Farm Subsides

They are in and out of the news quite a bit so why are farmers given money from the government?

Well when the subsidy system was first introduced the idea was to ensure a cheap supply of food to the public. This worked a treat for a long while allowing people to walk into a shop and buy, for example a loaf of bread for about 20 pence. However to produce food at cheap levels was and still is impossible for a farmer in the UK. The reasons for this are that a farmers ‘overhead’ costs (things like electricity, water, labour etc) are all very expensive because of this countries very high standard of living. This is down to the government not the farmers!

So to allow the public access to cheap food meant that the farmers had to produce it at a loss. This means it cost more to produce it than the final sale price. The deficit between the cost price and sale price is effectively what the subsidy covers plus giving the farmer an income so that he actually gets paid for what he is doing.

So where are we now in the subsidy debate?

In 2005, subsidy that was linked to production (i.e. the farmer gets ‘X’ amount for every acre of wheat and a different amount for every acre of beans and a different amount for every animal he keeps etc) was dropped. The government decided that they would give farmers a subsidy not linked to what they produced but would be now based more around the environment. The effects of this are far more beneficial to UK agriculture than the previous system because instead of now cropping land that perhaps should not have been cropped, we as farmers can leave land ‘fallow’ which means uncropped. It will also make us more efficient because we have got to produce food under the final selling price to keep our business’s profitable. One of the best ways of doing this is by working with other ‘like minded’ farmers to spread costs over larger areas of farm land. This in term helps to maintain a profit but also keep food prices at an acceptable level for the general public.