A summary of 2024 financial results and the future challenges for the farming industry

It’s no surprise that dairy farm profitability for 2024 has overall been lower than the previous year. Average milk price has seen an approximate reduction of 16% (8-10ppl) on the previous year, whilst at the same time input costs have remained volatile. Key costs such as feed, fuel and fertiliser reduced from the high prices of spring/summer 2023, however, the reduction was far outweighed by the milk price reduction, resulting in lower margins.

Milk price is now on the rise again so it will be interesting to see what 2025 has to offer. Slurry storage and management, potential legislation changes and the ability to manage input costs will be some of the key challenges facing dairy farmers in the future.

The UK and global demand for beef remains strong, with the 2023/24 year seeing some of the highest £/KG prices to date. The high output prices have been matched with high input prices resulting in no major changes in beef cattle gross margins overall. The UK suckler herd numbers are declining, with increasing levels of beef originating from dairy systems. However, this supply may be more limited in future with declining dairy cow numbers predicted. Despite the high market prices and strong demand, the increasing costs of beef production present concerns over future profitability.

Lamb prices per KG for the first 2 quarters of 2024 were some of the highest ever seen, which has resulted in an overall strong year for sheep farmers in terms of sales. Gross margins remained comparable to the previous year as the spike in lamb prices was followed by strong markets for store lambs and replacement ewes. The total UK breeding ewe flock numbers may be lower this season, as farmers took advantage of the high meat prices, with ewe lambs being sold to slaughter instead of kept for breeding. There is no suggestion of declining demand, meaning the strong prices in the sheep market may be here to stay for 2025.

Both broiler and egg producers have experienced strengthening markets and increased prices compared to previous years. Supermarket and consumer buying habits are shifting towards higher welfare options, with free range egg production increasing each quarter since the spring of 2023, along with free range egg prices also increasing. Broiler production has seen similar trends with many supermarkets pledging to support higher welfare options. It’s likely UK demand for the poultry industry will continue to increase. The investment in poultry buildings is significant and planning may be a key challenge for any producers wanting to expand.

2023 was the last year of the Basic Payment Scheme with 2024-2027 being transition years with farmers instead receiving de-linked payments. Hidden within the latest budget announced by the Labour party was more rapid phasing out of the de-linked payments for this period. For 2025, a 76% reduction will be applied to the first £30,000, while a 100% reduction will be applied to any amount over the first £30,000. This essentially means that BPS will be capped at £7,200 for all farmers (a 76% reduction on £30,000). This needs consideration when planning for future cashflows.

Countryside Stewardship and SFI options may be attractive alternatives.

Capital grant applications for 2024 have now been closed by DEFRA and there is uncertainty about what will be available in 2025. Applications that have been submitted but no offer made by DEFRA are currently on hold. DEFRA have made it clear their future policies will be in line with prioritising food security and nature conservation.

As with many other farm costs, fertiliser prices have been extremely volatile and are likely to remain this way.

From 1 January 2027, the government plans to introduce a tax on imported fertiliser products with the aim of reducing overseas carbon emissions, which industry sources have suggested could increase the price of fertiliser by £50/t. Farmers need to continue to consider the need to absorb these additional costs against potential alternative options, such as improved use of natural fertilisers.

In summary and as always, there are a lot of changes ahead so planning and managing your cashflow will continue to be an important part of running a successful farming operation.