High prices bring optimism to farming

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As investors and policy makers hunt for growth in Britain’s struggling economy, farming rarely gets a mention among the sectors positioned to drive recovery.

Yet, farming was one of the UK’s most profitable industries last year, increasing aggregate net profits 25 per cent to £5.7bn, according to the National Farmers’ Union.

Measured against sectors in the FTSE 100 index, only mining and oil and gas saw bigger growth, according to forecasts from UBS, the investment bank.

Farmers have endured a tough period over the past two decades, roiled by livestock disease and pressure on prices. However, a combination of commodity price inflation and global concerns over food security have provided a fillip – in turn attracting more investment and encouraging more young people to look to the land for employment.

This has brought a new mood of optimism to Britain’s farms. “The image of a grumpy old man leaning on a five-bar gate with his trousers held up by baler twine is over,” says Peter Kendall, president of the NFUand an arable farmer in Bedfordshire.

Instead, modern farms such as his use GPS devices to spray crops, high-tech computers to irrigate raspberries and strawberries and solar panels to generate power.

“It’s now a high tech industry, not the way it was 10 years ago,” says Mr Kendall.

After spending years shedding jobs, farming expects to hire 6,000 new entrants a year until 2020, although this is effectively all replacement rather than expansion.

“We heard a massive amount of noise about [General Motors creating] 700 new jobs at Ellesmere Port, but farming created 10,000 more jobs in 2010-11,” says Mr Kendall.

David Cameronsignalled his awareness of the industry’s importance last week whenthe prime minister revealed that he was a regular listener to Radio 4’s Farming Today. Mr Cameron has also called on consumers to support farmers by buying British produce.

But while the NFU prepares to launch a campaign on Monday burnishing the industry’s economic credentials, more challenging times could be around the corner.

Supplies of grain including wheat – “probably the one commodity that underpins agricultural profitability,” according to Mr Kendall – are rising, threatening to depress prices. US corn stocks are also set to hit their highest level in six years.

The strengthening of the pound against the euro, amid renewed turmoil in the eurozone, is another worry for export-orientated farmers. So too is sluggish consumption at home.

Declining subsidies from the European Union – which have long buoyed the industry – is another reason why farmers’ traditional grumbling is unlikely to be eliminated entirely.

But long-term trends, such as UK population growth, point to rising demand for British farm produce. “If we don’t produce more, we will be less than 50 per cent self sufficient in indigenous food,” says Mr Kendall.

Growth in global population and rising demand from emerging markets is likely to fuel further price inflation in the long run even if grain prices take a dip in the near term.

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