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Forward Planning 2019 HSBC UK Agriculture Inside: ◆◆ Economic outlook ◆◆ Arable budgets ◆◆ Dairy budgets ◆◆ Red meat budgets ◆◆ Agricultural support ◆◆ HSBC UK Agriculture contacts
Section badge Foreword Looking ahead to 2019 and beyond 2 Forward Planning 2019
Foreword
Neil Wilson
Head of Agriculture 07920 416109
HSBC UK Bank plc neil.wilson@hsbc.com
Welcome to Forward Planning 2019. Given some of the
challenges and changes we expect in the year ahead, we
have taken a different approach to our publication this time
around. For this edition, we have chosen to focus on the
Enterprise margins and Whole farm budgets, with Mark
Berrisford-Smith providing his expert Economic outlook.
For 2019, we will provide regular updates Planning in the face of uncertainty
to Forward Planning as we go through the
year, rather than just one annual booklet. There are plenty of views about the
We intend to publish a briefing in early progress of Brexit negotiations, and I will
spring, and again in early summer, with not add to those wide-ranging thoughts
up-to-date thoughts and views on how we here. However, we are only a matter of
are shaping up during the Brexit process. months away from exiting the EU and we
have a real lack of clarity about the future.
The figures used in the Enterprise margins Indeed, it may have been generations
and Whole farm budgets cover the since the agriculture industry has faced
2018/19 growing season for crops that will a similar level of uncertainty about
be marketed in late 2019 and into 2020. its future path. The last few Forward
Livestock systems, including dairy, cover Planning booklets have also pointed at
the 12 months from April 2019 to March uncertainty and volatility as key matters
2020. The 2019 figures are calculated for the industry to wrestle with. But, whilst
using an average euro-sterling exchange many businesses have tried to focus on
rate of 85p. Please refer to the footnotes planning for the future and striving for
of each section for specific reasoning and excellence, it has been very difficult to
assumptions on the various figures do so with any degree of confidence.
and outcomes.
This has been reflected in many of
the conversations I have had with the
industry in recent months. Certainly, we
all want to advocate robust planning
and strategic outlooks as a vital way of
navigating challenges and delivering
successful business outcomes. »
HSBC UK Agriculture 3
Forward Planning 2019
Yet, more and more discussions have put on farm businesses and we have
been reflective of the plan to ‘wait and strategies in place to ensure we are geared
see’. You may be surprised to hear that I up to help. This year, many cashflows
am not actually dismayed by that attitude, have been significantly impacted by
because there is a plan behind it. Most the weather. If that is the case, please
have thought long and hard about how do not hesitate to ask about how we
they want their business to look in a can support you and your business
few years’ time, and view taking major through any problems that may arise.
decisions at the moment as a risk too far.
Our commitment to agriculture
Multi-generational farm businesses have
2018 has been another year of great
much to consider when coming to strategic
progress at HSBC UK. We became a
decisions. Whilst some will disagree, I
ring-fenced UK bank at the start of July,
take comfort that the majority of these
well ahead of the required date of 1st
businesses have a plan, even if that plan
January 2019. Our agriculture business
is to delay major decision-making. As we
has also continued to grow, with customer
have stressed in the past, I believe the very
numbers increasing and new lending
best way of dealing with uncertainty and
continuing to build. To underline this, and
volatility is to have your business in the
to offer the industry support into 2019, I
best shape possible. This is achieved by
am delighted that Amanda Murphy, UK
considering all areas – such as productivity
Head of Commercial Banking, has ring-
and cost management – through to
fenced a minimum of £300m for agricultural
really understanding what the customer
businesses – out of HSBC UK’s recently
wants from produce leaving the farm.
launched £12bn SME lending fund. This
There is a significant amount of research underpins our commitment to both the
that suggests that well-managed and UK economy and, importantly, to the UK
productive businesses, with well- agriculture industry, as we head into 2019.
controlled costs of production, can
Even though we look ahead to uncertain
weather volatile and uncertain periods.
times, our lending philosophy will be
For all businesses, regardless of the ‘plan’,
unchanged. It remains focused on
getting into great shape for the future is
understanding the management quality and
something we can all work hard on over
long-term viability of the farming businesses
the coming months. Focusing on your
we work with. To support our agriculture
farm’s controllable areas is crucial, and
relationship managers, we provide regular
giving consideration to benchmarking
industry updates. These are supported by
performance with peers would be
industry colleagues, a bespoke agriculture
worthwhile. I do see benchmarking as
managers training course and a national
an excellent way of recognising good
development event. There, we host a number
performance, and for identifying areas
of well-known industry speakers to help us
for improvement. Come and talk to us
maintain and develop our knowledge of the
if you want to consider benchmarking
agriculture and farming industry.
but are not sure how to get it going.
Even the best plans can face challenges, Wellbeing
and the weather over the last year will This year, one of the key topics up for
have dealt many a heavy blow. We discussion was that of wellbeing and
recognise the strain that the climate can mental health. Under the pressure of
4 Forward Planning 2019
Foreword
The very best way uncertainty, volatility and planning,
of dealing with sometimes agriculture and farming can
uncertainty become a lonely place. It is easy to feel
overwhelmed by the possible changes
and volatility that may be coming along. Add to this the
challenging climatic conditions of the last
year and we can see how our wellbeing can
is to have your business in the be easily set aside. If I can emphasise one
best shape thing – it is ok not to be ok. There are plenty
of places to turn for help and guidance.
possible
Our friends at RABI, FCN and RSABI, as
well as many others, are here to talk and
guide you through difficult times. My team
of agriculture managers and I are also
here for support. If you do feel stressed or
overwhelmed, please come and talk to us
and we can help signpost you to further
help. By working together, we can all go
forward into a positive place, and with the
best mindset possible.
Collaboration
As we head into the most important time
for our industry in generations, HSBC UK
is committed to sector-wide collaboration
that aims for the best possible long-term
outcomes for the agriculture industry.
We are open for business and, with
our £300m lending fund, we are fully
committed to the sector. Please come
and speak to us to see how we can work
together.
Our best wishes go to all our customers
and the wider industry for the year ahead.
Whilst it is a fascinating and challenging
period in our agricultural history, I do hope
that it is a successful one for you all, and I
will reflect on the next few months in our
spring publication.
Neil Wilson
Head of Agriculture
November 2018
HSBC UK Agriculture 5
Section badge Contents 6 Forward Planning 2019
Contents
Foreword 2
Economic outlook 8
Arable
Enterprise margin Winter wheat – feed 16
Winter wheat – milling 17
Winter barley – feed 18
Spring barley – malting 19
Winter oilseed rape 20
Field beans (winter and spring) 21
Potatoes – ware 22
Potatoes – processing 23
Sugar beet 24
Whole farm budget Combinable crops 25
Combinable crops – additional 100ha FBT 26
Combinable crops and potatoes 27
Dairy
Enterprise margin Dairy cows 30
Dairy cows – spring calving grass-based system 31
Dairy replacements – cost of rearing 32
Whole farm budget 250 Cow dairy farm 33
300 Cow dairy farm – spring calving grass-based system 34
Red meat
Enterprise margin Suckler cows – spring calving 38
Finishing store cattle 39
Lowland sheep 40
Upland sheep 41
Hill sheep 42
Whole farm budget Lowland mixed farm 43
Upland beef and sheep farm 44
Hill beef and sheep farm 45
Agricultural support Agricultural support 46
The Basic Payment Scheme 48
Farm support, 2020 onwards 50
HSBC UK Agriculture contacts 52
HSBC UK Agriculture 7
Agricultural support Red meat Dairy Arable Economic outlook
Economicoutlook
8 Forward Planning 2019
Economic outlook
Economic outlook Arable Dairy Red meat Agricultural support
HSBC UK Agriculture 9
Economic Outlook
Economic outlook
Arable
Dairy
Red meat
The Brexit process still poses
considerable
uncertainty
Agricultural support
for 2019
10 Forward Planning 2019Economic Outlook
Economic outlook
Mark Berrisford-Smith
Head of Economics, Commercial Banking
HSBC UK Bank plc
Arable
With many farmers and growers having to cope with
drought conditions during the summer months, 2018 is
likely to see a retreat in Total Income From Farming (TIFF),
partially reversing the robust expansion of 2017. But, against
the backdrop of another year of solid expansion for the
global economy, most prices for foodstuffs and agricultural
raw materials have continued to firm. Yet, the Brexit process
still poses considerable uncertainty for 2019. A messy
Dairy
‘no-deal’ exit from the EU in March would cause disruption
to supply chains, with tariffs on goods moving between the
UK and the EU-27 increasing the prices of some products
considerably for end users.
The combination of drought conditions from the levels that prevailed during 2017,
in Australia and parts of Europe, and and with the price of milk recovering after
trade tensions between the United States a period of weakness at the start of the Red meat
and some of its major trading partners, year, it looks like average milk prices for
have served to increase the volatility of 2018 will be similar to 2017.
many agricultural prices on commodity
markets. In particular, wheat and barley There will, however, be no boost to the
prices moved higher on concerns about a sector’s income from disbursements
reduction in the size of the global harvest, under the Basic Payments Scheme (BPS).
even though inventory levels remain high The exchange rate set for payments from
by historical standards. On the other hand, December 2018 is 89.28p per euro, which
is almost identical to the rate for 2017. The
Agricultural support
retaliatory trade measures taken against
the United States by China and Mexico key factor in determining the movement in
caused prices for soybeans and pork to fall TIFF for 2018 will therefore be the level of
sharply. For producers in the UK, prices production, which is bound to have been
have increased a little in sterling terms adversely affected, at least in the arable
sector, by the dry weather. »
HSBC UK Agriculture 11Forward Planning 2019
Economic outlook
Meanwhile, the wider economic climate Although the worst of the period of
in the UK remains sluggish, as it has been consumer retrenchment is over, the scope
since the start of 2017. Even if we assume for a revival is limited by the becalmed
an orderly departure from the EU, little state of the housing market. The market
improvement is expected throughout has finally run up against the affordability
2019. The economy is forecast to expand buffers, and so is expected to remain
by 1.3% this year, accelerating a touch to in the doldrums for some time. This
1.5% in 2019. means that the so-called ‘wealth effect’
is no longer there to sustain consumer
The household sector has borne the brunt sentiment and spending.
of the recent slowdown, with consumers
Arable
retrenching as spending power has been Following the quarter-point rise in the UK
eroded by higher inflation. Although the Bank Rate in August 2018, HSBC expects
annual rate of consumer price inflation is the Bank of England to leave interest rates
now easing back, having peaked at 3.1% on hold during both 2019 and 2020. And
in November 2017, the scope for further even if the Monetary Policy Committee is
declines is limited by the recent firming in minded to proceed with further tightening,
the price of crude oil. HSBC expects that the bar for action will be set even higher
the annual rate of inflation will stand at than usual until there is greater certainty
2.3% at the end of 2018, easing further to over the Brexit process. The key metric
1.7% at the end of 2019. This should allow to watch will be the growth of average
the ‘real’ incomes of households to start earnings, and whether the tightness of the
Dairy
rising again, albeit only modestly. Despite labour market finally induces employers
the tightness of the labour market, with to offer bigger pay increases. If growth of
the unemployment rate at its lowest since average earnings were to rise markedly
the mid-1970s and a near-record number above 3%, and look to be heading for 4%,
of reported vacancies, pay growth remains then the MPC would have little choice but
relatively subdued by historic standards, to act.
with annual rates of increases for the key
As for sterling’s exchange rates, they are
measures standing at around 3%.
being driven almost entirely by the ebb
Against this backdrop of a prolonged and flow of the news emerging from the
Red meat
period of belt-tightening by consumers, Brexit negotiations. The pound has been
the retailing, dining and food service carrying a Brexit discount ever since
sectors have come under considerable the EU referendum in June 2016. It will
strain. The long-established supermarket only return to its underlying fair value
chains are struggling to sustain their once there is clarity on the exit treaty
positions in the market against increasing and the ongoing economic relationship.
competition from the discounters, in an Assuming that some sort of agreement is
environment where consumers are not reached to allow the UK to exit in March
just focusing on ‘value for money’, but are 2019, or shortly after, and that it receives
Agricultural support
less loyal than was once the case. People all necessary approvals, then HSBC
are also eating out less often, which expects sterling to gain some ground
has heightened pressure on the casual against the euro. The exchange rate is
dining sector, as evidenced by a string of therefore forecast to be at 85p (€1.18 per
corporate failures and restructurings. £) in September 2019. But the exchange
rate between sterling and the dollar is
12 Forward Planning 2019Economic Outlook
Economic outlook
The economy is forecast
to expand
by 1.3%
Arable
this year, accelerating a
touch to 1.5% in 2019
projected to change little, on account of
the US dollar being forecast to gain some
ground. It is anticipated that the Federal
Reserve will raise its policy interest rate
three more times before the end of 2019,
Dairy
which will take the range for the Federal
Funds target rate to 2.75 and 3.00%. At
the same time, with the pace of economic
growth in the euro area easing a little
during 2018, the European Central Bank
is not expected to begin the process of
raising its policy interest rates until the
autumn of 2019.
In the event of a disorderly ‘no-deal’ exit
from the EU, sterling is expected to fall Red meat
sharply in value, down to around $1.10
to the pound. This would set in motion
the same processes that were unleashed
by the referendum, with import prices
rising and feeding through to higher
rates of inflation, which would in all
likelihood force households into further
retrenchment. With the adverse effects
of another currency shock coming on top
Agricultural support
of disruption to the movement of goods
and also potentially to some aspects of
financial services, HSBC forecasts that in
such a scenario the UK economy would
enter a mild recession.
HSBC UK Agriculture 13Arable
Arable
14 Forward Planning 2019Arable HSBC UK Agriculture 15
Enterprise margin: Arable
Economic outlook
Winter wheat – feed
Performance level
Tonnes per hectare 8.60 10.00 8.60 10.00
£ per hectare £ per tonne
Arable
Output @ £160.00 per tonne 1,376 1,600 160.0 160.0
Total gross output 1,376 1,600 160.0 160.0
Variable costs
Seed 80 80 9.3 8.0
Fertiliser 193 210 22.4 21.0
Spray 197 232 22.9 23.2
Total variable costs 470 522 54.6 52.2
GROSS MARGIN 906 1,078 105.4 107.8
Dairy
Total overheads 90.4 78.5
Total cost of production (£/t) 145.0 130.7
Net margin (before support payments) (£/t) 15.0 29.3
Red meat
Crop price Net margin sensitivity – £/t
(£/t) 8.60 t/ha 10.00 t/ha
140.00 (5.00) 9.26
160.00 15.00 29.26
Agricultural support
180.00 35.00 49.26
Price based on feed wheat sold mid-season
The value of straw is excluded from the gross margin
Total overheads derived from the combinable crop unit on p. 25, including allowance for rent, finance, drawings and tax
16 Forward Planning 2019Enterprise margin: Arable
Economic outlook
Winter wheat – milling
Performance level
Tonnes per hectare 8.20 9.30 8.20 9.30
£ per hectare £ per tonne
Arable
Output @ £172.00 per tonne 1,410 1,600 172.0 172.0
Total gross output 1,410 1,600 172.0 172.0
Variable costs
Seed 85 85 10.4 9.1
Fertiliser 205 233 25.0 25.1
Spray 204 232 24.9 24.9
Total variable costs 494 550 60.3 59.1
GROSS MARGIN 916 1,050 111.7 112.9
Dairy
Total overheads 94.8 84.3
Total cost of production (£/t) 155.1 143.4
Net margin (before support payments) (£/t) 16.9 28.6
Red meat
Crop price Net margin sensitivity – £/t
(£/t) 8.20 t/ha 9.30 t/ha
152.00 (3.10) 8.59
172.00 16.90 28.59
Agricultural support
192.00 36.90 48.59
Price based on milling wheat sold mid-season
The value of straw is excluded from the gross margin
Total overheads derived from the combinable crop unit on p. 25, including allowance for rent, finance, drawings and tax
HSBC UK Agriculture 17Enterprise margin: Arable
Economic outlook
Winter barley – feed
Performance level
Tonnes per hectare 7.25 8.75 7.25 8.75
£ per hectare £ per tonne
Arable
Output @ £145.00 per tonne 1,051 1,269 145.0 145.0
Total gross output 1,051 1,269 145.0 145.0
Variable costs
Seed 78 78 10.8 8.9
Fertiliser 161 180 22.2 20.6
Spray 164 170 22.6 19.4
Total variable costs 403 428 55.6 48.9
GROSS MARGIN 648 841 89.4 96.1
Dairy
Total overheads 102.7 86.1
Total cost of production (£/t) 158.3 135.0
Net margin (before support payments) (£/t) (13.3) 10.0
Red meat
Crop price Net margin sensitivity – £/t
(£/t) t/ha 8.75 t/ha
125.00 (33.30) (10.03)
145.00 (13.30) 9.97
Agricultural support
165.00 6.70 29.97
Price based on feed barley sold mid-season
Malting varieties can attract a premium
The value of straw is excluded from the gross margin
Total overheads derived from the combinable crop unit on p. 25, including allowance for rent, finance, drawings and tax
18 Forward Planning 2019Enterprise margin: Arable
Spring barley – malting
Performance level
Tonnes per hectare 6.25 7.50 6.25 7.50
£ per hectare £ per tonne
Arable
Output @ £160.00 per tonne 1,000 1,200 160.0 160.0
Total gross output 1,000 1,200 160.0 160.0
Variable costs
Seed 70 70 11.2 9.3
Fertiliser 108 116 17.3 15.5
Spray 116 122 18.6 16.3
Total variable costs 294 308 47.1 41.1
GROSS MARGIN 706 892 112.9 118.9
Dairy
Total overheads 119.1 101.5
Total cost of production (£/t) 166.2 142.6
Net margin (before support payments) (£/t) (6.2) 17.4
Red meat
Crop price Net margin sensitivity – £/t
(£/t) 6.25 t/ha 7.50 t/ha
125.00 (41.20) (17.60)
160.00 (6.20) 17.40
Agricultural support
195.00 28.80 52.40
Price based on contracted malting barley sold mid-season
Distilling barley will attract higher prices than brewing barley
The value of straw is excluded from the gross margin
Total overheads derived from the combinable crop unit on p. 25, including allowance for rent, finance, drawings and tax
HSBC UK Agriculture 19Enterprise margin: Arable
Winter oilseed rape
Performance level
Tonnes per hectare 3.10 3.75 3.10 3.75
£ per hectare £ per tonne
Arable
Output @ £340.00 per tonne 1,054 1,275 340.0 340.0
Total gross output 1,054 1,275 340.0 340.0
Variable costs
Seed 55 55 17.7 14.7
Fertiliser 190 207 61.3 55.2
Spray (inc. desiccation) 235 245 75.8 65.3
Total variable costs 480 507 154.8 135.2
GROSS MARGIN 574 768 185.2 204.8
Dairy
Total overheads 247.9 204.9
Total cost of production (£/t) 402.7 340.1
Net margin (before support payments) (£/t) (62.7) (0.1)
Red meat
Crop price Net margin sensitivity – £/t
(£/t) 3.10 t/ha 3.75 t/ha
300.00 (102.70) (40.10)
340.00 (62.70) (0.10)
Agricultural support
380.00 (22.70) 39.90
Assumes oilseed rape sold mid-season
Oil bonuses included @ £25/t
HEAR & HOLL oilseed rape achieving £30 – 40/t more
Total overheads derived from the combinable crop unit on p. 25, including allowance for rent, finance, drawings and tax
20 Forward Planning 2019Enterprise margin: Arable
Economic outlook
Field beans (winter and spring)
Performance level
Tonnes per hectare 3.75 4.50 3.75 4.50
£ per hectare £ per tonne
Arable
Output @ £180.00 per tonne 675 810 180.0 180.0
Total gross output 675 810 180.0 180.0
Variable costs
Seed 83 83 22.1 18.4
Fertiliser 66 72 17.6 16.0
Spray 150 165 40.0 36.7
Total variable costs 299 320 79.7 71.1
GROSS MARGIN 376 490 100.3 108.9
Dairy
Total overheads 151.3 126.1
Total cost of production (£/t) 231.0 197.2
Net margin (before support payments) (£/t) (51.0) (17.2)
Red meat
Crop price Net margin sensitivity – £/t
(£/t) 3.75 t/ha 4.50 t/ha
150.00 (81.00) (47.20)
180.00 (51.00) (17.20)
Agricultural support
210.00 (21.00) 12.80
Price based on a mix of feed beans and export for human consumption
Total overheads derived from the combinable crop unit on p. 25, including allowance for rent, finance, drawings and tax
HSBC UK Agriculture 21Enterprise margin: Arable
Economic outlook
Potatoes – ware
Performance level
Tonnes per hectare (sold) 45.00 50.00 45.00 50.00
£ per hectare £ per tonne
Arable
Output @ £160.00 per tonne 7,200 8,000 160.0 160.0
Total gross output 7,200 8,000 160.0 160.0
Variable costs
Seed 1,020 1,020 22.7 20.4
Fertiliser 585 605 13.0 12.1
Spray 565 580 12.6 11.6
Nematicide* 294 294 6.5 5.9
Potato council levy 45 45 1.0 0.9
Dairy
Total variable costs 2,509 2,544 55.8 50.9
GROSS MARGIN 4,691 5,456 104.2 109.1
Total overheads 102.5 94.3
Total cost of production (£/t) 158.3 145.2
Net margin (before support payments) (£/t) 1.7 14.8
Red meat
Crop price Net margin sensitivity – £/t
(£/t) 45.00 t/ha 50.00 t/ha
110.00 (48.30) (35.20)
160.00 1.70 14.80
Agricultural support
210.00 51.70 64.80
These are indicative margins, as the sector is now so specialised
Potato price will vary greatly, according to quality, season, contract and market
Storage can often lead to higher prices, costs of up to £40 per tonne can be incurred
*Depending on the method of application, nematicides are assumed to cover 50% – 75% of the potato area
Total overheads derived from the combinable crop and potato unit on p. 27, including allowance for rent, finance, drawings and tax
Potatoes grown on annually-rented land could add a further £15/t to the cost of production (COP)
22 Forward Planning 2019Enterprise margin: Arable
Potatoes – processing
Performance level
Tonnes per hectare (sold) 48.00 53.00 48.00 53.00
£ per hectare £ per tonne
Arable
Output @ £140.00 per tonne 6,720 7,420 140.0 140.0
Total gross output 6,720 7,420 140.0 140.0
Variable costs
Seed 890 890 18.5 16.8
Fertiliser 513 542 10.7 10.2
Spray 475 533 9.9 10.1
Nematicide* 290 290 6.0 5.5
Potato council levy 45 45 0.9 0.8
Dairy
Total variable costs 2,213 2,300 46.0 43.4
GROSS MARGIN 4,507 5,120 94.0 96.6
Total overheads 96.1 88.9
Total cost of production (£/t) 142.1 132.3
Net margin (before support payments) (£/t) (2.1) 7.7
Red meat
Crop price Net margin sensitivity – £/t
(£/t) 48.00 t/ha 53.00 t/ha
110.00 (32.10) (22.29)
140.00 (2.10) 7.71
Agricultural support
170.00 27.90 37.71
These are indicative margins, as the sector is now so specialised
Some contract prices will be subject to quality
Potato price will vary greatly, according to quality, season, contract and market
Storage can often lead to higher prices, costs of up to £40 per tonne can be incurred
*Depending on the method of application, nematicides are assumed to cover 50% – 75% of the potato area
Total overheads derived from the combinable crop and potato unit on p. 27, including allowance for rent, finance, drawings and tax
Potatoes grown on annually-rented land can add a further £12/t to the cost of production (COP)
HSBC UK Agriculture 23Enterprise margin: Arable
Sugar beet
Campaign 2019/20 (1-Year Contract)
Performance level
Adjusted tonnes per hectare 75.00 75.00
£ per hectare £ per tonne
Arable
Output @ £20.42 per tonne ex. farm 1,532 20.4
Total gross output 1,532 20.4
Variable costs
Seed 225 3.0
Fertiliser 275 3.7
Spray 230 3.1
Total variable costs 730 9.8
GROSS MARGIN 802 10.6
Dairy
Total overheads 16.1
Total cost of production (£/t) 25.9
Net margin (before support payments) (£/t) (5.5)
Red meat
Yield (t/ha) Net margin sensitivity – £/t
75.00 (5.50)
85.00 (2.40)
Agricultural support
95.00 0.00
Break Even = 94.93T/ha @ £20.42/t
Price is the ex. farm price assuming British Sugar Haulage Scheme
Price is adjusted from £19.07/t, to account for removal of crown tare, to £20.42/t
Contract price is subject to early and late delivery bonuses
Most growers will incur contract lifting charges in the region of £200 – £250 per hectare
One year contract: 15% of the sugar revenue, above the EU sugar price of €375/t, will be paid to growers as the market bonus
Three year contract: 25% of the sugar revenue, above the EU sugar price of €475/t, will be paid to growers as the market bonus
Total overheads including allowance for rent, finance, drawings and tax
24 Forward Planning 2019Whole farm budget
Economic outlook
Combinable crops
ROTATION: Wheat, beans, wheat, barley, oilseed rape
Gross margin
Area Yield Gross margin
ha t/ha £/ha £ Total
Arable
Wheat (feed) 255 8.60 906.0 231,030
Winter barley 130 7.25 648.0 84,240
Oilseed rape 120 3.10 574.0 68,880
Field beans 130 3.75 376.0 48,880
Fallow 15 (25.0) (375)
TOTAL GROSS MARGIN 650 665.6 432,655
Overheads
Labour 88.1 57,245
Dairy
Power and machinery (incl. depreciation) 286.6 186,273
Administration 50.9 33,068
Property 36.9 23,983
Overhead costs 462.4 300,569
Surplus (deficit) pre-rent and finance 203.2 132,086
Farm-specific overheads
Rent and finance* 160.0 104,028 Red meat
Drawings and tax 86.9 56,500
SURPLUS (DEFICIT) PRE-SUPPORT PAYMENTS (43.8) (28,442)
Potential support payments Scotland Wales England
Surplus (deficit) pre-support payments (28,442) (28,442) (28,442)
Plus Basic Payment** 132,851 79,941 143,824
Plus Stewardship*** - - -
Agricultural support
Surplus (deficit) post-support payments 104,409 51,499 115,382
*Assumed 50% land rented (50% Agricultural Holdings Act (AHA) + 50% Farm Business Tenancy (FBT))
**1 euro = 85 pence
***Due to many farms no longer receiving environmental payments under the old scheme, and a small uptake in the new CSS,
the budget assumes no stewardship income for consistency. However, LFASS will continue to be received in Scotland
Fallow area refers to blackgrass control and failed crop
HSBC UK Agriculture 25Whole farm budget
Economic outlook
Combinable crops – additional 100ha FBT
ROTATION: Wheat, beans, wheat, barley, oilseed rape
Gross margin
Area Yield Gross margin
ha t/ha £/ha £ Total
Arable
Wheat (feed) 38 8.60 906.0 34,428
Winter barley 20 7.25 648.0 12,960
Oilseed rape 18 3.10 574.0 10,332
Field beans 20 3.75 376.0 7,520
Fallow 4 (25.0) (100)
TOTAL GROSS MARGIN 100 651.4 65,140
Overheads
Labour 80.0 8,000
Dairy
Power and machinery (incl. depreciation) 245.0 24,500
Administration 30.0 3,000
Property 25.0 2,500
Overhead costs 380.0 38,000
Surplus (deficit) pre-rent and finance 271.4 27,140
Farm-specific overheads
Red meat
Finance (marginal cost) 30.0 3,000
SURPLUS (DEFICIT) PRE SUPPORT PAYMENTS (EXCL. Rent) 241.4 24,140
Potential support payments Scotland Wales England
Surplus (deficit) pre-support payments 24,140 24,140 24,140
Plus Basic Payment* 20,439 12,299 22,127
Margin available for rent + profit 44,579 36,439 46,267
Margin available for rent + profit/hectare 446 364 463
Agricultural support
Profit margin, drawings and rent tender are to be determined by the reader
*1 euro = 85 pence
Fallow area refers to blackgrass control and failed crop
Assumes little additional mechanisation is necessary, but a small provision has been included
Assumes no Environmental Stewardship Agreement
Assumes Drawings and Tax are yet to be accounted for
26 Forward Planning 2019Whole farm budget
Economic outlook
Combinable crops and potatoes
ROTATION: Wheat, oilseed rape, wheat, potatoes, wheat, beans
Gross margin
Area Yield Gross margin
ha t/ha £/ha £ Total
Arable
Wheat (feed) 321 8.60 906.0 290,826
Field beans 107 3.75 376.0 40,232
Oilseed rape 107 3.10 574.0 61,418
Potatoes (ware) 107 45.00 4,691.0 501,937
Fallow 8 (25.0) (200)
TOTAL GROSS MARGIN 650 1,375.7 894,213
Overheads
Labour 191.9 124,759
Dairy
Power and machinery (incl. depreciation) 528.6 343,598
Administration 71.1 46,183
Property 110.3 71,712
Overhead costs 901.9 586,252
Surplus (deficit) pre-rent and finance 473.8 307,961
Farm-specific overheads
Rent and finance* 288.1 187,232 Red meat
Drawings and tax 142.3 92,500
SURPLUS (DEFICIT) PRE-SUPPORT PAYMENTS 43.4 28,229
Potential support payments Scotland Wales England
Surplus (deficit) pre-support payments 28,229 28,229 28,229
Plus Basic Payment** 132,851 79,941 143,824
Plus Stewardship*** - - -
Agricultural support
Surplus (deficit) post-support payments 161,080 108,170 172,053
*Assumed 50% land rented (50% Agricultural Holdings Act (AHA) + 50% Farm Business Tenancy (FBT))
**1 euro = 85 pence
***Due to many farms no longer receiving environmental payments under the old scheme, and a small uptake in the new CSS,
the budget assumes no stewardship income for consistency. However, LFASS will continue to be received in Scotland.
Fallow area refers to blackgrass control and failed crop
HSBC UK Agriculture 27Dairy Dairy
Dairy
Enterprise margin: Dairy
Dairy cows
Economic outlook
Production year April 2019 – March 2020
Performance level
Milk sales litres per cow 7,500 9,000 7,500 9,000
£ per head Pence per litre
Output
Milk 28.75 pence per litre 2,156 2,588 28.8 28.8
Arable
Plus calf (£160 less 8% mortality) 147 147 2.0 1.6
Less cow depreciation* (177) (201) (2.4) (2.2)
Total gross output 2,126 2,534 28.4 28.2
Variable costs
Feed cost £250 per tonne 600 8.0
Feed cost £270 per tonne 948 10.5
Vet and med 80 105 1.1 1.2
Dairy sundries (incl. recording, AI and bull depreciation) 150 195 2.0 2.2
Dairy
Forage £600 per hectare 300 360 4.0 4.0
Total variable costs 1,130 1,608 15.1 17.9
GROSS MARGIN 996 926 13.3 10.3
Total overheads 14.9 12.4
Dairy replacement variable costs 2.3 2.3
Dairy replacements (4.2) (4.2)
Total cost of production (ppl) 28.5 29.0
Red meat
Net margin (before support payments) (ppl) 0.3 (0.2)
Net margin sensitivity – ppl
Milk price 7,500 litres 9,000 litres
(pence per litre) per cow per cow
21.75 (6.8) (7.3)
28.75 0.3 (0.2)
Agricultural support
35.75 7.3 6.8
Assumes herd is not affected by TB
Milk prices can vary significantly, within and between contracts, due to issues including milk quality and volume bonuses
*Cow value less cull value (inc. 10% mortality) divided by expected years in herd (25% & 28.50% replacement rate)
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
Total overheads derived from the 250 Cow dairy unit on p. 33, including allowance for rent, finance, drawings and tax
Total cost of production net of calf sale, replacement variable costs and dairy replacement output
30 Forward Planning 2019Enterprise margin: Dairy
Dairy cows – spring calving grass-based system
Economic outlook
Production year April 2019 – March 2020
Performance level
Milk sales litres per cow 5,000 6,000 5,000 6,000
£ per head Pence per litre
Output
Milk 27.50 pence per litre 1,375 1,650 27.5 27.5
Arable
Plus calf (£120 less 8% mortality) 110 110 2.2 1.8
Less cow depreciation* (132) (132) (2.6) (2.2)
Total gross output 1,353 1,628 27.1 27.1
Variable costs
Feed cost £230 per tonne 173 3.5
Feed cost £240 per tonne 312 5.2
Vet and med 45 55 0.9 0.9
Dairy sundries (incl. recording, AI and bull depreciation) 90 110 1.8 1.8
Dairy
Forage £350 per hectare 140 2.8
£400 per hectare 200 3.3
Total variable costs 448 677 9.0 11.2
GROSS MARGIN 905 951 18.1 15.9
Total overheads 16.2 13.5
Dairy replacement variable costs 2.1 2.5
Dairy replacements (4.4) (4.0)
Red meat
Total cost of production (ppl) 23.3 23.6
Net margin (before support payments) (ppl) 4.2 3.9
Net margin sensitivity – ppl
Milk price 5000 litres 6000 litres
(pence per litre) per cow per cow
20.50 (2.8) (3.1)
27.50 4.2 3.9
Agricultural support
34.50 11.2 10.9
Assumes herd is not affected by TB
Milk prices can vary significantly, within and between contracts due to issues including milk quality and volume bonuses
Assuming spring block calving (12 – 15 weeks) – grazing based system. Milk price reflects seasonality
*Heifer value less cull value divided by expected years in herd
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
Total overheads derived from the grass-based 300 Cow dairy unit on p. 34, including allowance for rent, finance, drawings and tax
Total cost of production net of calf sale, replacement variable costs and dairy replacement output
HSBC UK Agriculture 31Enterprise margin arable
Dairy replacements – cost of rearing
Age at calving (years) 2 2.5 2
AYR* AYR GRAZING
£/Hd £/Hd £/Hd
Arable
Output
Value of down calving heifer 1,400 1,400 1,200
Less calf (£160 less 8% mortality) (147) (147)
Less calf (£120 less 8% mortality) (110)
Total gross output 1,253 1,253 1,090
Variable costs
Calf rearing 110 110 110
Feed cost 245 308 205
Dairy
Forage £356 per hectare 214 285 125
Miscellaneous 106 120 93
Total variable costs 675 823 533
GROSS MARGIN per heifer reared 578 430 557
Stocking rate
Hectares per heifer reared
0.6 0.8 0.4
Red meat
Agricultural support
*All year round
Assumes herd is not affected by TB
If block calving, need to calve at 2 years
Down calving heifer value is set to represent the comparable cost of purchasing the heifer
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
The lifetime yield and 1st lactation yield increases with the reduced age at calving
Overhead costs would add a further £0.50 – £1.00, per head, per day to the cost of rearing
32 Forward Planning 2019Whole farm budget
250 Cow dairy farm
Economic outlook
Gross margin
Farm size 140 ha
Herd size 250 cows
Milk price 28.75 ppl
Arable
Number Milk sold Gross margin
Hd l/cow £/Hd £ Total
Dairy cows 250 7,500 996.4 249,110
Replacements 63 578.0 36,414
TOTAL GROSS MARGIN 1,142.1 285,524
Overheads
Labour 230.3 57,585
Power and machinery (incl. depreciation) 363.6 90,891
Dairy
Administration 80.4 20,090
Property 81.0 20,255
Overhead costs 755.3 188,821
Surplus (deficit) pre-rent and finance 386.8 96,703
Farm specific overheads
Rent and finance* 176.4 44,087
Drawings and tax 186.0 46,500
Red meat
SURPLUS (DEFICIT) PRE-SUPPORT PAYMENTS 24.5 6,116
Potential support payments N. Ireland Scotland Wales England
Surplus (deficit) pre-support payments 6,116 6,116 6,116 6,116
Plus Basic Payment** 42,491 28,634 19,270 30,998
Plus Stewardship*** - - - -
Surplus (deficit) post support payments 48,607 34,750 25,386 37,114
Agricultural support
*Assumed 50% land rented (50% Agricultural Holdings Act (AHA) + 50% Farm Business Tenancy (FBT))
However, additional 22ha rented land assumed at £480/ha all rented
**1 euro = 85 pence
***Due to many farms no longer receiving environmental payments under the old scheme, and a small uptake in the new CSS,
the budget assumes no stewardship income for consistency. However, LFASS will continue to be received in Scotland
Northern Ireland Basic Payment is estimated due to unknown entitlement value
Scotland Basic Payment assumes additional 22ha has the same entitlement value as existing 118ha
HSBC UK Agriculture 33Whole farm budget
300 Cow dairy farm – spring calving
Economic outlook
grass-based system
Gross margin
Farm size 169 ha
Herd size 300 cows
Milk price 27.50 ppl
Number Milk sold Gross margin
Arable
Hd l/cow £/Hd £ Total
Dairy cows 300 5,000 904.6 271,389
Replacements 60 557.0 33,420
TOTAL GROSS MARGIN 1,016.0 304,809
Overheads
Labour 133.3 40,000
Power and machinery (incl. depreciation) 191.1 57,314
Administration 51.6 15,492
Dairy
Property 52.9 15,881
Overhead costs 429.0 128,687
Surplus (deficit) pre-rent and finance 587.1 176,122
Farm-specific overheads
Rent and finance* 175.2 52,544
Drawings and tax 205.0 61,500
SURPLUS (DEFICIT) PRE-SUPPORT PAYMENTS 206.9 62,078
Red meat
Potential support payments N. Ireland Scotland Wales England
Surplus (deficit) pre-support payments 62,078 62,078 62,078 62,078
Plus Basic Payment** 51,282 34,560 19,270 37,413
Plus Stewardship*** - - - -
Surplus (deficit) post-support payments 113,360 96,638 81,348 99,491
Agricultural support
*Assumed 50% land rented (50% Agricultural Holdings Act (AHA) + 50% Farm Business Tenancy (FBT))
However, additional 51ha rented land assumed at £480/ha all rented
**1 euro = 85 pence
***Due to many farms no longer receiving environmental payments under the old scheme, and a small uptake in the new CSS, the budget
assumes no stewardship income for consistency. However, LFASS will continue to be received in Scotland
Northern Ireland Basic Payment is estimated, due to unknown entitlement value
Scotland Basic Payment assumes additional 51ha has the same entitlement value as existing 118ha
34 Forward Planning 2019Whole farm budget
Dairy
HSBC UK Agriculture 35Red meat
Red meat
36 Forward Planning 2019Red meat HSBC UK Agriculture 37
Enterprise margin: Red meat
Suckler cows – spring calving
Economic outlook
Calving spring 2019 and sold at 12 months of age as yearling stores
Performance level
Average liveweight sold per cow (kg) 338.2 368.0 338.2 368.0
£ per cow Pence per kg lwt
Output
Store cattle (89% calving %) – see matrix* 804 237.7
Arable
Store cattle (92% calving %) – see matrix* 893 242.7
Less cow and bull replacement charge** (105) (105) (31.0) (28.5)
Total gross output 699 788 206.7 214.2
Variable costs
Feed cost £235 per tonne (incl. creep feed) 153 129 45.2 35.1
Bulk feed 18 18 5.3 4.9
Vet and med 45 40 13.3 10.9
Bedding straw 80 80 23.7 21.7
Dairy
Commission, haulage, levies, tags and sundries 50 50 14.8 13.6
Forage 0.9 ha per cow and store to sale 125 125 37.0 34.0
Total variable costs 471 442 139.3 120.2
GROSS MARGIN 228 346 67.4 94.0
Total overheads 173.5 159.5
Total cost of production (p/kg lwt) 343.8 308.2
Net margin (before support payments) (p/kg lwt) (106.1) (65.5)
Red meat
*Store sale prices matrix
kg lwt p/kg lwt £/hd £/hd
Steers 390 240 936
Heifers 370 235 870
Agricultural support
Steers 410 245 1,005
Heifers 390 240 936
**Replacement value less cull value divided by expected years in herd plus an allowance for bulls
Sale price assumes calves sold onto the traditionally strong spring market for grazing cattle
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
Total overheads derived from the upland beef and sheep unit on p. 44, including allowance for rent, finance, drawings and tax
38 Forward Planning 2019Enterprise margin: Red meat
Finishing store cattle
Economic outlook
Stores purchased throughout the year 300 – 380 day feeding period
Performance level
Average liveweight sold per cow (kg) 600.0 600.0 600.0 600.0
£ per cow Pence per kg lwt
Output
Sale 1,238 1,271 206.3 211.8
Arable
Less store purchase price – see matrix*
£768 plus 0.5% allowance for mortality (772) (128.7)
£705 plus 0.5% allowance for mortality (709) (118.2)
Total gross output 466 562 77.6 93.6
Variable costs
Feed costs/by products £220 per tonne 220 36.7
£210 per tonne 168 28.0
Vet and med 25 25 4.2 4.2
Dairy
Bedding straw 75 75 12.5 12.5
Commission, haulage, levies, tags and sundries 60 60 10.0 10.0
Forage 0.25 ha per hd 43 43 7.2 7.2
Total variable costs 423 371 70.6 61.9
GROSS MARGIN 43 191 7.0 31.7
Total overheads 44.5 44.5
Total cost of production (p/kg lwt) 243.8 224.6
Red meat
(p/kg dwt) 443.3 408.4
Net margin (before support payments) (p/kg lwt) (37.5) (12.8)
*Purchase prices matrix
kg lwt p/kg lwt £/hd £/hd
Average 320 240 768
Above average 300 235 705
Agricultural support
Sale prices
kg lwt p/kg lwt kg dwt p/kg dwt £/hd £/hd
Average 600 206 330 375 1,238
Above average 600 212 330 385 1,271
Assumes killing out at 55%
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
Total overheads including allowance for rent, finance, drawings and tax
HSBC UK Agriculture 39Enterprise margin: Red meat
Lowland sheep
March/April lambing flock
Performance level
Lambs sold per 100 ewes 150 170 150 170
Average liveweight sold per ewe (kg) 60.0 68.0 60.0 68.0
Arable
£ per ewe Pence per kg lwt
Output
Lamb 40kg liveweight @ 190p per kg 114.0 129.2 190.0 190.0
Wool 2.6 2.6 4.3 3.8
Less ewe and ram replacement charge* (22.0) (22.0) (36.7) (32.4)
Total gross output 94.6 109.8 157.6 161.4
Variable costs
Feed costs £245 per tonne
Dairy
40kg per ewe, 10kg per lamb 13.5 14.0 22.5 20.6
Vet and med 9.0 9.0 15.0 13.2
Commission, haulage, levies, tags and sundries 8.0 8.5 13.3 12.5
Forage 0.14 ha per ewe 15.0 15.0 25.0 22.1
Total variable costs 45.5 46.5 75.8 68.4
GROSS MARGIN 49.1 63.3 81.8 93.0
Total overheads 135.5 119.6
Red meat
Total cost of production (p/kg lwt) 243.7 216.6
(p/kg dwt) 513.1 456.0
Net margin (before support payments) (p/kg lwt) (53.7) (26.6)
Agricultural support
*Replacement value less cull value divided by expected years in flock
Assumes killing out at 47.5%
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
Total overheads derived from the lowland mixed-farm unit on p. 43, including allowance for rent, finance, drawings and tax
Total cost of production net of wool sale
40 Forward Planning 2019Enterprise margin: Red meat
Economic outlook
Upland sheep
Breeding stock and lamb production
Performance level
Lambs sold per 100 ewes 130 150 130 150
Average liveweight sold per ewe (kg) 47.5 54.8 47.5 54.8
Arable
£ per ewe Pence per kg lwt
Output
Lambs 45% Finished @ 38kg @ 185p per kg
25% Store @ 32kg @ 185p per kg
30% Breeding @ £75 per head 89.6 103.4 188.6 188.7
Wool 2.2 2.2 4.6 4.0
Less ewe and ram replacement charge* (21.0) (21.0) (44.2) (38.3)
Total gross output 70.8 84.6 149.0 154.4
Dairy
Variable costs
Feed costs £245 per tonne
35kg per ewe, 8kg per lamb 11.1 11.5 23.4 21.0
Vet and med 7.5 7.5 15.8 13.7
Commission, haulage, levies, tags and sundries 7.0 7.5 14.7 13.7
Forage 0.21 ha per ewe 13.0 13.0 27.4 23.7
Total variable costs 38.6 39.5 81.3 72.1
Red meat
GROSS MARGIN 32.2 45.1 67.7 82.3
Total overheads 120.9 104.8
Total cost of production (p/kg lwt) 241.8 211.2
(p/kg dwt) 520.0 454.2
Net margin (before support payments) (p/kg lwt) (53.2) (22.5)
Agricultural support
*Replacement value less cull value divided by expected years in flock
Assumes killing out at 46.5%
Budgeted price adjusted for breeding sales
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
Total overheads derived from the upland beef and sheep unit on p. 44, including allowance for rent, finance, drawings and tax
Total cost of production net of wool sale
HSBC UK Agriculture 41Enterprise margin: Red meat
Economic outlook
Hill sheep
Performance level
Lambs reared per 100 ewes 100 115
Lambs sold per 100 ewes 75 90
Arable
£ per ewe
Output
Lambs 50% finished @ 30kg @ 180p per kg
50% stores @ 25kg @ 180p per kg 37.1 44.6
Draft ewe 8.1 8.1
Wool 1.8 1.8
Less ram replacement charge* (4.7) (4.7)
Total gross output 42.3 49.8
Dairy
Variable costs
Feed costs £250 per tonne
20kg per ewe, 8kg per lamb 7.0 7.3
Vet and med 6.5 6.0
Commission, haulage, levies, tags and sundries 5.0 5.0
Wintering costs 4.0 4.0
Forage 5.0 5.0
Red meat
Total variable costs 27.5 27.3
GROSS MARGIN 14.8 22.5
Total overheads 64.7 64.7
Net margin (before support payments) (£/hd) (49.9) (42.2)
Agricultural support
*Replacement value less cull value divided by expected years in flock
Forage costs include contractor’s charges for specialist contracting, e.g. silaging
Total overheads derived from the hill beef and sheep unit on p. 45, including allowance for rent, finance, drawings and tax
42 Forward Planning 2019Whole farm budget
Economic outlook
Lowland mixed farm
60 suckler cows, 80 cattle finishing, 500 lowland ewes
Gross margin
Head Area Gross margin Gross margin
ha £/hd £/ha £ Total
Arable
Suckler cows 60 50 228.0 273.6 13,680
Cattle finishing 80 20 191.0 764.0 15,280
Lowland ewes 500 66 49.1 372.0 24,550
Winter barley 20 648.0 12,960
Spring barley 20 706.0 14,120
Total gross output 176 457.9 80,590
Overheads
Labour 60.0 10,558
Dairy
Power and machinery (incl. depreciation) 269.2 47,383
Administration 54.3 9,558
Property 63.5 11,171
Overhead costs 447.0 78,670
Surplus (deficit) pre-rent and finance 10.9 1,920
Farm-specific overheads
Rent and finance* 88.0 15,490
Red meat
Drawings and tax 125.0 22,000
Surplus (deficit) pre-support payments (202.1) (35,570)
Potential support payments Scotland Wales England
Surplus (deficit) pre-support payments (35,570) (35,570) (35,570)
Plus Basic Payment** 35,991 25,884 38,962
Plus Stewardship*** - - -
Agricultural support
Surplus (deficit) post-support payments 421 (9,686) 3,392
*Assumed 50% land rented (50% Agricultural Holdings Act (AHA) + 50% Farm Business Tenancy (FBT))
**1 euro = 85 pence
***Due to many farms no longer receiving environmental payments under the old scheme, and a small uptake in the new CSS,
the budget assumes no stewardship income for consistency. However, LFASS will continue to be received in Scotland
For consistency with other countries, Scotland excludes the beef calf scheme, where businesses can apply for a payment of
approximately €110/calf (or €160/calf on the islands) in addition to the Basic Payment
Assumes temporary grass for the third crop
HSBC UK Agriculture 43Whole farm budget
Economic outlook
Upland beef and sheep farm
120 suckler cows, 1500 upland ewes
Gross margin
Head Area Gross margin Gross margin
ha £/hd £/ha £ Total
Arable
Suckler cows 120 108 228.0 253.3 27,360
Upland ewes 1,500 315 32.2 153.3 48,300
Total gross output 423 178.9 75,660
Overheads
Labour 63.6 26,894
Power and machinery (incl. depreciation) 117.1 49,541
Administration 28.1 11,882
Property 35.4 14,971
Dairy
Overhead costs 244.2 103,288
Surplus (deficit) pre-rent and finance (65.3) (27,628)
Farm-specific overheads
Rent and finance* 54.9 23,228
Drawings and tax 70.9 30,000
Surplus (deficit) pre-support payments (191.1) (80,856)
Potential support payments Scotland Wales England
Red meat
Surplus (deficit) pre-support payments (80,856) (80,856) (80,856)
Plus Basic Payment** 79,172 54,053 92,761
Plus Stewardship*** - - -
Surplus (deficit) post-support payments (1,684) (26,803) 11,905
Agricultural support
*Assumed 50% land rented (50% Agricultural Holdings Act (AHA) + 50% Farm Business Tenancy (FBT))
**1 euro = 85 pence
***Due to many farms no longer receiving environmental payments under the old scheme, and a small uptake in the new CSS,
the budget assumes no stewardship income for consistency. However, LFASS will continue to be received in Scotland.
For consistency with other countries, Scotland excludes the beef calf scheme, where businesses can apply for a payment of
approximately €110/calf (or €160/calf on the islands) in addition to the Basic Payment
Areas used by individual farmers to generate this level of physical and financial output will vary considerably between country,
topography and also the level of subsidy that these attract. Please be guided by and adjust for local circumstances
44 Forward Planning 2019Whole farm budget
Economic outlook
Hill beef and sheep farm
35 suckler cows, 850 hill ewes
Gross margin
Head Gross margin Gross margin
£/hd £ Total
Arable
Suckler cows 35 228.0 7,980
Hill ewes 850 14.8 12,580
Total gross output
20,560
Overheads
Labour 4,826
Power and machinery (incl. depreciation) 23,853
Administration 7,333
Property 8,291
Dairy
Overhead costs
44,303
Surplus (deficit) pre-rent and finance (23,743)
Farm-specific overheads
Rent and finance* 10,013
Drawings and tax 19,000
Surplus (deficit) pre-support payments (52,756)
Potential support payments Scotland Wales England
Red meat
Surplus (deficit) pre-support payments (52,756) (52,756) (52,756)
Plus Basic Payment** 26,468 68,536 41,388
Plus Stewardship*** - - -
Surplus (deficit) post-support payments (26,288) 15,780 (11,368)
Agricultural support
*Assumed 50% land rented (50% Agricultural Holdings Act (AHA) + 50% Farm Business Tenancy (FBT))
**1 euro = 85 pence
***Due to many farms no longer receiving environmental payments under the old scheme, and a small uptake in the new CSS,
the budget assumes no stewardship income for consistency. However, LFASS will continue to be received in Scotland
For consistency with other countries, Scotland excludes the beef calf scheme, where businesses can apply for a payment of
approximately €110/calf (or €160/calf on the islands) in addition to the Basic Payment
HSBC UK Agriculture 45Agricultural support
(as of September 2018)
Farm support in the UK is set The BPS will continue for 2019 in all parts
of the UK. From 2020, new, national
to undergo a radical change schemes could be introduced. However,
over the next few years, as a Defra has stated that, in England, the BPS
will continue into 2020, with only some
result of the decision of the ‘simplification’ promised. Other UK regions
UK to leave the EU. may decide to follow suit.
All devolved regions have undertaken
consultations on the future of farm support,
but final decisions have not yet been taken
on the precise scheme details. A summary
of likely outcomes is provided at the end
of this section.
support
Agriculturalsupport
Agricultural
46 Forward Planning 2019Agricultural
Agriculturalsupport
support
UK Agriculture 47
HSBC
HSBCAgricultural support
Economic outlook
Basic Payment Scheme 2019 Summary
England Scotland Wales N. Ireland
Entitlements and Regions:
Entitlement grant SPS entitlements New grant in 2015 New grant in 2015 New grant in 2015
retained
Arable
Phasing to a fully Regional Completed By 2019 By 2019 By 2021 (subject
Payment rate to consultation)
Number of Regions Three; Three; One One
1. Lowland 1. Arable/Grass
2. SDA 2. Good R.
3. Moorland Grazing
3. Poor R. Grazing
Top-Up Schemes:
Schemes operating Greening, Greening, Greening, Greening,
Young Farmers Young Farmers, Young Farmers, Young Farmers
Coupled Redistributive
Dairy
Payments1 Payment2
Young Farmers payment limit 90 Ha 90 Ha 25 Ha 90 Ha
Young Farmers qualification None None None Level II
requirements agricultural
qualification
‘Greening’:
Greening requirements Three basic EU Three basic EU Three basic EU Three basic EU
measures – Crop measures measures measures
diversification,
Red meat
EFAs and Perm.
Pasture retention
Permanent pasture
Yes Yes Yes Yes
at a national level?
Land eligible for EFA 1. Fallow 1. Fallow 1. Fallow 1. Fallow
NFC = Nitrogen fixing crops – note; 2. Hedges/trees 2. Field margins 2. Hedges, trees 2. Hedges,
eligible crops and management 3. Field margins 3. Green cover and stone walls ditches, stone
may vary between regions. 4. Green cover 4. NFC 3. SRC walls
SRC = Short rotation coppice (no 5. NFC 5. Hedges 4. Afforested land 3. Agro-forestry
inputs). 6. Agro-forestry 5. NFC 4. SRC
Agricultural support
Green cover includes catch crops 5. Afforested land
and cover crops. 6. NFC
48 Forward Planning 2019Agricultural support
Economic outlook
England Scotland Wales N. Ireland
Restrictions/Deductions:
Minimum claim size 5 Ha 3 Ha 5 Ha 5 Ha
Arable
Capping/Degressivity rates 5% above 5% above €150-200K – 15% 100% (i.e. full
(not applicable to the Greening €150,000 p.a. €150,000 p.a. €200-250K – 30% capping) above
payment) 100% (i.e. full €250-300K – 55% €150,000
capping) above > €300K – 100%
€600,0003
Capping labour cost deduction No No No No
Active Farmer test ‘Negative list’ ‘Negative list’ Basic ‘negative ‘Negative list’
abolished from abolished from list’ used abolished from
2018 2018 2018
Minimum claim area for
N/A from 2018 N/A from 2018 21 Ha N/A
Readmission under Active Farmer
Dairy
Minimum activity levels on No naturally-kept Payment Regions Saltmarsh and Rules on
naturally-kept land land defined 2 and 3 defined – dunes defined – minimum activity
– therefore no min. stocking weed control, levels apply – see
issues levels or fencing and water scheme guidance
an Annual provision required
Environmental
Assessment
Pillar transfer (modulation
12% 9.5% 15% 0%
replacement)
Financial discipline Rate the same across all EU Member States: set on a yearly basis so currently
unknown – 1.5 % assumed for 2019
Red meat
Estimated payments for 2019:
Estimated net payment for
lowland4 (non-LFA) arable land5 €264 €250 €1366 €330
– €/Ha
Estimated net payment for
lowland4 (non-LFA) arable land5 £224 £213 £1166 £281
– €/Ha
Agricultural support
1
Payment of approx.€105 per beef-bred calf (€160 in the islands). Plus €78 per ewe hogg for farms with more than 80% of their land in
Region 3 and less than 200 Ha of Region 1 land
2
Payment of approximately €119 per Ha on the first 54 Ha of each claim
3
100% cap above €600,000 introduced from 2018 onwards
4
Only the Lowland Region is shown in England & Region 1 in Scotland
5
Assumes the hectare was used to grow a combinable crop in the reference period (2000-02), and Arable Area Payments were claimed
upon it. No National Reserve application made. Rates shown are after all deductions for Pillar transfers and Financial discipline (latter
assumed at 1.5%). Conversion from euros to sterling estimated at €1 = 85p in 2019
6
Excludes Redistribution Payment
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