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Another tough year in store after 12 months of hardship

The past year has been a memorable one for several reasons.

First there was all the pageantry of the Queen's Diamond Jubilee, then the Olympics where British athletes excelled themselves, but above all else – from a farmer's perspective – was the atrocious weather.

I won't dwell on the weather and its disastrous effects, suffice to say it stretched all farmers mentally, physically and financially.

Another feature of the farming year was price volatility, both for what farmers receive for their produce, and what they pay for things such as feed, fertiliser and fuel.

It's interesting to reflect that back in 1952, the year of the Queen's coronation, it took the value of the wheat output on 10.5 acres to pay for the best-selling tractor of the day – the 24hp Ferguson TE20 – which back then cost £365.

That was at the 1952 average wheat yield of 1.2 tons per acre and at the wheat price in June that year of £29 per ton.

Fast forward to June of this year, when, at the national average yield of 3.2 tonnes per acre and a spot wheat price of about £168 per tonne, it took more than 113 acres worth of wheat to pay for a top-selling modern equivalent, like the John Deere 6630, with 137hp and a price tag of £60,951.

Just as impressive has been the dramatic 10,745% rise in land values since the day of the Queen's coronation. Indeed, Professor Donald MacRae recently cited the rise in land values as one of the main reasons for the increase in farmers' wealth. He pointed out that back in 1986 Scotland's farmland and farm buildings were worth around £4.8 billion, but that figure had risen to a staggering £33.85bn. Better still, farmers didn't pay a penny tax on that £29bn increase in values. Indeed, the facts that farmers don't have to pay tax on the increasing value of their land and buildings, and that agricultural holdings are exempt from inheritance tax, are two reasons that have contributed most to soaring land prices.

Farm produce may not have risen in value as much as land, but prime cattle that were selling for 12.4p per kg live weight on Coronation day were making 185.5p on the same day in June this year. Similarly, lambs that fetched 29.9p per kg deadweight back in 1952 had risen to 438.2p this summer.

I could go on, but that would be labouring the point. Suffice to say that inflation has all but killed what few chances there were for new entrants to farming to get started.

The simple fact is that those young hopefuls will be looking for virtually non-existent tenancies. When they do find one, they will discover that banks, in the absence of security, are unwilling to lend the large sums required to set up a viable business.

While most farmers pay lip-service to the need for new entrants, the reality is they really don't care and are busy concentrating on their own survival. That may well require them to offer big rents for any additional land that becomes available locally, so they can spread their fixed costs over more acres.

While urban consumers were picking up bargains galore at the Boxing Day sales last week, farmers didn't get the same discounts from their merchants. The price of feed, seed, fertilisers, medicines and fuel remained the same on Boxing Day and may even have risen.

It's hard to forecast the prices that farmers will receive for their produce in the coming year as there are so many variables. The dramatic rise in cereal prices this year will probably encourage farmers around the world to sow more and that may depress prices globally.

Here in the UK, the wet weather and sodden land led to farmers sowing less than usual this autumn. Some of those crops that have been sown may well fail as a result of water-logging, disease and pests like slugs. That could lead to a rise in the area of land sown to barley in the spring, so arable farmers are braced for a lot of disruption to their markets next year.

Livestock farmers also look set to see a continuing squeeze on their returns. Beef producers in particular will be very hard hit if the EU does a trade deal with Brazil that reduces tariffs on Brazilian beef.

Fortunately few, if any, of us can accurately predict the future, as those who believed the Mayan prediction of the world coming to an end on December 21 discovered.

As always, we'll just have to take what comes and deal with it as best we can.

Contextual targeting label: 
Agriculture

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