Author: Caroline Ingamells

The Land Reform (Scotland) Bill has been passed.  The Bill, which was introduced back in March 2024, aims to regulate the management and transfer of large landholdings and modernise agricultural tenancy law.  The Bill has been fiercley debated and is a contentious piece of legislation.  The Bill is in three parts.

Part 1 of the Bill refers to large land holdings, these are either a single holding or a composite holding of over 1,000 hectares (amended down from 3,000 hectares during the Bill’s passage through Parliament).  The new legislation includes;

• Land Management Plans – for large land holdings there will be a requirement for publicly available Land Management Plans (LMP) to be prepared, with community engagement on their development and when there are any significant changes.  LMPs will need to be reviewed every 5-years.
• Community right to buy – when a large holding is to be transferred, community bodies are given an opportunity to register an interest; they will be informed when the land is being sold and lotting decisions (see below) must take account of existing occupation, giving occupants the chance to buy.  This will end any private, off-market, deals; community bodies, tenants and crofters will have to be informed of the sale.
• Lotting power –  if being sold/transferred the owner will have to apply to Ministers for a decision on whether to sub-divide the land into lots.  Ministers may require them to break the holding into smaller lots before transfer, if that is considered in the public interest.
• Enforcement –  a new Land and Communities Commissioner will have the power to investigate and enforce compliance.  If the owner fails to comply with the obligations i.e not having a LMP, the Commissioner can impose a fine and this has been raised to a maximum of £40,000

Part 2 of the Bill seeks to modernise Scotland’s system of land tenure by creating a new model lease to promote environmental sustainable land use and reforming legislation around small landholdings and agricultural tenancies.  This includes;

• A Model lease for environmental purposes – Scottish Ministers are required to publish a Model Lease designed for letting land where the use is wholly or partly for an environmental purpose.
• Small landholdings – alligning these more closely with agricultural holdings in terms of rights and functions.
• Agricultural Holdings – the Bill introduces amendments to both the Agricultural Holdings (Scotland) Act 1991 and the Agricultural Holdings Act 2003 including;
  • registration of interest and right to buy
  • Landlord’s right to resumption including notice, compensation and reversion arrangements
  • compensation for improvments, including improvments which enhance sustainable or regenerative agricultural production
  • extending Tenant’s diversification to cover environmental benefits
  • compensation for game damage
  • rent reviews – including the productive capacity of the holding, rent payable on similar holdings, economic conditions of relevant agricultural sectors, open market rent for Landlord’s fixed equipment not used for agriculture, and open market rent for land not used for agriculture
  • the rules for good estate management and rules of good husbandry to include references to sustainable and regenerative practices

Part 3 of the Bill covers misceallaneous provisions, including ancillary provisions, regulation – making powers, commencement and the short title.

Not surprisingly there is a split in reactions to the Bill.  Community groups and land‑reform campaigners welcomed parts of the Bill as a step forward for transparency and empowerment of local communities but some feel the Bill does not go far enough.  Large landowners have voiced concern over the Bill describing it as overly bureaucratic and likely to discourage investment.

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The latest farm profitability figures show a divergence in the fortunes of the arable and livestock sectors.  This comes from Defra’s latest Farm Business Income (FBI) figures for England.  The data relates to the 2024/25 year – covering harvest 2024 and the 2024 BPS payment.  They are an update of the estimates released in the spring.  Although titled ‘income’ what the series shows is average profit at the farm level for a typical farm in each sector.    The chart below summarises the data for the past few years – all figures are in real terms at 2024/25 prices.

An average is first given for the five years 2016/17 to 2020/21.  The data for the four following years has been split into the contribution from each of four ‘profit centres’.  It shows how important subsidy income (BPS and agri-environmental income) and diversification income has been to the profitability of some sectors of English farming.  The light blue columns are our initial forecasts for the current, 2025/26 year (i.e. 2025 harvest and BPS year).

Cereals farms recorded a small increase in profits for harvest 2024 compared to the previous year, however FBI is significantly down on recent years but also considerably below the average from 2016/17 to 2020/21.  Cereals farms actually made a £27,400 loss from their agricultural operations in 2024/25.  A 9% fall in input costs, chiefly driven by lower fertiliser costs, was not enough to offset a larger decrease in output from crop enterprises.  Looking to 2025/26, with a difficult growing season and poor commodity prices, The Andersons Centre’s estimates (covering 2025 harvest) do not look like being any better and with a further decline in BPS payments to a maximum of £7,200, we are forecasting a drop to below the 2023/24 year level.

In real terms FBI for General Cropping farms declined slightly in 2024/25 compared with the previous year, but remained just above the average from 2016/17 – 2020/21.  However, it can be seen by the height of the columns on the chart, receipts from agriculture (red column) have been falling and it is actually income from agri-environment and diversification activities that have risen to keep profits stable.  The increase in returns from agri-environment will be SFI income, with farmers trying to re-coup some of lost BPS payments.  The orange segment shows the BPS returns and it can be seen how quickly this has fallen.  For the current year, we are estimating a decline to below the average for the 2016/17 to 2020/21 years, due to low commodity prices and the knowledge that the BPS has been restricted to a maximum of £7,200 per farm; this compares with an average of £18,100 received in 2024/25.

After a decline in FBI for Dairy farms in 2023/24, incomes recovered in 2024/25.  This was driven by an increase in the milk price.  The average farmgate milk price rose by 8% in the period.  The increase in cattle prices more generally, has also assisted Dairy farms as output from other cattle enterprises rose by 38%.

Lowland and LFA Grazing Livestock farms experienced good increases in FBI for 2024/25.  For Lowland Grazing farms, in real terms, this is the highest income since 2009/10.  But, even with strong livestock prices, average Lowland Grazing farms only made £900 from their agricultural activities and LFA Grazing livestock farms actually still made a small loss from agriculture.  For average Lowland Grazing farms, income from agri-enviroment has more than doubled and diversification receipts have also increased.  For the current, 2025/26 year, we are forecasting the strong livestock prices, particularly for beef, and low feed costs will result in a further increase.  LFA Grazing Livestock farms rely heavily on their agr-environmental activities which are 57% higher than in 2023/24, equating to 59% of the average FBI for these types of farms in 2024/25.

For specialist Pig farms, although the average FBI in 2024/25 fell from 2023/24 levels, returns from agriculture (red bar) were much improved.  A drop in feed costs was a key driver.  The main reason for an overall decline from 2023/24 is a drop in diversification income which has fallen by about two thirds with lower output from food processing & retailing, tourism and building rental.  However, as was noted last year, there is always a note of caution around both the Specialist Pig and Poultry figures as the samples are relatively small, meaning individual farms can have a large influence on the results, this is possibly what has happened here with the diversified enterprises.  For the 2025/26 year, with feed costs still low, a small increase in profits is forecast.

Specialist Poultry farms have had another good year.  Income from agriculture, agri-environmental and diversification all experienced strong increases year-on-year, only returns from BPS have fallen.  Profits are forecast to increase further for next year.  The full Defra report can be found via https://www.gov.uk/government/statistics/farm-business-income.

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The Animal and Plant Health Agency (APHA) has provided an update on the progress being made in the development of a cattle bovine TB vaccine.  According to the Agency Phase 1 and Phase 2 are now complete, but an additional Phase 3 is due to commence on commercial cattle which should be completed in 2026.

Phase 1 focused on testing the performance and safety of the DIVA skin test.  DIVA is an acronym for Detect Infected among Vaccinated Animals and this was an important first step to ensure the test could accurately identify animals that were truly infected with bTB or just protected by the vaccine.  Phase 2 evaluated the safety of the cattle BCG vaccine and how well the DIVA skin test worked in vaccinated cattle.  This provided data on how the vaccine and test perform in real-world conditions.  The results from these trials are being used to support applications for Marketing Authorisations.

Phase 3 is an additional phase, taken by the GB administrations to allow APHA to gather ‘additional data’ on the DIVA skin tests performance.  Phase 3 will take place on commercial cattle across England and Wales involving at least 10 farms and 750 animals.  APHA says it is continuing to ‘work at pace’ but will only deploy the vaccine and companion DIVA skin test when it has all the right steps in place.  However, the Agency does not give a timescale of when this might be, saying the aim is to deliver an efective cattle TB vaccination strategy within the ‘next few years’.

This update follows the Government’s announcement in August saying that it has started work on co-designing a comprehensive new bovine TB Strategy for England.  To ensure the new Strategy is using the latest scientific and practical evidence since 2018, Professor Godfray has updated the evidence base for TB control.  The full report, Godfray bTB Evidence Review Update 2025 can be found at https://assets.publishing.service.gov.uk/media/68d563169ce370a7e0a0fcfe/Godfray_bTB_Evidence_Review_Update_2025.pdf .  The new draft TB Strategy for England is expected to be published in Spring 2026.  Bovine TB remains one of the most challenging animal health issues facing livestock farmers in the UK.  However, the Government is moving away from widespread badger culling, instead, it is expanding badger vaccination and continuing to develop the cattle vaccine. The goal remains to achieve Officially TB Free Status for England by 2038.

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Mid-tier agreements under Countryside Stewardship, due to expire at the end of this year, will be extended for a further 12 months.  Defra has announced that those Countryside Stewardship Mid Tier (CSMT) agreements due to expire on 31st December 2025 will be rolled-over on the same terms and payment rates.  With no SFI available, or even any information on what and when new schemes might be available, agreement holders would have been left with no funding for their environmental work.

The RPA will write to eligible farmers with details about the extension offer over the next few weeks.  Anyone with a CSMT expiring on 31st December, who has not heard by 6th November should contact the RPA.  The extension agreement will continue under the same rules, terms and conditions as the existing CSMT agreement – it will not be possible to amend, add or delete options.  The letter will contain details of how to accept the extension which must be made by 27th November 2025.

Defra said details of the ‘revised’ SFI offer would be available in ‘summer’ 2025, but nothing has been announced yet.  We do not expect any scheme to be available until April 2026 at the earliest.  The longer the wait for details goes on, the more likely it is that it will be even later in 2026 before the scheme reopens.  We hope to get some detail soon to help with planning and budgeting – those who entered SFI in 2023 when it first opened only have one year left to run on their agreements.

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Recent statistics show that on-farm production of renewable energy and the completion of carbon audits are becoming more mainstream in farming.  The data is from a publication ‘Energy use on Farms’ and is sourced from the Farm Business Survey in England.

In terms of renewables, the data indicates that over a third of farms now generate energy on-farm from renewable sources.  Perhaps not surprisingly, solar is the main technology, although renewable heat and wind power are also well-represented.  The statistics also provide more detail on the reasons and barriers to farmers adopting renewables.

The data finds that, overall, 20% of English farms had done a carbon audit.  The figures are based on the 2023/24 Farm Business Survey, so the numbers are likely to have risen since then.  There is a large disparity between sectors.  In the Dairy sector 57% of farms had done an audit – largely driven by processor requirements.  This drops to 15% in the Cereals sector and just 7% for Pigs and Poultry.  The most commonly used calculators were Agrecalc and Farm Carbon Calculator, with 44% and 23%, respectively, using these tools.

The full release can be found at – https://www.gov.uk/government/statistics/energy-use-on-farms-in-england/energy-use-on-farms-in-england-202324

The Andersons Centre carries out carbon audits for its clients.  If you would like a farm carbon audit undertaking or would like to discuss the merits of having an audit please contact us via [email protected]

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Unprecedented farmgate prices for beef and lower feed costs sees Meadow Farm forecast to make its largest-ever margin from production.  In fact this is only the second time in its history that the mixed livestock farm model has made a profit before support payments.

Meadow Farm is a notional 154-hectare (380 acre) beef and sheep holding in the Midlands. It consists of grassland, with wheat and barley mainly for livestock feed. There are 60 spring-calving suckler cows with all progeny finished, a dairy bull beef enterprise and a 500-ewe breeding flock.  It has an SFI 2023 agreement.

The table below sets out actual results for the years 2023/24 and 2024/25.  There is then an estimate for the current year and also the first forecast for 2026/27.  As Meadow Farm sells its livestock in the autumn, for the 2024/25 year finishing back in March, it did not experience the significant rise in cattle prices during the first five months of this year.  Some of the higher variable costs are due to the farm entering the SFI (i.e. herbal ley establishment).  The extra income from the SFI offsets the decline of the BPS and the business profitability improves.

For the current year 2025/26, the current strong livestock prices and lower feed costs are forecast to continue through this autumn resulting in an increase in the gross margin.  Overheads rise again partly due to inflation but also because Meadow Farm has budgeted to replace its old tractor and loader and also to upgrade its cattle handling system; partly grant funded under the Farming Equipment and Technology Fund (FETF).  Finance costs reduce, due to lower borrowings and interest rate cuts; drawings rise with inflation.  Overall, the margin from production is budgeted to be the largest in the farming model’s history.  The BPS sees a large decline as the higher deductions under the agricultural transition ‘kick-in’.  The SFI declines marginally, due to the lower management payment in years 2 and 3, but business profitability is good.

For 2026/27 we have forecast livestock prices to ease, in particular for cattle, from their current exceptionally high prices as the cost of living sees purchasers switching to cheaper proteins – poultry and pork.  This sees the margin from production fall marginally back into the red.  With the BPS now negligible it shows how important the SFI payment has become to this type of business.

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Change in Scotland’s support schemes has been very slow in arriving.  It seems increasingly likely that meaningful reform is slipping even further into the future.  Given the issues with the Agricultural Transition in England, Scottish farmers may well be pleased to hang on to the BPS for as long as possible.

There has been no ‘big announcement’  from the Scottish Government changing policy or timescales.  It is still publicly committed to introducing the new Four-tier support structure, starting in 2026.  However, a careful reading of recent publications seems to indicate that any reform in 2026 (or even 2027) will largely be a cosmetic re-branding excercise with the BPS continuing to play a key role in farm support.

This analysis comes from reading the latest Routemap document from June (https://www.ruralpayments.org/topics/agricultural-reform-programme/arp-route-map/ ) plus recent announcements on Greening changes.  The Routemap states –
‘Tier One will provide direct payments to support active farming. We will start off using the current Basic Payment Scheme (BPS) and add new conditions over time.‘  Whilst we probably knew this to some extent, it seems the emphasis has changed a bit to indicate any major changes are some way off.

For Tier 2, the Scottish Government is putting Greening under this heading – ‘Tier 2 will support farmers and crofters to do even more for climate and nature. The first change will be asking more arable farmers to manage Ecological Focus Areas. The details of this change will be published in summer 2025‘.  We had always assumed that Tier 2 would look a bit like the Sustainable Farming Incentive in England – payments for doing specific actions.  This is what the ‘Measures’ previously published looked like – but it has all gone quiet on these. In the short-term at least, Tier 2 just looks like a rebranding of Greening. The note does state ‘This scheme [AECS] is expected to continue until at least 2026 to deliver elements of Tiers 3 and 4 until new Elective and Complementary Support mechanisms are introduced. Some of the options currently available through AECS are being considered for inclusion in Tier 2 over time so that more people can implement them.’  So, Tier 2 might become more SFI-like over time, but it doesn’t seem very imminent.

Then there is the whole paragraph about the ‘Future Operating Model’.  This is the computer system that runs schemes in Scotland.  In short, this will not be changed until 2027 at the earliest.  Whilst this is about administrative systems rather than the schemes themselves, it seems difficult to introduce anything very radical unless you have the IT to run it.  Given there is going to be no change in the system until after the end of 2026, this seems to reinforce the ‘no-change’ message for 2026.

So, it seems BPS will continue in 2026 (possibly rebranded as Tier 1 or some other name) as will Greening (under Tier 2).

In terms of payments, the Scottish Government has made the following commitments;
• 70% of funding will be allocated to Tiers 1 and 2
• we will apply a funding split of 70 / 30 between Tiers 1 and 2
Looking at the agricultural budget (https://www.gov.scot/publications/scottish-budget-2025-2026/pages/11/ ) current BPS, Greening and Coupled spending comes to around 70% of total spend (this includes administration).  And Greening has always been around 30% of Pillar 1 support.  Thus, carrying-on as now would be completely consistent with these promises.

Therefore, we foresee no ‘big bang’ of reform for 2026 and possibly 2027 as well.  For those wanting to budget support payments for next year it seems pretty safe rolling-over the BPS/Greening payment rates from 2025. 

With regards to BPS payments, the Scottish Government is due to start issuing advance payments on the 2025 BPS at the start of September.  Advances will be at the usual 90% of the estimated total amount.  Ahead of payments commencing, payment rates for 2025 have been announced.  These are shown in the table below.  Rates are slightly lower than in 2024 due to some funds shifting to the Young Farmer Top-up and New Entrants from the National Reserve.  Full details can be found at – https://www.ruralpayments.org/news-events/payment-rates-set-for-basic-payment-scheme-and-greening-2025.html .

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Harvest is now complete for most in the south of Great Britain.  As discussed elsewhere, the overall theme of harvest 2025 is ‘variability’ – some farms have had acceptable results whilst others have seen pretty disasterous yields.  Even on the same farm there has been big differences dpending on soil type, crop and if a shower arrived at the right time.  We seem to have spoken about variability a lot for the past few harvests.  This is perhaps an effect of climate change.  It makes generalised comments about a ‘good’ or ‘bad’ harvest much less relevant. 

All this needs to be remembered when looking at the figures for Loam Farm.  These have been updated for the actual yields seen from harvest 2025 and likely prices for the 2025 and 2026 year.  Loam Farm is located in the East of England, so was affected by the dry spring.  However, as the name suggests, its soil type means yields were impacted less than farms on lighter soils.  The table below sets out the results for the last two harvests, a provisonal figure for 2025, and a forecast for the 2026 season.

Loam Farm is a notional 600 hectare business that has been used since 1991 to track the fortunes of British combinable cropping farms.  It is based on real-life data.  It is partly owned and partly rented, has a working proprietor plus one full time member of staff and harvest casual.  It grows wheat, oats, beans and barley and has a SFI agreement (2024 version).  

The 2025 results have deteriorated since the last update in the late spring due to a combination of lower yields and falling markets.  It results in a Margin from Production even lower than last year’s poor outcome.  With less support from a much-reduced BPS, the farm tips into an overall loss making position.

This will be reflective of many combinable crop farms – facing a second year of low or negative returns.  Some businesses (although not Loam Farm) also had a poor 2023 harvest as well.  The cumulative effect of this is starting to be seen in farm finances.  However, to reiterate the point above, not all businesses will be in the same postion.  

Looking ahead to 2026 the assumption is that yields will return to average levels.  Despite lacklustre forward markets this improves output and gross margin.  The farm returns to making a margin (albeit small) from production.  The BPS, at a maximum of £600, has become an irrelevance.  The SFI provides a useful boost to income, but the 2026 year is the final one for the farm’s ‘core’ 2023 agreement.  What support might be available for 2027 onwards is another uncertainty for this business.

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The Welsh Government has published details of the Sustainable Farming Scheme (SFS) which commences on 1st January 2026.  The SFS is replacing the Basic Payment Scheme (BPS) in Wales and, from 2026, farmers will have the choice to either enter the SFS or remain with the BPS.  The BPS will be phased out by 2029.  Below is a summary of the scheme details, a full description can be found via https://www.gov.wales/sustainable-farming-scheme-2026-scheme-description-html#175191

Scheme Structure

The three-layered structure from previous consultations has remained – Universal, Optional and Collaborative Layers.  These three layers sit above the SFS Regulatory Baseline and a Universal Code (see ‘Scheme Requirements’ below).  The Universal Layer has 12 Universal Actions (UAs) which farmers must meet (where relevant to their holding) to receive the Universal Payment.  Those who want to go further and deliver more targeted outcomes can choose to undertake the Optional Actions (OAs) and there may be opportunities for landowners toSustainable Farming Scheme: Wales work together and deliver environmental benefits at landscape or catchment scale by undertaking Collaborative Actions (CAs).

Scheme Requirements

There is a set of Scheme Requirements that underpins the three-Layered structure;

• SFS Regulatory Baseline – much like the existing cross-compliance regime.
• A Universal Code – a framework of non-regulatory requirements designed to protect soils, biodiversity and habitats, trees and landscape features.  This includes the requirement for at least 10% of each farm to be actively managed as Habitat (the previous requirement that a further 10% be manged as woodland has been dropped).
• A Farm Level Carbon Baseline – this will be a requirement in the second year of the Scheme based on information provided in the SAF in the previous year

Payments and BPS

A Universal Payment will be made for undertaking the SFS Scheme Requirements and meeting all the Universal Actions.  In addition, a Social Value reflects the public value of outcomes delivered through participating in the SFS which are not reflected in market prices.

For those farmers who join the scheme in 2026 and farm 100 hectares or less there will be an additional one-off £1,000 Stability Payment.  Capping will be applied to payments.  Details of capping and payment rates are summarised in the table below.  Payment mechanisms and rates for the Optional and Collaborative Actions are not yet available.

The Basic Payment Scheme (BPS) is being phased out from 2026.  Farmers can decide to remain in the BPS or go into the SFS.  Once they have chosen to participate in the SFS they will not have the option to revert back to the BPS.  The BPS payment, including Redistributive and Young Farmer Payment will be phased out as detailed in the table above, so that there will be no application or payment in 2029.

The application process for the SPS will be similar to the current BPS, with farmers declaring annually all the land under their management control on their SAF by 15th May each year.  There will be no requirement to have entitlements for the scheme.

Summary of Payments, Capping and BPS Phase Out

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The Government has published its Food Strategy for England called ‘Towards a Good Food Cycle’.  It sets out the challenges faced by the food system, a vision of what a ‘good food’ system would look like, and the outcomes that would deliver such a system.  There are ten of these outcomes but they are somewhat banal in that they tend to be vague aspirations that it would be difficult to disagree with.  The Strategy has little in the way of concrete actions to drive these outcomes, but it does make linkages with the plethora of other Government initiatives such as the Land Use Framework, 25-Year Roadmap for Farming and Farm Profitability Review.  The full Strategy can be found at – https://www.gov.uk/government/publications/a-uk-government-food-strategy-for-england .

The overal vision for a ’21st Century’ food system encompasses;

• a thriving food sector – contributing to economic growth and a productive UK population
• a healthier population – the Strategy refers to the ‘Good Food Cycle’ which is set out in contrast to the ‘Junk Food Cycle’ identified by Henry Dimbleby in his 2021 Food Strategy (see https://www.nationalfoodstrategy.org/)
• lower environmental impact from food production
• a more resilient food change – in the face of climate change and a more volatile geopolitical situation

The ten outcomes that are meant to deliver this vision are;

• An improved food environment that supports healthier and more environmentally sustainable food sales
• Access for all to safe, affordable, healthy, convenient and appealing food options
• Conditions for the food sector to thrive and grow sustainably, including investment in innovation and productivity, and fairer more transparent supply chains
• Food sector attracts talent and develops skilled workforce in every region
• Food supply is environmentally sustainable with high animal welfare standards, and waste is reduced
• Trade supports environmentally sustainable growth, upholds British standards and expands export opportunities
• Resilient domestic production for a secure supply of healthier food
• Greater preparedness for supply chain shocks, disruption, and impacts of chronic risks
• Celebrated and valued UK, regional and local food cultures
• People are more connected to their local food systems, and have the confidence, knowledge and skills to cook and eat healthily

As can be seen, these are all worthy goals that it would be hard to argue with.  In Government, the easy bit is to set out desirable outcomes.  The hard bit is making it happen.  Whilst the Strategy links to existing policies with achieving these ends, there is nothing really radical or transformational in it.

 

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Defra’s budget is to be cut in real-terms over the next three years.  This is the headline result of the long-awaited Comprehensive Spending Review (CSR).

The Department’s ‘Resource’ spending (i.e. day-to-day expenditure) is to fall by an annual average of 2.7% between the current year, 2025/26, and the 2028/29 financial year.  Capital spending, which, in Defra’s case, mainly goes on flood defences, does slightly better; falling by an annual average of 1.8% over the same period.  Defra is one of the Departments with the largest cuts in real-terms funding.

Farming Budget

Farmers are likely to be most worried about the agricultural support budget.  The Farming and Countryside Programme (FCP) is the equivalent of the spending that used to be received under the Common Agricultural Policy.  The Review sets out that an average of £2.3bn will be paid under the FCP over the next three years.  This compares with £2.4bn budgeted for 2024/25 and £2.6bn this year (although the current year is being boosted by underspends from previous years).  All of these figures are at current prices so do not account for inflation.  Effectively, the Government has done what previous administrations, and the EU, have done for many years, and just rolled-over the existing funding, but not uprated it for inflation.  Assuming 2.5% inflation for the next two years, and with the drop from £2.6bn this year, to £2.3bn in 2028/29, this results in around an 18% real-terms reduction.  Even being generous and using £2.4bn as the starting point, it is still an 11% real-terms cut.

These cuts will be translated into the budgets for Wales, Scotland and Northern Ireland through the Barnett formula.  

A subsequent Blog post on the Defra website (see https://defrafarming.blog.gov.uk/2025/06/16/spending-review-2025-a-commitment-to-farming/ ) provided a bit more detail on the breakdown of spending.  The table below summarises this.  We have put the current year’s spending in for comparison – although the breakdown in the Farming and Countryside Programme (FCP) for this year is not known – so they are our estimates.  The figures are all in current prices – so take no account of inflation.

It can be seen that the budget for the FCP falls significantly in current terms compared to the current year.  It is the rather nebulous ‘Nature Schemes’ that brings the figure back up.

Nature Schemes

The Blog post states that the ‘Nature for Climate Fund’ and the ‘Biodiversity Targets Programme’ will be ‘worth up to £400m per year‘.  Firstly, this figure is somewhat less than the £450m p.a. allocated to ‘Nature Schemes’ in the overall budget (it’s not clear why – some other schemes may be included).  Secondly, the two words ‘up to’ in the statement seem to provide significant wiggle-room for Defra.  Lastly, it is unclear what these schemes (and any other Nature Schemes) will fund.  The Defra article refers to tree-planting and (rewetting) peatlands.  Whilst these grants may be open to landowners and farmers it is a stretch to consider them ‘farming support’ as these uses suggest the land mostly, or wholly, coming out of productive agriculture.

BPS and ELM

It is stated that the BPS (aka ‘delinked payments) will continue for 2026-27 and 2027-28.  However, all reference amounts up to £30,000 will be reduced by 98%(!), with nothing paid on amounts above this.  Therefore, the maximum any business will get in 2026 and 2027 is £600.  

Defra promises ‘more details later this summer’ on how future ELM schemes will work.  Defra has stated an aspiration to make the schemes simpler.

Probably the best thing that can be said about the Budget settlement is that ‘it could have been worse’.  However, the pressure on Defra spending looks set to remain.  This has implications for ELM schemes.  As we have written previously, it is highly unlikely that the SFI, when it returns in 2026, will look much like the scheme just closed.  It may well not be open to all farms (being targeted on certain locations or farm sizes).  The options are likely to alter too as Defra looks for value-for-money in its reduced circumstances.

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With harvest fast approaching for many, and already started for some, we have updated the figures for our Loam Farm model.  This shows that the 2025 crop is likely to deliver another lacklustre set of returns on cereals farms.

The table below summarises the last two harvests and the one upcoming.  We have also added a new budget for the 2026 harvest year.  To recap, Loam Farm is a notional 600 hectare business that has been used since 1991 to track the fortunes of British combineable cropping farms.  It is based on real-life data.  It is partly owned and partly rented, has a working proprietor plus one full time member of staff and harvest casual.  It grows wheat, oats, beans and barley and has a SFI agreement (2024 version).  

The 2023 year was reasonable – although it looked poor at the time, in comparison with the two spectacular years that preceded it.  Harvest 2024 suffered from the very wet autumn 2023 through into spring 2024 reducing yields.  Grain prices were also lower than in the previous year.  This meant the farm made a loss from production last year and required the BPS and SFI to bring it back into surplus.  For the current year the weather has presented the opposite problem – it has been too dry through the spring.  This is forecast to result in yields again being lower than the farm’s average.  Prices have not improved since last year either.  It can also be seen that overhead cost continue to push up.  Overall, the Margin from Production is still negative, although slightly better than last year.  However, there has been a big drop in the BPS with the maximum £7,200 being received in 2025 equating to just £12 per Ha on Loam Farm.  SFI payments have increased a little as the farm ‘upgraded’ its agreement by going for some extra SFI 2024 options.  The overall Business Surplus is set to be lower than last year.

Farmers generally think ‘next harvest will be better’.  This may be true.  We cannot know the weather for next season, but a ‘reversion to the average’ sees output increase.  Variable costs are quite stable.  After two poor years the farm is cutting back slightly on investment which helps keep overheads in check by reducing depreciation.  However, the farm is budgeting £25,000 on drainage works to address some of the issues highlighted in the past couple of seasons.  The Margin from Production at least ends up as a positive.  It can be seen that the BPS for 2026 is down at £1 per Ha.  This follows Defra’s announcement that the maximum payment will be £600 per business in 2026 and 2027.  The overall Business Surplus improves but is still below the long-term average for this model farm.

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