2 April 1999

Banker fears for livestock

DAIRY and sheep enterprises in the north-east are of greatest concern for banker Ian Stockley, head of Agricultural Services with Lloyds TSB, following the CAP reform deal and with the continuing strength of sterling.

Long-term prospects for dairying, he said, looked gloomy. The industry had to get away from relying on the liquid milk market. The future lay in producing high-value dairy products but, unfortunately, UK processors were not moving in that direction. The likely result was a further cut in producer prices.

Mr Stockley also feared for the future of the sheep sector. If statistics were to be believed, the national ewe flock was set to expand again because last years collapse in lamb and cull ewe prices had forced many farmers to retain more female sheep than usual.

A potential rise in the lamb crop, against a background of reduced demand, was worrying.

Beef production, however, looked more attractive, with home consumption back to pre-BSE levels and, hopefully, the prospect of exports resuming.

It was clear from the CAP reform package that support for the beef industry would continue. But he warned that any increased production, which could happen when the calf slaughter scheme ended in June, could result in prices falling again.

On cereals, while much depended on the strength of the £ and where the market price settled, support price cuts were lower than originally predicted and would be spread over two years. Growers could live with that, Mr Stockley believed.

Meanwhile, pig and poultry producers should benefit from lower feed costs.

He predicted that industry restructuring, which had been underway for the past 20 years, would now accelerate. That, however, did not mean that only large-scale farmers would survive.

Efficiency was the key, along with matching expenditure to income.

For smaller farmers in particular, that would increasingly mean earning more off the farm, whether through contracting, other jobs or through diversification.