Cash-strapped farmers face an uphill battle to get fair prices for livestock and the EU subsidies they rely on are dwindling



A businessman won't last very long if he supplies something for a price that is below the cost of production. Yet farmers are being asked to do just that.

Costings compiled by the levy board last autumn showed the average beef farmer lost around £400 per animal. This figure excludes the direct farm payment from the EU, paid in place of subsidies after the Common Agricultural Policy reform.

However, supermarkets haven't taken on board the fact that these payments are being phased out, and without an increase in farm-gate prices, livestock farmers face losing what is fast becoming an uphill battle.

Government figures estimate that the average net income for a livestock farmer and his spouse is about a third of the national minimum wage?, generated solely through off-farm income, diversification and a declining farm payment.

Traditionally, subsidies were paid to bridge the gap between the cost of production and the price farmers received at market but with the new Single Payment Scheme this is no longer the case.

Already we are seeing signals ?that retailers have failed to realise the ramifications of de-coupling farm payments from production, its devastating impact on farm incomes and the industry's ability to restructure.

??British beef and lamb production is becoming unsustainable. The only way many farmers are surviving is by drawing down their farm payment in the short term to restructure and offset the shortfall of their true ­production costs.

But it is unrealistic to think farmers will be able to offset their poor market returns by drawing on their historical payments indefinitely.

Supposing we take on board the argument from some retailers that farmers should rely on their farm payment to subsidise beef and lamb production in the short term. Surely the flip-side of this is that farm-gate prices will steadily improve to make up for the increasing shortfall. But even with farmers using their single payment, most are receiving appalling returns for their investment. We need an immediate remedy if we are to avoid long-term damage.

The price paid to farmers must rise if retail bosses want a sustainable supply of high quality, traceable British beef and lamb on their shelves. It is perhaps perverse that at a time when the consumer is demanding locally produced and extensively reared lamb, ?farm-gate prices fell by 20p per kg during the last four weeks - a situation exacerbated by cheap imports.

Future supplies of locally produced beef and lamb look increasingly uncertain at a time when sales of premium and locally branded products are rising. But prices haven't shifted significantly during the past year, despite the double digit inflation rise. ?



There are comparisons to draw with the dairy sector, and livestock farmers are now looking for the same drive forward in price from the supermarkets. Tesco took the first move by raising milk prices for its 850 dairy farmers after pressure to make its supply chain - and prices paid to farmers - fairer.

With Waitrose and Marks and Spencer leading the way, other multiples need to do the same for beef and lamb to keep the critical mass in the livestock sector and pay UK farmers a fair price for the quality produce they rear.n

Peter King is chief livestock adviser at the National Farmers' Union