Farm Business Income Falls

Farm profits have fallen significantly in most sectors in the past year.  This unsurprising result comes from the latest English Farm Business Income (FBI) figures just published by DEFRA.  The latest data is for the 2015/16 year which runs until February/March so includes the 2015 harvest.  At present the figures are initial estimates and will be updated in October, but the overall trends are clear.

FBI can be thought of as average profit for farms in a particular sector.  As the chart below illustrates, many of the figures show a fall.  Cereals’ returns drop by 24%; mainly due to lower prices.  General Cropping farms are expected to see profits fall by 17%.  In this sector, better potato returns last season offset a decline in sugar beet and cereals profitability.  The biggest falls are in the Dairy and Pigs categories, with drops of 45% and 46% respectively.  In both cases the fall in output prices has more than overwhelmed any fall in cost.  Bucking the general downwards trend is poultry where relatively robust prices, lower costs, and higher throughput have all contributed to a higher FBI.  Lowland Grazing Livestock is up slightly at +8%.  There has been a bigger increase in returns on LFA Grazing Farms, rising by 47% (albeit from a low base).  This can be largely attributed to the introduction of the BPS system which is paying higher rates on SDA and Moorland than the SPS did.

The chart below splits returns into four ‘profit centres’ for the previous two years.  This data is not yet available for 2015/16, but, given the level of overall profits, it seems highly likely that the profit from agriculture will be negative in the first five categories for the current year.

Farm Business Income (Real Terms, 2014/15 prices) – 2009/10 to 2015/16