The drop in the inflation rate was a nice pre-Christmas present for consumers and politicians. The 3.2 per cent rate for November shows inflation coming back into line, albeit well above the Bank of England’s two per cent target.

This paved the way for a useful quarter point cut in the bank rate, bringing some much needed relief for retailers facing a Christmas shopping trade undermined by a lack of consumer confidence. It was interesting however that the Bank of England’s monetary policy committee was deeply divided over the justification for a rate cut. Politicians in the government will doubtless line up to seek credit for this outcome, but in reality nothing they did had any impact on the latest inflation figures. Inflation in the UK is driven by global factors that influence key sectors of the economy, including energy and food costs. It is in this area that there are some alarm bells sounding for farmers around the latest inflation figures. According to reports the big driver was an unexpected drop in food prices unexpected, because it happened at a time of the year when food prices are expected to increase in the run-up to Christmas.

Deep discounting then in a December battle for market share of the the staples then brings prices down at a cost to retailers rather than farmers.

This time around the figures confirm we are entering an era of global food markets coming off their peaks. These peaks have been good news for farmers; they saw global beef prices hit their highest ever level.

Interest rates were cut before Christmas after inflation fell to an eight-month low in November, economists think. Picture: Jordan Pettitt/PA Wire

placeholder image — Interest rates were cut before Christmas after inflation fell to an eight-month low in November, economists think. Picture: Jordan Pettitt/PA Wire

But the adage of the cure for high prices being high prices that reduce demand is clear now. Dairy markets have fallen significantly and others are following. This has generally been a good year for farm gate prices, but as we reach the shortest day of the year it is not only the season that is on the turn, but potentially the era of high food prices. If this proves accurate this is a difficult process for farmers to manage. If prices begin to dip, as they already have according to the inflation figures, consumers will be expecting them to fall further and faster.

The logic then is that the pressure will return for farmers to produce quality food below the cost of production. We had years of that and it undermined farming, without being appreciated by consumers, who simply wanted more. The industry has managed to get prices to levels that are realistic and profitable.

It cannot allow a situation to develop where a falling market feeds off itself and drives prices down at an unrealistic rate. Politicians would be happy to see this happen, but the industry needs to start the new year with a fresh willingness to hang tough on prices and prevent a repeat of the past. It is a harsh reality of UK politics that no-one cares about farming until there is a shortage of food on supermarket shelves.

This contrasts, yet again, with the position in the EU, where despite all its faults the European Commission is committed to farming and food. The latest move in that direction was a nice Christmas present from the Commission, president, Ursula von der Leyen.

She has promised funding for a campaign to encourage consumers to buy European food, based on quality, provenance and what farmers deliver for society. This is part of a wider approach to boost the importance of European food security.

This contrasts with the position here where there is a political disconnect between farming and food production with agriculture seen as a green tool rather than as a vital food producing national asset in an increasingly uncertain world. This is unsurprising from a government that hit farmers with a grossly unfair change to inheritance tax. The Conservatives have said they would scrap this if they won the next election, but from where they are that is an unlikely prospect. Reform has suggested it would seek to scrap inheritance tax completely, but while the Conservatives are out to correct a wrong there is a sense Reform is promising wildly to get elected rather than offering thought out policies. This remains a vexed issue and the best hope remains that the government might yet make changes. A first step for that to happen would be an improving economy that could deliver growth and tax revenues. A drop in inflation is a small, but welcome and essential first step along that road.