The Andersons Centre’s Meadow Farm model has been updated, and shows how the grazing livestock sector continues to be heavily reliant on subsidy. The table below shows the final results for 2018/19 and 2019/20, an estimate for the current year, and a forecast for 2021/22.
The 2019/20 year was affected by low livestock prices, particularly the beef price. For the current year, 2020/21, both cattle and sheep values have recovered. Meadow Farm sells all its finished cattle from August to October and lambs from July, with all having left the farm by the end of December. This year it is expected to capitalise on the current good trade and crucially, all lambs will have been sold before the end of the Transition Period and the possibility of a no Free Trade Agreement with the EU. But after a tough winter and spring, resulting in low yields, the arable side of the business is forecast to decline. Overheads are expected to fall, in part due to a drop in the fuel price, but also because of a decline in machinery and property depreciation. With such a poor year in 2019/20 the proprietors of Meadow Farm have not bought any big pieces of machinery. However, they were able to replace their old mobile sheep handling equipment and buy a new EID reader, obtaining a 40% grant from the Countryside Productivity Small Grant Scheme. Such low levels of reinvestment are not sustainable though. The combined margin from production is the strongest it has been for a number of years, but the margin from production is still negative and it remains the case that it takes the BPS and CSS payments to provide any profit.
Looking ahead to 2021/22, notwithstanding the possibility of a No Deal Brexit, the sheep price is forecast to decline. But if we do not get a Trade Deal with the EU, Meadow farm could experience a much sharper fall in sheep prices. The beef price is also expected to drop back from its current high as more cattle become available. In contrast, the crops gross margin is forecast to increase as yields recover to a more ‘normal’ level next year. Overheads continue to fall, as a lack of confidence in the industry over Coronavirus and in particular Brexit, sees the proprietors of Meadow Farm refraining from investing. The margin from production remains negative, similar to 2018/19 and it, again, takes the BPS and CSS to provide any profit. This is lower though as the BPS is reduced by 5% in the first year of the BPS Transition, which will see direct payments reduced to zero by 2028.
Meadow Farm is typical of many livestock holdings in England, it is a notional 154 hectare (380 acre) beef and sheep farm in the Midlands. It consists of grassland, with wheat and barley for livestock feed. There are 60 spring-calving suckler cows with all progeny finished, a dairy bull beef enterprise and a 500 breeding ewe flock. The business is subsidy-dependent, but with direct payments decreasing from 2021 it will need to adapt; maybe through restructuring to reduce its overheads, which are fundamentally too high, or perhaps by taking advantage of the new ELM scheme, or possibly a combination of both.