Friday, October 19, 2018

Recovery in farm incomes sees surge in profitability

May 31, 2018 by  
Filed under News & Business

Farm incomes soared last year – largely due to better farmgate prices buoyed by a further weakening in the value of sterling, according to initial Defra estimates.

First estimates for 2017 suggest Total Income from Farming rose by £1.68bn (41%) to £5.74bn during 2017. In total, agriculture contributed £10.3bn to the national economy – a year-on-year increase of 20% measured by Gross Value Added.

The main drivers were a 12% increase in crop production driven by better prices and higher output for cereals and industrial crops; a 7% increase in meat production; and a 24% increase in livestock products driven by better milk prices.

Encouraging signs

Overall productivity is estimated to have increased by 2.9% between 2016 and 2017 to the highest level recorded. The volume of all outputs increased by 3.6% compared to 2016 while the volume of all inputs increased by just 0.7%.

Defra said farmers were in a strong position ahead of Brexit and agriculture remained a profitable and rewarding business. The increased productivity recorded showed farmers were using smarter and more efficient methods and embracing innovation, it added.

Farm minister George Eustice said: “Estimates show 2017 was a good year for the farming industry, in particular those in the arable and livestock sectors. While the increase in farm gate prices has helped, it’s also encouraging to see signs that productivity is on the up.

Different challenges

“Farming is a volatile business and individual businesses will face many different challenges in a year, but these estimates show an industry ready to make the most of the opportunities leaving the EU will present.”

But the NFU said farming’s growing contribution to the economy was further evidence that the government needed to properly value to sector. Although farming profitability had increased, it was from a low base, said NFU deputy president Guy Smith.

“The increased profitability of our sector is particularly good news, as farmers have experienced a full year of higher commodity prices due to the devaluation of the pound which occurred after the EU referendum,” said Mr Smith.

Sustained performance

“It is important to remember that this rise comes after three years of falling profits and margins, and increased price volatility for many across the industry. However, the NFU is concerned whether this performance can be sustained in future years.

“In addition to the effects of the recent wet weather, the cost base of the industry has been rising. Some farm commodity sectors are also witnessing falls from the recent historic highs seen in 2017. Milk price, for example, has fallen nearly 8% in the past three months.”

Lower farmgate prices would feed through to a lower bottom line for 2018, said Mr Smith. “It would be reckless to draw from these figures that farming is entering a period of sustained profitability,” he added.

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