Pig profits decimated as other sectors also fall, says Defra

Profits for pig producers are projected to have fallen by almost 100%, while other sectors also suffered in 2018, according to the latest provisional Defra statistics.

Cereals was the only farm type that is projected to have increased its returns, up 13% to average £73,000 as outlined in today’s farm business income (FBI) provisional statistics for the 12 months between March 2018 and February 2019.

See also: 6 tips for improving short-term farm finances

A combination of higher input costs, largely driven by the price of feed due to last year’s tumultuous weather, saw other sector’s profits take substantial hits.

The average 2018 Basic Payment is also expected to fall by 1% across all farm types, compounding profits.

Poultry, dairy and lowland grazing livestock farms are all predicted to have dropped FBIs by 45%, 22% and 29% on the year respectively.

The preliminary figures are liable to change as more data and a greater sample size is analysed, according to Defra, who will publish the full FBI results in October this year.

What is Farm Business Income?

For non-corporate businesses, farm business income 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.

In essence, farm business income is the same as net profit, which as a standard financial accounting measure of income is used widely within and outside agriculture.

Using the term farm business income rather than net profit gives an indication of the measure’s farm management accounting rather than financial accounting origins, accurately describes its composition and is intuitively recognisable to users as a measure of farm income.

How did each sector fare?

Cereals

Up 13% to average £73,000

  • Increases were influenced by global weather conditions and harvest concerns
  • Total crop output is expected to by 9% higher than in 2017-18
  • Increased prices are offset by a predicted yield reduction, except for winter barley as a result of last year’s extreme weather events
  • Higher output will only be slightly offset by rising input costs of about 3%
  • Machinery depreciation, fuel and oil contributed most to input costs increases
  • Average agri-environment schemes and BPS is unlikely to change much on the year

General cropping

Down 8% to average £85,000

  • Higher input costs of 3% on feed, fertiliser and machinery are predicted to more than offset slightly higher outputs
  • Peas, beans, potatoes and sugar beet should see price increases
  • Overall crop outputs should see reduction due to last year’s volatile spring and summer weather
  • Oilseed rape yields, particularly those crops grown on lighter soils, are expected to be down
  • Beans, linseed and potatoes will all see a reduction in cropping area
  • Average agri-environment schemes and BPS is unlikely to change much on the year

Dairy

Down 22% to average £93,000

  • A 1% increase in milk production is expected to drive dairy farm outputs by 2%. This is driven by an increase in yield rather than cow numbers
  • Across the period, farmgate milk prices are expected to remain similar to the 12 months previous – however this varies considerably from farmer to farmer
  • Input costs are predicted to increase by 8%, largely driven by higher feed costs and requirements, particularly during last year’s wet spring and dry summer
  • Average agri-environment schemes and BPS is unlikely to change much on the year

Grazing livestock (lowland)

Down 29% to average £16,000

  • Output falls for cattle and sheep should be offset by an increase in crop output, leading to a total output decrease of just 1%
  • Last year’s challenging weather is predicted to have led to few store and finished lambs, while record high prices at the start of the period have returned to more normal levels
  • Prices for finished cattle started 2018 well but fell back due to the dry summer. Store cattle prices were also down on the previous period
  • Input costs are expected to rise by 5% driven by higher feed costs of about 17%, with concentrates costing about 12% more than the previous period

Grazing livestock (LFA)

Down 17% to average £24,000

  • Cattle output is predicted to fall slightly, reflecting lower average prices compared to the previous period
  • Prices for breeding ewes and hogs are also expected to be down
  • Agri-payment schemes, which represent a major source of revenue, are expected to increase by 6% in 2018-19
  • Similar output levels compared to the previous year are expected to be offset by higher input costs almost across the board – with feed alone increasing by 16%

Pigs

Down 96% to average £1,000

  • Pig incomes have dropped dramatically, from £31,300 to just £1,000 in 2018-19
  • Increased feed costs of 8% are expected to be the main factor behind the fall
  • A slight increase in production is believed to be offset an output reduction of 2%, reflecting falls in prices for cull sows, clean pigs, weaners and stores. The full extent of these price decreases will not be wholly realised until the final Farm Business Survey results are published in October
  • It is believed that contract rearing units will not be as affected by these lower prices
  • Changes to livestock valuation are also expected to contribute to the fall in income

Specialist poultry

Down 45% to average £53,000

  • The small sample size of the sector, as well as uncertainty over its structure, make the results for poultry more unreliable than others
  • Poultry prices have held steady on the year, while production has grown. Eggs have mimicked this trend, with these factors combining to increase output from the sector by 3%
  • Inputs have overtaken outputs however, growing by about 8% over the period, driven by higher feed costs

Mixed farms

Down 10% to average £38,000

  • Decreases in income are attributed to a rise in input costs, notably feed, fuel and machinery depreciation
  • Farm outputs are expected to rise by 3%, driven by crop output
  • Average agri-environment schemes and BPS is unlikely to change much on the year

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