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Farming & Rural Business Community

The view from the Chair

Author: Aloysia Daros, Partner, Smith & Williamson LLP

Published: 16 Aug 2021

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There is in some quarters a perception that change in farming takes place incrementally and can sometimes be measured in generations rather than years or months. Over the two years since my first contribution to this newsletter, nothing could be further from the truth.

Looking back over the eight previous “views”, I have been staggered by just how many changes we have seen in a short time. When I wrote the first one in January 2019 we were still a member of the EU, and at a political impasse. The opposition parties were threatening significant increases in public spending and taxation and the aspiration for subsidy reform was clearly set out, but by a government incapable of implementation.

In that short period since then we have seen progress that is little short of revolutionary. A general election changed the face of politics, the Agriculture Act empowered radical reforms and, despite concerns about lack of clarity, we are seeing quite clearly the outline of a new Environmental Land Management (ELM) regime which will reshape agriculture and its role in the environment. All farmers will see their subsidies reduced, but those who embrace the changes will find new avenues opening, and may also be able to trim their cost base to survive and even prosper. Those who ignore the threats and opportunities presented by the new regime will find life increasingly uncomfortable over the next few years and will face a difficult future.

The speed with which some have moved towards the new regime is meaningful. About 2,000 farms have signed up to participate in the ELMS pilot, but, bearing in mind that only those who are not in any existing scheme are eligible, this is a decent level of take up. By the time this article goes to press many of them will have submitted their applications. Initial evidence suggests that the income from a comprehensive ELM scheme can be well over 50% of that receivable from the existing flat rate subsidies (based on the pilot rates). With a bit of streamlining which ELMS may encourage, and perhaps with enhanced rates in the main scheme, the future for the farms that can change both farming systems and, more importantly, mentality, is maybe not as bad as feared. As accountants, we need to understand how these new schemes work and encourage clients to explore their options sooner rather than later.

Aside from the matter of the most fundamental review of agricultural policy in a generation, my term of office has also seen a world changing pandemic which has utterly destroyed treasury spending constraints, racked up an eye-watering increase in the national debt, implemented controls on individual liberty which would hitherto have been regarded as utterly unacceptable by those on all sides of the political spectrum and changed the way we organise our working lives, perhaps forever. We can only be thankful that our clients were practicing social isolation as a way of life long before it became compulsory, so although those sectors which use casual labour have been hit by both COVID-19 and Brexit, mainstream agriculture has been less affected than many sectors of the economy.

Finally, we have had a roller coaster ride in commodity prices. Over a two year period, both cereals and meat initially dropped 10% and subsequently rose 60% from the low points. Currently cereals, beef and lamb are standing close to their highest values for a decade. If prices are sustainable at this level, some of the concern which has surrounded reductions in subsidy will be allayed, but history has shown us that commodity prices are notoriously fickle, and sound businesses will need to store up reserves now against belt tightening in the future – or indeed, make hay while the sun shines.

So to conclude, my term in the chair has never been less than exciting, and if I have learnt something it is that predictions in agriculture are only ever lucky or wrong. Or to echo the closing paragraph of my first “view”:

“Whatever happens in the wider world, our clients will, at least for the next few years, continue to grow crops, raise livestock and run into problems of one sort or another with landlords, family members and HMRC. In the longer term strategic decisions will need to be made and implemented but in the meantime they will need to hope for the best but prepare for the worst.”

*The views expressed are the author’s and not ICAEW’s.