Rollercoaster ride for commodities
Volatile commodity prices are set to continue beyond 2014 following a rollercoaster year for growers and livestock producers.
Political uncertainty and unpredictable weather were among the main drivers that have made farm prices increasingly difficult to forecast – and meant official statistics looked out of date as soon as they were published.
Key influences include Russian import restrictions and political unrest in eastern Ukraine, with the crash of Malaysian Airlines flight MH17 – presumed to have been shot down close to the border with Russia – sending shockwaves through global markets in July.
Unveiled this autumn, Defra’s latest farm income figures show huge swings in farm profitability across the different farming sectors. Based on the year to February 2014, they show dramatic falls for arable farms while dairy, pigs and poultry made gains.
But dairy fortunes then plummeted during a year that saw farmgate milk prices fall by one-third for many producers. Further cuts are likely over the coming months before any eventual recovery – a downward trend testing the mettle of even the most determined and optimistic farmers.
Beef prices have also been under the cosh. Beef commodity prices fell to three-year lows earlier in the summer, prompting Defra to announce plans for a beef industry summit to discuss ways of taking volatility out of the market.
While farm prices have always been volatile, the “up horn, down corn” scenario, where one sector prospers while another struggles, certainly no longer rings true. Livestock farmers have arguably borne the brunt of the downturn but arable growers have also suffered declining margins.
Wheat prices have fallen by 30% in the past year, with spot feed wheat trading at a high of £168/t before falling towards £100/t and bouncing back to £128/t. Meanwhile, oilseed rape growers have seen a £381m drop in the value of their crop due to a reduced production and lower prices.
Speaking at the annual AIC Agribusiness conference in November, NFU president Meurig Raymond said farmers faced a decade of volatility. Although the longer-term prospects remained bright, many sectors remained under pressure, he warned.
Uncertainty over CAP continues
Producers face “unacceptable” delays in the registration process for new CAP payments after a year of uncertainty that saw detail about the new regime trickle out.
Questions remain over the final detail of CAP reform despite the imminence of the reformed CAP, which is due to come into effect from 1 January 2015. Getting to grips with the new rules and registration process continues to be described by the NFU as a “major issue” for farmers.
Growers who choose hedgerow maintenance as one of their environmental land management options are already likely to see their direct payments delayed. That’s because the mapping process required makes administering payments much more complex.
Hedgerow maintenance is one of five options available to growers who must ensure that 5% of their land is managed according to ecological focus area rules. The other options confirmed by Defra during 2014 are fallow land, buffer strips, cover crops and nitrogen-fixing crops.
At the same time, growers with more than 30ha of arable land must comply with the three-crop rule – a requirement that poses a particular headache for contractors block-cropping small parcels of land because it is being applied on a farm business basis rather than a holding basis.