UK farming made surprisingly good profits in 2023 according to Defra. The Department has recently released figures for Total Income from Farming (TIFF) – this is the aggregate profit for the whole UK farming and horticultural sector. The headline figure is that profits fell 16% in real terms between 2022 and 2023, but last year’s figures still came in at a very healthy £7.2bn – the third highest returns in the past 25 years.
The Defra figure for 2023 is much higher than we had been predicting. We had estimated that profits for the year would fall to around £5bn. Part of the reason is a sizeable upwards revision for the 2022 year (from 7.9bn to £8.6bn). This results in the 2023 figure being higher. There is a history of quite large revisions in the TIFF figures – we would not be surpised if those for the past year were amended in due course as well.
Both crop output and livestock output were down in 2023 compared to 2022 – by 16% and 7% respectively in real terms. (Both of these drops were lower than we had forecasted). Variable costs (called ‘intermediate consumption’ in these figures) showed a surpising drop of 9% year-on-year. The fall was wholly due to a big drop in the value of animal feed consumed on farm.
The chart below shows the evolution (in real terms) of TIFF over the past 25 years. TIFF shows the return to all entrepreneurs for their management, labour and capital invested. In simplistic terms, it is the profit of ‘UK Agriculture Plc’. Also shown on the chart is the contribution of direct support (BPS plus agri-environment scheme payments). This has declined in recent years as inflation has eroded its real terms value. However, it continues to contribute a sizeable proportion of farm profits.
Given our belief the 2023 figures might be revised downwards somewhat, our estimate for the current 2024 year is for a TIFF (in real terms) around the £6bn mark. We would expect costs to rise as inflation continues to work its way through the system. Harvest 2024 looks set to deliver low yields and unspectacular prices. In contrast, most livestock sectors are currently having a reasonable year. TIFF at this level would be very much in the normal range seen over the past few years – discounting the very good returns of the past three years.
The data on farm incomes (profits) comes from Defra’s annual publication ‘Agriculture in the UK’. This compendium of statstics includes data on all aspects of the food and farming sector. Full details can be found at – https://www.gov.uk/government/collections/agriculture-in-the-united-kingdom
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