Farming Incomes Up In English Regions

All English regions have seen an increase in their total farm incomes over the past five years according to a statistical release from Defra. Total income from farming in England as a whole increased by 19% and regional increases range from 9% in the South West to 33% in the East Midlands.

Agriculture makes an important contribution to the national economy. It contributed 0.61% to the economy but contributions vary from region to region. At local level the contribution of agriculture to the local economy ranged from 0.17% in the South East to 1.26% in the South West. It contributes least to the local economy in London and the South East.

England can be divided geographically into livestock farming areas in the north and west and arable areas in the south and east. This is reflected in the fact that livestock output was most prominent in the South West and the North West and crops were predominant in the East of England.

In England as a whole, agriculture's contribution to the economy was £7,125m (0.61%) and employed 1.14% of the workforce.

Defra Releases December Survey Results

Defra recently released statistics from the December Survey as at 2010 giving details of crops and pigs and population estimates of cattle and sheep.

The wheat cropping area remained stable again last year decreasing by 0.5% to 1.8m hectares. Winter oilseed rape areas increased by 12% to 655,000 hectares and the winter barley area decreased by 8.5% to 310,000 hectares. The area of arable land to be left out of production in 2010-11 increased by 9.3% and is 248,000 hectares. The area may change depending on factors like market conditions and the weather. The amount of hay produced in 2010 was 2m tonnes and the grass silage produced amounted to 20.5m tonnes. Silage from other crops totalled 5m tonnes.

On the livestock side, the total number of cattle and calves decreased by 1% to 5.4m. Pigs decreased in number by 1.7% from 3.6m to 3.5m and there were 415,000 breeding pigs. Sheep and lambs remained stable at 9.9m.

Farm Business Income 2009/10

Average farm business income (net profit) per farm of all types annual percentage change was down 15% at current prices at £43,400 and in real terms at 2009/10 prices they were also down 15%. Cereals were down 34% at £46,000 and general cropping down 31% on 2008/9 and 2007/8 at £66,000. Dairying fell by 19% to £56,100. Net farm income (return to farmer) for all types was down by 24% at current prices and in real terms at 2009/10 prices at £31,500. Cereals saw a 47% fall to £27,900 and general cropping a 40% fall to £48,900. Dairying fell 32% at current prices and 31% in real terms to £40,500. Cash income (revenue less expenses) however increased by 4% across all types of farming to £63,400. Cereals increased cash income by 4% to £78,700, general cropping fell 15% to £104,300, lowland grazing livestock increased by 20% to £27,900, LFA grazing livestock by 24% to £29,300 specialst pigs by 19% to £86,300 and mixed farming by 20% to £55,300 in 2009/10 over 2008/9. Dairying cash income fell 4% to £75,000 at current prices.

Supply And Demand Combine To Increase Farm Prices

Farmland prices increased in H2 2009 after a slight fall in H1. The changes were due to a decrease in supply in both commercial and residential farmland sectors, stable demand in the residential sector and increased demand in the commercial sector according the the RICS Rural Land Market Survey for H2 2009. Price expectations increased but more so in commercial.

RICS publishes two different measures of farmland prices, the opinion based and the transaction based measures. The RICS opinion based measure of farmland prices increased by 4% to £12,715/hectare in H2 from £12,172/hectare in H1 2009. Arable land increased by 5% to £13,713/hectare in H2 from £13,085. Pasture land increased by 4%. In H1 it was £11,260/hectare and in H2 it increased in £11,718. The transaction based measure increased by 7.5% in H2 from £15,199 to £16,381/hectare.

Demand for farmland in the residential sector stabilised during H2 2009. Demand for commercial farmland increased. Some surveyors suggest commercial farmers are still interested in expanding their operations. Surveyors also suggest that low interest rates are making commercial farmland more attractive to non-commercial buyers. Supply however is falling in both residential and commercial farmland sectors. These conditions are expected to continue which will help increase prices further during 2010.

December Survey of Agriculture 2009

The December Survey of Agriculture in England 2009 gives data showing the winter crops areas and livestock numbers of agricultural holdings in England as of 1 December 2009.

The area of wheat sown by 1 December 2009 increased by 10.9% on 2008 to 1.8m hectares. The winter OSR area increased by 9% to 589 thousand hectares from 541 thousand hectares and winter barley decreased 4.8% to 342 thousand hectares. Oats and field beans increased to 83 and 88 thousand hectares respectively. The area of arable land intended to be left out of production in 2009/10 is 226 thousand hectares more or less unchanged from 2009.

Hay production increased in 2009 by 6.3% to 2.2m tonnes. Silage production from grass decreased by 2.4% to18.4m tonnes. Silage produced from other crops increased by 4.2% to 4.6m tonnes.

There were a total of 5.5m cattle and calves in England in December 2009. An increase of 1% from 5.4m in 2008. The dairy herd decreased by 1.4% to 1.2m which offset an increase in the beef herd of 1.1% to 731,000. The total breeding herd remained more or less unchanged at 1.9m.

The total number of pigs in England in 2009 increased by 1.3% from 3.7m in 2008 to 3.8m in 2009. The number of breeding pigs increased by 4% to 438,000 in December 2009 from 354,000 in 2008. Fattening pigs increased to 3.3m. The increased numbers may be due partly to lower costs and steady prices which has resulted in amny producers seeing profits.

Sheep and lambs in England decreased by 3.8% to 9.9m in 2009. The female breeding flock decreased by 2.2% to 6.2m continuing a downward trend beginning in 2004. Sheep prices have remained good but supply has been reduced due to the reduction in the size of the breeding flock.

Farm Business Management Practices 2007-8

More results from the Farm Business Practices survey of 2007-08 have been published by Defra. The main highlights are given on the first page. They show that the more educated farmers are more likely to perform better. A lot of farmers have no qualifications and do not practice basic business management skills. LFA grazing livestock farmers are less likely to have had any further/higher education. Arable farmers are more likely to have had a further/higher education and along with dairy farmers are more likely to consider improvements. Skills used by the top performers include risk management, IT, business planning, marketing and management accounting. Of these skills, 72% of high performers are likely to have at least 4 key business skills compared to 40% of low performers.

The measures of economic performance for the farms is the ratio between economic output and inputs and are divided into low, medium and high performance percentiles. The low performers make up the bottom 25%, medium the middle 50% and high the top 25%.

The results show that 60% of farmers have a further or higher educational qualification of some kind. Fewer, about 20%, have had business management training. Farmers with further or higher education or business management training are more likely to be top performers. At 29% it is more than in the 25% high performance percentile. More than 50% of LFA grazing livestock farmers have no qualifications at all. Nearly 50% of dairy farmers have a diploma/certificate in agriculture. Cereals farmers are more likely to have degree in agriculture and/or a business management qualification. There were a lot of farmers who had considered education and training but decided against it. The main reason given was than they were not sure of it's benefits to the business.

As far as skills and knowledge are concerned, farmers with skills and knowledge of management accounting are more likely to be high performers. Farmers not applying management accounting knowledge and skills (49%) are more likely to be low performers. Some farmers use more than one skill. The main management accounting skill used is reviewing the profit and loss account. Cereal farms are more likely to use all skills (except benchmarking) included in the survey. LFA grazing livestock farmers are least likely to use any management accounting skills.

Farmers using marketing skills are more likely to be high performers (32%). It is the same with IT (28%). Cereal farmers are most likely to have computing equipment. The least likely are the LFA grazing livestock farmers with up to 25% having no business computer. Some have computer equipment but do not use it for business. Of those who do not have a computer or do not use it for business, 45% are low performers and 20% are high performers. Broadband is widespread particular among cereal farmers and they are more likely to have computer literate business users.

Most farms don't acknowledge any knowledge or skills gap. Farms that do recognize a skills or knowledge gap are more likely to be high performers. The highest proportion were the LFA grazing livestock farmers (>70%) the lowest the cereal farmers (>50%). A risk management strategy was used by 70% of farms. A range of crops or enterprises was the most common. The farms with a risk management strategy were more likely to be high performers.

The uptake of technical advice seems to be an important factor in running farms with 98% of high performers and 93% of low performers saying they take technical advice. Business skills seem to give a certain edge. Diversification seems to require and provide more skills.

Formal or informal business plans were made by farms in all performance groups. The most common method used was to measure the farm's performance by the annual profit and loss account. The results showed that those that do not plan ahead are more likely to be low performers.

The survey also gives profiles of high and low performers who carry out at least one business management practice skill. The most common business management practice skills used by the high performance percentile include management accounting, IT, business planning and risk management. Of the high performers, 72% are using 4 key business management practice skills whereas only 40% of low performers are carrying them out. Of the high performers only 1% are using no skills whereas for low performers the figure is 11%. The high business performers have an average of £574/hectare farm business income and the low performers -£78/hectare.

The distribution of farms beween high and low performance showed that 50% of cereal farms were high performers and 19% of general croppers. Only 6% of cereal farms were low performers and 5% of general croppers. The low performers included lowland grazing livestock farms with 37% and LFA grazing livestock with 20%.

Earlier results published last March show that 24% of low performers did not identify any of the management accounting practices compared with 9% of medium and 8% of high performers. Most farmers with further or higher educational qualifications also had a diploma/certificate in an agricultural or related subject. The number of farmers with a diploma/certificate in agriculture have an inverse relationship with age group.

The survey was based on a sample of around 1,900 farm businesses from all regions and types of farming. The sample for management practices was reduced to 1,450 farm businesses but it remains a representative sample.

Farm Rents Up By Over 5% In 2008

The ONS/DEFRA estimates of farm rents statistics show Full Agricultural Tenancies (FAT), Farm Business Tenancies (FBT) and Seasonal agreements for 2004 to 2008 have risen by over 5%.

FAT agreements increased by 5.1% to £136/ha in 2008 compared with £130/ha in 2007. The FBT agreements increased by 5.4% to £160/ha largley due to an 11.4% increase in the price of cattle and sheep farms in lowland areas and a 9.8% rise in the average rent of arable farms.

The average rent for dairy farms under FAT agreements continued to rise last year to £167/ha. Cattle and sheep farms also increased again from £106/ha in 2006 to £123/ha in 2008. Seasonal agreements rent prices decreased from £117/ha in 2007 to £107/ha in 2008. The most significant contributor to the increase under FAT agreements was from general cropping farms which saw a 9.6% increase between 2007-8 and cattle and lowland sheep at 8.3%. Cattle and sheep in less favoured areas (LFA) offset the trend with a decrease of 2.3%. The overall total area of rented land decreased by 2.1% from 1,768.7 to 1,731.1 thousand ha.

As regards farms under FBT agreements the main contributors were cattle and lowland sheep with an increase of 11.4% between 2007-8 and general cropping at 9.8%. The increases were offset by a decrease in the rents of dairying land of 1.2%. The total area under FBT agreements increased by 3.2% from 1,022.2 thousand ha in 2007 to 1,054.5 thousand ha in 2008. The main contributors were cereal farms with 5.5% and cattle and lowland sheep with 5.3%. There was a fall in the area in dairying of 1.4% and general cropping of 1.1% which helped to offset the increase in area in 2008. The average rents for farms under seasonal agreements in 2008 was £107/ha, a fall of 8.5% on 2007 at £117/ha.

The most expensive area in terms of FAT agreements by region was the South East at £162/ha, followed by the East of England at £157/ha and the least expensive was the North East at £99/ha. The most expensive area by region under FBT agreements was the East of England at £180/ha and the least expensive was the North East at £147/ha.

Farm Incomes Up By 25%

Total income from farming is estimated to have risen by 25% in real terms. The causes were a fall in the value of agricultural outputs of 2.5% offset by a greater fall in input costs of 4.9% and an increase in Single Payment Scheme payments of 17%. Total income is expected to fall by 8.8% in 2010.

TIFF per full-time person equivalent is expected to rise in 2009 by 26% as a result of the increase in TIFF and a fall in the volume of agricultural labour input and is expected to fall by 8% in 2010.

Agricultural output is expected to have declined by 2.8% in 2009. The main factors are a fall in the value of crop production partly offset by an increase in the value of livestock production. The fall in crop values was driven by a fall in wheat, barley, oilseed rape and potato prices partly offset by an increase in the value of sugar beet yields which are expected to be high and the area of forage crops is expected to increase. Increases in cattle, sheep and pig production and an increase in capital formation in livestock ofsetting a fall in milk production value explain the increase in the value of livestock production.

Output is expected to decline further in 2010 to be only partly offset by declining input costs and a rise in payments. These estimations are subject to very broad margins of uncertainty due to the nature of agriculture.

Final June Agricultural Survey Results, England 2009

The final June Survey results for England were released by DEFRA and ONS on 19 November 2009. Some of the key results were that the total area of agricultural holdings in England has increased to 9.4m hectares since 2008. The total croppable area is estimated at 4.9m hectares. The area cropped has fallen to 3.99m hectares but the total land out of arable production stands at 231,000 hectares. Fruit and vegetables grown outdoors account for 140,000 hectares, up 2% on 2008. Common rough grazing stands at 427,900 ha. The total agricultural area has increased in size again this year to 9.8m ha.

Owner occupied land is largely the same as 2008 at 6.3m ha. Land rented for more than a year is also unchanged at 3.3m ha. The area under Full Agricultural Tenancy agreements (FAT) continued to decrease, by 2.9%, to 1,680,900 ha and Farm Business Tenancies have increased 3.8% to 1,094,400 ha. Other agreements have risen to 497,800 ha, up 2.2%.

The national herd of cattle remained at around 5.5m according to the Cattle Tracing Scheme. There were 3.9m pigs, up 0.5%. These included 444,000 breeding pigs. The national sheep flock was 14,984,000 sheep and lambs, down 3.5% on June 2008. The female breeding flock of 6,672,000, down 5.1% on last year, included 5,550,000 ewes for further breeding and 797,00 first time breeding ewes. 326,000 ewes were intended for slaughter. Rams totalled 171,000, down 5.4% on 2008.

The total number of people employed in agricultural was 363,000 up nearly 3,000 from last year. These included 223,000 farmers, business partners, directors and spouses of which 127,200 were part-time, 11,900 salaried managers and 127,800 other workers, 49,400 of which were full-time, the rest part-time or seasonal/casual or gang workers.

Farmland Prices

According to recent RICS data on farmland prices during H1 2008 there was a 47% rise year-on-year, the fastest in the survey's history, compared with 28% year-on-year in H2 2007. In H2 2008 both arable and pasture land prices fell.

Reported sales increased by 50% in year to H1 2008. The revised figures for H2 2007 show a fall of 2%. In H2 2008 farmland sales increased 16% to 270. Individual farmers share of purchases increased from 50-60% between H2 2007 and H2 2008 and agricultural businesses share increased from 5-8%.

Strong demand below all the time high of H1 2007 in H1 2008. Residential demand fell for the first time since Q4 2005 during the same period. In H2 2008 demand for residential and non-residential land both fell and in the residential sector it was the fastest fall in the survey's history. The lifestyle buyers were once one of the main drivers of the residential sector. Commercial sector demand is still strong. UK banks have been willing to lend to the agricultural sector and it has risen by 8.2% year-on-year.

The increases in availability in both residential and commercial sectors from H1 2008 remained stable. Rising input costs have been making it more difficult for many of the smaller farming estates. Residential sector supply fell at the fastest rate since H2 2005.

Commercial sector farmland price expectations remain positive, above the long run averages. Residential farmland price expectations became negative for first time since Q4 2005 in H1 2008 and fell further to the lowest in the survey's history in H2 2008.

The average price for arable land in England and Wales was £13,182/ha in H2 2008 down a fall from £14,463/ha a 20% change over the year and for pasture £11,490, from £11,477/ha and an annual change of 16%. The range was £11,120 to £14,827 for arable and £12,356 to £7,660 for pasture. The average rent in England and Wales for arable land during H2 2008 was £155 (AHA 86) and £226 (ATA 95) and for pasture £114 (AHA 86) and £164 (AHA 95).