Fall In Agricultural Productivity For Second Year In A Row

Total factor productivity (TFP) in agriculture is estimated to have fallen marginally by 0.1% between 2012 and 2013. There was an increase of 0.5% in the volume of outputs compared with 2012 but a larger increase of 0.7% in inputs. It is second year in a row that TFP has fallen.

Final output by volume at market prices increased by 0.5%. The increase was offset by a 0.7% increase in the volume of all outputs and entrepreneurial labour used in the process.

Long term trends show that total factor productivity increased by 20% between 1988 and 2013 largely due to the volume of outputs remaining the same while the volume of inputs and entrepreneurial labour fell by 18%. TFP was basically unchanged during the mid-80s to mid-90s, it grew by 18% between 1997 and 2005 and has remained unchanged since then with year to year variations.

Total factor productivity is a key measure of the economic performance of the agricultural industry as it measures the efficiency of the industry at turning inputs into outputs.

Total Farm Incomes Up 13%

Defra released the first estimates of total income from farming (TIFF) recently and it is reported to have risen by £708m or 13% in real terms between 2012 and 2013 to £5,464m. In terms of annual work units (AWU) of entrepreneurial labour the increase was 15% in real terms to £28,426 in 2013. The difference is due to a decline in the numbers of farmers and other unpaid workers.

Key contributors to the increase were milk by £505m, potatoes by £210m, and barley by £199m. The increases were offset by a decrease in value of oilseeds of £245m and an increase in the cost of animal feed of £740m.

Agriculture's contribution to GDP measures as gross value added at basic price increased by 7% or £604m to £9,222m. Intermediate consumption increased by £892m to £16,492m mainly due to an increase in the price of animal feed an additional increase in the value of seed. There was a reduction in the number of employees but a small increase in pay of £23m to compensate. The total compensation of employees in 2013 was £2,379m.

Compared to 1994 total income from farming per AWU of entrepreneurial labour has increased by 10% compared to a 15% fall in total income from farming.

Biggest Fall In Agricultural Productivity Since 1985

Total factor productivity figures from Defra suggest that the agricultural industry has seen a fall of 2.9% between 2011 and 2012 giving the lowest level since 2007 and it is the biggest single year fall since 1985. The poor levels of productivity reflect the poor weather conditions according to Defra.

The picture can be looked at over the longer period. Between 1986 and 2012 the volume of final output has remained fairly stable and the volume of all inputs and entrepreneurial labour has fallen by 19%. Looking at it that way total factor productivity has increased by 21%. This is he first Defra release to use 2010 as the base year for total factor productivity.

Farm Incomes Down By 13%

Defra released the second estimate of the total income from farming (TIFF) statistics for 2012 recently and the figures suggest that farm incomes fell by 13% (£721m) between 2011 and 2012 to £4,810m (real terms after allowing for inflation). RPI inflation increased by 3.2% during 2012.

Two main factors were given for the fall in total income and they were the weather and the resulting increased cost values; and a fall in the value of direct payments to farmers due to adverse changes in the Pound/Euro exchange rate. Poor weather affected the volume and quality of the harvest and increased the value of inputs used.

The income of farmers per annual work unit (AWU) was estimated to have fallen by 14% in real terms to £24,570 in 2012.

Gross output at basic prices at November 2013 was £24,089m and total intermediate consumption was £15,464m. There was a small decrease in Gross Value Added (GVA) of £51m to £8,625m because the increase in the value of intermediate consumption (goods and services used in production) was greater that the increase in the value of output.

Longer term trends show that total income from farming has remained at a higher level than the late 1990s and early 2000s but below a peak in the mid-1990s. Entrepreneurial labour income has performed better than TIFF mainly due to a decrease in the number of farmers and other unpaid workers.

Agricultural Total Factor Productivity Lowest Since 2004

Total factor productivity in the agricultural industry has fallen by 3.2% between 2011 and 2012 to its lowest since 2004. It is the largest single year fall since 1985. The poor weather conditions in 2012 are said to be responsible. Looking at the longer period the output of the industry has remained more or less unchanged between 1986 and 2012 while the inputs and entrepreneurial labour fell by 19%. This had the effect of increasing productivity by 20%.

Fall Of 14% In Farming Incomes

Total income from farming (TIFF) has fallen by 14% to £4,704m between 2011 and 2012 according to Defra, allowing for he effects of inflation. TIFF per annual work unit of entrepreneurial labour is estimated to have fallen by the same percentage to £25,175 in 2012. The fall in income was said to be due to an increase in the value of inputs and other costs greater than the increase in the value of output. There was also the effect of the changes in value of the pound against the euro regarding direct payments to farmers.