Mixed picture for 2011 farm incomes

Farm business income has risen in several sectors but fallen dramatically in others.

The latest DEFRA forecasts for the year ending in February 2012 predict a 6% rise for cereal farm incomes to £90,000 but general cropping looks like being down by 24%.

Record oilseed rape crops produced from a larger area and sold at higher prices, along with higher wheat and barley prices were the main positive contributors to arable incomes but increases in fertiliser and fuel costs held farm business income back for many.

General cropping results, where potatoes account for roughly a quarter of output, were badly hit by lower returns from the heavy and early potato crop and will see farm business income fall to £85,000 compared with £111,500 the previous year.

Another fall of 20% is expected on specialist pig farms in 2011/12 following the marked fall of the previous year and despite an increase in output from firmer finished pig prices. Feed costs account for more than half of input costs here and have continued to rise in 2011.

DEFRA Farm Income figures

Better beef, milk and sheep prices are expected to bring significant increases in income on dairy and grazing livestock units, up by 27% and 30% respectively. However specialist pig and poultry farm businesses are expected to record a fall when the final figures are published in October.

Dairy farms on average should see farm business income increase by about a quarter compared to 2010/11 due to milk prices over the year being about 10% higher, along with firmer prices for breeding heifers, beef cattle and cull cows. Increased feed and fertiliser costs were more than offset by higher output, said DEFRA.

Firmer prices for fat and store cattle, high finished lamb and cull ewe prices are the main contributors to better grazing livestock unit performance, although the difference between opening and closing valuations for trading livestock will boost these results.

Although output on specialist poultry farms and broiler units is expected to increase it will be offset by the increased costs of production, particularly feed, pushing average income here down by about 8%.


Farm business income

Farm business income is broadly equivalent to net profit and represents the financial return on capital invested in the farm business, including land and buildings. It attributes a value to manual unpaid labour but does not account for unpaid management time.  

Mixed farms are expected to see farm business income rise by about 7% from higher output values across all enterprises but particularly from cattle rearing and combinable cropping.

A strong overall performance from farming was in contrast to the performance of the wider economy, said NFU chief economist Phil Bicknell, who cautioned that the results would contain much regional variation.

“All farmers have faced significantly higher operating costs over the last year, with the 18 % increase in fuel costs and the 20% rise in fertiliser prices the most significant.

“The farming industry remains susceptible to a range of factors. Even with some of the improvements indicated by these forecasts, we’re still talking about returns on assets in the range of three to six per cent across farm types.

“Amidst continuing Eurozone uncertainty, farmers will be conscious of the link between farm profitability and changes in currency. Nonetheless, these figures and the long term drivers for agricultural markets give cause for optimism, certainly when compared to other areas of the economy.”

Average farm business income across all farm types in Northern Ireland is expected to increase by 5% to £30,673 in 2011/12, with higher milk prices and a 6% higher output contributing to better results on dairy farms.

However, cereals, cattle and sheep in LFAs, along with lowland cattle and sheep units, pig producers and mixed farms will all see a drop in income.

Futures contracts: farmer views wanted

Do you use futures and options markets to help you manage risk? Or are you interested to learn more? Farmers Weekly is keen to find out the extent to which UK farmers use these markets. Complete our survey here.

Take the survey

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

View course
See more