FOOD PRODUCTION will be a loss-making activity on many farms once decoupled payments are introduced, according to new figures from accountant Deloitte.
The firm‘s latest farm incomes survey, based on 100,000ha (247,000 acres) of lowland England, shows a boost in net food production for the 2003 harvest year to £142/ha (£57/acre).
But the results from this year‘s harvest are expected to fall sharply to £25/ha (£10/acre).
And once support cash is taken out of the equation in 2005, net food production will tumble into the red by £175/ha (£71/acre) if commodity prices do not improve.
“Even with area aid, the gap between costs and output has been narrowing.
“The real contribution from core activities is a pretty horrendous figure,” said Mark Hill, head of food and agriculture at Deloitte.
But, overall, farms would still produce a net income of £84/ha (£34/acre) after taking into account other sources of cash like contracting, diversified enterprises, environmental schemes and the single farm payment.
Mr Hill said it was unlikely farmers would abandon their loss-making crops immediately.
“There will definitely be a response, but it will be a slow and steady one. The best land will stay in production and there will still be reasons to continue cropping.”
Colleague Richard Crane added: “During the initial years of the single farm payment there will be a lot of cross-subsidisation, as people won‘t believe just how bad the figures are.”
But Mr Hill said the implications should send a powerful message to the industry and government.