February 1, 2011

UK's livestock, dairy incomes set to dive

UK's farming incomes are seen to drop across the livestock and dairy sectors, according to the latest trends and statistics published by Defra.

The Farm Business Income forecasts for England for 2010/11 predict that grazing livestock farm revenues will dip, with lowland grazing units expected to suffer the most with a predicted 48% drop, and livestock producers in less favoured areas facing a fall of around a third.

Dairy farmers are bracing themselves for incomes to fall by almost a quarter, while poultry producers are looking at a 6% fall. And a combination of high feed costs and lower prices could bring pig producers' incomes down by up to two-thirds.

Arable farmers, however, are poised to reap the rewards of high grain prices and Defra predicts that their incomes are set to increase by a massive 73% this year, following last year's 34% drop in revenues.

NFU senior economic adviser Phil Bicknell said, "Arable incomes are the obvious bright spot, yet even these need to be considered in context. The global supply situation has led to stronger grain prices, boosting England's arable incomes. However, it is important to remember that a significant amount of grain will have been sold forward or under contract at prices nearer to last year's lows in March of GBP92.50/tonne (US$148.45) rather than the highs of GBP201/tonne (US$322.58) in January 2011."

The high price of grain has dramatically pushed up animal feed prices and the NFU says this will be a prime factor in the expected falling incomes across the livestock and dairy sectors.

Bicknell said, "While Defra's forecasts don't provide a breakdown of input costs, buying feed typically represents the primary cost for livestock farmers and higher grain prices will have exaggerated feed bills still further. "This situation has been further compounded by a severe lack of fodder crops from last summer and the extended winter feeding needed in 2010 due to bad weather and a prolonged winter. Farmers already predicted this increased need for purchased feed and for many these forecasts won't come as too much of a surprise."

"Farm gate prices are the other obvious factor impacting on farm incomes, and many farmers have seen revenues weaken. Beef prices for much of 2010 were down on 2009 levels, and pig prices spent much of the year under pressure. The NFU has well-documented the situation in dairy where, despite rising global commodity prices, the price paid to farmers for their milk remains painfully slow to increase," Bicknell added.