Scottish Farming Update | Spring 2024

Welcome to this quarter’s Scottish Farming Update, which is produced by our Farming Research Group and reports on market and administrative issues that affect farmers’ business decisions and on which they may need to act.

During the First Minister’s Address at the NFUS AGM, Humza Yousaf provided assurances that there ‘would be no cliff edges’ in up-coming support transitions to the new four tier framework.  He went on to say that funding under tiers 1 and 2 would make up 70% of the overall funding pot.  With these tiers being the ones that will most closely reflect the current payment system, this was taken as a clear sign that the Scottish Government recognise the economic importance of farming and that production of high-quality food will be a priority.   Tiers 3 and 4 will cover the climate change mitigation such as AECS and farm efficiency drivers.  Whilst some encouragement has been received from the First Minister’s address, we will have to wait until the end of the year to find out what the overall budget allocation will be.

Arable prices as shown in the market update have fallen around 15% since this time last year. Lower prices will mean significantly reduced profitability for grain and oilseed farmers in 2024.  We have updated our arable farm profitability model using current market data to produce revised forecasts for harvest 2023 and harvest 2024. The net margin for an average performing arable farm for harvest 2024 is expected to be £258/ha (£208 in 2023) and for a higher performing farm it is expected to be £475/ha (£416/ha in 2023).

In Farm Business News:

Medium-term drivers of farm production in Europe

The EU has published a report on the main drivers expected to affect farming in the region in the medium-term to 2035. They are:

These are expected to include lower meat consumption, especially of beef and pork; dairy product consumption is expected to be stable; and increases in consumption of some plant proteins, such as pulses. These changes are expected to lead to a stable area used for arable production but a switch in the arable crops grown, from cereals to soya beans and pulses. The area used for animal production is also expected to be stable, due to more extensive farming systems offsetting the expected reduction in livestock numbers.

Updated arable farm profit forecasts for harvest 2024

We have updated our arable farm profitability model using current market data to produce revised forecasts for harvest 2023 and harvest 2024. The modelling tool uses a set of universal assumptions to provide an outlook for the sector. The analysis shows that the net margin – which can be considered to be the equivalent of profit, before rent and finance – for an average performing arable farm for harvest 2024 is expected to be £258/ha. This is higher than the estimate for harvest 2023 (£208/ha) owing mainly to higher grain prices currently available for 2024 crops compared with 2023 crops. The model shows that higher performing businesses can expect much better results than the average performing businesses (£475/ha for 2024) due to higher yields and lower fixed costs.

Operators investing billions in new EV charging sites

Electric vehicles are now accounting for about 20% of all new car sales and it is estimated there are about 850,000 fully electric cars currently on the road in total and an additional 530,000 plug-in hybrids. As the number of cars has increased, so has the number of chargers available just not by enough.

The Government’s target is for 300,000 public chargers to be available by 2030, but Zap- Map, a website which tracks the rollout of charging devices, estimates there were just 48,450 electric vehicle charging points across the UK at the end of August 2023. While this represents a 42% increase in the total number of charging devices since 2022, there is still clearly a long way to go. This provides an opportunity for landowners with property close to major road networks and for landlords of rural commercial buildings.

2024 Rural Payments Timeline

The Scottish Government Rural Payments and Inspections Department (SGRPID) have published their intended timeline for direct and SRDP payments – summary given below

Read more from the Strutt & Parker Scottish Farming Team on:

• Dates for your 2024 diary
• Global grain market update
• Livestock update
• Fertiliser & fuel update
• Farm business news