Profits at arable farm will show a significant setback
from last year's rain-hurt harvests, with those at dairy and livestock farms
down by up to one-half, UK farm officials said in a report termed a "wake-up call".
Crop prices have soared thanks to the poor results from 2012
harvests, which showed the lowest wheat yields in 20 years and smallest potato
crop since the 1970s.
London wheat futures hit a record high of £227.00 a tonne
last month, and remain at elevated levels, of £213.40 a tonne for the spot
March contract, while potatoes are selling on the open market at £312.28 a
tonne, more than triple their levels a year ago, according to the Potato
However, the higher values have failed to make up losses in
yield and quality, which have triggered price penalties, and higher costs from
extra sprays and fuel prompted by the rainy weather, which has continued after
landing the UK with its second-wettest year on record in 2012.
"Virtually all inputs have increased in terms of price with
additional increases in volume expected for some," Defra said, adding that this
was particularly the case for agrichemicals, as the spread of disease
encouraged by wet weather "increased the need for more frequent fungicide applications".
"Volumes of fuel are also likely to be higher reflecting
additional field operations and grain drying requirements."
The ministry estimated net profits at English cereal farms and
broader arable enterprises falling by 11% in the year to the end of next month.
However, for England's livestock farms, the drop in profits will prove
even more severe, with dairy and meat producers unable to pass on in full
higher feed bills, which have been raised by a double whammy of rising prices
and greater needs.
Ave English farm business income per farm, 2012-13, (change on year)
General cropping: £90,000, (-11%)
Cereals: £84,000, (-11%)
Dairy: £50,000, (-42%)
Mixed: £50,000, (-24%)
Specialist poultry: £41,000, (unchanged)
Specialist pigs: £19,000, (-50%)
Grazing livestock (lowland): £18,000, (-44%)
Grazing livestock (LFA): £14,000, (-52%)
Dairy farms, which topped the national farm profitability league
in 2011-12, will show a 42% drop in profits."Not only have feed prices increased, but volumes are also
likely to be higher due to a combination of reduced grazing days and lower
quality home-produced forage," while milk prices have risen only 1%, Defra said.
For lowland grazing farms, the fall in profits is expected at
Pig farm decline
However, an even bigger fall in earnings, of 50%, is
forecast at pig farms, suffering their third successive year of declining
profitability since topping the table of farm prosperity in 2009-10.
"Feed costs, which account for over half of the input costs
on these farms, have continued to increase in 2012-13 as a result of higher
cereal and soya prices," Defra said.
The comments which follow an estimate from Bpex, the pig
industry bureau, that pig producers lost £60m in 2012, despite prices of
finished animals rising to a record high of 160.95p per kilogramme in December.
They remained in the red this month, to the tune of £7 per
pig, Bpex said.
The National Farmers Union described the Defra data as a "wake-up
call for us all", saying that they "shatter the myth that high commodity prices
would mean high profits.
"The reality is that price volatility, low profitability and
falling confidence does not provide a secure framework for a sustainable food
industry," NFU chief economist Phil Bicknell said.
Indeed, the data "underline the importance" of the European
Union's farm support programme, the CAP, he said.
"Single farm payments act as a lifeline for many farm
businesses and play a vital role when it comes to adapting to
increasingly-volatile agricultural markets."