Is Agriculture in Crisis?

Is Agriculture in Crisis?

Debate between Sean Rickard and George Monbiot, published in Prospect magazine, April 2001

Dear George

I can understand and sympathise with those farmers who are unlucky enough to suffer the destruction of their animals, blaming foot and mouth disease on modern farming practices and greater openness to trade. But at a time of distress and suffering, such reactions are unlikely to be made on the basis of a careful analysis. Unfortunately the loss of objectivity is not confined to distressed farmers. The general reaction to this outbreak has bordered on the hysterical, particularly the questioning of our food system and the readiness to exaggerate the downside, while ignoring the benefits.

Let me start my quest for objectivity by putting the current outbreak in perspective. At the time of writing, the number of confirmed outbreaks stands at 85, approximately 0.1 per cent of 130,000 holdings with livestock in the UK. So far 80,000 animals have been destroyed. Even if this number doubles, it would represent only one quarter of the 600,000 beef, sheep and pigs slaughtered each week in the UK or 0.5 per cent of the total number that will be slaughtered this year.

For those affected compensation may not prevent lasting economic cost and for may other farms there will be knock-on effects arising from restrictions on animal movements. But again, the problem should not be exaggerated. The ban on animal movements is now being relaxed and over the period that restrictions will apply only a proportion of the marketings expected for the year would be affected. For farms that have delayed the sale of animals, there will be a loss of cash flow, but once the ban is lifted the animals will be sold. In terms of the industry’s income, the impact would be the cost of the extended feeding of these animals – about £1mn per week – plus any consequential reduction in market prices. Lower market prices are likely for pig farmers where delay reduces values, but less so for other animals. Despite the loss of income the pig sector will rapidly recover. Last year’s outbreak of swine fever – whilst resulting in the destruction of 300,000 pigs – did not prevent incomes on pig farms improving rapidly over the year. A potential, more serious longer term cost to the livestock sector is the ban on exports. Once the disease is eradicated the EU market – where we sell the bulk of our meat exports – should quickly be opened up again, but overseas markets will take a matter of months.

Undoubtedly, the disease will hasten the departure of some farms from the industry, though this should be set against the fact that for more than thirty years the number of farms has declined at an average of more than 1,000 per year. Without wishing to minimise the personal suffering of some farm households, it is a gross exaggeration to suggest that this outbreak threatens the future of the industry. The foregoing suggests to me that recovery will be rapid. And in part this will be due to the food system’s detailed record keeping, which is proving much more adept at tracing the movement of animals than was the case in the last outbreak in 1967.

One of the reasons for the over-reaction to the scale of the outbreak is, I suspect, that it coincides with a recovery in farm incomes after three years of historically low incomes. The fact that incomes were low had nothing to do with modern farming, the supermarkets or increased trade. Overwhelmingly, low farm incomes were the product of the strength of the pound against the euro. In the mid 1990s when the weak pound boosted farm incomes to very high levels and world commodity prices reached a cyclical peak I do not recall any complaints from farmers about access to world markets or modern production systems.

Let me now turn to the widening debate that seeks to lay the blame for the “crisis” in agriculture at the door of intensive large-scale farming and the modest opening up of EU agriculture to global trade. Particular targets are the supermarkets and the distances these organisations are accused of forcing animals to travel. When the dust settles on this unhappy episode for UK agriculture, calmer analysis will tell us where and how this outbreak started. I will be very surprised if any of the items listed above played a part, much more likely villains are bad farming and traditional livestock markets.

There are very few issues in life that are clear cut and it would be foolish to pretend that modern farming practices and logistics do not impose some costs. But these must be set against the benefits they deliver. In twenty years of experience with food and farming I have observed how the supermarkets have broadened the range of choice for consumers while forcing the food chain to improve quality and hygiene. These are very real benefits. Farmers accuse the supermarkets of exercising their considerable market power to keep farm-gate prices low. Non-farming critics go wider, suggesting that in some way they have encouraged the concentration of production on larger farms and destroyed local centres of food production.

Yet the drivers of low prices and structural change are ultimately technological progress and increasing knowledge. Productivity growth is the basis upon which rising incomes and living standards are built. If farm incomes are to keep pace this can only be achieved in one of two ways. Either the food chain adopts the technology and techniques that increases the average size of operation, or it has to rely on ever larger handouts from the government. Larger units deliver economies of scale, while centralisation provides conformity and continuity. The result is lower prices for consumers and a high degree of certainty regarding the food products purchased.

In 1970 the average household spent 25 per cent of its income on food, the equivalent figure today is little more than 10 per cent. This is a very real benefit, particularly for those households where incomes are low and the priority is to reduce expenditure. It is arrogant in the extreme for “well affluent” commentators to declare that people should (be forced to) pay more for food. The downside of modern techniques is that we can produce all the food we need with fewer people. Over the past 25 years UK farming has shed the equivalent of 180,000 full time jobs.

Would things be better if we could return to more locally based centres of food production? Firstly, this could only be achieved behind tariff walls, which would presumably require us to leave the WTO and the EU at enormous costs to other industries. Secondly, consumers want choice and competition from trade, not only broadens choice, but also drives greater efficiency. Thirdly, there are many very poor countries in the world that desperately need to be allowed to sell us foodstuffs.

We will do nothing to enhance the environment by attempting to turn the clock back to some mythical small farm idyll. If the objective is to improve the environment and animal welfare then let us take away the production subsidies from farms – most of which feed only into higher land prices – and divert the money saved into targeted schemes to this end. It would be foolish in the extreme to allow an outbreak of foot and mouth disease to condemn a generation of consumers to higher food prices, less choice and probably lower quality.

Dear Sean,

You are right to suggest that the dangers of foot and mouth have been exaggerated. We’d have been rather better served if our officials had reacted to BSE with the alacrity with which they have tackled foot and mouth, and reacted to foot and mouth with the complacency with which they handled BSE. I would be surprised if the cost of pandemic foot and mouth, a disease from which most animals recover, matched the costs imposed by the foot and mouth control programme.

You are right too to point to the distorting effects of farm subsidies. They have raised the price of land, chemicals and machinery, helping to drive some 300,000 small producers out of business since 1947. Because they reward acreage and production, 80% of the public funds for farming find their way to just 20% of our farmers.

This is not an accident of policy. For decades, British governments have campaigned against the redistribution of European money. After the 1999 CAP negotiations, the Ministry of Agriculture boasted “The Government fought hard – and successfully – against the Commission’s proposal” that “the bulk of the subsidy cuts [should be] targeted towards larger farms.” It has refused to use the European funds available to help new farmers enter the industry, choosing instead to buy small producers into retirement. The purpose of these measures, the ministry tells us, is to “facilitate restructuring”. We can, I hope, agree that the near disappearance of small farms from Britain is partly the result of social and economic engineering by successive governments.

As a man who rightly puts much store by economic success, I hope you will also be able to see that this policy makes no sense at all. In every other sector of the economy, producers are being encouraged to concentrate on low volume, high value production. In farming, the only sector whose scale is definitively limited by geographical constraints, our tiny islands are being pushed into direct competition with million-acre grain farms in Canada and Russia, and million-sow “hog cities” in North Carolina.

Interestingly, the few British farm products which do enjoy international success — such as Stilton cheese and Scotch whisky – arose from small-scale, specialist production. The farms whose trade has boomed in Britain are those supplying organic food and local markets. The demand for organics currently exceeds supply here by 230%, and is growing at 40% a year. In 1998, Britain had two local farmers’ markets. Today there are 300. I’m sure you’ll agree that farmers should respond to this demand. But where is the demand for GM ingredients, or for pork produced on the other side of the world, but packaged here and misleadingly labelled “British”, or for pesticide residues in fruit and vegetables?

You write that you will be “very surprised” if global trade is responsible for the outbreak of foot and mouth, and that the “much more likely villains are bad farming and traditional livestock markets.” Now forgive me if I’ve missed something, but it was my understanding that the theory of spontaneous generation died with Louis Pasteur’s experiments in 1860. The virus must have come from somewhere. If you are really seeking to suggest that foot and mouth did not arrive in Britain with meat imported from another part of the world, I hope you have a robust alternative hypothesis.

There’s no question that technological change and economies of scale have reduced the price of food. But you have mentioned only the least of the costs they impose. Professor Jules Pretty of Essex University has calculated that intensive farming’s measurable externalities – the contamination of drinking water, damage to wildlife habitats, soil erosion and mass slaughter and compensation programmes – amount to £2.3billion a year, or an average of £208 an acre. We pay for farmers’ reduced costs, in other words, through higher water bills, poorer health, and public money which might otherwise have been spent on schools and hospitals. It is not clear how this could be construed as a benefit to the community, especially to its poorer members. As a fellow free marketeer, I hope you’ll support my contention that producers should carry their own costs, rather than dumping them, as a result of lax regulation, on other sectors.

It is also clear that only some of the savings these externalities afford are passed onto consumers. The superstores, as they frequently remind us, are economically efficient. They shift £250,000 of goods per member of staff per year, while small independent stores can move only £50,000-worth. They bypass the wholesalers, they are powerful enough to demand rebates from their suppliers, they pay, in most places, lower business rates than smaller shops. Yet still they manage to charge more for their raw farm products than most specialist retailers: generally an extra 30-40% on meat, fruit and vegetables. The organic lamb sold in my local farmers’ market marginally undercuts the conventionally reared meat in the nearest superstore.

It’s hard to see how you can dispute the contention that the supermarkets have “encouraged the concentration of production on larger farms”. The big chains are currently seeking to reduce their suppliers to no more than three for each farm commodity they buy, as this helps them to centralise distribution and standardise their products. Last year ASDA/Walmart entertained the idea of taking this concentration a step further, by setting up a single pig farm in Poland to supply all the pork it sells in Britain.

Neither can you reasonably deny that they have increased the distance over which food travels. The consumer group Sustain, for example, tracked vegetables grown just outside Evesham first to Hereford, then to Dyfed, then to Manchester, then back to a supermarket in Evesham. The superstores improve their economies of scale by storing entire lines in one place.

By cutting out the middleman, moreover, the supermarkets have undermined the livestock markets, helping to ensure that even the farmers who don’t sell to them have to travel much further to find a buyer. Trading distances, and hence the potential spread of disease, are compounded by the superstores’ practice of pasturing English cattle in Scotland for a fortnight in order to sell them as “Scotch beef”, and English lambs in Wales, to sell them as “Welsh lamb”. In this respect at least, the spread of foot and mouth has been assisted by the sale not of cheaper food, but of more expensive food.

You suggest that we could return to local food production “only … behind tarriff walls”. But as the proliferation of farmers’ markets suggests, the change can be brokered partly by means of the consumer choice you rightly celebrate. And there’s another possible solution, which is to internalise the externalities of long distance transport. One of the reasons why the superstores are able to centralise their distribution and why produce from the other side of the world undercuts our own is that fuel is too cheap. Government figures show that even before the concessions in the new Budget, big trucks were paying only 90% of the costs they impose on the infrastructure, human health and environment. There is no tax at all on aviation fuel, despite the massive environmental and social costs of flying in food. If farmers really want to revive local markets, they should start campaigning for more expensive fuel.

Dear George

Your first two paragraphs were a cause of concern. I was in full agreement, but the status quo was restored by paragraph three and this is a suitable place to start.

The mantra that small farms are more deserving of public funding is questionable. Firstly, the very smallest farms; namely part-time farms are steadily growing in number and now account for 47 per cent of all farm holdings in the UK. These farm households earn the bulk of their income in other occupations, produce less than three per cent of total agricultural output and occupy some 5 per cent of the farm land. Secondly, the farms that are disappearing are the smaller “full-time” farms. There is no evidence to show that as a category such farms produce either higher quality food or better protect the environment. What studies do show is that it is the management ability of the farmer and the resources and incentives available that matter and in my experience these are more likely to be found on larger scale farms.

The evidence suggests you are misguided in your desire to protect smaller scale farms from market forces. Far from protecting any particular size group I would like to see all production subsidies rapidly phased out. This would drive the less efficient out of the industry, but have the beneficial consequence that farmers would need to more carefully align what they produce with market demands. If you are correct in your belief that there is a demand for low volume, high value foodstuffs, then this will be supplied. Forced to get closer to their customers some farms would change to more extensive practices. But as I believe there are much larger markets for cheaper food many would not, indeed could not. The authorities could use the funds saved to enhance the attractiveness of environmental schemes though there is no reason why these should be targeted at smaller farms.

I am not impressed with your attempt to link the outbreak of foot and mouth to trade. We can only be sure that consumers are receiving value for money if there is competition and trade encourages competition. I view attempts to constrain trade by protecting local markets as ultimately permitting waste, loss of quality and excessive prices. No system is perfect, but if the rules are adhered to the risk of imparting infection is very low and this must be set against the benefits of trade for both exporting and importing countries.

I am even less impressed with partial calculations of the environmental cost of farming. I suspect we could repeat the exercise for all process industries with laughable conclusions. A comprehensive calculus would have to include the wider benefits of cheaper, good quality food, eg better health, wider employment opportunities and so on and then the net cost might not be very large. In any event, the system you like to knock has been improving its act. Modern precision farming technology continues to reduce usage and the likelihood of pollution, though such techniques are costly and therefore confined to larger farms.

Let me now turn to your bete noir. The supermarkets are not saints, but again I accuse you of a lack of objectivity in your approach. It is society’s demands for greater regulation – along with the general forces of progress – that have driven many smaller (inefficient?) abattoirs out of business. But even if they still existed, it is farmers more than the supermarkets who seem to delight in trading and marketing animals around the country. Supermarkets would much prefer direct purchase avoiding livestock markets.

The fact that the supermarkets are seeking to reduce their suppliers is hardly evidence of “encouraging large scale farming”. It is evidence, if other sectors are any guide, of compressing supply chains so as to reduce transaction costs, and improve understanding between supplier and consumers. As I explained in my first letter, larger farmers tend to have a cost advantage but smaller farms can achieve many of the advantages by joining together in “groups” to increase supply and benefit from the sharing knowledge and costs. It is the mindset of farmers that prevents this, not the supermarkets.

Your own words make it clear that the system you criticise does not prevent the emergence of small scale successes, such as specialist cheeses. And market forces – aided to a considerable degree by the supermarkets – are encouraging the expansion of organic production. As the output of organic food grows, so the laws of supply and demand will ensure that the premium price is reduced, causing hardship for some organic farmers. Should we then protect them?

You should not be making unsupported guesses as to the cause of this outbreak of foot and mouth disease or seizing on one of your favourite scapegoats. If it turns out that the virus arrived in an airline meal that was subsequently fed on a smaller farm to pigs in untreated swill, your opposition to trade and support for smaller farms will look a little shaky. More to the point, I accuse you of such a narrow focus that you cannot, or chose not to, acknowledge the far wider damage you risk by shielding a group of farmers from the benefits of competition and the struggle to innovate and succeed.

Dear Sean,
I fear you have failed to grasp my arguments, let alone to answer them. So let me spell out my position in terms which even you should be able to understand.

You claim that I “desire to protect smaller scale farms from market forces”. My purpose is precisely the opposite: to expose all British farming to the market. My complaint about the distribution of subsidies is that, as a result of a deliberate programme on the part of government, they protect one faction – the biggest farmers – at the expense of the others. The resulting distortions in the structure of the industry ensure that it is less capable of responding to demand and, in the long term, less viable. If subsidies are to be sustained, this imbalance must be redressed.

But, like you, I have long argued that production subsidies should be dropped altogether, saving public funds for environmental measures. In this respect we are in agreement. Incidentally, your claim that “there is no evidence” to show that small farmers better protect the environment is quite untrue. A study by the Institute for Food and Development Policy shows that small farmers in the US devote 17% of their land area to woodland, compared to 5% on large farms. Research published in the Journal of Agricultural and Applied Economics suggests that small farms are twice as likely as large ones to subject their land to soil conservation techniques.

But let’s stick to the issue of protectionism. Your response convinces me that I am the free marketeer, and you are the protectionist.

By dismissing the issue of externalisation, your model ensures that intensive agroindustry, the superstores and national and international transport all continue to receive massive public subsidies: the money devoted to mopping up the mess these sectors leave behind. You maintain that a “comprehensive calculus”, taking into account such factors as “better health” and “wider employment opportunities” would reduce the net costs imposed by big business. In truth it would do precisely the opposite.

Let’s ignore for the moment the massive, though currently incalculable future cost of the misuse of antibiotics on intensive livestock farms. Let’s ignore the costs of treating the current and future victims of nvCJD. Let’s ignore the poisoning of farmers and consumers by pesticides, and concentrate on the issue of employment. A study of 93 new superstores by the big chains’ own reseach organisation, the National Retail Planning Forum, shows that the opening of every large outlet destroys a net 276 jobs, as a result of the subsequent closure of small shops.

But though it would favour my argument, unlike you I wouldn’t include employment in a “comprehensive calculus” of externalities. I don’t need to. There is, as I have shown, already quite enough evidence to reveal that the money made by the superstores and intensive agroindustry is extracted only at a corresponding cost to ourselves. This social and environmental subsidy shields them from fair competition in a genuinely free market.

Dear George,

I readily admit that I fail to grasp your arguments as they are incoherent. We are agreed that subsidies are distorting. As currently paid they are skewed towards larger farms who produce the bulk of output. Where I part company is on the impact of removing these subsidies on the structure of the industry. Sectors of the industry that are not supported eg, horticulture and intensive livestock, have developed further down the road to intensity and large scale businesses than is the case in the heavily supported sectors. And this should be no surprise. The only purpose of headage payments, set-aside and quotas is to slow the structural consequences of technological and knowledge developments.

I therefore, completely fail to grasp how removing production support is going to prevent the speeding up of the structural change you so dislike. And I am completely at a loss to understand how removing support would weaken the supermarkets, prevent the growing concentration of food processors or hinder international trade. You might slow the trend towards larger scale farming if you concentrated all support on smaller farms but in so doing you would introduce new distortions, create waste and have no funding to enhance the environment.

The only way the trends outlined above might be efficiently reversed is if consumers demonstrated a desire to purchase locally produced food from local outlets. If they did this then local prices would rise and businesses would respond. Your obsession with the evils of the supermarkets not only devalues your arguments by preventing you from admitting the benefits they deliver but also it leads you in to propose naive policy prescriptions. Supermarkets are far more responsive to consumers than farmers and they have done more than farmers to provide the standards of quality and hygiene that people demand. It is the supermarkets, not the providers of farm support that are responding to consumer demands by encouraging an increase in the supply of organic produce. If you want change persuade consumers that you are right and they will do the rest.

Dear Sean,
What a disappointment! You have chosen, again, not to engage with my arguments about externalisation, the issue that’s surely central to any sensible discussion of this subject. I can only assume you have nothing to say in your defence. And there I was, looking forward to a fight.

Perhaps, like me, you can see all too clearly that an unsubsidised market in which the costs of the biggest players are routinely dumped upon other people remains an unfair one, however “free” it may at first appear. Perhaps you understand, but dare not admit, that the neoliberal perception of freedom is lopsided: celebrating freedom to act, but not freedom from the adverse consequences of other people’s actions. In a free and fair market, in which the social and environmental costs of intensive production were reincorporated, the price of its products would rapidly overtake the price of food from small organic farms. It is hard to imagine, in these circumstances, how the superstores and intensive agroindustry could survive the market forces from which they have so far been shielded.

Your contention that farmers are not responsive to demand mystifies me. They have responded all too well to the demands of the CAP, which is why the rural environment has been so badly damaged. They have responded all too well to the demands of the superstores, which is one of the reasons why so many have gone out of business. They are now responding as rapidly as the distorted market allows to the public demand for local and organic food.

The necessary market changes will not be easy to achieve. The Department of Environment attempted a small step in this direction in 1997, by proposing a parking tax on out-of-town superstores, in the hope both of recovering some of the costs of the traffic problems they cause, and removing one of their unfair advantages (free parking) over city centre shops. After concerted lobbying by the superstores, the proposal was dropped. Consumer behaviour alone, in other words, cannot broker these structural market changes: we need to be active citizens, demanding political redress, as well as active shoppers. Only then will we be able to exercise choice in a genuinely free market.

Yours sincerely, George Monbiot