Threat from the euro and drought

THERE is no doubting that a significant percentage of the increase in Net Farm Income UK farmers have benefited from is attributed to the weakness of sterling against the Euro.

This has led to higher farm gate prices for farmers, who along with the food and drinks manufacturers have greatly contributed to the national balance of payments through higher levels of exports due to the weak pound.

As I sit in the kitchen preparing the 2012 budget to show my bank manager, the uncertainties surrounding the euro and whether the Greeks can actually survive within the euro are a great concern.

Any failure would have serious implications to my own business and the whole of UK agriculture.

Should the pound strengthen against the euro, to the levels we had ten years ago, our exports would be uncompetitive and farm gate prices would drop along with the single farm payment paid to ourselves from Europe.

It is an unfortunate fact that the majority of farms both in the UK and Europe are still reliant on this payment to remain in profit, six years after reforms were introduced to scrap production subsidies.

A proportion of the money paid to farmers is now used to provide rural development grants and also to fund environmental schemes on our farms and these have been successful in their objectives.

With this in mind, many a cautious farmer will have decided to look into prices currently being offered for new crop wheat and oilseed rape.

With an average yield of three and a half tons an acre for wheat and one and a half tons an acre for oilseed rape most farmers should make a small profit.

This would normally be the way I would budget for my own business, but this year I will not be following that path.

The reason I will not be selling any more grain forward is because of the threat of drought.

At the time of writing, (third week of February) I have only measured 60mm of rain this year.

At the moment there is no demand for water from the crops of wheat and oilseed rape as they are dormant, but in six weeks time these crops will need regular rainfall to reach their yield potential.

During a dry spring this could be supplied by reserves of water in the subsoil, but due to the dry winter there is very little moisture at depth in this part of the country.

There are several similarities between this season and 1976 at the moment.

In 1976 we had a very dry spring and summer and this reduced the yields of cereals by half and crops like potatoes only yielded four or five tons an acre without irrigation. A normal yield for potatoes in the 1970s would have been about 15 tons an acre.

If the wishes of the chairman of the Environment Agency are granted, and we are blessed with double the annual rainfall for the spring and summer, things on the farm would fare a little better.

A significant percentage of the wheat varieties we grow are very susceptible to disease and demand high levels of fungicides to keep them clean.

If there is an explosion of yellow rust and septoria tritici during this spring, this would greatly reduce the yield potential of our crops.

It is for all the above reasons that this year’s budget is hard to predict accurately.

There are always unknowns in both the weather and the political climate that we deal with as farmers from season to season, but this year they are more extreme.