22 August 1997

Green money boom finished

UK farmers have seen the last of the green money bonanza.

So concludes Michael Murphy, writing in Cambridge Universitys latest edition of Farming In The Eastern Counties.

Fortunes peaked in the 1995 harvest year, as green £ devaluations boosted compensation payments, helping gross margins rise 8.8% to £1077/ha (£436/acre).

Together with higher-than-average yields and good harvesting conditions, this increased net farm incomes by nearly a third on the previous period to £399/ha (£162/acre). But variable costs rose by 5%, a sign that the terms of trade were beginning to turn against farmers, as the momentum of cost increases gathered pace.

Meanwhile the negative effects of "green money at the farm-gate" soon began to bite. "The results for the 1996 harvest year are likely to reveal the reality of farming in a less protected sector," says the report.

"By late 1996, the tide had begun to turn against farmers as the value of sterling began to climb irrepressibly on the international money exchanges, reflecting a buoyant UK economy and investors confidence."

By mid 1997 it broke the psychological barrier of 3DM, as a result of which the value of the green exchange rate has plummeted.

"Farmers face a bleak future, at least in the short-run, for as long as sterling continues to triumph on the exchanges," says the report. &#42

Tim Relf