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Farming’s financial woes could hit the wider economy

08:07 30 January 2016

A farmer ploughing his field near Aylsham. PHOTO: ANTONY KELLY

A farmer ploughing his field near Aylsham. PHOTO: ANTONY KELLY

Archant Norfolk 2014

The most complex agricultural recession in a generation could take its heaviest toll on East Anglia’s youngest farmers – and the many ancillary industries which rely on the region’s food chain.

The stark warning was issued by farming leaders after the release of a government report outlining a bleak economic outlook across many key sectors.

Defra’s Farm Business Income forecasts for 2015/16 are derived from information on prices, animal populations, marketing, crop areas, yields and input costs.

After two years of bumper harvests and ideal growing conditions, a global over-supply has forced prices downwards for most commodities, with a particularly harsh impact in the dairy and pig industries.

The report shows income for cereal farms dropping by 24pc compared to 2014/15, general cropping down 17pc, pig farms down 46pc and dairy down 45pc.

Industry leaders said the financial woes are not limited to the farming community – they will knock on into an extended food chain estimated to be worth £3.5bn to the Norfolk and Suffolk economy. And the deepest damage could be felt by farming’s youngest generation.

Tony Bambridge, managing director of contract arable farmers and seed potato producers B&C Farming in Marsham, near Aylsham, is also the National Farmers’ Union council delegate for Norfolk.

He said: “It is very seldom that everything is as low as it is now at the same time. Some of it is of our own making.

“Three years back the harvests were not so good, world stocks were deemed to be critical and everyone talked about the world having nine billion mouths to feed – so we had to crank it up. The industry worldwide took these signals and succeeded in increasing production. We have all done such a wonderful job as farmers in producing very good crops and so we have produced more than is needed.

“Agriculture is cash poor but asset rich. Farm borrowing has gone up to an all-time high as they try to maintain their business. We are borrowing more but we are in a fortunate position that we are able to borrow on the collateral value of our land. If there are going to be casualties it will be new businesses and young people who are renting land and don’t have that collateral behind them to extend their borrowing.

“We also need to understand the impact on other businesses. Farming is just one part of the food industry. It is the primary producer, but if it is struggling every other aspect will struggle as well.

Ken Proctor, a dairy farmer at Shipdham near Dereham and former NFU Norfolk chairman, said continuing delays to the payment of Basic Payment Scheme (BPS) subsidies had exacerbated the cashflow problems.

“The report is pretty gloomy reading,” he said. “The long and short of it is there is too much stuff on the market. Stocks are at an all-time high, there is no money in the markets and that is almost the perfect storm. Until the output is lowered, the prices won’t come back.

“It is very much hand-to-mouth out there. The Basic Payment Scheme has been somewhat held up, and without that it is pretty obvious a lot of farmers won’t survive. It is survival of the fittest, and that is a horrible thing to say.

“I am 58 and I have never seen a situation where every commodity was depressed, with the exception of white meat and eggs. The whole agricultural industry is really in a depressed state. But it is not just the farmers that will suffer. There are lot of other companies, whether that’s concrete companies, building companies, machinery suppliers, or general maintenance... the farmers will have no money in their pockets to pay for these people. So this is not just isolated to farmers.

“The really sad thing is the youngsters in the industry, the people who should be moulding the industry and going forward. They have got a massive challenge to survive.”

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