News that the global investment bank, Citi, expects UK inflation to top 18% by January 2023 is as predictable as it is unwelcome.
Anyone with a working knowledge of farming will already experience rates above 18%, whatever the Bank of England tells us. Indeed, the “real” rate of inflation in our world is certainly over 25% right now and shows little sign of slowing down, despite lower commodity prices for feed and fuel, at least for the moment.
Feed barley has returned to almost manageable levels since the spring frenzy, trading at around £230/tonne, losing around 50% of its increase from the 2021 crop. We can also almost live with the price of some protein (probably not soy), exorbitant prices earlier this year.
Red diesel is back below £1/litre, but both it and DERV should be well below where it is, with crude trading around $95/barrel. The weakness of the pound against the US dollar and refiners exploiting the market with exorbitant margins – four times higher than two years ago – mean that retail prices remain stubbornly high. Mind you, I saw £1.60/litre petrol on the forecourt this week!
The real killer is fertilizer. With gas prices totally out of anyone’s control, especially politicians and a few dominant fertilizer companies, who have operated like a cartel for years, we are truly on a hiding spot.
Luckily, I have never seen or experienced a better growing season at Nith Valley Head than this year. We’ve been spared the destruction the drought has brought to the east and south of the UK (and beyond), with misty mornings and showers much of the summer. Consequently, the second-cut silage was completed at the end of July with full pits, and now we have sequels aplenty.
Efficient use of slurry has certainly helped, meaning we have enough unused fertilizer left for a first application in spring 2023. Good job when I hear where the prices have gone, with an amazing rumor of 890 £/ton for 34.5% YEAR last week, an increase of more than 40% since June and 300% since last year.
Many input costs that were not immediately apparent in the spring are becoming all too real, including rising borrowing costs. Electricity is the most obvious, with its link to gas – a cost that was never too much of a concern before, is now a real concern.
If – and it’s a big ‘if’ – beef and lamb prices follow their seasonal norm from now on, then this may all be manageable, but £4.70-£4.80/kg remains the break-even price for clean beef and must be reached this autumn/winter, or the exodus of suckler cows into the UK will continue unabated.
Likewise with milk, after seeing them rise to a realistic level, they should stick. Indeed, this is the case for all agricultural raw materials. UK consumers have been used to cheap food for too long – having to pay realistic prices for food for the first time in almost a generation has been a real shock.
It’s no surprise that UK inflation is the highest in the G7. Much of this is no doubt linked to rising food prices from suppressed levels not seen in other G7 countries.
This is, of course, entirely because we have a supply chain in the UK controlled by a handful of powerful retailers and equally powerful processing suppliers – the beef supply chain being a prime example!
We now have chaos in the country with all kinds of workers on strike. Railways, the public sector, dockworkers and even lawyers are among a growing number of sectors pushing for a cost of living increase in their wages. Why not, they face cost increases that all households will experience this winter?
We have a rudderless British government riddled with in-fighting and a Scottish government more interested in scoring political points to secure independence by blaming the British government for everything, rather than dealing with the realities of economic collapse.
I’m old enough to remember the strikes and the three day week in December 1973/74 and the lights out that brought down the Heath government. And the winter of discontent from November 1978 to February 1979 – inflation out of control, strikes among railway workers, transporters, the NHS, gravediggers, garbage collectors, (does that mean anything to you?), and the most cold for 16 years.
In fact, the ground was so frozen that we didn’t play rugby from late November to late February that season. Either way, Ford auto workers got a 17% pay rise, public sector workers were offered 5% by James Callaghan’s Labor government and four months later Margaret Thatcher was prime minister.
The current situation in which we find ourselves is very similar to these events, although the cause is different. The way politicians are handling it, or should I say not handling it, also seems hellish, and so could come to the same result as Callaghan and Heath if they don’t get it.
Meanwhile, it’s business as usual in Scottish agricultural policy – as Callaghan said when he returned from a holiday in Barbados amid the mess of 1979 – “crisis, what crisis? Ouch!
ARIOB continues to do little or nothing. NFUS, in particular Martin Kennedy, acts as the media spokesperson for ScotGov, even speaking oddly on behalf of the CabSec about officials’ plans to reduce suckler cows in Scotland to meet climate change targets.
What about any attempt by the NFUS to compensate for the financial problems that ALL of its members are currently facing? Five hundred pounds for soil sampling and paying the BPS advance a few days early is as useful as a chocolate firewall.
What about acting as a lobbying organization, dare I say a union, and lobbying on behalf of its members for something tangible?
There’s one obvious area he could focus on – if he had the will and the bottle to do so, which he obviously doesn’t. It’s a struggle to preserve the value of public support in almost every sector of our industry.
The real value (including the impact of inflation) of agricultural support payments has fallen by 50% over the past 20 years. LFASS in 2002 was around £60-65m – today it is around £60-65m. The value of support payments to Scottish agriculture has been around £500million over the past 20 years.
In 2019, for example, statistics released by the Scottish Government show total support payments amounted to £488m, a fall of 2% in real terms by its own admission.
It is not just the reduction in the value of these inflation-eroded payments that is the problem, it is the purchasing power of these reduced payments that is of greater concern. Fuel costs increased 237% for DERV and 570% for red diesel, contractor costs increased 245%, skilled trades labor increased 333%, power increased by 390%, electricity increased by 429%, fertilizers increased by 470% – some real farmer examples of cost increases since 2002.
In other words, in addition to accelerating inflation eroding the value of Scottish government payments to agriculture, the purchasing power of agriculture is currently being decimated. The Scottish Government’s budget, on the other hand, was £19 billion in 2001 and £49 billion in 2021, an increase of 258%.
Sheep and finished cattle have both increased by around 235% in 20 years, but this does not affect the rising costs we are currently facing and there is no guarantee that they will remain.
So workers in almost every conceivable industry are on strike, fighting for the rising cost of living for their beleaguered families. We have an admission by ScotGgov that support payments do not reflect inflation, let alone the particular costs we face in agriculture and there has been absolutely no response from Martin Kennedy.
Rumor has it that he doesn’t think it’s “credible” to ask for increases in the cost of living for farm families. If true, I would use “unbelievable” as an adjective to describe this ridiculous position.
This represents a complete dereliction of duty by the NFUS and if not, what do they have in mind to support their members? But NFUS is now so close to ScotGov that he may have forgotten why he was elected and what NFUS is supposed to stand for. I am not the only former president or vice president to think this.
We’re used to being let down by politicians and officials, especially those with an anti-meat agenda, but let down by the organization set up to represent the views of industry – that’s a whole new ball game.