David's Digest

I drove over to Cheffin's machinery sale yard near Ely the other evening to chair a meeting hosted by the auctioneers in conjunction with Whiting & Partners, accountants and Clydesdale Bank. The topic for discussion was "Fenland Farming - What the Future Holds".
David Bolton of Cheffins reminded the audience of the huge changes in commodity prices and gross margins since 1995. That year, he said, feed wheat averaged £120/t and with a 3.75t/ac yield left a gross margin of £451/ac. This year he predicted a price of £92/t (a bit optimistic I thought), a yield of 3.85t/ac and a £248/ac gross margin. In other words a gross margin drop of over £200.
He had done similar calculations for sugar beet. In 1995 the price was 40.34/t, average yields were 19.3t/ac and the gross margin was £493/ac. Twelve years later he expects the 2007 price to be £20.28/t, the yield (because of varietal improvements) to be 28t/ac and the gross margin £299/ac. He had omitted Single Farm Payments and Entry Level Scheme from all the 2007 figures because, as he said, they are now decoupled from production.

What took you so long Sir Terry? OK, we must not be churlish when you do finally respond to a crisis among your suppliers and although I am not involved in milk I add my thanks to that of those who do produce it. But I cannot resist pointing out that it has taken many months of campaigning by dairy farmers and a hundreds of casualties in the shape of producers forced out of the business along the way.
Those that are left and selling to the biggest UK retailer must now ensure that the increase announced by Tesco's actually appears on their milk cheque and does not disappear into middlemens margins. They must also hope that other milk buyers who have not yet raised their prices to viable levels are embarrassed into following Sir Terry Leahy's example.
What this tells us is that even retail giants will do the right thing eventually provided public opinion demands it. I believe that the stream of press articles and TV programmes showing exactly how supermarkets mistreat some of their suppliers, the latest of which was aired on BBC1 as recently as Monday evening, is almost entirely responsible for the rise in price. That and the realisation that unless something significant were done soon the critical mass that it takes to sustain an industry would be lost. Let us hope it was not too late.

NFU President Peter Kendall was on the Radio 4 programme "BH" this morning welcoming Tesco's decison to increase the price of milk. He said it was encouraging that a major retailer had recognised the need to pay more to help save the dairy industry. And he added that he hoped UK consumers would now accept the benefits of home production and buy locally. I may not have used his exact words - I was in the shower at the time and its difficult to make notes.
But when asked if he claimed UK food (specifically organic, I think) was more environmentally friendly than that which is imported he hesitated and said no he didn't think that. He just asked people to remember that UK food was subject to rigorous inspection. He seemed reluctant to remind listeners about food miles. Indeed he was clearly at pains not to be perceived to be complaining by telling it how flying produce around the world must add to global warming, never mind doubts over the provenance of some imports.
Minutes later a listener sent in a text message asking why consumers should believe such stories from the industry that gave us Foot & Mouth disease. By which time it was too late for Peter to respond as his link to the Cambridge studio had ended. I ask, not for the first time, if the farming message might have been more effective if the NFU had been a bit more agressive and told the whole story - not just the most palatable bits.
Yesterday morning Meurig Raymond was on the Radio 4 farming programme talking about government plans to share the costs of infectious diseases. He too seemed almost hesitant to mention that F&M was imported, not generated in Britrain.

What you have to remember, said the man who had lived and worked in China for the last seven years, is that the Chinese have a sense of history that is much longer than we have in the west. Most of the people here believe that the last sixty years of Communism was only a brief interruption in the dominant position in the world which China should hold and indeed used to hold a few thousand years ago when it was a leading civilisation.
Whether they agreed with that assessment or not, members of the Farmers Weekly Farm Study Tour of the country could only wonder at the speed of industrial and infrastructure development that had happened in China over the last ten years and is clearly still going on.
We have been through literally beautiful new airports, travelled smooth and wonderful new six and eight lane highways and marvelled at forests of prestige office buildings that leave London standing.
Here is real wealth exemplified, perhaps most eloquently, in the City of Chongqing. Twenty years ago it was a "small city" of only 8 million people. Today that City has more than 31 million and it is the second biggest in China, after Shanghai. We drove through the centre of Chongqing after dark and it was lit up with neon lights like Disneyland.

My cup runneth over! Not only have we had more than 60mm of rain in the last couple of weeks and are now having pleasant warm growing weather to follow but in todays post we received notification that the final 40% of Single Farm Payment due to this farm on account of 2006 had been paid into our bank. A few of my neighbours have had similar notifications over recent days so perhaps the Rural Payments Agency are beginning to catch up.
About time too. Although I hear from various usually reliable sources that a significant number of English farmers may still not receive their cheques by the end of June target. If that turns out to be the case another hefty fine will be imposed on this country by the European Commission. And UK taxpayers will once again have to pick up the tab for DEFRA's inefficiency. The buck stops now, as previously, with The Secretary of State only this time it is David Miliband not Margaret Beckett. We farmers feel a bit better since the said lady went to the Foreign Office. But is the actual performance of her bright and ambitious successor, in matters of greatest importance to us, very much better? I think not.

I am as perplexed as most dairy farmers must be by the announcement that Cadbury's have been forced to raise prices because of a 20% increase in milk prices.

OK, there may have been some supply problems during the recent floods in the West Midlands but only for a few days surely. In any case there will not have been time for that to affect supplies of dried milk powder which the company claims to use in its products.

Nor do I know of many milk producers who would admit to a 20% rise in returns last year. The modest increases in some producer prices are so recent as to be irrelevant to Cadbury's 34% fall in profits last year.

So, what's the real story? Has milk production dropped so much because of low returns that powdered milk is now in short supply? Or is Cadbury's simply seeking a convenient excuse for its poor performance and product recall problems by blaming dairy farmers? I think we should be told.

According to the Bank of England, annual food inflation hit 6% in April. Waterlogged crops and Foot & Mouth disease in this country together with extreme weather conditions in other parts of the world from which we could otherwise import supplies could push up prices further, it warned.

Might I and others be forgiven for retorting "We told you so"?

Indeed I am reminded of a comment made by A G (Arthur) Street on the long running BBC radio programme Any Questions. It was in the era of the ration book in the 1950's when food production was perceived as more important than it is now. Any Questions often had a farmer panelist in those days.

On the evening in question a member of the audience complained about the rising cost of potatoes. To which Arthur Street replied that farmers who grew potatoes had spent many months ploughing their fields, planting the seed potatoes, nurturing the plants, protecting them from blight, then lifting, grading and bagging the tubers before delivering them to greengrocers.

It hasn't been a good year for potatoes, he continued, so there aren't as many to go round and the price has increased. Furthermore, the farmers who grew them need that extra money to make a living from putting food on your table. "So I'm glad the price you pay for potatoes has increased," he concluded. Interestingly, the audience, presumable mainly made up of consumers, applauded him.

It wouldn't be politically correct to say such things these day's so I had better not repeat it.

As UK dairy companies belatedly begin to raise ex-farm prices rather than risk milk production melt-down the talk turns to the need for further consolidation in the dairy industry in order to provide a more solid basis for investment and greater leverage against the big retailers.

In other words we are likely to see a significant reduction in the number of companies, perhaps down to just a handful for the entire UK. If this happens, some commentators say, it would allow milk prices paid to dairy farmers to increase still further.

Suddenly, the things some of us have been saying about the need for better prices in order to provide greater food security for UK consumers are coming to pass. Shortages always drive markets in the end. It's happening with arable crops as well because of a world shortfall between production and demand.

But perishable, short-shelf-life milk has always been a special, relatively local, case. And industry calls for a more consolidated processing and distribution sector have a familiar ring. Remember the Milk Marketing Boards in each country of the UK? Make's you wonder why they were kicked out in the first place, doesn't it?

Many justifiably harsh words have been spoken about the way supermarkets held down ex farm milk prices while raising retail prices. It was obvious they were coining it while claiming what they were doing was in the best interests of consumers. However, I doubt if many dairy farmers realised a criminal cartel was in operation. That, anyway is what the Office of Fair Trading has alleged. The full facts, after the supermarkets have been given the chance to defend themselves, will be released in a few months.

Meanwhile, during the period of the alleged offences thousands of dairy farmers were forced out of business, some tragically. Its what happens when one side of an industry becomes so powerful that it can treat the other side with disdain; when greed takes over from fair business ethics; when individual hunger for bonuses becomes so dominant that they are prepared destroy the lives of those they deal with. Its what globalisation is doing on an even bigger scale.

The case has been reported extensively and there is no need for me to give further details here. However, a couple of key questions remain.

If supermarkets are fined hundreds of thousands of pounds, as some commentators suggest, where will the money go? To the farmers who were robbed in the first place? Or the Treasury? Do you need three guesses?

And if supermarkets were colluding over milk prices, how many other commodities might have been subject to similar behaviour? The Competition Commission should tell us that sometime next year. This may be the first of many shocking disclosures.

At breakfast in the Farmers Club in London this morning I spoke to an egg producer who supplies ASDA and Tesco's. Yesterday he had been to see ASDA buyers who had agreed to increase the prices he would be paid to just about cover his higher feed costs. This morning he was going to see the buyers at Tesco's and was confident they would agree to something similar. He was happy that he was being fairly treated and I was surprised and pleased for him.

The same cannot be said for many pig producers according to a senior pig politician I also met at the Club. The build-up of pig numbers on farms because of F&M restrictions is being made worse by increasing imports from Denmark and Holland who seem able to supply cheaper sides thereby improving retail margins. The highly developed and economical processing and marketing sectors in those countries is well known, of course. But they must, surely, be paying more for feed, just like UK producers, so how can they undercut the UK to such an extent? However they are doing it the situation on most UK pig farms is extremely serious and will get worse if prices don't rise substantially.

The third person at the Club with whom I discussed such matters was a senior NFU man who had just returned from the Conservative Party conference in Blackpool. On the train he had sat next to a prominent conservationist (who had also been there) who spoke of widespread concern among "greens" at potential loss of habitat as a result of the abolition of set-aside. The NFU man had explained the brutal facts about current lack of profitability of grazing livestock. F&M and now Bluetongue had wrecked the economy of production and now the high cost of feed was the last straw for many. He had asked the conservationist to try to influence the food trade to pay more for beef and lamb. Because if returns don't improve, he said, there will be no animals to graze our countryside and every acre of grass capable of growing arable crops will be ploughed. And that, he emphasised, would be far more serious for wildlife than the loss of a relatively small area of set-aside.

I was talking to this farm finance expert the other day. He spends most of his time visiting farmers and studying their accounts. I reasoned he must know more than most about the number of acres it takes these days for a farming family to make a living. So I asked him.

Its dangerous to generalise, he said cautiously, but here in Norfolk on Grade Three land with a typical arable rotation and no livestock I would estimate you would need a minimum of 1,500 acres (600ha) to be viable. If you have high overheads, like a big overdraft, a huge mortgage or a high rent, you would, of course, need more. But in such a case you would ideally want to increase in multiples of 1,500 acres to be able to run tackle and employ labour economically.

If you farm less than 1,500 acres (and we do!) its necessary to diversify to create other income streams to make up for the lack of acres, he went on. And if you do it well, the non core income can be more secure than that from producing commodities. That comment gave me a little comfort for we have diversified for years. But it also reinforced the need to either get hold of more land to farm (and land prices and rents continue to increase) or develop diversified activities further.

Does your advice hold good now that arable crop prices have increased sharply? I asked. Very much so, he replied. I am not expecting bumper farm profits in East Anglia this year. Do you realise that although the value of spot wheat is some £160/t, because of forward selling, the average achieved for grain harvested this year is likely to be under £100?

That too gave me food for thought.

Outside in yesterdays pouring rain stood fifty or so pig farmers sheltering under umbrella's. As everybody who was anybody in the grocery business arrived at the Royal Lancaster Hotel in London for the IGD's most prestigious conference of the year the farmers politely handed each of them a flyer. The headline said "I'll be history by Christmas (and so will my competitiors on the Continent)".

The hand-out went on to explain, in extremely moderate language, that pig production costs had risen so much in recent months that every pig was making a loss of 30% of its gross value. We must be paid more, and quickly, or we will be forced out of business the flyer said - and pig farmers all over Europe face a similar situation. In other words, Mr and Ms Grocer, don't rely on imports because they won't be there either.

Later, in the Great Hall some 700 delegates heard speaker after speaker representing UK supermarkets express sympathy with the pig farmers. "We know we will have to pay more", was a typical comment that was often followed by, "but that does not mean we will give up trying to supply our customers as cheaply as possible".

Over coffee during one of the conference breaks I found myself beside a breakfast cereal manufacturer who also supplied some of the retailers who had been on the platform. "Well, the speakers seemed to be saying the right things about paying more", I volunteered. "Yes, the top men always do", came the weary reply, "It's the ones on the buying floor you have to watch out for. They still work by the same old rules as they always have."

I wonder if those buyers realise how vulnerable their pig meat supply base has become?

Its been a long time coming and even now its not exactly exciting. But British Sugar, the monopoly processor of all the sugar beet grown in this contry, has finally accepted that if it wishes to have sufficient critical mass of beet grown in Britain to run its factories it will have to pay more for roots than was originally negotiated a year ago.

£17.50/t plus a few pounds ex the SFP was the base price set by the EU. British Sugar added a pound or so to that and said that was all it could afford. Take it or leave it. Oh yes, and they also agreed to an escalator clause that would add a bit more if the price of wheat rose to £95/t.
This at least was recognition that for farmers to want to grow beet it would have to be competitive with grain.

Then, of course, the price of wheat went up. And suddenly the £95 escalator clause was irrelevant. Growers, myself included, said negotiations should be re-opened and account taken of the new situation. Well, eventually they were as British Sugar realised that the habit of growing sugar beet, so ingrained in east anglian farmers, would not be enough to keep them growing the crop.

I once read a book about tulip bulbs in Holland. A few hundred years ago, when tulips first became the symbol of the Dutch nation and new varieties and colours were at a premuim, there was a run on the price of bulbs. Small quantities of special types became more and more valuable, finally changing hands at exorbitant prices equivalent to the value of a big house. Tulips became currency and the hysteria spread - until, of course, the speculators came to their senses and the market collapsed.

I was reminded of this when I read the weekly market report received today from the farmer owned merchant, Grainfarmers. "Another amazing week in the wheat markets around the world -or should we say the USA," the report began. And it went on to describe how last week, in Minneapolis, after daily exchange limits were removed, the price of wheat went up more than £100/metric tonne in one day. It came down by a bigger sum by the end of the week but not before one US merchant, who employed a rougue trader, had lost $140m.

At the same time, here in the UK, prices moved up by a more modest £12/mt. Even so it seems to me we are witnessing a certain amount of madness in grain markets that is sentiment (ie panic) led rather than by any real evidence of a huge potential shortfall to justify such volatility.

If you got in with a secure sale on the day, fully back to back with reliable traders, good luck to you. But for most people daily price movements on a scale previously only seen through an entire year and who did not catch the moment, such changes are unsettling and dangerous. Because we can so easily come to believe this activity on financial markets is the real world whereas for the majority it is fantasy - like those tulip bulbs.

The Chief Executive of Carrefour, the French based retailer that claims to be the second biggest in the world (after Walmart) said at the World Retail Congress in Barcelona that the retail industry is facing its most significant challenges for a generation.

Jose Luis Duran, for it was he, pointed to cost inflation in commodities and the resulting inflation in selling prices as particularly difficult issues. "There is volatility and confusion", he is quoted as saying. "Confusion for our team, confusion for our customers and confusion for our business partners." Carrefour has an annual turnover turnover of some Euro102bill.

Well, M. Duran, join the club. That's what its been like for your farmer suppliers for several years. Some of them have squeezed out costs in order to continue supplying you at lower and lower prices. Others have been forced out of business by the unremitting pressure you and your kind have placed them under. Moreover, the fact that many producers have gone is one of the reasons for the shortage in the market place and the higher prices you now have to pay.

I take no pleasure in pointing these things out. For I am aware that you and other powerful retailers will simply increase your pressure on suppliers in order to maintain your margins. But I hope even you in your exalted position will now realise how it feels when, as you put it "costs grow faster than prices". We farmers know it well.

I am indebted to a couple of correspondents to the Daily Telegraph for the following.

They were responding to reports of unprecedented increases in food prices. Catherine Spencer of Warminster, Wilts, who is an egg producer, said she had watched free range egg prices in supermarkets rise by 83p/doz over the last twelve months. As a producer of free range eggs she had only received an extra 16p/doz over the same period. She wondered what had happened to the 67p difference.

Dr Kieth Ray of Marlow in Buckinghamshire pointed out that while the price of a loaf of bread had increased by 15% because, according to retailers, "the price of wheat has doubled". But Dr Ray, who has spent 30 years in the food industry and knows how much wheat is used to make a loaf, calculated that a doubling in the price of wheat equated to around 7%, not 15%.

He too suggested that someone in the production and marketing chain was taking advantage of current headlines about food shortages and higher commodity prices to make a lot of money.

Who could that possibly be?

I'm not involved with pigs at present (thank goodness!) but I kept them from the time I was ten until a family reorganisation a few years ago so still retain an affection for them, although not, I hasten to add, for the current economics surrounding them.

But out of habit I keep an eye on pig statistics and frankly they are unbelievably bad. In this country, for instance, the pig breeding herd that numbered just over 800,000 sows ten years ago has halved since and is forecast to decline to 380,000 by next year at this time. Numbers started to go down as a result of unilateral welfare regulations and accelerated with the rocketing cost of feed.

Quite apart from the tragedy to individuals who have either given up keeping pigs or are having to face up to the probablity that they may have to do so, the danger is that sometime soon there may be so few being produced here that there will be insufficient critical mass to support a slaughtering and processing industry and everything will have to be imported. 

There are those in government and elsewhere in this country who actually advocate that, of course. They are presumably not aware or do not care that a similar situation also exists in most other pigmeat producing and exporting countries as well. Danish producers are said to have lost around £1billion over recent years and are still recording unsustainable losses. There is even talk of the monopolistic and high profile co-operative, Danish Crown, being attacked by its members who are threatening to break away and form a rival organisation.

The Irish pig population is expected to fall by another 10% this year are those in Hungary and Poland. French pig farmers are said to be losing £32/pig, and so it goes on across Europe. Only Holland appears to have escaped the worst of the crisis, presumably by finding cheaper feeds (whatever they may be) and adding extra value. Somehow the Dutch still seem to be able to sell to supermarkets at the budget prices they demand.

Meanwhile ex farm prices are beginning to rise as reduced supplies force them up. If that trend continues some producers who have weathered the crisis so far may decide to hang on. But I suspect that few of those who have left the industry will be tempted back. And this is happening at a time when, on the face of it with consumers facing higher and higher food prices with the spectre of shortage on the horizon, maximum production is required.

Our political masters and our biggest customers seem to have little concept of the long term risks they are taking by not supporting pig producers better. Will they wake up in time to save a vital sector of agriculture?

Grower power, as expressed by around 300 of them representing some 14% of the national crop, who attended a meeting near Peterborough last month, forced British Sugar to re-open price negotiations with the NFU for 2009. The result has been a grudging £1/t increase in the contract offer plus a further £1/t transport allowance.

This shows that if farmers stick together in sufficient numbers they can influence what buyers pay them for commodities. But whether this paltry improvement will persuade growers to reverse the decisions many had made not to grow the crop again, only time will tell. For it barely recognises the real increases in the costs of growing beet and certainly does not cover them.

Only those growers on top grade land who can produce 75 to 80t/ha on a regular basis will find the British Sugar attractive. And only then because the value of some alternative crops has come down recently. Growers on grade 3 land who can only manage 60t/ha in a good year are unlikely to be swayed by British Sugar's "largesse". Who knows where that leaves this country's domestic sugar industry?

I have no inside knowledge on the Bank of England's decision to cut the base interest rate by one and a half percent to 3%. But I can only assume the statistics and the forecasts on which they based the decision were horrific.

Before the event most commentators were predicting a cut of half a percent; a few said it might even be as high as one percent; only one academic said it should be one and a half percent, only to be ridiculed by the rest.

The implications of the huge (in banking terms) cut are that there must be a very torrid time ahead. The recession, in other words, is set to get deeper and wider and there will be lots of casualties along the way.

The NFU has rightly called for the cut to be passed on to farmers who borrow money. For the record I was being warned by a banker a couple of weeks ago that while base rates were virtually certain to come down, the rates charged by the banks would not alter much. In other words, if you have been paying one and a half percent, or two, or more above base rate when it comes down you will probably have to pay the same interest as before except that it will be at a much bigger premium above base rate than it was previously.

Banks, don't forget, have been nationalised or have had to refinance themselves with expensive money and are anxious to return to full solvency as soon as possible. As usual they will look to their customers to help them do it.

So, I wish the NFU well and very much hope that on the back of the relatively solid land assets owned by farmers they succeed in getting those rate cuts passed on. But I am not totally optimistic especially for the tenanted sector or for those who are particularly heavily borrowed.

Meanwhile, this morning in my post, I received a letter from my bank urging me to "make savings" by spending on some special offers of wine and so on that I did not want at cut prices. In another letter from the same bank in the same post I was reminded I could put five family names on my credit card. Needless to say both letters went straight in the bin. I do not intend to try to spend my way out of recession.

While I was away at the Oxford Conference this week the postman brought a letter from Defra to say our SFP was about to be paid into the bank. Hooray! We will probably now be able to survive to the end of the month.

Seriously though, it is the earliest we have ever had it - even though its still a month later than farmers in Scotland and Wales. I am also acutely aware that many of my fellow English farmers have not yet received their cheque and others have still to be paid in full for previous years.

This years payment is, of course, rather larger than before reflecting the "favourable" (for UK farmers) exchenge rate between the Euro and the £ together with an allowance to compensate for the reform of the EU's sugar beet regime.

So, as the frost and fog come down dropping outside temperatures to -4C and I throw a few more logs on the farmhouse fire in an attempt to raise the temperature, I am feeling a little happier than I was. And I hope all those farmers who have not yet had their payment get it soon. And yes, the head cold from which I was suffering last week (not man flu Isabel) is getting better.

Most people in this country, I suspect, believe the credit crunch is affecting Britain more than anywhere else. I certainly held that view until I met my friend Matt Dempsey, the editor of the Irish Farmers Journal, a few days ago. "We have much bigger problems than you do", he assured me. He went on to tell me that Irish banks are much less solvent than those in this country and that Ireland is anticipating public debt to rise to over 60% of GDP by 2010.

British farmers are probably better off than their Irish counterparts too bearing in mind that we import a significant proportion of our food and because it has to be paid for in devalued £'s it costs more. This in turn drives up the value of home produced commodities - like grain over recent weeks, for instance.

Ireland, on the other hand is a net exporter of food. Indeed Britain accounts for a total of 21% of Ireland's export earnings of which a high proportion is food. And while Ireland uses the Euro, which has revalued by about 30% against the £ since the current crisis began, Britain pays for those goods in devalued £'s. Some Irish people are understandably feeling somewhat peeved that Britain has so far failed to join the Euro.

All of which will make the Farmers Weekly study tour of Ireland starting on May 26th even more interesting than I first thought. Although I am confident that the welcome we will get from Matt Dempsey and others will be just as warm. He is helping us with the details of the programme of visits and will ensure that we see the best that Ireland has to offer.

When we are in Northern Ireland we will have the help and advice of another friend, Campbell Tweed, a former President of the NI Farmers Union (whose beautiful farm is, incidentally, to be featured on the BBC's Time Team tv programme next Sunday at 5.30pm) together with the principal and lecturers of Greenmount Agricultural College on the edge of Belfast. The ten day tour promises to be interesting, informative and the scenery is gorgeous..

There are a few of places left on the tour for anyone who would like to join. Let me know if you'd like details. You can contact me on whiterails@paston.co.uk

Time was when I might have opened a comment on the annual Economic Forum with the words "The great and the good are heading for their annual economic shindig in Davos this week.....But given the world financial crisis brought about, or at the very least, allowed to happen, by those who will attend the event it might be more appropriate to say something like "This week, as the worlds guilty parties gather at Davos, the cold wind of world recession is cooler than the snowy mountains around the ski resort.....

 For the 2,500 strong guest list will include the chairmen of several prominent but now virtually insolvent UK and other countries banks (presumably paying their delegate and hotel fees out of bail-outs provided by taxpayers); some of the worlds top economists who advise banks and politicians on the policies they should follow; and heads of government from around the world.

Vladimir Putin, the Prime Minister of Russia will, for instance, give the keynote address (presumably it will include information on how to exploit your customers when you are sitting on the worlds biggest supply of natural gas); and Gordon Brown, our own Prime Minister will, I imagine, try explain to delegates how to banish boom and bust. I doubt if he will have a very big audience.

In more prosperous times the Davos gathering has been an excuse for a few days skiing at public expense and lots of partying. This year, we can only hope, the leisure activities will be kept to a minimum and serious discussion about what went wrong and what to do next should dominate procedings. If not we have the right to ask the reasons why.

Last time I was in Davos (many years ago and at my own expense) I skied the famous Kublis run - at the time the longest downhill piste in Europe. For the first few miles the skiing was easy with lots of snow and relatively gentle slopes. But the nearer we got to the village the steeper and more difficult the terrain we had to negotiate. Furthermore the snow that was there had turned to ice and there were rocks everywhere to snag your ski's and trip you over. It was almost impossible to get a grip. By the time we reached the bottom we were out of control and relying on pure luck to stay on our feet.

It stikes me that world finances have travelled a similar journey over recent months and we are still on the icy bit. I hope Davos gets some metaphorical fresh snow this week to enable the guilty parties to begin to recover their (and our) balance. 

According to todays Daily Telegraph an un-named, but by implication, influential senior economic adviser to Gordon Brown told him the City of London was the only really important engine of the British economy and that "the rest of the country can be turned over to tourism".

Admittedly this advice was said to have been given sometime before the fall of Northern Rock. I should also point out that the expose has come from the UK National Defence Association which particularly deplored the fact that defence was looking at a £15bill shortfall in funding and that it was bracketed by the said economist alongside manufacturing and virtually all other industries.

There was no mention of agriculture or food in the report. But doesn't its content sound familiar? Our industry has suffered from the same kind of attitude. Government policy towards it, delivered through DEFRA, has sidelined us. Food and farming were branded unimportant. Tourism and a pretty environment were given top priority. You could just imagine that same economist telling Gordon Brown to let farming go hang and import most of our food. It is entirely consistent with what happened to defence.

And where has that advice to rely wholly on the City got us? I don't need to give an answer. It is transparently obvious to us all. And it confirms what dangerous people some economists are. Governments should sack them all and go back to legislating with common sense. But they've been listening to economists for so long they have probably lost the ability to think for themselves. Sometimes I pull out my hair in despair. And if you've seen my photograph you will realise where that leads.

Christmas has come early. Yesterday we received notification that our Single Farm Payment was about to be paid into the bank. Having complained (many times) about the Rural Payments Agency and its tardy ways I feel I should at least recognise that they are improving. And about time too.

But as I heave a grateful sigh of relief that the bank manager will not now need to review our overdraft I am amazed at how much more the payment is worth because of the lower value of sterling against the Euro. I shudder to think how reliant we are on payments from Europe. And I wonder how we will manage without it if and when the payments stop, or more likely are significantly reduced, after 2013.

We all hope,of course, that the coming world shortage of food will force prices up enough to replace the disappearing Euro's. If that happens, fine and dandy. But we will be very lucky indeed if the timing is that convenient.  

Crucial statistics estimated by Defra and on the basis of which the government decides what's to happen to agriculture, it has now been admitted, were more than 30% out when they were issued a couple of months ago.

As Phil Clarke has revealed in his blog of yesterday "How reliable are farm income figures?" actual income from farming during 2009 has now been calculated to be a fall of 6% from the previous year. Last autumn Defra said Total Income from Farming (TIFF) had risen during 2009 by 25%. Now they say their starting point was wrong; that they had underestimated TIFF for 2008 and that was the basis for their discrepancy.

Both Phil (in a blog) and I (in a column in FW) questioned the accuracy of the Defra figures when they were first published. Without having access to the working documents we sensed that the estimates just didn't feel right. But Defra went ahead and published anyway. Now, it seems we were right and Defra was wrong.

So, does no-one at Defra have enough understanding of our industry to have similar instincts? And if they don't, shouldn't they check them out with someone who does? Come to that why can't they get them right to start with?

Why does it matter? Because there will be many in government and out there among consumers who will remember the first figure but may not even see the correction; because government policies may well be based on false information; because this is yet another example of an incompetent administration that should be sent to the knackers yard. 

Why should we believe anything Defra tells us?