2 February 1996

Market factors help to lift UK farm incomes

By Philip Clarke

MARKET factors have been the main driving force behind the significant increase in UK farm incomes announced this week.

The continued weakness of sterling has helped maintain the export drive, while weather factors at home and abroad have had a big impact on cereal and potato prices.

In aggregate terms, UK farm output increased by 9% in 1995 to £17.4bn.

The most significant rise has been in the arable sector, where the world shortage of grain combined with higher area payments to lift output 20% to £2.9bn.

Oilseed rape output fell, due to area aid penalties. But potatoes enjoyed another big lift in value (up 40% to £1bn) not least because almost half the 1994 crop was sold in the first few months of 1995.

Livestock farmers also faired better in terms of output values, especially pig producers, who enjoyed a 20% average price rise in 1995. Milk receipts were up 7% at £3.4bn.

On the input side, both livestock and arable farmers faced increases, with the feed bill up 2% at £3.3bn and fertiliser prices up 12% over the 12-month period.

In total the farm input bill rose 3.1% to just over £8bn, leaving a gross product of £9.4bn.

After a year of strong investment in 1994 (about £1.9bn), depreciation charges have risen in 1995 as have interest payments, rent and labour. The overall effect is that net farm income (returns to farmers and their spouses after family labour) has risen by 34% to just over £4bn at current prices.

But not all sectors have benefited from this increase. Poultrymen, in particular, have suffered from falling prices and rising feed costs.

A clearer picture of how the individual sectors have performed is shown by the indices of net farm income (see graph). Immediately obvious is the spectacular rise in cereal farm incomes.

Converting these indices into monetary values, it is estimated that net farm incomes on English cereal farms averaged £43,600.

General cropping farms have been much more static at a provisional £63,100, reflecting the more subdued performance of oilseed rape, sugar beet and pulses.

Dairy farms, having seen incomes drop in 1994/95, appear to have recouped some of that loss, with net farm incomes at £31,700. Similarly, upland and lowland livestock farms are not expected to achieve 1993/94s income levels, though at £16,000 and £7800, respectively, they are doing better than last season. &#42