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UK Farmers: Crisis Point?
What's the truth about farming incomes and what's behind it all?
There's been an annual audit of farming incomes since 1989. This has been carried out not by the farmers themselves, but by the firm of accountants Deloitte and Touche. The most recent of these audits has found that average net farm income was £41 per hectare in 1999-2000. This was £16 per hectare less than farmers received in 1998-99. The audit forecasts a net
loss of £22 per hectare in 2000-01. With the average size farm being 200 hectares, net income this year is just over £8000, whereas in 1995 this figure would have been over £80,000.
Part of the blame for this can be attributed to the strength of £ sterling, which reduces the value of Euro payments to farmers from the EU Common Agricultural Policy. (CAP). The CAP, which was created to provide stability in agricultural markets so that farmers would be encouraged to produce food for European citizens, operates by means of intervention in the
market. This 'buffer stock' system gives farmers certainty over the price they will receive for their goods. But the price that farmers receive is denominated in Euros and UK farming incomes are therefore affected by currency fluctuations. Other factors certainly have contributed. These are investigated later in this feature.
A buffer stock scheme operates as shown in the diagram below.
Where there is an excess supply at P*, this would normally cause the price to fall in the market. However, in the case of a buffer stock scheme the excess supply is bought by the government (or some other agency) and stored. Then if there is an excess demand the government can sell some of their stocks to prevent the price rising.
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