Arable farmers must not allow better returns to distract them from preparing their businesses for the scheduled end of the single farm payment 2013, according to consultant Andersons.
The firm’s Richard King said that while the price outlook for cereals and oilseeds was more promising than for several years, farm businesses needed to prepare strategies for 2013 when direct farm support faced further reforms.
“There is a lot more optimism, but the danger is that farmers relax and allow businesses to drift. Futures prices of £100/t for feed wheat are available for harvest 2008, so by forward selling farmers can effectively guarantee themselves two good years.”
Mr King said some farms were close to achieving the “holy grail” of financial independence from subsidy. “It is looking possible to be profitable without support payments, but if farmers let costs drift up and prices do fall back, they will be faced with still higher costs and have in effect gone backwards.”
But he added that inherent market volatility meant there was no reason why wheat prices couldn’t slide back to £70/t in the short term. “I have no doubt that better returns will draw out a lot more wheat produced at harvest 2008.”