Despite the beautiful weather, there are clouds overhead as far as many farmers are concerned. Milk purchasers are dropping their milk price, the value of arable crops continue to fall and beef prices, although they appear to have stabilised, are still around 20% down on the price achieved a year ago.
Milk prices appear to be falling because of increased production here in the UK and falling dairy commodity prices across the world. Dairy farmers have certainly seen reasonably good returns in the last 18 months or so but the tide appears to have turned; for instance Dairy Crest has announced a 1.1p per litre reduction on their standard price from 1st September while Arla has announced a 0.94p per litre drop from August.
Arable farmers appear to be facing even tougher times as grain markets continue to fall. There are a number of factors affecting such prices which include a general expectation of heavy crops this harvest and strong sterling which is making British exports less competitive. There is talk of lower yields in the US where some crops have been hit by drought which may reverse the fall in prices but to counter that the Russian grain harvest is forecast to increase. But, at present it appears to be the supply side of the market which is outstripping demand, hence prices are depressed.
As far as the beef sector is concerned, significant losses have already been made by some beef fattening units which bought expensive “store” cattle a year or so ago and now those cattle are ready for slaughter, the finished beef price has fallen to such a level that farmers are unable to recoup the cost of feeding the animals over the last year.
However, there is cautious optimism that the price of beef has at least levelled out and there are the odd signs that prices may start to gently improve but this is not a moment too soon for most beef farmers, who like arable farmers in particular, will find 2014 a very testing year.
Whether we are entering an era of lower commodity prices is not clear; we hear many people talking about the need to feed more mouths across the world and how this should provide a secure future for farmers, but this has not been borne out by the experience of many farmers over the last year or so. What seems clear to me is that farmers must become used to large fluctuations in world commodity markets and as a consequence they will need to make good use of their profits in the good years in order to survive the lean ones.
James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells
T: 01749 683381