What a difference a year makes as prices (and costs) soar

THIS week is one of the busiest periods in the farming calendar with the focus very much on the Royal Highland Show, which begins its four-day run at Ingliston on Thursday. Farmers like nothing better than to meet with friends and colleagues to discuss how crops are faring, prices for livestock and the general state of the industry.

Seldom in recent times has so much changed in the space of just 12 months and I suspect there may be many more changes before next year's show. There could have been few farmers who would have predicted wheat would hit £200 per tonne. It did not last long, but returns from cereal crops remain close on double those of last June.

Scotland produces some of the best beef cattle in the world and here prices are around 50p per kilo deadweight better than last June and may well go still higher, especially if production in the European Union continues to decline. Sheep producers are faring better, but that has to be put in the context of the disastrous trade of most of last year.

But the real question revolves around whether anyone is actually making money. There is little point in farming if there is no profit in the business. The big problem for the industry is the massive increase in costs.

Oil and fertiliser are the obvious examples, but the cost of feeding livestock, especially in the intensive sector, has soared. A typical ration for feeding pigs costing £157 per tonne in May 2007 has risen to £273 per tonne 12 months on. No wonder the number of sows being culled is now at record rates.