19 December 1997

Strong £ hits farming hardest

By Philip Clarke

AGRICULTURE has been hit worse than most other sectors of the UK economy by the strength of sterling, which has pushed incomes down.

"This is because the currencies of the countries with which UK agriculture competes have gener-ally been weakening while the pound has strengthened," says Midland Bank head of agriculture, Norman Coward, writing in the banks latest Forward Planning publication.

In particular, he cites French grain exports, cheap imports of milk products, beef and pigmeat from northern Europe, and fruit and vegetables from Spain and Portugal.

"Against all these countries, the £ has revalued by far more than the trade-weighted average, and UK agriculture has suffered as a result," he says.

Future a little rosier

But the future now looks a little rosier. The 1998 crop is being produced using lower cost fertiliser and sprays, while animal feed is also cheaper.

The industry is still in reasonable shape having cut borrowings and reinvested in the good years. Most importantly, the pound is forecast to weaken a little in late 1998, he says.

But prospects are far from wonderful, and farmers need to pay close attention to budgeting as margins remain tight.

The Forward Planning booklet contains some example budgets for most commodities as a guide. For example, winter wheat is predicted to make a gross margin of £660/ha (£267/acre), based on a feed value of £90/t, yield of 7.4t/ha (3t/acre), area aid of £248/ha (£100/acre) and variable costs of £254/ha (£103/acre). &#42