22 October 1999

Strong £, weak prices add to income worries

By Robert Harris

MANY farms are heading into the red this year as the strong £ and weak commodity prices continue to pressure the industry.

Incomes, already at a 10-year low, will slide further, according to new figures released by accountant Deloitte and Touche. It reckons an average client – a family farm with several enterprises on 300ha (740 acres) of English lowland – will lose £10,000 in the year ending June 2000.

That marks a fall of almost £400/ha (£162/acre) in five years, says partner Mark Hill. "It is a huge drop, And it is likely to be at least three years before we see any improvement."

Dairy farms with arable are expected to show the biggest average loss in 1999/2000 of £60/ha (£24.30/acre), assuming an average milk price of 18p/litre.

"Every farmer involved with dairying is at a watershed," says Mr Hill. "Farmers have to make a decision whether they are in it for the longer term. If they are not, they should get out now with dignity and some equity."

Farms majoring on potatoes and other roots will also make a small loss, mainly due to this seasons poorer potato prices. Combinable crops remain a marginally better bet, says colleague Richard Crane.

"We predict an average net farm income of £36/ha, based on a marginal fall in commodity prices, to £71/t for wheat, balanced by an increase in harvest 1999 yields."

Siôn Roberts, chief economist at the NFU, says the figures highlight the stark difference between farming and the rest of the economy. "Both the service sector and manufacturing are now recovering. These figures back up the dire picture we have drawn."

And, he says, Deloitte & Touche figures probably represent above-average farm businesses. "This shows that the agricultural recession is really cutting to the bone."

Net farm incomes have collapsed in Scotland, says Douglas Bell, SACs rural business adviser. "On average, they have decreased by 98% between 1996/97 and 1998/99, to just £416 a farm.

"While this years easier harvest may have stemmed the tide for many arable farms, predictions for the livestock sector, especially dairy, look gloomy."

In Wales, the outlook is equally bad. "We forecast that beef and sheep sector incomes, which are already making a loss, will fall a further 41% this year," says a spokesman for the Farmers Union of Wales.

It also forecasts a bleak outlook for dairy farmers, adding that 11% of Welsh dairy farmers have quit in the past two years, 3% more than the national average.

lDetails of 1998/99 farm incomes and advice on page 26. &#42