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Variation in GB dairy farm business incomes by country
Wednesday, 17 February 2021
By Patty Clayton
With significant changes on the horizon to agricultural policy, impacting subsidy payments to farmers, we’ve looked at how farm business incomes for dairy businesses differ across countries.
Regardless of location, direct payments (BPS) account for a significant proportion of total farm income. Scottish dairy farm businesses show the highest reliance on direct payments, where they accounted for 61% of total farm business income (FBI)[1] on average. Scottish farmers also had a larger share of total FBI derived from agri-environment schemes on average than both England and Wales.
With the shift in agricultural policy away from direct payments, and towards payments for public goods, we will undoubtedly see an increase in the share of FBI coming from agri-environment schemes. However, it is not yet clear how this will impact overall income.
For England and Wales, the transition period will start from 2021 and 2022 respectively. For Scotland, this will be delayed until at least 2024. Our Business Impact Calculator allows farmers in England[2] to see how the phased reductions in BPS payments will impact their business.
The provision of public goods, on which payments will be based in England and Wales, will come at a cost, unlike BPS payments. As such, net returns from these schemes will vary, as will the potential impact on production efficiencies. There may well be trade-offs between agricultural output and public good output, highlighting the importance of knowing the relative costs and returns of the various income streams.
[1] Farm Business Income represents the financial return to all unpaid labour on invested capital; it can be equated to net income before drawings and tax. Figures are based on the 3-year average from 2016/17 to 2018/19.
[2] The calculator is currently only able to measure reductions in England up to 2024, but will be updated to include the devolved nations once the required information becomes available.
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