A field day for British farmers
While most of the economy suffers, the livestock industry is profiting from the pound's weakness
Friday 10 April 2009
British farmers are often viewed as people with a lot to complain about. And with the recession in full flow, one might expect them to be even more despondent. Remarkably though, some farmers have seen their businesses turned around by the recession, and have reason to feel quietly pleased about the country's economic woes. This is particularly true for those who work in the beleaguered livestock sector, who have seen their costs fall as the price of meat rises.
The main cause of the farmers' delight is the weakened value of sterling against the euro. Although this might be bad news for British holidaymakers who want to soak up the sun in Spain, historically a weak pound has always been good news for farmers, as their EU subsidies are paid in euros. Another benefit is that British exports have become more competitive.
According to Francis Mordaunt, head of business research at Andersons agricultural consultants, the pound's slump has prompted a "recovery" period in the livestock sector, giving hope to farmers who have spent the past 10 or 15 years getting by on a pittance.
"The sector that is doing better at the moment is livestock, because they've got lower feed costs due to cheaper grain," he said. "Livestock farmers – those who sell beef, sheep, pigs and poultry – are benefiting from the weak sterling without any doubt. But you have to remember that being a beef or sheep farmer has not been profitable for many years. Many have been living off £10,000 which clearly isn't a living wage. They really only survived because they've diversified, and go out to do other things."
Adam Quinney, 46, rears cattle and sheep near Redditch in the West Midlands. He is now making twice the amount of money per cow than he did this time last year, and can now afford to be cautiously optimistic about the future of his business.
"The livestock sector has improved a lot over the past three or four months especially," he said. "It's really down to two reasons: the demand has been high because the number of livestock has fallen after low returns in previous years, and the rate of exchange has gone in our favour so our meat is competitively priced in Europe. It's made a fantastic difference. In 1996, BSE cut the value of our cows dramatically. At that time we would get around £300 per cow, but now they're fetching anywhere between £800 and £1,000 which obviously makes a big difference.
"Foot-and-mouth disease in 2001 also set our business back by about five years. We didn't get it – our neighbours did – but the resulting restrictions harmed our business big time.
"There are a lot of people who have been very despondent about being livestock farmers for the past two years, but now they're thinking there is a future, although they're still being very cautious. If the pound was to go back to where it was a year ago, a lot of our increases could be lost. But at the moment, there's a lot of demand for our products, and hopefully the price will remain firm so we can repair some of the damage done over the past 10 years."
According to Mr Quinney, the most remarkable thing about the past few months is the euphoria with which the slightest increases in the value of livestock has been greeted by formerly depressed farmers.He added: "This week, the price of a lamb increased to about £80 or £90, which everyone thinks is fantastic even though that's only £10 or £15 more than the price they were when I left college 25 years ago.
"Nevertheless, people seem a lot more buoyant and optimistic. We're not out of the woods yet, but what's really pleasing is that people are saying it's worthwhile reinvesting.
"Of course we're sensitive to the fact that all around us there are people losing their jobs in big numbers. Farmers have pensions too, and we've seen ours collapse just like everybody else. But every dog deserves its day."
Unfortunately, the story is very different for arable farmers, who have been badly affected by the escalating prices of feed, fuel and fertiliser – known in the trade as "the f-ing costs". Filling tractors with diesel and spreading good quality fertiliser has become prohibitively expensive, especially for farmers who rely on crops for a living. Many are now relying on the money they made from recent harvests to stay afloat.
"Arable and cereal farmers have just had two good years, but they're less optimistic now," said Francis Mordaunt. "They are staring at a loss year in 2009 unless prices improve. The cost of fertiliser is particularly high at the moment, and they've had to set prices which don't give them a return on the cost of their production. At the moment they're slipping backwards day by day."
Peter Kendall, 48, is an arable farmer who owns 1,500 acres of land at Eyeworth in Bedfordshire, where he grows a number of crops including wheat, oilseed rape, spring beans, oats and barley. He is also president of the National Farmers' Union. "As an arable farmer, it's been a once-in -a-lifetime rollercoaster over the last 18 months," he said. "We've seen absolutely record highs, followed by an explosion in costs as the price of fertiliser mirrored the rising price of oil. Our costs of production then escalated and we had a record high crop yield, which forced prices down again. Considering the costs we're now facing, it's not looking as rosy as it did.
"I don't want sound as if I'm whingeing, but if it wasn't for the falling value of the pound against the euro, there would be very long faces all round in the arable sector. Thankfully, at the moment we've still got the receipts from better harvests in 2007 and 2008, but everyone's a lot more nervous about the coming year because there's so much uncertainty."
It would be easy to put the sudden change in fortunes down to rising food prices, but such increases are not instantly fed back to farmers, who usually only provide the raw ingredients to the food processors before the products are marked up as they hit the shelves. As a result, most will only experience a tiny increase in revenue.
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