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Anthony Gibson: Sorry tale of incomes falls from new figures

By Western Morning News  |  Posted: February 06, 2013

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One of the best indicators of the winners and losers in any farming year are the Farm Business Income figures, which have just been published for the calendar year 2012.

Not that there were any winners in that annus horribilis agricolae, only varying degrees of pain, but you will understand what I mean.

That every type of farm suffered a fall in profits is hardly a surprise, especially as the Single Farm Payment was down by 10% due to the stronger pound. What is alarming, though, and could cause significant tensions within the industry, is the widening gulf between cereals and livestock.

According to the survey, the average cereal farm suffered an 11% fall in profits last year, to £84,000. But dairy farms saw their incomes cut by 42% to £50,000, while hill livestock farming families fared worst of all, losing more than half of their profits, and being left with only £14,000 out of which to pay themselves. At two full-time equivalents, each working 60 hours a week, it works out at £2.24 per hour. The National Minimum Wage is £6.19 per hour.

The picture becomes even starker if you look at the income per hectare for the four main farm types in the South West (and I've adjusted the 2011 figures from the Farm Business Survey by the 2012 percentage change): cereals £320 per hectare; dairy £309 per hectare; lowland livestock £122 per hectare; and hill livestock £99 per hectare.

In its response to the latest figures, the NFU says that they "serve as a timely reminder that Single Farm Payments act as a lifeline for many farm businesses and play a vital role when it comes to adapting to increasingly-volatile agricultural markets".

Well, up to a point, Lord Copper. But if the Single Farm Payment is an income-support measure, as that comment implies, I don't quite see the point of making a higher payment of £202 per hectare to the still nicely profitable cereal grower, than the £179 per hectare which is all that the struggling hill farmer receives. (And nor, incidentally, does it make any more sense if you take the opposite tack and regard the SFP as a reward for environmental performance).

We don't have to look very far for an explanation for this depressing state of affairs. With cereals, oilseeds and potatoes, higher costs and lower yields were offset by significantly higher prices; with beef, milk and lamb, they were not. Indeed, sheep farmers saw prices fall by over a quarter, due to a very modest increase in production at home, and a massive increase in imports from abroad, from New Zealand especially.

I wish I could be more optimistic about prospects for the year ahead. But the recovery in milk prices seems to have stalled, beef prices are not expected to strengthen until later in the year, and the price of lamb is still bumping along the bottom. For arable farmers, the chances are that the main problems will be agronomic rather than economic, but even sky-high prices aren't much of a consolation if you've only got half a crop.

There is one bright spot, and that is the exchange rate. At the start of this week, the Pound had fallen by 10% from its 2012 high against the Euro. That will boost exports – which are vitally important for lamb – and make imports less competitive, ditto for beef, pigs, poultry and milk.

But if confirmation were ever needed that, despite all the wonders of modern technology, farming is still a hugely weather-dependent industry, then the farm business income figures certainly provide it.

And yes, farmers will have been more than usually grateful for their SFP cheques, always assuming they've arrived.

Anthony Gibson is a freelance writer and may be contacted at anthony.gbsn@googlemail.com

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