Farm management challenges demand radical business reviews

Some farming businesses are going to have to radically review what they do, says farm business consultant Andersons in its latest assessment of the outlook.

The firm runs several farm models to demonstrate budgets and performance. Its Regen Farm model on clay loam soils is fully regenerative and has been for some years.

The outlook for the 2026 harvest on this 600ha farm is a farming or production loss of £39/ha, before Basic Payment Scheme income (£1/ha) and Sustainable Farming Incentive (SFI) income of £124/ha.

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This marks the fourth year in which the business made a loss from its pure farming activity, after drawings, rent and finance.

Amelia Rose, a farm business consultant with the firm, says that like many others with SFI agreements ending next year, the Andersons model regenerative farm has a dilemma: does it go for SFI26 this autumn and risk being able to put in only a limited area, or wait until March/April next year when its current SFI scheme ends, in order to potentially get a bigger slice of the SFI budget.

Yields are forecast to improve for this year’s harvest and crop prices have recently improved. Variable costs have been kept under control as the farm bought fertiliser before the sharp increases in spring.

2027 harvest

Making a profit from production remains challenging for the 2027 harvest, with higher fertiliser and fuel prices, plus general inflation and lower SFI income.

The financial stress on combinable cropping businesses is beginning to build, after a run of poor harvests. While there are no new answers, the scope for collaboration with other farmers remains one of the most direct routes to improving performance and lowering costs, says the firm.

This farm business needs a total review as its level of output is not sufficient to cover the cost of production, says Amelia.

“We’re only two to three years into a period of possibly five years of hard going. It’s very hard to justify a combine on 600ha.

“Overheads need to be managed where they can be. Labour, power and machinery are all big items – labour could perhaps be cut by half a full time equivalent, using self-employed resources,” she suggests.

“There are no easy wins but small savings do add up.”

Review insurance

Insurance is one area she suggests where there is potential for savings. Farms of this size and type would typically be spending about £15,000 a year on insurance – the equivalent of £26/ha or £2.60/t on a 10-tonne/ha performance.

There is a tendency to renew insurance without a proper review, says Amelia. Savings could be made by checking cover levels and what is covered.

For example, there may be unused machinery on farm that is still on the schedule, or some that has been sold but is still on the list.

Buildings is another area. “If a building such as an old pole barn is no longer in use, would you replace it if it blew down in a storm? The same applies to non-listed traditional buildings – if they would not be replaced, then insure them just for demolition costs.”

Living costs should also be calculated as part of a business review, as drawings can add up to a level that may surprise some people when they do the exercise.

“There needs to be a level of discipline on drawings,” says Amelia.  

Roadmap shows direction

Farm management is likely to have to undertake more compulsory, legislated environmental measures in future, for no payment, suggests Jeremy Moody, secretary and adviser to the Central Association of Agricultural Valuers.

“In practice, producers should see the present Environmental Land Management schemes as a transitional regime,” he says.

“Items like buffer strips, which have previously been paid for, are likely to become compulsory in legislation, while conversion of farming practices is to be for decision in the marketplace by farmers, perhaps in conjunction with supply chains. Money will move purely to public goods, such as habitat creation.”

Commenting on the government’s Farming Roadmap for England, he says it sets out a line of direction for farmers, who may need to make some difficult decisions about a future that’s very different from the past.

“The Roadmap’s overall aim is towards lower input, high technology farming, with a mistrust of fertiliser and a concern about water quality. Farmers should expect the regulatory baseline for good farming practice to rise, with no more money to be paid.”