Farm income surged by more than 40 per cent last year, with an increase in the milk price making a significant contribution to the improvement.
First estimate of total income from farming (TIFF) in the United Kingdom in 2017 suggests that TIFF increased by 41 per cent in real terms compared with the previous year - from £4,060 million to £5,743 million.
The latest figure is the highest of any in the last seven years.
The figures were welcomed by NFU deputy president Guy Smith, who said the increased profitability of the industry is 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.
However, he said: “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.”
The TIFF report, which has been published by Defra, also remarked on the weakening of Sterling. The authors of the report said: “In 2017 the pound further weakened against the Euro and thus slightly boosted the value of basic payments made to UK farmers, which were 2.4 per cent higher than 2016.
“Payments are set in Euros and converted to Sterling each year using the exchange rate set by the European Central Bank every September. In 2017 €1=85.2p compared to €1=73.1p in 2016.”
Value of all outputs
The report indicated that the value of all outputs, in real terms, rose by 10 per cent to £26,340 million.
A 12 per cent rise in crop output was driven by increases in both prices and production for cereals and industrial crops. A seven per cent increase in livestock for meat was driven by price increases and a 24 per cent increase in livestock products was driven by an increase in milk price, it said.
The cost of intermediate consumption rose by 5.1 per cent, due to higher cost prices. Animal feed, fertiliser and energy were the main contributors to this increase. This led to a 20 per cent (£1,698 million) rise in gross value added at basic price to £10,300 million, said the report.
“Incomes tend to be volatile and following an overall upward trend from the year 2000, income fell in 2015 driven down by lower prices and a less favourable exchange rate and despite the exchange rate strengthening in 2016, commodity prices did not recover enough for incomes to improve,” said the report's authors.
“In 2017 incomes are estimated to be slightly ahead of the 2013 figure, as the pound weakened further, which helped commodity prices rise and added to the value of payments under the Basic Payment Scheme.”
Current climate
Guy Smith has questioned whether the improvement in 2017 can be sustained in the current climate.
“In addition to the effects of the recent wet weather, the cost base of the industry has been rising,” he said.
“Some farm commodity sectors are also witnessing falls from the recent historic highs seen in 2017. Milk price, for example, has fallen nearly eight per cent in the past three months.
“Lower farm gate prices will feed through to a lower bottom line for 2018 and it would be reckless to draw from these figures that farming is entering a period of sustained profitability,” he said.
“In order to put farmers in the best position to continue producing food for the nation, this sort of volatility needs to be addressed in future agricultural policies.”
He said that TIFF figures illustrated the importance of the agricultural industry to the UK economy. The report showed that agriculture contributed £10,300 million to the national economy (gross value added) - an increase of 20 per cent compared with the previous year.
“This is positive news for the farming sector and very clearly demonstrates the significant contribution agriculture makes to the wider economy,” said Guy Smith.
“As the NFU prepares to submit its consultation response to government on a future farming policy, these newly released figures provide further evidence that a new agricultural policy must allow farm businesses to be productive, profitable and progressive,” he said.
Output of crops
Overall output of crops value rose by £1,178 million or 14 per cent to £9,508 million, with increases seen in all crops.
Cereal harvests were up on last year, as yields and cropped areas mostly increased. Prices continued to improve in 2017, following the price increases seen in the latter part of 2016, and for the year were higher overall.
The value of wheat rose by £368 million to £1,992 million. The harvest was average, quality good and a higher yield somewhat compensated for a 1.7 per cent reduction in planted area, resulting in volumes up by 2.7 per cent. Price rose by 19 per cent, as the higher prices seen in the second half of 2016 continued through 2017.
The value of barley rose by £194 million to £893 million, driven by both price and volume. The barley planted area was 4.9 per cent higher, yield was slightly up on 2016, resulting in an 11 per cent rise in volume. Price was 15 per cent higher.
Oilseed rape rose in value by £223 million to £764 million, driven by higher production and price. Yields matched the record high of 2015 and compensated for the reduction in area, resulting in a 23 per cent increase in production.
The value of sugar beet rose by £78 million to £228 million, driven by volume. The abolition of EU sugar quotas led to a 30 per cent increase in cropped area and a 58 per cent rise in production.
Potatoes rose in value by £86 million to £897 million. A 4.5 per cent increase in planted area and higher yield contributed to this rise, which led to year end stocks at their highest recorded level. As a consequence price fell by 4.2 per cent.
The value of vegetables increased by £47 million to £1,456 million, driven by small increases in price and volume. Higher production and price resulted in the value of fruit increasing by £60 million to £759 million.
The total value of output of livestock was 13 per cent higher at £14,412 million.
Milk, meat, eggs
The value of milk increased in value by £1,044 million to £4,344 million. Production was four per cent higher, as increased yield offset a fall in dairy numbers.
The average price of milk in the 2017 calendar year was 28.86 pence per litre - 6.12 pence pr litre higher than 2016 and the highest annual price since 2014.
The value of eggs rose by £21 million to £624 million, entirely volume driven as throughput at egg packing stations rose by 4.2 per cent whilst price remained fairly stable.
The value of livestock primarily for meat rose by £643 million, with increases seen in all sectors. The value of cattle meat increased by £225 million to £2,989 million. This was entirely price driven as production was slightly down on the year.
Pig meat rose in value by £230 million to £1,329 million. This rise was entirely due to a 23 per cent rise in price as a result of tightening supplies in the EU. Production levels fell by 1.6 per cent, although carcase weights were slightly heavier.
The value of sheep meat rose by £46 million to £1,197 million. This was driven by both price and volume. The weakening of Sterling made exports more competitive, pushing prices up.
Poultry meat rose by £136 million to £2,418 million. This was also driven by both price and volume. A fall in turkey meat production was more than offset by the rise in broiler production.
