Casting the blame for the UK farming crisis

Conventional thinking has obscured the real causes of the farming crisis by casting the blame in many different directions:[79]

• British farmers are too stuck in their ways to respond quickly and dynamically to market signals (see 'The Architects of UK Agricultural Policy' below);
• Agricultural subsidies have led to overproduction and low farmgate prices;
• The collapse in world commodity prices due to a glut of food on the global market has pushed the price paid to UK producers down;
• The middlemen: grain merchants, processors and retailers are all taking an excessive cut of the profit in the food system;
• The high value of the pound against other currencies encourages supermarkets to source food abroad rather than buy home grown produce and also makes it difficult for UK farmers to export;
• The high value of the pound against the Euro has meant that EU subsidies paid in Euros are worth less to UK farmers than to their counterparts in Europe. If the UK was to join the EU single currency this would make UK produce cheaper on the world market thereby increasing exports;
• The financial collapse of the Russian and Asian markets has reduced UK exports to those regions;
• BSE and the subsequent ban on export of British beef has damaged the beef export industry;
• Too much red tape: excessive rules and regulations such as meat and dairy hygiene regulations require the purchase of new equipment and the implementation of costly procedures making UK produce less competitive;
• The 'Foot and Mouth' crisis closed export markets and lead to huge extra costs to farmers because of movement restrictions;
• Higher environmental, labour and animal welfare standards mean UK goods cost more to produce. For example, a UK ban on tethering sows means that it is cheaper to import pigmeat from Europe where animal welfare standards are lower;
• Recessions in the agricultural sector are cyclical. This traditional model of agricultural economics argues that prices continuously fluctuate due to oversupply, undersupply and the uncertainty of the weather.

This farming crisis is however more than just a cyclical downturn that will pick up, in fact it already has, with a slight recovery in farm incomes in 2002/2003. But overall farming remains in steady decline and it will be terminal for most if effective measures to address the fundamental causes of the crisis are not taken now.

Many of the issues above are certainly contributory factors; but lost export markets, the strong pound and excessive red tape are not the real causes of the farming crisis, they are simply UK-specific factors which have exacerbated the underlying global crisis in farming. In fact, the restructuring of agricultural markets is at the root of the farming crisis.

This restructuring of the food system is taking place through a combination of three processes: globalisation, liberalisation of the trade in food and the concentration of power in this restructured market into the hands of a small number of multinational food corporations.

The UK Government and its advisors are wedded to the idea of the creation of a global free market in agricultural produce; some are ideological free marketeers, some see trade liberalisation as an inevitability that the UK cannot oppose and others support trade liberalisation as a route to increasing their market share and corporate profits.

- former chief economist at the National Farmer's Union, currently lecturer at Cranfield School of Management and advisor to New Labour on agriculture policy is an ideological free marketeer. He advocates getting rid of 'trade distorting' subsidies and argues that only large farms are economically viable as only they, through economies of scale, can lower production costs and thus the relative price of food.[80] Rickard argues that agriculture is first and foremost a food-producing industry, it so happens that its 'shop floor' is the countryside, but this should not distract from its key function.[81]

'There is a band of small full-time farmers producing 15% of the [country's] output. These are under pressure and do not have the economies of scale. There is nothing that can or should be done to save them. The top 20% with 80% of the output are in a different league, and can compete with the best in the world. They have the makings of a successful food industry.'[82]

Rickard's view is that many of these small farmers are 'not good farmers or good businessmen' - otherwise they would have increased the size of their businesses - and that handing out subsidies to these 'unviable' farms will only serve to prolong the crisis. 'Ultimately, supporting these farmers only delays the inevitable for a year or for two years......We simply have too many farmers, and too many farmers who are not doing a good job, at that.'[83]

'The only way ahead is to scrap subsidies, make full use of technology such as GM crops, ignore the nonsense about paying farmers to look after the countryside and get farmers to produce what the market wants.

Good luck to the 113,000 lifestyle holdings, better luck to the 63,000 large scale holdings and hard luck to the 63,500 small time farmers who are on their way out in the next few years'.[84]

One of the criticisms levelled against farming by neo-liberal economists such as Sean Rickard is that farmers are not responsive enough to market signals.

By this they mean that when they see the demand for their product declining, they should simply switch to a product for which there is high demand - just like a factory. But farming doesn't work like that. Not all land is equally suited to all types of farming, especially hill farms. Switching production may well require new farm machinery and buildings which many farmers are justifiably reluctant to borrow money to purchase given the volatility of the market. Farmers are on a yearly cycle and cannot simply change production, especially if they are rotating their crops to benefit the soil. Also, farming is one of the most highly skilled professions: a lifetime's experience in animal husbandry does not necessarily make you a good horticulturalist.

- former head of giant UK food processor Northern Foods plc, longtime donor and supporter of New Labour, close ally of Tony Blair and Labour-appointed peer. Haskins has advised both the UK and Irish Governments on agricultural policy issues. In 2001 he was appointed the Government's Rural Recovery Coordinator (to oversee the government's rural rescue attempt following the foot and mouth crisis).

Haskins is an advocate of trade liberalisation and sees larger more industrialised farms as a necessity for the UK to compete in global export markets with the much larger farms of the US and Canada. This might help the giant food processors like Northern Foods and the supermarkets to source food even more cheaply. But the changes he advocates are likely to be disastrous for everyone else.

Of his appointment as rural recovery coordinator, Guardian City diarist Richard Adams said '...a decision to place Haskins in charge of a “rural recovery plan” is akin to asking Lady Thatcher to head a task force on the future of the coal industry.

Lord H has already made it clear what he wants: mergers of dairy companies and bigger, industrialised farms, geared up to provide the bigger food manufacturers with everything on a plate.'[85]

On the future of farming, Haskins himself puts it like this 'Farms will get bigger and that's a good thing. A lot of agricultural reformers, like the Prince of Wales, want farmers to stand around being subsidised and making thatched roofs. Well that's for the birds. Agriculture has got to strive to be more competitive and more productive.'[86] He has also predicted 'that as many as half of Britain's farms would disappear in the next 20 years.'[87]

As to the demise of small farmers, he suggests that they will not survive unless they are prepared to 'innovate and diversify'[88] He has for example suggested that small farmers should take second jobs to survive, 'milking their cows in the morning, working on a BMW assembly line during the day, then milking their cows in the evening' and that British farmers 'molly-coddled' by European subsidies could learn a thing or two about innovation in farming from the French.[89]

For more information see the Corporate Watch profile of Northern Foods plc.[90]

- Food and Farming Minister. Whitty says that the government does not believe that Britain should be self-sufficient in food. He, and the UK government, appear to accept trade liberalisation as 'inevitable' and to believe that Common Agriculture Policy reform and World Trade Organisation agreements will continue to push UK farmers onto the global free market. Whitty says Britain is part of the global economy and UK farmers must compete on the world market. He believes that British farmers could tackle imports and compete for exports if producers became more competitive (i.e. if there were an overall reduction in the number of farmers, leaving some larger and more industrialised farms with a few organic farms to serve a niche market). Whitty says that 'A [self sufficiency] target is not what drives policy. Being competitive is what drives policy'.[91]

- Chair of the Policy Commission on the Future of Farming and Food. The 'Curry Commission' was set up by the Government in 2001 to look at the future of farming in England.[92] But the Commission was severely hampered in its enquiry. It was not allowed to question the government's commitment to trade liberalisation, so it could not investigate the role of the globalised free market and the market power of big corporations in controlling the prices paid to farmers.

The Report appears to make all the right noises. Its laudable vision for the future of agriculture is of 'a profitable and sustainable farming and food sector, that can and does compete internationally, that is a good steward of the environment, and provides food and a healthy diet for the people of England and around the world.'

It makes over a hundred recommendations for a 'sustainable future for farming'; it wants progressively to do away with subsidies, which it says cause 'distortions', and it enthusiastically backs local foods, organic farming, farmers' cooperatives, healthy eating and adding value on the farm.

Although the Government has found the money to implement the recommendations, it is arguable whether the report will have any real impact on the farming crisis, as in reality without tackling the power of the food corporations no amount of value adding or niche-marketing alone will enable UK farmers to stand up to the pressures of the global market. As Sir Don himself said in response to a threatened price war between the supermarkets, he is 'deeply concerned' that prices were being cut on the high street 'without serious thought being given to the impact on the supply chain.' He said there was no more slack for farmers to take up, 'The pips are really squeaking.'[93]

- Chief Executive of Tesco Stores plc. Tesco is the largest UK supermarket and the biggest buyer of UK agricultural produce, but despite its claims to bend over backwards to support UK agriculture, Tesco is no friend to the UK farmer. In search of produce at the cheapest possible price, Tesco buyers take advantage of globalisation and trade liberalisation to shop around the world for produce. They play farmers around the world off against each other, generally to the detriment of UK farmers who often cannot compete with produce from overseas. Even when Tesco is buying UK produce its market power is so great that it can force prices down, frequently below the cost of production, and make farmers comply with unreasonable quality standards and contractual conditions (see 'The Power of the UK Supermarkets').

In its defence, Tesco, somewhat disingenuously, argues that it has no control in the market place and that farmgate prices are low because of free trade policies. Tesco says it cannot set prices because it buys from processors not directly from farmers (which is not the case with fresh produce), it therefore pays the market price and has no power to set prices (see 'The Power of the UK Supermarkets'). It also argues that the price paid by retailers is not the most important issue, rather UK farmers are suffering from the high rate of exchange of the pound, which reduces the value of EU subsidies.[94]

While this is true, big retailers like Tesco have been able to take advantage of subsidies to force down the prices they pay to farmers knowing that farmers' incomes will be topped up by government subsidies. (see box 'The subsidy myth') Tesco is well placed to influence Government food and agriculture policy via the 'revolving door' of ex-government employees joining Tesco and appointments of Tesco executives to government advisory groups and also through support for and contributions to New Labour.

Terry Leahy sits on the Government's Competitiveness Advisory Group, the Department of Trade and Industry's Competitiveness Working Party and the South East Regional Competitiveness Working Party. The company's corporate affairs director Lucy Neville-Rolfe joined Tesco from the Cabinet Office and now sits on the Foreign and Commonwealth Office's Management Board. The Prime Minister's former private secretary became Tesco's director of government affairs. Tesco is a donor to New Labour and is the biggest backer of the government's New Deal scheme. Tesco also gave £12 million towards the cost of the Millenium Dome. Tesco is bound to have the Government's ear given that £1 in every £4 spent on groceries goes into Tesco's till.

For further information see the Corporate Watch profile of Tesco.[95]

- Former President of the National Farmers Union. The NFU's analysis of the causes of the farming crisis has cast the blame in many different directions - excessive red tape, the high value of the pound and the BSE/foot and mouth crises' impacts on UK export markets - but has failed to acknowledge that the real cause of the farming crisis is the restructuring of the food system by global free trade and the rise in the power of the big food corporations. [96]

However there are signs of a changing view and at the Royal Show in June 2003, Ben Gill said 'Farmers are having to fight in an increasingly cut-throat marketplace, dealing with the might of major international companies... At the moment there is a glaring imbalance in the global food chain at the expense of farmers.' (See also Corporate Watch's profile of the NFU.[97])

References
[79] See for example the NFU Agricultural Review. Farming in Crisis, April 2003.
[80] Also see Appendix II of Corporate Watch (2003) 'The National Farmers Union: friend to big business, not to small farmers', Corporate Watch www.corporatewatch. org.uk/profiles/nfu/nfu10.htm#sdfootnote92anc; Viewed 11/2/04
[81] Sean Rickard and Sandra Bell Environmental Forum in The Landworker March/April 2000
[82] 'Flamboyant economic pundit Sean Rickard has been upsetting farmers with his radical predictions about the future of their industry.' see www.warmwell.com /byronmar9.html; Viewed 23/7/03
[83] 'Bad Businessmen and Bad Farmers'. Guardian Special report on the farming crisis. 14/9/99 http://news.bbc.co.uk/1/hi/special_report/1999/09/9 9/farming_in_crisis/440840.stm; Viewed 23/7/03
[84] Fordyce Maxwell 'Subsidies must go, says Rickard' The Scotsman March 6th 2002
[85] Richard Adams, City diary, Guardian, August 7 2001 www.guardian.co.uk/Archive/Article/0,4273,4234737, 00.html
[86] Patrick Wintour 'Blair forces farming shakeup: Labour peer to spearhead radical rethink' The Guardian August 6 2001 http://politics.guardian. co.uk/footandmouth/story/0,9061,532663,00.html
[87] Caroline Lucas, Michael Hart and Colin Hines (2002) Look to the Local - A Better Agriculture is Possible! www.carolinelucasmep.org.uk/publications/inde xCAPreport.htm; Viewed 6/1/04
[88] Chris Haskins 'Farming has a fertile future' New Statesman September 24 2001
[89] George Monbiot 'That's the horror of Haskins' The Spectator September 1 2001 www.monbiot. com/dsp_article.cfm?article_id=450;Viewed 5/1/04
[90] Corporate Watch Company Profile Northern Foods plc ttp://www.corporatewatch.org.uk/profiles/food_ supermarkets/northern_foods/northern_foods1.html; Viewed 5/1/04
[91] Isabel Davies 'Food Imports Look Set to Stay' Farmers Weekly Interactive November 25 2002 www.fwi.co.uk/article.asp?con=8062&sec;=17& hier=17 Viewed 4/1/04
[92] Farming & Food: A Sustainable Future, Cabinet Office, 2002; http:// www.cabinet-office.gov.uk/farming; Viewed 5/1/04
[93] Felicity Lawrence 'Supermarket price war threatens farmers' Guardian January 19 2004 www.guardian.co.uk/business/story/0,3604,11 25913,00.html; Viewed 19/1/04
[94] Farmers stage milk price protest BBC News Online March 20 2000 http://news.bbc.co.uk/1/hi/wales/683759.stm; Viewed 5/1/04
[95] Corporate Watch company profile Tesco Stores plc www.corporatewatch.org.uk/profiles/food_supe rmarkets/tesco/tesco1.html; Viewed 5/1/04
[96] National Farmers Union, UK Agricultural Review, June 2003 www.nfu.org.uk/stellentdev/ groups/public/documents/farming_facts/agriculturalrevie_ ia3f71a232-2.hcsp; Viewed 5/1/04
[97] Corporate Watch (2003) 'The National Farmers Union: friend to big business, not to small farmers', Corporate Watch www.corporatewatch.org.uk/ profiles/nfu/nfu.htm; Viewed 5/1/04