PROSPECTS for farmers in 2015 are more uncertain than for many years.

There is a general consensus emerging that farm profits will be down in 2015 and that follows a fall of about 15 per cent in 2014.

The factors that depressed output prices – particularly in the dairy and combinable crops sectors – last year will apply in 2015. While there have been some cost decreases they have not been enough to compensate for the falls in farmgate prices.

The pound is likely to remain strong. The weakness of the Eurozone and its sluggish growth compared to the UK will mean that the euro remains below – possibly well below – 80p. And the exchange rate remains the biggest single determinant of farm profitability in the UK.

Base rates will rise at some point in 2015 – depending mainly on how far inflation declines. The longer it stays low the longer rates will stay where they are but rise they will, eventually and that in turn will hit farm businesses that have borrowed to invest in recent years.

There is also likely to be no let up in the store wars which have been a feature of the UK food retailing sector in the latter half of 2014. The impact of the German discounters on the UK big four supermarkets will result in more price cuts – some on a loss-leading basis – that will, in turn, put more pressure on UK farmers.

In such a climate farm efficiencies will be more important than ever. The best farms will survive this latest swing in the cycle, the less efficient will fall by the wayside.