Analyst Insight: Another steep drop in delinked payments in 2026

• UK feed wheat futures (Nov-25) closed at £184.75/t yesterday, up £3.95/t (2.2%) from the previous close. The May-26 contract also rose by £3.75/t (2.0%) yesterday settling at £195.00/t
• Domestic prices followed global markets up yesterday. A combination of short covering of funds, new global export demand and weather concerns in parts of Europe and the US drove wheat markets up. Paris (Dec-25) milling wheat closed at €219.50/t up €6.00/t (2.81%), while Dec-25 Chicago wheat closed up by $9.28/t (4.3%)
• Nov-25 Paris rapeseed futures ended yesterday’s session at €500.25/t up €1.25/t (0.25%). Some support comes from firmness in brent crude oil prices with continued developments in the middle east. Nov-25 Winnipeg canola futures hit a contract high on Tuesday, but came back slightly yesterday to $736.40/t down $3.40/t (-0.46%)

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In the 2024 autumn budget, a steeper than expected reduction in direct payments in England was announced for 2025. Following the Spending Review on 11 June 2025, Defra have confirmed that reductions to direct payments will be larger still in 2026 and 2027.

What are the changes?

An accelerated cut to direct payments in 2025 caught many by surprise, leading to concerns over cash-flow and dealing with lower than expected income. Following the Spending Review, Defra have announced that in 2026 and 2027:

• The first £30,000 received from direct payments will be reduced by 98% (compared with 76% in 2025)
• Any amount over £30,000 will be reduced by 100%

What do the changes mean for farm businesses?

We will use our AHDB virtual farms (farms on a spreadsheet) to explain.

The table below shows direct payments received by the AHDB 455 ha virtual arable farm between 2020 and 2027. Reductions in direct payments began in 2021.

If reductions in direct payments continued in a linear fashion from 2025, (Table 1, row A), the farm would receive £4,800 and £2,400 respectively, in 2026 and 2027. Due to the latest announcement, the farm will only receive £600 in both 2026 and 2027. This is the maximum all farms are expected to receive in 2026 and 2027.

Reductions in direct payments were designed so that larger farms, which received higher direct payments than smaller farms, would experience a relatively steeper cut in their support compared with smaller farms in absolute terms. This is evident from the table above. However, the accelerated reduction in direct payments in 2025, and now for 2026 and 2027 will affect all farms and so it is important to plan ahead and budget accordingly.

Applications for the Sustainable Farming Incentive (SFI) have been paused, with details of the new iteration of the scheme due to be released later this year. Applications for Countryside Stewardship Higher Tier are due to open, on an invitation only basis, this summer.  Exploring different income streams and getting the most out of your farm business is imperative for farm businesses, especially under current circumstances, as well as trying to plan ahead as much as possible.

From an arable point of view there has never been a more important time to understand your costs as a grower, Farmbench can help with this.

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