Winners and losers in the farming sector
Land prices, inheritance tax, professionalisation, entrepreneurialism, and winners and losers.
In my last post I shared some data that, by my mind, shows that the majority of farms in England are not accumulating capital, and haven’t been for a long time. There are periods of time where the land asset tends to valorise, usually at times of financial shock and high inflation. But recently that has plateaued again after a brief surge after the financial shock triggered by the onset of the Covid-19 pandemic. For several years before this land values had been trending slightly downwards, after what was an exponential growth between 2002 and 2014. During those years the average price of land in the UK went from about £1800 per acre to about £7500 per acre, and today it’s at just over £8000 per acre. Any landowning farmer selling during that time made a pretty penny.
But whilst the rise of land prices is good for some, it is bad for others. The price of land today makes it incredibly difficult to enter farming. If you’re a farm needing to expand it is similarly a problem. But if you need to take on debt to invest in costly new infrastructure or looking to retire and sell the farm then it’s useful to have valuable assets you can leverage.
The proposed policy to reintroduce inheritance tax on farmland is in part an attempt by the state to recapture some of this value. There are two good arguments against this in my opinion: firstly, farmers do not necessarily see this value, and secondly, it will make it even less profitable to farm and even harder to invest in the farm, at a time when we really need to be investing more money in farming.
A tax break is, in fiscal terms, a form of public spending, and I think we have to invest in agriculture, albeit not in a defence of the status quo but in a recognition of the need for positive change. Particularly on an island where we import almost half of our food (85% of fruit and vegetables!) and where we need to make certain green transitions in order to e.g. tackle biodiversity loss and increase climate resilience. So why not only tax farmland that is sold out of the family, as some farmers suggest, or to raise the threshold to try and better target those who only buy farmland as a tax dodge, as other farmers have suggested. The inheritance tax issue is one of mostly losers for farming, and I would suggest that the public also loses. A few hundred million in extra tax income, what the government term a ‘rounding error’, is more than offset, negatively, by the further decline of agriculture. Also of significance is that the UK has a trade deficit of £35 billion on food1. And in reality it’s even worse, because that figure includes exporting, for example, £1.6 billion of cocoa, tea and coffee — products we buy in cheap thanks to neocolonial exploitation, process and sell on for a profit. A continuation of a long British colonial legacy.
In my last post I shared a chart which I think shows that in rough terms 84% of farms are failing to accumulate capital: this means 16% are accumulating some capital. Or, in other words, are somewhat successful as capitalists. In order to learn more about this I’ve started looking into what they call high performing farms to see what can be gleaned.
Quick side note: the data in the previous post was based on farms who generate more than £21,000 per year in agricultural output and so are deemed commercial farms. Crucially, that rules out hobby farmers.
According to the Agricultural and Horticulture Development Board (AHDB) the bottom performing farms really can become successful: ‘Can farmers in the bottom 50% reach the level of the top performers? Yes they can, and it is largely within their control.’
There are some large disparities between the bottom and the top. For example:
Again this data is based on what is considered a commercial farm. Evidenced by the fact that for the dairy category, the mean annual output of the bottom performers is still at £429K. This isn’t a hobby farm and it’s similar for the other categories.
So perhaps I’m wrong in my last piece, perhaps modernisation, better practices, and better training will lead to a narrowing of this gap between the best and worst performers and capital will continue to serve agriculture? The AHDB have identified eight factors for success in farming:
The drive seems to be towards professionalisation and development of better business skills (what some might call entrepreneurialisation2). I can believe this will work for a percentage of farms. Whether that means these farms (best and worst performers) in the long run can keep up with global competition, can keep accumulating capital above inflation, and can remain resilient enough in the face of worsening weather patterns, I think is less persuasive. The fact that there are economically inefficient farms that can be improved right now is one thing, the fact that, for example, growing wheat reliably becomes more and more erratic as it is exposed to droughts and floods, is quite another.
Ultimately though we come down to the question of what we want from our farming system. Capitalism is based on maximising exchange value, which according to its orthodoxy, is meant to secure a rational organisation of society. The fact that inequality continues to rise, colonial genocidal violence continues to rage on, and the climate crisis continues to spiral out of control, would indicate that their political economy is anything but humane. Pragmatically-speaking if your livelihood depends upon improving your business through efficiency gains and cutting costs further then it makes sense to try and follow the advice of ADHB.
But that doesn’t mean that capitalism is the best political economy to secure good, sustainable and just food production. Clinging on and doubling down is understandable. However, it seems abundantly clear to me that, over time, there are more losers, and less winners.
no idea if that is how you spell that! And I haven’t yet read Foucault on his idea of the ‘entrepreneur of the self’