What will happen to farming in Devon post Brexit?

Yesterday I attended the Devon Local Nature Partnership conference ‘New Horizons for Devon’s Natural Capital’. Great speakers, well attended and well organised. Whilst there are many exciting initiatives happening right now in Devon and the ‘Green Brexit’ mission of Michael Gove gives environmentalists much to be optimistic about with the mantra of ‘public money for pubic goods’, I nevertheless left the conference with a sick feeling in my stomach. What does the future hold for Devon’s multitude of small family farms?

Most of my friends are not rural policy wonks and therefore they are unaware of the situation that farming in Devon (and elsewhere) finds itself. Read on.

Here is Professor Matt Lobley from the Centre for Rural Policy Research (where I work) at the University of Exeter talking about  Farm Business Income. Matt told the audience that the bottom 42% of small farms in England contribute just 2% of agricultural output…. There will be those who say these farmers are inefficient and a widespread re-structuring of the industry is required, I say be careful what you wish for. The consequences for the natural character, landscapes, biodiversity and social fabric of counties like Devon in losing 42% of its small family farms would be immense and would led to outcomes which would fly in the face of the Green Brexit objectives.

The rest of this blog attempts to explain the predicament that farmers in Devon now find themselves and gives a small insight into what has to be done over the coming 5 years. The following data comes from various Defra Farm Income reports.

This graph shows the average Farm Business income in England for the various different types of farming. It shows that across England cereals, grazing livestock (lowlands), grazing livestock LFA (Less Favoured Areas) and  mixed farming all lose money on the agricultural side of their businesses.

This table gives the actual figures included in the above graph. So if we look at Grazing Livestock (lowland) i.e. much of Devon that isn’t on Dartmoor or Exmoor, the figures show that the agricultural business lost £8,700 but agri-environment payments (money for looking after wildlife) generated £3000, diversified income (e.g. running a B & B on the farm) produced £6500, the Basic Payment Scheme (subsidy for owning land) provided £15,300 giving an overall Farm Business Income of £16,100. So £24,800 comes from grants, diversified non agricultural businesses and the Basic Payment Scheme to offset the £8700 agricultural loss giving the family farm an income of £16,100. That is not a living wage, i.e. the income provided is unable to pay the farmer, spouse and other working family members a rate of pay equal to the minimum agricultural wage.

The above figures are the 2016/17 figures for England but if you look at the regional numbers other trends emerge.

These are the 2015/16 figures: the average England FBI figure for grazing livestock is £14,400 but in the south west this drops to £10,300. The dairy sector on the other hand is stronger in the south west.

Here are the summary forecasts for 2017/18.

And here are the detailed forecast figures for 2017/18 along with the trends since 2012/13, an 8% decline for upland hill-farmers (LFA) and a standstill position for lowland grazing livestock. A major increase for dairy and a substantial one for cereals. A volatile market but a very precarious one for livestock farmers.

There are some pretty stark numbers in these datasets. Many farms, particularly small farms make small margins and many others are very reliant on agri-environment grants and the Basic Payment Scheme. After we leave the EU the Basic Payment Scheme will be phased out and public money for farmers will be provided in return for the provision of public goods (e.g. wildlife, access, looking after the historic environment, carbon storage, flood prevention, provision of drinking water etc). The following table shows the scale of the shift in policy and the implications of what might happen if it can’t be achieved.

The column titled CAP (Common Agricultural Policy) Subsidy is the sum of the agri-environment grants and the BPS subsidy. This is the amount of money therefore that farmers will have to earn via the provision of pubic goods if they are to maintain their current income levels. The final column shows what the impact would be on their Farm Business Income if they are unable to do this.

And here’s the rub – some farms on account of their location are much better placed than others to provide a suite of public goods and therefore receive public money. So for example hill-farmers in National Parks have made a very strong case that they can provide these public goods as these areas are rich in natural capital and this has been acknowledged by Government. On the other hand lowland graziers perhaps will find it much more difficult to provide public goods as they are not situated in National Parks with Bronze Age landscapes and Special Areas of Conservation where millions of people go for access and recreation.

The stated aim of these changes is to leave the environment in a better condition than it is in now, this means changes to the way things are done. Judging by the conversations that I’ve heard hill-farmers might be able to provide £22,800 worth of public goods to make up for the loss of their Basic Payment Scheme subsidy, the question is whether for example lowland graziers can provide £15,300 and dairy farmers £25,300 worth of public goods in return for the money.

I had a conversation with Robin Milton, Chair of Exmoor National Park, hill-farmer and NFU Uplands chair about this very topic yesterday and that was why I left the conference with a sick feeling in my stomach.

The state of English agriculture

Defra have just published their results from the Farm Business Survey 2015-16 – see here. As I have worked on upland issues on Dartmoor for over a decade I have in the past tended to focus on the figures that relate to upland farming. This time though I have looked at the entire farming sector. The figures are entirely astonishing.

This graph from the Defra report covers ‘cropping’ farms (i.e.  arable farming and horticulture)

This graph shows the situation across the sector in 2014-15 and compares it with 2015-16. For those not familiar with Defra statistics I will try and explain what this data shows. Farm Business Income is the key figure – it might also be described as farm profit before the farm’s family labour input is included. So for cereal farms the Farm Business Income fell from £45,000 to £35,500. The bar chart also tells us how that income was made up. The dark blue bit at the bottom is the income from the agricultural activity. For cereal farms this is negative. So the average cereal farm in 2014-15 made an agricultural loss of approaching £10k and by 2015-16 this had worsened to approaching £20k.

Defra calculate that the figure for the farm’s family labour input is £21,200. So if that figure is deducted from the Farm Business Income (£35,500 – £21,200) you get a figure of £14,300 which Defra called the Farm Corporate Income.

In addition the average cereal farm in England received £7200 from agri-environment schemes, £34,300 from the Basic Payment Scheme and over £14,000 from diversification out of agriculture. If you remove the Common Agricultural Policy subsidy money out of the calculations (the £7200 and the £34,300 = £41,500) the average cereal farm in England makes a Farm Corporate Income loss of -£27,200.

You can work through all the other types of arable farming from the graph in a similar way – in 2015-16 ‘General Cropping’ broke even on its agricultural activities, whilst ‘Mixed cropping’ made a loss of approaching £20k. Only ‘Horticulture’ made an agricultural profit and is much less reliant on subsidies.

This is the data for livestock farming in England.

In all sectors, except LFA (Less Favoured Areas) grazing livestock i.e. upland grazing e.g. Dartmoor, the Farm Business Income has dropped year on year. The Defra report notes that the LFA figure has risen because the subsidy payments in the uplands has been increased. Only the poultry sector in 2015-16 was profitable if you removed the subsidy payments.

‘Lowland grazing’  now produces a lower Farm Business Income than LFA grazing. The data is also produced Regionally by Defra and the lowland grazing  Farm Business Income for the south west is £8400.

If you remove the subsidy payments from these figures and take account of the farm’s labour input only horticulture and poultry are financially viable and I used to think that the uplands were a special case.

These figures are of course averages across the country and there is much variability between Regions and the size of farms – if you want to delve into the detail you can download the Defra Excel spreadsheet here.

I find these figures astonishing and entirely shocking on many different levels. Despite  £3+ billion of public subsidy English agriculture was unable to make a profit in 2015-16 and a large number of farmers failed to produce a fair return for the labour of the family farm.

And that neatly brings us to Brexit, the Government has promised to maintain the current subsidy scheme until 2020 whilst they work out what will follow the EU subsidy model. These figures show that without subsidy agriculture generally in England (not just the uplands) will find it difficult to be viable. Additionally without access to foreign markets for exports on similar terms to the ones currently offered by the Single Market the profitability of English agriculture will reduce further. That might be to be resolved as early as March 2019.

All of this complexity largely falls to Defra for resolution. Yesterday the Institute for Government published a report entitled ‘Whitehall’s preparation for the UK’s exit from the EU’ which you can download here.

This graphic summaries what the Insitute for Government believes will be required of Defra.

Their report concludes ‘Whitehall has the skills but not the capacity to deliver’.

I can’t bring myself to write the final paragraph – I’ll leave that to you.