Record milk prices have put dairy in contention as the most profitable sector in UK farming, but times are not so prosperous for pig enterprises, whose earnings are on course to halve over two seasons

English dairy farmers, backed by milk prices growing at double-digit annual rates, are set to achieve profit rises of 27% over 2011-12, government data showed.

The rises in milk prices to a record 29.3p a litre in November, the latest data available, reflect elevated values on international markets, where dairy products are 22% more expensive than their average of the last eight years, according to Commonwealth Bank of Australia.

And they have come largely at the expense of processors, who face pressure for cut prices from their supermarket customers - leading to the low-margin environment which has encouraged Robert Wiseman Dairies to accept an offer from Germany's Theo Muller group.

Dairy producers are also being boosted by increased values of breeding heifers and beef, the UK's agricultural and environment ministry, Defra, said, helping dairy farms absorb price rises and lift average profits to £84,000. 

Potato blow

Income at that level puts dairy enterprises on a par with general cropping farms, the top earner last season, but which have seen profitability hurt by a decline in potato prices.

Grain farmers, mid-table performers before the jump in cereals prices which started in June 2010, are expected to be the most profitable, with average income of £90,000, double that two seasons before.

"This is largely due to a much higher output for oilseed rape crops for the 2011 harvest, resulting from a combination of increased area, yield and prices."

UK rapeseed farmers avoided the poor conditions which undermined output in Germany, which was demoted this season to Europe's second rapeseed place producer, after France, and whose woes have supported prices.

Profits slump

However, pig farmers, the country's most profitable agricultural businesses two seasons ago, will achieve profits averaging £35,500, down 20% year on year.

"This is despite an increase in livestock output, driven by firmer prices for finished pigs," Defra said.

Feed costs, which account for more than half pig farms' input costs, "continued to increase in 2011 as a result of higher cereal prices".

Poultry farms too are set for a fall in profits, of 8.1% to £62,500, thanks to higher feed costs.

'Cause for optimism'

"The intensive livestock sectors have suffered," the National Farmers Union said.

However, it flagged the contrast in the prosperity of many areas of farming compared with the hardship facing other sectors.

"These figures and the long term drivers for agricultural markets give cause for optimism, certainly when compared to other areas of the economy," Phil Bicknell, the NFU chief economist, said.