Combination of factors could drive up food prices, says Norfolk farmer Kit Papworth
PUBLISHED: 11:33 11 May 2018 | UPDATED: 11:42 11 May 2018
Food prices are set to rise – and it’s not just Brexit trade deals that are making this likely, says KIT PAPWORTH of north Norfolk farming contractors LF Papworth Ltd.
Some years ago, I was fortunate to meet a man who had made significant money by trading commodities.
When I told him what I did, he replied: “You farmers are all the same, forever optimistic, no risk management and always sell on a downward market”.
I was indignant. I pointed out that farmers were much better at marketing these days and that managing risk was part of the job. He said: “A word of advice – stop watching the wheat and rape markets. Watch oil. Buy your fuel and fertiliser as far forward as you can when it is down and sell your grains when it is up.”
While that has not formed the entire basis for our marketing strategy since, I have never forgotten his words. This week, oil has reached highs last seen in 2014 and new crop prices for all of our farm commodities are looking more promising – perhaps we have turned the bottom of the price curve in time to compensate for lower yields expected for the 2018 harvest following such a wet spring.
When wheat reached its highest ever price, back in 2008, the news was full of stories of how the price of a loaf would rise to £1.30 because of the cost of wheat. Since then, despite a 50pc reduction in its value, a loaf of bread has barely dropped in price.
This is because the price of milling wheat needs to rise by £10 per tonne to add just 1p to the cost of a loaf and that prices never come down as fast as they go up. What could have a much bigger impact on food prices is Brexit, and our ability to negotiate trade deals with the EU. A House of Lords committee this week suggested that some foods could rise in price significantly and by an average of over 20pc.
There is another factor that I believe will impact on food prices. UK farming isn’t actually profitable. It needs over £3bn of government support to keep farmers producing cheap food in the current regulatory framework, while managing the environment.
If the net income to farmers is to reduce as a result of Brexit, more of the remaining support is to go to supporting environmental stewardship in whatever form this may be, and farmers have already cut their costs as far as possible then shortages will inevitably occur, resulting in increased food prices.
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