Monday 30 June 2014

Potential threats to farmers as the British Economy strenghtens

As the British economy strengthens this may pose threats to farmers because it is likely the pound will strengthen and interest rates will rise.

The strengthening pound is a particular threat for two reasons; first because it will impact on the value of European support payments which are defined in Euros and converted to pounds before being paid to farmers and second because it will make exports less competitive and imports comparatively cheaper.

The exchange rate in particular has been identified in recent years as one of the most important factors influencing the profitability or otherwise of British farmers and for livestock farmers in particular the receipt of European support can often make the difference between profit and loss.

These livestock farmers are also potentially vulnerable to the impact of increased imports which have been implicated in the recent slump in beef prices as beef is being imported from destinations such as Ireland and Poland. As a result the value of beef cattle in this country have fallen by approaching 25% in the last 6 months or so which is posing a serious threat to many livestock farmers.

This has lead to criticism being directed at farming leaders where many farmers feel the National Farmers Union (NFU) has not been doing enough to “beat the drum” for British beef producers. But the NFU has explained it has been encouraging the public to buy British beef and to back the “Red Tractor” logo.

The Red Tractor logo was introduced in 2000 in the wake of the BSE crisis to give the public confidence in British produce. The Red Tractor is a food assurance scheme which covers production standards developed by experts on safety, hygiene, animal welfare and the environment amongst other things. The Red Tractor logo means the food or drink has met these responsible production standards and is fully traceable back to independently inspected farms in the UK.

The NFU are also highlighting where supermarkets have not made enough effort to differentiate between British and Irish beef. But, the Chairman of the NFU Livestock Committee has admitted it has been incredibly difficult to gain traction on this due to the combination of an over-supplied market and soft demand for beef in this country which is giving the retailers the chance to ‘drive down’ farmgate prices.

However, NFU President Mr Meurig Raymond said that, “Confidence, particularly among beef finishers, is at rock bottom. This is a crisis. It is our top priority,” He added that, “Next Tuesday’s beef summit, hosted by Farming Minister George Eustice, would be an opportunity to reinforce these messages and encourage DEFRA to promote beef exports.”

So it appears a lot is hoped of this high level meeting next week but it remains to be seen what effect political influence will have on market forces and the often obscure world of the meat industry from the predominantly Irish owned abattoirs to the supermarket dominated retail sector.


James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

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