Agriculture in crisis: Why Britain's farmers are making a loss on nearly everything they grow

BRITISH AGRICULTURE has never seen anything like it: most farmers are currently earning nothing from what they produce. The world economy has turned against them and combined with local problems to such effect that depression has crushed all sectors of the farming economy, apart from wheat growing, at once.

A survey by The Independent shows that on virtually every other commodity you care to name - beef, lamb, milk, pig meat, chickens and eggs, oilseed rape, fruit and vegetables - prices have collapsed so catastrophically that farmers are getting less for their products at the farm gate than they cost to produce on the farm.

It is its universal nature that has turned the present depression into a real crisis for British agriculture. In the past if one sector of the farm economy was down, another would probably be up. Now everything is down. If 1998 was a disastrous year for UK farmers, with income, for example, falling from a profit of pounds 10,000 to a loss of nearly pounds 30,000, 1999 is clearly worse.

Even the EU subsidies, for long the chief point of contention with those who thought farmers were too easily bankrolled by the state, are no longer keeping their heads above water. EU area payments are just keeping wheat profitable, but they cannot keep in the black the thousands of farmers who grow bright yellow fields of rape seed: they are currently losing about pounds 30 per ton on their crop, even when the subsidy is taken into account.

There is a similar story with livestock rearing, the worst-hit sector of all. The prices have fallen so far that EU payments per head on cattle and sheep are not preventing loss in many cases. And the financial crisis is being aggravated by a serious animal welfare problem: the market collapse means more than a million animals - dairy calves and "culler" ewes too old for further lambing - now have no value whatsoever. Loss-making farmers facing a charge to have them taken off their hands by slaughterhouses have begun to dump them on public roads.

But - perhaps contrary to popular belief - most farm commodities are not subsidised at all and with them there is no relief from the icy economic wind. Pig farmers are currently losing a straight pounds 11 on every pig they produce. Potato farmers are losing between pounds 17 and pounds 27 on every ton of potatoes they take out of the ground. Chickens and eggs are being sold well below production cost as, for many producers, is milk. Many fruits and vegetables are grown at or below the margin of profitability.

Behind it all is a dire combination of adverse economic factors, the most important being the strength of the pound. Sterling has risen from about 2.2 marks to the pound in 1996 to more than 2.9 today.

While to Gordon Brown this may be welcome foreign confidence in his handling of the economy, to farmers such an enormous rise merely means they cannot export competitively, and cannot compete with overseas produce, which is flooding into Britain more than 30 per cent cheaper than it was three years ago.

We are in a single European market; increasingly, the World Trade Organisation wants to get us into a single global market, and there is no more protection against the almighty Market Price.

Added to sterling's strength has been the collapse of many foreign markets, with the slide of the Asian economies and in particular the Russian economy having the greatest effect. Russia has traditionally been one of the biggest importers of EU farm produce, taking, for example, 30 per cent of its pig meat, but with its currency and economic crisis a year ago the market disappeared.

This has had a particularly dire effect on British lamb producers, who used to get up to pounds 8 from the Russians for the skin and fleece of every animal they slaughtered; now they get nothing at all.

A raft of other problems peculiar to Britain is making things worse. With beef, there is the BSE hangover: although British beef was eaten in Europe for the first time in three years last week, the pounds 600m foreign market that disappeared overnight has still to be rebuilt and prices are still far below what they were before the crisis, while the continuing beef-on-the-bone ban hinders the rebuilding of confidence.

Furthermore, at the start of this month, the Government abruptly scrapped the calf processing aid scheme, which gave payments to slaughterhouses and farmers to dispose of the 600,000 unwanted calves born every year to British dairy cows. A cow must calve every year to produce milk. Before the 1996 BSE ban, nearly all of these calves had been exported to Europe for veal production, which ended in Britain in the Eighties. Now, at the height of the calving season, they suddenly have no value. Indeed, farmers making a loss anyway must pay slaughterhouses to take them.

Sheep farmers face a similar problem with the one million culler ewes sent to market annually, whose pelts and skins would have once fetched a good price from Russia, but are now worthless. These 1.6 million unwanted animals with no monetary value are about to become an enormous problem.

Britain also has its own problems with pigs: honourably, this year the UK has abandoned the production method of tethering pregnant sows inside their stalls, which many felt was cruel. But the rest of the EU continues it, and it is much cheaper than alternative, more humane methods, so Danish bacon and the rest of European pig meat comes into Britain at prices far below the cost to British producers.

THE PRICE SQUEEZE - LIVESTOCK

DAIRY CALVES

COST OF PRODUCTION

Byproduct of milk production

BRITISH FARM GATE PRICE

No value. Negative cost to the farmer to have them disposed of

BEEF

COST OF PRODUCTION

Almost breaking even after BSE crisis

BRITISH FARM GATE PRICE

94 per kilo (before BSE crisis, was 105 -110p, or higher)

SUPERMARKET COST

Mince, pounds 5.58 per kg; sirloin, pounds 11.99

MILK

COST OF PRODUCTION

Probably more than 18.5p for most farmers

BRITISH FARM GATE PRICE

18.5 p per litre (Average price across all producers)

SUPERMARKET COST

99p per litre

LAMB

COST OF PRODUCTION

Probably more than farm gate price for very many farmers

BRITISH FARM GATE PRICE

74.3p per kg (a year ago was 100p)

SUPERMARKET COST

Cutlets, pounds 7.78 per kilo; loin fillet, pounds 14.49

CULL EWES

COST OF PRODUCTION

Byproduct of sheep farming

BRITISH FARM GATE PRICE

No value for most of them. Likely negative disposal cost

PORK

COST OF PRODUCTION

95p per kg

BRITISH FARM GATE PRICE

84p per kg

SUPERMARKET COST

Loin steak, pounds 6.09 per kg; fillet, pounds 7.99

CHICKEN

COST OF PRODUCTION

May be as high as 26-27p per lb

BRITISH FARM GATE PRICE

21.5p per lb

SUPERMARKET COST

pounds 1.14 per lb

EGGS

COST OF PRODUCTION

About 45.3p on average

BRITISH FARM GATE PRICE

27p per dozen on average

SUPERMARKET COST

pounds 1.95p per dozen free-range; pounds 1.45 fresh

THE PRICE-SQUEEZE - CROPS

WHEAT

COST OF PRODUCTION

About pounds 95 per tonne

BRITISH FARM GATE PRICE

pounds 115 per tonne including subsidy for bread wheat, pounds 100 per tonne for poorer wheat

RAPE SEED

COST OF PRODUCTION

pounds 200 per tonne

BRITISH FARM GATE PRICE

pounds 170 per tonne including subsidy

POTATOES

COST OF PRODUCTION

pounds 77 per tonne

BRITISH FARM GATE PRICE

pounds 50-60 per tonne

SUPERMARKET COST

pounds 270 per tonne (pounds 27 per kg)

APPLES (DISCOVERY)

COST OF PRODUCTION

25p per lb

BRITISH FARM GATE PRICE

30p per lb top grade, less than 25p across whole harvest

SUPERMARKET COST

39p per lb

SAVOY CABBAGES

COST OF PRODUCTION

About 13p per head

BRITISH FARM GATE PRICE

10-12p per head

SUPERMARKET COST

47p per head

SWEDES

COST OF PRODUCTION

About 6p per head

BRITISH FARM GATE PRICE

5p per head

SUPERMARKET COST

35p per lb

ICEBERG LETTUCE

COST OF PRODUCTION

25- 35p per head

BRITISH FARM GATE PRICE

30p per head

SUPERMARKET COST

47p per head

TOMATOES

COST OF PRODUCTION

Above farm gate price in some cases

BRITISH FARM GATE PRICE

pounds 4 for six-kg box (66p per kg)

SUPERMARKET COST

40p per lb, 89p per kg