Farming for profit and farming for subsidy

This summer I fitted in a weekend visit to some Bordeaux vineyards (at my own expense as part of my holiday before you start to hurl your allegations!). I also visited some English farms, not in my own constituency.

The Bordeaux vineyards show what can be achieved, at the top end, by the vigorous pursuit of quality and improvement, through investment, thought, the application of science and judgement, and the exploitation of world brands inthe ever enlarging glamour end of the global market. The huge crane towering over the tiny property of Le Pin sums up the dramatic impact success at the top of the wine world that serving the mega rich can bring. Mouton Rothschild sports two massive construction cranes, as they too plough back some of the surging revenues from the giddy prices the rich Chinese will now pay for the finest wines. So far the buyers queue at the gates, the higher the prices rise. The best in Bordeaux show that from a very small farm base you can add prodigious value through selection, quality based production and excellent marketing.

My visit to one or two UK farms reminded me even in the UK we still have some relatively small farms struggling to make good money out of arable husbandry. If you are a wheat producer you are competing against the vast prairie farms of the new world, where ever larger and dearer machinery can till, sow and harvest vast acres laid out in mega fields with the minimum of cost. In the Uk we like our small fields and hedgerows, spinneys and lanes. The arable crops are broken up by the much loved features of the landscape and by the patterns of ownership and tenancy.

Which leaves us in the grips of the CAP. Much of what a farmer does is designed to use or draw on an EU subsidy. It distances the farmer from adding value and serving that ever growing and more demanding world market. Farmers do what the subsidy indicates. Green policies promote the idea of farmer as grand landscape gardener, earning money for maintaining various habitats and following prescribed rotations.

The CAP itself has been the object of criticism with demands for reform from successive British governments. Mr Blair said he was surrendering part of the UK’s rebate on contributions to buy us agricultural reform. We have lost a big chunk of the rebate but there is still no sign of reform. The new UK government should demand the follow up promised to Mr Blair. Now would be a good time to see if we can remodel or remove the CAP to give taxpayers a better deal.

Successful farming either applies more machinery and technology to ever larger units to get the economies of scale, of adds more and and more value to the fruits of the land before it leaves the farm gate. The successful Bordeaux chateau show what you can achieve by way of extra revenue if you turn your fruit into an iconic product. Some English farmers are struggling, despite some rises in grain prices, because they face strong global competition from bigger and better invested farms. The CAP is dear to taxpayers, but it cannot make up for all the problems caused by the lie of the land, the size of the holdings and the shortage of capital.

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23 Comments

  1. oldtimer
    Posted September 18, 2010 at 9:55 am | Permalink

    I, too, have just returned from a short break at a farmhouse b & b in Wiltshire. There the dairy farmer told me he had been unable to sell beef for consumption for several years because of bovine TB and an inability to cull badgers. He was well and truly fed up ("heartbroken" was the exact word used) with having to oversee and help with birth bullocks and then shoot them the next morning. Now he paid someone £10 headto do the job for him.

    We should also ask ourselves why DEFRA is commonly known in the countryside as the Department for the Elimination of Farming and Rural Affairs.

    • APL
      Posted September 19, 2010 at 1:11 pm | Permalink

      oldtimer: "why DEFRA is commonly known in the countryside as the Department for the Elimination of Farming and Rural Affairs."

      It does what its master the European Union tells it to do. And it plans the same fate for farming in the UK as has befallen our once great fishing industry.

      Redwood, meanwhile is working for change from within the Tory party.

  2. Iain
    Posted September 18, 2010 at 10:23 am | Permalink

    Debating changes in agriculture is about as much use as debating the possibility of changing our weather , its out of ours and your control, unless of course you politicians who gave away the sovereign means to make changes are going to claw back that sovereignty, are you?

  3. Mark Wadsdworth
    Posted September 18, 2010 at 10:28 am | Permalink

    "In the Uk we like our small fields and hedgerows, spinneys and lanes."

    Can't say that I'm bothered. They were laid out that way because it suited agricultural practices at the time. They wouldn't look like that if we started again now.

    PS, ag land subsidies are the worst kind of subsidies – all they do it push up land prices and rents and do not lead to more farm output or lower food prices. It's like negative land value tax, which would push down selling price of land, but otherwise have no dead weight costs on the economy.

    • StevenL
      Posted September 18, 2010 at 2:53 pm | Permalink

      I'm with MW on this one. By the way, it's even worse when you do some research and find out who actually owns all this agricultural land. A lot of them have owned it since the dark ages and live in castle's full of original Van Gough's.

      Why do taxpayers want to subsidise these people in 2010? It's different in France because they beheaded them all a few hundred years ago.

      • APL
        Posted September 20, 2010 at 6:12 pm | Permalink

        StevenL: "It's different in France because they beheaded them all a few hundred years ago. "

        Is it not worth making a distinction between someone who rightfully owns land, regardless of the fact that it may have been thier ancestor that originally obtained title, and someone who obtains public money by virtue of some idiotic scheme concocted in the 1950s intended to the bribe the French part time farmer to support another idiotic scheme?

        With regard to beheading property owners, just because the French did a thing, doesn't mean that thing is a good idea, nor that we should slavishly copy them.

        Far better in my opinion to abolish the CAP and with it agricultural subsidies.

        Disclosure: Not a land owner.

  4. P Haynes
    Posted September 18, 2010 at 10:35 am | Permalink

    Yes but what could be done on UK farms to make money without subsidy (other than building houses) when they are at a competitive disadvantage due to low sunlight levels, the size and type of land, high wages, high taxes and over regulation?

    And we still have higher wage level than most countries despite Gordon Browns great efforts.

  5. Jonathan
    Posted September 18, 2010 at 12:07 pm | Permalink

    I always thought the French got much more money in CAP subsidies than the British.

    There is a place in the market for premium agricultural produce. But most of the time, most people just want affordable, reasonable quality food from a supermarket. Hedgerows are required to house the insects that pollinate the plants, and as windbreaks to protect them.

    However, I don't agree that my money should be taken in taxation to employ lots of bureaucrats to distribute it to farmers so I can get slightly cheaper food. It would be better to have more money in my pocket to pay slightly higher food prices. Withdrawing these subsidies would hit the poor most, but there are other ways to help them, and some of the savings could be directed towards them, for example in higher personal allowances, and a higher entry point for national insurance.

  6. Kevin Peat
    Posted September 18, 2010 at 1:57 pm | Permalink

    Around 15 years ago I visited a spectacular vineyard and chateaux in Bordeaux and was taken on a guided tour – the rest of the party comprised of French people. At the time my French was functional (I was working for Eurostar) and I was the idiot of the class (not for the first time in my life !) How gratifying it was for me when the tour guide announced at the end of his spiel that the vineyard was owned by "…that great British company BASS." That wiped the smug looks of a few Gallic faces and caused a few to choke on their wine. I was so proud !

    (Cont)

  7. Kevin Peat
    Posted September 18, 2010 at 1:57 pm | Permalink

    Sadly BASS is now owned by Canadians and Belgians. (Wiki)

    The loss of our national stake in such high-end cultural activities is of more concern to me than the CAP. Along with EU directives (smoking bans and soon to be more restrictive drink drive laws) comes the abolition of the British country pub in which we used to drink our own produce.

    'Clever' people tell us that national ownership doesn't really matter.

    I'm afraid it does. From your article and the reaction of my French companions I infer that it matters a great deal. Rather than watching in awe and wonderment our predecessors were players in the Bordeaux region. Ownership meant that we British once knew how to produce great wine – we did it by delegation and we had the good sense not to try it here.

  8. forthurst
    Posted September 18, 2010 at 5:42 pm | Permalink

    The CAP is a problem but so are the monopolistic supermarket buyers, so is Defra, so all those various agencies which like to stick their oars in whenever someone wishes to produce food or engage in light industry. Farmers do what they do because as long as they can keep their heads above water, they will continue with their ancestral traditions and provide us with fresh food because on the whole they are vigorous honest hardworking folk who would far rather be farming than operating swindles in the City of London. It is high time the government took action because a very high proportion of farmers are falling behind with investment in their businesses in order simply to avoid foreclosure.

  9. Alan Wheatley
    Posted September 18, 2010 at 6:32 pm | Permalink

    "Much of what a farmer does is designed to use or draw on an EU subsidy". It has been farming along such lines for a long time. Hopefully farmers would respond if instead of telling them what to do they were freed up to run their farms their own way.

    Subsidy is required in some case, such as hill farmer where, in effect, the sheep are mowing machines necessary to keep the fells look the way we like them.

    And with farming to the fore, can anyone tell me the point of the milk quota and the reason we are not allowed by the EU to produce all the milk we consume?

    • Robert
      Posted September 20, 2010 at 9:59 am | Permalink

      Turn swords into ploughshares, spears into pruning hooks and mowing machines into cutlets – personally, I would be more than happy to see our fells return to their natural state.

  10. Gideon Mack
    Posted September 18, 2010 at 6:44 pm | Permalink

    Sorry to change the subject but::-

    I'd like to comment on the anti wind turbine campaign by 'HARM' in Rushy Mead. Please accept this comment as a vote in favour of erecting said wind turbines in Rushy Mead – the nimby campaigners are wrong in their facts and most seem to live across the M4 motorway from Rushy Mead totally invalidating their cause.

  11. Martin Cole
    Posted September 18, 2010 at 7:03 pm | Permalink

    Just to the north of the Bordeaux vineyards lies the Charente where with the Charente Maritime almost all Cognac Brandy is produced.

    Interestingly the system of Apellation Controle which accounts for much of the successes of the Bordeaux wines has been extended and refined for Cognac with the initial strict rules which cover everything from when the grapes be picked to the exact method and timing of distillation etc. was laid out by members of the family of the same Jean Monnet 5born in Cognac) who is responsible for the present structure of the EU.

    Such market regulation and control is about as far as one can get from the free trade models we Anglo Saxons have always historically promoted and pursued. Knowing this background might help in contemplating the present economic mess of the EU today.

    Historically the Charentes have prospered on the back of salt tax exemptions granted by François 1ere and subsequently by Cognac. This has caused considerable historical resentment in surrounding departments such as the Dordogne. Those in power can decree the winners and losers on sometimes arbitrary grounds to match their own preference and prejudices.

    Understanding the CAP and the general mess of the EU is much simpler once the intricacies of these French quirks are fully grasped.

    Once all this is understood, the arguments for remaining within the EU can immediately be seen as absurd for those with no land borders to countries operating such an economic system. I hope you took time to examine the complex system involving the production and marketing of good Clarets, if not, on your next visit come to the Charente and discover the "mysteries" of Cognac.

  12. John Moss
    Posted September 18, 2010 at 7:55 pm | Permalink

    The global finaincial crisis has, predictably, raised protectionist instincts. However, when we cannot lower interest rates any more, cannot print any more money and cannot raise taxes any more for fear of killing the goose, the only thing left is to reduce the cost of trade.

    Scrap the CAP and the trade barriers to agricultural imports and exports. End the haggling at the WTO with a simple proposal to end the lot. No transition, no phasing, perhaps a hardship fund, but no more. Scrap the lot, now.

    We have aeroplanes transporting food around the globe and we have potentially valuable agricultural exports too. Beef and lamb have to be hung for a week or two to mature. They are still picking raspberries in Scotland, yet they would not know what they were in Nairobi.

    We could lift Africa out of pocerty, create a huge growing continent and market for our other exports and feed ourselves, probably cheaper, but also with farmers earning more.

    Go on – scrap it!

  13. Iain Gill
    Posted September 18, 2010 at 8:35 pm | Permalink

    i have always been impressed by the new zealand farmers

    they do great stuff despite not being in the european club

    we could learn a lot from them

  14. Rob
    Posted September 18, 2010 at 9:34 pm | Permalink

    Yet another reason not to be in the EU.

  15. Andrew Johnson
    Posted September 19, 2010 at 12:29 am | Permalink

    Oh dear John, not the old hoary chestnut that the CAP needs the much promised reforms. The dead hand of the EU and governments who have allowed Britain to be overly dependant on foreign food can be seen everywhere in agriculture and fisheries. For years now, we the tax payers, have been paying farmers NOT to grow food on land which is highly productive. Despite being surrounded by what used to be seas full of fish,we hardly have any fish left or fishing fleet to fish them. I simply don't believe that CAP reform is going to happen, because the coalition leaders, lack the will to act in the best interests of Britain- following the baffling example of a long line of political leaders since Edward Heath. I've finally made up my mind, that Labour, Liberal, Conservatives or any combination of them will continue to give away our national sovereignty despite the best efforts of politicans like you. I now know who will be getting my vote in the not too distant future.

  16. Alan Jutson
    Posted September 19, 2010 at 8:56 am | Permalink

    Just returned from a couple of weeks in Cornwall, having rented a very nice barn conversion/hay loft, from a local farmer.

    Yes farming has changed both in France and in the UK over recent decades with subsidy after subsidy for almost everything. Many Farmers no longer grow what is best suited to their own land/soil, given that quota's restrict them, and a subsidy will encourage.

    Many have diversified/invested in other fundraising interests (holiday lets, sporting rights etc) as they are paid to set aside fields for nature, and those fields which are ploughed, are encouraged to leave a 3 metre boundary (or similar) to the hedgrows surrounding them.

    Given that we are now importing a higher percentage of our foodstuffs from afar, it would seem madness to use less of our countryside for food production, and at the same time pay for the privilage.

    Many French vineyards are protected (Champagne, Cognac regions) from like named competition, even though competitor products can be as good.

    The main French wine regions are having to pull their socks up due to the success of the New World wine producers taking a huge market share from them over the last 10 years..

  17. Cllr Robin Smith
    Posted September 20, 2010 at 9:55 am | Permalink

    The asnwer might be as follws:

    1) Is the farmer a freeholder?
    2) Is the farmer a tenant?

    If the former, the farm will prosper. The latter and they will be working on the margin. Most freeholders are larger farms. Most tenants are smaller. Can you see the problem now?

    The enterprising and Tory like farmer is never able to gather a surplus of capital due to the landowner taking any gains made in production, as rent. The rent goes up as the entrepreneur works harder. It has very little to do with "investement" though that is a small factor.. And the monopoly farmer takes all the rent as imputed income and keeps all his additinal production.

    You have not questioned the idea of RENT and how it is distributed. The is basic economics. What gives?

  18. Matt
    Posted September 20, 2010 at 4:52 pm | Permalink

    A lot of money is wasted in giving grants to farmers.

    The entire “upland” sheep raising industry is subsidised, partly to preserve the “natural” moorlands, these areas are not naturally heather clad, take the sheep off them and they will return to the oak ash woodlands that they once were.
    The unemployment resulting equates to closure of one coal mine.
    Farm land is exempt from inheritance tax and council tax – rare privilege

    Most of the small family farms in the USA have gone swept up by large corporations, efficiencies have soared.
    Doing farm tax returns you notice that some farmers make lots of money, others are on the bones of their bottoms, get by on state handouts and are poorly motivated – polite way of putting it.
    The offspring inherit the farm, no test necessary (Even traffic wardens do some exam)
    Inheritance Tax would allow new blood into the industry, allow the successful farms to, more easily, and buy up the poor performing farms.
    Take away the subsidies New Zealand did and they never looked back.

    Savings look at farming?

  19. Gerard
    Posted September 21, 2010 at 10:01 pm | Permalink

    Given that we are now importing a higher percentage of our foodstuffs from afar, it would seem madness to use less of our countryside for food production, and at the same time pay for the privilage.

    A visitor during the Second World War had a view similar to yours:

    The first thing which struck him was the shocking waste of good farming land.

    Why is so much land that is obviously fertile lying idle in farms of 1,000 acres and even larger? Why are so many patches of scrub and useless bushes left uncleared? We [Australians] can respect good timber — that is always an asset — but stunted copses and brambles are an eyesore which no good farmer should tolerate a day longer than he can help.

    In my view things on the land are much the same now.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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