How to financially prepare for food production shortages
By Andrew Heskin, Partner and ARA specialist
Recent reports from Natural England have highlighted a challenging future for farmers, with food production potentially declining by up to 25 per cent if the most ambitious climate targets are enacted.
This forecast stems from a strong trade-off between food production and emissions reduction, as outlined in the Agri-Environment Evidence Annual Report.
With these changes on the horizon, farmers should think about the financial implications and strategies to overcome potential food production shortages.
What could the financial impact look like?
The anticipated reduction in food production will inevitably affect farm incomes, as lower yields and reduced output could translate into decreased revenue.
However, the financial impact will vary depending on the farm’s size, location, and current production practices.
Key areas that may be affected include:
- Revenue streams
- Operational costs
- Land use changes
Strategies to alleviate financial risks
To keep the potential financial challenges posed by reduced food production at bay, farmers should consider several different strategies.
Diversify revenue streams
Diversification is a great way to maintain financial stability in the face of reduced food production. Farmers can explore alternative revenue streams, such as:
- Investing in renewable energy projects, such as solar panels or wind turbines
- Developing farm-based tourism activities, like bed and breakfasts and farm tours
- Growing high-value crops or niche products that are in demand
Improve productivity on remaining farmland
Given the potential reduction in arable land, farmers should look to improve productivity on the remaining farmland. Farmers can achieve this by utilising technology to optimise input use and monitor crop health, and by implementing sustainable farming practices, such as crop rotation, cover cropping, and integrated pest management,
Reduce waste and increase efficiency
Reducing food waste and improving efficiency can help lessen the impact of lower food production.
Streamlining supply chains to reduce losses from farm to market can ensure more produce reaches consumers.
Investing in storage capabilities will reduce post-harvest losses and can preserve more of the crop and extend its marketability.
Look out for Government schemes and subsidies
Farmers should actively participate in Government schemes and subsidies designed to support the transition to more sustainable practices.
These schemes may offer financial incentives for adopting new technologies, implementing conservation measures, or repurposing land for environmental benefits.
Plan for financial resilience
Regardless of the environment, building financial resilience should always be an essential strategy for farmers. This can involve:
- Setting aside funds to cushion against unexpected downturns
- Ensuring that insurance policies cover potential risks associated with climate change and reduced production
- Conducting regular financial reviews
Our team of experts is ready to provide advice and financial planning services to help you prepare for the future and keep your farm financially resilient. Contact us today.