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Total income from farming in UK fell £971 million

Christian Fernsby ▼ | November 29, 2019
The second estimate of Total Income from Farming (TIFF) for the United Kingdom for 2018 has been published.
UK farmers
British farms   UK farmers
Total Income from Farming fell £971 million (17%) to £4,644 million  Agriculture contributed £9,548 million or 0.51% to the national economy (Gross Value Added), a decrease of £651 million (6%) on the year.

Topics: Income farming UK

Crop output value rose 0.9% to £9,265 million.

The cold, wet spring followed the dry, hot summer contributed to lower yields of key crops however better prices helped offset production falls.

o The value of total livestock output rose 2% to £14,741 million.

Prices were generally higher but the challenging weather conditions affected volumes; the late cold spring disrupted lambing and the hot, dry summer led to poor grass growth and difficulties feeding livestock.

o In general all intermediate consumption costs rose, with fuel, feed and fertiliser costs showing the largest increases.

The key drivers of agricultural income include the volume of production, commodity prices and the cost of inputs.

These are themselves driven a range of factors such as the weather, exchange rates, oil price and global supply and stocks of commodities.

As a result, UK agricultural income tends to be volatile and fluctuate from year to year.

Incomes have generally followed an overall upward trend from the year 2000 (Figure 1).

However, in 2015 TIFF fell sharply in spite of high levels of production that year, driven lower commodity prices and a less favourable exchange rate (stronger pound compared to euro).

In 2016 the exchange rate improved (pound weakened) but a poor harvest and continued low commodity prices kept income low.

In 2017, TIFF increased to the highest point in 4 years as a result of a favourable combination of a weaker pound, strong commodity prices and high levels of production.

In 2018 incomes fell from this high level in spite of the total value of production remaining high with lower crop yields being more than offset strong commodity prices.

However, the price of key inputs (particularly energy, fertilisers and feed) increased sharply, pushing up the costs of production.

As a result incomes fell 19% to £4.6 billion.

In 2018 Total Income from Farming fell £971m to £4,644m, a 17% decrease on 2017.

The main contributors to this decrease are the rise in animal feed (+£560m), goods and services (+£252m), fertiliser (+£22m), energy and labour costs (+£143m and +£76m respectively).

Conversely the output value of potatoes fell £220 m and oilseed rape £108m.

Gross value added at basic prices, which identifies agriculture’s contribution to the Gross Domestic Product (GDP), fell 6% (£651m) to £9,548m.

In 2018 agriculture represented 0.51% of the national economy.

Overall output of crops value rose £81m or 0.9% to £9,265m.

Cereal harvests were down on last year.

Whilst cropped area changed little on the year, yields fell notably as a result of the prolonged dry, hot weather.

The value of production was boosted better prices offsetting the falls in production.

The value of wheat rose £37m to £2,011m.

Lower yields and only a slight increase in planted area resulted in volumes down 8.7%, better prices, up 11.5%, compensated for the fall in volume and boosted the value.

Production of barley was down well below the 5 year average as a result of decreases in both planted area and yield.

However the overall value rose £67m to £938 m as a result of higher prices (up 18%).

Oilseed rape fell in value £108m to £654m, driven lower production (-7.1%) and price (-7.6%).

Yields fell back to more average levels following the high of 2017 whilst planted area increased 3.8%.

The value of sugar beet fell £15m to £214m.

Whilst planted area was 2.9% higher, yields were 16.9% down on the 2017 record high resulting in a 15% fall in production.

Potatoes fell in value £220m to £641m.

Both reduced planted area (-3.2%) and lower yields (-15%) affected the summer drought contributed to a 19% fall in production.

Price fell 7.8%, with the price recovery throughout the year failing to offset the low prices at the start of the year.

The value of vegetables was virtually unchanged at £1,421m as lower volumes (-9.6%) affected the challenging weather conditions were offset higher prices (+10%).

Fruit fared slightly better and despite a late start to the season, the hot, dry weather resulted in an early harvest with production slightly up on the year (+1.5%).

Overall the value of fruit rose £24m to £776m with price up 1.6%.

The value of other crop products, including seeds and straw increased significantly £320m to £759m.

Strong demand for straw from the livestock industry resulted in an increase in both production and price, however this higher value is reflected in the costs livestock farmers incurred (shown in other goods and service costs).

Overall the value of total livestock output was 2.2% higher at £14,741m.

The value of livestock primarily for meat rose £163m with increases seen in the sheep and poultry sectors.

The value of cattle meat decreased £36m to £2,952m, production also fell 2.1% on the year and price rose 0.9%.

Pig meat fell in value £73m to £1,253m.

Price fell 6.9%, as result of over production early in the year and continued downward pressure on price in the autumn/winter.

In spite of this the 2018 price was still around 14% higher than 2016.

Production levels rose 1.5% although carcase weights remained very similar to 2017.

The value of sheep meat rose £60m to £1,261m, price driven as volumes were lower.

The cold late spring affected lambing and the hot dry summer affected finishing and as a result production decreased 3.3%.

Price was the highest seen in recent years, with the continued weakness of the pound supporting exports and boosting prices.

Poultry meat rose in value £208m to £2,626m, the highest recorded value.

Continued expansion of the sector to meet demand boosted production (+5.7%) with price 2.7% higher than the previous year.

The value of milk increased £136m to £4,487m, primarily price driven.

Despite a slight fall in dairy cow numbers and the dry weather conditions affecting grass growth production levels were maintained.

The average price of milk in 2018 (calendar year) was 29.26 pence per litre (ppl), 0.56 ppl (1.9%) higher than 2017.

The value of eggs rose £17m to £641m, entirely volume driven as throughput at egg packing stations rose 5.1%, putting downward pressure on price (-2.2%).

The total cost of intermediate consumption rose £1,189m to £17,014m.

All intermediate consumption costs rose with the exception of plant protection products.

Animal feed, other goods and services, energy and fertiliser showing the largest absolute increases.

The cost of animal feed rose £560m to £5,571m, a combination of increased volumes and feed price.

The extreme weather conditions led to greater demand the livestock sector as the late, cold spring kept livestock inside for longer and the hot summer affected forage and grass growth.

The higher cereal prices kept the annual average feed price up on the year.

Energy costs rose £143m to £1,377m.

Global oil prices continued to rise in 2018, pushing up energy costs, however generally milder weather conditions and efficiency savings helped reduce usage on farm.

Fertiliser costs rose £22m to £1,252m, a consequence of the higher oil price as usage was down.

Other goods and service costs rose £252m to £3,497m reflecting the increased demand for straw the livestock industry.

The total value of compensation to employees was £2,703m, a rise of £76m.

In line with the national living wage increase, average labour costs were higher whilst labour volume was slightly down on the previous year.

In 2018 agriculture provided 1.17% of jobs in the United Kingdom.

Direct payments, including payments on product (worth £46m), rose to £3,313m.

The value of the Basic Payment Scheme was just slightly less than 2017 payments at £2,734m, due to the stable exchange rate.

In 2018 agri-environment payments were around £26m higher than 2017.