Farming News - The impact of Covid & the long-term prospects for agriculture.
The impact of Covid & the long-term prospects for agriculture.
Justin Ellis Agricultural Relationship Manager for Virgin Money, considers the impact of Covid and the long-term prospects for agriculture.
When we were considering the potential effects of Brexit, there was talk about challenges in the supply chain and what free borders meant for UK industry, both in terms of trade flow, but also the free movement of labour within the EU. Now, however, we are glimpsing a series of events which could create a further challenge for agriculture which needs to be addressed.
The delays around Brexit allowed many businesses to plan around the foreign labour that they might lose, with many taking the option of temporary visas. It was always going to create some pressures in the market, but challenges that could be overcome in time, and would be very localised.
And then Covid struck, causing massive changes in demand, with lockdowns and much of the economy closed down or restricted, not just in the UK but across the World. Whilst there were very obvious tragic consequences around Covid, there really was a ‘Dunkirk spirit’ in 2020. Getting food to the right place and making sure crops were harvested resulted in the empty shelves being short-lived, and food becoming one less thing to worry about during the pandemic.
Perhaps the first we started to see of the supply chain issues was talk of a chip (computer!) shortage, and the knock-on effect this had on car manufacturing - an issue we are now told will continue well into 2022.
And as we have gone through the summer, more local tightness of supply has happened, with shortages of building materials and some imported goods. We are also now seeing, as furlough has come to an end, shortages of key workers. Summer holidays and the ‘pingdemic’ certainly exacerbated the situation, and have had serious consequences in our slaughterhouses as they struggle to get over a backlog built up across the summer.
Lorry drivers now join that list, with the haulage industry further hampered by HGV testing being suspended, and then operating at much lower capacity than the obvious demand. All this has certainly highlighted some of the fragility in the supply chain, and our ‘just in time’ mentality has been severely challenged.
For farmers, input shortages are a relatively new phenomenon. Shortages of Glyphosate, a basic of agronomy, is unhelpful and where supplies have tightened, there have been very significant increases in prices as the laws of supply and demand come into force.
Worker shortages have also put a strain on outputs, in extreme cases, with crops not being harvested or processed, and in others, such as the pig and poultry sector, significant additional costs being endured as stock is delayed in going to slaughter.
There is a rebalancing going on in the supply chain, and it is not just the UK but with countries around the world playing catch-up post-Covid. Undoubtedly there are some extra strains in the UK as we also adjust to life outside the EU.
I believe supply chains will return to normal, and there will be a few more bumps along the way, but the availability of labour, and people’s ways and choices of working has, post-Covid, changed for the longer term.
There has long been debate in the UK about our farming being less productive than other nations. The relative plentiful supply of low-cost labour has driven some of that, and held back investment in technology to reduce our labour requirement. Many companies are now looking at automating where appropriate, and I am sure this will accelerate. This may actually help the sector in the longer term.
Wage inflation will be another issue, as fewer workers in the market can be choosy over where they work and what jobs they do. That’s not just in Agriculture, but across the workforce, and will feed through into consumer prices. It is often the case in the past that the farmer is squeezed, and has had to absorb additional costs as these come along. Hopefully the new-found support for farmers post-Covid will mean they get paid a fair proportion of the selling price. This will enable them to invest and automate to overcome some of the short-term challenges we are seeing now, and avoid these potentially dragging down the sector in the long term.
Post-Brexit, UK agriculture was already focused on a different future and Covid has made further change inevitable with different factors coming into the mix. The present supply chain issues will not go away overnight, and the industry needs to look at long term solutions to solve challenges around labour and rising costs. Productivity will be a key part of that and the pace of change will increase, with the added challenge of climate change.
I often describe the sector as resilient, which it certainly is, but the pace of change is increasing and we all need to be aware of that, forward planning has never been more important. I hope the agricultural sector will use its new-found voice and public support to build an industry that is world class in all aspects, not just in its resilience.