Writing this in mid-September after another harvest is complete, I, like many growers, find myself reflecting on the growing year just passed.
For myself and many others it has been a year to forget, culminating in the worst harvest in decades. Growers will now be focusing on autumn plantings and scrutinising their production costs as cash flows will remain tight for the year to come.
Timely Basic Payment Scheme (BPS) payments will be crucial this winter more than ever and it will be the support mechanism that allows many arable businesses to remain viable. As we know, BPS will soon come to an end, to be replaced by a system that remains largely unknown. We can only hope that the new ELM (Environmental Land Management) schemes will offer enough to offset a significant part of BPS lost, but there is no guarantee.
This has led me to consider the structures that my own business works around. As a contract farmer, myself and the land owners I have worked for have benefited from the support of BPS. However, now that our Contract Farming Agreements (CFA) are going to come under increased pressure, the way in which the loss of BPS agreements will be mitigated within CFAs will be interesting to say the least.
Will the farmer take the hit or will the contractors have to work for less? Or will we find new, innovative ways of working? Whatever we do, it will have to be sustainable for both parties.
In the past, the greatest benefit for the landowner has been that they knew exactly what their labour and machinery costs were, and the contractor farmer’s business benefited by achieving certain economies of scale, allowing for reinvestment in machinery and labour to continue.
My concern is that contractors will be asked to reduce their share of the agreements going forward to compensate for the loss of BPS. I believe this will result in a race to the bottom and ultimately leave only the big players left to farm the ground.
However, the farmer or landowner must have a reasonable return on their investment and the risks undertaken. Is it time for contractors to start working collaboratively rather than ‘chasing acres’ and working against each other? Sharing machinery and labour can significantly reduce costs if done in the correct way.
The same can be applied to individual farmers who wish to reduce their own costs as the loss of BPS starts to bite. Rather than look towards the CFA route, I wonder whether they would be better off looking to close neighbours who may well be trying to achieve the same goals.
At home, we are considering all options when it comes to how our business structures can develop post-BPS, aiming to remain in business and return a decent living from our investments and efforts. Restructuring will not be easy for us but is necessary to achieve the productivity gains that we need to survive life after BPS and whatever Brexit may throw at us.
CFAs may well remain in place, but they will be different and more nuanced, suiting the needs of the individuals and the land that is farmed