The agriculture industry is arguably the most exposed to life after Brexit, with over £2billion in subsidies paid each year to offset the fact that businesses don’t receive a fair farm-gate prices. Whilst ministers have promised to cover the shortfall until 2020, there is rightly a lot of worry heaped on the shoulders of many an aging farmer. Most of whom, are well into their sixties and still working six and half days a week.
There are many goals to be reconciled and rewritten as regards agricultural policy. Food needs to be affordable for consumers, but balanced against a reasonable income for producers. With inflation set to rise, it’s time we looked harder at what we are importing versus what can be produced at home is just one of the thoughts from John Mulheron, CMF Capital’s Managing Director.
“With the majority of farmers voting to be free of the EU, at least now we have some clarity of how we intend to shape our future as regards trading relations. Though how this works across the various key industry sectors or how it will play out still isn’t clear and that is even before we’ve started any formal negotiations. Whitehall should take note that agriculture contributes £9.9bn to our GDP, is worth over £280bn and employs close to half a million people.” Commented Mulheron.
According to DEFRA, half of all farmers are in debt and in real terms haven’t seen wages increase since 2009. Sons and daughters are shunning their farming roots to find jobs in other industries, creating a void in the ‘next generation’ which is vital to ensure farming survives, let alone advances. Farming is in the blood, but the industry needs a transfusion to help shape its future.
“At CMF Capital, we have funded numerous projects within the agriculture industry, from renewable energy solutions, large scale machinery or helping farmer’s diversification strategies. We know from first hand, that as traditional revenue streams dry up, the industry has had to look to non-typical opportunities as a way of paying the bills.
Research shows that around 57,000 farmers have already diversified their businesses. On paper, it is often attractive and exciting, but it comes with another in-tray of things to understand, manage and finance.” Continued Mulheron.
Crucially, access to funding must not dry up and the government has a duty not only to protect and transition farmers through the ‘Brexit years’, but also to help devise a new subsidy framework that is fairer for all. The current one, largely rewards large scale, highly automated farms fails to understand the more rural farming business. Whilst these farmers don’t churn huge volume, they support local communities and manage environments or ecosystems. A job that goes largely unnoticed.
Like all industries, technology is fast shaping our working lives and farming is no exception. From drones that can report back on your estate to robotics or GPS self-driving tractors; the ‘precision agriculture’ that will make us more productive and therefore more competitive. Investment into these areas can make a huge difference, but they are a massive leap of faith to a farmer who should be drawing his pension.
Yes, we have witnessed a shift to organic, traceable, local produce over the past decade, but there are an ever-increasing number of mouths to feed, many of whom are on low wages and cannot afford potatoes that still have mud on them. For most, a visit to a farm shop is made on holiday and the butchers is a quarterly treat when the in-laws are in town.
Not even Hugh Fearnley-Whittingstall could persuade the masses to eat slightly wonky parsnips. Instead of landfill, let’s chuck them in the anaerobic digestion plant along with the other 160m bananas we happy throw each year.
With major supermarkets waging a constant price war, driving suppliers to the brink of destruction it means farmers have little choice than to improve their own margins.
“A fairer farming subsidy would see investment in future technologies and finding ways to excite and recruit the next generation into a viable industry that they can make a success of things by being more productive and maybe being able to spend time with their families. It would see additional streams of funding for previously non-core projects such as renewable energy; which the agriculture industry already contributes around 23% of power into the grid.” Said the CMF Capital Managing Director.
Whether this policy and funding comes from government or farmers work with businesses such as ourselves, it must be given time to become streamlined and efficient. That requires solid investment, project support through to completion and fair rates of interest that allow the farmer or landowner to see a decent reward for their bravery.
There are numerous grants and organisations that lend more than a helping hand to the industry, but in 2015 it reached record borrowing levels of around £16.9bn. Whilst I don’t think we will see interest rates change much over the next year, even a small rise would leave some farmers dangerously exposed. Alternatively, a sharp drop in land prices could lead to future funding being tightened by the major banks.
“Yes, Brexit will be a nervous time and the impression has so far been defensive and closed, obsessed with reducing immigration. This has been balanced with a number of wins in terms of investment and commitment from multinationals, but if Theresa May believes in her ‘shared society’ we have to invest in our heritage industries – engineering, manufacturing and farming – to make them more competitive whether it’s exporting globally or reducing our reliance on imports.” Concluded Mulheron.
