Monday 5 January 2009

Ill Winds - Could 2009 be good for farming?

First of all apologies for the lack of updates recently. I have been spending much time intruding on the grief of another industry.

A new year brings new concerns for the countryside, but all is not as bleak for farmers as it might at first seem. The pound is bouncing along a historical floor against the Euro, and this brings good news for many.


For a start a low pound brings with it good news on subsidies, In the old days these were paid under the common agricultural policy of the Europe Economic Community, the EEC, which eventually mutated into the European Union. The subsidies changed into the Single Farm Payment, but one thing remained the same… The level at which UK farmers were, and are paid changed every year according to the strength of the pound.

On the 16th of September 1992, the sterling crashed out of the European Exchange Rate mechanism. The value of the pound took a massive dive against a basket of European currencies. Agricultural subsidies were paid against the value of a nominal `Green Pound’ As the pound tumbled against other European Currencies, the value of the subsidy which farmers were paid in sterling rose. Infact it rose so far that some farmers I know bought new combine harvesters, and promptly went off to international sunspots.

The value of the pound has also recently been tumbling against the Euro, but unlike 1992, most of the falls have taken place after the determining date for the setting of the level of subsidies. Nevertheless the value of the single farm payment will be about 14% higher than farmers would have expected if the pound had stayed close to last year’s exchange rate against the Euro.


There is, as with everything a down side. A massive drop in the pound means a big rise in the price of anything imported. For farmers this is mainly oil and fertilizer. Of course the oil price has been dropping recently, and the rate of exchange between the pound and the dollar is what really matters.

The good new is that it’s not just oil which comes into this country. So does food. Suddenly Danish and Dutch bacon is also very expensive. In recent weeks UK lamb has been `cheap as chips’ to French buyers, and the New Zealand sellers have developed markets closer to home which may well be more lucrative than Europe.

Prediction for the year… Of all the industries to be affected by the economic gloom, farming is the one, in my opinion most likely to emerge unscathed. If it doesn’t there will be food shortages, and the shopping bill will become hideously expensive.