Economist warns of support payments falling to £36 an acre

Published on Friday 19 March 2010 18:43

A LEADING economist has set out his vision of agriculture in 2020, with support payments as low as £36 an acre and billions of pounds of cash coming from renewable energy production.

Francis Mordaunt predicted the common agricultural policy budget would shrink, with member states either reluctant or unable to put more money into the communal pot.

He backed a view increasingly taken by forecasters when he said Scottish livestock producers with high levels of historic payments would have far steeper and quicker reductions.

In what he qualified as a worst-case scenario, he said the acreage payment could go down to 36, with a combination of a stronger pound and a 40 per cent reduction in the CAP budget being the main drivers. This compares with the suggested 106 per acre that would occur with a move to area-based payments using current financial data.

Usually, sterling weakness helps the industry even if it means that costs, such as fertilisers and fuel, rise. A recent recovery in the pound has changed the equation as far as support payments are concerned, but Mordaunt believes sterling is now overvalued.

While he was largely speaking on Scottish agriculture, he referred to the wider UK position and was blunt on the ability of Welsh farming to survive any reduction in support.

"Welsh farming is a basket case," he said. "It is all about sheep and cattle on the hills. At least Scottish agriculture has a range of activities that allow leeway when any particular sector is under pressure."

Last year, the total income from farming in the UK amounted to nearly 3.5 billion, slightly more than the amount of taxpayers' cash invested in support.

Mordaunt believed that by 2020, an additional 4bn could come into the industry through renewable energy schemes. Anaerobic digesters, wind turbines and biomass would all contribute massively to the rural economy, he said. "Renewable energy creates an enormous opportunity for the industry, especially when the income stream is guaranteed for 20 years."

However, some farmers would be so indebted they might not last that long, he warned. Mordaunt pointed out that bank borrowing had increased by 59 per cent in the past decade, a rate of increase that far outstripped other industries.