Market volatility takes its toll on Welsh farm incomes

Increased volatility has been highlighted today with the latest Welsh Government Farm Income forecasts predicting a decline in the profitability of farming across all sectors.

The figures, based on Farm Business Survey results for 2013-2014, show that average farm business income across ‘All Farm Types’ is forecast to decrease from £29,000 in 2013-2014 to £22,200 in 2014-2015 - a decline of around 24%.

For dairy farms, average farm business income is forecast to decrease by around 23%; cattle and sheep (LFA) farms are forecast to decrease by 22% to £15,000 while farm business incomes on cattle and sheep (lowland) farms are expected to decline from £28,600 to £23,100.

NFU Cymru President Stephen James said, “The industry saw falling farm-gate prices across all commodities during 2014. These figures provide the first official indication of the financial impact on Welsh farm businesses and highlight the cash-flow challenges that farmers are likely to face in the coming months.

“These are challenging times across all sectors - market volatility, a strong pound and significant cuts in direct payments as a result of the pillar transfer decision have taken a heavy toll on the industry over the past 12 months. The support of Government, banks and the supply chain is crucial to help us come through these difficult times.”

Mr James continued, "The GVA (Gross Value Added) figures from agriculture show increases of around 15% from £325.2 million in 2013 to £374.3 million in 2014. NFU Cymru believes this provides strong evidence of the positive contribution that agriculture makes to the economy of Wales.

"The opportunities for Welsh farming are clear – in the longer term global and domestic demand for food is set to increase. But for Welsh farmers and the economy of Wales to benefit, we need Welsh Government to establish the right conditions through its policy and regulatory framework.

"The Rural Development Plan 2014-2020 provides an immediate opportunity to put in place a suite of measures that support on-farm investment and enhance the competitiveness of agriculture and we look forward to the implementation of the schemes over the coming months."

FUW President Emyr Jones said: “The combined impact of reduced farmgate prices, the Welsh Government’s 15% Pillar Transfer, a reduced CAP budget and a Single Payment exchange rate of £0.7773/€1 has had a catastrophic impact on farm incomes.

“The fact that sterling is continuing to strengthen against the Euro means there is ongoing pressure on prices, with the situation in relation to Greece not helping.”

Mr Jones said that the Union’s vociferous objection to the reduction of direct farm payments by 15% (the ‘15% pillar transfer’) was well publicised, but the decision could not now be overturned.

“We cannot control the exchange rate, and despite our fierce lobbying against it, the decision to transfer 15% has been made. The only area where there is flexibility to act is in terms of ensuring Rural Development funds are directed at bringing farm incomes back up, and not squandered.”

Mr Jones said that further changes to direct payment rates which would be decided upon over the coming months would also add to uncertainty and disruption for the industry, and would inevitably put further downwards pressure on many farm incomes.

“The figures announced today should come as a wake-up call to all those within Welsh Government who have not yet recognised the need for an RDP which is totally focussed on boosting the efficiency and profitability of farms.”