View From The Train Window

21st December 2011

The East Coast line must have been travelling at particularly high speed in 2011 – it’s gone so fast down the track I can hardly recall what has happened.

One thing, however, does stand out. Northumberland and Durham look as well as I have ever seen them and the farming year has – well come on, let’s face it – been for most, fantastic! That long spell of snow was hard work for the livestock boys, but most people came out of it well and it has been a great grass and forage year. Harvest and redrillng for the 2012 crop, has been as good as I have ever seen it, and commodity prices have been – great! However, if you fall asleep “on the track” at Alnmouth and end up over the Border you suddenly descend into another world where the harvest and “back end” has been a nightmare because of too much “wet stuff”. Go the other way down the line into East Anglia, and they grew some of the most pathetic crops you will have ever seen due to not enough water and the prospects for availability of water in 2012 look particularly grim. Take a look at the “financials” of farm business in these various locations, and you will see hugely differing pictures.

Which takes me onto the subject of risk. Anybody who participates in a trade or business is taking a risk with the cash they invest. The theory is that the higher the level of risk, the greater the level of return you should expect. Here are some thoughts for 2012 going down the track:

  1. Weather is a significant risk. You can’t do anything about it, but you might like to think whether climate change is going to have a practical impact upon your cropping and stocking decisions.
  2. Europe is in melt down and there is no way that it is going to survive in its current form. Like it or not UK farming will be affected. Can you remember when €1 equalled 67p? It was only four years ago. If you apply that to your SFP and commodity prices, see where it leaves your cashflow.
  3. The cost of growing the 2012 cereal and forage crop will be the most expensive in the history of modern UK farming. That means even more money invested and at risk.
  4. When money gets tight, people start to prioritise where they spend it. It is absolutely inevitable, that a bankrupt Europe at some stage will cut back on its CAP budget – it is merely a question of when.

Some other thoughts occurred to me as the countryside rushes by:

  • When will UK farming wake up the highway robbery of machinery manufacturers. Do you pay twice as much for your car today as you did five years ago?!
  • Land that was worth £3k per acre in 2007 now trades for £6k per acre. We have seen blocks of 400 acres of land in the Yorkshire and Lincolnshire Wolds selling for over £10k per acre. Why?One of the big drivers in my view is that land is such a safe investment – at the end of the day people need food and in a serious crisis you can just shut the gate, feed your family, produce your own energy and survive.
  • Water – too much of it and you get damage and too little you can’t produce anything. This is going to become the resource that in the future you will need to effectively manage.

My one piece of advice for 2012? Get on the train and look out of the window beyond the farm gate in order to try and understand what threats, and indeed, opportunities, are coming down the track to meet you.

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