The turmoil in international markets presents a golden opportunity for some and a costly experience for others. The actions of one man, Donald Trump, the US president and self-appointed leader of turmoil, has damaged not only the UK and other countries that export to the US but also the American businesses which he wants to protect.
Business sees doing nothing as the best option, halting investment and development.
Other countries and companies take retaliatory action. If the US can double tariffs, why can’t they add 50% to their sales price and take advantage of the inflationary mood that exists today?
Chancellor Rachel Reeves is using similar tactics, springing taxes on sectors like farming, and the consequences for farmers are not good. As global markets gyrate, so farming markets, including machinery are affected. All farmers, especially arable, are caught up in the chaos. The more turmoil in the markets you are trading, the more forward planning and action becomes necessary. Some of these measures can involve major changes in the ownership structure of the farm business, incorporating complex contracts and huge commercial lawyer fees. Setting up and managing trusts has traditionally been a tool for the landed gentry rather than working farmers, but this is changing as assets become a taxable resource for government funds.
Turmoil in agricultural markets is increased as government support and subsidy are reduced. Government assurances that the sector will still be protected to £2.5bn looks increasingly unlikely given the present economic situation. Inflation is up, productivity down and both are clearly the result of increased treasury spending (NHS salaries, winter fuel and other U-turns) and reduced tax takes, including the exodus of billionaires. As farm subsidies are reined in, so the return from farming becomes increasingly important.
Of course, this would happen in one of the driest seasons ever recorded, where yields have been knocked sideways and livestock feed costs are through the roof. And as many readers point out, conventional cost-cutting initiatives are getting exhausted. Vanity purchases of a flashy tractor or any other machine are now very much in the past.
The US president’s negotiating style of big threat, hasty action followed by a climb-down (all done within an atmosphere of fear), has a deeper consequence: it can become contagious, with traders turning sharper and less accommodating. Those with deep farming roots will remember the old-school trading method, when the grain merchant or livestock dealer arrived to assess and price up the fruits of the farmers’ labours. These proceedings were far more than settling a price, because in many instances both sides were keen to ensure the same arrangement could carry on for future years. It’s a rare trader who works on these principles today. Continuity is trumped by today’s margin, with complex contracts which need reading and amending in a way that would be foreign to our grandparents.
