Farm Incomes Resilient in 2012

UK farm profits fell by 14% between 2011 and 2012.  This is the headline figure from the latest Total Income from Farming (TIFF) figures produced by DEFRA.  TIFF shows the total profits from all UK farming businesses on a calendar year basis.  The series has been running for 40 years and is a useful guide to the overall financial health of the agricultural sector.  Although a fall was expected by nearly everyone in the farming industry after the poor weather and high costs of 2012, the drop is probably less than most thought likely.  We were predicting a fall nearer 20%.  However, these figures are only first estimates and have a history of large revisions.

The figures for 2011 started out at £5,693m.  When these were published last May we thought it looked too high and forecast that the final result for the year would be ‘nearer £5.3bn’.  The latest DEFRA figures show profits for the 2011 year now at £5,272m – a 7% change from the first estimate.

The profit for 2012 is put at £4,704m.  This is a 11% reduction on the previous year, or 14% when adjusted for inflation.  The reasons for the fall were a drop in thevalue of the Single Payment due to exchange rate changes (-£200m).  Total output actually went up (+£355m), but this was more than offset by higher costs (animal feed alone went up by £228m). 

There are reasons to believe that the 2012 figure may be revised downwards when the next set of data come out in November.  For instance, the output of cereals in 2012 is estimated to be marginally up compared to 2011.  Although prices have been high, this looks odd given the drop in output and quality from harvest 2012.  It should be remembered that these are calendar year figures, so perhaps it is assumed that the bulk of grain sales occured before Christmas.  This would leave little to fall into the 2013 calendar year so may end up depressing TIFF this year.  The release does state that the data on outputs is 90% complete, so perhaps changes will be limited.  However, only 30% of the data on ‘intermediate consumption’ (basically variable costs) is currently available, and that for ‘other costs’ is only 55% complete.  Thus there is scope for quite a lot of movement here.

We would estimate that the TIFF for 2012 might end up around £4.3-£4.4bn (this is a figure we have had for some time and see no reason to change it yet).  Looking ahead to the current year we still believe that there could be a slight uplift in overall profitability.  Although the problems with combinable crop plantings have been well-documented, we would expect some improvement in the returns from dairy, pigs, sheep, potatoes and fruit compared to 2012.

For more information on the TIFF figures see – https://www.gov.uk/government/publications/total-income-from-farming-in-the-uk