Where does all the money go when we subsidise farming? - Yorkshire Post Letters

The Government announced in the Budget that they will spend “£5bn over 2024-25 and 2025-26 to support the transition towards a more productive and environmentally sustainable agricultural sector in England, ensuring food security” through the Department for Environment, Food and Rural Affairs. For comparison, the Department for Work and Pensions gets £10.8bn a year.

Recent coverage has repeatedly emphasised that farms make very low profits. Farmers seem to be as dependent on taxpayer-funded welfare as the unemployed and pensioners. Meanwhile, wildlife is disappearing at an alarming rate. So what is going on and can anything be done?

Here is a simple story of farming folk. Jemima Typistdaughter has a farm. Charlotte Scotland, who has fortuitously been trained in modern farming practice by a global company that sells seeds and chemicals, provides professional advice.

Every year, Charlotte works out what crops are likely to do well and how much subsidy Jemima will get. She also calculates the optimum amount of fertiliser and agrochemicals to buy to get the best farm income.

Charlotte goes back to Jemima and presents her plan for the farm. They have developed a long-term business relationship over many years. What’s more, the global farming organisations have prepared the ground by sponsoring several farming conferences, and by advertising and sponsoring advertorials in the farming press. The plan is accepted. So far so good.

The plan is carried out and the farm makes a small profit or loss for the year. It’s disappointing to get such a small return. Farming is hard, and that’s why profits are so low.

Or is that really what is going on? What really affects these decisions?

If Charlotte has access to all the numbers, what are her priorities? If it’s maximising farm profits, then she’s not doing very well.

It's important to ask how agronomists like Charlotte get paid for their advice. Is it a fixed fee, or a percentage of the profits (which will be at risk if the farm doesn’t do well)? Or is she getting a percentage of turnover, or of the annual spend on all the inputs she has recommended? Possibly an annual fee from the global company who trained her? Perhaps her motivations result in farm inputs or expenses being as high as possible while keeping the farm just in the black.

What is the Government’s role here? Taxpayers don’t want the Government to raise taxes to increase subsidies, and the Government doesn’t want farms going bankrupt en masse. So, ideally subsidies are set at a level that keeps farms just in the black.

Finally, what about the customers? Farms mostly sell to large concerns like supermarkets, or bulk consumers making animal feed or even biofuels. Specialist crops also go to bigger processors who sell to end users. If these powerful customers negotiate lower prices, this impacts farm profits. But there’s a safety net, government subsidies for farming exist to keep farms in profit, so in the long term, even when prices are uneconomically low, subsidies will rise and most farms will stay just in the black.

Considering the above, it’s impossible that low farm profits are simply about how hard farming is. It’s about who benefits from increasing the value of the inputs the farm buys each year. It’s about how agronomists and advisors are paid. It’s about how aggressive the customers are in driving down prices. Fundamentally it's about a cast-iron £5bn guarantee from the Government to keep farm businesses in the black.