Tips to survive and thrive amid falling BPS payments

The UK agricultural sector is undergoing the biggest policy shake-up in 60 years, and government support for farmers is facing a radical overhaul.

Defra has started its new Environmental Land Management (ELM) programme, which pays farmers in England public money to deliver environmental outcomes.

Devolved administrations in Wales, Scotland and Northern Ireland are looking to learn from the approach taken in England and implement their own alternative farm support schemes in the coming years.

See also: Opinion: Stewardship had been good to us. Will ELM be too?

Outside the EU and the Common Agricultural Policy, the UK government has promised to maintain the annual £3bn budget for agriculture for the duration of this parliament. What happens after that is a big unknown.

Although the budget will be unchanged for the near future, it is clear the cost of a farmer accessing agri-environment scheme money will be much higher than accessing the Basic Payment Scheme.

Income forgone

Greater participation in new green schemes will involve giving up farming in some way – such as not growing a crop or rearing animals on part of the farm.

Farmers will also have to spend money to deliver environmental outcomes, such as buying seed to plant grass margins or wild bird seed mixes.

Land agent Strutt & Parker says the average farmer with 200ha of land received a BPS payment of about £47,000 in 2020. The annual area-based payment will drop by 38% this year to £29,500.

By 2028, the government expects to remove BPS payments entirely and that figure will be zero. (See “Basic payments 2020 to 2028: Example farm”.)

Over the past 12 months, economic upheaval has thrown plans into turmoil for many farm businesses.

There has been a massive divergence: some sectors, such as arable and dairy, have performed much better than others, notably pigs, poultry and fresh produce.

“It has placed the issue of the removal of the BPS lower down the list of priorities for farmers,” says Jonathan Armitage, head of farming at Strutt & Parker.

“Farmers need to focus on what they can do now to replace the income provided by the BPS. Just as one income is removed, it does not mean you are automatically going to find another income stream to replace it.”

Basic payments 2020 to 2028: Example farm (200ha)

2020 2021 2022 2023 2024 2025 2026 2027 2028
£47,276 £43,494 £36,495 £29,496 £22,589 £16,942 £11,295 £5,647 £0
Source: Strutt & Parker, *calculations from 2024 based on current understanding from Defra announcements on how payments will be cut

Five ideas

Farmers Weekly asked five farmers managing varied farm businesses about steps they are introducing to make a successful transition. Here is what they said:

1. Build a business plan around public goods – Martin Lines, arable farmer, Cambridgeshire

The shift away from the BPS – one application process for one payment – will require an asset management focus of “stacking” income streams, says arable farmer Martin Lines.

In England, that could mean enrolling in the Sustainable Farming Incentive, Countryside Stewardship Plus, and private finance schemes.

Mr Lines, who is also chairman of the Nature Friendly Farming Network UK, says farmers should build a business plan using public goods as an asset in their individual landscapes, and understand their costs of production and market needs.

They should also make use of any capital grant funding available now, especially in areas where they will need to invest in years to come to mitigate their environmental impact.

2. Maximise your productivity at a reasonable cost – Monty Andrew, beef and arable farmer, Lincolnshire

Mixed farmer Monty Andrew is overlooking agri-environment schemes and instead focusing on maximising his crop production at the cheapest price.

Mr Andrew farms 160ha near Stamford, Lincolnshire, where his cropping rotation includes wheat, oats and sugar beet grown as a break crop under a contract with British Sugar.

He has stopped growing oilseed rape as he considers it “too much of a gamble” due to increasing pest and disease pressures and a lack of effective chemical options.

Mr Andrew has increased his herd of Charolais-cross cows from 20 to 30 head.

This has created more farmyard manure, which has reduced his N fertiliser bill. Home-grown hay and any excess oats not sold for human consumption are used to feed the cows.  

3. Consider buying quality used machinery – Rob Gardner, arable farmer, near Basingstoke, Hampshire

Buying quality used machinery from a trusted supplier can be a shrewd option to cut costs for any farm business, says Rob Gardner, farm manager at Manor Farm in Upton Grey, near Basingstoke.

Mr Gardner says the farm recently needed to invest in a new power harrow. They identified a Maschio Torro Rapido Plus 6m power harrow as a good match but did not want to pay £48,000 for a new one.

“We contacted one of the biggest second-hand dealers in the country. We traded in some of our old kit in exchange, so the power harrow only cost us £11,000. You can do an awful lot of repairs for £36,000,” he says.

Mr Gardner says his current tractor is a 280hp Fendt 828, but if he were to upgrade, it would be to a bigger, more powerful seven-series tractor, such as a Fendt 728 Vario.

“That costs £340,000 new. Who can afford that?”

4. Build a circular farming system – Peter Kendall, arable and poultry farmer, Bedfordshire

Former NFU president and past AHDB chairman Sir Peter Kendall is always looking to build circular systems within his own mixed farming business, in Eyeworth, east Bedfordshire.

Renewable energy production – through 350kW of solar panels with a further 350kW to be added soon – is helping to cut running costs on his 360,0000-bird broiler unit.

His four poultry sheds are heated with both ground source heat and biomass.

Sir Peter is building resilience into the system in other ways, using poultry manure and green composts to slash his N fertiliser bill and leasing industrial units on the farm thanks to its good location between Cambridge and Bedford.

Farmers should also look at how they can create partnerships to build smarter, integrated systems, he suggests. “If you farm next to a glasshouse or near a dairy, have you got a building you can put solar panels on?”

5. Become a service provider – Chris Gardner, farmer and agricultural contractor, Warwickshire

Chris Gardner got into agricultural contracting by using his machinery to do farming jobs for neighbours.

Based in Warwickshire, he now has farming clients across the country, mainly trimming hedges in the autumn and winter and slot seeding and grass work in the spring and summer.

“Contract farming is not an easy business. You must be brave, especially buying the machinery,” Mr Gardner says. “A lot of people are doing it, but if you can find a niche, that’s the key.”

Doing jobs for neighbours to build a reputation is a good way to start, he suggests.

‘Drive your business, rather than be driven’, says adviser

Farm businesses are still waiting for clarity from governments on the future direction of travel for farming policy in the UK. 

But farmers may need to accept that there will be constant change and start making proactive decisions today based on the information available, says Jonathan Armitage, head of farming at Strutt & Parker.

“Unfortunately, we don’t have all the detail we would like,” he says. “But at some point, you have got to take control of your farming business and drive it, rather than being driven.”

Mr Armitage says there are two strategies for running a successful business.

First, take advantage of the opportunities, which involves exploring the options around the four lines of income for farm businesses:

  1. Profitable farming – growing crops and rearing animals to raise money
  2. Profit from agri-environment schemes, including various sources of natural capital
  3. Profit from diversification. Most farms have some sort of non-farming venture
  4. BPS payments, which at present still make up the biggest element of profit for most farm businesses.

Mr Armitage urges all farm businesses to consider each of the four areas and how they can be used to maximise existing income streams or generate new ones.

“That could be about identifying marginal gains to drive up productivity or might involve introducing a particular crop or livestock for a specialist market,” he says.

Second, farmers need to analyse risk and manage it.

“If you are an arable farmer, one example could be deciding whether to grow oilseed rape or another break crop with a more stable output and contract price, such as sugar beet.”

Mr Armitage says farm businesses should also evaluate any financial risks, such as exposure to movements in interest rates.

Many farm businesses also have a small number of staff with individual skills sets that are heavily relied on. “What happens if that person is ill, or leaves. What will you do in that eventuality?” he asks.