NEW YEAR 2022

  • Written by Andrew Davis
  • Posted on Jan 06, 2022
  • Articles

The turn of the farming year comes at Michaelmas in late September rather than now.  That is the time when harvest yields are reckoned, cropping plans for the coming year implemented.  Ewes are flushed to increase ovulation before the tups join them and winter housing is prepared for cattle.  And yet it is customary, as Big Ben rings in the new calendar year, to reflect on the twelve months gone and look forward to the seasons to come.

It is difficult to gain an accurate picture of the 2021 harvest.  Yields were variable, with farmers in the Cotswolds reporting good results whilst on our local chalk soils yields were average at best.  This was disappointing as wheat, in particular, looked full of promise in early summer.  It is not clear what caused the decline but the weather was capricious, ending in a slow damp harvest that damaged quality.

The good news is that sales prices have soared.  Feed wheat is worth over £220 per tonne, milling £265, feed barley £205 and oilseed rape £580.  This compares with values a year ago of £185, £200, £140 and £360.  World grain stocks are said to be very low, with supply and demand on a knife-edge as some countries ban exports to ensure adequate home supplies.  Australia is expecting a good harvest with wheat up around two million tonnes but that is a drop in the ocean of a global wheat harvest of 750 million tonnes.

This may seem positive for arable farmers but these prices come more than mid-way through the season.  For various reasons, farmers need to sell earlier, storage space and cash flow pressures prominent amongst them, so a lot of grain was sold at much lower values.  There have been big rises in the price of beef, lamb and milk too, improving returns.  The one livestock crisis is in pig production with a combination of low prices and labour shortages in abattoirs and cutting plants.  There is an oversupply of pigmeat on the continent pushing prices lower, some 10% below the five-year average.  Meantime healthy pigs are being culled on farms because slaughtering capacity is severely reduced by labour shortages caused by immigration restrictions and Covid.

There has also been a huge surge in input costs, especially those connected to the price of oil and gas.  Fertiliser plants closed for a short time earlier in the year due to the cost of gas, resulting in a shortage of ammonium nitrate.  If a farmer can secure supplies today, he is likely to be paying close to £700 per tonne, a massive 250% increase on the £200 per tonne a year ago.

A further financial aspect is the decline of the Basic Payment, which is being phased out from 2021 to 2027.  Payments up to £30,000 were cut by 5% last year and will be reduced by a further 20% this year, 35% in 2023 and 50% in 2024.  From £30,000 to £50,000, the cuts are 10%, 25%, 40% and 55%, with progressive cuts above that.  A farmer who receives over £150,000 will see that reduced by 70% in 2024.  For many farmers, the Basic Payment makes the difference between profit and loss, so they need to plan very carefully for the future.

So what are the prospects for 2022?  A mild dry autumn allowed significant planting.  The area of winter barley is up, despite a disappointing year in 2021, so too is the area of winter wheat.  After years of dramatic falls, the area of oilseed rape is likely to be up too, encouraged by the price, although flea beetle remains a potent threat.  The variability of yields in recent years is caused in part by the degradation of soils; where there is no compaction and the organic matter content is adequate, yields respond accordingly.  The other issue, of course, is the cost of inputs; will there be any return on the use of nitrate.  One farmer, who bought his fertiliser early at last year’s prices, claims he would be better off to sell it and fallow his land!

It is easy to suggest that farmers should improve their soils by growing more restorative crops, especially legumes and pulses that can increase soil nitrate, but that requires investment for the longer term that many farmers cannot afford.  Many are turning to agri-environment schemes, Countryside Stewardship and the Sustainable Farming Incentive, the first element of the Environmental Land Management Scheme to be introduced.  It has been suggested that 20% to 30% of arable land may be entered whilst, locally, some entire farms are covered.  Improving soil health and fertility is more effective with grazing livestock and there are signs of an increase in the national dairy herd after many years of decline.  There are reports that liquid milk may be in short supply in the spring and prices may exceed 40 pence per litre.

We are in a period of seismic change for farmers as the Basic Payment is phased out and trade deals bring greater international competition.  Some farmers may take advantage of the lump sum retirement scheme when it is introduced later this year.  Income from diversification and from other sources will become even more critical whilst many farmers may opt to give up farming themselves, get contractors in, put more land into trees and nature conservation or both.  Those that carrying on regardless in the hope that everything will work out are likely to be severely disappointed.

A happy, prosperous and peaceful New Year to all readers of this column.