Challenges Facing UK Agriculture

in a Global Market

Séan Rickard
Cranfield
Cranfield School
School of
of Management
Management
s.h.rickard@cranfield.ac.uk
s.h.rickard@cranfield.ac.uk

© 2006 Séan Rickard

 Introduction

Î UK
UK farming
farming faces
faces many
many challenges
challenges but
but
water
water is
is not
not the
the prime
prime challenge;
challenge;

Î We
We will
will examine
examine to
to what
what extent
extent structural
structural
change
change will
will be
be influenced
influenced by
by aa lack
lack of
of water;
water;

Î II am
am confident
confident that
that by
by 2100
2100 there
there will
will still
still
be
be an
an agricultural
agricultural industry
industry here.
here.

© 2006 Séan Rickard

 A little history

UK agriculture is largely driven by

the CAP whose support levels and
mechanisms have undergone three
major reforms
since 1992 We now have a system of
farm level payments whereby
farmers can be paid
Key issue is whether for producing
CAP reform will lower nothing providing
the intensity and they keep the land
change the industry’s in ‘good heart’
structure

© 2006 Séan Rickard

 A little economics
n The
The effect
effect of
of the
the CAP
CAP has
has been
been to
to encourage
encourage
over
over production;
production;
o The
The Single
Single Payment
Payment Scheme
Scheme should
should be
be seen
seen
as
as aa transition
transition -- payments
payments will
will be
be reduced;
reduced;
p ItIt would
would be
be surprising
surprising if
if the
the reform
reform did
did not
not
result
result inin less
less output
output –– smaller
smaller area?
area?
q In
In future
future the
the industry’s structure
industry’s structure will
will
depend
depend much
much more
more on
on market
market forces;
forces;
r These
These may
may not
not generally
generally be
be adverse
adverse with
with
industrial
industrial crops
crops and
and global
global water
water shortages.
shortages.

© 2006 Séan Rickard

 Not necessarily true…..

The reform we were told would lead

to a reduction in the intensity of farm
production and the resulting low input
farming would
reduce output Moreover the official view was
that less intensive production
would attract a price
At this early stage premium offsetting
across the EU, only the revenue effects
in the beef sector is of reduced output
there some evidence
of reduced output

© 2006 Séan Rickard

 Income pressures are not new …
Index Total Farming Income
200
(Real terms 1973-2006 100)
180
160 Future: less
140 decline more
120 volatility?
100
80
60
40
20 Underlying trend

1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006

© 2006 Séan Rickard

 Production has grown …
1973 Index numbers
160
(2000 100)
140 2006
120
100
80
60
40
20

cereals potatoes fruit sheep poultry eggs

industrial vegetables cattle pigs milk
© 2006 Séan Rickard
 What of the land area …
Million/Hec Rough grazing
8
Arable Grass
7
6
5
4
3
2
1

1984 1987 1990 1993 1996 1999 2002 2005

© 2006 Séan Rickard
 Changes in the arable area …
Million/Hec
Horticulture
4.0
3.5
3.0
2.5 Cereals
2.0
1.5
1.0
0.5
Other arable

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
© 2006 Séan Rickard
 A little more realism…..
n Extensive
Extensive production
production systems
systems result
result in
in low
low
productivity-high cost
productivity-high cost production;
production;
o The
The idea
idea that
that extensive
extensive production
production will
will attract
attract
aa price
price premium
premium is
is flawed;
flawed;
p Even
Even organic
organic with
with its
its clear
clear message
message is
is and
and
will
will remain
remain no
no more
more than
than aa niche
niche market;
market;
q Consumers
Consumers’’ demands
demands for
for variety
variety have
have been
been
confused
confused with
with aa commitment
commitment to
to low
low input
input farming;
farming;
r Only
Only an
an efficient,
efficient, technologically
technologically advanced
advanced
industry
industry is
is likely
likely to
to prosper
prosper in
in the
the future.
future.

© 2006 Séan Rickard

 Industrialization here to stay…

Technology Replaces
people with
New machines
Genetics
knowledge and new
techniques
Management

Change will
Larger farms Economies
continue: the
lower unit of scale
alternative is
costs and and rising
not a realistic
concentration productivity
option
© 2006 Séan Rickard
 Vulnerable to climate change?

Experts seem to agree that winters

will be wetter and milder, more prone
to extreme weather and the summers
will be hotter &
drier notably in The main impacts will be
the South East increased evaporation a
longer growing
The threat to season and with
biodiversity and the intense rain more
Water Framework run-off and top-
Directive will increase soil erosion
the pressure to protect
the environment
© 2006 Séan Rickard
 What of the environment ….
No doubt that But technology and
farming like other better management
industries must adopt are more likely to
production systems deliver sustainability
that are sustainable than extensification

Low productivity Wrong to assume

farming will not able that sustainability
to feed the world and and industrialization
sustainability will are not capable of co-
increasingly depend existing: our future
on GMOs depends on it

© 2006 Séan Rickard

 Horticultural sector
n Most
Most of
of the
the water
water extracted
extracted by
by UK
UK
agriculture
agriculture is
is used
used for
for spray
spray irrigation;
irrigation;
o Overwhelmingly
Overwhelmingly irrigation
irrigation is
is used
used on
on field
field
vegetables
vegetables and
and fruit;
fruit;
p Licences
Licences have
have resulted
resulted in
in substantial
substantial
increased
increased use
use of
of winter
winter storage
storage reservoirs;
reservoirs;
q The
The government
government believes
believes reservoirs
reservoirs will
will not
not
be
be sufficient
sufficient to
to match
match demand;
demand;
r Hence
Hence the
the need
need to
to encourage
encourage trickle
trickle
irrigation
irrigation and
and new
new management
management practices.
practices.

© 2006 Séan Rickard

 Scope for industrial crops ….
Currently there is a In the UK bio-fuels
renewed interest in are unlikely to
bio-fuels and the account for a
global effect has significant area but
been to increase the industrial crops could
prices of cereals be significant

Industrial (and food) Apart from increasing

crops will receive a the returns to
major boost from GM farming, GM crops
technology creating may also cope better
many value adding with dryer more
opportunities extreme conditions
© 2006 Séan Rickard
 Some tentative projections
n The
The horticultural
horticultural area
area will
will continue
continue to
to
decline;
decline;
o The
The cereals
cereals area
area will
will be
be largely
largely influenced
influenced by
by
world
world prices;
prices;
p The
The areas
areas of
of ‘‘industrial’
industrial’ crops
crops will
will start
start to
to
increase
increase steadily;
steadily;
q Cattle
Cattle populations
populations will
will continue
continue to
to decline,
decline,
but
but only
only slowly;
slowly;
r The
The acid
acid test
test is
is the
the price
price of
of land,
land, if
if demand
demand
declines,
declines, prices
prices will
will fall.
fall.

© 2006 Séan Rickard

 Concluding thoughts

Î Farming
Farming faces
faces many
many challenges,
challenges, but
but they
they
can
can be
be managed;
managed;

Î In
In aa globalised
globalised world
world we
we should
should expect
expect
more
more trade
trade in
in foodstuffs;
foodstuffs;

Î More
More than
than half
half our
our land
land will
will continue
continue to
to
be
be devoted
devoted to
to grazing
grazing livestock.
livestock.

© 2006 Séan Rickard

 Challenges Facing UK Agriculture
in a Global Market

Any Questions?

© 2006 Séan Rickard