The banks are greedier than ever

A decent weekend begins the long task of drying out the land at Crouchlands. The sunshine and wind has done a great job, and there is the chance of heifers going out to graze before too long if it stays dry. Silage fields will take longer as the long grass covers the ground and prevents it drying out. We have freeze-branded the heifers last week (as they were in) in preparation for calving, run out of straw for bedding due to heavy use when the rain was at its worst, which meant bedding with hay for a few days whilst we waited for our next delivery of straw. Unfortunately, hay is not as good as straw for bedding; I say unfortunately, because it is cheaper this year than straw, due to the demand.

Our neighbours at Tillington have got the silage contractors in, cutting the early grass crops (late) on the free draining soils. Our land at Tillington has enjoyed the wet weather, growing quite nicely, with no problems grazing cattle there right through April, despite the rain. The maize drilled a month ago is almost up, having struggled through a good four inches of soil, as we drilled deep due to the dry weather at the time. We are lucky that it has made it and not been eaten or rotted in the soil, which was very wet indeed. Warm weather will soon draw it through, and then we will see how it looks. Meanwhile we will be getting on with drilling the rest of the maize ground this week and checking the grass silage fields at Crouchlands every day to see if we can cut some grass. It needs a bit more sun really, and I will be using an additive this year; the first time in a long time.

Having got one of their own into trouble (again) who took the easy decision of slashing the milk price to its farmers, the totally discredited milk processors have now all piled in, announcing cuts of their own, leaving an average dairy farmer £20,000 worse off at a time when a difficult spring, with record costs for feed, fertilizer and fuel are pushing milk production costs to a very high level. Our disgraced milk processing sector, having lagged behind the rest of Europe by some months on price as the market strengthened, never reaching the peak prices paid, are now unashamedly leading when it comes to the market softening and prices falling. So enraged is everyone over this, that Defra commented strongly on the Dairy Crest’s cut (never seen them do that before), which provided the lead for others to follow in this downward spiral, and Minister Jim Paice is threatening to legislate. With a closed liquid market in this country, dominated by processors who have a contract which once signed, forces dairy farmers to sell every litre to the company, and they must give 12 months’ notice if dissatisfied, whilst the company can change price and conditions at will; it is right that the Minister is looking at legislation, before these idiots ruin the industry. Those of us supplying major retailers are the only ones in the liquid sector (producing milk in the shops) who have the luxury of covering our costs of production.

Processors have for some time enjoyed the benefits of a good rate of exchange for exporting coupled with soaring dairy commodity markets, low interest rates, and low production from farms creating demand at home, and what do they do? Squander it all competing against each other, slashing prices in an attempt to grow market share, and grab each other’s contracts. Well that is what a free market is all about I hear you say. Of course it is, but these jokers do it with abandon, knowing that they can protect their margin, and deduct any losses or lack of competitiveness from the dairy farmer’s price. That is what they have always done. It is like a developer selling houses cheaper than anyone else, building a bigger share in the marketplace by discounting the house price, and then taking it from a contracted builder, who ends up operating at a loss. A position which is neither fair nor sustainable.

There’s been a lot of talk about lack of growth in the economy recently, with politicians pretending to be economic experts, which in itself is rather strange, given that economists rarely live in the real world. As the Classics Professor said on the BBC’s ‘Question Time’, I know nothing about the economy and how it might recover, and listening to you lot, I realise that neither do you! As countries in Europe rail against austerity, and here it is becoming less and less popular (not that it should have been popular with ordinary people in the first place!) as the dreaded coalition stumbles on from one fiasco to another; the idea that somehow countries would easily adjust to living within their means, having had decades of a good time, and been persuaded by all and sundry that this is for ever, is preposterous.

We all started borrowing when credit restrictions were eased as inflation soared in the 1970s; which meant that saving was no longer an option. By the time you had enough saved, the price had more than doubled. Retirement ‘lump sums’ for those who had worked in the public sector through the 50s and 60s, traditionally went a long way to paying off a mortgage or bought a decent car; now paid for a few months groceries! Everyone was encouraged to buy a house; it could only increase in value! This pushed up house prices to levels which were completely out of kilter with other European countries, especially Germany, which had a very different attitude, and is the strong player today. Houses abroad tend to be places to live rather than a tradable investment; it is a very different approach.

Houses in the UK are not worth today’s valuations, and it prevents young people buying them, but no government has the courage to do anything about it, and the ‘big society’ will ensure as house owners themselves, that not too many more are built. This means that parents often take out second mortgages to help their children buy on to the housing market, and of late end up very often selling their house to pay for their old age retirement home bills. In the end, are we better off, or is it a big merry-go-round, which is loaded with pressure and stress for the majority? Can we get an economy going without a major housing building programme which is so desperately needed, and would lead to thousands of jobs?

Then we have the banks. Today, they are not only greedier than ever (and that is saying something), but they won’t lend. How can you get the economy going if the banks will not lend? I have plenty of examples in the agriculture industry, where sound businesses cannot borrow. The agriculture industry was seen historically by banks as ‘safe but boring’; we all saw where their ‘exciting’ sectors took them, but now they are reluctant to lend, even where the case is sound. Their rates are very high, when one considers the base rate level, and the various ‘charges’ and ‘arrangement fees’ are legendary. The banks are central to why the economy is comatose. Mervyn King at the Bank of England, giving his BBC lecture recently admitted some blame, but no accountability. Lack of accountability is at the root of where we find ourselves in this country today; others pay for it, and it continues...

Gwyn Jones - Farm Diary