June 2010 Archives

It’s the last day of June and a little bird, (well, an electronic alarm on my mobile), has just reminded me that six months ago I made a few predictions about the price of various farm inputs and outputs.

It has to be said that betting has never been my strong point, so it’s just as well that there was no money involved in this little exercise.

But for the record, at the end of 2009 I suggested that the following prices would prevail by the middle of 2010:

Feed wheat (FW ex-farm price) £107/t
Nitram (GrowHow price) £205/t
Finished lambs (R3L carcases) 440p/kg
Red diesel (FW IPM price) 49p/litre
Bank of England base rate 0.75%
Euro:Sterling exchange rate 86p

The reality, it has to be said, is somewhat different. Today’s “actuals” are as follows:

Feed wheat (FW ex-farm price) £95/t
Nitram (GrowHow price) £215/t
Finished lambs (R3L carcases) 420p/kg
Red diesel (FW IPM price) 53p/litre
Bank of England base rate 0.25%
Euro:Sterling exchange rate 82p

So on just about every measure, (with the exception of the bank base rate), the reality has been worse for British agriculture than predicted at the start of the year...

Remember the price spike of 2007 and 2008?

It does seem quite dim and distant, though a quick glance at the Farmers Weekly graphs confirms that wheat prices really did climb to £180/t and oilseed rape really was fetching £380/t.

Heady days! But what were the causes?

The perceived wisdom at the time pointed to a host of factors including supply shortfalls, low stocks, increasing demand for food, high oil prices, growing demand for biofuels, the strong US$, the activity of speculators and attempts by some governments to limit exports.

Of these, industry representatives and politicians were often quick to play down the role of biofuels and play up the role of speculators.

 Until the financial crisis came along and bankers stole their mantle, hedge fund managers really were the scapegoat of choice...

DEFRA secretary Caroline Spelman has announced the first cut of an agency serving her department, as the new coalition government sets about its task of reining in the budget deficit.

The Commission for Rural Communities, which operates the Rural Development Programme for England, is to be subsumed back into DEFRA, saving about £5.8m.

The Animal Health and Veterinary Laboratories Agency will also soon merge, delivering further savings.

For more infor, see FWi

This morning the pound has strengthened to the highest it has been against the euro since November 2008. At lunchtime (Thursday 24 June) it was valued at €1.2215 compared with €1.2006 at the start of the week and just €1.0696 at it's low point last October

According to Jeremy Cook of finance brokers World First, sterling is continuing to trade in a post-Budget and post-England World Cup win high.

"Two of the big three credit ratings agencies have already commented positively on Osborne’s measures and confidence in the pound is growing day by day. If sterling’s recent strength against the euro is duplicated on Sunday by the England team, Fabio will have nothing to worry about.”

Good news for the footy, not such good news for farming.

“Tough, but could have been tougher.”

That seems to be the verdict of most commentators on Chancellor George Osborne’s first “austerity budget”, which saw a mixture of tax increases and spending cuts announced as he tries to balance the books.

For agriculture too, the “could have been tougher” response seems to be about right, with gains and losses identified in equal measure.

On the downside, the reduction in the annual investment allowance from £100,000 to £25,000 from 2012 will certainly hurt farmers investing in plant and machinery.

The increase in VAT to 20% will also impact on cash flow for farm businesses - most of which are zero-rated, but still have to claim back the now higher rate of tax...

The Agricultural Wages Board has decided on a 2.8% wage increase for Grade 2 workers and a 2.4% increase for Grade 1, it has been revealed.

The full breakdown of wages from 1 October 2010 for a maximum 39 hour week is as follows:

Grade 1 - £5.95/hour

Grade 2 - £6.58

Grade 3 - £7.24

Grade 4 - £7.76

Grade 5 - £8.23

Grade 6 - £8.88

The NFU has described the AWB as "an industrial relations relic".

Pig producers now have an important new outlet as the Philippines has re-opened its market to the UK.

The market had been closed since the outbreak of Foot and Mouth Disease in 2007 and never formally re-opened. Work by BPEX and DEFRA has helped fast-track the approval from the country's veterinary authorities.

"This has all happened in the last four weeks and already two or three consignments have been exported," said BPEX international manager Peter Hardwick. "The Philippines is a very important market for the fifth quarter and offals, and we have hopes the trade will grow rapidly."

Barclays head of agriculture Martin Redfearn makes full use of the tried and tested mnemonic “CAMPARI” to explain what a banker is looking for when deciding who to lend money to.

Broken down into its constituent parts, CAMPARI stands for Character, Ability, Means, Purpose, Amount, Repayment and Insurance, he told a recent poultry seminar.

Tick all of those boxes and you’ve got yourself a loan!

Well, I’ve got my own drink-related mnemonic when deciding what I look for when choosing a bank - and that is VODKA.

V stands for Value. A bank should offer its customers great value for money - and that means free banking and realistic interest rates. The current premiums over base rates on borrowings are a disgrace and as for the pitiful rates of interest on savings…

As predicted on this blog in May, the EU Commission is taking "a little and often" approach to the release of butter and skimmed milk powder from intervention, so as not to weaken the dairy markets.

Today (Thursday) has seen the first release of stocks, with the commission accepting bids for 11,551t of butter at prices between €3450/t and €3851/t. But it rejected bids for another 60,930t, and rejected all bids for SMP, because the prices were too low.

With some 76,00t of butter and 257,000t of SMP taken into intervention last year, there is still clearly a long way to go before stocks are cleared.

* See FWi Business for full story later

One of the first things I was told when I ventured out into the world of poultry was that "as soon as the UK laying flock gets over the 32m mark, prices collapse".

The comment was actually made to me in the sidelines of the International Egg Commission conference in Paris in April by a couple of gentlemen who, judging by appearances alone, had a good deal more experience of these things than I did.

And it turns out that they were prescient words indeed. Having just put the latest issue of Poultry World to bed, my eyes were drawn to two of the graphs on the market prices pages - one rising steeply off the grid and the other trending sharply downwards.

The one in the ascendency was the "size of the UK laying flock". This is actually a projection, based on hatchery placings. But the line shows that the national flock topped the 32m mark in May and is forecast to exceed 33m by September, largely due to the ongoing expansion of the free-range sector...