NEW data on average Scottish farm business incomes indicates that over 60 per cent of the country's farms would make a loss without the subsidy they currently receive via the European Union's Common Agricultural Policy.

The latest statistics published by the Chief Statistician, based on a survey of 500 commercial farms, actually show that incomes in Scotland have gone up in 2017-18, with the average rising 19% to £35,400, the highest level over the last six years – but that average is masking fundamental financial weakness, industry leaders warned.

Commenting on the results, the National Farmers Union Scotland said that the continued reliance on support payments to make farming pay was symptomatic of a food chain that did not offer primary producers 'adequate and stable returns from the marketplace'. While the Scottish food and drink sector continued to grow steadily in value, its first and most important link was not, said the NFUS, getting its fair share from the marketplace.

The survey found that contract farming and diversification had helped offset losses from farming activity, and that farms that had expanded beyond traditional agricultural work, such as renting out buildings or holidays homes and building small wind farms to generate electricity, had incomes that were around £19,600 higher compared to those that have not diversified.

However, for farms where there were fewer diversification and contract farming opportunities, such as sheep farms and beef farms in Less Favoured Areas, continued the historical trend of having the lowest incomes. For these farms, subsidies played an important role, and they were estimated to be making a loss of £27,400 without support.

Rural Economy Secretary Fergus Ewing said: “It is pleasing to note that cereal farms experience a six year high income, while dairy and general cropping farms continue to recover from the problems experience in 2015-16 due to low milk prices and subsidies, though they remain sensitive to market and economic fluctuations. But these figures also mask the stress that many individual farmers and crofters tell me about, due to severe financial pressure and thin margins they are facing.

“Worth around £500 million a year, the statistics show the importance of continued EU funding to Scotland’s farmers in supporting jobs and sustaining rural businesses. It is clear that if we want sheep on hill and cattle in fields then we need to continue to support our farmers. That is why I continue to push the UK Government for confirmation that Pillar 2 funding is included under their funding guarantee – something we have yet to receive.”

NFUS director of policy Jonnie Hall, said: “The headline figures of continued increases in average farm incomes are welcome news. However, scratch the surface, and the vulnerability of many farm types, notably beef and sheep producers in our LFAs, remains a significant concern and underlines the fact that the Scottish agricultural industry continues to find itself in a dark corridor of uncertainty.

“Reliance on support payments, together with increasing diversification, are symptomatic of farming enterprises that cannot rely on adequate and stable returns from the marketplace to offset costs that continually creep upwards. Add in that increased farm debt is likely to be feeding working capital and cash flow needs, rather than investment, then questions have to be asked about the confidence and financial resilience of many farm and crofting businesses as they face what may be very turbulent times ahead," said Mr Hall.

“What is unequivocal is that Scottish agriculture is in clear need of a new policy settlement that enables every farm business to adapt to a new operating environment, through innovation and investment, to deliver the highest quality food as well as a flourishing environment and thriving rural communities.”

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