The specialization wheel turns full circle

Monday, November 1, 2010

With the European agriculture sector advising increased flexibility for more reliable farm income, old hands are experiencing more than a touch of déjà vu

by NORMAN DUNN

Specialization looks like it's now destined for a back seat in European family farms with low returns from most traditional enterprises – dairy, pigs and poultry, for instance – making "diversification" all the more attractive.

The return to multi-enterprise production is being pushed forward by advisors all over Europe. And, in some cases, the trend is being taken to extremes. This summer, in Germany, a farmer earned nationwide publicity because he runs pig, poultry, arable cropping and bioenergy production businesses on his 900 acres. Mind you, the scenario on this farm includes energy from both biogas and wind turbines. Wood is also chipped and dried before selling on to home heaters. And probably soon to be added to the livestock enterprises is an aquaculture unit.

Travelling through Europe just now, it seems there's hardly a farmstead without new sheds or buildings being constructed for some sort of new enterprise – from riding schools to farm shops, milk bars or (particularly popular this year) pick-your-own flower plots.

But it's really nothing new, is it?  When I was fresh to farming 60 years ago, branching out into new sources of income usually meant buying a few hundred layers and knocking-up some nesting boxes for the back barn. Or (in my part of Scotland) planting a few acres with raspberry canes and delivering fruit to the local jam factory.

Starting a new enterprise was fairly cheap then and, anyway, multi-enterprise farms were the only form of business we knew. As a teenager, I worked on two farms regarded as quite normal. One had milking cows, a laying unit with a few thousand birds as well as a broiler unit and a 200-sow farrow-to-finish enterprise. Out in the fields potatoes were produced, as well as barley and wheat. And sheep were bought in for winter to feed off the dairy pastures.

The other business had beef cows with calves fed to slaughter and a large flock of sheep, but it also fed slaughter hogs and ran a small egg-laying unit with eggs sold to private customers.   

I recall my amazement when travelling down to England as a school kid and visiting a dairy in Cheshire where grass was the only crop, with straw and corn shipped in from the east for winter feed. "What did the farm hands do all year with nothing but milking twice a day and hay-making for a few weeks in summer?" I remember wondering.

Even then, though, that type of farm was being held up before all of us as a shining example of the ideal agricultural business of the future. "Specialization" was the word on every advisor's lips.

And that's the way things went throughout much of northern Europe in the 1960s and '70s. The "old fashioned" mixed farms borrowed heavily for much larger milk production premises with new herringbone parlours, beef cows were sold off and pastures plowed for monoculture wheat. Hog units were pulled down and rebuilt with more room for often 20 times the original count of animals and, everywhere, huge broiler and layer houses were emerging from greenfield sites.

Specialization was certainly simpler. But the new investment wave dragged many a family farm deep into the red. And everyone assumed that returns would improve if production became more efficient.

Now, 30 years on, we see specialist milk producers earning very low margins indeed. In fact, until mid-summer this year, the price farmers across Europe were receiving was a good 30 Canadian cents below break-even. Danish hog producers (among the first in Europe to specialize) now need units of around 500 sows if they want to make any margin at current prices. But they also have to invest in, or rent, land required under law for spreading the manure produced. Result: hog producers often can't drum up the required capital and are leaving the sector in droves.

Only specialized grain growers are smiling this summer as milling wheat prices hit the C$230/tonne mark in September and even feed barley fetches C$175/tonne on the main markets. But three years ago I remember British wheat farmers claiming they weren't even covering costs and in fact losing an average C$10 an acre. And that wasn't even counting drying costs with the crop that year arriving dripping wet at 20 per cent moisture!

So now the wheel has turned full circle in Europe and agricultural consultants (the people who used to be called farm advisors) are recommending the multiple-enterprise approach for more security in overall income. Funny that no one thought of that when specialization was advised.

Oh, and there's one other factor to be faced by those taking the diversification route for farm survival. With more complicated planning permission procedures, environmental protection measures and modern wage and insurance levels, the changeover is going to be even more expensive than specialization was! BF

Norman Dunn writes about European agriculture from Germany.