Farm business income survey shows exchange rate benefit

Defra has forecast farm business income for 2016/17, but says there is "not sufficient data to provide accurate forecasts" for horticulture.

Horticulture will be included in the October final figures.

Defra said it had been the case "for a number of years" that horticulture was not included in the forecasts but could not say why horticulture is not included in the farm business forecasts.

The forecasts for 2016/17 are derived from information available in early February 2017 for prices, animal populations, marketings, crop areas, yields and input costs and are intended as a broad indication of how incomes for each farm type are expected to move compared with 2015/16.

Defra said: "The fall in the value of the pound has been a key driver in increasing average Farm Business Income on cereal, general cropping, mixed, specialist pig, lowland grazing livestock and grazing livestock farms in the Less Favoured Area (LFA) - areas where farming is handicapped by geography, topography or climate and in which farmers are eligible for EU compensation.

"Average incomes are expected to have fallen on dairy farms due to lower milk prices and reduced output. Lower egg prices and higher feed costs are the main driver for a fall in average incomes on specialist poultry farms. The 2016 Basic Payment is expected to be around 19% higher than in 2015 for all farm types, reflecting the weaker exchange rate when payment rates in sterling were determined at the end of September."

Cereal farm business income is predicted to be up 7%, with general cropping including potatoes up 24%. This is because produce prices are higher while input prices are unchanged in the sectors.

Horticulture average farm business income in 2015/16 rose 11% to £35,100. Output fell, fixed costs such as regular labour reduced and diversification increased.

NFU President Meurig Raymond said that while many sectors had seen improved fortunes – mainly due to the falling value of the pound – the wider industry was suffering from sharp rises in farm inputs, such as for feed, fertilisers and machinery.

"It is good news that many sectors are currently seeing improved commodity prices. However, for all sectors these figures can quickly change and steep reductions in the dairy and poultry sectors only go to emphasise that farmers are in an extremely volatile sector," he added.

"Looking ahead, this uncertainty shows no sign of abating and there will be many challenges ahead as Brexit negotiations begin.

"With that in mind, I am calling on the government to ensure it can introduce a domestic agricultural policy which helps build a more profitable farming industry, by focusing on productivity, volatility mitigation and environmental measures, as highlighted at our conference last week.

"Our industry now needs certainty and firm commitments from government if the country is to feel the benefits of a thriving food and farming industry. NFU members want to deliver on a vision shared with Government for an increasingly profitable, competitive and sustainable food and farming sector. 

"We have been clear on what we believe is needed to achieve this.  Firstly unrestricted access to the European market, secondly continued access to a competent and reliable workforce both pre and post farm-gate and thirdly a new agricultural policy which assists in the development of an increasingly productive, progressive and above all profitable farming sector."

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