19 October 2001

Link up to give incomes a lift and curb costs of production

By James Garner

GROW, get together or get out. That is the advice from accountant Deloitte & Touche, whose 12th annual farm income survey predicts that family farms might earn twice as much next year, to a total of £5000 a unit.

Despite a marginal increase in income, the accountant remains cautiously optimistic that this could signal the end of agricultures most serious recession since the great depression.

But further rationalisation is on the cards and it is not just small farms that are threatened; big units are feeling the pressure, too.

Mark Hill, head of agriculture at the firm, believes arable farms in East Anglia have already taken steps to meet the challenge. Having restructured and tightened belts, they have forced costs of production down to levels that are nearly competitive on a world stage. But with average wheat prices falling to just £67/t in 2000, wheat yields across units needed to average 10t/ha (4t/acre) to make money.

Next years forecast predicts a better time for combinable crops growers. Expected incomes should rise to £60/ha. But there would be no gain for root crop growers and another loss for combined dairy and arable units (see graph).

Some farmers need to leave the industry to give others a chance to grow. "The average age of farmers is now 58 and with limited prospects of a spectacular climb out of recession, getting out is a real option," said Mr Hill.

But getting together remained the favoured option, although the hardest to achieve, admitted Mr Hill. "With very thin balance sheets, the ability to muster forces is necessary. Farmers are stoically independent, but now they must pool resources and tackle the market."

Richard Crane, head of East Anglia for the firm, said by "overcoming pride" and working together farmers could probably cut costs from £84/t to just £70/t and still grow crops yielding 10t/ha.

Mr Hill added: "Farmers must get a greater hold on the end price. Less and less money is cascading down to the primary producer; instead it is being soaked up by middlemen."

He warned this was bad for investment in the countryside. Farmers had to capture added value by moving further up the food chain or join farmer-owned businesses to ensure sufficient investment into rural areas. &#42