Income from Scottish farming falls as cost rise bites

Total income from Scottish agriculture fell last year as farmers felt the effects of higher input prices, new figures from the Scottish Government have revealed.

The provisional figures estimate that Total Income From Farming decreased by £11.9m in 2008 to £629.6m, a fall of 1.8% over the previous year before inflation is taken into account. In real terms, this represented a fall of 5.6%.

While the value of outputs (principally cereals, finished cattle, milk and eggs) increased by £187.3m (8.8%) on 2007 and farmers received slightly more in decoupled payments and subsidies, this was far outweighed by a £216m (16.7%) rise in the cost of inputs.

Fertiliser accounted for the biggest increase, with total fertiliser and lime costs rising just over 50% (£72.1m). Fuel and oil costs were up by a similar percentage (£37.1m) and feed bills increased 19% (£69.9m). Alongside higher input prices, increased crop areas last season also contributed to the overall rise in costs.

NFU Scotland’s policy director Scott Walker said that such a rise in costs could not be budgeted for and while some input prices had fallen slightly this year, they still remained at historically high levels.

“Looking ahead to 2009, we are expecting this to be a difficult year for farming,” he said. “For sectors such as milk we have already seen farm gate prices fall by eight percent in the first few months of the year. Input prices remain high and there is much pressure from retailers on product prices.

“While the industry is, to some extent, isolated from the effects of the credit crunch, the global nature of this problem will mean demand for food may be less than it otherwise would have been. This, in turn, can be expected to impact on the prices achievable and only add to the volatility to which farming is increasingly prone.”

But there was some more positive news. The Scottish Government also released separate estimates of Net Farm Income (based on the 2007 harvest, not 2008), which suggested that overall, NFI increased between 2006-07 and 2007-08, with increases in all farm types other than lowground cattle and sheep.

Specialist cereal farms saw the largest increase, with NFI rising £24,500 to £45,200 in 2007-08, largely due to the high cereal prices seen during that period, which more than offset corresponding cost increases. NFI across all farm types increased by £10,000 to £29,800, the figures showed.

But Mr Walker was cautious about reading too much into the NFI figures. “We continue to harbour reservations over the meaningfulness of the NFI figures. While we welcome the fact that many farmers may have had a better year financially in 2008, many of our members will look at the levels of profitability suggested in the Scottish Government figures and believe that they bear no resemblance to their own farming business.

“For years we have asked that the way in which NFI figures are calculated be revised and we believe that a change will be made for 2009.”

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