Farm Profitability in 2015

DEFRA’s first estimate of Total Income From Farming (TIFF) for the UK for 2015 shows that farming profitability fell by 29% between 2014 and 2015 in real terms.  This gives a return to the entire industry of just under £3.8bn.

The data comes from the latest Total Income From Farming Figures (TIFF) figures.  TIFF shows the total profits from all farm businesses in the UK on a calendar year basis.  It is the return to all the entrepreneurs in agriculture and horticulture for their labour, management and capital invested in their businesses.  The series has been running for over 40 years and is generally regarded as the benchmark for the financial health of the sector.  Despite the use of the word ‘income’ it can be thought of as the overall profit of the farming industry.

With prices continuing to drop across-the-board in 2015, the fall is expected, but is a little more than we had been forecasting (about £4bn). Total crop output has fallen by 8%.  Most crops experienced a fall, only oilseed, protein crops and fruit & vegetables increased.  Better growing conditions in 2014 and 2015 led to two good harvests, but commodity prices have fallen due to increased global production and stocks leading to the fall in output in 2015.  Oilseed rape rose for the first time in three years, but this was entirely because of good yields.

Much has already been said about the fall in milk prices, which started in 2014.  Output from milk is shown to have fallen by 20% between 2014 and 2015.  The value of livestock ‘primarily for meat’ decreased in all sectors apart from cattle.  Total livestock output fell by 9%. 

The strengthening of the Pound against the Euro in 2015 meant that the value of the Basic Payment was lower in 2015 compared with 2014, the last year of the Single Payment.

On the cost side, there have been further falls in energy costs (£215m) and animal feed costs (£201m) but not enough to offset the large falls in output.

Looking to the current, 2016 year, we have projected a small increase in profitability, based largely on the weakening of the Pound. Whist this has had minimal impact on output prices so far (impact on input prices has led the way so far),  it will add value to the Basic Payment Scheme payment, calculated in September. Otherwise, prices are not yet exciting.  There may be some uplift in the arable sector; however it may be 2017 before milk prices start to recover and meat prices are not very promising.  Although substantially less than has been for the last seven years, it should be remembered that this level of return is much better than was achieved in the late 1990’s and early 2000’s.

For the full statistics see – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/519745/agriaccounts-tiffstatsnotice-28apr16.pdf