Goodbye and good riddance

Goodbye and good riddance: 2015 has been a year to forget for most farmers.  The bright side has probably been the weather helping crops grow well and producing record harvests for many, which was just as well because crop prices tumbled.  

To put this in to context, the value of feed wheat has fallen from around £130/tonne a year ago to around £105/t just before Christmas. This is a drop of nearly 20 per cent and with costs of production running at around £130/t it is not difficult to do the maths. 

In the livestock sector, sheep farmers had a particularly difficult year as lamb prices fell away sharply in the spring and summer with many lambs being sold at around £60/head compared to  £80-£90/head the year before.  This has led to very challenging times which still remain with lamb prices now about 50p per kg lower than a year ago.

Beef prices became more stable in 2015 but that followed big price falls in 2014 and so some respite was welcome. But even so prices have eased with finished cattle prices currently down around 15p/kg compared to this time last year.

However, the headline grabbing news has been the sustained and dramatic fall in milk price which is keeping many dairy farmers under pressure.  In this area we are luckier than some as very few of our farmers are signed up with the worst hit milk purchasers such as First Milk where their producers are receiving not much more than 17p/litre.  

Even so, many of our local farmers are receiving only around 22 or 23p/litre which is well below the average cost of production, resulting in widespread financial problems.

But, unlike other agricultural sectors where the value of the product being produced is similar for most farmers in that sector, the price dairy farmers are paid for their milk varies widely, being dependent on the milk supply contract any particular farmer has been able to secure.  As a result there are dairy farmers on supermarket aligned contracts who are still receiving around 30p/litre which is almost twice as much as those on the worst contracts.  

This means that the fortunes of two seemingly similar neighbouring dairy farmers can vary widely but in reality the majority are not on the best contracts and are suffering badly.  Unfortunately there is little sign that prices will improve dramatically in the short to medium term and so the gloomy theme of 2015 seems likely to continue in 2016.  

The only ray of sunshine is the fall in other costs of production such as feed and fuel bills, but in many ways these simply reflect the worldwide fall in commodity prices across the board which are the main reason farmers around the world are feeling the pinch.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk