'Current subsidies are funding in-efficient farming' - Micheal Gove (Chat away)

[GTB]

There's no doubt that subs are propping up a few inefficient businesses and quite a few efficient ones too i.e. those that were/are using sub money to buy more land or invest in modern infrastructure. BUT I do think it's a bloody cheek for Gove to be saying these things when he wouldn't know an inefficient farm business if it hit him on the nose.

 

[newhollandfarmer]

A complex matter that very few fully understand, and even less know of a viable long term solution to. Least of all this execrable baffoon!

 

[joe soapy]

I was wondering that
inefficient at what
what do they want, grow more and sell for less ?

The much derided farmers that do the minimum to maintain the land whilst receiving the SFP should be classed as the efficient ones.
It was decided long ago that producing food in this country was holding the population back. Indeed, a study for Devon came to the conclusion
that the average income per head would rise 25% without agriculture . If only farmers would spend their income on luxury goods and good living
instead of trying to produce food we would be in a much better place, and by buying our food from the 3rd. world they would also be better off.
Such is the crazy world of Westminster think tanks

 

[Goweresque]

And Michael Gove's statement would be wrong how exactly?

https://fullfact.org/economy/farming-subsidies-uk/

The average UK farm made £39k profit in 2014/15. Made up of on average £28.3k of subsidy (BPS and enviro schemes), £2.1k of actual agricultural profits, and the remainder from diversification. Thats the average across the board, there's variations in different sectors etc. By definition of average that means half will be doing worse than that - making losses on their actual agricultural activities (but still getting the same BPS of course as thats fixed per acre). Details in graph below:

So its blatantly obvious that BPS is allowing a good third or more of the agricultural sector to keep farming when it would stop without the subsidy, as they're losing cash every year on their farming activities.

I cannot see how a viable self sustaining agricultural sector can emerge while such a large amount of production is being dumped onto the market at a production loss.

 

[jendan]

The majority of politicians are pretty useless, most of what they do bring very few benefits to the people they are supposed to be serving.

Also, while most farmers try hard to do better and increase efficiency there are also a load who do very little, are pretty crap farmers and have a fairly easy life living off the subsidies.

It would be better for younger entrants if these left the industry.

Maybe they are not "pretty crap farmers" after all if they "do very little,and have a fairly easy life living off the subsidies" ,probably more like the height of achievement.You can bet your life that those kinds of farmers have put a good proportion of their SFP into good pensions or investments over the last 10 years or so as well.It will pay them much better in the future than "to try hard to do better and increase efficiency",(to produce more and sell it for less) And how on earth will it be better for younger entrants if they leave the industry? If they are tenants on AHA,they would surely be relet on a FBT.Owner occupied farms being bought up by larger farmers. If you havent already read "On the smell of an oily rag" by the late John Cherrington,it would be good reading for you. If things get really tough after Brexit,the only way to survive will be to spend next to nothing,or as little as possible.

 

[Tarw Coch]

And Michael Gove's statement would be wrong how exactly?

https://fullfact.org/economy/farming-subsidies-uk/

The average UK farm made £39k profit in 2014/15. Made up of on average £28.3k of subsidy (BPS and enviro schemes), £2.1k of actual agricultural profits, and the remainder from diversification. Thats the average across the board, there's variations in different sectors etc. By definition of average that means half will be doing worse than that - making losses on their actual agricultural activities (but still getting the same BPS of course as thats fixed per acre). Details in graph below:

View attachment 620530

So its blatantly obvious that BPS is allowing a good third or more of the agricultural sector to keep farming when it would stop without the subsidy, as they're losing cash every year on their farming activities.

I cannot see how a viable self sustaining agricultural sector can emerge while such a large amount of production is being dumped onto the market at a production loss.

Just wondering how many farmers tell the govt all these financial details, I know I don't.

 

[tepapa]

These inefficient farmers are doing the industry a favour. Imagine if the whole UK ag was at full production, you would be paying the super markets to take your produce rather than your neighbour.

 

[Goweresque]

Just wondering how many farmers tell the govt all these financial details, I know I don't.

HMRC get to see every farming partnership accounts, and every farming company accounts too. So they certainly have the information. Whether they are allowed to publish that data (once made anonymous) I have no idea. The State certainly knows exactly how much every farm makes from farming activities, from subsidies and from 'other income', which is where diversification would often get placed.

 

[Goweresque]

These inefficient farmers are doing the industry a favour. Imagine if the whole UK ag was at full production, you would be paying the super markets to take your produce rather than your neighbour.

Quite the reverse. Its the removal of the production by the inefficient that drops overall production and increases prices for the survivors (hopefully). Most marginal land will not be taken on by a 'more efficient' producer, it will stop producing at all. Which is what needs to happen.

Post BPS I fully expect agricultural production, particularly of grains and livestock to nosedive, as marginally profitable producers leave the scene. Some of that land will be put back into production by lower cost producers, but even they will be working to far lower production/cost targets, and a lot of land will leave agricultural production entirely. When the system settles down after the big upheaval the level of production will still be a lot lower than it is today, just that the people in it will have to be making a profit, otherwise they won't be in it for long(or have lots of money from outside farming to pour into it).

 

[Nithsdale]

Only way to make it efficient (for the tax payer) is link subsidies back to production... which we can't do due to WTO agreements


I can't see how UK ag can survive without subs in one form or another - but it is bloody wrong on all levels for someone to sit on their farm/land, do sod all with it and still get a good salary in the form of SFP.

The Govt will need to weed out the 'money for nothing' claimants, it will save millions every year! I just wish we had a govt. in place fit for running the country because the cretins in power are showing their inability on every level

 

[tepapa]

Quite the reverse. Its the removal of the production by the inefficient that drops overall production and increases prices for the survivors (hopefully). Most marginal land will not be taken on by a 'more efficient' producer, it will stop producing at all. Which is what needs to happen.

Post BPS I fully expect agricultural production, particularly of grains and livestock to nosedive, as marginally profitable producers leave the scene. Some of that land will be put back into production by lower cost producers, but even they will be working to far lower production/cost targets, and a lot of land will leave agricultural production entirely. When the system settles down after the big upheaval the level of production will still be a lot lower than it is today, just that the people in it will have to be making a profit, otherwise they won't be in it for long(or have lots of money from outside farming to pour into it).

Thats the same as what i said. The inefficient are reducing supply by being inefficient. Imagine if they were efficient.

 

[tepapa]

I can't see how UK ag can survive without subs in one form or another

UK ag will survive without sub. The sad part is that not all/ if many current UK farmers will survive

 

[S J H]

So scrap subsidies and the inefficient will wither away.
Be interesting to see how many can survive and make realistic profits on world markets.

30 years ago a guy I knew in haulage used to say "you have to have the hard times to get rid of the opposition" I'm sure he didn't think when he said it that one day he'd be part of that opposition.
I wonder how many who think they're efficient won't last.

In some cases- yes, however you are placing a net over the whole industry, there are many businesses that are using the subsidy to help farm better and more efficiently, you seem to think that all subsidies are used and spent on creating a business that is less sustainable.

Perhaps he’s suggesting subsidies are themselves inefficient? Some farmers might spend it on a holiday or build a swimming pool which is not supporting ag.

If you pay someone a flat area rate for just being in control of that area, then it is not going to promote efficiency.

If a farm needs funds to improve efficiency then this can surely be financed through a bank rather than subsidies, if it's not backed by a bank, then I very much doubt that it is a worth while investment.

 

[Henarar]

Quite the reverse. Its the removal of the production by the inefficient that drops overall production and increases prices for the survivors (hopefully). Most marginal land will not be taken on by a 'more efficient' producer, it will stop producing at all. Which is what needs to happen.

Post BPS I fully expect agricultural production, particularly of grains and livestock to nosedive, as marginally profitable producers leave the scene. Some of that land will be put back into production by lower cost producers, but even they will be working to far lower production/cost targets, and a lot of land will leave agricultural production entirely. When the system settles down after the big upheaval the level of production will still be a lot lower than it is today, just that the people in it will have to be making a profit, otherwise they won't be in it for long(or have lots of money from outside farming to pour into it).

why won't the slack be taken up by imports ?
yes any less production should have an affect on prices but if its only less production in this country then is it really going to make that much difference
it won't be any better for the ones that are left just worse for the ones that are gone

 

[ollie989898]

And Michael Gove's statement would be wrong how exactly?

https://fullfact.org/economy/farming-subsidies-uk/

The average UK farm made £39k profit in 2014/15. Made up of on average £28.3k of subsidy (BPS and enviro schemes), £2.1k of actual agricultural profits, and the remainder from diversification. Thats the average across the board, there's variations in different sectors etc. By definition of average that means half will be doing worse than that - making losses on their actual agricultural activities (but still getting the same BPS of course as thats fixed per acre). Details in graph below:

View attachment 620530

So its blatantly obvious that BPS is allowing a good third or more of the agricultural sector to keep farming when it would stop without the subsidy, as they're losing cash every year on their farming activities.

I cannot see how a viable self sustaining agricultural sector can emerge while such a large amount of production is being dumped onto the market at a production loss.

And finally this debate will get somewhere. This is the crux of the entire problem.

 

[S J H]

So do you see yourself as being Inefficient ?

I get very little payment, I was at a meeting last night, where production grants were discussed, and the amount was laughed at, and it's near enough the same amount as I received.

I farm the same numbers as the average livestock farmer according to Cambridge university, but I have a full time job aswell.

I don't think I'm that efficient, but I think that's more to do with building things up.

 

[Nithsdale]

UK ag will survive without sub. The sad part is that not all/ if many current UK farmers will survive

Currency is key to the success IMO... the weaker the £ the greater the chances we have.

 

[Henarar]

Thats the same as what i said. The inefficient are reducing supply by being inefficient. Imagine if they were efficient.

is being efficient necessarily about producing more produce ?
I would have thought it was about producing more profit

 

[tepapa]

Currency is key to the success IMO... the weaker the £ the greater the chances we have.

But unfortunately Ag is small fry in the GB economy behind London's money trading so i wouldn't hold count on that helping us out

 

[tepapa]

is being efficient necessarily about producing more produce ?
I would have thought it was about producing more profit

But are the two not linked?

 

[Goweresque]

Thats the same as what i said. The inefficient are reducing supply by being inefficient. Imagine if they were efficient.

No it isn't. What you are assuming is that the 'more efficient' producers always produce more from the same amount of land. Some for sure. But its also possible to be be 'more efficient' by producing less, but at a lower cost, so your profit is greater.

Efficiency is about cost of production, not getting the maximum amount of grain from a 10 acre field regardless of cost.

If I produce 2t/acre of wheat but my costs are £100, i'm in a better position to the man who produces 3t/acre but whose costs are £250/acre. He produced more, but I was more efficient (cost per tonne of production £50 vs £83). I also made slightly more overall profit (with grain at £140/t), and I had less capital at risk in the ground too.

This is farming blind spot. It's been living in the post war 'produce more at all costs' mentality for so long that it only measures 'efficiency' in output per acre. Its forgotten entirely about the profit margin on its operations, because the taxpayer has always supplied a healthy one at the end of the year.

Its entirely possible UK food production could halve eventually as a result of these changes, yet at the end of it everyone still in the industry will be making a profit, because they're farming larger areas more extensively, producing less but at far lower COP.