‘Bleak’ fig­ures show farm in­comes fall by al­most half

The Oban Times - - Farming -

THE in­comes of com­mer­cial farms in Scot­land are es­ti­mated to have de­creased by 48 per cent in the past year, ac­cord­ing to a gov­ern­ment re­port.

The lat­est re­duc­tion in farm busi­ness in­come, a mea­sure of the re­turn to un­paid labour on com­mer­cial farms, con­tin­ues a five-year de­cline in av­er­age in­come.

The lat­est fig­ures, re­leased by Scot­land’s chief statis­ti­cian, ex­am­ine a num­ber of fi­nan­cial in­di­ca­tors for the ac­count­ing pe­riod 2015-16, which fo­cuses on the 2015 crop year. The re­sults are based on an­nual au­dits of 500 com­mer­cial farms in Scot­land.

NFU Scot­land’s di­rec­tor of pol­icy Jon­nie Hall said: ‘These bleak in­come fig­ures pro­vide hard ev­i­dence of the sus­tained fi­nan­cial dam­age to farm busi­nesses across a range of sec­tors. Anec­do­tal com­ments and sus­pi­cion around how dif­fi­cult it has been for farms and crofts to make a profit in re­cent times are now backed by fact.

‘The vi­a­bil­ity, let alone prof­itabil­ity, of ev­ery Scottish farm­ing busi­ness re­lies on three cogs work­ing to­gether – costs, mar­kets and sup­port.

‘Given the de­te­ri­o­ra­tion in farm in­comes, the ev­i­dence is now clear that no part is cur­rently work­ing for farm­ers or crofters. Whether pro­duc­ing live­stock, crops, milk, poul­try, pigs, fruit or veg, farm­ers and crofters con­tinue to face ris­ing in­put and com­pli­ance costs, de­clin­ing mar­ket re­turns and an ero­sion of sup­port pay­ments that are con­spir­ing to threaten the very ex­is­tence of many.

‘These fig­ures high­light the ab­so­lute re­quire­ment to drive down all costs, en­sure a much fairer share of the mar­gins in the sup­ply chain to the pri­mary pro­ducer, and the vi­tal need for governments to com­mit to on­go­ing sup­port tar­geted at ac­tive farm busi­nesses.

‘As we en­ter a pe­riod of even greater un­cer­tainty, with the po­ten­tial to fur­ther un­der­mine con­fi­dence, it is es­sen­tial that pro­duc­ers are given un­equiv­o­cal signals that new trad­ing deals and sup­port ar­range­ments will put the pros­per­ity of farm­ing busi­nesses top of the agenda.

‘There is also a fur­ther onus on those fur­ther up the food and drink chain to ur­gently ad­dress the im­bal­ances. Scot­land’s food and drink sec­tor, lauded for its on­go­ing suc­cess and am­bi­tious tar­gets, must start to de­liver for those at the far­m­gate and who have seen their in­comes fall by more than 75 per­cent since the start of the decade.’

Es­ti­mates from the Scottish Gov­ern­ment’s an­nual farm busi­ness sur­vey show that the av­er­age farm busi­ness in­come was £12,600 in 2015-16, rep­re­sent­ing a drop of £11,500 from the pre­vi­ous year. Since a peak in in­come in 2010-11, com­mer­cial farms’ in­come has de­creased 75 per cent in real terms.

There was less spend­ing on in­puts in 2015-16 com­pared to the pre­vi­ous year. How­ever, there was a big­ger de­crease in crop and live­stock pro­duc­tion on av­er­age for all farm types. This, com­bined with a re­duc­tion in grants and sub­sidy pay­ments and less favourable mar­ket prices, es­pe­cially for dairy farms, cre­ated a down­ward pressure on prof­itabil­ity from agri­cul­ture.

Be­tween 2014-15 and 201516, rev­enue from di­ver­si­fied activities in­creased by 19 per cent to £2,800. Di­ver­si­fied farm busi­nesses achieved in­comes, on av­er­age, £11,000 higher than non- di­ver­si­fied farms. The most com­mon di­ver­si­fied ac­tiv­ity was rent­ing out build­ings (other than for tourist ac­com­mo­da­tion).

The ba­sic pay­ment scheme re­placed the sin­gle farm pay­ment scheme in 2015 as the method of al­lo­cat­ing funding through di­rect pay­ments. The av­er­age value of all grants and sub­si­dies in 2015-16 was £ 38,100, a fall of six per cent on the pre­vi­ous year.

Gen­eral crop­ping farms had the high­est av­er­age farm busi­ness in­come in 2015-16, at £24,100. How­ever, this was still an 11 per cent de­crease on the pre­vi­ous year. Be­tween 2014-15 and 2015-16 all eight farm types ex­pe­ri­enced a de­crease, with dairy farms ex­pe­ri­enc­ing the largest de­crease, on av­er­age down 97 per cent.

This was largely due to the drop in milk prices over the past year from an av­er­age of 30p per litre in 2014-15 to 21p per litre in 2015-16. Mixed farms had the sec­ond largest per­cent­age de­crease in av­er­age in­come, down 81 per cent.

Con­vert­ing the in­come es­ti­mates to hourly in­come for un­paid labour, such as farm own­ers, fam­ily mem­bers and busi­ness part­ners, shows the in­come gen­er­ated from 59 per cent of farm busi­nesses wouldn’t have been enough to meet the le­gal min­i­mum agri­cul­tural wage for paid work­ers.

Farm busi­ness in­come is the pri­mary mea­sure of farm level in­come in the UK but has only been cal­cu­lated since 2009. A re­lated mea­sure, Net Farm In­come, has a longer se­ries and shows the av­er­age net farm in­come in 2015 was the low­est since 1999-2000, when ac­count­ing for in­fla­tion.

Av­er­age debt lev­els are fairly low, with li­a­bil­i­ties equal to 10 per cent of the value of as­sets. The av­er­age net worth of Scottish farm busi­nesses is es­ti­mated at £1.3 mil­lion.

Pro­vi­sional na­tional level in­come es­ti­mates re­leased in Jan­uary showed a £122 mil­lion de­crease in in­come from the farm­ing in­dus­try in 2015 and an es­ti­mated in­crease in 2016 of £96 mil­lion, in­clud­ing a £ 53 mil­lion in­crease in sub­sidy lev­els.

While cat­tle and milk prices have de­creased, ce­real prices have re­cov­ered since a de­crease in 2015 and potato and lamb prices have in­creased. The sur­vey does not in­clude in­for­ma­tion on pig, poul­try and hor­ti­cul­ture sec­tors.

NFUS di­rec­tor of pol­icy Jon­nie Hall.

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