Farm Incomes Boom

2011 was a very successful year for farm businesses, with profits hitting their highest levels for 15 years. This impressive performance is shown in the latest total income from farming figures released by Defra in May.

Total income from farming

The total income from farming (TIFF) figures show the returns to entrepreneurs (farmers) in UK farming – they are a close reflection of the aggregated profit for the agricultural industry. For 2011, profit is (provisionally) put at £5.69bn. This is a 25% improvement in real terms over the 2010 figure. This profit is also the industry's best performance since 1996, and is £0.5bn higher than the next best year in that 15-year period (which was 2009).

Output rose by 15% between 2010 and 2011 (at current prices), with crops increasing by 21% and livestock by 15%. This increase outpaced the rise in costs with 'intermediate consumption' (basically variable costs) going up by 10%. Other costs rose 14%, with subsidies remaining unchanged.

It is important to highlight that these figures are still only provisional and revised ones will be published in November. There is a history of quite large revisions and this year is expected to be no different. Our view is that, if the figures are going to change, they will come down. Defra's release states that it has collected only 30% of the data on variable costs and 55% of the data on other costs. Given that Defra is therefore likely to find more costs, we could end up with a TIFF closer to £5.25bn.

Returns per entrepreneur

The returns per entrepreneur (per farmer) are even more impressive. As the industry gradually restructures, farm sizes are increasing and the number of farmers is slowly declining. The result is that the returns are being shared by fewer people. This sort of change is normal and is even necessary for the survival of any healthy industry. The TIFF per entrepreneur is almost at the same highpoint as that reached in the mid-1990s.

Looking ahead

Looking to 2012 we would expect incomes to...