UK farmers face decline in profitability

Defra’s latest Farm Business Income forecasts predict a decline in the profitability of farming across the majority of farming sectors and serve as a warning as to how much agriculture is susceptible to increased volatility, the NFU have said.

The figures show a 13 per cent fall in incomes for dairy farmers. Similarly, the livestock sectors have suffered, with incomes on pig farms forecast to be down by 23 per cent and on poultry farms by 12 per cent. Forecasts indicate that grazing livestock farms are showing signs of recovery.

However, even with increases in income across the beef and sheep sector, profitability still remains at a very low level, with farm income in this sector projected to sit around £16,000. A marginal increase in incomes is also expected in cereal farm income.

NFU president Meurig Raymond said: “2014 has been a year where, across commodities, the industry has seen falling farmgate prices and these figures are the first official ones to indicate the financial impact on farmers.

“This challenging situation is particularly true for the dairy industry, where some farmers have seen dramatic cuts in the price they receive for their milk and where the difficult market conditions could force many out of the industry. I’m afraid this snapshot doesn’t fully capture the desperate situation faced by some farmers. The average figures mask the breadth of milk prices currently received by dairy farmers or the cash flow challenges that farmers face in the coming months.

“However, volatility is not entirely unique to the dairy sector. The price received by farmers for pig meat, wheat, potatoes, and oilseeds also plummeted in 2014. With the extent of those price shifts, alongside a stronger pound, it’s not surprising that farm incomes are down and at the same we see the confidence of farmers falling.

“Ultimately, having a financially viable business gives farmers the confidence to invest in the future and build resilience. With less than 100 days to the General Election, it’s clear that there is a vital role for the future government to work with farmers to support growth and send the right business signals to invest. The NFU has outlined a number of policy asks which are laid out in our Election manifesto.

“The opportunities for UK farming are clear – in the longer term global and domestic demand will increase. But for British farmers to benefit, we need the right policy and fiscal environment across government which encourages the sector to increase efficiency, develop and embrace technological advances, and take a long-term balanced view to investment.”

Following a strong 2013, Scottish farmers have seen their incomes fall dramatically last year which is causing a crisis of confidence in the industry, according to a new survey.

Rural Affairs Secretary Richard Lochhead said: "Agriculture is the cornerstone of Scotland's rural economy and it is disappointing that farming incomes fell last year after such strong growth in 2013 - although I note the longer-term trend is more encouraging with farm incomes more than doubling since 1998.

"Last year's drop in farm incomes will come as no surprise given the dreadful budget deal negotiated by the UK Government and subsequent reduction in Single Farm Payments.

"Cereals have been hit by the fall in world prices, however it's good to see that our farmers have been at least partly helped by bringing in a bumper harvest and by the fall in fuel, fertiliser and seed prices.

"There was a good potato harvest but a fall in consumer demand has seen a challenging year for the potato sector, where we have also seen a fall in income.

"The Scottish Government continues to do what we can to create the right conditions for Scottish farming to flourish but clearly we would be able to do more had Scotland received in full the 223 million euro (£166 million) convergence uplift that rightly belongs to Scottish farmers."

Uncertainty about new Common Agricultural Policy (CAP) reforms was also having a negative impact on the Scottish farming industry.

The Bank of Scotland report said 70% of farmers rated the service as 'poor or very poor.'

"These are clearly testing times for Scottish farmers. The fall in confidence in this year's survey reflects the current backdrop of depressed agricultural prices," said Donald MacRae, Bank of Scotland's chief economist.