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Reduced farm profitability and labour issues ones to watch in 2019

Farmers should savour the good fortune they enjoyed in 2018 and brace themselves for a series of challenges in 2019, writes Jonathan Wheeler.

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Reduced profitability and labour issues ones to watch in 2019

Farmers should savour the good fortune they enjoyed in 2018 and brace themselves for a series of challenges in 2019.

 

Speaking at the launch of “Outlook 2019” report, Sebastian Graff-Baker, from Andersons Midlands, said those challenges included reducing profitability and significant trouble obtaining quality labour.

 

Incomes

 

While farm incomes reached £5.8 billion in 2018, the figure was boosted by currency movements and disguised a long-standing lack of profitability in many farm businesses, because support payments accounted for £3 billion of that figure:


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“Too many parts of our industry are not generating enough income from raising livestock and growing crops”, he told the launch event at Brooksby College, Melton Mowbray, Leicestershire.

 

“Currency movements had a huge effect on farm prices, with the Government’s figures suggesting a 10% shift; they altered GDP by 3%.

 

“In addition many commodity prices were favourable and some shortages in the arable sector contributed to quite high prices”.

 

A quick poll of those attending - who included bankers, land agents and other industry professionals - suggested the majority expected the TIFF (Total Income From Farming) to remain over £5 billion for 2018, although some expected it to fall below that level.

 

His colleague Richard King, Head of Business Research, pointed out that 2017’s income was the highest since the 1990s:

 

“Things were quite good, but whether they felt that good I doubt” he said, reminding the audience that DEFRA could still correct the figure downwards”.

 

But the likelihood of difficulties securing skilled labour could start to affect the industry as Brexit takes effect, with the horticultural and dairy industries both likely to be hard hit.

 

Horticulture is already paying more for labour than it used to, and suffering from having to accept lower calibre workers, says John Pelham, from Andersons Midlands.

 

Wages

 

“The sector has seen significant rises in wage costs, principally due to lack of availability – the sector has nothing like the 75,000 workers it needs - and increases in the Minimum and Living wage, which combine to produce an increase of 20%.

 

“Farmers are having to get used to not having enough people, or those they have being of lower calibre than before. They are also seeing many new faces for the first time rather than people with whom they are familiar”.

 

With a shortage of labour supply, they could not afford it dispense with sub-standard employees in the way they could previously, because there was nobody to replace them, he added.

 

Dairy consultant Tony Evans says the sector faces a difficult, longer-term problem over a different sort of “replacement”:

 

“We have a real inherent problem with skills. There are 18,000 people employed milking cows and we need 1,000 new entrants every year and they are just not appearing”.

 

He expects the sector to have a tough time in 2019 because forage stocks are well short of requirements, and the sector faces higher feed bills at a time when milk prices are expected to fall.

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