Landlines: Farmers struggle in a free market

Farmers need support payments to survive.
Farmers need support payments to survive.

Farm income figures published last week for 2012 and 2013 confirm what we knew already – 2012 financial results were bad, mainly because of the appalling weather, and improved in 2013 because the weather and some prices improved.

Because most farmers have moved on from the horrors of 2012 and have already made decisions for 2014 based on what happened last year, I’m not sure how relevant such historical figures are.

For what they’re worth, total income from farming (TIFF) for Scottish farms in 2012 is estimated at £700 million, down 18 per cent on 2011. The 2013 estimate is TIFF of £830 million.

The thing to remember is that accounts for every individual farm will tell a different story depending on situation, size, types of enterprise, whether rented or owned, with or without a mortgage, employing staff or a one-man show, well managed or poorly managed. TIFF also doesn’t take account of non-farming income such as that from B&B, farm shop or an off-farm job.

But the most significant statistic revealed by the national farm accounts for Scotland is the part played by support payments, or as we might say subsidies. In 2012 subsidies of £554 million from European Union and government accounted for 79 per cent of Scottish TIFF; last year £562 million of subsidies accounted for 69 per cent.

That is a most unwelcome reliance on subsidy, one more or less duplicated in England and possibly even higher in Northern Ireland and Wales. Mentioning it brings us straight into the perennial debate about whether farm subsidies can be justified.

One argument is that farmers should either make a living from the free market for what they produce or get out to make room for someone who can, as happened in New Zealand 30 years ago.

The counter-argument is that farming is vital to the rural economy and that support payments have a trickle-down effect. Even the best farmers and producers, it is argued, would have trouble surviving in a free market because of the political vagaries of world trade and unfair competition.

That argument is going to continue as long as subsidies continue. And there is no question that subsidies will continue in a European Union where in many of the 27 member states agriculture and the vast food industry that depends on it still has clout. But the complaint by British farmers is that not only do our politicians and civil servants lack clout in EU negotiations they are actively against farm subsidies and want them removed.

That’s why, they say, more or less final agreement on changes to the common agricultural policy (CAP) due to take effect in 2015 have given British farmers a raw deal and Scottish beef farmers in particular a desperately bad one with support payments for many likely to be slashed by one third to one half. Not a happy prospect.