The Andersons Centre is predicting that major structural change will impact across UK farming over the next decade.
This was the overarching conclusion emanating from the agribusiness consultancy’s recent autumn seminar.
Factors that will directly impact on UK farming businesses over the coming years include: The changing format of the government support systems available to agriculture, rising inflationary pressures, stronger interest rates, increased pressure on farm input costs, and challenging farmgate returns.
But, according to Richard King, head of business with the Andersons Centre, inflation will remain the “key challenge” for all farming business over the coming months.
“It is currently sitting at around 7%, well above where it would have been a couple of years ago,” King said.
“The net result of high inflation is higher wage costs, higher interest rates and higher costs for farmers across the board.
“Agriculture came through two very good years in 2021 and 2022. Yes, input costs did increase during this period,” he said.
“However, strong farmgate returns more than compensated farmers for the enhanced spending they incurred at that time.
Significantly, the tenor of most food commodity markets has fallen sharply since the beginning of 2023.
“Specifically, where dairy is concerned, there was a degree of hope expressed earlier in the summer that world markets might stabilise as we headed towards the end of the year,” King said.
“It turns out that such optimism was premature. The reality is that the outlook for milk prices remains extremely challenging over the coming months.
“Most farmers will have invested the profits made up to the beginning of this year in their businesses. And this is a good news story.
“In terms of input costs, it is also worth noting that fertiliser prices have fallen significantly from the heights of last year,” King added.
“However, the economic challenges confronting agriculture across the UK continue to mount up. One of these is the high tax bill facing many farm businesses at the end of next January.
“This is an inevitable consequence of the two good years that agriculture enjoyed in 2021 and 2022. The reality is that farmers will have to find the money to meet these commitments.”
Support for UK agriculture
According to King, the banks will continue to support the farming sectors.
“But the period ahead may well see it becoming that little bit more difficult for farmers to get that overdraft increase they might be looking for,” he said.
“The bottom line is that the banks will want to see a strong business case made against every funding request they receive.”
Richard King fully recognises the strong economic headwinds confronting agriculture throughout the UK at the present time.
“In these circumstances, farmers have no option but to sit down and ruthlessly assess the state of their businesses,” he said.
“Their priority must be that of improving efficiency levels across the board. Finding ways of reducing on-farm input costs is equally important.”
Significantly, the Andersons representative believes that the UK government will retain its current level of support to the farming sectors.
“But how the money is spent will be the big issue. In England and Wales, environmental payments represent the future,” he said.
“But these do nothing for the bottom line of a farming business, as would have been the case back when the single payment was available.
“Now farmers have to actually spend money before they can recoup the support that is available from government.”