Total Income From Farming

The drop in farm profits in 2012 was not as bad as initially reported.  DEFRA’s latest revision of the Total Income From Farming (TIFF) figures show that it is estimated to have fallen by 13% in real terms to £4,810 million.

TIFF shows the total profits of all UK farming businesses on a calendar year basis.  It is designed to show the performance of the whole of the agricultural industry.  The first estimates for each year come out the following May (see Bulletin 05(13) for details).  They are subsequently revised in late November to provide a more accurate picture. 

In fact, the TIFF figures are in a constant state of revision.  The latest release  has increased the final figures for the 2011 year from £5,441m to £5,531m – making that year look even better in historic terms.  Profits for 2011 were over half-a-billion pounds higher than any year since 1996.  With a higher starting point, a 13% real-terms reduction for 2012 results in the new figure of £4,810m.  This compares with £4,704m previously quoted – a 2% upwards change.  We had been expecting the revision to be downwards rather than upwards.  Ever since our Outlook 2012 we have been forecasting a TIFF for 2012 of £4.5bn or less (possibly as low as £4.25bn).  Knowing the problems the industry suffered in 2012, the DEFRA figures seem too high, and continue to do so.  However, perhaps we should remember that it was only in the second half of the 2012 year that the weather really started to impact on businesses.  Cropping businesses also had the benefit of very high prices.  The financial effects of the wet/cold weather may therefore show up more in the 2013 figures. 

DEFRA’s first estimates for 2013 will not be published until May.  However, Andersons have made their usual forecast in their ‘Outlook’ publication.  This has TIFF dropping back to around £4.0-£4.1bn in real terms.  This would be a reduction of around 15% from the new, revised DEFRA figure for 2012.  With a higher starting point, the drop might not be quite as steep, but we would be very surprised if incomes in 2013 are not lower than last year.  Looking forward to 2014, Andersons see some recovery in profits.  TIFF is estimated to recover to £4.5bn.

The statistical note also includes an interesting aggregate Balance Sheet for UK agriculture.  This had not been updated for a couple of years.  It shows that, by the end of 2012, the net worth of the industry stood at £221 billion.  This is an increase of £61.5 billion over the five years since 2007.  Almost all of the increase is down to the rising value of property held by farm businesses.  The increase of £61.5bn equates to around £12,300m per year.  It can be seen that the ‘profit’ from holding farms and farmland has been around three times greater than the profit from actually farming it (TIFF) over the last five years.  The full release can be found at – https://www.gov.uk/government/publications/total-income-from-farming-in-the-uk)