The Courier & Advertiser (Fife Edition)
Farm businesses need to diversify
Scottish farm businesses will most likely need to diversify in order to survive falling commodity prices, claims a leading economist.
According to the Bank of Scotland’s chief economist, Donald MacRae, there is little prospect of an increase in commodity values in the next 10 years.
In his latest economic bulletin Mr MacRae refers to a report from the United Nations’ Food and Agricultural Organisation (FAO) and the world economic organisation OECD.
The report suggests that in real terms, prices for all agricultural products will decrease over the next 10 years.
“The main reason is that growth in production, helped by productivity growth and lower input prices, will outpace increases in demand,” he said.
“But prices are projected to remain at a higher level than in the years preceding the 2007-08 price spike.
“The message from the OECD-FAO is that farmers should budget for declining prices in real terms for agricultural products in the short and medium terms.”
As a result of the falling prices, Mr MacRae said diversification would become more important to Scottish farming businesses.
He said off- farm income had contributed between 16 and 24% of total farm income over the last five years, delivering an average income of £4,000.
“Almost half, 43%, of diversified activities were renting out buildings for other uses than tourist accommodation, but it was income from land used for mobile phone masts that generated the greatest margins from diversification,” added Mr MacRae.
“Of the other separately identified activities, processing and retailing of farm produce was the least common activity, with only 2% of farms engaged in this activity. Micro-electric generation and wind turbines were the only activities which made an average loss, although the losses seen were not as high as in 2012-13.”
Scottish Government figures put average farm business income at £38,000 for diversified farm businesses, compared with £28,000 for nondiversified businesses.