David Richardson: The truth behind TIFF figures

Total Income From Farming (TIFF) has increased 25% this year, according to DEFRA. Not on this farm it hasn’t. The NFU, together with normally bullish consultants, says the figures should be “regarded with some scepticism”. Apparently, on average, farmers earned £23,000 this year, an interesting comparison with DEFRA officials who got a £15,000 bonus on top of their salaries.

Statistics are like bikinis. What they reveal is interesting. What they hide is vital. When those statistics are estimates based on incomplete information they are unlikely to be worth much. However, they might repay examination if only to work out where they might be wrong.

The reason the estimates offended me (and other arable farmers, I suspect) is clear. They show the value of wheat has declined by 18%, barley by 15%, rape by 24% and potatoes by 17% – a more accurate reflection of our situation than the overall estimate. I would add that those declines might be an underestimate if you sold well last year.

True, some input costs have come down – fuel and oil by 21%, fertiliser by 16% and seeds by 14%, according to DEFRA. But one of the most significant, namely fertiliser, was, in many cases, bought during the high priced period of summer 2008.

Pressure from fertiliser companies, fears it might get even more expensive, the desire to move it onto farms to avoid logistical problems in spring, and tradition, all contributed. In other words its a false assumption that the actual cost was as low as suggested.

Livestock, on the other hand, has had a better year – some would say, about time. Cattle prices are said to have risen almost 7%, pigs 16% and sheep 12%, although milk was lower by 12%. Even so, combined with lower feed prices, down 13%, these increases will have improved margins and contributed to the higher average.

But the devaluation of sterling against the Euro has had the greatest influence on potential profitability, accounting for a 17% rise in the value of single farm payments (when we eventually get them – the French have had theirs for weeks).

And if you doubt what difference our currency status has made, consider the plight of the Euro-using Irish. The Irish Farmers Association has predicted a drop in average farm income this year of 20%, and that follows a 13% decline last year.

But in case UK livestock farmers feel cocky (there’s no danger with their arable peers) DEFRA has forecast an 8.8% fall in UK farm incomes next year. The calculations are all subject to review next spring when they will have actual figures to go by.

But before we ditch the DEFRA document, it is worth noting the recent history of TIFF. Back in 1973 when Britain joined the Common Market our industry had a total income, adjusted for inflation to today’s real terms, of nearly £9bn.

The trend was then downwards, interrupted briefly by drought-induced sugar and potato shortages in the mid 1970s and the devaluation of sterling just before the Tories took power in the late 70s, until 1992 by which time TIFF was down to £3bn. Then came another sterling devaluation and within a couple of years it was back at £7bn.

Since then, TIFF has been back in the doldrums bottoming out at under £2bn at the turn of the century, only recovering to £3.4bn last year. Seems like droughts and devaluations are better for farmers than good growing conditions and prosperity in the rest of the economy. Or am I just being cynical?

Read more from David Richardson on his blog.