Written by Catherine McBride
This article was first published in Briefings for Britain and we re-publish it here with their kind permission.
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(You can read Part 1 here)
One conclusion from the Agribusiness Consulting Informa report would be unsurprising to most businessmen. In all sectors and all scenarios, no matter how unlikely the scenario was, high performing farms, measured in terms of their output/input ratio, remained profitable. But the result that would surprise most non-farm businessmen was that in all scenarios, and all sectors, low performing farms lost money – including in the base case! That is the do-nothing case. In other words, they are losing money now.
DEFRA calculates that 20 per cent of all UK farms have a negative FBI. In other words, a fifth of all UK farms are making a loss on their farming activity even with basic payments and environmental subsides. So how do these farms survive? Obviously, these are not farms but lifestyle choices (or clever tax planning) and the farmers have another source of income: this could be providing holiday accommodation; running a farm shop; or covering their land with wind turbines and solar panels. Occasionally the farm owner is a retired rock star or film actress, but those are the exceptions.
I do not object to farmers increasing their income in non-farm activities, but I do object to politicians and the NFU using these hobby farms as a reason to block trade deals with efficient farmers in other parts of the world.
I also object to giving extra subsidies to farmers on poor land which the EU’s CAP payment system encourages members states to do. In a free market system, poor land is cheaper so farmers can run larger farms and compete with those on better quality land. It is only under the EU’s inverted regime that farmers are better off farming poor-quality LFA land than running farms on good agricultural land. In 2019, Defra’s FBI analysis, Table 2.1, shows that both types of grazing farms lost an average of over £16,000 on their farming activities, but the LFA farmers picked up over £10,000 more in their Basic Payments (subsidies) plus £7000 more in Agri-environmental subsidies.
It is a bit rich for the NFU to want to block unsubsidized beef and lamb from Australia, when even the average grazing farm in England is only breaking even with the help of UK taxpayers. One third of lowland grazing farms in England made a FBI loss in 2019/20 including subsidies. As did one out of every five LFA grazing farms, while less than 10% of either group had a Farm Business Income above £75,000 unlike 44% of England’s Dairy farms. Shouldn’t UK taxpayers be questioning the Government as to why they are still subsiding these loss-making grazing farms?
Luckily, unlike the UK, Australia doesn’t subsidize its farmers otherwise everyone would want to run a massive desert farm like Anna Creek Station. It is one of the biggest cattle stations in South Australia, at over 23 thousand square kilometres slightly larger than Israel, but its land is dry, and it only runs about 17,000 head of cattle in a good year, and a tenth of that in a bad one. So Anna Creek is unlikely to be running the UK’s efficient farmers out of business – or ‘flooding’ the UK market with beef as Batters would like to suggest.
Furthermore, we should question whether a country that is already importing a large amount of its food – even food that it has the weather and soil to produce for itself – should be allowing good farming land to be used for solar farms. The NFU is claiming that farmers should be protected because they are the stewards of the countryside, yet politicians are subsidizing the same farmers to cover the UK’s green and pleasant land with wind turbines and solar panels. Not to mention allowing biomass power plants that burn wood – a natural commodity that the UK had already decimated before the Napoleonic wars and is now proposing to do the same again but this time in the name of environmental protection.
There is another solution to the protectionist verses trade debate. The UK has been importing on average 330,000 tonnes of beef each year over the past six years. I would suggest that the government set a maximum global import quota at 330,000 tonnes but sold as licences to UK importers – so not part of any free trade agreement with any country. Then give the Australians tariff-free access for their agricultural products as the UK has done with the EU. UK farmers will not be competing with any more imports than they do now, but the Australians and the Irish can fight it out between themselves for UK customers. Hopefully, this will produce lower priced imports for UK consumers. All imports will still have to meet the same food standards as UK producers.
That way the Government gets to help the 67 million UK consumers without putting any extra burden on the half a million UK farmers, many of whom are not involved in beef farming, and many of whom would benefit if they could sell pork, or cheese, or barley distilled as whisky to Australia.
(Catherine McBride is an economist writing frequently on agriculture policy and a Fellow of the Centre for Brexit Policy)
Catherine McBride has confirmed my suspicion. The N.F.U. does not represent what I would call Farmers. It represents Large Land Owners.
Getting out of the E.U. was supposed to ensure that we became a Sovereign Nation making our own laws. That surely includes who we trade with and on what terms.
We proved centuries ago that free trade was better for us than protectionism.
She is right in pointing out that this nation can not afford to cover many acres of potentially productive, food producing, land with wind mills and solar panels.
(Nor should we cover that land with buildings, to house unwanted, alien, ‘invaders’!)
So, if all these inefficient farms go bust, what happens to the farms/land?
99% of the rural landscape in the UK is managed, there are few “natural” areas of the UK anywhere.
Are we to be dependent on foreigners for our food as well as our energy needs?
It’s no good whining, these problems can’t be avoided, not everything is about money.
Let the unproductive hill farmers turn their land over for forestation and pay them to do so? This is more help than the local high street food traders who never got a penny when they closed their shops.
The arable farmers seem reasonably efficient and should be able to compete if they invest in technology.
The Tories could help British food producers by demanding clear indication on packaging where food orginated to guide the consumer to their products more effectively. Local authorities need lobbying by locals to demand all school meat dishes are British meats.
I buy all raw meats from my local butcher who sources all his meat locally.
Clear and prominent indication of origin is a necessity for all goods in the shops, especially if we want to boycott those from the EU.