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An agricultural industry in crisis?

An agricultural industry in crisis?

This summer, a week doesn't seem to have gone by without some mention in the media of falling food prices, struggling farmers and a UK agricultural industry in crisis.

Low farm gate prices have spurred dairy producers to blockade supermarket depots, sheep farmers to withhold their supply of lambs and senior NFU representatives to organise crisis meetings.

No longer confined to the realms of agricultural journalism, low food prices and the state of the British agricultural industry is now 'mainstream' news.

Some blame the nation's supermarkets, arguing that their rapid expansion over the last two decades has come from pressurising suppliers to secure food at very low prices in order to maximise profits.

However, in reality the current price situation is due to the influence of wider economic forces, over which supermarkets and farmers have little influence.

If I think back to my economic lessons at college (OK, think alongway back), one of the basic principles taught was that oversupply of goods within a market will result in downward pressure on price. Unfortunately, this is exactly what is happening within agricultural produce markets at both a domestic and global level.

In the UK, during July, the AHDB reported that up to 90,000 extra lambs would be slaughtered during the 2015 season compared to last year, and pig meat supplies were expected to increase by 2%. In the dairy sector, figures show that UK milk production was up by 3.9% in June compared to the same month in 2014.

The EU Commission has also reported that the cereal crop harvest for 2015-2016 will be up 6% on average figures, with yields potentially hitting 307 million tonnes. On the global market, the FAO is predicting a 2% increase in milk production for 2015, up to 805 million tonnes.  

With increasing supply, downward price pressure is inevitable and the situation is exacerbated by falling global demand for food commodities.

China's economic slowdown (growth has declined from 10% to 7% over recent years) coupled with Russia's ban on EU food imports has resulted in constricted sales outlets and a huge surplus of food commodities on international markets.  

The situation for UK farmers is not helped by the current strength of Sterling against the Euro, which has resulted in reductions food exports to EU nations and even higher levels of availability domestically.

All of these economic factors combine to present a 'perfect storm' scenario and, as a result, UK farmers are experiencing low farm gate prices and very challenging market conditions.

However, as challenging as the current situation is, markets are volatile and things will, eventually, change for the better. Whilst this will be of little comfort to many, and farmers may feel helpless in their inability to influence wider economic forces, proactive steps can be taken to pave the way for a more resilient agricultural sector in the future, by embracing the benefits of effective PR and marketing. 

By using communication tools and strategies to further increase dialogue with consumers and show just how much time, passion and effort goes into producing food, UK farmers can help convince the public that paying a fair price for their product is a worthwhile thing to do. When markets improve, this will have the most beneficial impact on the industry in the long run.  

Farmers Guardian showed just how effective a simple communications tool like Twitter can be in helping achieve such an objective during their #farm24 campaign last month, where they encouraged farmers to upload pictures and videos to Twitter during a single 24 hour period. It gave a fantastic insight into the work of UK farming, captivated the interest of the public and is the type of thing that needs to happen more in the industry.

Blogs, videos, newsletters, websites and social media can be other, relatively easy, ways for those within the agricultural industry to increase engagement with the general public in a very accessible way.

So, whilst there are multiple economic factors to blame for low farm gate prices, and little that food producers can do to directly influence these forces, proactive steps can taken to increase positive consumer engagement and pave the way for more prosperous times in the future. Perhaps we need to start thinking of consumers and retailers as our customers and become truly market focused to avoid such volatility in the future…

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