Deloitte & Touche report – analysis

12 October 2000

Deloitte & Touche report – analysis

By FWi staff

ALMOST every sector of farming will make a loss next year, according to a stark forecast made by accountants Deloitte and Touche.

Only a recovery in potato prices offers some optimism for a specialised sector of Britains farms, reveals the companys annual agriculture survey.

Analysis of accounts covering 100,000ha of land, mainly in England, show that average net farm incomes plummeted by 90% from a peak in 1995/96.

In 1999/2000, average net farm incomes were just 41/ha, a year-on-year fall of 16. They are the lowest since the annual analysis began 11 years ago.

Mark Hill, partner at Deloitte and Touche, said: “An average 200ha family farm, which five years ago earned 80,000, must now survive on little more than 8000.”

The statistics are based on accounts with year-ends up to 30 June, 2000. They are based on harvest 1999 results and subsequent income and expenditure.

The overall result for the year would have been considerably worse were it not for bumper 1999 harvests and agrimonetary compensation.

But the firm predicts that fortunes will decline still further. For the year ahead, it forecasts that net farm incomes will turn into losses of 22/ha.

A sector-by-sector analysis of the report shows that:

Combinable crops to slump

Net Farm Income (/ha)
  1998/99 1999/2000 Forecast 2000/2001
Combinable crops 47 115 -18

Growers of combinable crops enjoyed an increase in their average net farm income up from 47/ha to 115/ha. This was largely due to yield and quality increases.

For instance, average wheat yields rose by more than 15% to 9.18 tonnes/ha and, thanks to good quality, achieved an average selling price of 73/t.

Agrimonetary payments and no penalties on oilseed rape area aid also boosted the performance of combinable crops. But losses will be made next year.

Roots sector to remain low

Net Farm Income (/ha)
  1998/99 1999/2000 Forecast 2000/2001
Combinable & root crops 178 36 42

Bumper potato yields had the opposite effect for farmers who grow root crops.

Prices collapsed as an 11% increase in production took average net farm income from 178/ha to just 36/ha. Little recovery in incomes is expected.

Dairy incomes set to plummet

Net Farm Income (/ha)
  1998/99 1999/2000 Forecast 2000/2001
Dairy & arable 15 38 -86

No farm in the sample was involved exclusively in dairy production. Average net farm incomes rose for dairy/arable farmers from 15/ha to 38/ha.

This was largely due to arable returns supporting dwindling dairy profits. While yield per cow rose, this was insufficient to offset the continued drop in milk prices.

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