28 March 1997

Food sector takes shine off balance of payments figures

By Philip Clarke

GOVERNMENT figures out this week show the UK achieving the highest balance of payments surplus for a decade, much to the delight of Tory politicians on the hustings.

But the story is somewhat different within the food sector, where 1996 saw the first significant deterioration in the trade balance for several years. According to figures in the newly-published Agriculture in the UK 1996, self-sufficiency in all food fell 5% to 53%, while the drop for indigenous food was 6% to 69%.

"This was mainly due to lower levels of both output and exports of beef, and higher levels of imports of meat and meat preparations, other than beef," says the report.

But the balance of payments effect was just one of the ways BSE affected the industry.

"The quantity of beef production for human consumption fell by 29%, as the carcasses of 1.1m cattle and 0.4m calves were removed from the food chain." The average price over the 12 months was 13% lower, leading to a 38% drop in total earnings to £1.29bn.

Much of this loss was offset by additional subsidies and other payments. The MAFF report records a figure of £154m in extra suckler cow and beef special premium, and £572m for the OTMS and calf processing scheme.

Despite this, most farms in the UK are looking at lower net farm incomes in 1996/97.

"On LFA cattle and sheep farms, the effect of the drop in beef prices has been partially offset by increased headage payments, though lower sheep annual premium rates will counteract the effect of higher sheep prices," says the report.

Using indices of net farm income and Farm Business Survey results, FW estimates net farm income on English LFA livestock farms to fall 3% to an average £17,720.

"On lowland cattle and sheep farms, incomes are likely to fall further, as they do not benefit from the increased HLCA rates and, in general, they operate at lower margins." This is borne out by predictions of a 21% drop in net farm income on English lowland units to just £7300.

Looking at other enterprises, dairy farms throughout the UK have also suffered an income drop in 1996/97, with Welsh producers taking the biggest hit – down 30% to an average £24,480 – due to a combination of loss of calf sales, lower milk prices and increased transport charges for smaller operators.

Cereal growers have also been hit by the bigger crop, lower prices, higher input costs and stronger currency. Scottish arable producers are expected to see a 19% drop in income to £25,380 a unit. On general cropping farms the falls are more dramatic, primarily due to the lower potato price this season.

&#8226 Agriculture in the UK 1996, £13 from HMSO. (0171-873 9090.) &#42