CHIEF arable adviser for the NFU, Guy Gagan, has warned that new European directives, aimed at financial services, could see UK farmers inadvertently treated as financial institutions, forcing them out of a key market.
Farmers stabilise their businesses through buying contracts on the London agricultural commodity futures market, which sets long-term prices for their harvests. UK prices for wheat, barley and oil seed rape can be highly volatile, depending on the weather.
The Markets in Financial Instruments Directive has been revised and was agreed by the G20 group of nations and designed to prevent speculators using the commodity futures market driving up food prices.
The European Securities and Markets Authority is deciding how it will be applied in the UK.
The NFU is now playing catch-up to try to persuade the authorities in Brussels to exempt British farmers from the directive.
Mr Gagan said: “In its current form, the directive could swamp farmers with paperwork and additional rules on the contract size could see farmers unable to protect their entire harvest.
“With fewer participants active in the futures market, it is also likely to impact liquidity and the London agricultural commodity market could be regulated out of existence by the new measures.”
Also, a more volatile price environment would have an impact on the UK economic recovery.
An NFU report states that agriculture contributed £24bn to the UK economy in 2012, up from £16bn in 2007.