No profit in dairy sector before basic payments

According to consultants Andersons dairy budgets for the 2020/21 milk year show no profit before BPS payments: Dairy budgets

The main factor is a lower milk price, estimated to be down by 0.8p a litre. The firm sees the next decade as one of profound change as subsidies are withdrawn. Milk producers will find accessing the ELMS scheme more challenging than other sectors. Farmers in the sector are least likely to have joined existing stewardship schemes.

Dairy farming in the traditional milk production region of Wisconsin in the United States is also facing big challenges, with farms either going industrial or going bust. The rising cost of labour is one factor: Business has gone sour in America's dairy capital

UK consumers drink just half the milk they did in 1974. Research by market analyst Kantar found that the decline can be linked to reduced consumption of foods such as tea, coffee and breakfast cereals. The uptake of plant-based alternatives is also contributing, although these products still account for 4.6 per cent of the volume of all milk sold in the UK.

The answer no longer lies in the soil

NFU Mutual have produced an excellent report on diversification activity by UK farmers. What is clear is that one response to the phasing out of subsidies is an increase in diversification activity: Diversification

A note of caution is necessary. Much of the low hanging fruit has already been taken. Diversification requires a different skill set from farming and often considerable capital, so risks need to be carefully assessed.

NFU Mutual's Chris Walsh told Farmers Weekly:'There is only room for a certain number of farm shops, holiday cottages and wedding venues, so farmers planning to diversify need to do careful research and costings before they start converting cow sheds into cafes.'

Some of the traditional favourites such as on farm holiday lets are seeing a fall off in income as customers favour long weekend breaks over weekend stays. Mind you, one can adapt to this by offering luxury accommodation for large family get togethers, having shelled out a four figure sum this morning.

Perhaps most worrying is that the sector most under threat by market trends as well as subsidy withdrawal is livestock farming in challenging locations which often offer fewer diversification opportunities. Forestry is one that may be available.

Defra statistics show that diversification generated £740m of income in 2018/19, up six per cent on the previous year.

Cornish MP is new Defra secretary

George Eustice has been promoted from Minister of State at Defra to be the new Secretary of State. He is the MP for Redruth and Camborne.

Coming from a farming background, his family still run a fruit farm, restaurant and farm shop in Cornwall where they also have a herd of South Devon cattle and the country’s oldest herd of the rare breed of pig, the British Lop.

His appointment has been welcomed by the NFU.

The British Association for Shooting and Conservation (BASC) says the appointment of George Eustice as environment secretary signals the arrival of a ‘real countryman’ at the heart of government.

Christopher Graffius, BASC’s executive director of communications and public affairs, said: 'George Eustice is a farmer with a sound knowledge of the environment and rural affairs. His appointment means that we have a real countryman at the helm and this can only be of benefit to conservation, shooting and rural affairs.'

Could Dom's deal be bad for UK farmers?

The Foreign Secretary, the Rt. Hon. Dominic Raab is visiting Australia today and tomorrow: Foreign Office statement

A free trade agreement with Australia has received much less attention than one with the United States in terms of its impact on agriculture, but it could actually be greater. My concerns in the past have focused on exports on lamb and cheese, but I may have been focusing on the wrong target.

According to Wake up to Money on Radio 5 this morning, Australia is interested in beef exports, including hormone reared beef (which concerns me more than chlorinated chicken, although that is bad enough).

The writer visits an irrigation area in New South Wales

This figures as some years ago I was given a study tour by the Department of Agriculture in Australia. We visited a huge dry lot beef farm where our guide kept referring to the 'beasts'. No doubt they were properly looked after, but I don't think animal welfare activists would like what I saw. The entire output was going to Japan, but some of it could easily be sent to the UK.

I also visited a wine production area which relied heavily on irrigation (with consequent impacts on the Murray-Darling system). Australia is also interested in more access for its wines and claims that that could costs by £1 a bottle.

Much Australian wine is at the cheap end of the market (I have crossed the famous 'Jacobs Creek') although I have had some excellent wines from the Margaret River area of Western Australia. There is probably no real threat to the developing UK industry (I should declare that I am investor in Chapel Down in Tenterden, Kent).

It's livestock producers that should be concerned.'

Incidentally, according to The Times yesterday the Foreign Secretary is known in Whitehall as 'Dim Dom'. I am sure this is unfair, but I also know how tough and well-informed Australian negotiators can be.

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?

Farm produce may have to be taxed

The Committee on Climate Change has recommended that consumers cut that consumption of beef, lamb and dairy products to combat global warming. If this does not happen, taxes on these products may be necessary: Unwelcome news for farmers

The NFU's response is here: Strong message on climate change

Recent severe weather events, with a higher incidence of droughts and flooding, appear to have enhanced farmers' awareness of climate change, as evidenced by an interesting survey conducted by Farmers Weekly: Cost of extreme weather.

On a visit to my brother-in-law's sheep farm last weekend I learnt that lambing at the 1,000 foot level now starts much earlier than it did in the past as the climate has warmed.

More than four out of five farmers said they are experiencing more frequent extreme weather events on their farm – ranging from severe drought and hot summers to flooding and intense rainfall at unexpected times of the year. Three-quarters of those questioned said it had cost them more than £50,000 – an average of more than £10,000 per year.

More than two-thirds of farmers believe the increase in extreme weather events seen over the past five years is due to climate change – but many believe it isn’t. Some 31% said they believed weather patterns were cyclical and had always changed over the years Many said weather patterns were natural and had little or nothing to do with mankind or the impact of human activity.

I have a family interest in the success of livestock farming, but it is smell the coffee time. Domestic consumption of red meat is likely to decline for health as well as environmental reasons. Given that the Committee on Climate Change thinks there needs to be more woodland, livestock farmers could be given incentives to plant trees - but no regimented conifer forests please.

Dysfunctional CAP on its way out, but can farming meet climate change challenge?

The Agriculture Bill which will provide the basis for farm policy in England after Brexit has been published: A boost for the environment and food production

In line with the new policy approach developed by Michael Gove when he was secretary of state at Defra, it is claimed that 'It sets out how farmers and land managers in England will in the future be rewarded with public money for “public goods” – such as better air and water quality, higher animal welfare standards, improved access to the countryside or measures to reduce flooding. This will contribute to the government’s commitment to reaching net zero emissions by 2050, while at the same time, helping to boost farmers’ productivity.' [Farm productivity has been growing slowly.]

'This will replace the current subsidy system of Direct Payments which pays farmers for the total amount of land farmed, skewing payments towards the largest landowners rather than those farmers delivering specific public benefits.' Farmers have been highly reliant on those subsidies to keep their farms viable and the new form of payment is likely to generate a less certain income stream. Overall farm funding will be maintained at current levels, but not adjusted for inflation, for the duration of the current Parliament, i.e., potentially until 2024.

The main concern of farmers is not the domestic legislation but the prospect of imports of cheap food, produced to lower standards, as the result of trade deals: NFU president Minette Batters.

Much of the future for British farming will depend on the adoption of new technological innovations with the prospect of a digital revolution in farming that deserves to be encouraged by appropriate government funding.

Few of us will mourn the disappearance of the dysfunctional CAP which was not well adapted to British farming. However, the ability of British farming to adapt to climate change and reduce greenhouse gas emissions will be a big challenge for farmers. Recent extreme weather events in the UK including both droughts and floods have brought home the reality of climate change to the farming community.