A happy, if belated, new year to all and if better weather than we had in December has reached all parts by now, so much the better. Is it any consolation to know that we have just lived and worked through the worst December since 1890, or possibly any one of several Decembers in the decade 1810-19? Thought not.
What about the thought that at least we’re not living in Siberia where the city of Yakutsk claims to be the coldest in the world, with temperatures dropping as low as -70C? Steel can shatter, mercury freeze, and fires are kept burning under fuel tanks. Quite why anyone lives there is another matter, but all counter-claims from anywhere in the Borders or north Northumberland after last month will be considered.
There are two traditional ways of approaching a new year by columnists. One is to produce a spoof series of forecasts that seem outlandish and ridiculous until gradually overtaken by real events during the year. For farmers in particular, the realities of weather, European politics and volatile markets for almost every one of their products mean that the truth of what happens in any given year is usually more unexpected than any attempt at fiction.
The other approach is to look seriously at the prospects for the year ahead. No matter how carefully done, for example by consultants Andersons in their annual Outlook publication, no guarantee can be given of actuality matching assessment – and laughs are in short supply. But Andersons’ Outlook 2011 is worth reading if you have time and energy to spare after coping with whatever the weather happens to be throwing.
The one-page introduction alone is worth a thought, pointing out as it does the importance of the strength – more pertinently the weakness – of sterling to British farming. When sterling is weak in relation to other currencies, it raises some farm costs, such as imported machinery, possibly fertilizer, but according to Andersons: “The overall effect is an increase in farming profits.”
That has been true since September 2007, the last time the euro was worth less than 70p, bearing in mind that Europe’s common agricultural policy (CAP) subsidies are set in euros and that these subsidies are worth several billion pounds a year to Britain’s farmers – the weaker sterling is, the higher the value of the euro exchange rate, the bigger the subsidy.
Andersons note: “In 2007 UK farm profit (total income from farming) was £2.6billion; the equivalent figure was over £4billion in both 2008 and 2009, as is the final forecast for 2010.”
The importance of the value of sterling to the economics of UK farming cannot be overestimated, they say, because it will be a key factor in the prospects for the coming year, mainly because – they don’t add, but we know – of its effect on total CAP subsidy.
The importance of that subsidy to farmers in general and some specific types in particular has frequently been shown, including Scottish government figures for 2010 for subsidy as a percentage of farm business income. For sheep farms, for example, in Scotland’s less favoured areas (LFA) – hills, islands and moorland – subsidy accounts for 184 per cent of income and for LFA beef farms subsidy accounts for 181 per cent. For lowland cattle and sheep, subsidy accounts for 156 per cent of income. For cereal growers, the figure is 94 per cent, even for dairying, generally thought of as subsidy-free, the figure is 46 per cent.
In short, whatever way we look at it, without CAP subsidy the great majority of Britain’s farmers would struggle to stay in business with the knock-on effects that could have for the whole rural economy. Lucky, therefore, that – getting back to Andersons’ Outlook introduction – farming businesses are likely to suffer less from the UK Government’s looming financial crunch measures than many others.
Andersons note: “Austerity measures will see a reduction in Government spending, although with such as proportion of farm support being European rather than national, the immediate effects on the farming industry will be limited.”
There is, of course, a “however” lurking: “However, change [to the CAP] looms on the European front, with talks beginning in earnest in 2011 that could see radical cuts in farm support after 2013.”
That is something we heard and read a lot about in 2010 and there will be even more discussion and argument about CAP change in 2011 and beyond. What Andersons find encouraging – as I do whenever I see some development or idea on a farm that is not related to subsidy – is: “Many businesses are using the current period of improved profitability not only to consolidate their financial position, but to fund new developments.”
In general, they believe, the UK farmer is becoming more of an entrepreneurial businessman by developing farming activities alongside non-farming enterprises and environmental management, especially younger farmers and managers.
As has been proved time and again throughout the history of farming, the best will adapt, survive and thrive no matter what conditions they have to deal with. Whatever 2011 brings, I wish success to all those who plan and work for it.