Farm Incomes Rise in 2013

DEFRA has released some surprising farm income figures for the 2013 year.  The first estimate of Total Income from Farming (TIFF) for last year was £5,464 million – up 13% on 2012.  We stated at the time (see Bulletin 05(14)) that this looked rather high and we had been expecting a downwards revision to get to a figure closer to £5bn.  However, rather than the revised figures being pared-back, a further uplift has been seen.  TIFF for 2013 is now estimated to have risen by 15% to £5,638 million. This makes 2013 more profitable than 2011 and, in fact, the most profitable year since 1996!

Delving into the figures we see some inconsistencies.  DEFRA’s own data puts cereal production lower in 2013 than in either 2012 and 2011, yet output from cereals has risen year-on-year in the latest figures by 6%.  Other oddities include an almost 40% rise in potato revenue, and a fall in equipment and machinery depreciation for the year.  A £504 million increase has also been seen in milk output; this looks a little steep considering prices didn’t rise significantly until the second half of 2013.

The aggregate balance sheet has also been published. The industry has seen net worth increase by 11.7% between 2012 and 2013. The majority of this increase has been due to the rise in land values. Land values have increased from £74.2 billion in 2003 to £223.3 billion in 2013.  This equates to a £14.9bn increase each year. Overall liabilities have fallen by around £200 million.

The next estimate could see a revision in the 2013 TIFF figure but is unlikely to drop significantly to the level we had expected.  We have previously forecast that TIFF for 2014 year could drop to around £4.7-£4.8bn.  This would be a fall of around 15% from the (revised) 2013 position.  Given the higher starting point, the reduction may not be quite so great, but we would certainly expect a figure close to, or below, £5bn.  However, according to DEFRA’s figures, we were way out with our 2013 estimate, so who knows what the final result will be!?  But other industry commentators are equally puzzled by the official statistics.  The first DEFRA estimate for 2014 will be published in April/May.

Looking further ahead, our thoughts for 2015 currently suggest a further decrease in profitability.  A reduction of 6-8% would put TIFF in the region of £4.4bn.  This would be the lowest level since the step-up to the new ‘plateau’ of profitability in 2008.  However, it needs to be remembered that this is still a far better performance than any of the years from 1997 to 2007.  The full DEFRA publication can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/379757/agriaccounts-tiffstatsnotice-27nov14.pdf 

Total Income from Farming is the profit from all YK farming and horticultural businesses.  it operates on a calendar year basis and measures the return to all entrepreneurs for their management, labour and capital invested.  In simplistic terms, it can be considered the profit of ‘UK Agriculture Plc’.