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markets were poised for a ‘significant recovery’(OECD, 2001). However, in early 2001, the wettest
year since 1776 and with the lowest commodity prices since the 1930’s in many sectors there was the
widespread outbreak of‘foot and mouth’ disease (FMD).
Following the ‘golden period’ in the early 1990’s, things began to go really wrong in the UK livestock
sector following the BSE crisis in 1996. These problems were exacerbated by other ‘extemal
economic’ pressures such as the high value of the pound and its effect on trade and market prices,
world economic problems (particularly in South East Asia and the former Eastem bloc), and an
oversupplied European food market. By the late 1990’s these ‘macro’ pressures were affecting all
livestock sectors. This downward pressure on market prices and farm income has brought into focus
the need for structural changes throughout the livestock production, meat processing and marketing
supply chains in Britain.
Pressures on Farm Incomes
The Ministry of Agriculture and Fisheries (MAFF) figures, show that Total Income from Farming
peaked in 1995, and then fell by an estimated 69%. In 2000 it fell by 27% in real terms compared to
1999 and stood at its lowest level for twenty years (MLC, 2001). By way of comparison farm incomes
in the UK in 2000 according to Eurostat, fell by 8% compared with an average increase in the EU as a
whole of 1.9%. Ln the livestock sector there was a slight increase in cattle output in 2000, but this was
counterbalanced by reductions in finished sheep and lamb production and in the sheep annual
premium. Cattle and sheep farms in the Less Favoured Areas (LFA) have seen net farm incomes fall
in real terms since 1977/78, and averaged under £8000 in 2000/01 (MAFF, 2001).
Real farm incomes in recent years have fluctuated following a cyclical pattem:- falling between 1977
and 1981, recovered a little before falling again in the mid 1980s, strong growth in the early 1990s
(the ‘golden period’), then fallen dramatically in the mid to late 1990s. Although the cyclical nature
of farm incomes is clearly subject to a wide variety of economic factors other than commodity prices
(eg effects of national economic growth, exchange rates, and interest rates etc), each subsequent
"trough" in the recent cycles appear to be lower than earlier troughs implying a sustained structural
decline. To reverse these declines and achieve any sustained recovery the sector needs to adapt to the
changing conditions of the marketplace.
Structural Change in the Agricultural Sector
Agriculture across Europe, is having to respond to changing domestic and intemational market
conditions and EU govemments are coming to recognise that the complex system of subsidies and
protection for agriculture has compounded its problems. Enterprises in many other industrial sectors
have had to react to changing market conditions and recognise the competitive pressures of the
globalisation of production and trade. In seeking to protect agriculture, decades of market pressures
have built-up, such that the structural change facing agriculture will be more painful and dramatic than
it could have been.
There has been a steady decline in the number of farm workers. As a result of the problems in the
livestock sector and the competitive pressures in the arable and horticultural sectors, the National
Farmers Union estimates that within the past two years over 40,000 jobs have been lost from the UK
agricultural sector. There has also been a decline in the overall number of farms, and a rise in the
proportion of larger farms.
Rationalisation in the agricultural sector is taking place in a number of ways. Small less viable
holdings are being taken over by larger farms and agri-businesses that benefit ffom economies of
scale. There is also a trend in that in many parts of the country owners of farm holdings (and
especially the lifestyle and amenity ‘newcomers’ to rural areas) have rented out land to larger
enterprises. There will remain a role for smaller farmers - but this is likely to be in ‘niche’ farming or
part time, even ‘hobby’ farming. Such farms tend to become specialised in for example, organic
farming, or rare-breed animal husbandry. This trend is already becoming apparent in some of the more
affluent rural areas of England. Many farms are also diversijying into non-farm activities. These
changes will present new opportunities through a new enterprise mix between large low-cost
technically effícient farming businesses, and small innovative high-value farm-based enterprises