Falling farm incomes jeopardise tomorrow's food supply

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Defra’s latest Farm Business Income forecasts show significant falls across almost all the farming sectors. Average incomes are expected to fall by almost a half on dairy farms in 2015/16, although the figures mask significant variations. Similarly, the arable sector has also suffered, with income forecast to be down by 24 per cent.

Forecasts indicate that grazing livestock farms are showing signs of recovery. However, even with increases in income across the beef and sheep sector, profitability still remains at a very low level and recent drops in commodity prices will be taking their toll on those businesses too.

This is the second year of significant falls in farm incomes.

NFU President Meurig Raymond said: “Given the low prices we have witnessed across the industry it is no surprise that we have seen sharp falls in incomes. But the figures still make sobering reading. Agriculture is short on good news right now with the last 24 months seeing British farming face massive challenges.

“The subsequent cashflow problems this creates for agriculture should be a worry for all in the agri-food sector. Farmers need to be profitable so that they can reinvest in the future. The reality is that low profitability and falling confidence should be a wake-up call for everyone and it’s the antithesis of a sustainable framework for the UK  food industry.

“While the short term focus is on income and cash flow, the longer term issues are around better management of risk and volatility and everyone has a role to play in achieving that. There is no quick fix but we all have are responsibility towards achieving a better functioning supply chain, only then will farmers have the confidence to invest in the future and build resilience. The solutions are out there – for example forward contracts, formula pricing, supply chain integration  - but these currently characterise a disappointingly small proportion of the food supply chain.

“The opportunities for UK farming are clear – in the longer term global and domestic demand will increase. 2016 will see a new food and farming plan laid down by Defra. A plan to ensure British agriculture thrives needs to be bold, it needs to address fundamental issues of productivity and competitiveness and it needs to see a culture change about how we value food and farming. It must set a confident path for all parts of the UK food system.”

The FBI figures are for March 2015 February 2016, with the latest estimates covering the 2015 harvest and including the 2015 rate of the Basic Payment Scheme. Actual survey results for this time period will be published at the end of October 2016.