The Plight of the Farmers.

Charles Clover has a piece on the fact that farming is grossly unprofitable in the UK while the retailing of the produce is highly profitable.

My instincitve reaction to any such moaning from producers is that the price system is trying to tell you something. There’s obviously too many farmers. This is slightly tempered by two things. One is the alleged monopsonist status (well, oligopsonist really) of the supermarkets and I see no problem in an investigation into the truth or not of that. Mon-opolies and -opsonies should indeed be investigated and where found dismantled. The second is that if no one farms the land at all then the landscape, created over the centuries by such, will inevitably change. That’s a slightly different question, should we try to subsidize the keeping of Britain as it is or allow it to change?

However, I can’t help feeling that the elephant in the room is being ignored. Farming is so bound up in the ludicrous stupidities of the European Union’s CAP that there are bound to be problems. Abolish that first then take a look at the other issues. We may well find that in the absence of that system that no subsidy is in fact required, as New Zealand found out when they simply abolished their entire system.

3 responses

  1. I heard in one or two places that when New Zealand ditched the subsidies farmers suddenly found that they rose in public esteem. I don’t think this was particularly because the people had all taken free market economics to their hearts; rather it was because it’s human nature to slightly despise those you dole out money to.

  2. A key factor, usually unremarked upon, about farming profitability is the difference between owner and tenant farmers.
    Owner farmers have usually inherited their farms. Farming is exempt from inheritance tax. Generally they farm with the requirement of making a decent personal income, not a return on the capital value of the farm.
    Tenant farmers are in a very different position. Due to CAP subsidies and EU guaranteed high prices, the rental value of farms increased well beyond true free market levels. CAP subsidies have now been reduced, but the rent review system for farms and farmland provides no mechanism for downwards revisions, only upwards. So the correct response to falling prices – lower rents – is ruled out. Tenant farmers are trapped in the middle.
    So CAP subsidies and protection still provide a good living for owner farmers (although less lucrative than previously) while the reduction from previous levels forces losses on tenant farmers.
    Rent reviews that allow downward revision are part of the solution.
    Tim adds: Makes sense to me.

  3. The CAP is clearly a factor. Another is planning regulations, which prevent farmland being used for more profitable (and therefore productive) purposes.

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