Page last updated at 23:22 GMT, Monday, 11 August 2008 00:22 UK

Rising food prices sow hope for farmers

By Katie Hunt
Business reporter, BBC News, Bakewell, Derbyshire

James Furness
Rising milk prices are making life easier for dairy farmer James Furness
Fifth generation dairy farmer James Furness is savouring an unusual feeling - optimism.

After years of low prices that did not cover his costs, the milk he produces from his 160-strong herd of cows in the heart of the Peak District now fetches 26 pence per litre.

This is eight pence more than a year ago and almost double what it fetched in 2001 when things were at their worst.

"Back then, my wife had to work full time even though our daughter was very young," he says.

"We lived off her wages."

Encouragement

Rising food prices are source of concern for consumers as the cost of their weekly shop mounts and politicians worldwide fear that food shortages could spark unrest.

But with the era of cheap food coming to a close, the UK's farmers are hoping that power will shift away from the supermarkets and give them a better position at the negotiating table.

Mr Furness's optimism was shared to varying degrees by the other farmers, tractor salesmen and cattle breeders attending Bakewell Show last week.

It is the Peak District's main agricultural event and has been taking place each August in the Derbyshire market town for almost 200 years.

Graph

Surrounded by gleaming red and blue tractors, Charles Moorman says business is brisk at the agricultural machinery firm he works for as a sales manager.

His company, Platts Harris, is experiencing delivery delays because manufacturers cannot keep up with demand from farmers eager to replace worn-out equipment.

"We've had a good spring," he says. "Things started picking up in the second half of last year.

"Farming has gone through a sorting out period over the last 10 years. Those who have survived will be doing better now. Higher prices are giving them encouragement."

Varying fortunes

The upbeat mood at Bakewell is also reflected nationally. The UK's total income from farming, including subsidies, rose to 2.54bn last year - an increase of 10.2%.

But the figures reveal a widening gap in the fortunes of cereal producers and those in livestock farming.

Belfield family
Livestock farmers are being hurt by the rising cost of cattle feed.

"For arable farmers it's been a real beanfeast," says Mr Furness, who is also chairman of his local branch of the National Farmers' Union.

Wheat and barley farmers enjoyed a windfall year in 2007, with the value of production up 44% as increased global demand and a lower harvest worldwide led to higher market prices.

The value of the livestock farming, by contrast, rose just 3% despite higher prices for sheep, pigs and cattle. The value of milk production rose by 13%.

"Their costs, be they fuel, feed or fertilizer, are going up much quicker than their prices," says Richard George, a National Farmers' Union economist.

"They are probably, in some cases, doing worse than they were two years ago."

This is a viewed shared by Keith and Janet Belfield, who have 200 British Blue cattle on their farm near Buxton in Derbyshire. They recently obtained their highest ever price for a breeding bull - 9,200 guineas or 9,660.

Graph

Their prize-winning beef heifers now fetch a "fat price" at auction of 2.20 a kilo - some 1200 to 1300 per animal - up sharply from 1.50 a year ago.

But they say they have not felt the benefit of higher prices, primarily because feed costs have doubled over the past year.

Linked to soaring global cereal prices, cattle feed also contains proteins ,such as soy, that have rocketed in cost.

Legislation

Dairy farmers like Mr Furness are faring better, but even so his profit margins are slim - just 2p on a litre of milk.

Sign
Farmers also face unforeseen events

His expansion plans have also been put on hold by potential new European legislation to reduce water pollution from agricultural fertilizers and manure.

Farms located within Nitrate Vulnerable Zones, which cover about 55% of the UK, are required to adhere to a set of measures to reduce the amount of nitrate lost from their land to watercourses and groundwater supplies.

Mr Furness estimates that he may need to borrow 100,000 to build a new facility to store the slurry produced by his dairy cows.

Despite the encouragement offered by rising prices, it is clear that farmers are not quite ready to give their industry a clean bill of health.

"You'll never make a fortune from this business," Mr Furness says with a wry smile.


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