Farmers pessimistic about future after terrible season of flood devastation
Farmers are still struggling to keep a foothold in the rural economy, and risk being left behind by rural businesses in other sectors, as the countryside begins to emerge from recession.
Those are the findings in the latest CLA/Smiths Gore Rural Economy Index (REI), which reports that non-agricultural businesses expect to increase their sales and employment, as well as increase profit and investment.
But farmers are looking ahead with trepidation, with the weather in recent months having a catastrophic effect on attitudes. In the third quarter, almost half (47 per cent) predict profitability to fall in the coming months, almost double the 28 per cent with a similar outlook in the second quarter.
CLA president, Harry Cotterell, said: “The outlook from the latest REI is positive for non-agricultural businesses.
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“However, 55 per cent of rural businesses that use lending report borrowing rates have worsened, which of course could slow their economic recovery.
“In contrast, confidence and sales in the agricultural sector are significantly down on the start of this year due to adverse weather conditions.”
Rupert Clark, of Smiths Gore, said there had been a shift in the market with a fall in sales and profitability for many farming businesses because ‘dreadful’ weather during 2012 affected the harvest and caused difficulties for next year’s crops.
Mr Clark added: “If the weather in 2013 improves, we expect to see an increase in agricultural confidence as the underlying market fundamentals, of price and demand, are strong.”
Looking at rural businesses, excluding agriculture, in the third quarter, 45 per cent reported higher sales over the past six months – up from 31 per cent in the previous quarter; 56 per cent reported higher business optimism for the next 12 months – up from just 20 per cent in the previous quarter; and 48 per cent predicted higher profitability over the next 12 months – up from 26 per cent in the previous quarter.
Despite the rural economy showing signs of recovery, the CLA said the impact of this year’s bad weather on agriculture was “plain to see”, with 47 per cent of agricultural business predicting a drop in profitability – up from 28 per cent the previous quarter.
In addition, 21 per cent reported lower sales over the past six months – from 12 per cent in the previous quarter; and 31 per cent expected to make a lower investment in their business over the next 12 months – up from 20 per cent in the previous quarter.