25 December 1998


Farmings ups and downs are usually accepted as part of the job. But the speed and depth of the latest economic downturn have surprised even well managed businesses.

Survival is now the name of the game on many farms. Apart from potatoes, and to a lesser extent oilseed rape, commodity values have tumbled across the board.

In the past two years, the value of milk has fallen by 6p/litre. Steer prices have slipped by a quarter, finished pigs by half, and lamb values by 56%. Feed wheat prices have dropped almost £40/t since harvest 1996. The result? Average UK farm incomes are a mere quarter of two years ago.

But the worst may be over. The £, strong on foreign exchanges for so long, has weakened, losing 13% against the years high.

That, and receding fears of domestic inflation, have eased pressure on UK interest rates, and the European Central Banks decision to set the euro base rate at 3% is also good news. The UK rate has fallen 1% in three months, and high street banks forecast a further 0.5% reduction by the end of next year.

The governments aid package, the lifting of the beef export ban and rising world prices for several commodities as supplies tighten all make more cheerful reading.

But uncertainties remain. The Agenda 2000 proposals are far from agreed, and could yet spring some nasty surprises. And World Trade Organisation talks, due to start next autumn, could also add pressure; the USA and several southern hemisphere countries will push to strip away protectionist barriers to free trade.

No one expects overnight recovery. UK agriculture must be fitter and leaner to shake off the worst recession for 60 years. The government has made it clear there will be no more aid. Farmers must continue to help themselves.

Few, if any, farmers can honestly say there is no room for improvement. Benchmarking the business will reveal how radical the surgery should be.

Restructuring debt can improve cash-flow. Making the most of tax allowances can save £s. Careful purchasing, from high capacity machines to farm insurance, can also shave costs.

For others, more major surgery may be needed. Joint ventures can, if tackled correctly, offer big savings.

These, and other ploys, are no quick fix. Considerable pressure on farm incomes is likely to continue through the millennium.

But for the majority of farms, an injection of good business practice now will help speed the healing process in the New Year.

See more