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Adapt or quit, farmers are told

Fordyce Maxwell Rural Affairs Editor

Professor Phil Thomas has a message for farmers. It is that British farming is slightly bigger than Morrisons, the smallest of the six big supermarket groups, and rather smaller than Somerfield in fifth place.

But not all of his speech to an Anglo/Scottish Borders conference was as bleak as that. Some parts were bleaker as he put his theme of a future for food and farming in the region into a world context.

Describing a speech as "thought provoking" should not be done lightly, but the former head of the Scottish Agricultural College who chaired this year’s inquiry into foot-and-mouth disease in Cumbria gave a talk to decision-makers in the Borders, Cumbria, Dumfries and Galloway and Northumberland which was precisely that.

Following is an outline of what he said.

The global market for food is promoted by the World Trade Organisation, constrained by national import barriers and tariffs and modified by national food and agricultural policies with some local dimensions.

At present more than 800 million people are undernourished. If that figure is to be reduced or eliminated as the world population increases, food production must increase by about 75 per cent and, if poorer countries become wealthier, the diet changes and people eat more meat and dairy products.

About 80 per cent of increased production will come from higher yields and more intensive farming, only about 20 per cent from cultivation of new land.

This might seem encouraging for British farmers. But the price of agricultural products depends on what poor people can afford to pay and what richer people in industrialised countries are prepared to pay - and as their incomes rise, a shrinking percentage of them are spent on food, down from an average of 20 per cent to less than 10 per cent in the past 30 years.

"Downward pressure on food prices has gone on for decades and will continue, even as demand grows."

That is one of the reasons, although not the only one, why British farm incomes are low. It is not the present run of low-income years which is unusual, but the succession of mid-90s high income years. A graph of the past 30 years shows, with blips, a steady decline in farm income and a widening gap between the cost of inputs and return for production. Last year’s foot-and-mouth epidemic was, in the long history of farming, a blip. The industry was in trouble long before that.

Supply companies have merged and consolidated, research and development has contracted, the number of farm businesses continues to shrink, as does the number of jobs. Total farm output has fallen as individual businesses increase efficiency and attempts are made to diversify. The Scottish Executive and the UK government had produced strategies intended to help farmers plan for the future - the Executive’s forward strategy for farming and, for England and Wales, the Sir Don Curry report.

"These recognise, I suggest, that farming no longer makes the bricks for the whole rural economy, but that the industry should still be seen as the cement which holds that economy together."

However, the Scottish strategy takes a more realistic view, starting from where farming and the rural economy is, compared with the Curry report’s listing of middle-class aspirations and apparent bias against technology, especially genetic modification.

The Curry report also argued for immediate wholesale reform of the European Union’s common agricultural policy. That is not going to happen. Its opponents say that it is not working, that it is expensive, bureaucratic, anti-market and environmentally damaging.

But only five EU countries, including the UK and Germany, with a total of 32 votes are demanding reform now. Four, with 18 votes, are undecided. Seven, including France, Ireland and Spain, with 37 votes, are against reform. The chance of getting the 62 votes needed for reform is nil.

"It will only be tinkering at the margins for the mid-term review. The UK, the Executive and farmers will have to work with what we have."

Reasons given for the poor state of UK farming include it being an old-style industry, the power of supermarkets, low product prices and farmers not producing "value added" factors such as farm quality assurance and animal welfare. In fact, agriculture in most EU countries is doing reasonably well, denying the "old-style industry" reason.

There is a concentration of retailing in the UK, with total farming output less than that of Somerfield and less than one-third of Tesco, but there is also retailing concentration in other countries.

A recent survey by the Food Standards Agency indicated that food safety was listed by only 4 per cent of shoppers as a factor, country of origin by 3 per cent, environmental concerns by 2 per cent, whether a product was local by 2 per cent, animal welfare concern by one per cent and seasonality by 1 per cent.

The choice for farmers is to make better returns from farming, generate more income in other ways or quit farming. Government policy is unlikely to have a big impact on decisions made by individual businesses.

If they stay in business, farmers must reduce costs, add value or become a rural business with farming interests, not simply try to be a diversified farm.

In answer to a question on England/Scotland differences of approach and prospects Thomas said: "Scotland is a rural country, which England is not. That’s the benefit of devolution when it comes to farming and the rural economy."

Scotland’s farmers might like to ponder that.