FACTS FROM FIGURES THE INCOME SQUEEZE By Roger W Dean, Dean Agricultural Associates
Farming publications and the airwaves at a–quarter- to-six in the morning have lately been reverberating to the sound of the debate over how much should be taken away from the English Pillar One payments and transferred to Pillar Two, the environment. DEFRA Secretary Owen Patterson was understood to intend making the maximum modulation to direct payments – 15 per cent – from 2014. The NFU claimed that Patterson had pledged to ‘review proposals to transfer the maximum 15 per cent from direct support to rural development schemes’ and that he would only go ahead with 15 per cent if it could be demonstrated that it would deliver ‘worthwhile and valuable outcomes’. In the event, the rate of modulation for England was set at 12 per cent for the first four years after 2014. In Wales, however, the Welsh Assembly Government opted for a rate of 15% whereas, in Scotland, there will be a 9.5% rate. In Northern Ireland, the rate will be 7%. Roger Dean has been examining the role played by direct payments in farm business incomes in the constituent parts of the UK and the impact it has on the feed industry’s livestock customers.
Farm Business Incomes, we remind ourselves, is the return to all unpaid labour – farmer, spouses and others with an entrepreneurial interest in the farm business – and to their capital invested in the farm business including land and buildings. It is usually divided into four distinct components: • Total output from agriculture (including crop and livestock valuation change); plus.
• Total output from agri-environment schemes; plus. Table 1: Farm Business Income by Type of Farm – England Average per Farm (£) Dairy Grazing Livestock - Lowlands
Grazing Livestock - less Favoured Areas Specialist Pigs
Specialist Poultry Mixed Farms
2010-2011
66,000 21,500 21,500 44,500 68,000 51,000
2011-2012 (1)
86,500 32,000 29,000 38,000 46,500 74,000
2012-2013
51,500 16,500 16,500 41,000 94,000 38,000
(1) Revised weighting framework seperating specialist poulty meat from specialist poultry layers Source: DEFRA Publication 31 October 2013
PAGE 18 JANUARY/FEBRUARY 2014 FEED COMPOUNDER % Change
2012-2013 against 2011-2012” -40.5 -48.4 -43.1 7.9
102.2 -48.6
• •
Total output from diversification; plus. Single Payment Scheme.
From the total comprised of the above items are deducted direct
costs and overheads, including fuel, repairs, rent, depreciation and paid labour plus Profit or Loss on sale of fixed assets. Table 1 shows current estimates of Farm Business Incomes by farm
types of immediate concern to the feed industry from 2010-11 to the latest estimate for 2012-13. It should be noted that the definition of Farm Business Income covers the twelve months March through February; thus, estimates for 2012-13 cover the UK harvest of 2012 and also the lower rate of Single Farm Payment caused by the appreciation of sterling against the Euro in which the Single Farm Payment is denominated. In 2012, this was €1 = £0.79805 as against £0.86665 in 2011; in 2013, it was set at £0.83604, slightly better than in 2012 but worse than 2011. It should be noted that the 2012-13 data in Table 1, published on
31 October, is the last estimate prior to the publication of actual data in December 2013. English dairy farms’ average Farm Business Incomes was
estimated to have fallen substantially by around 40 per cent to £51,000. Agricultural output was higher, largely due to slightly higher milk prices and an increase in average herd size. However, input costs increased to a greater extent, particularly for feed. This is likely to reflect increased volumes as well as higher prices for purchased feed and forage due to a combination of reduced grazing days and lower quality home produced forage. Looking at cattle and calf feed prices collected under DEFRA’s voluntary monitoring scheme, it will be noted that, in the first quarter of 2012, cattle and calf feeds averaged £221 while, in the first quarter of 2013, they averaged £253, an increase of £32 or more than 14 per cent. Large falls in average incomes were foreseen on grazing livestock
farms in both the lowland and less favoured area in 2012/13. Lower livestock output reflecting lower sheep prices in 2012, combined with higher costs, resulted in an estimated 48 per cent fall in incomes on
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