Rising input costs ‘continue to hit farmers’ margins’

RISING fuel and input costs, increased business reporting requirements and looming Common Agricultural Policy (CAP) reforms are among the challenges facing East Anglia’s agricultural sector in 2012, a financial expert says.

Financial and business advisers Grant Thornton says although East Anglian farmers are currently doing well from high arable prices, they are facing increased working capital requirements because of fuel and input cost rises.

This, along with greater demand from lenders for business reporting to support borrowing requirements, are putting additional pressure on the region’s agricultural community which contributes 22%to local Gross Domestic Product (GDP), it says.

East Anglian agricultural partner Ian Carr said rising input costs were continuing to hit margins for crop farmers. Very dry weather affected many crops in the first half of 2011, with East Anglian farmers in the drier areas reporting one of the poorest harvests on record, he said.

“The region’s pig farmers are also being hit as the UK market continues to suffer with further decreasing prices,” he added.

“The requirement from lenders for increased business reporting provides another demand on farmers’ time and the growing requirements under the Common Agricultural Policy (CAP) to meet environmental standards means many farmers are now having to employ consultancies to take this complex area off their hands – another demand on financial resources.”

Although the proposed CAP reforms to make the system fairer and greener have generally been considered by East Anglian farmers as acceptable and part of the role of modern farming, there is concern that some of the changes will be counterproductive, he said.

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“Under the CAP reforms, the European Union plans to split the support system into two elements; the Basic Payment available to all ‘active farmers’ who comply with basic measures; and the Environmental Top Up, a 30% premium for those who adopt enhanced environmental measures,” he said.

Most milk and cream on sale in the UK is heat-treated to kill any harmful bacteria or virus that could be present. However, restricted sales of raw drinking milk and cream are allowed in England, Wales and Northern Ireland.

The Food Standards Agency says there is an inherent food safety risk associated with drinking raw milk because germs normally killed by pasteurisation may be present. The sale of raw milk is therefore strictly controlled. Older people, infants and pregnant women are particularly vulnerable to food poisoning, so are advised not drink it.

Currently in England, Wales and Northern Ireland, unpasteurised cows’ milk can only be sold direct to consumers from farms or direct from the farmer. This includes routes such as farmers’ markets and milk rounds, or as part of a farm catering operation. The sale of raw milk is not allowed in Scotland.

Raw milk must be labelled to let consumers know that it has not been pasteurised and may contain organisms harmful to health. Farms selling raw cows’ drinking milk direct to consumers are also inspected more frequently than businesses producing all pasteurised milk.