Recently in Recession Category

Yesterday (Thursday) I had the pleasure of attending one of the Andersons spring seminars at Salisbury racecourse on Opportunities in a Changing Agriculture.

Surprisingly it was the first of these annual events I'd been to - and sadly one of the last that well-known agricultural consultant and analyst Francis Mordaunt would be giving before his impending retirement.

Explaining complicated issues in simple and engaging terms is a gift, and one that Francis has in abundance.

In just 30 minutes he gave a crash course on the current state of British agriculture, encompassing most of the external factors affecting it, giving an assessment of the health of the industry and providing some useful pointers as to where we might be heading.

The key points were as follows:

* UK farming has weathered the recession better than most sectors. Total Income From Farming (TIFF) in 2008 and 2009 came to over £4bn each year - well up on the £2-3bn seen in the previous eight years.

* At this level, TIFF was finally in excess of direct payments, showing that farming is making a small profit even without subsidy...

Farmers Weekly's publisher Trevor Parker approached me at the start of the week and asked me to come up with a current "state of the industry" assessment for a presentation he is giving.

It was a good opportunity to take stock and have a think about where we have come from in the past 18 months and where we might be going. The following is what I told him:

UK agriculture was the best performer in the European league table of farm incomes in 2009. EU farm income figures from Brussels show that the UK is just one of four member states to have seen an increase in farm income in 2009 - thanks in large part to the weakness of sterling. Provisional figures put us up 14%, compared with a 35% decline for Hungary, 25% decline for Italy and 20% declines for France and Germany. DEFRA predicts an 8% fall in UK farm income in 2010, but it will still top £4bn - the second best result in a decade...

On first inspection, DEFRA's latest estimate of 2009 UK farm incomes is enough to cheer the heart.

In a year in which many people in the British workforce have had to endure pay freezes, and in some cases pay cuts, those in the farming industry have apparently seen average incomes climb by 25%.

In aggregate terms, the UK Total Income From Farming is being estimated by DEFRA at about £4.2bn. That comes on top of last year's 36% increase.

And in terms of income per person employed in agriculture, the figure is put at about £23,000 - not exactly Premiership footballers' territory, but comfortably above the minimum wage.

But don't get carried away just yet. These figures are merely first estimates and DEFRA's track record of getting it right first time leaves a lot to be desired!

This time 12 months ago DEFRA was suggesting that Total Income From Farming had climbed by 8% in real terms, as higher cereal prices in the first half of the year outweighed the effects of rising input costs...

When you attend a conference organised by English Farming and Food Partnerships, you expect to hear a lot about collaboration.

And yesterday's "Routes out of Recession" conference, held in the aesthetically pleasing Plaisterer's Hall in the City of London, was no exception.

DEFRA minister Lord Davies was first out of the blocks, stating that "strong working relations and collaborative relations in the food chain are vital". (It was about all he did say.)

EFFP chief executive Sion Roberts was more erudite, claiming that "the unifying principle that the visionaries all share is the drive to strengthen food chain relationships". (Good point, well made, Sion.)

Other speakers were quick to latch on to the theme. Jonathan Warburton described how his bread empire was built on trust and mutual reward along the chain, while NFU president Peter Kendall quoted the examples of the Red Tractor logo and designated supply chains in the dairy sector as examples of the industry working together to extract more value.

And Morrisons chief executive Marc Bolland spoke at length of his strong determination to work with all stakeholders, but especially farmers, to deliver "shared benefit for all"....

Economics is undoubtedly a complicated subject.

It's been a long time since I studied it in any formal sense, but I can just about remember the theories of opportunity costs and marginal gains, even if the detailed econometric formulae I could once rattle off have long gone.

But as a former student of economics, I was somewhat dismayed by a comment from Barclays Bank agricultural specialist Martin Redfearn at today's (Tuesday's) HGCA outlook conference in London.

According to Mr Redfearn, "if you could teach a parrot to say the words 'supply' and 'demand' you could give it a mortar board and call it a professor of economics".

The remark seemed somewhat dismissive of all the years I spent studying the subject, though it has to be said, he does have a point....

At face value, a 33% drop in anything looks like a bit of a slump, or in the case of the AEA's monthly tractor sales data, a "depression", given that this index is so often referred to as the barometer of the UK farming industry.

Certainly, the drop in the number of tractor registrations in the past few months has been considerable, with the August figure coming on top of a 27% year-on-year downturn in July, 6% in June and 16% in May.

But to call it a slump or depression would be an overstatement - a "correction" is probably the better phraseology.

Looked at over the longer term, this year's tractor registrations are still pretty buoyant. In the first eight months of the year, UK farmers have purchased 11,889 tractors over 50hp. That is more than they bought in the whole of 2000 and 2001.

OK, by year-end total tractor sales are likely to be well down on last year's 17,000-plus. But even if they reach 14,500, as seems likely, it will still have been one of the best years for the past decade....

It always amazes me how two different journals can run the same story with such different interpretations.

Case in point is this week's report from the IGD, (or Institute of Grocery Distribution in its former guise), which is the latest survey tracking the performance of the organic sector during the recession.

According to the headline on food trade website talkingretail.com "Consumers are still supporting organic food".

The article goes on to explain that "nearly one in five of all UK shoppers are remaining loyal to organic food and drink, and are maintaining their expenditure".

Compare and contrast that upbeat message with our own interpretation. "Four out of five shoppers shun organic". According to our report, 10% of former organic shoppers have found alternative products, while another 8% are buying fewer products.

We're not by nature a miserable lot in the Farmers Weekly office. But I do believe our headline better reflects what is going on in the retail sector.....

Every cloud has a silver lining - even if it's a very dark cloud, full of water and preceded by an unseasonably chilly wind.

What am I talking about? The CLA's Rural Economy Index, of course.

According to the latest survey, for the second quarter of this year, rural businesses are growing increasingly confident about their future prospects.

The survey is based on a blend of rural businesses - farms, estates, rural surveyors, tourist-based activities, food service outlets etc.

According to the report, some 17% of the 100 companies surveyed said they felt their businesses would grow in the next six months, compared with just 12% who felt that in the first quarter of the year....

Earlier this month Tesco put out a press release suggesting it was seeing some "green shoots" of recovery in the organic market.

Having been hit hard by the recession last autumn, the supermarket reported a month-on-month increase in organic vegetable sales since the start of the year, suggesting the market would be "back on track" by the autumn.

This positive news was reinforced this week by news from OMSCO that retail sales of organic milk have also climbed significantly.

Their data pointed to a 10.5% increase over a four week period, leading to the conclusion that "despite the recession, demand for organic milk has remained robust."

Encouraged by this market upturn, OMSCO is poised to launch a £1m multi-media campaign to promote the benefits of organic milk. "The most important thing for us to do is to remind consumers of the nutritional differences of organic milk," said marketing director Richard Hampton.

But OMSCO will have its work cut out...

By Paul Spackman

We seem to have had a run of surveys over the past couple of weeks - from Defra's farm rent figures to DairyCo's farmer intentions survey. The latest comes from our friends at the NFU who have found that one in four farmers feel the credit crunch will significantly affect their business - up from one in six last December.

OK, so the sample size wasn't huge - 179 farmers filled in the online survey - but it's probably a timely reminder that now is not the time for complacency.

It's hardly surprising that farmers are starting to feel, or at least worry more about the effects of the recession. Whether it's the tighter availability of credit from the banks, shifting exchange rates affecting the value of agricultural products and inputs, or reduced consumer spending on organic, or premium cuts of meat, one way or another, agriculture will be affected.

Many people understandably thought farmers would be sheltered from the worst of the downturn, but I doubt anyone really believed we would be immune from its impact - especially when you consider the depth and severity has been likened to the dark days of the 1930's recession. The longer the latest recession goes on, the more people it's likely to affect...