Real estate, alternative real assets and other diversions

What is a farm? The farming industry is the most extraordinarily complex aggregation of components

The Farmer

Part 1 – Complexity and the Burden of History

With the result of the Brexit vote leading to a long, complex and, to date, pretty fruitless period of negotiation to tease British agriculture apart from the safety blanket of the CAP, there has been a flurry of policy positioning papers from the various representative bodies, NGOs and others with a stake in the future of both the countryside and the farming industry.  A common feature of these is that they start from the assumption that the status quo is pretty good – it just needs to lean a bit further in their particular direction.  And, in making simple assumptions about the status quo, they have missed the opportunity to go back to first principles and generate a serious debate about the industry.  

However, to generate that debate requires a challenge to a whole heap of received wisdom, on which policy and other assumptions are based. Not many are prepared or even able to do this.  To really pick apart and discuss the possibilities for the future, it is important to look at farming from as many angles as possible.  The industry is the most extraordinarily complex aggregation of components, and this very complexity is a challenge in itself.  And it is to address, or put to one side, this very complexity, that simple, one dimensional assumptions are made, and, if they have the support of vested interests, they go on to form the basis for policy.

Complex asset

A Farm is the most wonderfully bewildering and complex asset – the source of historical wealth and political power, an essential provider of food (although international trade has removed much of the local immediacy), an appreciating asset (which comes with productivity growth), an environmental and ecological asset,  an often subsidised asset, an asset treated as a special case for tax and regulation, a lifestyle asset (both for those enjoying life in the countryside and those seeking to earn a living from the farm), a uniquely heterogenous asset, an asset exposed to global markets and weather events well outside the control of the individual farmer, an asset requiring an extraordinarily wide range of management skills and information, and a financial/capital asset.  

Everyone is interested – politicians, consumers, commentators, the media – we all eat, and most enjoy some aspects of the countryside (even though vanishingly few could actually identify a crop in a field).  And everybody has an angle; few seek to look at the whole; fewer consider issues of very long-term sustainability; and some would seek to challenge some of the descriptions of a farm detailed above.  

Historical asset

Farms carry with them the burden of history; there is never a ‘bare canvas’ on which to work.  Old model cars, less efficient, noisy etc. can be swept away, recycled.  Farms remain in situ, and carry with them all of the decisions made by previous occupiers, many resulting from policy decisions (grow more wheat, corn laws, do less damage, pay tax and so on).  Structure, scale, infrastructure are all the result of historic decisions, and there may be therefore, an inbuilt lack of competitiveness for many – wrong capital structure, wrong infrastructure, wrong scale, which are really hard to change, when tax and subsidy embed (protect) the decisions of the past.

Scottish past

All farms were originally carved out of the wilderness, but technology and productivity have moved forward so far, that some of the former wilderness is now surplus to agriculture.  In the end even water cannot be pushed up hill forever, and commercial reality drives change.  I grew up on a Scottish Highland Estate, 25,000 acres of rock and bog, which grew monumental quantities of dry matter for a few short summer months.  Why was that land farmed?  Because it had made economic sense to run sheep in the hills in the 19th century.  Sheep and deer are browsers, so virtually all of the remaining native forest disappeared, and it was bad for the climate – have you felt the warmth in a wood on a cold, windy day?  

As the economics of wool collapsed, and the introduction of freezer shipping from New Zealand blew away the sheep-meat industry, so policy makers decided that the now impoverished upland sheep farmers should be protected, and that the most recent landscape, merely an unintended consequence of introducing sheep in the first place, was the one to be preserved.  In the end, after millions of pounds of taxpayer cash, the sheep have nearly all gone, and areas of mountain are fenced against the deer to allow the regeneration of native pine forest – a new and more productive landscape is being created, and all in spite of the best efforts of policy to maintain a status quo.

The Farmer

About Nick Tapp

Nick Tapp

Nick has spent a career in farming and the food supply chain, developing a particular interest in the perversity of politics as it effects much of the industry.

Articles by Nick Tapp

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