Farming is certainly a profession where you need to be skilled at dealing with the unexpected. Planning is notoriously difficult given the vagaries of the weather along with the volatility of markets and the ability of external events to impact the industry.
That all said, despite the challenges, farming has always proved to be a resilient sector and one that is good at adapting and quickly replanning to get the best result possible. Of course, most of those variable challenges are outside a farmer’s control, but some are not. Recent years have seen the poorer performing farmers leave the industry at a faster rate than ever, and I suspect that will be a trend continuing in the future.
Predicting future performance is a tough challenge. Benchmarking was historically much easier with more central recording in most sectors, but this has now been fragmented and farmers are relying more and more on their professional support network to help them understand how their farm is doing and what’s possible, using their own data pool and knowledge to help benchmark their performance.
The changes to IHT have certainly focused farmers’ minds on the future and what it might look like. The assumption that they would simply keep farming until they dropped is no longer a good mindset to have – if it ever was. But understanding the immediate prospects for their business is crucial to making informed and appropriate decisions.
Looking forward over the next five years is always difficult but some trends are emerging and what is clear is that the pace of change is increasing and standing still is not an option.
The IHT challenge has at least forced many farming families to have a discussion about succession. In many cases, this will create change in family control and a younger generation taking the helm. Inevitably, this will create some refocusing of businesses and a closer look at the bottom line and what it will mean to be successful in the future.
Of course, some families, where succession is not clear, may decide it is time to sell up and that will probably bring more land to market. Given that scale will be important, this will create opportunities for others to expand and grow their businesses, including perhaps many who are on the other end of those succession discussions.
Technology and data will continue to play an important part in farming, and particularly in refining and optimising performance. Data can now be collected and analysed relatively cheaply and focusing that data on improving performance will become the norm. Undoubtedly, using AI to help analyse data will also become a feature but it will require a new skillset and perhaps highlight and accelerate the need for new blood in the industry.
Dairy, pigs and poultry have all shown what can be done by managing data, both for better performance but also in animal welfare and in supporting the reduction in carbon in farm businesses. There are some good lessons from these sectors as to how data has been managed and used to benefit the bottom line.
Volatility in markets will continue to be a feature as it always has been in agriculture. Working with buyers becomes ever more important and it’s good to see longer term contracts appear that can support investment. It’s more important than ever for farmers to build those buyer relationships and fully understand the market they are supplying.
Finally, climate change and the drive towards net zero will inevitably continue to be a focus for the farming sector. Government targets are there for reducing greenhouse gases across the farming industry and, unless those are reset at some point, the challenge will remain to demonstrate the industry is moving in the right direction.
Unfortunately, measuring carbon on farms has not got any easier and there is a lack of consistency in the audit tools available to measure farm emissions. That said, it is important all farmers understand their own position and undertake some form of audit so they can see what the journey might look like for their own business.
The good news is that carbon is generally a cost, so reducing carbon will improve the bottom line and getting on the journey, sooner rather than later, will be no bad thing for farmers and good for the wider industry.
The next five years is likely to be more of the same: farmers working hard to produce high quality food at incredible value for money whilst looking after the environment and supporting nature. To do that will require increasing sophistication and expert advice from a wide network of professionals who can support this industry’s exceptional resilience.
Of course, there will be challenges, but I remain firmly positive about the future of our farming sector.
For more information, get in touch with Brian Richardson.
*the views expressed are the author’s and not ICAEW's