Farm sector profits likely to fall

Defra’s Farm Business Income has warned the farming sector could suffer a decline in profitability after being hit by poor weather and rising costs.

The forecasts for the year ending February 2013 have highlighted bad weather and an increase in input costs as the reasons behind the profit decline. These figures, the NFU said, are the first to indicate the financial impact on farmers.

Livestock producers are among the hardest hit with farmers battling increased feed costs and a rise in the amount of feed used. Profitability for the pig and dairy sectors could fall by 50% and 42% respectively, the report said. Beef and sheep producers could expect a fall of 44% in the lowlands, whereas their uplands counterparts could expect falling incomes of 52%.

However, the poultry sector remained unchanged in the report.

Chief economist at the NFU Phil Bicknell explained that the figures made “sobering reading”, but would not surprise many in the industry. He said: “It’s been well documented that rising costs outstripped farmgate price changes for dairy and pork producers at times over the last year. More recently we can add the plummeting lamb price to the list of challenges the industry faces.”

NFU also highlighted that such a forecast was a “severe” and “timely” reminder that single farm payments were a lifeline for many farm businesses.

“The weather caused chaos across the board and has laid bare the importance of CAP payments. With profits squeezed, a larger number of farmers will again be forced to rely on CAP’s direct payments to underpin their business in the year ahead,” Bicknell added.

“Falling farm income data shatters the myth that high commodity prices would mean high profits. Farmers cannot produce at little or no profit indefinitely; they need to turn a profit and they need to re-invest. The reality is that price volatility, low profitability and falling confidence does not provide a secure framework for a sustainable food industry. These figures should be a wake-up call for us all.”

Ulster Farmer’s Union president (UFU) Harry Sinclair said: “The scale and extent of the collapse in farm incomes in 2012 will leave many farming families questioning whether the food supply chain will ever deliver a sustainable income for them. Since the middle of last year the UFU have been highlighting just how bad the situation is for farmers, with costs increasing, farmgate prices falling and bad weather compounding an already difficult situation, and yet retailers and processors have refused to respond to the developing crisis.”