There is no question, there are big problems facing farming

Without that farmers might not cope with the vagaries of the weather and prices. It has been an awful Spring, for the most part, but just in time for the Balmoral Show the weather has picked up. It may only be temporary – hopefully not – but it will kickstart some much needed optimism amongst farmers as they meet friends and set the farming world to rights at the show. They will enjoy their day out and put a brave face on the problems facing the industry. Beyond that, talking to other farmers and exhibitors at the show will offer a useful reminder that they are not alone with their problems – and at a time when mental health is recognised as an important issue in farming that is important.There is no question that there are big problems facing the industry around prices, costs and profitability. The challenge of attracting a new generation into the industry remains and a seemingly constant diet of bad economic news does not help that process.

The EU’s latest short term report on agricultural markets is certainly an unwelcome does of reality. What it says makes economic sense, but it is far from the news farmers anywhere in Europe want to hear.In any report there are few more scary terms than “an uncertain outlook”. However that is exactly what the European Commission is saying in its latest summary of agricultural markets.

This uncertainty has less to do with the weather, or indeed anything farmers can control, than to what is describes as “geopolitical crises” in Ukraine and the Middle East. The report says these affect trade, prices and the overall economy. It warns that the inevitable result is continuing economic pressure on farmers. We and much of northern Europe have had a difficult spring, but elsewhere, particularly in the south of Europe, conditions have been favourable, with a good combination of heat and moisture.

However there is no getting away from uncertainty. According to the EU report input costs and farm gate prices remain an issue. It says there has been some welcome easing of input costs, but these remain above pre-Covid levels.

This makes pressure on margins a continuing fact of life for most enterprises. The report concludes that returns are continuing to decline faster than any fall in input costs, with an inevitable impact on profitability.To add to the gloom the report says the hangover from the months of rampant food price inflation is still causing pain.

It says this and limited prospects for economic growth are acting against farm gate prices settling at levels that reflect input costs. This goes back to a problem well flagged up during the time of maximum inflation – the art of trading down from premium to basic products to stretch shopping budgets.

As analysts warned then, people have got used to these lower prices and it is proving difficult to rebuild premium markets. Without these it is a big challenge to get prices back up for farmers.

This is a problem that will not be easily solved and what we are seeing in the short term market outlook report is a coming together of negative factors that will impact profitability. It is not quite a perfect storm of negatives, but it is not far off it, thanks to wet weather for some areas, still high input costs and still low farm gate prices. These are economic conditions that have few positives for farmers in the UK or any EU member state.One positive for the EU has been high levels of food and agriculture exports. The top three countries for exports remain the UK, United States and China.

The figures confirm that despite Brexit traders have found ways to maintain business – although the impact of the UK imposing customs checks remains to be seen. The UK is the biggest single export market for EU food, accounting for almost a quarter of all sales. The big products for EU exports globally are cereals and dairy products, which translate directly back to farm incomes.Brazil remains the biggest single supply source, because of reliance on protein imports. This is followed by Ukraine. The UK is the third biggest source of imports, again proving that businesses have found ways to get around the regulations ushered in by Brexit.