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Landlines: Goodbye and good riddance to 2012

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  • by Halidon
 

LOGICALLY, we all know that the difference between December 31 and January 1 is only a matter of seconds, not a quantum leap into a brave new world. But logic has nothing to do with the feeling of relief virtually every farmer will have when they say goodbye to 2012.

From the end of the warmest March on record until time of writing this has been the worst year for weather any of us can remember. Dreadful growing conditions, waterlogged fields, rubbish silage, worse hay, appalling grain, oilseed, potato and vegetable harvests, livestock that didn’t grow or thrive as they should, now facing a winter of expensive feeding and poor quality straw.

Missed anything? Probably, but whatever I’ve forgotten almost certainly also had a hard time, including those farm diversifications such as bed and breakfast, holiday cottages, caravan sites and farm shops.

Next month and into a new year much of the above will be quantified by the usual series of government financial reports although no one needs to be told that the poor physical results on farms will be confirmed by poor financial returns, in spite of, for example, record grain prices.

But Andersons, farm business consultants, have got their figures, or at least an informed estimate, in early. They forecast that total income from British farming (TIFF) will be down about 20 per cent in 2012 compared with the good year of 2011, that is about £4.25 billion compared with £5.3 billion.

That’s a thought, and not a happy one, a national result comprising the individual financial woes of tens of thousands of farmers. Another thought, from Andersons, is that they expect incomes to recover in 2013, on the assumption that we don’t get more bad weather on the same scale as this year.

We all hope that and, with that proviso, Andersons’ commodity and area specialist advisers pool their forecasts to suggest an industry recovery in profitability of ten to twelve per cent.

That would bring total income from farming back to about £4.7 billion or a little higher. Richard King of Andersons notes: “This may look rather unexciting compared with the £5bn+ of 2011. However, it must be remembered that both the 2012 and (what we forecast for) 2013 figures are still a big improvement on returns for farming in the decade from the mid 1990s to mid 2000s.”

With that very human ability we have to forget the bad times as years go by, that’s a good point to make although after 2012 many farmers will need more convincing than that to believe things were worse, financially, a few years ago.

Regardless of weather, Mr King suggests that to bounce back from 2012 costs need to be a priority on every type of farm. He notes: “It is a truism, but in almost all sectors low cost of production is the key to profitable farming. With the current high price of many inputs” – seed, feed, fertiliser, fuel among them – “there will be an even greater need to use them effectively.

“The range in performance between businesses is large and almost certainly getting wider with the best farms continuing to innovate and improve.”

Unfortunately, taking a little gloss off the forecast of a better 2013, Mr King also suggests that the worst of the financial blows inflicted by 2012 might not become apparent until well into the new year when, he warns, “a number of businesses may see serious cashflow problems.”

That will probably be because arable farms find they have less left to sell than thought, the extra cost of livestock feed mounts up, tax bills from previous more profitable years have to be paid and the single farm payment subsidy will be lower than 2012 because of the euro/sterling exchange rate.

Not forgetting, of course, the disruption to cropping plans caused by wet weather this autumn with a big drop in the area sown to winter wheat and oilseed rape.

Many growers plan to use the winter wheat seed they have in spring, if and when ground conditions allow, but there is also likely to be a big increase in the area of lower-yielding, less profitable, spring barley.

Oh, and the sterling versus euro problem continues as Mr King notes: “The Eurozone crisis rumbles on and a significant weakening of the euro to the detriment of UK farming cannot be ruled out.”

That problem also has implications for the UK economy as a whole as it continues to struggle for any kind of recovery.

It’s always easy to forget other businesses have financial worries as poor, or at least lower, domestic demand for almost everything has been compounded by weak export markets.

Arguments about the future direction of Europe’s common agricultural policy (CAP) also continue, as 27 member states try to reach a political compromise on how to reduce the European Union budget and farmers wonder what the implications will be for their support payments.

So we will soon say goodbye and good riddance to 2012, but the welcome for 2013 might be more muted than we would like? Happy new year anyway.

 

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