production over the same period. Output from poultry meat also fell as lower prices were partially offset by increased throughput. Input costs were lower, particularly for feed as well as other livestock costs. The point of the foregoing is to stress the role that non-agricultural


cashflows have on farming businesses’ overall profitability as measured by Farm Business Incomes. While livestock and, indeed, all farmers do not make long-term decisions on the basis of a single year’s financial outcome, it is likely to affect decisions on investments as well as other strategic choices. For example, and as has already been stressed, the data in Table 1 are averages. Averages are not quite in the same league as statistics (as in, there being lies, damned lies and statistics) but they may come close. Rural Business Research published data that breaks down averages into the bottom quartile (25 per cent), the middle quartile (50 per cent) and the top quartile (25 per cent) by financial results. This gives an indication of how many farms might be affected by specific policy measures inasmuch as any sustained agricultural policy may have on less efficient producers – the bottom 25 per cent – and the extent that more efficient producers – the top 25 per cent - could increase production to make up for the losses originating from their less efficient colleagues. In short, during the Brexit discussions, the question is likely to be raised, in Whitehall if not in Brussels, of how much home- produced food could – or should - the UK produce, should the reported ambitions of certain politicians to eliminate the so-called ‘subsidies’ be realised, whether in whole or in part. In particular, it will be asked what is what we may term the ‘equilibrium’ Farm Business Income required in England for farmers to continue to produce the amount of food that they do at present. The figures in Table 1 reflect very much a current situation report and, disappointing as they are, are unlikely to affect individual farmers’ decision to remain in or leave the industry. Similarly, nor would an exceptional report in terms of a single year’s Farm Business Incomes be sufficient to attract a swathe of new entrants into the industry, such as was the case in 2013-14 when average Farm Business Incomes for dairy farms in England reached £87,000 per farm or, indeed, in 2014-15 when they reached £83,800, significantly above the £46,500 recorded for the 2015-16 outcome. A return to these sorts of levels of Farm Business Incomes for English dairy farms would not imply the inevitability of an increase in the number of dairy farms; that involves a discussion regarding the future structure of the industry. What is involved, however, is a strategic analysis of how much milk the UK should be producing domestically and to what extent, if at all, the UK should be relying on imported supplies to a more significant extent that is presently the case. What Table 1 does highlight is the role played by the basic Payment


Scheme as an integral part of Farm Business Incomes in England, ranging from boosting average Farm Business Incomes for dairy farmers to rescuing the cattle and sheep enterprises of England from serial losses made in their day-to-day agricultural businesses. Whether these payments should be continued and, if so, in what form, will be a major part of the discussions even now in train about the post-Brexit shape of UK agriculture. Another aspect that should engage the attention of the Brexit negotiators is the question of how the development of what may


metamorphose into a British Agricultural Policy will affect the regions. Contrary to some politicians’ beliefs, rural England is not a ‘green and pleasant land’ by pure chance. Agriculture in England and, indeed, in the other regions of the UK, is an essential element in maintaining the countryside in the condition that makes rural England a viable economic proposition. Closely related to this question is that of how agriculture and the devolved administrations should be brought into the debate. The Scottish Government calculates two main measures of agricultural income, one of which is Farm Business Income which it describes as ‘providing a sectorial insight into the incomes of farm businesses for eight different farm types, with estimates of average incomes, outputs, costs and (inevitably) subsidies’. The Scottish Government’s latest estimate of Farm Business Incomes, applying to 2014-15, was £23,000, its lowest level since 2009-10. This represents a fall of 26 per cent (down £8,000) over the previous year and of 55 per cent (down £28,000) since a peak in 2010-11. When subsidy payments are excluded, the average Farm Business Income constitutes a loss of £17,000 in 2014-15. In each of the last six years, Farm Business Income excluding subsidy payments has been negative. Farm Business Incomes in Northern Ireland will also require detailed


consideration. In contrast with those of Scotland, an estimate of Farm Business Incomes in 2016-17 is included which shows consistent increases over those in 2015-16, notably with regard to cattle and sheep in both lowland and less favoured areas but also showing a 16 per cent increase in dairy profitability. The upturn in their incomes is mainly attributed to higher subsidy receipts combined with more favourable lamb and pig prices in the 2016-17 accounting year. Inevitably, following the Brexit vote, the question has to be asked about what will happen when Britain leaves the EU. The Daily Telegraph sagely observed that it all depends on what – if


anything – replaces the CAP, ‘which is what farmers have complained is the big unknown’. The NFU’s initial comments were that it was ‘impossible’ to measure the impact of being outside the EU since it was not known what relationship the UK would have with the EU nor the conditions under which British farmers would be expected to operate after the UK’s departure. However, as the NFU President observed in a BBC interview, simply removing CAP support, while it remained in place in the rest of Europe, ‘could devastate British farming’. If this happened, the respected consultancy Agra Europe suggested that land prices would crash and ninety per cent of farmers could go out of business. Agra Europe concluded its observations by noting that ‘What is certain is that no UK government would subsidise agriculture on the scale operated under the CAP.’ It is true that advocates of Brexit, such as farm minister George


Eustice, insist that Britain could opt to continue providing subsidies. But this will depend upon looking rationally at the data in the light of decisions about what the UK wishes or decides to do about its food supply in the longer term, rather than allowing unsupported ideological commitments to obscure the essential issues. The agricultural supply industry and its large feed manufacturing component have a demonstrable and critical interest in the outcome of this debate and, at an appropriate moment, must be ready to speak without equivocation.


FEED COMPOUNDER MAY/JUNE 2017 PAGE 21


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