AUCTIONEERS
AUCTIONEERS
COMMENT
AUCTIONEER
Chris Turney
Hamiltons
WHAT exactly have my grasskeep prices to do with farming in Poland?" comes the question from yet another frustrated land owner as I try to explain why the prices had fallen back by some 20%, with no prospects of an upturn for the foreseeable future.
The annual grasskeep trade is not a precise indicator of the state of agriculture in the UK because the majority of the thousands of acres that change hands each season do so by private treaty.
Indeed, most occur between the same owner and occupier year after year, while the value of smaller areas that come up for auction is determined by localised supply and demand which can see figures varying from £150/acre down to £20 or even less.
However, the current recession has caused 40% to be wiped off the grasskeep values compared with five years ago.
In areas of limited demand, grasskeep is virtually being given away. This is more to do with stocking densities, which comes back to the basic economic equation of supply and demand.
The European effect on grasskeep is more complicated to interpret. Agriculture in Europe is controlled by a series of artificial mechanisms. Butter mountains and milk lakes caused politicians to panic in the early 1980s, but rather than allow the open market price fluctuations to control output, artificial control systems were produced such as milk quota.
European demand
If European demand for milk and milk products was to fall by 20% then production could be cut using quotas. This worked very successfully for a number of years, although it created its own hardships. The politicians like this because it saves the embarrassment of dumping surpluses onto Eastern European markets.
However, as politics became more important than real business, unsatisfactory compromises were negotiated and, despite falling demand for the milk products, the quotas remained relatively untouched.
Agriculture in the 12 countries applying to join the EU is generally very inefficient, but those countries do have the potential of being some of the best farming units in the whole of Europe.
When they become modernised – not if – then Europe could again be saturated with agricultural products. Because of regional extremes, the main way this can be controlled is through quotas. If quotas remain, production will continue at a level exceeding demand with a result of low prices, which in turn means that there is no scope for an upturn.
Grasskeep values
Add to this the reality that while there is an exodus across the board in the dairy industry, the shortfall will very quickly be taken up as other units expand to "stay where they are". The fact that supermarket buyers will go for the cheapest regardless of where it comes from also adds to the malaise. As incomes have fallen, so have grasskeep values.
But what of the future? We are now in a new millennium and a new era of agriculture. Fifty years from now, Eastern Europe will be one of the worlds most important food production areas.
Problems of language, transport and management will have been overcome and UK agriculture could be reduced to specialist production.
Subsidy payments
Diversification is, therefore, a must. Large parts of the UK will look more like a tourist leisure park – subsidy payments already encourage this.
As far as grasskeep areas are concerned, they seem destined by subsidies to be part of the countryside "beautification" scheme.