Non-farming income set to become more important

Non-farming income is becoming increasingly important to some farming households, according to the NFU.

A DEFRA Farm Business Survey of 2011-12 found 78% of the total income for farm households came from the farm. However, 92% of farm households had a second income off-farm from a spouse or partner.

Phil Bicknell, chief economist at the NFU, said the fact these figures were released 18 months after being gathered meant the situation had changed for most farming sectors.

“DEFRA is predicting around a 40% drop in dairy incomes for example [since the data was gathered], meaning non-farming income will become much more significant in the future,” he said.

“I think it will start to account for an increasing proportion of household income and will be more responsible for paying for household expenditure.”

In 2011-12, 25% of farming households already had a higher income from non-farming sources than coming from the farm (including any diversifications).

DEFRA suggested in these cases the farm could be seen as less important than the other income.

“In these households, the farmer’s attitude to the farm business might be different to those where the main source of income is from the farm business. For example, the farm businesses might be seen as a lower priority,” said the report.

The average household income was £63,300, a 9% increase on 2010-11, due to the rise in farm business income, according to the report. Non-farm income had remained largely unchanged at £14,000-15,000 a household.

The figures, which were gathered before last summer’s milk price crisis, showed dairy farms had the highest average household income at £86,500 – a 24% increase on 2010-11. Cereals and horticulture households were not far behind. All farming sectors saw a rise, except pig, poultry and general cropping, which fell on average.

The report also warned that examining average household incomes could hide information about the wide range of incomes.

For example, 2% of farm households had negative incomes, less than the 4% in the previous two years, while 17% of farming households had incomes of more than £100,000.

The report also noted:

• The average salary for farms with sole proprietorship, 66% of all farms, was £22,400, while the average farm business income (FBI) was £25,200. The top 25% of these took a salary of £45,500 on an FBI of £74,000, while the bottom quarter took £15,600, despite an FBI of just £8,400 on average.

• Tenant farmers took the highest salaries, at an average of £25,800, while owner occupied business drawings averaged £19,000. This compares with FBIs of £19,600 and £22,100 respectively.

• FBIs rose around 15% in 2011-12, after higher prices for cereals, oilseed rape and milk.

• More than a third of farmers were taking a bigger salary than their farm income in 2011-12, borrowing more or taking from previous years’ profits.

• The figures were going in the right direction, said the NFU. In 2009-10, 50% of farmers drew more than the total business income, with this figure falling to just over 40% in 2010-11.

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