Food, Glorious Food

Food, Glorious Food

Why is the price of agricultural land going down? Quite simply farmers are very worried about the effects of Brexit. Of course, land prices only affect sales and mortgages, so this is really a proxy for farming's economic health - to farm you need land. If land prices are dropping this means people see farming as becoming uneconomic.

Subsidies
The government has promised to maintain subsidies until 2020 - after that they won't say. It is likely the subsidies will drop 20% and keep going down after that.

How big a difference will that make? On average 60% of farm income is from subsidies, rising to over 100% for grazing livestock. So a very big difference.

Another issue is the expected loss of land management payments (worth £600 million) - i.e. being paid for looking after the land rather than what is produced.

Exchange rates
The fall of the pound means that many inputs (feed, fertiliser) are more expensive now, so expected profit per acre is less, meaning each acre is worth less in investment terms.

Labour
Another serious concern is who is going to harvest the crops? I've hand-harvested melons - I lasted a day and won't ever do that again. There are around 35,000 non-UK agricultural workers, two-thirds from the EU. That is not including seasonal workers.

Cutting migrant numbers will mean attracting UK residents to farm labouring - wages will have to rise, so prices will have to go up. That is for permanent posts - seasonal work is even more problematic. Most UK residents want a permanent job.

One strategy would be re-introducing the Seasonal Agricultural Workers Scheme - but that would go directly against the pledge to cut immigration to “tens of thousands” - remember students count as immigrants, though they are only here temporarily. There is also the issue of how to make sure temporary workers actually return home.

Exports
On the bright side, if the pound falls low enough then UK crops will still be economic to grow for export. The downside is that this pushes up UK food prices - e.g. British wheat is now 38% more expensive than last year.

Why? The lower price for overseas customers (due to the low pound) means there is more demand from them, while the higher price of imports (the pound again) means that UK customers (e.g. for animal feed and bioethanol) switch to British wheat. In consequence, the price of Hovis Wheatgerm bread has increased 31%.