Jeremy's Blog 20th August 2021: Business Perspective for Farming Choices
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 19th August 2021
The old saying is that a farmer only controls what is under his boot. Weather, governments, markets and all are external, to be taken as they come. Looking to what can be controlled is particularly important at such a time of change.
The problem is less uncertainty than perspective, seeing where value, reward and risk really lie. Too great a focus on the changing landscape of schemes draws the eye and mind away from the basics of business. For the average broadacre cropping or grazing farmer, a 10 per cent change in yields is equivalent to a 50 per cent change in Basic Payment. Good farming practice and cost control can be worth much more. Single and Basic Payment have inflated costs and slowed business change. For some, opening new approaches to income will do far more, even more with a better understanding of what markets want and where margin can be earned and retained. Others may choose income from letting land out. Some will find profit in government schemes; others from private investment in environmental change.
The new schemes should be viewed in that light – not uncritically as though they are a lifeline or a necessity but for what they can do for the farm business, if they can do it. Designed to buy change, even if offering profit they will bring less short term margin than Basic Payment. However, rebuilding soils or adding capital value might be worth more. They might fit with the business’ intentions and plans; even take them further but could detract from them. These are to be judged on their merits – a key arguments for considered advice.
The same will be true of private schemes like biodiversity gain. That may well offer more value - but for a 30 year commitment akin to that for a solar farm lease. Selling carbon might not offer value: what is a farmer who cannot manage his carbon? Yet taking payments to manage land to improve soil carbon might go very well with good farming.
This is the importance of looking at the business rather than craving a Basic Payment substitute. We are given a transition period for subsidies or trade agreements with that time to be used for adapting. That is the point of the CAAV publication, Reviewing a Business, and now the AHDB’s Farming Business Review package launched yesterday. Good farmers are not waiting on government but looking to be fit for the transition.