DEFRA predicts big fall for livestock incomes

Incomes are set to fall dramatically on English livestock farms in 2011, although arable farmers will fare much better, according to DEFRA estimates.

Its Farm Business Income (FBI) forecast for 2010-11 (i.e. the 2010 harvest) suggests specialist pig producers will be hit hardest by soaring feed costs and lower prices, with average incomes forecast to be 68% down in real terms on the 2009-10 season at £24,000.

FBI on grazing livestock is forecast to halve over the same period, to £11,500, while dairy farms are likely to see a 28% fall to £42,500 as higher costs outweigh an increase in the average milk price for the year.

But DEFRA predicts a “substantial increase” in incomes on arable farms, on the back of higher prices for cereals, oilseed rape and potatoes. FBI for 2010-11 is forecast to be up 64% on the previous season at £79,500 on cereal units and up 50% to £104,500 on general cropping farms.

“In a week where government was urged to increase food production by its chief scientific adviser professor John Beddington, the farm income figures are bitterly disappointing,” NFU president Peter Kendall said.

“For England’s farmers to play their part in meeting our future food production challenges, they require sustained investment in productive capacity. For many sectors, the indications are that the current returns from farming barely cover the costs of production, let alone provide the cash for re-investing in farming businesses. This is economically unsustainable.”

Even the better arable incomes had to be considered in context, NFU senior economic adviser Phil Bicknell added. “It is important to remember a significant amount of grain will have been sold forward or under contract at prices nearer to last year’s lows in March of £92.50/t rather than the highs of £201/t in January 2011.”

Meanwhile, the Scottish Government has published its Total Income From Farming (TIFF) estimate for the 2009-10 season. It put TIFF at £618m, up 25% (18% in real terms) from the 2008-09 season.

Within this TIFF figure, gross output increased by £110m (4.7%), due to higher prices for cereals, oilseed rape, finished sheep and lambs, and finished cattle and calves. Input costs were £34m (2%) lower, and total subsidy payments were down £29m (4.7%) due to a less favourable exchange rate with the Euro in September 2010.

The total amount of support received by the industry, most of it through the CAP, was £597m.

“These figures show that the support farming receives from the CAP remains essential for the survival and well-being of farm businesses in Scotland and that must be borne in mind when politicians begin to thrash out a deal on CAP reform in the coming months and years,” said Scott Walker, NFU Scotland‘s policy director.

“The debate around the future shape of the main support stream to Scottish agriculture, the Single Farm Payment, must take into account how the delivery of support will impact on individual businesses across the whole of Scotland.”

What is Farm Business Income?

• In essence, FBI is the same as net profit

• For non-corporate businesses, FBI represents the financial return to all unpaid labour (farmers and spouses, non-principal partners and their spouses and family workers) and on all their capital invested in the farm business, including land and buildings

• For corporate businesses, it represents the financial return on the shareholders capital invested in the farm business

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