Looking back at 2021 and key themes for the Agriculture sector in 2022 - PKF Francis Clark
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Looking back at 2021 and key themes for the Agriculture sector in 2022

This blog post was originally published in the Western Morning News on Thursday 23 December 2021.

As I look into 2022, there will continue to be large and fundamental changes for the sector that will need to be embraced. This is likely to require a new way of thinking.

I often take the opportunity to look back at the previous year and look forward to the year ahead and I had hoped I would be looking back at Coronavirus and the lessons learned. However, this appears to be a pandemic that keeps on giving and the Omicron variant will bring many more challenges for the forthcoming months.

And as time goes by, we are slowly hearing more about the real impact Brexit may have for the farming sector.

It was with relief that I had heard 95% of farmers in England received their 2021 Basic Payment Scheme (BPS) money in the first week in December. However, it is also at this time that the reality of the phasing out of such funds going forward will begin to take grip. Depending on the size of your farm, this year’s receipt will be 5-25% less than received in 2020 and this reduction might be manageable due to generally strong farm gate prices in the sectors that have typically relied most on BPS (beef and sheep). However, as the years pass, the reduction will hit harder and it will be essential that farm businesses have looked at all future income sources, whether that be the new government initiatives or via other diversification channels, to ensure a sustainable future.

Towards the end of last year, further details have been announced regarding the Sustainable Farming Incentive (SFI) Scheme for 2022 and as expected soil health will be the key focus.

For SFI 2022, farmers will be paid between £20/ha to £54/ha to protect soils with three soil standards being available:

  • Arable and horticultural
  • Improved grassland
  • Moorland and rough grazing (introductory level).

Of interest to me is that DEFRA intends to make these payments quarterly. Whilst this would appear to be better for cash flow management, I will wait to see how this works. Unfortunately my experience has been that the making of annual payments for BPS and bi-annual payments under the stewardship schemes have proven challenging enough for DEFRA in the past!

I do not intend to go into more details now and you can do this in your own time, however, the question will now be whether or not the payments will be sufficient to encourage farmers to apply.

The government has stated they would like to see 70% of eligible farmers apply, however, we will have to see what the actual uptake might be, fearing that a poor uptake could be interpreted as lack of interest and allow funds critical to the industry to be diverted elsewhere.

We also still wait for more details on the Local Nature Recovery and Landscape Recovery Schemes as well as further clarity on lump sum payments and delinking of direct support despite the consultation period on these ending some time ago.

Whilst the NFU continue to lobby for the delay on BPS reductions, I would not be banking on any changes and hope for further clarity in 2022.

On a positive note, the Farming Investment Fund (designed to aid farmers invest in new technology and equipment) was launched last year. Full details can be seen here.

The scheme is in two parts:

The Farming Equipment and Technology Fund (FETF) – a small-scale scheme with grants of up to £25,000 and is generally seen as easy to access. It is open until 7 January 2022.

The second scheme is the Farming Transformation Fund (FTF) – for larger items of spending with grants up to £500,000. The deadline for the first-stage of this being 12 January 2022.

Whilst I am not personally sure that subsidising a shiny piece of equipment will turn around a struggling business and is necessarily the best use of funds, the FETF is appearing popular and I would be looking to take advantage of it now rather than waiting for further rounds in the future.

2021 saw the first trade deals being brought to the table and we can expect to see more in 2022 and beyond, potentially with some countries/regions where their agricultural products are a more important part of their offering to us. Watch this space.

The issues of lack of available labour in the sector remains and is arguably getting worse. The general shortage of labour across the country and linked wage inflation across many sectors puts more pressure on the agricultural industry unless costs rises can be obtained from the consumers, and this assumes that you can even get any labour in the first place!

COP26 might have been and gone but the issues of protecting natural capital, the environmental costs and benefits of different farming systems, regenerative farming, sources of carbon sequestration and the commitment of being carbon neutral by 2050 are not going anywhere. In fact I am sure that if it were not for the issues of the pandemic this would be even further up the political agenda and cannot be ignored. All things to start thinking about in 2022, if you have not done so already.

I remain confident that farming will play a significant positive role environmentally and in the long term the future for British Agriculture is bright. As I have said before the current challenge could be getting to the long term!

 

 

 

 

FEATURING: Brian Harvey
As head of PKF Francis Clark’s agricultural sector group, Brian manages a dedicated team of agricultural accountants and tax advisers. He hails from a Cornish… read more
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