Friday, February 15, 2008

A dose of reality

We've written frequently about the effect of increased commodity prices on farming in the UK – but only in general terms. In The Scotsman today, however, we get chapter and verse on the disaster hitting pig growers.

In the mid-1990s, the paper tells us, there were 70,000 breeding sows in Scotland. The total is now down to little more than 45,000 animals. Costs have shot up while ex-farm prices have barely moved.

We are then introduced to Jimmy Traquair, who runs just over 300 sows at Wellington Farm, near Dalkeith, with his son, Robin. He claims he has never experienced a situation like the current depression in more than 30 years of farming and would not be surprised if Scotland was to lose 20 percent of its breeding herd in a relatively short period.

He says: "It's intolerable and some people will undoubtedly pack it in before much longer. There are others who will struggle on because they grow their own barley and hope matters (will] improve."

However, the Traquair family only owns 12 acres and have to buy about 100 tons of barley a month. The latest load came in at £174 per ton delivered, more than double the £80 the business was paying this time last year.

At the same time, arable farmers who sell grain to pig producers are reported to be increasingly anxious as to whether they will be paid. There are, as yet, no reports of any pig producers going bust, but several are teetering on the brink in the face of losses of as much as £20 on each animal sent for slaughter.

Traquair says: "We are surviving, but only just. The problem is the price we are receiving. It's around 112p per kilo, but the reality is we need between 20p and 30p more to make a profit and allow for reinvestment."

The latest survey of compound feed costs by the Meat and Livestock Commission (MLC) clearly illustrates the pressure producers are under, with a rearing ration that cost £229 per ton in January 2007 now coming in at £283 per ton. That price would probably have been higher but for the fact that most feed manufacturers bought grain and protein on forward contracts at a time when cereals were lower.

This, of course, is only the start. We are not dealing with a market "blip" but a sustained, structural change in the commodities markets. And, as always when we see rapid rises in basic commodities, it takes some time for the costs to feed through into the retail sector.

Thus, for every £1 spent on pork in the supermarket, the farmer gets 35.5p. The bacon situation is worse with just 28p coming back to the producer. This is the economics of the madhouse. Framers who go out of business are not quickly or easily replaced, but demand – for the moment - is not reducing. The end point is real shortages followed by higher prices, the driver of inflation.

Yet, it seems, only a regional paper like the Scotsman wants to write about it, and even then it does not join up the dots. But that is the real world, which has no place in modern British politics. Farm policy is made in Brussels, so there is nothing our local politicians in Westminister can do about it.


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