UK farming income rises to £3.46bn, but tougher times lie ahead

Total income from UK farming rose by over a third last year to £3.46bn, according to provisional figures published by DEFRA today (29 January).

In real terms, TIFF increased 36.3% as higher input costs (namely energy, fertiliser and feed) were outweighed by a 25% increase in the value of farm products to £19.8bn. There was a particularly large increase in the value of cereal production in 2008, which jumped by more than 65% to £3.2bn, largely due to increased area and higher prices last harvest.

The livestock sector also fared well, again largely due to better prices. The total value of cattle production increased by over a quarter to £2.1bn, while the value of sheep and lambs increased 29% to £822m, poultry increased 23% to £1.5bn and pigs increased by 17% to £858m, the highest since 1998. The value of milk production also increased 22% to £3.5bn.

The NFU‘s Tom Hind said the news was encouraging as it should have allowed farmers to carry out some reinvestment in their business, but he doubted whether the performance could be maintained through 2009.

“On one hand exchange rates remain favourable and input costs, though stubborn, may be expected to fall. On the other hand a key contributor to improved incomes has been higher, livestock, dairy and cereal prices. Wheat prices fell substantially in the latter half of 2008 and dairy prices have started to come under pressure since the turn of the year, despite farmgate milk prices in the UK being below the current EU average.”

Indeed, DEFRA’s Farm Business Income figures, which compared performance across different types of English farming during the twelve month period from March 2008 to February 2009 showed that farm income across all types was expected to fall by 8%. Grazing livestock, dairy and specialist pig farms were forecast to have higher incomes while those on cropping farms were predicted to fall.

In Scotland, figures released by the Scottish Government showed that within the UK TIFF figures, there was considerable variation. North of the border, TIFF decreased by £11.9m in 2008 to £629.6m, a fall of 5.6% in real terms. This was largely due to higher costs – especially fertiliser and feed – outweighing better prices.

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

“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 per cent in the first few months of the year. Input prices remain high and there is much pressure from retailers on product prices.”

Widespread economic gloom was likely to lead to continued price competition and possible changes in consumption, which could affect farm profits, Mr Hind added. “What is clear is that volatility, the buzzword of the moment, is likely to be a feature for the foreseeable future and it will require all parts of the supply chain to find ways to ensure profitability levels can be sustained.”


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