Compiled by FWi staff
THIS was one of the toughest years many farmers have ever experienced. Sterlings strength prompted revaluations of the Green Pound at every touch and turn, and the new Government refused to apply to the EU for compensation.
Recently released Government statistics confirm that annual farm incomes have plummeted by 37% (the NFU would put it at 47%) and farmers across all sectors are looking to the future with trepidation.
- Lower incomes mean leaner times are ahead, warn economists. Market volatility and currency movements mean it will become ever more important for farmers to reduce costs, says director of Midland Agriculture, Norman Coward.
- Capping area aid – known as modulation – would be “bad news all round”, says Simon Ward, Bidwells consultant to the Arable 2000 Working Group. It would wipe out farm profits, undermine rural employment and cause environmental degradation in East Anglia, he says. Modulation is against the interests of British farmers, says NFU chief Sir David Naish.
- Joining EMU will pose no threat to UK farmers, provided they keep costs under control, says Howard Davies, deputy governor of the Bank of England. “In an environment without devaluations, there will be no place to hide if production costs get out of hand,” he says.
- Green Pound revaluation on January 21 knocks over 5% off UK intervention prices.
MAFF figures released in February show a 7.3% fall in UK farm incomes during 1996 due to lower prices for cereals, potatoes and beef, coupled with a 7% rise in input costs. But NFU chief economist Sion Roberts says the figures fail to account for Green Pound revaluations late in the year and the real fall is much worse.
MAFF applies to Brussels to “freeze” the rates used to calculate direct income support. But with another Green Pound revaluation on the cards for 29 March, the fall could be much greater. The Green Pound gap stands at 7% (12 March), suggesting a 3.5% revaluation on March 29.
- Another Green Pound revaluation of knocks over 3.5% off farm prices – bigger than forecast.
- The new green rate is 74.2p/Ecu and brings the total revaluation of the Green Pound since last summer to 12%. Cereal intervention prices drop £3.25 to £93.85. With Sterling continuing to be firm as currency markets anticipate an interest rate rise after the general election, another revaluation in June remains a distinct possibility.
The effect of Sterlings strength on grain prices is countered by a lack of rain across Europe. UK exports may be a possibility if the European harvest is poor, say traders.
Sentry Farming Group blames its 2% fall in annual profits on Sterlings stength. The year has been “difficult,” says managing director Andrew Mason.
Farm management company Broadoak Farming warns of a near 20% fall in net farm profit on combinable crops for the coming season.
The NFU demands compensation for the strong Pound which it says is having a “devastating” effect on farm incomes. A single currency would end the problems caused by green rate revaluations, says NFU policy director Ian Gardiner.
New farm minister Jack Cunningham says he will put consumer interest at the top of his agenda. Within three days of taking office, Dr Cunningham announces plans for the introduction of an independent food agency to oversee production “from plough to plate.”
A surge by Sterling is enough to confirm the revaluation of green rates, cutting support prices to farmers by 2.9%. Sterling is at a six-year high against the French franc.
The new Labour Governments first budget will do little to reduce Sterlings strength, says Midland Agriculture director Norman Coward. But the doubling of capital allowances for small- and medium-sized businesses is welcomed by all sides of the industry.
NFU leader Sir David Naish requests an urgent meeting with Bank of England governor Eddie George to discuss the damaging effect of the strong Pound on British agriculture. The NFU wants the Government to apply for compensation from Brussels for all farmers who have suffered green currency movements. Despite months of lobbying, the only response the NFU has received is that the Government is “considering the matter”.
The Green Pound is re-valued once again – this time by 3.6%. Further revaluations remain a distinct possibility, despite a slight weakening of Sterling. Currency will remain volatile for the rest of the year and could trigger further cuts in support, says Midland Agriculture director Norman Coward. UK farmers have seen the last of the green money bonanza, concludes Michael Murphy of Cambridge University.
The Government causes uproar in the farming industry by cancelling this years national hill-farming review. Hill Livestock Compensatory Allowances will remain at 1996 levels, say Government officials.
The Pound rises to DM2.89 after Chancellor Gordon Brown says Britain will defer joining European monetary union until after the next general election. One year ago, Sterling stood at £1=DM2.44.
The Government refuses to bow to pressure over the hill-farming crisis, saying no cash is available.
The EU Court of Auditors claims that European cereal and beef reporters have been over-compensated by nearly £3 billion since the 1992 CAP reform package which attempted to shift support away from production.
Government statistics estimate that total income from farming this year has plummeted by 37%. But the NFU says the situation is far worse and incomes are down by 47%.