High food prices to remain the norm

FARMING and food production operates within a global economy and our domestic food policy operates within an EU framework.

New housing facilities at the Hillhead Dairy Monitor Farm
New housing facilities at the Hillhead Dairy Monitor Farm

FARMING and food production operates within a global economy and our domestic food policy operates within an EU framework. High food prices are set to remain the norm and the position is fast consolidating.

The days of a UK or EU “cheap food policy” now seem a relic of the past as global food prices reached record highs in July 2012.

The World Bank, in its recent quarterly Food Price Watch report, warned the most expensive food on a global-basis, would increase hunger and malnutrition in the poorest countries.

The World Bank maintains policies such as the imposition of export restrictions, implemented as prices increase, has in part, helped stabilise global food prices.

However, all things are relative as grain prices remain high; 12% higher than a year ago, while wheat and maize prices have increased by 24% and 17% respectively.

The increase in global prices is due to severe drought conditions in the US, Australia as well as the three Black Sea exporting countries of Kazakhstan, Russia and Ukraine. The long-term effects of the US drought – the worst in over 50 years – now seems set to run into 2013 and 2014.

There appears little respite as US winter wheat crops have continued to suffer from the drought, and farmers could abandon up to one third of the new crop owing to weather conditions.

Decisions on US crop abandonment will have to wait until the spring as the drought, coupled with record temperatures and high winds on the plains; has left new crops in the worst recorded conditions in over half a century.

In the past 60 years, wheat crop abandonment has only exceeded 25% on two occasions, according to United States Department of Agriculture (USDA) records. In 1988-89 and 2001-2002, wheat crop abandonment reached 25 and 29%, respectively.

Current crop conditions are recorded by USDA as being worse at this point in the season, with 26% of the new wheat crop already being rated as poor ... very poor by late November.

To date, the first 11 months of 2012 mark the warmest of any year on record for the contiguous United States and now seem likely to surpass the current record as the warmest year on record.

Important wheat-growing regions such as the High Plains states have 65% recorded drought levels and Nebraska is now rated with 100% severe or worse conditions.

The past 12 months have been turbulent for the UK farming industry. Agriculture has been filled with uncertainty on numerous fronts owing to various market circumstances and inclement weather. The industry has literally reeled from pillar-to-post.

Farming and food production has suffered from a severe bout of Old Testament conditions.

The usual suspects emerged in the shape of drought, flood and disease. Dry weather conditions for the first part of the year resulted in water shortages and the implementation of hose-pipe bans. This was swiftly followed by what seemed 140 days and nights of continuous rain.

UK arable crops have been recorded as being down by 25-40% placing further pressure on margins.

The inevitable feed price increases have resulted and farmers are paying more for protein and soya.

Stable diet foods such as potatoes have suffered as a result of early dry conditions followed by record rainfall, turning crops, in some cases, into pulp.

Yields are reported to be down by as much as 40% and even in December, some potato crops in the region remain in the ground. UK milk production hit record low levels in November according to the Rural Payment Agency. Only 972m litres were delivered to dairies, down 63m litres for the same corresponding month last year.

Furthermore, November deliveries were 21m litres less than October levels. In total, UK milk production level has fallen to 8.78bn litres, a reduction of almost 240m litres below 2011 levels.

Milk production levels for the current quota year have been revised downward by almost 5% to 12.9bn litres; the lowest recorded level for 15 years.

The inclement weather conditions have combined to reduce milk production levels as a result of the wet field and grass conditions as well as a lack of sunshine to promote grass quality and growth.

The cost of producing milk has continued to increase as a result of higher feed costs according to Keenan nutritionist Seth Wareing.

“The spike in feed prices is likely to cost dairy farmers an extra 2p per litre to produce over the winter months,” he said. “Average yield per cow has also reduced, in some cases by as much as 4 or 5 litres and milk produced from forage has dropped to the four to five litres level.

“On one hand, feed prices have increased and on the other hand, production level has decreased.

Cows have not peaked as high on daily milk production levels owing to poor quality grass conditions in the summer months. And yields are therefore unlikely to increase on a per cow per day basis owing to the reduction in silage quality.”

Mr Wareing works across a broad section of beef and dairy farmers, offering independent support and advice alongside a farmer’s preferred feed supplier and company consultants.

He recommends farmers do not cut back on concentrate feeding, despite an increase of £25 per tonne to the £250 per tonne region. Instead, he suggests farmers incorporate bio-fuel co-products into the ration in order to reduce overall costs.

UK dairy farmers are caught in a Catch-22 situation as the increases in feed costs will place further pressure on margins. The real test will lie in the coming months and whether dairy farmers will receive a “fair” price to cover the increased costs of production.

Given the average cost of production is running at 29.5p per litre, a further 2p increase in production costs will place pressure on dairy companies and supermarkets to provide beneficial price support for UK milk producers.

Livestock farmers face further uncertainty as a result of Schmallenberg disease (SBV) affecting cattle and sheep; and a resulting loss of progeny.

Almost 300 new cases of SBV have been recorded in the UK during the past month taking the total number to 715.

The number of SBV cases in UK cattle continues to increase at an alarming rate; up from 196 recorded cases in the previous month to new figures of 453. Cases in sheep stand at 262.

The first early lambs are now being born and already SBV concerns are mounting as the virus appears to have spread from Europe into greater numbers of UK cattle and sheep.

An uncertain time lies ahead across agricultural sections, as well as human populations, as a result of drought, famine, flood and disease.

The more things change; the more things remain the same.

An uncertain time lies ahead across agricultural sections, as well as human populations due to drought, famine, flood and disease


David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer