Northern Region Agriculture & Rural Development: What Futures?

The countryside and its supposed bedrock, farming, are commonly supposed to be under threat. What might the future hold? This article explores the major pressures and apparent opportunities facing agriculture and rural development in the Northern Region. It begins (section I) with a brief review of the recent economic history of the agricultural sector in Britain, drawing out the implications for the North. It then outlines the major policy directions apparent in both European and British policy (Section II), including a critique of the Agenda 2000 proposals. Section III outlines an alternative policy strategy, without which any policy critique is largely rhetorical. The last major section (IV) explores the implications of these policy directions, in conjunction with market trends, for the future of farming and rural development in the North. Section V offers some conclusions for both future practice and research. I . Recent Economic History of Farming in the UK The agricultural sector is in decline its share of national economic activity and incomes is falling and will go on falling. This is an inevitable fact of socio-economic life as people become richer, they spend a smaller fraction of their total income on food (though greater fractions on services, entertainment, and on meals outside the home). As they do, so the falling share of total spending generates a smaller share of total earnings accruing to the producers of food. On the other hand, as economies grow, so demands for other goods and services grows, and opportunities expand for those previously earning their livings from farming. Farmers, their families and their employees leave the industry over time (or find part-time occupations and income sources other than farming) to take advantage of these opportunities. Typically, such adjustments happen as generations change farmers heirs and offspring do not follow their parents into the business but find other occupations, so the adjustments are not necessarily either traumatic or dramatic. Typically, the first to leave are those who have better opportunities elsewhere, or who are less implacably wedded to the career and lifestyle of farming. Those remaining in the industry tend to be content (or are able) to earn rather less than those who leave, so farm incomes tend to lag behind those elsewhere in the economy. In the past, this apparent income lag or gap has been sufficient to persuade politicians to favour the farm sector with support and subsidies. This tendency has, from time to time, been re-inforced with arguments in favour of: import saving; countervailing action against monopolistic food manufacturers, processors and distributors; supporting rural (agriculturally-dependent) local economies and so forth. However, both economic logic and the history of farm returns clearly show that supporting farm product prices and receipts does not increase farm incomes (Figure 1). Why not? Increasing farm receipts encourages more people to stay in farming than otherwise and encourages more use of inputs than otherwise. Both these effects tend to increase costs, leaving farm incomes (as the difference between receipts and costs) no higher than before. Since people will only remain in farming so long as their incomes (and lifestyles) are expected to be more attractive than those elsewhere, farm incomes are more determined by what people can earn elsewhere than by the receipts from farming. The post war history of British agricultural returns clearly illustrates this logic. Figure 1 shows the post war history of the UK’s real gross agricultural product (RGAP (93)). This measure is the difference between gross receipts from farm output sales (cereals, livestock products etc.) and gross expenses on farm inputs (fertilisers, feedstuffs, power and fuel etc.), with the result being deflated by the national Gross Domestic Product deflator (base 1993), as the most comprehensive indicator of inflation, to produce a measure of total farm returns in real purchasing power terms. The pattern of cost change is closely similar to that of changes in gross output receipts changes in real spending on inputs closely follows changes in gross receipts (output), which 1 This article (especially section IV) draws heavily on ideas and arguments developed during the preparation of a report on the present situation and future prospects of the “Northern Uplands Red Meat Chain” (NURMC), coordinated by the Northern Development Company (NDC), with substantive inputs from ADAS, MLC and the Department of Agricultural Economics and Food Marketing, the University of Newcastle upon Tyne. A shortened version is forthcoming in the Northern Economic Review, early 1999. Northern Region Agriculture & Rural Development: What Futures? © David R. Harvey, AEFM, Newcastle University Jan. 1999 2 reflects the substantial fraction of farm costs made up by feed and seed. These changes are shown in more detail in Box 1, though only for the period 1973 1997. This industry gross product is the national equivalent of the farm gross margins at the farm business level, and it is from this gross income that the industry and its farmers pays for its land, labour, capital and management in other words, it is this gross product which pays those people trying to make a living from farming. Two trend lines are shown for this gross income from farming, both showing substantial declines: one taken over the whole post-war period (1947 1997), the second, steeper, trend beginning from 1973 (the year of formal entry to the European Union (Community as was) and the start of the UK accession to the EU’s Common Agricultural Policy (CAP). The rather few occurrences of counter-trend fluctuations in the industry’s gross income are typically consequences of rapid (and shortlived) increases in world farm commodity prices (48 52; 73 75) or of substantial declines in the international value of sterling (depreciating exchange rates (64, 71 75; 84, 92-93), through which international prices (and EU support payments) are reflected to British farmers. Figure 1 UK Real Gross Agricultural Product (RGAP) £ m il li on , r ea l t er m s, '9 3 ba se