The National Farmers' Union has warned that the agricultural industry needs mechanisms in place to deal with increasing volatility.
This is despite incomes remaining relatively stable through 12 months of political uncertainty, fluctuating prices and currency values.
New Total Income From Farming figures from Defra (TIFF) show UK farming’s profitability recorded an increase of 1.5% or £59 million in 2016 to £3.96 billion, following a sharp downturn in 2015.
The report says the weakening of the pound against the Euro drove an 18pc increase in the value of subsidy payments under the Basic Payment Scheme.
The scheme is set in Euros and converted to sterling each year using the exchange rate set by the European Central Bank every September.
The fall of the pound
The fall in the value of the pound has been a key driver in increasing average Farm Business Income across farming sectors.
It has been a driver in increasing income in the cereal sector, general cropping, mixed, specialist pig, lowland grazing livestock and grazing livestock farms in the Less Favoured Area (LFA) for the year ended 28 February.
The statistics show that average incomes are expected to have fallen on dairy farms due to lower milk prices and reduced output.
But the wider industry is still suffering from sharp rises in farm inputs, such as for feed, fertilisers and machinery.
'Living in volatile times'
NFU President Meurig Raymond said that in a time of uncertainty, agriculture needed a Government that would introduce a domestic agricultural policy to build a more profitable farming industry, by focusing on productivity, volatility mitigation and environmental measures.
“Although the overall profitability has recovered to certain degree, we are still far from seeing levels which will sustain a long-term and profitable farming industry,” said Mr Raymond.
“They also highlight that we are living in volatile times, where the economic outlook can change on a daily basis.
“With the General Election coming up very soon and as we head towards Brexit, it is crucial that political parties set out clear policies that work for farm businesses so we can ensure there is a profitable, productive and progressive agriculture and horticulture in the future.”
