rose to a seven-year high, or 59 per cent, in 2025, according to Strutt & Parker. The proportion of “lifestyle buyers” — people buying farms to live on, rather than farm — fell to 11 per cent last year, down from 20 per cent five years ago. “There’s obviously less tax advantages to owning land now,” Holt told the FT, adding that returns from farmland were “so poor” that buyers were better off leaving their money in the bank.

Burnham names farming as critical sector

A little noticed aspect of Andy Burnham's speech at the People's History Museum in the northern capital of Manchester was the following statement: "We need to safeguard sovereign manufacturing and production capability across the country in critical sectors like steel, defence, energy, food and farming. Rather than being prepared to let it go as we have sadly done in the past.”

Including farming in this list is interesting given the Labour Government's fractious relationship with agriculture after the inheritance tax changes.

There is great scope for improving productivity in this sector using new technology, but this requires more capital investment, training and knowledge exchange.  The maximum grant available under Defra's ADOPT (Accelerating Development of Practices and Technologies Fund) has been doubled, but the fund itself does not meet the challenge.

The maximum eligible project cost has increased from £100,000 to £200,000.   A new funding window will open every eight to nine weeks.

Projects have to be collaborative with the lead partner in England rather than elsewhere in the UK.  Projects should run for between six and 24 months and will receive 80 per cent of eligible costs, alongside facilitator support from the ADOPT Support Hub delivered by ADAS, UK Agri-Tech Centre and the Soil Association

Regen farming suits heatwave

Another summer of record-high temperatures in England is accelerating the take-up of regenerative farming, a method that helps restore soil quality by cutting out chemicals and intensive ploughing, making it better at retaining water during hot spells.

Research by Barclays, published this week, found that more than half of the farmers surveyed this year had adopted regenerative practices, with nearly two-thirds of the 233 farmers saying they were reducing their pesticide or herbicide use.   The report can be found here: https://www.barclays.co.uk/content/dam/documents/business/agribusiness/Barclays_Resilience_in_the_Field_1July2026.pdf

 “Farmers are panicking about what to do . . . But those that started regenerative farming 10 to 15 years ago are in a more resilient place,” Martin Lines, chief executive of the Nature Friendly Farming Network told the Financail Times. The acceleration was both climate change-driven and a commercial imperative, the Barclays report found.

Agricultural input prices have increased by 6.7 per cent in the 12 months to April 2026, significantly ahead of inflation, according to official statistics. Fertiliser prices are not as high as they were at the beginning of the war in Iran and closure of the Strait of Hormuz, giving farmers some breathing room.

The price rise provoked fears that arable production would fall significantly next year as farmers opted out of planting. “Much of that concern has dissipated,” Michael Haverty, partner at the Anderson’s Centre farm consultancy told the FT. “Fertiliser prices have not risen by as much as initially feared. As things stand, it gives time for supply to recover ahead of the next major applications of fertiliser in the spring.”

Longer term, farmers are advised to plant hedgerows and trees that provide shade for animals while also supporting biodiversity. “The best time to plant a tree was yesterday,” Holly Purdey, an organic livestock farmer in Somerset told the Pink ‘Un.

Nine years ago Purdey started planting hedgerows and trees to create natural shade for her sheep and cows. She also created natural water storage and flood management by digging ponds and trenches. “Sometimes [farmers] only act when it goes into a point of an emergency, because on farms, we’re often firefighting,” said Purdey.

This year’s arable harvest is projected to be better than last year, which was one of the worst harvests ever recorded. Despite a very dry April and May, late rainfall in May provided some relief for crops, according to the Agriculture and Horticulture Development Board, a farmer-funded advisory group.

While yield outcomes for the harvest will depend on the severity of the heatwaves this summer, AHDB analyst Helen Plant said there was “reason for cautious optimism”. The take-up of regenerative agriculture has been aided by the UK’s post-Brexit agricultural support schemes, which pay farmers to adopt sustainable farming practices and restore the natural environment.

The scheme should in theory successfully accelerate a transition to environmentally friendly farming, but that the former Conservative government arguably failed to ensure funds were fairly distributed. Last year, 4 per cent of England’s farms were receiving 25 per cent of the available funds, according to Defra.

The Labour government has since redesigned it to ensure smaller farms that were not yet enrolled in the schemes could also access it, opening it for applications in September this year.

Is English farm policy better under Brexit?

The Economist thinks that getting rid of the Common Agricultural Policy has led to a more effective farm policy in England so it is one example of a Brexit dividend (Wales and Scotland are different cases).

The journal comes from a stance that favours market oriented policies so the views expressed in an editorial and article are no great surprise.  In broad terms I agree with them.   This doesn't mean that Brexit was a good idea viewed in the round, but the CAP remains a dysfunctional policy in many respects.

First, I think that blanket subsidies for farmers related to the size of farm discourage innovation.  They could well be used for personal consumption rather than investment in the enterprise.   Scotland continues to give direct subsidies as part of a generous package for farmers (but they have elections in May).  Wales offers such support to a lesser extent.

Funds should be linked to specific policy targets and in particular genuine public goods such as the environmental benefits specified in current policy.

Given the sector's poor productivity record and the need to take advantage of digital technology, money should be made available for capital investment and training.  New capital grants have recently been announced, but the funding does not match the scale of the problem and is likely to run out quickly.

The conflict in the Middle East has given farm organisations the chance to bang the food security drum to justify a restoration of direct support, but food security is a merit good rather than a public good.  Our imported food comes from a wide range of countries.

As The Economist points out, diversification has been important for the viability of farm businesses.  A family moved from Wales to the better land of Warwickshire in the 1930s.  The land is still farmed and the farm manager was short listed for farm manager of the year a few years back

However, their main now comes from a very successful removals and storage business (I am a satisfied customer of both aspects of their operation).   Business is so good they have a coffee shop on site.

Watching the latest series of This Farming Life it is also evident that many farms rely on the off farm income of at least one partner.  (One farming relative has married a university lecturer).

Farming involves hard physical work, good business sense and long hours, but this doesn't justify distorting subsidies.

Who would be a farmer?

Farming is often hard physical work, involving long hours and often poor returns on capital.  It is also a dangerous occupation with a poor health and safety record.  Yet programmes on television show that many people want to become farmers.   A nephew is a nth generation farmer and finds it a very fulfilling role.

I was therefore interested in a survey from the Agriculture Society that showed that being a farm manager can be a lucrative role.   The average gross salary is £64k and non-cash benefits come in at £16k (typically accommodation and a vehicle).   Average bonuses are £3.6k.   So a typical package could be £80k+ but one in five receives a total package worth more than £100k a year.   Moreover, one third earn income from other sources,

Physical work accounts for less than 25 per cent of their time and the highest earners do the least amount of physical work,   Most farm managers are in southern, eastern or central England, i.e. they are most likely to be found on big arable enterprises, but many are expected to identify non-farming income streams.    The role involves managing people and risk as well as production.

Only five per cent are women.

Middle East conflict will force up fertiliser prices

Britain imports all its fertilisers and the conflict in the Middle East is likely to force up their cost and, in due course, food prices in the shops.   Given that farmers have most of their stocks for this area, that effect is likely to be felt later in the year.

UK arable farmers will face a “cash crisis” this summer when they are forced to fork out for more expensive fertiliser as the US-Israeli campaign against Iran restricts the global supply of raw materials to help grow crops.  Farmers who grow grains are already under financial pressure following two consecutive years of poor harvests and a five-year low wheat price. 

Now they could see production costs soar, in what would be a repeat of the input cost crisis that followed Russia’s full-scale invasion of Ukraine.   “The hit to farmers’ pockets will be this spring and summer,” Nick Shorter, chief executive of farm management firm Velcourt, which oversees 56,000 hectares of UK arable farmland. told the Financial Times. “There is a real cash crisis looming.”  

 

The majority of arable farmers have secured their supply of fertiliser for the upcoming spring, which means the higher costs will not be reflected in the season’s grain price. But from this month onwards, farmers expect to start ordering fertiliser for next year at a higher price. The Middle East is a major producer of fertilisers and the conflict has caused trade flows through the Strait of Hormuz to grind almost to a halt, forcing up global prices. 

About 35 per cent of global exports of urea, a widely used nitrogen fertiliser, pass through the Strait, according to CRU data, as does 45 per cent of global sulphur exports, used to produce phosphate fertilisers. Granular urea prices in the Middle East have risen from $485 a tonne before the outbreak of the conflict, to $650 at the end of the week. 

The price of ammonia imported to Europe reached a three-year high of $750 a tonne on Friday, according to S&P Global.  “It’s not the same scale of increase that we saw in the Ukraine war but it’s still an extra cost,” David Swales, head of economics at the Agriculture and Horticulture Development Board, a levy board that supports farmers. told the Pink 'Un.  “We’ve had horrendous weather, the amount of arable [produced] has been down a lot, but the market has been well supplied . . . They’ve got a lower price and less to sell. Higher fertiliser prices chucked on top of that is a challenge for them.” 

Fertiliser is the biggest input cost for arable farmers, making up a quarter of production costs for crops, followed by fuel at about 10 per cent. Velcourt’s Shorter told the FT that since February 24, his urea supplier’s price had risen 14 per cent while ammonium nitrate was up 10 per cent. The price for red diesel had risen 55 per cent to 104p per litre.

Weather in Southern Europe could push up food prices

Looking across the valley from my family member's farm in Spain towards a distant urbanization.  Almonds and oranges are mainly grown in this part of the valley, but grapes are grown nearby.

Voters and consumers particularly react to food price inflation which has remained relatively high.  I certainly notice it on my trips to the supermarket and I am not a poorer consumer.   The least well off spend a great portion of their budgets on food and often have to rely on food banks.

One of my children has a small retirement farm in Spain and tells me that January has been unusually cold and wet, albeit that has replenished their water source.   The almond trees do seem to have blossomed more or less on schedule.

A lot of big fruit and vegetable producers in the UK decamp to Spain for the winter.   The carbon footprint of growing tomatoes under heated glass is greater.

A wave of extreme rain and flooding across the Mediterranean countries and north Africa has battered the winter growing regions that feed Europe, disrupting supplies of fruit and vegetables and threatening food price rises. Spain, Portugal, Morocco and parts of Italy and Greece function as Europe’s winter “pantry”, exporting tomatoes, cucumbers, avocados, peppers, berries and citrus fruit northwards when domestic output is limited.

But extensive damage to crops and infrastructure in recent weeks could quickly ripple through wholesale markets and supermarket supply chains, warn economists. “When you have the types of floods that we’re seeing in Europe and north Africa, combined also with the very wet winter here in the UK . . . there’s no way around it: we’ll see the pressure on vegetable and fruit prices,” David Barmes, policy fellow at the London School of Economics’ Centre for Economic Transition Expertise told the Financial Times.

Spain, which recorded its wettest January in 25 years, has already recorded damage to 22,000 hectares of agricultural land, according to insurance association Agroseguro. Luis Planas, Spain’s agriculture minister, told the Pink ‘Un that the affected area could “nearly double” once assessments were complete. The ruin extends beyond crops to irrigation systems, farm machinery and rural roads, complicating harvesting and distribution even where produce survives.

The concentration of European winter fruit and vegetable supply in a handful of regions makes markets particularly sensitive to weather shocks. In January last year, Spain accounted for more than 70 per cent of UK sweet pepper imports and 65 per cent of cucumbers, while Morocco supplied more than a third of British strawberry and raspberry imports, according to UK trade data.

“The biggest, probably most proximate impact [from the recent weather] is the impact on fresh produce from Spain and Morocco,” Tom Lancaster at the Energy and Climate Intelligence Unit, a UK-based think-tank told the FT. “If supply tightens, buyers may find themselves competing for smaller volumes,” he said. “You might also see an impact on quality: fruit damaged by heavy rain doesn’t travel or store as well.”

The Netherlands imports 35-40 per cent of its fresh vegetables from Spain, Morocco and Portugal, which together also provide 15-20 per cent of its fresh fruit imports during January and February, according to ING.    (Perhaps that explains why there are so many Dutch expats in my daughter’s area of Spain, indeed my great-granddaughter has a decent command of Dutch).

 In Andalusia, one of Spain’s main agricultural regions, farmers’ association Asaja estimates that 20 per cent of all production has been lost. In one province alone, Córdoba, Asaja said losses totalled €700mn, with olive groves accounting for €550mn of that sum and further damage to cereals and citrus. Last week Pedro Sánchez, Spain’s controversial prime minister, visited the storm-hit town of Huétor Tájar, west of Granada, where the mayor explained that 80 per cent of its population depended directly or indirectly on the region’s asparagus production. With harvesting due to begin within weeks, mayor Fernando Delgado said that as much as a third of the crop remained underwater.

The adverse weather across Andalusia and other major growing regions in southern Europe meant “prices would be higher year on year”, Thijs Geijer, a senior economist covering food and agriculture at ING told the leading economics and business paper, adding that consumers would see fewer discounts. But he noted that the effect on inflation data could be muted in the Netherlands, where the affected products carry little weight in the consumer price index.

Barmes told the FT that the latest storms were part of a wider pattern of climate shocks feeding into food price inflation. His recent research has shown that the gap between UK and euro area food inflation in recent months was largely driven by a small number of climate‑sensitive items — including chocolate and olive oil — some of which carry a much heavier weight in the UK shopping basket, leaving British consumers more affected when extreme weather hits.

“To me, there’s little doubt that we’ll see pressure on food prices later in the year, even if some of it will be more short term,” he told the FT. “It’s very difficult to substitute away from Spain and Morocco in particular for certain parts of the winter vegetable basket, so I think we’ll see that [impact] quite soon, and then later, we’ll probably see effects also on fruit, and then also on meat and dairy . . . and olive oil.”

Central banks have begun acknowledging the influence of extreme weather on inflation dynamics. In its August 2025 monetary policy report, the Bank of England noted that climate-linked disruptions were contributing to higher UK food prices and complicating efforts to return inflation to its 2 per cent target. Governments have pledged support for affected farmers through insurance payouts and EU crisis reserve funds linked to the bloc’s Common Agricultural Policy.

Spain has vowed to give farmers €2.2bn in direct aid and spend €600mn on rebuilding infrastructure.  But economists say the broader concern is structural. “I think we’re really seeing that this is not a one-off,” said Barmes. “These types of climate-related supply disruptions are becoming more frequent, severe, and geographically widespread.”

Weather adds to worries of British beef farmers

The only thing saving UK beef production from collapse os that an increasing proportion of calves born to dairy cows are being reared for beef.  Although generally inferior in taste, it is cheaper to produce as it uses calves that are effectively a by-product of milk production.   But even these calves ae increasing in number as the dairy herd shrinks.  More milk is being produced per ciow because of improved genetics.

British beef consumption per capita is in steady decline but beef imports forecast tt increase in the medium term.  British beef farmers face a double blow from the changing climate as relentless rain forces them to keep cows indoors, after last summer’s drought stopped them storing away enough hay for the winter. This year’s rain has left grazing fields waterlogged and cattle stuck indoors, with insufficient hay to munch on because last summer was unusually dry — adding to the pressure on farmers also dealing with lower subsidies and volatile energy and feed prices.

 If the rain persists it could eventually put upward pressure on beef prices — which rose 28 per cent last year — alongside global factors such as shrinking herds and growing demand. The rain has blown a hole in farmers’ planning because they would normally only bring cattle inside for four to five months over winter, for which they would buy enough feed.

As little as two or three extra weeks indoors is a significant extra cost. Lucy Eyre, a beef and sheep farmer in Wales,told the Financial Times that British producers have had the “worst of both worlds” with “very poor” yields of silage, a feed made from hay, because of the dry summer.

And now turning cattle out too early is risky: on saturated ground they “make a mess” and “the grass won’t do as well later”. “Having to house livestock for two to three weeks longer might be the difference between making a loss and breaking even for many farmers,” Eyre told the Pink ‘Un.

The episode shows how the changing climate can weigh on farmers’ profits and eventually feed through to diets and consumer wallets. Food price inflation has proved stubborn in the UK, and rising grocery bills remain politically charged. Food and non-alcoholic beverage prices rose about 4.5 per cent in the year to December 2025 — an acceleration on the previous month, even as overall inflation eased.

David Swales, the interim chief economist of the UK Agriculture and Horticulture Development Board, told the leading business paper that tight supplies of beef globally, including a declining herd size in the UK, had pushed up prices, but the bad weather could exacerbate the problem. “It’s been very wet the last two months — if it carries on as wet as this, it could be very disruptive, and it could add a lot to farmers’ cost of production in the year ahead,” he said. “And this could mean further down the line that food prices have to rise.”

While the weather in Britain would not have an impact on the global market, not all beef is easily swapped for imports. Swales said “100 per cent British” pledges by supermarkets and restaurant chains such as McDonald’s meant their prices were more likely to be affected by the weather.

The AHDB said UK beef production in 2025 was 3.5 per cent lower than the year before due to shrinking cattle herds. It expects production to fall again in 2026 and close 1.3 per cent lower than 2025.  David Barton, chair of the National Farmers’ Union Livestock Board, said wet weather “shouldn’t have much impact on beef supply . . . So long as we have good weather late March into April all should be fine.” He argued that global supply and demand imbalances were causing price rises.

Cattle numbers have been falling in Britain and abroad. In the US, drought across key cattle states has led to herds falling to their lowest levels in decades, driving up prices. Imports to the UK also fell last year, down 3 per cent year on year due to tight supply in Ireland, which accounted for 62 per cent of all beef imports last year.

Irish producers have been losing share of the UK market to cheaper suppliers from Brazil, Australia and New Zealand. But greater imports could also have an impact on the national diet. “There’s two different kinds of beef,” said Tim Hayward, author of Steak: The Whole Story and an FT columnist. “There’s the stuff that runs to the American standards, which is grown now pretty much all over the world, with restricted roaming and feeding on corn, and that gives you fat, soft beef, very, very quickly.” And then there is beef grown in the UK: “We tend to grass finish our animals over here . . . If there is a reduction in the UK herd, and we’re doing more importation, it would be more importation of the crap beef.”

Farmers line up behind Farage

Why I am not surprised that 40 per cent of farmers say they would vote for Reform if an election was held tomorrow?   Owner occupier farmers have always been on the right politically, many of them holding posts in local Conservative associations.   However, they have become disillusioned with the Tories, although in a real general election I am sure that many of them would drift back.

In the 2024 general election, Farmers Weekly data shows that 57 voted Conservative and 15 per cent Reform.  Labour support today stands at just one per cent.

Reform support was strongest in the Midlands (52 per cent) and lowest in Scotland (31 per cent).  In Wales 22 per cent of farmers said they would vote for Plaid Cymru, but Reform would attract 35 per cent.  Just nine per cent of Scottish farmers would back the SNP, behind the Liberal Democrats on 13 per cent.

The Lib Dems did best in the South East and their traditional stronghold of the South West,

Despite the IHT controversy, only 35 per cent of farmers have a robust succession plan.   This is a worrying feature of an industry where those who are 80+ think they know best

Government gives way on farm inheritance tax

In a Christmas Eve u-turn the Labour Government has backed down on inheritance tax for farmers.  My estate will still attract 40 per cent, but only a minority of farmers will pay 20 per cent over a ten year period.

No doubt farmers will say it was their parades of shiny kit in London that made the difference, but I think a revolt by backbench Labour MPs from rural seats was more significant.  As many as forty of them were prepared to move an amendment to the Finance Act in what would have been a major revolt..

Moreover, it seemed unlikely that the measure would yield significant sums.

Fewer farmers will start paying inheritance tax from April after UK ministers were forced into a £130mn climbdown by a fierce backlash against the policy from rural communities and some Labour MPs. In a surprise U-turn just before Christmas — and with parliament not sitting — the government announced it was lifting the threshold above which farmers will have to pay death duties.

Chancellor Rachel Reeves announced in last year’s Budget that farmland would no longer be exempt from inheritance tax and would be liable for a 20 per cent levy on assets worth more than £1mn from April 2026. But on Tuesday ministers bowed to pressure and announced the threshold would be raised to £2.5mn, meaning that spouses or civil partners with combined estates worth up to £5mn will pay no inheritance tax on top of existing allowances.

Officials said the changes would reduce the number of family estates facing inheritance tax bills to about 1,100, from 2,000 under the original plans (these official  figures have always been disputed by farm organisations).

Only 15 per cent of farms will be liable for the levy, down from 25 per cent under the previous proposals. Introducing inheritance tax on agricultural land had been expected to raise £430mn a year for the government by 2029-30, but that figure is now likely to be £300mn — meaning a net annual cost of £130mn.

Environment secretary Emma Reynolds said the government had “listened closely to farmers across the country” and was making changes “to protect” more ordinary family farms. “It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities,” she added.

Farming groups have organised regular, noisy protests in Whitehall over the past year, with ministers criticised by opposition parties and some rural Labour MPs. Markus Campbell-Savours, MP for Penrith and Solway in Cumbria, recently voted against the original proposals and was suspended from the Labour party as a result.

A significant number of backbench Labour MPs abstained. David Smith, Labour MP for North Northumberland, said on Tuesday that the government’s decision was “sensible and mature”. Prime Minister Sir Keir Starmer last week met Tom Bradshaw, president of the National Farmers’ Union, who urged him to protect “the vulnerable and elderly” from the tax changes.

Bradshaw said on Tuesday that “while there is still tax to pay, this will greatly reduce that tax burden for many family farms, those working people of the countryside.  Starmer was also spurred into action by last week’s government-commissioned review of farming by former NFU president Minette Batters which found nearly a third of farms in Great Britain were loss making last year.

Batters said the inheritance tax changes had left farmers “bewildered and frightened of what might lie ahead”. One Labour MP questioned the timing of the announcement during the Christmas “dead zone”, saying: “My general view is if you are going to U-turn, reap the political benefits of it and properly argue for it.”

Asked why the change was not in last month’s Budget, a government official said ministers had wanted to “get it right” after a long time engaging with the farming industry.

I do hope that despite this policy change farmers will take succession planning more seriously and allow younger family members more say in the running of farms.

It also seems to me that the Government has spent a lot of political capital and been distracted from other issues while gaining very little in fiscal terms: this also applies to the winter fuel allowance.

Of course the animal welfare strategy just announced by the Government has also raised concerns in rural areas, in part because of production restrictions on pigs and poultry that di not apply to imported food and in part because of the proposed ban on trail hunting.

Food production is no longer profitable

Minette Batters has completed her review of farm profitability which some see as the Government using the former NFU president as political cover.

Nevertheless, I agree with her that Defra has lacked good political direction, being treated as an up or out way station for ministers (my words, not hers).  It pains me to say it but the only minister who showed any real leadership was Michael Gove,   Certainly not Liz Truss with her selfies and disastrous trade deals.

Batters reckons that Brexit left a policy void created by exit from the CAP (in my view something better could have been put in its place but wasn't.)

For the average farm, food production itself is no longer profitable, the report found. In the 2023-24 financial year, the average English farm made a net loss on agricultural activities, with state funding and diversification out of farming “providing the bulk of an average farm’s income”. 

Rising input costs such as fuel, fertiliser and animal feed following Russia’s invasion of Ukraine — as well as increasingly volatile weather — have battered confidence in the sector, the report found. But constant shifts in government policy, including the swift removal of agricultural support schemes, had weighed on real farm incomes. 

In March the government suspended one of its post-Brexit support schemes, the sustainable farming incentive, because the budget had run out, leading to a sharp drop in income for many farms. The government has not confirmed when it will be restarted. 

In 2023-24, the average income from farming in Great Britain was £41,500 per farm. A review by land agents Strutt & Parker found fewer than half of England’s farms made more than £34,500, the minimum income they define as economically sustainable.

In addition farmers are still smarting from the (partial) imposition of inheritance tax where a prolonged campaign has led to only minor government concessions.

Farm returns fall but little benefit for consumers

Farmers are known for complaining, but right now they may have a point. Agricultural commodities such as grains and sugar have plummeted on futures markets as global supplies have surged. European farmers are suffering in particular as they contend with high input costs and increasingly competitive global rivals.

Benchmark wheat futures in Paris have fallen more than 20 per cent this year to multiyear lows, dragged down by bumper harvests in Russia, Australia and parts of South America. Meanwhile, speculators are building bets on further price falls, with investment funds adding more than 280,000 new short lots in milling wheat futures in the week to November 21, extending their net short position, according to Euronext data. For UK growers, the fall has been brutal. Wheat prices are now little more than half the levels reached in 2022 following Russia’s invasion of Ukraine. Yet fertiliser, fuel and machinery costs — inflated during the energy shock — have barely retreated.

For arable farmers in Europe, “it’s not a happy situation at all,” Ole Hansen, head of commodity strategy at Saxo Bank told the Financial Times. There is a big gap between “the cheap crop that leaves the farm gate” and the price of bread “when it hits the store”, he said. While the upcoming harvest in Norfolk looks promising, the UK’s wheat yields at this year’s harvest fell after last winter’s torrential rain. But because international markets are well supplied, that does not translate into higher prices.

The financial squeeze is prompting visible restructuring. Brown & Co, the UK’s largest dedicated agricultural auctioneer, said the number of agricultural machines being put up for sale has risen sharply. “It’s become hard to find a day of the week without an auction,” said partner Simon Wearmouth. “I’ve never known the calendar this crowded.”

Even as grain markets sink, UK shoppers have seen little relief in the cost of bread, beer or baked goods. That is because the raw commodity typically accounts for only a small fraction of the retail price. In a loaf of bread costing £1.50, wheat may only account for 16.5 pence to 22.5 pence, according to Financial Times calculations based on research by the Agriculture and Horticulture Development Board, while barley only accounts for a small proportion of a pint of beer.

Energy, packaging, transport and processing costs and retail margins are the main components of the final price. Annual food inflation in the UK was 4.9 per cent in October, up from 4.5 per cent in September. The rise has been driven by five products — beef, butter, milk, coffee and cocoa — where supply shortages globally have pushed up prices.

Across the Channel, growers say the situation is similarly dire. In France, where sugar beet is a flagship crop, producers describe a sector under existential pressure after global sugar prices plunged almost 50 per cent over the past year.

Concessions for South Africa, Mercosur countries in South America and traditional cane exporters have added to supply on a market where European consumption is flat or declining. The result, has been factory closures, with six sites shutting in France since the end of EU sugar quotas in 2017, with more expected if 2026 prices fail to recover.

Producers on both sides of the Channel emphasise a structural problem: Europe’s high environmental and labour standards, while politically popular, make production significantly more expensive than in major exporting nations. In Brazil and India, cane cultivation benefits from favourable climates, large vertically integrated estates and looser rules on pesticides and labour.

Concession on inheritance tax on farmers

Rachel Reeves has eased inheritance tax on agricultural property after pressure from farmers.  Probably more important than their demonstrations was pressure from Labour backbench MPs from rural seats.

As the chancellor made her budget speech on Wednesday, the Treasury announced changes it said could save farmers and business owners £30m next year when passing on property and £70m a year in the following four years. Farmers, who had driven tractors up to the doors of parliament, were protesting outside at the same time.

From April, farmers and small business owners who are married, are in a civil partnership or have deceased spouses, will be able transfer their inheritance tax allowance of up to £1m of full relief to each other if one of them dies without having used their allowance. The change means a farmer could leave their £1m allowance to their partner, and use their own £1m allowance, to pass on £2m of farmland to their children without paying inheritance tax.

Tom Bradshaw, the president of the National Farmers’ Union, said: “It’s good to see the government accepts its original proposals were flawed. But this change goes nowhere near far enough to remove the devastating impact of the policy on farming communities.”

He added that the change would help widowed farmers but “it does nothing to alleviate the burden it puts on the elderly and vulnerable” and urged the government to address this with further measures.

Truss trade deal effects felt by British farmers

Liz Truss allegedly used a private jet to fly to Australia to secure a trade deal there.  She certainly got a good selfie and displayed the union flag, but there were concerns at the time that the marginal gains from the deal were offset by the potential costs to British farmers.   These concerns are now becoming more real.

An influx of Australian steak into the UK is undercutting domestic beef production, British farmers have warned, as the livestock sector starts to feel the effects of post-Brexit trade deals. A sharp uptick in imports of prime Australian cuts such as strip loin and rib was eroding confidence in the livestock sector, the National Farmers’ Union and National Beef Association told the Financial Times.

“These high-value cuts have the most distorting impact upon the UK beef market,” said David Barton, NFU chair of the national livestock board, because they are sold at a lower price than British cuts. In the first five months of 2025 Australia exported 6,503 tonnes of beef to the UK, more than in the whole of 2024, according to the Australian Department of Agriculture, Fisheries and Forestry.

The uptick follows a free trade agreement struck between London and Canberra, which came into force in 2023 and gave Australia access to a duty-free quota of 35,000 tonnes. Australia had previously exported modest amounts of beef to the EU, including the UK, typically under a quota arrangement paying a 20 per cent tariff rate. Some 95 per cent of imports in the first two months of the year were made up of fresh and boneless, high-end cuts, according to analysis by the UK Agriculture and Horticulture Development Board, a levy board that supports farmers.

Neil Shand, National Beef Association chief executive, said: “We need imported product when we’re not self-sufficient. But what we don’t like is putting it on the shelf at a lower price than our product.” Industry confidence was at “rock bottom” because of current government policy, he added, referring to recent changes to inheritance tax rules for farmers and the reduction of farm subsidies.

The UK imported 5,515 tonnes of beef from Australia and 4,110 tonnes from New Zealand in 2024, according to data from HM Revenue & Customs. The figures represent increases of 534 per cent and 339 per cent, respectively, compared with 2022, before free trade agreements agreed with the countries entered into force.

While volumes have soared, Australia is still significantly under utilising its access to UK markets, shipping only 15 per cent of its 43,300 tonne quota in 2024, according to the AHDB. Under the trade agreement, the quota will increase each year, reaching 110,000 tonnes by 2033.    One has to remember that Australia has significant commercial markets in the Middle East and Asia.   I visited one very large dry lot beef farm in New South Wales which was producing just for the Japanese market.

Farming groups have been sounding the alarm after seeing more beef from overseas on the shelves of major UK supermarkets, despite retailers’ commitments to source exclusively British prime cuts. The majority of the recent imports from Australia were going into food service, the NFU said. “We’re disappointed that retailers have broken their promise,” Shand told the Pink ‘Un. The NFU, meanwhile, claimed that Australian beef was produced to a lower standard than British beef, citing stricter UK rules on how long live cows can be transported before they require rest time.

The Australians, meanwhile, are pleased with how things are turning out. The surge in high-quality beef sales to the UK has helped restore historic trade ties between Australia and the UK, according to Andrew Cox, general manager of international markets at Meat & Livestock Australia, an industry body. “Before 1973, the UK was our largest agricultural export market,” he said. “It’s a ready-made market.”

The writer should point out that he has made a number of farm visits in Australia and is grateful  for funding in the past from Defra and also for the cooperation and hospitality of the federal government, state governments, farm organisations and individual farmers who have offered me generous hospitality on their farms.

Opposition grows to 'mega' farms

Cherry Tree in Norfolk and other intensive pig and chicken farms owned by Cranswick, the FTSE 250 food producer, are now struggling against opposition from locals and animal welfare and environmental campaigners. The farm manager faces regular complaints from one nearby resident in particular, although the Environment Agency has “only confirmed strong odours on a few occasions”.

 This culminated in April when Cranswick’s plan to build a “megafarm” to raise 14,000 pigs and 714,000 chickens at a time at an existing pig farm near two Norfolk villages was rejected by the borough council. It drew thousands of objections, including from Terry Jermy, Labour MP for West Norfolk, who declared it was “not the kind of farming this country wants or needs.”

Cranswick’s reputation was further damaged last week by the revelation in the Mail on Sunday of cruelty, including killing piglets with blunt force, at one of its 400 pig farms. Its shares fell by 9 per cent as supermarkets suspended supplies from the Lincolnshire farm, which had been certified by the Red Tractor “farmed with care” scheme. Cranswick describes the mistreatment as “wholly unacceptable.”

That contrasts with Cranswick’s growth in recent years, with its share price rising by 74 per cent since May 2023 to a market capitalisation of £3bn. It was founded in 1975 to make pig feed but has steadily expanded, entering chicken farming in 2016. Its shares recovered on Tuesday to a record high as it announced a 14.6 per cent rise in pre-tax profits for the year to March. Like the odour at Cherry Tree Farm, an air of unreality hangs over the anti-Cranswick campaign.

The cruelty in Lincolnshire was reprehensible and the company must prove it was isolated. But it generally conforms to supermarket-monitored welfare and environmental standards and its practices are akin to many farms.

Take one Cranswick chicken farm the Finanvial Times visited, where 33,000 eggs per shed are laid out on straw to hatch. The fast-growing chickens that emerge spend their brief lives in sheds, pecking at bales for up to 38 days before being slaughtered. Nearly 300,000 chickens are raised at a time at a nearby Cranswick farm with eight sheds. There are no cages and welfare standards have tightened. Cranswick just increased the space per bird in sheds by 20 per cent to 16 per square metre to comply with supermarket edicts.

It faces pressure to switch to more natural, slower growing varieties, which take longer to reach their final weight, under the Better Chicken Commitment campaign. Cranswick wants to build 20 chicken sheds at its site near the villages of Feltwell and Methwold, and a smaller number of new pig sheds. Despite its promised improvements, such as air scrubbers to curb emissions, it has been spurned. It is now raising 7,500 pigs there in ageing barns (the site has a permit for 29,000).

 While many prefer farms to be small-scale and free range, that can have drawbacks: free-range chicken farms have been blamed for some pollution in the River Wye because it is harder to contain waste.

The council ruled that Cranswick’s proposed new facility could harm the local environment and strangely cited a 2024 Supreme Court ruling on global warming and oil wells. The campaign, although largely principled, is impractical.

The UK relies on intensive farming for self-sufficiency, rather than importing EU chicken and pork raised to similar standards. Companies such as Cranswick need more space to keep filling supermarkets. The UK produces 1.2bn chickens for eating a year but met only 82 per cent of poultry demand in 2023. 

Cranswick can appeal and the application could be called in by Angela Rayner as housing secretary. “A pig is as clean as you make it,” the farm manager told the Pink ‘Un. Given the stakes for the country, someone should clear up the mess.

The writer of this blog has a substanial shareholiding in Cranswick

Defra committee suggests changes to farm policy

The House of Commons Defra Committee has some sensible and politically feasible suggestions in relation to recent Government farming policy.  Full report is accessible here: https://committees.parliament.uk/work/8722/the-future-of-farming/publications/

'Closing the Sustainable Farming Incentive 2024 (SFI24) without notice affected confidence in the Environmental Land Management Schemes (ELMS). This must be repaired to secure their future success. An alternative funding mechanism should be put in place to fill the gap in funding for those who missed out on the SFI24, and the Government should set out details of the next iteration of SFI as a priority. 

 We support the Government’s objective of reforming agricultural property relief (APR) and business property relief (BPR) to close the loophole that has encouraged wealthy investors to buy agricultural land to avoid inheritance tax. We are concerned, however, that no consultation, impact assessment or affordability assessment was conducted before the announcement of the reforms. 

The lack of proper evaluation of the impact of these changes 1 means that the scale and nature of its impact on family farms, land values, tenant farmers, food security and farmers in the devolved administrations is disputed and unclear. This comes with a considerable risk of negative unintended consequences. 

 Alternatives to the Government’s approach have been proposed, which may achieve the same policy outcomes while protecting vulnerable farmers. We are not in a position to assess the merits of each alternative but there is sufficient time for the Government to do so. Stakeholder concerns about the Budget’s taxation proposals have made it difficult for Government to articulate and deliver its wider vision. 

A pause in the implementation of the reforms would allow for better tax policy to be developed and the Government to convey a positive long-term vision. The Government should delay announcing its final APR and BPR reforms until October 2026, to come into effect in April 2027. This would also provide farmers with more time to seek appropriate professional advice.'

Farmers are unfortunately notoriously poor at succession planning and they need more time to adjust.

US targets more of UK agriculture for tariff cuts

The US is eyeing a multibillion-dollar slice of Britain’s pork, poultry, rice and seafood sectors, as it looks to expand its trade agreement with the UK, Donald Trump’s agriculture secretary said on Tuesday. 

Texan Brooke Rollins said these sectors were “at the front of the line” in ongoing negotiations to build on the trade deal announced last week, which gave US beef and bioethanol producers expanded access to the UK market.

Washington has touted the deal as a $5bn opportunity for American farmers, ranchers and producers, but the initial text of the agreement only covers about $950mn of trade in hormone-free US beef and ethanol. “Certainly pork and poultry are at the front of the line, along with rice and seafood,” Rollins said at a press conference in London on Tuesday, when asked about further products under discussion.

She added: “Food security is national security. The UK, for example, really relies on China and Russia for your seafood. America has extraordinary best-in-class seafood. Let’s talk about that.”

The remarks are likely to stir concern among British farmers and food producers, who have already raised alarms about potentially being undercut by cheaper US imports that may not meet UK or EU production standards.

 The UK has high tariffs on many agricultural products including up to 72 pence per kilogramme on pork, 107p on poultry, and 18 per cent on shrimp.

“We are more than happy to compete on a like-for-like basis,”  Richard Griffiths, chief executive of the British Poultry Council told the Financial Times. “But if we allow imports that are produced to standards beneath ours, that’s unfair competition.” 

Rollins suggested some US exporters would adjust to meet British expectations, in a softening from last week when she said no industry had been “treated more unfairly than our agriculture industry”. While she defended the safety of hormone-treated beef and chlorinated chicken, she said beef producers may be prepared to ditch hormones in order to sell to the UK and stressed “only about 5 per cent” of US chicken is now washed with chlorine.

 American producers “are constantly watching what the markets look like, and if the markets are calling for a specific type, or they have more opportunity somewhere, then I think that we, potentially, do see some movement in the market”, Rollins added.

Griffiths countered that among US producers “it’s standard practice to clean up at the end” with chemical washes — including but not limited to chlorine. British poultry farmers have to promote hygiene throughout the whole process, and can only use water. This is much costlier, he added.

UK ministers have repeatedly insisted that chlorinated chicken and hormone-treated beef would remain illegal in Britain. Rollins also stressed the reciprocal benefits for UK exporters: “While, in fact, we are excited about getting American beef, ethanol [and] hopefully down the line, rice, seafood, other products are coming into your country, this is also about getting more of your country’s products into ours as well.”

 Steve Reed, UK environment, food and rural affairs secretary, said the trade deal with the US would “protect Britian’s farmers and secure our food security”. “We have always been clear that this government will protect British farmers and uphold our high animal welfare and environmental standards,” he added.

Will the UK Government give away the farm?

The last Government (and Liz Truss in particular) concluded farm trade deals with the likes of Australia which were seen to potentially disadvantage UK farmers.

However, a more serious threat has always been a trade deal with the US with its mega food and farming corporations.   Much of the focus has been on the notorious chlorinated chicken, but if it was labelled properly, UK consumers could avoid buying if they wished (although it might be more difficult to avoid in takeaways and the catered food sector more generally).

The hope of a bespoke UK trade deal with the US may be a mirage.   However, it is clear that the UK Government has been prepared to make concessions on farm trade to secure a deal.   For its part the US administration needs to offer something to its rural base which may suffer from other measures.

Admittedly, the Government has been reluctant to make concessions on what are known as sanitary and phytosanitary measures, for example it is not willing to give ground on animal welfare or food hygiene standards.  This means that hormone treated beef will not arrive in the UK.

Britain is a major exporter of salmon, chocolate and cheese to the US.  Cheddar shipments have grown from about 4,500 tonnes in 2020 to more than 6,000 tonnes last year.   These are generally price sensitive products.

However, it does seem prepared to give ground on tariffs of up to 12 per cent on US chicken, pork and beef.   That could have significant implications for the UK food industry.