9 November 2001

UK arable sector is well placed to meet challenges

By James Garner

BRITISH arable farmers can be the most competitive in the world, claims a leading accountancy firm.

In an upbeat message at the recent Deloitte and Touche/HSBC Bank/farmers weekly conference, Taking Stock, Taking Action, in Peterborough, Mark Hill, head of Deloitte and Touche Agriculture told delegates that British farmers were in the "premier league" and well-placed to face the challenges ahead.

"UK agriculture has advantages, such as a ready supply of water and easy access to a market. Its disadvantage is high land costs, but the key thing is to exploit the UKs yield potential. If farmers can push their wheat yields to 15t/ha and reduce costs by another 10% to just £60/t, then we will easily be in the top tier."

Cheaper marketing costs in the UK compared with some competitors were a big advantage, he said. In Kansas, for example, it cost $30/t to move grain to a deep-water port, three times more than in the UK.

Growth in the world population and food market, particularly in the Asia and Pacific region, would eventually boost UK prices, predicted Steve Ellwood, head of HSBC agriculture.

But he warned farmers to change their marketing approach in the face of volatile and international grain markets.

"World grains stocks have fallen from 100 days supply to just 70 days stock. The international grain market is on a knife-edge. Wheat prices could swing $30/t either way at any time," he added.

"It is tough to expect farmers to market grain successfully in this kind of environment. Now is the time to manage risk in a different way, by using a manager, or a grain pool.

"The crucial decision here is choosing the right one and that means analysing past performance."

But there was little chance of the £ weakening next year and boosting prices. "The exchange rate is a massive handicap for UK agriculture, but our economy and currency are as strong as they have been for some time. It is hard to see the £ moving in our favour – it is the major challenge to our industry." &#42