16 December 2015

Chairman’s Report

We as a society like to feel that we have a stake in the process of providing a healthy countryside and healthy food. At the same time Society wants its food to be provided at the cheapest possible price.

When farming is profitable there might be scope for progress but this scenario cannot realistically be achieved when farming is hampered by Supermarket wars, the demands of the downstream participants and different pressures from all over the world.

Rural PLC (Kent) seeks to contribute to the debate on what British food and farming could and should be, through its own knowledge of the industry in Kent. Kent has long been acknowledged as the Garden of England and London’s Larder.

We reject narrow thinking and we recognise the importance of health and well being. We also recognise the need for a food and farming sector that is environmentally sustainable. Farming needs direction and purpose in terms of Government policy and there are serious concerns as to whether Government is actually well enough informed and equipped to provide the leadership required. It is essential that policymakers attach a much higher priority to food and farming policy than at present and that they do it in a more integrated manner.

Our farmers and food sector workers have to be properly rewarded to ensure that a truly progressive UK food and farming sector thrives and grows jobs as well as protecting and enhancing the natural environment. All too often the wider food system in the UK is unable to live up to its enormous potential to deliver for the public good.

There are so many snouts in the trough downstream of the farmer that by the time the financial reward comes back upstream there is little profitability left to reward the primary producer. UK farmers find themselves in a situation where it becomes harder and harder to succeed.

In Kent we have productive soil types, favourable climate, proximity to Europe and the population of the south east – and because of that, alongside our more extensive arable and livestock systems, we showcase horticulture in producing quality hard, soft and stone fruits, hops, vegetables and even wine. Yet Government and the public at large fail to recognise the vast investment required to sustain such enterprises and the colossal risk to which they are exposed through weather and the markets, to the extent that rewards to the farmer in a year like 2014 were negative on a wide scale.

That is not the fault of the farmer – we have one of the most skilled production industries in the world –but if there are no profits then we lose out on environmental protection and delivery of many other public benefits. Farming is always the whipping boy, simply because it is at the visible end of the production process. So many problems would be addressed if some of the downstream profit could be restored to the farmer.

Part of that process involves stimulating increased demand for quality British produce. Growing numbers of schools and hospitals, restaurants and cafés, nurseries and universities, are insisting on serving seasonal, local and good quality food but these examples are still the exception and only account for a small proportion of what is consumed daily. Public policy needs to support sound, safe jobs; proper protection of our soils and water; the creation and enhancement of space for nature and the production of quality food, meat and produce.

At Rural PLC (Kent) we champion food and farming systems in Kent where we believe many businesses have stepped up to the challenges of climate change and environmental loss. Rural PLC (Kent) produced its first Annual Report in 2012. Our Finance Director, Nick Holmes, highlighted that a massive one in seven jobs is reliant on the food sector and it is farming that is at the upstream end of the various processes. The scale of the multiplier effect in this industry is massive. We have input manufacturers feeding into production; production feeding into processing, followed by distribution to direct sales, supermarkets, retailers and a massive waste industry below all that.

Alongside the field to table cycle are the growing on-farm activities of diversification, farm energy and renewable, tourism and recreation. Nick Holmes points out that on the one hand it ought to be blatantly obvious why you would invest in Kentish farming. The balance sheet for Rural PLC (Kent) shows a massive market capitalisation that is comparable to a FTSE listed PLC – we have the obvious strategic benefits in that everybody needs to eat and land is a finite resource.

Couple this with an increasing requirement for development in the south east and you ought to have an investors dream. But – the reality is that is not how we are perceived because investors always require return on capital.

The return on capital in farming is and always has been very poor, and I stress again that there has to be recognition amongst both Government and the downstream businesses that without a secure food production sector there is a huge threat to large parts of the downstream economy and to the UK’s strategic food security.

Our initiatives at Rural PLC (Kent) include direct dialogue with industry influencers and a developing programme of work including production of a Rural Careers website and App, liaison with the three Kentish Universities over farm based research projects, a rural events calendar and showcasing some of the more innovative rural businesses around the county. The world of food production and the rural environment faces huge challenges. Government has to achieve profound engagement and not simply pay lip service to the issues. At Rural PLC (Kent), we believe that Kent can and should be at the forefront of the debate and we are constantly seeking the right areas in which to engage. In the financials, you will see that the strength of Kentish farming’s balance sheet has been sustained on the back of a strong land market, but the trading account has deteriorated, because of falling commodity prices and the stronger pound.

Farming means rural business on a wider base. If more businesses can achieve that objective, stronger voices will be heard. Kent is well placed to develop that objective.