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In many ways the prospects for farming in 2009 are no different to any other industry as it faces into the economic recession sparked by the exposure of problems in the US, as little as 6 months ago. However, David Cousins, Head of Farm Management at Bidwells Agribusiness, predicts there is some justification in the argument that agriculture will experience a squeeze rather than a crunch.
Cousins says: "There is no doubt that the market place is tough for everyone at the moment with the return to relatively high input costs and low output prices coming at a time when the consumer's willingness and ability to pay is being put under increasing pressure. Couple that with the fact that the problems in the banking sector affect borrowers of all types and it is clear that the short term will see producers operating at, or maybe even below the cost of production in many parts of the industry. So, no matter what it is we produce, attention to detail at every stage will be a key factor in driving out that extra pound of margin. "Reducing inputs to meet a fall in output price can be a dangerous game, particularly if yields are compromised. Yield remains the biggest single influence on profitability and maintaining low unit costs. In most circumstances, reducing inputs below the optimum for yield, will lead to disproportionate reduction in output. That being said, it is important to look at ways of cutting costs without cutting corners and at all times, we should be looking at the cost versus benefit equation. "If there was ever any doubt, the last twelve months should be sufficient evidence that we are living in volatile times. There are few areas of our business where we have absolute control, but there are many ways in which we can influence the outcome and, in doing so, manage the volatility and risk. Having focused on the production aspects, we must not lose sight of the market place around us and executing a well structured marketing policy based on realistic and attainable targets will go a long way towards this. "So what do the markets have in store for us in 2009? Certainly the retailers will be maintaining their pressure on delivering "value" to their customers and trying to limit the effects of food price inflation. However, in the longer term, the fundamentals that created the rise in prices a year ago, remain sound. The demands of an ever-increasing world population and the supply constraints of land availability, water shortage, climate change and limited technology, remain strong. As a result, there is good reason to suggest that the powers of supply and demand will be the dominant force in the agricultural economy, whereas the worldwide economic downturn will dominate the industrial and service sectors. "The underlying position is that world food stocks are low, the bumper harvest in 2008 is unlikely, in our opinion, to be repeated in 2009 and a return to more average yields will lead to a recovery in the commodity sectors. The general economic climate will no doubt have an impact, but as markets stabilise and then recover, the agricultural sector could well be one of the first to benefit." |
Rural agency 
