‘Farms cannot stand still even though profits have dropped’ - new report

Andersons predict that the total profitability from farming in the UK last year fell by around 15 per cent. Picture by Gary Longbottom.
Andersons predict that the total profitability from farming in the UK last year fell by around 15 per cent. Picture by Gary Longbottom.
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Farming profitability is expected to have fallen by around 15 per cent in the last 12 months, according to an analysis by industry consultants Andersons.

It is anticipated that difficult weather conditions, general cost increases and market downturns in some sectors contributed to the decline which follows a 20-year high for farming returns in 2017.

Forecasting for the year ahead is “almost impossible” due to Brexit uncertainty, Andersons warn in a new report that nonetheless urges farmers to strive for improvements that will improve their financial performance in the years ahead.

Andersons will welcome delegates to a seminar to discuss the prospects for UK agriculture at York Racecourse on March 15, just two weeks before Britain leaves the European Union.

Should a “cliff-edge” Brexit be avoided, the prospects, subject to currency fluctuations, look “reasonably good” for the year ahead, the consultants suggest in their latest Outlook report.

“Ironically, if a Brexit deal is achieved this may be bad for UK farming in the short-term, as it would likely see a strengthening of the pound,” writes Richard King, head of research at Andersons.

He forecasts that without a repeat of 2018’s weather-related issues, a small recovery in the Government’s official Total Income from Farming figure - the total profit from all UK agricultural and horticultural businesses in a calendar year - of around five per cent could by recorded in 2019.

Graham Redman, Anderson’s research economist, speculates that a lack of business clarity ahead of Brexit might curtail investment and delay productivity improvements on farms this year and that the general economic prospects for farm businesses are challenged by an increasingly difficult jobs market and a shift to robotics and artificial intelligence that remains in its infancy.

Nonetheless, farmers cannot afford to be overcome by a malaise, Mr Redman said.

“The lack of clarity post-Brexit might be postponing large investments... but whilst Brexit negotiators argue among themselves, it is still a good time to spot improvements in the farm business, work on them and put the farm in a stronger place than it was before,” Mr Redman writes.

Farmers have been offered some sense of direction. The draft Agricultural Bill, which is working its way through Parliament, sets out the Government’s intention to phase out direct support payments, based on land area, between 2021 and 2027.

These payments will be replaced by an environmental land management scheme which will pay land managers for delivering “public goods” allied to soil health, biodiversity and wildlife contribution, among other gains.

With that in mind, George Cook, Andersons’ senior farm business consultant, called for a change in management practices that have led to “significant reductions in soil organic matter, biodiversity above and below ground and to increased weed seed burdens in the post-War years”.

He said closer working relationships may be needed between land owners and tenant farmers to make these changes.

Andersons also reports that agricultural borrowing from banks rose in 2018 as some farmers sought to diversify or expand to offset changes in support payments in the years to come.