Opinion: Tremendous opportunities in farming? Not yet, there’s not…
The sun shone, the traffic wasn’t too bad and I’ve never seen so many bacon rolls on one showground. Most farmers I spoke to were in good humour, commenting that their crops looked well.
The hard ground and uneven surface made walking tiring and some sore feet will have resulted. But in the main, Cereals could be rated a success.
However, beyond the boundaries of the Cambridgeshire site, some worrying developments were taking place. World grain prices, led by the Chicago Board of Trade, were sliding to levels below most costs of production on the back of favourable growing conditions across most of the USA. European crops, too, were reported to be looking promising and anticipated supply problems from the Ukraine, if Russia had invaded, appeared to recede.
Sterling strengthened along with the UK economy, making British exports less competitive and some City pundits expect that trend to continue. And although many were casting around to try to find some phenomenon that would reverse the lower price trend, there was little sign they would be successful in the short term. Meanwhile, many of those crops that looked good from the road were in urgent need of extra doses of expensive fungicide to maintain quality.
As I often do at these events, I called on consultant Andersons to check its assessment of prospects based on results from its clients’ farms. It merges clients’ performances into one fictional, but typical, 600ha arable farm, which it calls Loam Farm. Its calculations this year indicated that whereas 2012 left a notional profit of £393/ha, in 2013 the same acreage and cropping – audited results for which have still not arrived on many desks – were down to £319/ha.
Its forecast for 2014 is another drop to £287/ha and this doesn’t include the most recent reductions in cereal values. Looking forward to 2015, Andersons anticipates overall margins to be down again to £231/ha. Bear in mind that those figures include all EU and environmental payments. Without such receipts, profits for 2015 would have almost disappeared, down to £6/ha, Andersons says. And throughout the four years, the assumption was that personal drawings had been virtually static.
Add to that the anticipated reduction in EU payments over the next few years and the almost inevitable increases in most input costs and the future begins to look worrying. For it isn’t just grain crops that are affected by falling values. Oilseed rape is already £100/t lower than it was a year ago and may be depressed further by Canadian imports scheduled to arrive in Europe in coming months.
The world sugar price has collapsed because of overproduction in Brazil and, although the crop in the ground is contracted to be delivered to British Sugar at a fixed price through the autumn and winter, the price for next year’s crop is due to be fixed shortly and it will doubtless be dragged down by the world surplus. And potatoes, having grown well in the warm, moist weather, are worth about £100/t less than a year ago and losing value by the day. The crisis in the beef trade is well known and milk prices, having enjoyed a brief resurgence for a few months, are falling again.
Bankers, politicians and others continue to stand on platforms and tell us this is one of the most exciting times agriculture has ever experienced; that there are tremendous opportunities for farmers to exploit. They may be right at some time in the future, but current evidence suggests otherwise.
David Richardson farms about 400ha of arable land near Norwich, Norfolk, in partnership with his wife Lorna and his son Rob.