The Future for Farming

James Walton Partner and Registered RICS ValuerGiven current commodity prices, a collapse in the dairy industry and poor returns through the principal beef, sheep and pig livestock sectors, it may seem surprising to suggest that prospects for farming look promising.

There have been reasonably good harvests around the world, to the extent that basic commodities are over supplied and the laws of supply and demand apply to see a falling price.  Nevertheless the same laws can only help agriculture in the future.  There are a number of factors which will give rise to either an increasing demand, or a problem supply including;

  • Population is expected it to increase from 7.3 billion people to 9 billion by 2050 and 11 billion by 2100.
  • More people are adopting a western diet, generally including pig and poultry meat.  These animals are inefficient in that they convert grain to meat with poor conversion rate.
  • In various parts of the world there are wars, problems with infrastructure and corruption, all of which limit or have the potential to limit food production.
  • Rainforest clearance continues at a pace which on the basis of recent experience not only gives rise to climate control problems but soil erosion, to the extent that much of the former forest is now unproductive.
  • Climate change itself.
  • Increase in plant pest and disease resistance and with more limited access to chemicals is going to put pressure on our ability to increase productivity.
  • Other uses of land such as for housing or infrastructure projects, solar farms and AD plants, all reduce the area of land capable of producing food.

All of these issues reduce the chances of food supply being able to keep pace with demand. We will need to produce as much food in the next 50 years as we have produced in the last 10,000 years.  Whilst science may produce some of the answers, with no alternative other than to adopt GM technology, but with advances in other plant and animal breeding too, some increase in yield and productivity can be anticipated.  However, food will in all likelihood become in short supply and this should give rise to a higher price, although still with significant crests and troughs in the supply curve, so affecting price.  The hope is that the crests will be higher and the troughs less deep.

muddy welliesFor arable commodities in particular, there is a further influencing factor which governs the price paid.  Given that these commodities are traded on a world market, and that we generally produce more in this country than we consume, the price taken is generally the price that we can find for our exports.  For those of us farming in the Midlands the value is proportionally less due to the cost of transporting this product to the port.  There is a further negative effect with a strong pound against other currencies, particularly the euro.  With a change in climate the prospect for of being able to grow economically some of the types of food that we currently import will increase.  One might expect then the dynamic of the export effect to reverse to the benefit of farmers in the Midlands.

Article by James Walton FRICS FAAV, Partner & Registered RICS Valuer, based in our Stratford upon Avon office.