After one of the toughest years in a generation, UK beef farmers will be hoping for a smoother time in 2019.
The long, cold winter followed by last summer’s drought led to worryingly short supplies of forage in 2018, prompting higher than usual slaughterings which in turn triggered a fall in store cattle prices. The after-effects are still being felt, with forage stocks still tight and UK calf registrations down more than 3% on the year in July to September, and 1.5% down in the 11 weeks to Christmas.
While the smaller UK cow herd could support market prices over the coming months, there is unfortunately little room to relax.
Financial Support Changes
The imminent switch from direct payments to subsidies based on delivering public goods post-Brexit means that for the country’s beef producers in particular, more challenges are on the horizon. Since joining the EU in 1973, the UK’s beef sector has received significant financial support from Europe thanks to intervention and headage payments, with subsidies being used in many cases to prop-up loss-making businesses.
The coming change means that those long-relied on payments that help farmers cushion themselves from unknowns such as beef volatility will be shifted to a system where farmers will need to prove they are offering public services and environmental benefits to get the same funding. What’s more, while the government has promised to maintain current funding levels until 2021, with growing demands on the government’s purse strings, there’s a real risk that payment pot could dwindle in the coming years
No Time for Complacency
This alone could be concerning, but when uncertainties around trade and currency values post-Brexit are factored in, for an industry which relies heavily on exporting its produce the coming months could be particularly difficult. The potential upheaval has led industry experts to warn producers not to be complacent if they want to be able to withstand any further turbulence.
“Loss of direct support payments would be a major blow to the UK beef sector, making it vital for producers to think about how to ensure they are financially robust enough to survive outside the CAP”
In its 2019 Farm Business Outlook report, farm consultant Andersons warned the loss of direct support payments would be a major blow to the UK beef sector, making it vital for producers to think about how to ensure they are financially robust enough to survive outside the CAP.
Protecting Beef Businesses
So what action can beef farmers take, and is there really any way for them to protect their businesses from beef volatility?
Paying attention to health, rationing, marketing and costings, as well as preparing forward budgets to understand their business’ financial health without subsidy is an important place to start. Understanding how sensitive farm profits are to changes in input costs is also critical to helping producers recognise where they need to pay particular attention. And while it’s an often-repeated message, looking for ways to efficiencies and reduce costs remains a key piece of advice. Outside of farms’ direct operations, tools such as volatility insurance could help producers protect themselves from any significant falls in market price or hikes in input costs.
Finally, thinking about which key input supplies could be disrupted in the face of a no-deal Brexit so that alternative arrangements can be made could also be beneficial.
No one can predict what that next 12 months will bring the farming sector; but from the difficulties of 2018, hopefully beef farmers can act ensure their businesses are not just robust enough to just survive the year ahead, but in a position to thrive in whatever opportunities 2019 creates.
Stable is the volatility insurance platform designed and built by farmers. We help farming and food businesses of every size and sector manage the risk of volatile prices so they can invest in their future with confidence. Stable’s index-insurance platform enables farmers and food businesses to insure themselves from a wide range of commodity prices and input costs. To read about examples of how Stable’s volatility insurance could help your farming and food business manage risk, read these case studies.
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