Dan Buglass: Positive signs of growth amid the winter gloom

Published on Sunday 4 January 2009 20:16

THAT is 2008 well and truly kicked into touch and I suspect that the majority of farmers will say good riddance to what was generally a difficult year. It is pointless attempting to pontificate on what 2009 will bring other than to say that it will be a testing time for the agricultural sector.

However, there are some positives, not the least of which is the fact that bank base rates are at a record low and may drop still further. But actually persuading bankers to lend at existing levels of overdraft may prove more problematic as they simply do not have the money.

The better news is the near- 25 per cent devaluation of sterling against the euro over the past 12 months. As a consequence, farmers received a welcome boost in their annual single farm payment cheques – the regime which replaced virtually all previous support measures.

The calculation for the SFP is made on one e day – 30 September. The reforms of the common agricultural policy in 2005 was expected to see the SFP gradually reduced over a period of time, but instead of UK farmers receiving a lower SFP, they actually benefited by a 13 per cent increase due to the exchange rate. The UK was virtually the only country where farmers gained.

Keeping out of the euro has been a major bonus for UK agriculture and farmers and, based on the current rate of exchange, they can anticipate a further boost in their SFPs this year.

The other bonus of a weak pound is that exports become increasingly competitive. The sheep trade has taken a substantial lift over the past fortnight and much of this improvement can be attributed to a strong export demand.

UK cereal exports will also become increasingly attractive. Since harvest, one leading firm of grain merchants in the East of England has exported almost 500,000 tonnes of milling and feed wheat, feed and malting barley, oilseed rape and beans to 16 countries throughout Europe and North Africa from 14 ports involving 135 ships.

This is excellent news for growers and has resulted in the price of feed wheat rising by around 10 per tonne recently.

However, competitors in the eurozone are feeling the pain and nowhere more so than in the Republic of Ireland. Beef production is a major plank in the Irish farming economy and over half of all the production is destined for the UK market. The weak pound is making life extremely tough for Irish exporters. In total, 42 per cent of all Irish food exports are traded with the UK.

This is big business, a measure of which can be seen from the fact that Ireland normally exports at least 100,000 tonnes of cheddar cheese to the UK each year.

Commenting on the current situation Paul Kelly, director of Food and Drink Ireland, said: "It's causing huge difficulties. We've seen a massive deterioration in the competitiveness of our exports. It's very difficult to ignore your next-door neighbour, especially when it is the fifth-biggest economy in the world."

But there is an upside for Irish farmers in that UK land values are now highly attractive. Over the past five years there has been a major influx of Irish farmers from both north and south of the border with many acquiring land in Scotland, especially in Dumfries and Galloway.

However, there have been fewer sales to Irish buyers over the past 12 months, but interest may soon revive.

GORDON Brown may or not call a general election later this year – I tend to think he will not. But there will be elections to the European Parliament in May. Just what this will mean in farming terms is uncertain, but there is likely to be increased pressure on the 40 billion (38bn) common agricultural policy: that is inevitable in the current economic climate.

May will also see the departure of Mariann Fischer Boel from the post of agricultural commissioner. This wife of a Danish farmer perhaps at times lacks the overbearing presence of her predecessor, Franz Fischler, but she has undoubtedly been effective. Her "health check" on the CAP refined the regime, but was largely neutral and Scotland certainly benefited from it. As to who her successor will be remains to be seen, but it is highly unlikely that he or she will be British.

ON A personal basis one the highlights of 2008 for me was a trip to Brazil last May. The visit was organised at the instigation of the Brazilian government in a clear attempt to assuage European concerns over its beef industry.

As one of a group of agricultural journalists from a range of European Union states that were previously major importers of beef from Brazil until Brussels imposed a near-total ban last January, we probably saw what the authorities wanted us to see.

We were generally impressed, though it was obvious that farmers and ranchers in this truly vast country have some way to go before they can match the production standards that are mandatory in the EU.

The consumption of beef in Brazil is rising rapidly, but still has some way to go before matching the per capita figure of over 60 kilos in Argentina, and I gained the impression that the big players in he beef industry were not overly-concerned at the export ban. They believe that they can find new markets, and that is precisely what they are doing in Russia.

Apart from visiting farms, ranches and a huge abattoir one of the great moments was seeing a female jaguar and her cub on a night-time safari in the jungle. That was something very special and very much a lifetime experience. I also caught several piranha fish on a vast river and ate crocodile steak, which was excellent.

Yes, it was a great trip, but I doubt if I ever want to test my constitution again by taking 11 flights in seven days. I now really know what jet-lag feels like.

But the real highlight of my year was the safe arrival of two more grandchildren. That takes the total to six, but old age is catching up because I have great difficulty in remembering all their birthdays.

The potential of Brazilian agriculture is enormous and young people from the UK could do worse than consider the opportunities afforded there.