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Average farm incomes drop below £20,000 as market woes bite

Defra’s first estimate of the 2015 UK farm income figures makes sorry reading for farmers, confirming the impact at farm level of the global downturn in commodity prices
Farm incomes were hit by the global downturn in commodity prices
Farm incomes were hit by the global downturn in commodity prices

Average UK farm incomes fell below the £20,000 mark in 2015 for the first time since 2007 as the market downturn wiped 29 per cent off the industry’s bottom line, according to official Defra estimates.

 

The 2015 UK Total Income from Farming (TIFF) of £3.769 billion was £1.526bn down on the 2014 figures, the first estimate for 2015 showed.

 

The 29 per cent reduction was driven by the fall in commodity prices reduced direct payments resulting from the less favourable euro/sterling exchange rate.

 

The average income per farmer is also estimated to have fallen between by 29 per cent in real terms last year to just £19,471, compared with about £27,000 in 2014 and £28,000 in 2013. It is the lowest figure since 2007, when farm incomes average just £14,000.

 

The worrying figures show, despite a big fall in the fall of direct payments in 2015, farmers relied on support for three-quarters of their income in 2015, up from 55 per cent in 2014.

 

Ironically, favourable growing conditions produced good crop growth and record yields in 2015. But this was heavily offset by lower commodity prices due to increased global production and stocks resulted, resulting in a big fall in output.

 

It is estimated that the net value of Basic Payments were 7.5 per cent lower in 2015 than Single Payments were in 2014, largely on the back of .

 

Key contributors

The key contributors to the change were the decreases in:

 

  • Dairy incomes by £931 million
  • Wheat by £432m
  • Pigs by £186m
  • Subsidies by £150m
  • Sugar beet by £142m.

 

This was to a small extent offset by a decrease in energy costs of £215m and animal feed costs by £201m.

 

But Labour, rent and interest rises further contributed to the overall fall in farm incomes.

 

Gross value added at basic price, which identifies agricultures contribution to the Gross Domestic Product (GDP), fell by £1.374bn to £8.495bn, a 14 per cent decrease.

Despite the fall in the value of direct payments by £150m to £2.8bn, farmers’ reliance on the payments grew as commodity prices fell – in 2015 subsidies accounted for about three-quarters of overall farm income, with considerable variation within that among individual farms.

 

TIFF is the income to those with an entrepreneurial interest in the agricultural industry, typically farmers and partners. A second estimate incorporating data that becomes available later in the year will be published in November.

 

Alarming

NFU chief economist and international affairs adviser Gail Soutar said the ’alarming’ figures must serve as a ’wake-up call’ to Government and the supply chain.

 

She said: "They remind us that farmers up and down the country and across the majority of sectors are dealing with the impact of devastating cuts in the value of their products.

 

"Lots of farm businesses find themselves in a loss-making situation. If prices and profitability don’t change, it is not just those farms that are at jeopardy, but our food processing sector, our rural communities and the environment.

 

“The numbers must serve as a wakeup call to others in the supply chain and government.

 

"We need everyone in the food supply chain to intensify their efforts to back British farmers. For example we need longer term relationships that deliver some certainty on pricing and give farmers the confidence that food production can be profitable.

 

"And we need government to do all it can including making sure that farmers don’t face the same crippling delays to farm payments that they have in 2015, with immediate action for those still waiting for 2015 payments to arrive."


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