Analysis – The search for pastures new

With more new cases of foot and mouth being confirmed the expectation is that it will be quite some time before the outbreak is finally contained.

This is the latest in a series of crises to have hit agriculture in recent years and for many, it will be the last straw. Although the government has agreed to pay full compensation for the value of stock slaughtered, the loss of income over a sustained period will rapidly deplete any cash reserves.

Knock-on effects
It is not just those infected suffering, but the knock-on effects of movement restrictions and the loss of markets will impact for some considerable time. The whole rural community is feeling the effects with many allied businesses suffering. The current crisis will hasten the existing trend of farmers and farm workers leaving the industry and contribute to the loss of further rural businesses.

For those who remain committed to UK agriculture, what are the options?

In its simplest form there are two ways forward; compete at world prices or diversify away from mainstream agriculture.

To compete on the world market requires minimising the unit cost of production.

Often, this means spreading those costs over a larger area or greater numbers of livestock. Although size isn’t always the least cost option, there is no doubt the move to larger holdings will continue.

Competing in the global marketplace
In the global marketplace there will be more volatility in returns and a greater emphasis on financial and marketing skills. The major cost savings areas are in machinery and labour, which is why the numbers of farm workers have dropped so dramatically.

In many cases the only way of achieving this is by sharing costs between units. This may take the form of one farmer contracting for another, or a number of farmers pooling resources together and running their units as one.

Such co-operation is one of the reasons why the smaller farms in continental Europe have been able to survive. Their highly developed co-operative systems give cost reductions and marketing clout.

Those who are either unable or unwilling to compete with the world market must look at other ways of sustaining their businesses. Diversification has become a much overused chant from politicians, commentators and advisers, but for many farmers it is the only option for survival.

Opportunities for diversification are many – from producing for a niche market – such as organic, to the conversion of redundant buildings or even finding employment away from the farm.

In many cases, approaching the situation with an open mind and a willingness to consider all options allows a solution to be found. Financial assistance by way of grants for a wide variety of projects and the recently introduced England Rural Development Plan has broadened the scope of these.

The government could also consider fiscal incentives to make diversification more attractive. The institute’s farming group is producing suggestions for the Treasury on how this might be achieved. Co-operation, farming part-time or running a B&B may not be what farmers came into the industry for, but for many there is little choice.

The bottom line is that with or without incentives change is inevitable.

For those who embrace it there is light at the end of the tunnel. For those who don’t, the future continues to look bleak.

  • Angus Burnett is a member of the ICAEW’s farming group and a partner in Winchester firm Martin and Company.

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