Farmers told efficiency is key to the future

While there will always be an agricultural industry in Scotland, the uncertainties surrounding Brexit and a second independence referendum, make for a difficult few years in farming.

This was the forecast from research economists at yesterday’s Andersons Spring Seminar in Perth.

The outlook may be bleak but the head of research at the Andersons Centre, Richard King, urged farmers to focus on aspects of their business they can control, such as improving efficiency and productivity and managing costs better so they are in the best possible shape to face the future.

Sterling has a stronger influence (60 to 70%) on farm incomes than any other factor and recently the weak pound has led to increased prices for output commodities such as beef, milk and cereals, while there is a time lag for inputs such as fertiliser, medicines and chemicals to catch up.

However Mr King said: “We would expect input costs that take longer to respond to inflation to start catching up during 2017 which means the gain that farming has enjoyed could be eroded.”

Scottish farm profitability figures for the last 10 years show how nearly every sector has consistently made a loss from agricultural activity and is dependent on subsidies.

LFA beef and sheep farming is particularly badly affected with loses before subsidy regularly over £30,000.

Mr King and his colleague Michael Haverty said it is pretty certain there will be three more Basic Payment Scheme (BPS) years with the possibility of a fourth in 2020 but post-Brexit, it is unclear how devolved policy might be and they warned: “The devolution of farm policy and the funds to go with it could become a battleground in the years ahead.”

Assuming the Scottish Government retains responsibility for agriculture and fast-forwarding to 2025, Andersons predict a 30% decrease in support, compared to a 50% decrease in England reflecting the relative importance of the industry in Scotland.

However, the future of farming in the UK depends very much on what kind of trade deals can be thrashed out following Brexit and delegates were warned agriculture is likely to be well down the list of priorities.

Agriculture only accounts for 0.6% of the GDP while agri-food exports account for just over 2% of total goods and services exports and just over 6% of imports.

Mr Haverty said: “The focus of trade discussions in farming is often on the UK’s ability to continue to sell products into the EU after Brexit.

“But equally, if not more important, is how easy is it for others to access our markets. At present our market is protected by EU tariff barriers.”

He added: “Key for farming is whether the big players such as USA, Australia and Brazil want access to our markets and the danger is that agriculture is used as a negotiating ‘pawn’ in future free trade agreements.”