Giving farmers chance to grow

With fuel prices up, grain prices up and consumer confidence apparently wilting by the day, is there anyone out there with cause for optimism in 2008?

Well, possibly, after years of what can only be considered a rough ride, it might just be the farmers' turn to get themselves back on their feet. As a manufacturer of agricultural machinery, and a long-time supporter of life in rural communities, I am encouraged by some positive signs in this market.

Farmers have had a proper buffeting over the last ten to 15 years. Market conditions have put them on a sticky wicket with very low grain prices on the one hand, and significant pressure from large supermarket chains to keep food prices cheap for their customers. Farmers have suffered while supermarkets have been able to lever them in their fight to increase their market share against competitors and make huge profits.

Then there have been successive epidemics and diseases. There was the long saga of BSE which floored beef production, followed by a terrible outbreak of foot and mouth; then, recently, the prospect of avian flu, more foot and mouth and some blue tongue into the bargain.

We should add to the catalogue of agricultural woes the lamentable failure of Defra's new computerised system for paying the single farm subsidy - which led to some farmers waiting 18 months or more for payment of a vital part of their income.

And while government is in the frame, farmers have not been helped by interference of various kinds from the public sector. Impositions vary from those affecting the social structure of rural life, such as the ban on hunting, to more bureaucratic fiddling such as the legislation governing hedge-cutting.

Annual cuts to maintain hedges are no longer allowed except on roads and verges where safety is an issue. But added to this there is a raft of puzzling schemes to which farmers must sign up in order to be able to cut their hedges every two or three years - depending on the scheme they adopt.

Hedges have been grown and cut regularly for hundreds of years to maintain their density and to be stock-proof. Doing this is an essential part of the maintenance of the countryside which everyone presumably wants to see continued. This kind of legislative interference is unwelcome and unnecessary.

But market forces might be changing in the farmer's favour. He still has to run a tight ship, particularly with utility, feed and seed costs rising to new heights, but he is starting to have a choice. Grain and oil seed rape is wanted not only for food but also for biofuels.

In 2007, the United States grew 90 million acres of corn for ethanol production, a 15 per cent hike on the previous year. The demand for grain all over the world is up with a consequence that prices have risen from about £90 per ton a year ago to nearer £200 per ton today.

This has a knock-on effect throughout the food chain and it is clear that the era of cheap food is over. The large supermarket chains have to pay realistic prices for grain, produce and meat. Some are trying to fix prices at reasonable levels for a number of years hoping to tempt farmers into a position of security. But farmers have options now.

They might decide to increase the amount they grow for profitable biofuel crops. They are in a position to bargain and deal when only a year ago they were on the receiving end of deals that they were hardly able to refuse.

None of this means that farmers are going to make vast profits at the expense of consumers - they have increased outgoings too. But it does mean that they are more able to call the tune, develop entrepreneurial options and survive with their dignity intact. They are the market for our products and I am hopeful that they will do well in the current climate.

• Geoffrey Davies OBE, is Managing Director of the Alamo Group, whose 22 companies include Ludlow-based McConnel, the world leader in the manufacturer of hedge cutters. Mr Davies was recently voted Britain's Entrepreneur of the Year for 2007.

• The writer of this column receives no fee but a £100 donation is made by the Shropshire Star to the charity of their choice. Mr Davies has asked that the donation be made to Hope House Children's Hospice at Morda, near Oswestry