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Monday, November 16, 1998 Published at 11:03 GMT

Business: The Economy

UK farmers' tale of woe

As farm incomes have dropped, protests have increased

Britain's farmers desperately need more help from the government.

UK farm incomes have crashed by 80% in the past two years, according to the National Farmers Union.

It's the biggest drop in a generation for the notoriously volatile industry.

[ image: Livestock producers have been hardest hit]
Livestock producers have been hardest hit
Some livestock prices are now below the cost of production, with pig farmers losing £20 per pig sold, and lamb producers between £12-£15 per lamb. Some farmers are even slaughtering their own herds.

Hardest hit have been livestock farmers, who have seen their prices crash by between 35% and 60% in the past two years.

Overall UK farmers now earn only £50 per acre - and it is estimated that more than four in five would be making a loss without subsidies from the EU.

Large arable farmers are still making a profit - albeit a smaller one than in the halcyon days of l994 and l995. But for some of the smaller hill farmers, severe losses may be enough to push them into bankruptcy.

World commodity slump

The farmers are the latest victims of the high pound and the crisis in emerging markets.

Farm prices are set globally, and agricultural products are traded around the world.

And the collapse in demand in emerging markets has lowered prices and hit exports.

Russia, for example, until this year took 45% of Europe's beef exports and 32% of pig exports - but now doesn't have the hard currency to pay for them.

But British farmers face two additional problems.

Victims of high pound

[ image: Tractor sales are down 42% as farm incomes plummet]
Tractor sales are down 42% as farm incomes plummet
The high pound and high interest rates have made UK produce more expensive overseas - while making it more expensive for farmers to pay off their loans for equipment.

The NFU has been one of the most vociferous groups in calling for the Bank of England to reduce interest rates, and the farming industrty is one of the biggest supporters of the single currency.

Sion Roberts of the NFU said:

"The way sterling has hit the industry shows what an open sector farming is. It is open to a truly global market and if supermarkets can source stocks from abroad they will do so."

And the high pound also reduces the value of agricultural subsidies from the EU, which are paid in "green pounds" that are not immediately adjusted to take account of exchange rate changes.

And finally, the BSE crisis, which has led to a ban on the export of British beef because of fears about its safety, has had a knock-on effect to other livestock sectors.

Consumption of all meat has been falling domestically. And recent fears about the safety of lamb have hit demand further, adding to the distress caused by the loss of £500m in beef exports.

Some farmers also believe that the large supermarket chains are taking advantage of their distress to force prices down further. But they deny the claim.

Trouble ahead

There is another threat on the horizon for farmers' incomes.

The EU is committed to reforming its system of agricultural support which makes up over 50% of its total budget by the year 2000.

Under one proposal, part of the aid payments to farmers would become the responsiblity of national governments.

The farmers fear that, under that plan, other governments will be more generous than the UK.

The Agriculture Secretary, Nick Brown, is hoping to get the beef export ban lifted by the end of the year, and reduce the billons of pounds that the Treasury has paid out to beef farmers.

But whatever he can spare for some farmers now, he faces an uphill task in reassuring the industry that the government is committed to restoring their battered incomes.

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