Meadow Farm Update June ’26

Meadow Farm, our mixed lowland farm model, made its largest-ever margin from production in 2025/26.  As previously reported, this is actually only the second time in its history that the business has made a profit before support payments.  For the current year, an increase in both variable costs and overheads, results in a large fall in the margin from production, but it is still budgeted to be positive.

Meadow Farm is a notional 154-hectare (380 acre) holding in the Midlands.  It consists mostly 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 which will finish at the end of this year.

The table below sets out actual results for the years 2024/25 and 2025/26.  There is then a budget for the current year and the first forecast for 2027/28.

For the financial year ending in April 2026, high livestock prices and lower feed costs resulted in an increase in the Gross Margin over the previous year.  Overheads rose, partly due to inflation but also because Meadow Farm replaced its old tractor and loader and also upgraded its cattle handling system; partly grant funded under the Farming Equipment and Technology Fund (FETF).  Finance costs reduced, due to lower borrowings and interest rate cuts; drawings rose with inflation.  Overall, the Margin from Production was the largest in the farming model’s history.  There is a large decline in the BPS because of the higher deductions under the Agricultural Transition.  The SFI fell marginally, due to the lower Management Payment in years 2 and 3; but business profitability is very good for this farm compared to historical levels.

For the current 2026/27 year, cattle prices are forecast to fall – as current market values are lower than last year.  However, as Meadow Farm sells its cattle in the autumn, it is hoped prices will have risen and we can adjust the figures upwards.  The budgeted lamb price is higher than last year.   The farm starts selling its first lambs about now (June/July) continuing through the autumn and the prices are currently very strong.  Variable costs increase due to an increase in the cost of calf purchases and also fertiliser; although MF did manage to buy some of its fertiliser before the hike in costs due to the Iran conflict.  Overheads continue to rise due to inflationary pressures but also the increase in fuel price.  Furthermore, on the back of last year’s profits, the proprietors are able to make some overdue repairs to the traditional farm buildings and they also renew their farm vehicle.  This sees the Margin from Production fall, although it is still positive.  With the BPS now negligible, it shows how important the SFI payment has become.

For the first forecast for 2027/28 output is expected to fall.  This is due to a decline in livestock prices.  We do not expect a ‘collapse’ and values are forecast to remain at historically high levels, but we are expecting them to come back a little from the exceptional highs as the ‘cost of living’ could see purchasers switching to cheaper proteins such as poultry and pork.  Variable costs are forecast to decline, due to lower fertiliser and calf costs.  Overheads are down due to an expected reduction in fuel costs by next year.  However, some fencing repairs are budgeted, partly funded by the Capital Grants scheme (due to open in July); this results in a negative margin from production.  With, again, practically no BPS now, just £600, Meadow Farm is reliant on its SFI to bring it back into profit.  It is hoped Meadow Farm will be able to secure a new SFI commencing in January 2027, but it can be seen how the loss of the payments for the ‘plans’ and the Management Payment together with the reduction in the payment for Herbal Leys under SFI26 reduces the revenue for this farm from £178 per ha to £117 per ha – a drop of £9,312 per annum.

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