2 April 1999

Almost half of producers fear next two years

NEARLY half of farmers fear their business could be at risk within the next two years, according to ADASs Farmers Voice survey. Yet four out of five plan to continue farming.

The newly-published data, covering 2500 producers countrywide, shows 8% consider themselves at "immediate" risk, with an additional 35% fearful of the two-year outlook.

"It is evident that many will fail to cover private drawings or even loan repayments this year and are continuing to fall into debt," said ADAS head of economics Bill Hall.

"While the current high asset value in farmland can support this in the short term, it is clearly not sustainable," he said at the launch of the firms new professional services division this week.

The outcome would be rapid restructuring, he predicted, with an ever-faster move to fewer, larger units. Driving people from the business was the bleak income situation, with 19% of cereal growers and 18% of milk producers losing money in 1997/98.

Uncertainty is another key factor in the change. "People are exposed to a lot of unknowns." And chief among these, said Mr Hall, were currency movements. "This is – and will remain – the most potent impactor."

Despite their fears, most farmers are committed to a future in the business, with the survey showing 79% planning to stay in the industry and many searching for positive solutions. "The next few years of turbulent change could provide the opportunity for the judicious expansion of farms, where it is possible to do so."

Indeed, many were already pursuing such plans, with 40% looking to buy more land and 54% keen to rent more. "Their appetite for expansion will remain." For many the drive for acres follows a profitable 1997/98, when nearly a quarter of cereal and dairy farmers made more than £30,000.

The drive for expansion will quicken as land prices and rent levels fell. "It is a question not if land prices fall – but when and by how much," said Mr Hall. "Were heading towards the £2000/acre-mark for bare land in the next year."

And deciding what to pay was crucial. "When to buy or rent more land, and at what price, can be a make-or-break decision."

The go-ahead farmers, meanwhile, would put more distance between them and the rest. "To be competitive it is no longer enough to be average," said Mr Hall, highlighting 1998 figures showing a £200/ha (£80/acre) difference in profit between the top 25% and the average arable grower.

Non-farming sources of income would also become more important, with nearly two-thirds looking at this option. Potential stumbling blocks abounded, though, with 40% highlighting planning permission problems and 30% pointing to a lack of capital. &#42

Dairy 1998 (£/ha)

Average Top 25%

Output 1890 2040

GM 1294 1405

Fixed costs 690 615

Rent/finance

& quota leasing 356 305

Profit 248 485