High input costs combined with reduced output values in the arable and dairy sectors are expected to knock almost £3bn off Defra’s Total Income from Farming (TIFF) figures for 2023.

That was stark revelation from The Andersons Centre spring seminar at Ingliston, where partner Michael Haverty told delegates the figures for the 2022 year hit record returns at just shy of £8bn. Initial figures for 2023 and 2024 put TIFF – the return to all farmers in UK agriculture and horticulture for their management, labour and capital in their business – at nearer £5bn.

The Scottish Farmer: TIFF is expected to drop £3bn in 2023TIFF is expected to drop £3bn in 2023

“We expect 2023 total income to be below £5bn which would be the smallest total since 2016 while it might rise above £5bn in 2024,” he said adding that high levels of inflation had also reduced profits.

The fall in farm incomes was the first of many set-backs for the industry and in all countries of the UK.

Richard King, Andersons Centre policy adviser said: “ The next five to 10 years will be a period of significant change for UK farming. Funds granted to farmers are falling in real terms and will probably continue to do so. At the same time claimants will have to do more to access the available money meaning less profit.

“Government policy in relation to agriculture – whatever the party or part of the UK – is almost wholly framed in terms of the environment. The key question for farm businesses is ‘do they have a plan to prosper through this period of change.’”

Mr King added that the overall UK budget for farm support has not been set for 2025 onwards, and therefore the allocation for Scotland is not known, which is the reason why the Scottish Government has been unable to commit on how much funding each tier of the scheme will receive.

Furthermore, total farm incomes in Scotland are expected to fall in the 2023/24 years with the sectors of cereal, general cropping, dairy and upland and lowland beef and sheep units all seeing a decline.

Dairy is predicted to remain the most profitable, with a 194ha unit bringing in an income of £100,000, against a 188ha general cropping unit of £65,000 and a 160ha cereal enterprise of £45,000.

LFA beef and sheep and lowland beef and sheep farms are expected to remain the least profitable, with an 815ha LFA unit bringing in £19,000 against a 138ha lowland enterprise of £25,000.

Incomes are unlikely to improve in future years to come.

“While policy framework for Scottish farmers will look very familiar in 2024, from 2025, conditionality will be added to the basic payment scheme and probably coupled payment and LFASS too. This will see claimants having to do something to receive the full payment.

“From 2026, a new four-tier structure will start to emerge with BPS split into a base payment and enhanced support.

From 2027, a further two tiers will be added, subsuming many of the present support schemes. It is not clear whether coupled payments will continue after 2027. They may be included in Tier 4 – complimentary payments,” he said.

“The balance will be key. If the majority goes to Tiers 2-4 then there will be little baseline support for the sector.

The Tier 1 ‘base’ payment will inherit the conditionality first seen in the essential standards for the 2025 BPS. Over time, it is believed the ‘baseline’ of what farmers are expected to deliver will rise. In order to get revenue back to BPS levels, farmers are likely to have to take part in the ‘enhanced’ tier.”

Commenting on the difference in financial payments available to farmers in England, Scotland, Wales and Northern Ireland Mr King added:

"Short-term, England has moved first in dismantling the BPS so that puts farmers in the other nations at a small advantage when delivering public goods payments have a cost, so the schemes are less profitable than the BPS.

"Longer-term, although there will be differences between the four parts of the UK, they are all likely to end-up at sort-of the same place in terms of payments – money for environmental improvements plus a drive for productivity.

"Any differences in scheme rules will not be as important as the management skills of the farmer. i.e. it not where you farm but how you farm."

Mr King also commenting on the food security which is of growing to concern for many when livestock numbers continue to decline in the UK.

Asked whether those remaining in the industry would reap the rewards with prices rising for beef, lamb, pigmeat, milk and cereals, he said:

"Probably not. Any shortfall from UK production will simply end up being replaced by imports.

"We are not actually convinced that there will be much of a decline in output. Areas where this is most likely to happen is beef and pigmeat But this is more to do with market forces (low profitability) than government policy," concluded Mr King.