Falling profits to up pressure on diversified income in 2026

With profits across the crop and livestock sectors predicted fall in 2026, farmers will need to rely more heavily on their diversified income.

This is according to findings from the latest edition of Nix Farm Management Pocketbook. 

Graham Redman, editor of the Pocketbook points out that while times for the livestock sector are buoyant at the moment and are budgeted to remain that way for much of 2026, this might change quickly.

See also: Feed and forage supplies set to tighten into 2026

“As we farm without much profit from support any longer, this is the time to build resilience into the farm business,” he said.

“Environmental schemes are good for farming as well as the environment, but profit is not the income, as it was with BPS.”

Variable profits

Low prices and rising costs mean profitability in the combinable crop sector is projected to fall below its long-term trend.

The average business is looking at losses of £71/ha if all costs such as imputed rent, finance and unpaid labour are fully accounted for.

High-performing combinable crop businesses could be looking at a profit of £210/ha by comparison.

Livestock sectors, though performing relatively well as a result of high prices and low feed costs, are still less profitable as subsidies have decreased. 

Average lowland beef and sheep units are expected to see profits at £66/ha, while upland beef and sheep units are looking at profits of £92/ha.

By contrast, the report suggest that the average dairy business is expected to make a profit of £977/ha, and high-performing businesses can expect to see £1,639/ha.

Cost of production

Grain and oilseed prices are lower than this time last year, but the overall costs of production have continued rising.

Arable variable costs, the report highlights, are up slightly and overheads have risen too, led by sharp increases in labour.

Rises in minimum wage and national insurance have both driven up farm labour wages.

The current lack of interest in farm work by locals and the increasingly generous employees’ rights and sick pay terms are all said to contribute to higher employment costs, the report says.

Knowing costs is critical

Mr Redman adds that knowing costs and expected outputs is critical in any difficult business environment.

“The modern farmer is increasingly aware that food security is not their responsibility, but making a profit from the farm is,” he said.

“If that means reallocating resources to non-farming activities, then so be it.”