Farm incomes increased for all types except specialist pig farms
THE Department of Food and Rural Affairs (DEFRA) publishes data on farm business incomes on a regular basis, and on October 31, it published the survey results for 2017/18, which covered the 2017 harvest and included the 2017 Basic Payment.
The key results are that the 2017/18 average farm business income increased for all farm types, except for specialist pig farms.
The primary reason for this was the devaluation in the Pound following the Brexit referendum in 2016, the aftermath of which agriculture is currently benefiting from today.
The change in exchange rate has led to price rises for a number of commodities and an increase in the value of the basic payment.
The value of the basic payment is defined by the EU in Euros and then converted to Sterling to be paid to UK farmers, based on the average Euro/Pound exchange rate during September in any one year.
On this basis, the average basic payment paid to UK farmers in 2017/18 was £31,700, which represents a 13 per cent increase on 2016/17.
Specialist cereal and general cropping farms, in addition to increased Basic Payments, benefitted from increased crop output, which was influenced by a combination of higher yields, prices and areas planted for most crops.
This was offset to a certain extent by rises in input costs.
However, the average income for these farm types increased by 49 per cent and 33 per cent to £64,200 and £93,300 respectively.
After a series of disastrous years, the dairy sector bounced back in 2017/18 with profits more than doubling, giving an average return of £119,700 per farm.
This improvement in fortunes was largely driven by an average rise in milk price of 23 per cent and higher volumes of production.
However, a huge gulf still remains between the top and bottom performing dairy farms, and with milk prices looking likely to remain volatile there is still concern about the viability of some dairy businesses.
Similarly, on lowland grazing livestock farms, although incomes increased by 36 per cent to an aver- age profit of £21,700 per farm, the basic payments still remained the single most significant element of these farmers’ incomes and despite stronger livestock prices, the activity of “farming”, excluding support payments, still lost money.
This exposes how vulnerable these businesses will be as we exit the EU and the direct payments currently received via the Basic Payment Scheme are gradually phased out.
It is also a sobering thought for farmers that if we do ever reach a satisfactory deal with the EU over Brexit, the value of Sterling is likely to rise, which historically has been bad news for farmers, although it is anyone’s guess what will happen on this front over the coming weeks and months.