Farm incomes halved

Figures from the Scottish Government’s annual farm accounts survey show that average farm business income fell by a quarter, £8000, between 2013 and 2014, to £23,000; the lowest level since the measure was introduced.

Income has been falling since a peak in 2010. Since then, commercial farms have seen a decrease of 55%, £28,000, from an average of £51,000.

The latest figure examine a number of financial indicators for the accounting period 2014-15, which focuses on the 2014 crop year. The results are based on annual audits of 500 commercial farms in Scotland.

The 2014 crop year had the benefit of generally reasonable weather throughout. Cereal production increased compared to 2013 and lamb numbers also rose, while longer term declines in other livestock halted.

However, market prices for cereals, potatoes and milk were down. These low prices, combined with the less favourable euro exchange rate and lower value of subsidy payments, caused profitability from agriculture to fall.

NFU Scotland director of policy Jonnie Hall said: “It’s no surprise that farm incomes have halved over the four years to 2014. It’s all about costs, markets and support. And for the vast majority of businesses, across almost all sectors, these three are conspiring to drag incomes down.

“Continually rising input costs, both cost of production and compliance, and low and often volatile market returns have prolonged the cost-price squeeze that Scottish agriculture has faced for a number of years," said Mr Hall.

“In years gone by, direct support payments went a long way in plugging that gap. However, the gap is widening while support is reducing – from a reduced CAP budget and an unhelpful euro exchange rate. This may yet be compounded further as the full extent of redistribution of CAP support reveals itself as we see the new area-based payments bed in.

“This undoubtedly suggests that support from now on has to be more targeted, to underpin active farming and crofting, while farm businesses, processors and retailers, and policy makers all need to focus on cutting costs and ensuring fairer margins through the entire supply chain,” he said.

The main factor behind the recent fall in incomes was the reduced value of crops, which fell by £18,000 on average in the year to 2014. The lower value of subsidy payments, which were £7000 lower on average, also played a large part.

Over the longer term, rising input costs for livestock, such as feed, as well as costs for machinery, land and buildings have also impacted on profitability.

But not all farming sectors saw lower incomes in 2014. Cattle and sheep farms benefited from lower input costs, and saw small increases in income compared to 2013.

Dairy farming saw the smallest decline in incomes, which fell by 14%, but continued to generate higher incomes than other farming sectors, with average incomes more than twice that of other farm types. The average income for general cropping and cereal farms fell by 25% and 38% respectively.

For in-depth news and views on Scottish agriculture, see this Friday’s issue of The Scottish Farmer or visit www.thescottishfarmer.co.uk