‘Bleak’ figures show farm incomes fall by almost half
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.