Jeremy's Blog 19th April 2024: A Mindset for Resilience

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 18th April 2024

We are almost always in the middle of a story. The past is not over but rather a prologue. The future is yet to come, evolving from now but with surprises. There is rarely a conclusion, though sometimes hindsight suggests a move to the next Act. The present is simply a waystation, not an answer. More than for some time, we are living amid accelerated change and disruption, perhaps familiar with what we have seen, though not fully seeing its shape, and not always recognising that more is to come or what it might be. Yet, we will manage better if we are prepared for it.

Wars and rumours of wars make that abruptly clear. Other changes creep up on us. Climate change with its variety of extreme weathers is one such, growing financial weakness another. All three (and other pressures too) force us to look harder at being more resilient, changing even if it is uncomfortable.

There is no reason to suppose that the repeated hammer blows of the financial crisis, the pandemic, disrupted supply chains, Russia’s invasion of Ukraine with further supply chain disruption have ceased. The next shock, whether from Chinese debt, the growing number of hooligan states, disease, geology or other, is unknown but will come. Wider disruption may create opportunities as well as problems for UK farming.

Climate change is more insidious, developing over the years and with more to come. In summer 2022, it was long hot drought. This winter’s relentless record rain has saturated land, bringing cost, frustration and drudgery – yet farming in southern Europe is hurt by drought, often after floods last year. As an El Niño year, we have a foretaste of coming years, even if all mitigation policies work. We have to learn to adapt and futureproof ourselves, whether by carrying water between years, creating shade, avoiding flood risk, improving soils, new technologies, genetic developments or the many other ways that we will learn.

The West’s increased dependence on debt is equally insidious, increasingly used to fund current lifestyles when money is needed for investment and defence. Public finances are at best precarious. With the Federal Reserve saying two months ago that US debt was on an “unsustainable” path, it may be that there are now no “risk free” assets after funding the crisis, pandemic and comfort – an issue for a key part of capital asset pricing valuation models. Farming as well as the whole economy has to improve productivity and achieve economic growth; requiring us to see the need to do that, not just wish it, if we are not simply to envy the next generation of rich countries.

We need greater resilience in food, energy and water when the pressures have been for all three to be cheap. Not only does risk require reward but resilience is about spare capacity, the buffer for shocks not “just in time”, bringing its own costs. With growing competition for land use, that adds to the challenges in learning how to make more from less, the need for a step change in how we do things.

So, we need to look at the tools that will best help that, including balance between regulatory assurance for markets and the public and the business freedom to manage change. We can learn from countries like Australia, living with violent swings in yields and looking to self-reliance, and Israel making the desert bloom with technology. While pump priming climate change resilience, Australia’s Farm Management Deposit Scheme enables farmers to shield income from tax in good years to be used in bad years; as we need to carry water between years and then irrigate efficiently, just one aspect of an openness to new technology. This is a different mindset for a new future, including the need for margin to reward risk and working capital.