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Sector trends

Life after coronavirus: agriculture

Roddy McLean, director of agriculture, and Ian Burrow, the head of agriculture and renewable energy, expand on the significance for their sector of a major new research project by the bank’s group principal economist, Stephen Blackman.

Nation & Society

Ian Burrow: “Being able to prove how food is produced will become ever more important in terms of government and consumer support – and technology and data gathering will play a huge part. I see farms using technology to benchmark their emissions, not just CO2, against similar-size farms. Am I as efficient as my neighbour? And if not, why not? But with so many different carbon calculators, government needs to give one consistent benchmarking measure. When every farmer knows what their emissions are, that leads to greater efficiency and greater profitability.”

Roddy McLean: “Consumers will be the biggest drivers of change, more forceful actors than regulation can be, as buying becomes an extension of their own values. Greta Thunberg and her generation are tomorrow’s consumers, and, as a sector, we need to keep up.”

Work & Play

RM: “Technology will dominate. Data gathering will become an integral part of the business, from emissions to soil mapping to drones. It’s easier than ever to gather data but the challenge is to maximise it. We’ll see an acceleration in automation, notably any application or machinery that allows farmers to free up time to work on their business rather than in it, and use that time to do more value-added tasks. The technology winners will be systems that take the raw data analyse it and provide recommendations to the end user to take or not. But internet connectivity and infrastructure remain a challenge in many rural areas.”

IB: “In terms of innovation, vertical farming will be huge, combining tech, innovation and data to take away the vagaries of climate – you know exactly what every tray will produce, the consistency, delivery of supply, output. Agritech is coming over the horizon quickly, and, as a bank, we’re putting more and more support into helping customers maximise those opportunities.”

Place & Community

RM: “The last year has brought focus on shopping locally, but farmers need to engage with the consumer to keep that going, to prick people’s conscience about emissions and the positives to the planet of small local supply chains, rather than shipping in string beans from the other side of the world. That said, a significant proportion of the population is very price-dependent and we must take account of that. The government must play its part, ensuring the quality of imported food aligns with the high standards of British farmers.”

“People moving out from cities will also impact rural communities, and we need to consider what that demand does to rural affordable housing. It brings opportunities for farmers, perhaps to repurpose into homes any buildings that are no longer fit for their original use, or to sell land with planning permission to a developer. Any influx of new communities makes it even more important for farmers to engage with local people, explain what they do and why, tell their story. If farmers don’t engage, they won’t get the benefits.

Economy & Finance

RM: “The wider farming economy is changing in the way people manage farms. For many farmers, it’s not about ownership or a secure tenancy but having access to land to farm. Novel arrangements such as contract farming will continue to grow. I see cases where farmers own land but don’t farm it, or food production doesn’t play as major a role as it did. Moving forward, diversification won’t just be farm shops or holiday cottages but a whole gamut of multi-faceted land management, water management, carbon management, for the greater good of society. More farmers will consider whether, say, the worst 10% of their land has more value in those opportunities than hammering away to get a half-decent crop. The climate-change agenda will bring those opportunities and give farming families a more resilient, sustainable business.

“Land values have held up through the current crisis, although the government will have to recharge its coffers in some manner and capital taxation will play a big part. If some capital taxation advantages are diminished or lost, it would impact values, but I’m not losing sleep yet.

“On a more individual level, as technology grows apace, more farmers are looking to acquire machinery through leasing models. As the machines get more complex, more people will take out operational leases so they can upgrade every couple of years.

The government must play its part, ensuring the quality of imported food aligns with the high standards of British farmers

Roddy McLean, director of agriculture

IB: “That said, there are still millions of pounds in asset finance. Thousands of farmers are buying kit, and we’re working constantly with our Lombard agri team to support this. It does depend on the farmer, their requirements and the kit itself, but this will evolve.”

Health & Meaning

IB: “There’s a lot of talk about eating less meat to reduce emissions. But as well as the protein benefits of meat, it’s good for the agri sector to produce it, using cattle to support biodiversity systems. Many landscapes are what they are because of the ruminative cattle on them. As a sector we need to tell this story to the public.”

RM: “We have to be aware of consumer direction. Vegetarians and vegans make up only 7% of the population, but the demographics are at the younger end and that figure will grow. Kellogg’s, Nestlé and KFC are all exploring vegetarian options, and raising billions of dollars from venture capitalists to do so. Soy forms the basis of many of these, but this is evolving – pulses that can be grown in UK conditions will step into that gap, and industry needs to be aware of what’s happening and go with it.

“My Utopia is to see profitable, resilient farms lauded for providing safe, wholesome, ethically produced food, and having a positive impact on the environment. That means farmers adapting, engaging, telling their stories. The rate of change is the fastest it’s ever been, but it will never be this slow again, and everyone in the sector needs to seize the opportunities this brings.

“Every business has to face up to their responsibility and what they can do to mitigate climate change. No one can self-isolate from it. We have to step up and do what is right to protect our species. We have no right to steal our grandchildren’s future.”

Megatrends: five essentials for the agriculture sector
  • Consumers, regulators and government will demand ever greener, more sustainable food chains to hit climate-change targets – and will expect data to prove it.

  • Farmers with the greatest knowledge and understanding of their emissions data will be the most efficient and the most profitable.

  • Increasingly, farmers will invest in new ways to diversify, hiving off land for land management, water management and carbon management for the greater good and a more sustainable, resilient business.

  • As more people swap the city for the countryside, this will bring opportunities for farmers to repurpose their land or property to accommodate them.

  • Farmers will embrace technologies such as vertical farming and automation – and as time goes on, will be more likely to lease than buy it.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the NatWest Group Economics Department, as of this date and are subject to change without notice.

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