Crunch 'to hit farming in 2009'

The NFU says dairy farms will see production fall "perilously" low

UK farm production will plummet during the coming year unless the industry gets more support from regulators and retailers, farming leaders have warned.

The credit squeeze and high costs of feed, fertiliser and diesel mean farms could struggle to stay in business, the National Farmers' Union says.

It has called for regulations to be eased and better deals from retailers.

But the British Retail Consortium says farmers benefited from 2008's high prices and should not be under threat.

NFU president Peter Kendall said many UK farmers had already reported difficulties as a result of the squeeze on credit, which was making "a major dent in producers' confidence in dealing with the high costs of farm inputs like animal feed, fertiliser and diesel".

'Break-even position'

As a result, the union predicts dairy farmers will see milk production fall to "perilously low levels" and that wheat production could tumble as arable farmers also deal with the "legacy of poor autumn sowing and growing conditions".

The warning comes after a record year for cereal crops.

In October, official figures showed British farmers had recorded a 28% increase in the amount of cereals harvested in 2008 compared with 2007.

The returns for producers have been increasing more rapidly than shop prices - so they are getting more than [they did] a year ago for their produce Richard Dodd British Retail Consortium

Wheat saw a massive increase, up 32% on 2007's harvest, to 17.5m tonnes.

But Mr Kendall said the wet weather at the end of last year would impact on 2009 harvests.

"Up to between 10 and 15% of land now lies unsown and many crops around the country have failed to grow because of the cool, wet autumn and winter.

"I anticipate that last year's record harvest may be followed by an equally dramatic fall in production during 2009, turning the UK from a net exporter into a break-even position."

Sheep farmers will also be hit by what the NFU describes as the "pointless" prospect of electronically tagging all their animals, to meet an EU directive that this must be done by 2010.

The horticultural sector will also be squeezed by retailers who are "continuing to use ruthless methods... in order to keep their costs down", the union says.

Mr Kendall added: "As the UK economy enters a full-blown recession, farming, as the UK's largest primary onshore industry, could be one of the bright sparks, helping to deliver segments of the rural economy from the gloom.

"But that simply won't happen unless farmers get the recognition they deserve from regulators and retailers."

Supermarkets 'not ruthless'

But Richard Dodd, of the British Retail Consortium, said there was "no reason" why farm production should go down in 2009.

"Food prices are well up on a year ago and are still going up. The returns for producers have been increasing more rapidly than shop prices - so they are getting more than [they did] a year ago for their produce.

"There is therefore a greater incentive than one or two years ago."

He dismissed claims that retailers used "ruthless methods" to keep costs low, adding the dealings between supermarkets and farmers were already good for both sides.

"Supermarkets are the biggest, though not the only customer of UK agriculture. More than three quarters of all the food sold in the UK's supermarkets is sourced from the UK.

"The relationships that they have are straightforward and mutually beneficial. The farmers benefit from the volume that supermarkets provide. Supermarkets benefit from having a guaranteed supply."

A spokeswoman for the Department for Environment, Food and Rural Affairs, said ministers were committed to working with the agricultural industry in the current economic climate to ensure a "thriving and productive farming sector".

"That's why, for example, we have urged supermarkets and suppliers to pay farmers as quickly as possible, continued to fight for a level playing field for British farmers through reform of the CAP [Common Agricultural Policy]."

The department had also worked with the industry to secure changes to the EU's sheep-tagging regulations, including a delay to some of the more costly elements, she added.

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