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Jeremy's Blog 25th June 2020: Business Review

26 June 2020

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 25th June 2020

UK agriculture typically earns some £22 billion from food production and draws some £3 billion in subsidies with an ex-subsidy surplus of £1 to £2 billion. 

Looking more closely, of that £22 billion of farming’s commercial activity, in descending order:

  • almost 20 per cent comes from dairying with BPS equal to 6% of sales
  • almost 20 per cent from grazing livestock with BPS equal to 34% of sales
  • some 15 per cent from horticulture with almost no BPS
  • some 15 per cent from cereals with BPS equal to 22% of sales
  • almost 15 per cent from poultry with BPS with almost no BPS
  • some 13 per cent from general cropping with BPS equal to 7% of sales
  • about 6 per cent from pigs with BPS equal to 1% of sales.

Those figures, with great differences between individual farms, frame the different potential impacts of the trade negotiations underway with the EU and others.  Alongside tariffs, these concern complex and critical regulatory issues that may be more important and harder to resolve than tariffs for some sectors. Importing sectors like dairy and horticulture might benefit but the risks to sectors with significant exports are clear.

For a generation, area payments have fed into costs and protected business structures that will come under challenge as Basic Payment erodes and goes, starting in England next year.  Many of those farmers who talk of England’s proposed ELMS as a new label on the same income stream are likely to be disappointed by its timing and its lower financial margin.  When available, it may prove an opportunity for some but it will be a contract of “something for something”, involving wanting cost and change in providing public goods for public money.

With the challenge of creating a more profitable and competitive sector, we are inevitably driven back to the work of the Agricultural Productivity Task Force now meeting again.  Its report, published in February, focussed on data, knowledge exchange, innovation, skills and rural infrastructure; that last including the CAAV’s work on enabling proficient people to have access to land. 

Ultimately this is for farm level decisions.  The CAAV is supporting members’ work in helping clients understand and review their businesses.  Reviewing a Business was published in December and we are now going ahead with the deferred Business Review Conference, as a virtual event, on July 27th - details published shortly.  

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