Growing pains: In their strange world of subsidies and quotas, farmers are not like other business people. David Bowen went to East Anglia to find out why they are still struggling to make a return

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In its heyday, Melton Constable had the largest railway junction in its part of the world. It was known as the Crewe of East Anglia. But times change. It still has a station and a number of railway workshops, but now they are full of potatoes.

Eighteen thousand tons of them are stored there. By June, when the store is empty again, they will have been flavoured with salt, vinegar or chicken tikka and eaten in pubs. For Melton Constable railway station is now an important link in the potato crisp production chain.

The station is a stage on a whistle-stop tour of the Astley estate, 4,500 acres of gently rolling north Norfolk countryside that have belonged to Lord Hastings's family since the 13th Century. Twenty-five years ago, it was a patchwork of tenant farms. Now only five tenants remain: 3,500 acres are run as one unit. This is a large East Anglian farm and one of the most efficient agricultural producers in Europe. It also fails to make a commercial return.

The world of agriculture is baffling to outsiders. Range Rovers, green wellies and The Archers mingle confusingly with milk quotas, set-aside and intervention prices. Farming is, however, as much a part of British industry as engineering or pharmaceuticals, and the larger farms are just as much businesses as any factory.

Yet after 10 years of Thatcherite assault on subsidy and state control, farmers still seem insulated from the rigours of the free market. Farming may be a business, but are farmers businessmen or mere sub-contractors to the bureaucrats of Brussels? A visit to a big diversified farm should provide clues.

Dick Broughton, general manager of the estate, is an unlikely grain baron. A comfortable-looking man of about 50, a local councillor and an active National Farmers Union man, he wears green cords, a sweatshirt and an elderly Barbour. His base is a cabin behind his house in the tiny village of Swanton Novers, where he works with a secretary and two dogs. There is no computer.

This is a complex business. The estate, which is divided into four farms, has a turnover of pounds 2.5m. Mr Broughton's regular tour is 24 miles long and takes in six villages. The business's backbone, and still the most profitable part, is 585 acres of sugar beet. Then, in order of profitability, come 170 acres of potatoes, 319 acres of wheat, 923 acres of barley, about 1,200 cattle, 1,800 sheep and 890 acres of woodland.

Mr Broughton will not reveal his exact profit, saying only that it has halved in real terms in the last seven years and 'it doesn't make a return good enough to allow long-term investment. That is why financial institutions have run like hell from farms.'

Last week John Gummer, the Agriculture Minister, announced that farm incomes had risen by 10 per cent in real terms in 1992. Mr Broughton is sceptical about this. Incomes were depressed in 1991 by the drought, he says, which cost him pounds 50,000 on sugar beet alone.

The only good news he will allow is that sterling's departure from the European exchange rate mechanism did a power of good. Sugar beet rose almost pounds 3 a ton to pounds 32, and grain rose pounds 15 to pounds 135 because most farm prices are set in European Currency Units. When the pound devalued against other EC currencies, the byzantine workings of agrimoney meant that payment to the farmers actually rose even though nothing was being exported.

The land looks much as it did when Mr Broughton arrived 26 years ago, and the same number of people - about 20 - still work it. But the food generated by the same land and people has multiplied many times. It is difficult to be precise about the figures, because 13 farms have been brought under direct control, but there were no potatoes in the late Sixties; sugar beet production was less than half its current level; there were no sheep, compared with 1,800 now; and 100 cows, compared with 450 now.

Mr Broughton says Astley has benefited from bringing the tenanted farms under central control, in part because it can buy supplies in bulk, but more because the land can be integrated to make best use of men and machinery. He does not, however, agree with the view that only giant farms and hobby farms will survive.

'On any farm you have to decide the standard of living you require and whether you can sustain it. You can make a very good living off half an acre of concrete if you have pigs or poultry.'

Driving down the narrow lanes to Melton Constable, Dick Broughton points to a field of sheep that are eating sugar beet tops, the remains of the crop harvested before Christmas. Farmers are astute users of what in a less traditional industry would be known as synergy. The animals live off the remains of the sugar beet, or on straw from the wheat and barley. The potatoes are fed with cow muck, and the whole system of crop rotation is based on one product feeding off another: wheat is put on the best former beet land, for example.

Big farms have an additional advantage: they can use their time efficiently. The Astley estate never stops. The harvest runs through August and September. Potatoes are lifted in September and October, sugar beet in the last three months of the year. Then come lambing and calving in January and February, followed by planting in March and more lambing in April. Only in May and June is there time for building repairs and a quick holiday.

'That means we always have a positive cash flow,' Mr Broughton explains. The workers have specialities, but they will turn their hand to anything. Right now, two tractor drivers are helping with the calving.

The sugar beet harvest is finished, though it is still being processed. Mr Broughton explains that it is more expensive to produce beet in England than in countries further south, but the British can compete because they have managed to extend the processing period from three to five months.

There is disillusion here for anyone who believes that quotas and red tape arrived with the Common Market. Sugar beet production has been restricted for several decades as a result of a government decision to limit competition with the cane growers of the Caribbean.

Though there are no subsidies, the price is not determined by the free market. One buyer, British Sugar, negotiates with one seller - the NFU, acting as the farmers' agent - and between them they arrive at a price for the year. Excess beet is sold on the world market at a lower price. Mr Broughton maintains that this does not mean the UK price is artificially high. 'The world price is the price for surpluses.'

The railway sheds of Melton Constable belong to High Norfolk Potato Growers, a group of farms that negotiates with the big food companies: farmers feel disadvantaged by their need to deal with big companies, and like to gang together to buy and sell. HNPG employs a marketing company, which sells the potatoes before they have been planted.

The potatoes are specially grown for crisps. The original crisp variety is Record, chosen for its yellow flesh (which makes yellow crisps) and impermeability to fat. Now Lady Rosetta is taking over. It can be stored at a lower temperature and does not have to be treated with chemicals to prevent sprouting.

Farmers learned after the egg controversy involving Edwina Curry that they ignore health and environmental issues at their peril. 'We had a big hiccup after that,' Mr Broughton says. 'I believe the consumer will want us to use fewer and fewer chemicals.'

He already knows the price he will get for the crop he starts lifting in September. He also knows that some of the potatoes will end up in McDonald's chips, some will go into waffles and croquettes, while most will be used in crisps. Twenty acres are under negotiation with another food company: they will probably end up as waffles.

Potatoes are also subject to British government, rather than EC, control. The Potato Marketing Board controls the acreage grown. Mr Gummer would like to abolish it; Mr Broughton wants to keep it. 'The board gives us the confidence to invest in long-term storage facilities,' he says.

He points out that potatoes are selling in the Netherlands and France at half the pounds 33 a ton the board has set as the minimum, which is already well below the pounds 60 it costs him to produce the crop. The PMB seems to be doing its job - Astley is getting pounds 75 a ton this year.

A field a little further on is being 'set aside' as a result of the Common Agricultural Policy reform introduced last May. Farms are paid to take 15 per cent of their arable land out of production: on this estate that means 200 acres, a reasonable-size farm in many parts of the country. If this has echoes of Major Major's father in Catch 22, who became rich not growing alfalfa, it does have some logic. The CAP was originally supposed to protect farmers from the ups and downs of food prices, so that they could invest for the long term. It did this by taxing imports into the EC and by setting minimum prices: if market prices reached this level, the surplus would be bought up and stored in 'intervention' warehouses.

The trouble was, new techniques, mechanisation and fertilisers were boosting productivity in the Seventies and early Eighties. Between 1973 and 1988, agricultural production rose by 2 per cent a year, while consumption rose by only 0.5 per cent. In the rest of the world, that brought prices down, but in Europe intervention prices stayed high - in large part thanks to the political clout of EC farmers. Increasing volumes of cereals and livestock had to be bought into intervention: by 1991 the programme, which had also become a happy playground for fraudsters, was costing dollars 9bn a year.

The central aim of the reform was to slash intervention stocks by reducing production. The guaranteed price of cereals is being cut by 29 per cent over three years, and farms of more than 20 hectares (49 acres) are having to take 15 per cent of their land out of production; a parallel scheme affects livestock. Farm subsidies will actually increase, at least in the short term, because farmers will be compensatedfor price and production cuts by increased direct payments. Mr Broughton estimates that 10 per cent of his arable and livestock income now comes in the form of 'financial assistance'. That will increase to 30 per cent under the new regime.

In theory, set-aside should allow land to return to its natural state. But the scheme is limited to either one year or five: farmers will not embark on long-term non-agricultural projects, and will probably do their best to keep weeds down.

Like many farmers, Mr Broughton is sceptical that 15 per cent set-aside will be enough to empty the warehouses, especially after the Gatt agreement in November, which, if implemented, will restrict the EC's ability to export subsidised grain. 'We could have 35 per cent of land set aside by 2000 because the EC has made false assumptions,' he says. These are, first, that productivity of the remaining land will not increase: 'It will, because we will have more time to farm it.' Second, that lower food prices will increase consumption. The effect of cheaper wheat on the price of bread will, he says, be tiny.

Just as the British consumer is paying the price for over-indulgence in the last decade, so part of the farmer's current problems come from times that were a little too good, Mr Broughton admits.

When Britain joined the EC in 1973, the grain price doubled overnight; land prices started to escalate and by the early Eighties 'it was impossible to do anything wrong. Prices kept going up and up.'

They stopped going up in the mid-Eighties, but costs did not. The big productivity gains of the Seventies were over, but equipment and other supplies became ever more expensive. Mr Broughton says the never-ending march of health, safety and other legislation has played its part. He cites a rule that, from April, farmers have to notify the Ministry of Agriculture, Fisheries and Food of the death of any male animal. 'So much legislation has been coming in, it's pushed up our costs of production considerably. I'm not against codes of conduct, but I do feel food purchased by government-run schools and hospitals from abroad should have the same standards applied to it. If I treated my livestock in the way it is treated in New Zealand and Australia, people in this country wouldn't be happy.'

He reckons the form-filling has added an extra eight hours to his secretary's week, and that he spends six hours a week reading to keep up to date with new ideas and rules. 'Farming' - that is looking at livestock and crops and talking to the workforce - takes up only 50 per cent of his time. The rest is spent on buying, selling and administration. He works from six to six every weekday, and on Saturday and Sunday mornings. 'If I didn't work so hard we would need more staff, which we can't afford.' The 16 farm workers do a 48-hour week and are paid about pounds 12,000, plus a tied cottage.

At least his boss gives him a free hand. He meets Lord Hastings and members of his family twice a year to discuss strategy. Then he is left alone - though the estate is expected to pay for itself.

The next farmyard is alive with the sound of bleating. Hundreds of shaggy sheep are huddled together in the biting wind: they are all heavily pregnant and are being cared for 24 hours a day. Behind them, under cover and in pens, are ewes with their new-born lambs. In the next shed two groups of heifers - some pink Charolais-Friesians, others black and white Hereford-Friesians - stand or lie. The scene is close to a rural idyll.

To the farmers, of course, this is the factory floor and despite the care given to the tiny lambs (one has even had a broken leg plastered up), there is little room for sentiment. The heifers are being sent to the abattoir tomorrow, while the lambs will live only until Easter.

The way to make money out of livestock is not, it seems, to pump the animals full of chemicals, but to use nature more efficiently. A cow will have her first calf by a Blonde Aquitaine bull. This is fine-boned, so the calf will be smaller and easier to bear. Later calves will have a Charolais as a father: they will grow fast, and put on much lean meat.

Modern methods have allowed the beef farmer virtually to abolish seasons: prices in the past year have varied only between pounds 2 and pounds 2.11 a kilo, so Mr Broughton keeps up a steady supply, sending 10 animals to the abattoir every week.

One of the few ways he can exert some control over prices is by shifting the lambing season. He lambs earlier than most farmers: though the animals have to be given feed rather than grass, he will get a better price because he will be selling in April or May, when there are fewer animals on the market.

Otherwise, it is just a matter of pleasing the customer: the lambs are grown to a standard 18kg size so their chops will fit into polystyrene supermarket trays. The ewes are tupped by the rams in two batches, to spread the lambing process: a coloured marker shows which batch they belong to. If the ewes do not become pregnant after two goes, they are sent to the abattoir: mutton mostly goes into meat pies. (Older cows often end up in beefburgers: tender beef would disintegrate).

Mr Broughton feels particularly aggrieved at the effect of the CAP reforms on his livestock. 'The thing that hurts me most is that after building up a market for what I produce, my numbers are now going to be restricted,' he says. At the moment, there is a 'headage' payment for all suckler cows, breeding ewes and young male animals - a subsidy designed to keep the less efficient farms viable. Under the new regime, only 90 cattle and 1,750 sheep will be subsidised, albeit at a higher rate per head.

In addition, the number of 'livestock units' allowed per hectare of pasture is being reduced from 3.5 to two by 1995. (In the wonderful world of Brussels, a cow is one unit, a sheep 0.15 of a unit and a 10-month-old male calf 0.6 of a unit). That means Mr Broughton must slash numbers or turn 350 acres of arable land over to grazing. 'I don't know that it will make sense continuing with livestock,' he says. 'It will be more viable to continue with cereal than to convert some of it to grass.'

Back towards base, and a National Rivers Authority van is parked in woodland by the road. This is where the estate slips from big business to conserver of the countryside: working with (and subsidised by) English Nature, it coppices three acres a year - cutting and bundling young hazel shoots that are then used to strengthen river banks.

Forestry has never been profitable, but in the early Eighties the farm was sufficiently wealthy to pay for two woodmen to plant and fell timber. When times became tough, they were the first to go. 'The general public was quite pleased when I stopped felling trees,' Mr Broughton says. 'But if we don't look after it, the woodland will soon fall into dilapidation.' The main victim of the recession, he believes, is the countryside, because its management must be a low priority for a farmer's investment.

Back at Swanton Novers, Mr Broughton considers the question that perplexes non-farmers. Why should farming be the only industry in Britain where subsidies, quotas and other affronts to the free market are so ingrained that not even Mrs Thatcher could dismantle them? Brussels can be blamed for much, but not all: many restrictions and subsidies pre-date our EC membership.

Partly, it is simply because these things already exist and are nearly impossible to get rid of. 'If subsidies and quotas were abolished in the current situation it would be an absolute disaster,' Mr Broughton says. 'I don't think the consumer is prepared suddenly to pay 50 per cent more.' Farmers would certainly not like to be paid 50 per cent less.

More persuasively, he says that European farms could compete on the world market only by operating on the scale of American Midwest or Australian operations. 'Would you like us to become prairie farmers?' he asks. 'That's what it's all about.'

What about diversifying, moving into horse-riding or fishing like Brian in The Archers? 'There are better opportunities to do that where there is population close by. We considered turning buildings into workshops. We would have got a 15 per cent grant, but we couldn't have claimed VAT exemption, so there wasn't much point.' Extracurricular activities for the moment remain restricted to an open day in aid of the church, a strawberry tea to raise money for charity, and trips round the farm on tractor and trailer.

A year ago John Major told farmers they should try to become more like other businessmen and produce food for which there was a growing demand. He gave as examples organic produce and traditional English apples. But Mr Broughton says the demand is too limited: he is tailoring his products for specific markets - lambs for supermarket shelves, potatoes for crisps - and there is little more he can do.

It is striking how small the resemblance is between farms and other businesses. Apart from the strange world of subsidy and quota in which they live, they do not have the control over their destinies that other companies can aspire to. The future hasn't been in our own hands since the 1847 abolition of the corn laws, Mr Broughton says. 'It is decided by politicians.'

Farms can move into other products but they are driven by the whims of Brussels and the Ministry of Agriculture rather than by the market. Farmers cannot easily 'add value' - they would, for example, be ill-advised to go into processing, and there is little they can do to make their wheat or cows more valuable.

One of the few things they can do is to increase productivity - and here lies the root of their resentment. 'Under successive governments we have been encouraged to increase food production,' Mr Broughton says. 'The government brought out a white paper in 1975 called Food from our own Resources. We responded to that with mechanisation and more efficient production. Which is why we are in the trouble weare now.'

To the layman, the logical answer to that would seem to be to withdraw government interference and subsidies. But that is something the farmers will not countenance. In any case, they argue, it would be unworkable and would destroy the British countryside. It seems unlikely that we will ever discover whether they are right.-

(Photograph omitted)