1 September 1995

Build on buoyancy

Its a bonanza! Combinable crop profits have rocketed as prices soar, area aid stays healthy and production costs rise only slowly.

For most arable farmers 1995 will be an exceptionally profitable year. CAP reform has proved a pot of gold rather than the threatening thundercloud so many forecast.

Admittedly the good times follow several years when returns on invested capital were becoming increasingly questionable. And growers with unirrigated root crops face a difficult autumn.

But the overall picture is good. Market demand is strong in most sectors and area aid continues to provide solid underpinning.

Provided interest rates stay low and cost inflation does not escalate out of hand, 1996 will be equally profitable.

Yet much of this current profitability stems from EU coffers. For many growers, aid payments account for more than 100% of their profits. It is something farmers throughout Europe rightly worry about.

CAP support certainly wont vanish overnight. And security of food supply will justify a certain level of support in the long term.

But as GATT bites, pressure on public spending grows and taxpayers demand more for their money todays underpinning is sure to dwindle. Should the £ ever strengthen significantly the picture would change even more dramatically.

So wise growers will spend this years profits with care. Clearing borrowings is a priority. Careful investment in labour-saving, cost-cutting technology is a further option.

Beyond that the pressure remains to extract the maximum profitability from every cropped acre. Agronomic advances have much to offer. From new varieties to improved advice there is tremendous scope for enhancing profits still further. Lets ensure crops get the best start possible this autumn so we can reap an even more profitable harvest in 1996.