Modest recovery in farm incomes overall?

ALTHOUGH some green shoots may appear in 2013, it seems likely another difficult year lies ahead, says Andersons partner, Richard King.

“We have now been writing about poor UK growth prospects for the last six editions of Outlook,” he says.

“Luckily agriculture is, to a certain extent, divorced from what happens in the wider economy. Even so, our sector is not immune to what happens elsewhere.”

He expects, while 2013 offers the prospect of better profits, businesses will have to work hard to realise the potential - especially when many will be grappling with the legacy of 2012.

“CAP reform will dominate the policy stage.  Andersons believe a political agreement on the reform could be concluded by the early summer.  However, the detailed rules allowing businesses to plan for the new regime may be some time in appearing, and it may be late in the year before full clarity emerges.”

One over-riding consideration, says Mr King is that in almost all sectors, having low costs of production is the key to profitable farming.

“With the current high price of many inputs there will be an even greater need to use them effectively. The range in performance between businesses is large, and almost certainly getting wider, with the best farms continuing to innovate and improve.”

Falling profitability

Outlook 2013 states profitability will have fallen in the current year just ending and there will be a huge variability in the financial performance of individual farm businesses, based on how they have been affected by the weather.

Overall, Andersons is forecasting Total Income From Farming (TIFF) to drop by 20 per cent in real terms compared to 2011. This implies a TIFF of around £4.25bn for 2012. 

Looking to 2013, the company expects incomes to recover somewhat - probably in the order of around 10-12 per cent in real terms.

Melton Mowbray-based consultant Joe Scarratt says this would bring TIFF back to somewhere in the region of £4.7bn, and possibly a little higher. 

“This might look rather unexciting compared with the £5bn-plus seen in 2011.  However, it must be remembered both the 2012 and 2013 figures are a big improvement on the returns the industry saw between 1997 and 2000.

“Even in such a difficult season as 2012, there are businesses in every sector recording good profits,” says Mr Scarratt.

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