Gloomy forecast as farm incomes set to fall – yet again
Gloomy forecast as farm incomes set to fall – yet again
TIGHTEN your belts because the worst is still to come.
That is the stark message to farmers from Deloitte and Touche, which predicts that after the 23% drop in farm incomes in harvest year 1996, a further 49% fall is still to come.
Figures from the accountants survey of clients covering 100,000ha (247,100 acres) of mainly English lowland, reveal average income fell to £278/ha in 1996.
Even the top quarter of the group saw an 18% drop to £587/ha. And the bottom quarter slipped into the red for the first time in four years, making a loss of £11/ha.
Deloitte and Touches Vincent Hedley Lewis pointed to the strength of sterling and variable wheat values, with June 1996 prices of £126/t replaced by £90/t at Christmas. (Yields were, however, the highest ever recorded at 8.52t/ha.)
"Those people that didnt sell early had to sit on the combine and watch the price fall."
The worst-hit sector was potatoes, where there was typically a 65% decline in profits. Some growers, who only the previous year had been near the top of the survey, found themselves near the bottom.
The sign of things to come, says Mr Hedley Lewis. "Potatoes will be an occasional bonanza between very bad years. They are a high risk, very technical business. If you play with potatoes, you are playing with fire."
Looking ahead in other sectors, dairy farmers will feel the big squeeze this year, with milk price budgeted to be 22p/litre.
And, with a predicted wheat price of £90/t, the mixed wheat and dairy producers could see 90% slashed from their bottom line, leaving £91/ha profit.
Farmers must hit back by scrutinising overheads – particularly labour, power and machinery, which typically account for two-thirds of the total.
"Unfix the fixed costs," urged Mr Hedley Lewis, suggesting starting with permanent labour, overtime and machinery purchase and repair policy.n
Vincent Hedley Lewis: Playing with potatoes is like playing with fire.
£/ha
95/9696/9797/98*
Combinable354302168
Combinable +
roots46216039
Dairy and
arable22730191
Average363278142
*Forecast
Source: Deloitte & Touche.