Written evidence submitted by Professor Terry Marsden (HIL0019)

The Future of Family Farming in Wales: challenges and opportunities. A Briefing note.

Terry Marsden. Professor Emeritus in Environmental Policy and Planning, Cardiff University.[1]

Introduction

This note first of all outlines my responses to the main questions in the Committee’s terms of reference regarding family farming. Second, it summarises some key results of research on farms in Wales which focusses on their socio-economic position, their likely trajectories, and the degree to which they are embedded in their local rural economies. Finally, I address the question of what practical steps should be taken by government policies at a time of transitions in policies affecting farming.

Terms of reference and key questions

How unique are family farms and how significant is their contribution to Wales’ cultural life? 

Family farms are a critical to the sustainability and stewardship of rural land and have been a continuous and central feature of Welsh rural and wider cultural life. Their continuity and socio-economic sustainability is now even more critical given the new and interconnected challenges rural Wales faces (see below). Standard measures of GDP and GVA do not capture the true socio-economic, cultural or ecological contribution of family farming. Also, and now just as importantly, family farms in Wales need to and can play a vital role overall in meeting Wales and UK’s environmental, climate change and sustainability goals.

What are the main challenges facing family farms specifically, and farming communities more generally, in Wales?

There are now three key interconnected challenges.

(i)                  Established markets for Welsh family farmers are facing new levels of disruption due to Brexit, newly agreed trade arrangements, and significant changes in consumer behaviour associated with a move away from red meat consumption.

(ii)                 Recent climate change mitigation and adaptation, reduced carbon emissions policies and restorative bio-diversity targets, are together likely to lead to reduced production and more extensification and multi-functionality of land use on farms. This will affect existing levels of already low profitability unless adequate and calibrated public support for incomes is provided through ‘public goods’ payments. These have yet to be fully detailed, and farmers are expecting falls in payments plus more conditions.

(iii)               The removal of CAP subsidies, and especially the Single farm payment (SFP) is likely to reduce incomes on hill and livestock farms by between 40 and 80%[2]. It is as yet unclear how far the Welsh Sustainable Farming scheme (or ELMs in England) will ameliorate these losses in subsidies, and how the new schemes will distribute such resources. There is a danger that the lengthy and uncertain transition (2021-2027) will lead to many farmers either leaving altogether or leasing out land to neighbouring and larger farm businesses. There is also a risk that family succession is likely to be less appealing to the next generation unless clear signals are given from governments about the national value of family farming.

What are the potential implications of free trade agreements for farmers in Wales?

New UK ‘free trade’ arrangements are occurring with countries (like Australia and New Zealand) which have: (i) significantly larger and more price competitive (and export- oriented) agricultural and food commodity and processing sectors; and (ii) have already experienced over 20 years of deregulation and restructuring of former state- based subsidy and support systems, such that they are geared to increasing their export markets. This is overall likely to lead to significant increases in price competition for the UK market, and limited opportunities for UK agricultural exports to these countries. In addition, more imports of food processed products (for example in dairy and cheese) could also hamper the domestic development of UK and Welsh food processing.

How, if at all, is the UK Government’s climate change policy agenda impacting on family farms, including the future generations of farmers, and rural communities in Wales?

Currently whilst targets are being set for carbon emissions etc. there is little policy concern on how these will affect the economic and social viability of farmers and wider rural communities.  Indeed, in England, it is being assumed and indeed encouraged that policy transitions towards sustainable farming schemes will represent an ‘opportunity’ to significantly reduce the number of farms and the more elderly farmers. It is especially unclear what combinations and balances between regulations and financial incentives will be put in place in Wales by the Welsh Government with regard to its outline sustainable farming proposals. These are mainly devolved Welsh Government competences, but  they need to be harmonised across the UK. Currently there seems to be a lack of dialogue and transparency over the interlocking nature of UK and Welsh environmental policies and how these relate the future viability of family farms.

Wales agri-food some key facts and flows: the anatomy of vulnerability

1. People[3]

• Total farmers: 39, 903 (2016)[4]
• Full time: 18 564
• Part-time 21,339
• Total number of workers: 12,000 (2017)
• Full time workers: 4000 (2016)
• 1038 Vets in Wales 25% EU nationals.
• Farms: Large number of farms with low turnover: 21,200 farms (86%) produce 29% of agricultural output but use 57% of farmed land.
• There are 500 farms with a high turnover that contribute 33% of output but only use 8% of the farmed area.
• 78% of farmland is classified as ‘disadvantaged’
• Total income from farming per hectare: England £331, Scotland £116, Northern Ireland £246, Wales £ 102.[5]

2. Products

• Sheep and lambs 10.0million (2017)
• Cattle and calves 1.1million (2017)
• 180,000 Farmed hectares (excluding common land)
• 64% permanent grassland
• 15% Rough grazing
• Arable 5%
• Fisheries lands 25,300 tonnes of seafish per year worth £38.8 million, 851 employed
• Other grassland 9%
• Land down to Horticulture: 0.1%
• Other land 7%.
• 306,000 hectares of forest: 49% broadleaf: 51% commercial conifers (15% 0f land area.) 2000 jobs.

3. Flows[6]

• 96% of sheep meat exports to EU27: a third of Welsh lamb 63,000 tonnes of sheep meat per year
• 47700 tonnes of beef produced a year some exports to EU (15-17 %) some 90% of beef exports to EU. Republic of Ireland represents 70 % of imports to UK (including Wales).
• 1.8 billion litres of Milk per year from 1700 dairy farms (50% processed in Wales, mainly for cheese) 50% of milk is exported to UK.(some EU)
• There are only 389 (1%) horticultural farms in Wales; 54% vegetables, 43% orchards.
• Tourism accounts annually for £2,870 million creating over 100,000 jobs
• Agriculture generated £385 million.
• Food and drink supply chain employs 240,000 people in2016 in 27,575 business units, turnover 91.1 billion, GVA of 4.5 billion.
• Rising food exports from Wales: 113% growth in value between 1999-2013, mainly (90%) to EU.
• 18% of all employment in food, 22% of all business units.
• 85% of food businesses are micro
• , employing fewer than 10 people.[7]
• Welsh products have EUPGI status.

4. Funding

• Wales receives £760 million per annum from the EU[8].
• The annual overall ‘Barnett’ Welsh budget is £15.5 billion; 6 billion goes on health[9] Wales received more per capita for these funding mechanisms than English regions
• Support payments for agriculture (pillar 1 and 2) was the largest amount in Wales of EU funding amounting to 2.8 billion between 2014 and 2020.
• Welsh government also ‘match funds’ EU funds (50% East Wales, 32.6 % Rural Development (Pillar 2) and 30.9% West Wales and the Valleys.
• The average Welsh(dairy) farmer (under CAP) received £32,300 per annum and each sheep farmer an average of £19.3thousand per annum.

Summary of results of Welsh Rural Observatory results conducted by the author and colleagues from 2013-21

The following text summarises some of the results of an extensive survey of family farms in Wales conducted in 2013. Over 3000 farms were surveyed. Some of the results are relevant for this enquiry. They show an insight not least into the diversity and vulnerability of family farming in Wales today.

Whilst mixed tenure farms were developing in the larger farm categories, with 19 per cent overall, the majority of farms were still owner-occupied and family run, with only eight per cent rented properties. The overriding picture is one of at least one or two family household members running the farm business and being variably dependent upon farm-based incomes. Where two or more households (21 per cent) of farm businesses were running the business, there was more opportunity for extra forms of non-farm income and diversification. Nearly 40 per cent of farm businesses had family members who held ‘off-farm jobs’; which has important effects on the local and regional economy, on the farm family household and on its relative resilience. The significance of off-farm employment is especially important for the survival of the smaller farms, where it can significantly boost and supplement farm income.  For instance, younger and female family members were contributing to significant overall family household incomes in over half those businesses in the highest income categories (over £31,000 per annum).

(i)                  A picture emerges therefore, where we have (i) agricultural productivist farms (especially dairy, and extensive large beef and sheep), (approx. 30%) which are well attuned to CAP reforms and making rational business planning decisions for the future: (ii) a significant multi-functional group (of up to 40 per cent) who are variable in size, but are creating their resilience through combinations of agricultural production and marketing, non-farm income, and diversification strategies; and (iii), as we identified in the previous survey [WRO, 2010], a severely vulnerable group of smaller farm families (approx. 30%) who have little knowledge or means to adapt to market or CAP-induced changes, and who are not planning any form of family succession. If these farms are dairy, they are likely to be particularly high up the vulnerability escalator.

(ii)                 Only 46 per cent of small farmers were planning succession compared to 80 per cent of the very large. What we witness here is the differential combination of social reproduction and economic reproduction mechanisms, whereby farm families display different levels of resilience and adaptive capacities according to the varying levels of family commitment to agricultural production and/or multifunctionality. The absence of one or other of these strategies creates greater vulnerability for the family and its business.

(iii)               A key expression of these variations came in farmers’ responses to scenarios for subsidy payment changes. Multi-functional farms (with off-farm income, diversification and alternative enterprises), or the more productivist farms, were far less likely to see the status quo as an option. Whilst, overall 34 per cent of all farms saw this as a strategy if payments fell by 20 per cent, where there were no off-farm incomes this increased to 65 per cent of farms. These more adaptive farms were also far more likely to buy farm inputs locally, change the type of farming, diversify activities and retain their land.

(iv)               Whilst the current levels of alternative enterprise adoption (e.g. horticulture, alternative livestock, energy crops/ bio-energy, or organic crops were low (less than 10 per cent in all categories), given the strategies identified above, revised farm policies could encourage much more take-up of these multi-functional activities. There is considerable policy potential to encourage more farming capacity in these alternative enterprises, given their current levels of take-up. This could target both small and large farms and farms of different types. More information and knowledge sharing, as well as extension services are needed in this regard. Up to 10 per cent were seen as considering these options; but they need more incentives and knowledge. These incentives and support structures for more diversification and value-added could be aligned to spatial policies. For instance, some upland areas and groups of farmers could be selected to encourage more diversified rural development, local sourcing and processing and the provision of environmental goods and services. Policies would need to encourage more farmer-to–farmer, and farmer-to-processor and retailer collaboration.

(v)                 If the hill and sheep and beef farmers are likely to continue to receive viable, if not extra, post CAP payments then there are serious grounds for making this conditional upon (i) adopting diversified and alternative enterprises; and (ii) sourcing and selling more locally and regionally. Whilst traditional diversified activities like farm-based accommodation and providing agricultural services (both just above 10 per cent) may have reached a plateau, there are opportunities for growth in energy, organic and horticultural enterprises, which could also allow farming to contribute to wider rural economy and sustainability goals. Planning policy could assist in increasing permitted development rights for such activities; 20 per cent of all farmers saw opportunities for alternative land use as important for the future. Hence the glass, or ‘green ceiling’ on the agriculturally-based eco-economy needs to be raised, at least by another 10 per cent over the next CAP period; with all CAP spending being conditional on such stimuli.

(vi)               Smaller and off-farm income farmers are more locally based in their purchasing; so if they obtain more  post-CAP funding this is more likely to enhance the local area. While this may follow it clearly does not take into account actual amounts. As we know dairying is less locally based, but in the livestock sector, livestock marts and abattoirs are still very important parts of the farming and food processing local community. These infrastructures could be built upon and stimulated by support funding. There has been a ‘hollowing out’ of food processing in Wales; but in some areas it is reviving. New incentives are needed to encourage local rural and market town business development in Wales regarding food processing and value-adding.

(vii)             Many farmers, especially those in the third ‘vulnerable’ category above, seem to be suffering from a sort of ‘false consciousness’ with regard to CAP changes. For example, 47 per cent of the survey envisaged no changes over the next five years and we have already seen the dominance of ‘business as usual ‘expectations; but 13 per cent expected to have left farming in the next decade; and relatively few farmers seemed to have the incentive to break through the diversified ‘glass-ceiling’. This may be partly explained by the relatively good recent market conditions in beef and sheep. Policy support for developing entrepreneurial skills in business planning, network-building, and Broadband use should be made more available and conditional on receiving CAP payments. There may be a very good argument for top-slicing CAP funding (and regional development funding) for creating these knowledge infrastructures across Wales.

(viii)            The data suggest that more emphasis should be placed upon understanding the relationships between family structures and farm strategies when considering the sustainability, resilience and adaptive capacities of Welsh farming and future funding support. Further analysis is needed on the characteristics of the three strategies identified above, as these seem realistic scenarios over and above questions concerning the location of the farm. In short, it is the combination of family occupancy and household characteristics combined with relative skill capacities and degree of agricultural dependence that tends to create a variety of response to both policy and market changes. If maintaining vibrant family farming is a significant part of Wales agricultural and rural policy, it will be necessary to re-skill and rejuvenate the 20-30 per cent of smaller and more vulnerable farms who are likely to leave the land if current remaining CAP payments are reduced by 20 per cent or more. These farmers are made more vulnerable by a lack of alternative forms of income and the social means to achieve this. This rejuvenation towards multifunctionality could create significant benefits for the local economy.

The longitudinal analysis conducted reinforces these conclusions in that we can witness the significance of farm family skill sets (for instance, levels of entrepreneurship, multifunctionality) and types of farm family strategy as being important factors in shaping the degree of resilience and adaptability of farms to impending farm policy changes. Those farmers displaying higher levels of these factors were less likely to adopt a ‘business as usual strategy’, and were therefore less vulnerable to CAP change effects. Hence, we need to recognise that while static variables like farm type and size provide the broad market and policy parameters for setting the levels of adaptability, the more dynamic features of farm and family strategies are a key feature of sustainability and of the degree of local impact we might expect. This strongly suggests that future farm policies should be as much about farm-based socio-economic support, planning and advice as it is about environmental restoration.

A stronger emphasis upon more diversification and local multipliers should be a priority in areas like Northwest Wales. Here 51 per cent of farms were diversified already and this could show a potential for more growth, even though many farmers saw barriers to this strategy. In the Southwest, we can begin to see a different scenario, with more vulnerability associated with reduced CAP payments on dairy farms, less diversification and multiple- income earning. In these regions, a focus upon how to change the strategy of the smaller dairy farmers would seem appropriate, given they are likely to be the most vulnerable in income terms. These farmers were also the most tied to local dairy processing and livestock abattoirs, which means that if they are vulnerable so are these local processing facilities. This begins to indicate that there could be significant local and regional downstream and upstream effects of the post- CAP changes, with an overall disinvestment in the dairy dominated areas like the Southwest, and at least the maintenance of local facilities in the Northwest and mid-Wales areas. Also the reliance on local livestock marts in the Northwest and mid-Wales areas is striking; such that we can begin to see a third level of causation of variation in post- CAP changes, after (i) farm size, type and income; and (ii) farm and family strategy and skill sets. Thirdly, (iii) comes a degree of differential spatial vulnerability and opportunity, which is tied to the different level and type of local and regional embeddedness groups of farms display in their local areas. This is associated with their level of purchasing and marketing, and becomes all that more important as the more diversified and eco-economies of rural regions gather momentum (combinations of food, fibre, energy, and amenity provision. It reinforces the points made earlier that any changes in the distribution of post-CAP subsidies, should also incorporate all three of these levels of variation. So an emphasis on skill sets and (collaborative) local and regional buying and selling become important areas for policy innovation.

Overall, we see from the spatial analysis that a set of generic factors are affecting the responses of farmers, associated with their farming strategies, their family cycle and position, and their ability to gain off-farm incomes. There are clearly general patterns to adaptability, vulnerability, resilience and multifunctionality. However, distributional changes in post-CAP revenues will have effects both on these general patterns and strategies, and on the quality and value of local and regional markets and supply chains in different parts of Wales. Welsh farmers are major traders in goods and services at the local and regional level, whatever the region or type of farm. However, changes in CAP revenue have the capacity to disrupt or to augment these ‘nested’ market relationships, with an average of 81 per cent of inputs and services purchased locally.

There is thus the evidence of strong embeddedness in the local rural economy and the relationships between farmers and local communities. Farmers in Wales trade, that is buy and to a lesser extent sell, predominantly in the local economy.

The analysis also shows that embeddedness in the local economy and policy dependency on SFP are variable. This variability is shown by the analysis to be a function of the type of farm and of economic size. Given the prevailing distribution of farms this reinforces the importance of new policy design being farm more spatially sensitive to local and regional conditions.

Conclusions: the need for urgent action

What practical steps can the UK Government take to support these communities and how should the UK and Welsh government work together to support these communities unique culture.

The evidence from research above suggests the following steps are now urgent for Welsh family farms.

• The UK and Welsh Governments should work together in defining well-communicated priorities for family farming as the transition to new funding mechanisms takes place over the transition period (2022-2027). This should be a central part of a wider strategy on developing UK multi-functional land use frameworks, capability and restoration, as for instance, advocated by the Royal Society (2021).[i]
• The socio-economic, cultural value and contribution of family farming needs to be built into forthcoming environmental, rural development and farm policies both in England and Wales,

through a more specified and spatially sensitive set of policies which enhances rather than reduces the sustainability and succession prospects of family farming and their role in local rural economies.

• A stronger emphasis in current (post CAP) farm policy in England and Wales needs to be placed upon whole- farm sustainability which includes socio-economic planning and advice as well as environmental advice and planning. Here targets need to be set for enhancing farm multi-functionality of land use and farm enterprises more generally. This should explicitly embrace the heterogeneity of family farming (as we empirically witness above), including small family farms who can practice more ecological ‘economies of scope’, rather than scale.
• Policies need to recognise the embedded nature of the family farming rural economy, and to develop a wider rural development set of policies which incorporate the farm economy. In neither England or Wales is it clear what rural development policies will unfold over and above the proposed outline ELMs and sustainable farming schemes. We should not be replicating the old CAP Pillar 1 and 2 dichotomy, but given especially the drive to develop farm multifunctionality, link directly farm-based policies to wider rural development policies.
• A stronger and more purposive set of incentives need incorporating into post CAP transition policies which encourage short-food and value- added supply chains as part of wider rural and farm development strategies.
• As part of the transition in UK policies a strong commitment needs to be founded on re-vitalising and extending where possible ways of encouraging new entrants into family farming, not least in increasing the role of County Farms as a first rung on the farming ladder, and new innovative forms of occupancy and tenure which stimulate new entrants including those from non-farming backgrounds.
• Land use policies which encourage bio-diversity and ecological restoration (soils, meadows, peatlands, woodlands etc) need to build into their objectives advisory and knowledge transfer functions aimed at existing landholders which take into account whole farm planning and accounting.
• A UK wide and Wales vision needs to be created for farming  for the next 20-30 years in the light of the transitions now occurring. Farmers and their key stakeholders need to be included in national and regional dialogues as to their plans and futures with regard to meeting the new challenges. This needs to be a deliberative process, not just a top-down one, or one based upon aggregated modelling assumptions. It needs to be place-based. This should involve the setting up of new agriculture and rural place-based forums, akin to the post-war agricultural committees in the UK and their equivalents in the 1930s US New deal era, whereby strategic goals can be interlinked with local and regional circumstances.[ii]

November 2021