Environmentally-focused farmers more financially stable

Farmers who diversify their outputs and practice lower intensity farming that includes environmental management report more stable finances, new research finds.

In a study published in Agricultural Systems, 2333 farms were surveyed over nine years as part of the Farm Business Survey about their financial stability.

The researchers, from the University of Reading, Newcastle University and Rothamsted Research found that the farms that received larger agricultural environment scheme payments saw greater short- and medium-term financial stability. Meanwhile, farms that received more direct subsidies (paid to farmers based on the area farmed) saw less stability of farm income.

Dr Jake Bishop, Lecturer in Crop Science and Production from the University of Reading’s School of Agriculture, Policy & Development said:

“Our latest research is interesting as it shows that farms that were adopting environmental management actually benefitted financially from their stewardship. This is encouraging news for farmers as the UK moves to the Environmental Land Management scheme.”

“The practices of diverse and lower intensity farming can have ecological and environmental benefits including to the soil and for pollinators, and these practices may well have resulted in a smoother, more predictable income over the nine years that we looked at.”

The research looked at financial data from farms between 2007-2015, and so the authors note that the findings do not consider changes to the way farms receive Government subsidies following the UK’s exit from the European Union. The team also notes that some farmers, such as those in hilly and mountainous areas, do not see the same stability from adopting environmental land management schemes.

Caroline Harkness, a PhD researcher from the University of Reading who was lead author of the paper said:

“Farmers are facing increasing pressures due to changes in climate, government policy and prices. Instability in farm income can be a real challenge. It was interesting, and encouraging, to find that farms adopting environmentally friendly practices also had more stable incomes.

“Farmers may be benefiting financially from their environmental management, while in contrast an increase in direct payments per hectare was associated with less stable farm income.

“Environmentally friendly farming practices including engaging in agri-environment schemes, diversifying outputs, and reducing the use of chemical inputs such as fertiliser and pesticides, are associated with ecological and environmental benefits and importantly could also increase the stability of farm income.

“Farms in the uplands are already operating in challenging environments and many of the options in agri-environment schemes may not be available or well suited to deliver ecosystem service benefits in these landscapes.

“Increasing diversity of outputs could make farm businesses more resilient to economic shocks or price fluctuations, and with rising input prices, a concern of many farmers is to control the use of expensive inputs. Whilst farms with higher input costs are more likely to have higher outputs this does not always translate to a higher farm business income, and these farms also saw larger fluctuations in income.”

Full citation:

Harkness, C., Areal, F., Semenov, M. A., Senapati, N., Shield, I. F. and Bishop, J. (2020) Stability of farm income: the role of agricultural diversity and agri-environment scheme payments. Agricultural Systems. ISSN 0308-521X (In Press)