The £900 million farm income wipeout

Farming incomes were hit by dramatic weather last year, with feed costs forced skywards, and other inputs rising. But egg and poultry is riding the storm thanks to growing demand.

Farmers earnt nearly £1 billion less from farming in 2018 than the year before, newly published figures from Defra predict.

In May, the government released the first estimate of Total Income from Farming (TIFF) for the United Kingdom for 2018. The figures show total income from farming fell by £929 million to £4,697 million, a 17% decrease on 2017. 

The main contributors to this decrease are the rise in animal feed (+£509 million), goods and services (+£358million), fertiliser (+£116 million), and energy and labour costs (+£110 million each). 

Gross value added at basic price, which identifies agriculture’s contribution to the Gross Domestic Product (GDP), fell by 6% (£626 million) to £9,586 million. In 2018 agriculture added 0.51% to the national economy.

Despite the overall fall, the poultry sector bucked the trend driven by higher consumption of poultry meat and eggs, although for egg producers this was offset by lower prices. The value of eggs rose by £17 million to £641 million, entirely volume driven as throughput at egg packing stations rose by 5.2% putting downward pressure on price (-2.3%).

Poultry meat rose in value by £208 million to £2.62 billion, the highest recorded value. Continued expansion of the sector to meet demand boosted production (+5.7%) with price 2.8% higher than the previous year.

The cold, wet spring followed by the dry, hot summer contributed to lower yields of key crops, however better prices helped offset production falls. The value of total livestock output rose by 3% to £14.8 billion.  The value of intermediate consumption is estimated to have risen by 8% to £17,065 million. In general, all costs were higher, particularly fuel, feed and fertiliser costs.

Total income from farming per annual work unit (AWU) of entrepreneurial labour (farmers and other unpaid labour) fell by 19% in real terms to £23.9 billion.

Costs rose with animal feed, other goods and services, energy and fertiliser showing the largest increases. The cost of animal feed rose by £509 million to £5.6 billion, a combination of increased volumes and feed price.  The extreme weather conditions led to greater demand by the livestock sector, and the higher cereal prices kept the annual average feed price up on the year.

Energy costs rose by £113 million to £1.3 billion as global oil prices continued to rise in 2018, pushing up energy costs. However, weather conditions and efficiency savings helped reduce usage on farms overall. Fertiliser costs rose by £116 million to £1.3 billion; this was a consequence of the higher oil price as usage was down. Other goods and service costs rose by £358 million to £3.6 billion reflecting the increased demand for straw by the livestock industry.

Incomes have generally followed an overall upward trend from the year 2000. However, in spite of high levels of production, TIFF fell sharply in 2015 driven by lower commodity prices and a less favourable exchange rate. In 2016 the exchange rate improved but a poor harvest and continued low commodity prices kept income low.  In 2017, TIFF increased to the highest point in 20 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.  The value of production increased slightly with lower crop yields being more than offset by strong commodity prices.  However, the price of key inputs increased sharply pushing up the costs of production. 

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