To the casual observer, it would seem all is well with British agriculture at the moment.
Figures presented by DEFRA at a seminar in York today (Wednesday), taken from the recently-published "Agriculture in the UK 2008" report, show how farm incomes increased by 42% in 2008 to £3.5bn. That gave an income per person engaged in farming of over £18,000.
Key events behind the increase were the boom in world commodity prices in the early part of last year, the weakness of sterling in the latter part of last year and the record grain harvest.
This bullish appearance is repeated in today's financial results from The Co-operative Group, which show that the farms department made a record £5.7m profit in 2008, more than double 2007's profit.
With sales of The Co-operative Farm's own products booming in Co-operative stores, the company is planning to double the size of its farming enterprise by 2011.
But the casual observer would be mistaken to think that this means British agriculture is booming.
For a start, UK farm income figures are still well below where they were in the 1970s and 1990s....
Commodity values have also fallen substantially in recent months, no more so than in the dairy sector where every milk buyer has slashed prices.
The harsh reality is that, while agriculture has enjoyed a slight respite for the past two years, the clouds are gathering again.
This is made crystal clear in the latest Farm Business Survey report from accountants Grant Thornton. According to the company's Gary Markham, a "perfect storm" is brewing, which could pitch many farm businesses into deep water.
On the one hand, input costs for the coming harvest have risen exponentially, largely due to the sharp increases in fertilisers, sprays and fuel going into last autumn. Grant Thornton puts variable costs for harvest 2009 at £201/acre, compared with £107/acre last year.
At the same time, many farmers will have hefty tax bills to pay in July 2009 and January 2010 on the back of increased profits in 2007 and 2008. This will play havoc with cash flows and net farm income, putting many farm businesses under extreme financial pressure once more.
Predicting the pressure points and taking action in advance - perhaps by forming syndicates or joining buying groups - will go some way to mitigate the problems, says Mr Markham.
Sound advice indeed.
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