Milking it?

This BBC news article asks whether the recent surge in food prices has brought benefits to the UK farming industry - a sector that has been in relative decline for many years and which now accounts for less than 1% of our Gross Domestic Product. Farmgate prices for milk have risen but the profit margins remain wafe thin because of rising input costs. New EU environmental standards also threaten to create higher costs for farmers. Total farm incomes have risen by more than 10% this year and the price of agricultural land has also headed higher - but the article reinforces the fragile nature of the industry and a widening gap in the fortunes of cereal producers and those in livestock farming. There is some excellent microeconomics here.