Why some dairy farms do better than others

Britain has a long-running productivity problem and that includes agriculture.   What is also the case both generally and in agriculture is that there is considerable variability in performance, something confirmed for the dairy sector by farm business consultant Andersons: https://ahdb.org.uk/knowledge-library/characteristics-of-top-performing-farms-2024

The top 25 per cent of dairy farms typically make about £120,000 more a year profit than the bottom 50 per cent.  The top farms obtained an average milk price 1.7p a litre higher than bottom producers.

Top farms were more successful because of factors such as relentless cost control, efficient stocking rates, knowing what the market requires and producing it, and keeping a close eye on detail.

Defra sets out its stall

Defra has provided more details on how direct payments will be phased out in England and how the future Environmental Land Management Scheme will function, although arrangements after 2021 remain unclear: Plans for future greener farming

ELMS will have a three tier entry scheme. As far as the basic payment is concerned, farmers making a claim of more than £150,000 will be subject to a 25 per cent reduction in 2021, while those making a claim of up to £30,000 will be subject to just a five per cent reduction.

I welcome proposals on productivity and research and development. From 2021, new government grants will help farmers to invest in equipment and technology which will help them to increase their productivity and deliver environmental benefits. From 2022, Defra will support research and development projects to help our farming industry benefit from innovation, enabling farmers to produce food more efficiently and sustainably with lower emissions.

As far as smaller investments are concerned, 'Grants will be available for equipment, technology, and small infrastructure investments that will make an immediate difference to farm performance, including investments that help farmers use less inputs, reduce emissions, and cut waste, which will also benefit the environment.' These will be for specific, pre-determined items - in other words the devil is in the detail.

As far as larger investments (sum not specified) are concerned, 'These grants will be for higher-value or more complex investments, with the potential to bring transformational improvements to business performance. Eligible investments could allow for more efficient use of labour, provide opportunities to switch to alternative or more efficient production methods, reduce environmental impact or create opportunities for new business models and alternative ways of selling produce directly to customers.' These will be for priority outcomes, including the use of automation and robotics.

Can agribots boost farm productivity?

It is well known that UK farming has a poor productivity record. Given the phasing out of subsidies after Brexit, farmers need to find new ways to run their businesses more efficiently.

One way forward is the use of new robotic technologies, in particular for weeding. Advances in computer vision are making this possible and The Economist reviews the potential: Robots are on the rise.

One of the companies discussed is RootWave which is located close to me in Kineton in Warwickshire. Their product uses electricity to zap weeds. Clearly a small start up company they recently acquired €6.5m of funding: Financing success

There is clearly some interesting experimentation and product development going on. But what are the chances of adoption by farmers? Capital costs are always a consideration and these agribots need skilled operators who have to be trained and then paid high wages.

Agricultural innovation usually follows a bell shaped curve with some farmers willing to be early adopters. They might be encouraged by government grants towards training and capital costs. Another round of the Countryside Productivity Small Grants Scheme is expected later in the year, but last time its budget was just £15m and the maximum any one farmer could claim was £12k which may not be game changing.

Agriculture Bill may threaten smaller farms

Richard Byrne from Harper Adams University welcomes the radicalism of the new Agriculture Bill but warns it may pose a threat to the viability of smaller farms: May not be enough to sustain smaller farms

He is justifiably concerned about trade relationships with the United States, but one might add that the phasing out of the Basic Payment is also a challenge, given that it represents the difference between profit and loss for many farms. ELMS may involve transaction costs (form filling) that it is easier for larger enterprises to deal with. Smaller farms may also be located in areas where fewer diversification opportunities are available.

But should maintaining smaller farms be a policy objective? Or would consolidating units boost productivity?