Farm incomes rise but pressure looms for 2009
Farm incomes saw a very welcome improvement in 2008 according to figures published by Defra today.
Total Income from Farming (TIFF results)* show that farm incomes rose from £2.54 billion to £3.46 billion in 2008 an increase of 36.3 per cent in real terms. However, according to the results of the annual Farm Business Income (FBI)** survey, which estimate returns to individual farm businesses, farm income to the end of February is expected to fall by eight per cent showing that more difficult conditions can be anticipated through 2009.
Commenting on the farm income figures, NFU Head of Economic and International Affairs Tom Hind said: "After several years of low levels of profitability today’s news of a substantial increase in farm incomes last year is very encouraging and should have allowed farmers to carry out some reinvestment in their businesses which is essential in order to improve their productivity and secure greater environmental benefits.
"The reasons for this improvement range from higher commodity prices to a weak pound, which in turn has increased the cost of imports and increased the value of farmers’ direct payments.
"Whether this improvement can be maintained through 2009 is highly debatable. On the one hand exchange rates remain favourable and input costs, though stubborn, may be expected to fall. On the other hand a key contributor to improved incomes has been higher, livestock, dairy and cereal prices. Wheat prices fell substantially in the latter half of 2008 and dairy prices have started to come under pressure since the turn of the year, despite farmgate milk prices in the UK being below the current EU average.
"In addition, the gloom over the British economy is bound to result in some changes in consumption patterns and ensure that price competition remains fierce, both of which will have an impact on farm profitability. What is clear is that volatility, the buzzword of the moment, is likely to be a feature for the foreseeable future and it will require all parts of the supplychain for find ways to ensure profitability levels can be sustained."
