5 February 1999

MAFFdata shows income slump worst since 1930s

By Robert Harris

FARM incomes in 1998 slumped to the lowest level in real terms since the 1930s, pushing several sectors firmly into the red.

Revised MAFF estimates show total farm incomes fell by 32% compared with 1997. But net farm income, which includes the cost of family labour, is down 48% to £1.18bn, says the NFU. In just two years, farm incomes have collapsed by 75%, it adds.

Falling commodity prices far outstripped any savings made on inputs, according to ministry figures. In the 1998 calendar year, output fell by 9% to £16.4bn at current prices. Main reasons include oversupply, economic difficulties in Russia and Asia and the strength of sterling.

Cereals output fell by 14% to £2.49bn, and livestock production by 13% to £5.46bn. Milk output fell by a similar % to £2.73bn.

Oilseed rape output remained largely the same. The only bright spot was potatoes, which recorded a 67% rise.

Biggest savings were made on feed and fertiliser. Farmers spent £2.42bn on the former, a saving of 15%. Fertiliser accounted for £821m, down almost a fifth. But more borrowings, at higher cost, saw interest payments rise 16% on the year.

Lowland beef and sheep farmers are set to suffer the biggest % drop in net farm income, a massive 350% in the year to Feb 1999 at current prices, albeit from an already low level. The fall in mixed farm incomes is put at 196%, closely followed by pigs and poultry at 175%. Dairy farmers incomes are set for a 39% slump; those on cereal farms and LFA beef and sheep farms by slightly less.

These figures, according to FW estimates, translate into negative farm incomes for three sectors. English lowland beef and sheep farms will have lost about £1600, pigs and poultry almost £12,000 and mixed farms about £5000.

English dairy farms should achieve an average net farm income of about £12,000, and LFA beef and sheep units about half that.

However, there were some positive indicators in the year ahead, said NFU chief economist, Siôn Roberts. These included a recovery of world market prices, the lifting of the beef ban, weaker sterling and lower interest rates. "We are not saying there will be a major rebound. But incomes have come down an awfully long way. We think there may now be an overall bottoming out."

John Page, head of agriculture at Barclays Bank, agrees. Although year-end figures showed lending to agriculture by Barclays rose by 5.7% in 1998, this was about half the increase seen during the previous year.

The ratio of debt to credit for all farming had fallen to 2.7:1, compared with 3:1 in 1997, he said. Arable farming was healthiest, with growers owing £2.27 for every £ of credit (£3.40 in 1997).

Pig farms were the main concern; these owed almost £9 for every £1 of credit, almost 2.5 times as much as in 1997. Continued support could not be guaranteed for some producers, said Mr Page. &#42

A stop-gap… while farmers prepare to build a market at Stanton, Suffolk, a new outfit – Hill Farm Sheep – is providing a liveweight outlet for stock. But another markets future was in doubt this week. (See page 18.)

Scots split over potatoes

A SPLIT is developing in the Scottish potato industry over the threatened relaxation of its tough seed health rules.

After the difficult harvest, the Scottish NFU and the Scottish Potato Trade Association asked the government for a one year derogation on a rule banning ware growers from using home-saved seed for more than one season. The bodies also requested that powdery scab tolerance be raised from 3-5%.

A ruling is still awaited due to conflicting evidence. British Potato Council official Joanne Kemp said there were arguments for second year home-saved seed in a year of shortage. But this could damage the high viral health reputation of Scottish seed and its protected status in Europe, she added. SAC expert John Anderson feared a derogation could badly damage future seed sales.

Scottish NFU potato committee chairman, Bill Reid said that the rule change was needed because of shortages. Cara, Estima and Nadine were sold out, he claimed. Mike Beattie, president of the trade association, said a derogation was justified in this exceptional year.

Experts believe the Scottish Office may refuse the powdery scab derogation but allow second-year home seed under individual licence. This may include a compulsory virus inspection. &#42