10 February 2016
Article by Rachel Prior, National Assembly for Wales Research Service
Image from Flickr by walkinguphills. Licensed under the Creative Commons
The Welsh Government has recently published Welsh farm income figures for 2014-15.
You can see the latest figures on the Welsh Government website here: Farm incomes, 2014-5
In the last year, dairy farm incomes in Wales have reduced by ten per cent to £70,200, lowland cattle and sheep farm incomes reduced by four per cent to £27,800. However, there was an increase of 20 per cent in cattle and sheep farms in ‘Less Favoured Areas’ (LFAs) to £23,300. This gives an overall mean across all farm types of a small decrease from 2013-14, of one per cent to £29,400.
The Welsh Government defines Farm Business Income (FBI) as:
…the return to all unpaid labour (farmers, spouses, non-principal partners, family workers and others with an entrepreneurial interest in the farm business) and to all their capital invested in the farm business including land and farm buildings…
FBI is therefore roughly equivalent to Net Profit, in a farming context.
FBI takes into account all subsidies, e.g. Common Agricultural Policy payments, any profit as a result of diversification of the farmland, and costs such as fuel, rent, animal feed and paid labour. It is used as a key indicator of the state of the farming sector by the Welsh Government. The graph below shows mean FBI for a number of farming sectors in Wales since 2003, adjusted to today’s prices.
Data from Welsh Government reports on farm incomes, including past releases. Adjusted to today’s prices based on UK Treasury GDP deflators.
Despite the decrease in FBI for dairy farmers since last year, the general trend over the last 12 years has been a turbulent increase with significant variation year on year. Dairy farm incomes have risen by around £35,000 on average in the last decade (in real terms, 2014-15 prices).
For cattle and sheep farmers in both lowland and LFAs (Less Favoured Areas is an EU term used to describe land that is unfavourable to farming for a range of geographical reasons such as poor weather or soil, high altitude or mountainous), the story is somewhat different, with very little change overall – a slight decrease for famers in LFAs, and a slight increase for farmers in lowland areas. There was again some changeability year on year, with better years in 2009-10 and 2011-12 for both groups.
The average for all farm types over the last 10-12 years shows a few favourable years between 2007 and 2012, but little change overall between 2003-04 and 2014-15.
This is very high-level data, and there are further complexities which are important to take into consideration when interpreting it. For example, this data is for a mean of all farms within that type. Although dairy farms seem to have by far the largest income, that could be as a result of a larger mean size compared to cattle and sheep farms. In addition, the use of the mean masks the potential for large variation within the sample: for example, in 2014-15, 11 per cent of dairy farms failed to make a profit, whereas 45 per cent made more than £75,000.
Recently, more support has been made available to dairy farmers in Wales due to low prices and the impact that has had on farm incomes. A total of €420 million was made available from the European Commission to directly support dairy and livestock farmers across the EU. Welsh farmers received £3.2 million of this, which was allocated to dairy farmers proportionally based on how much milk they produced in the year 2014-15. The average payment to Welsh dairy farms was £1,800, the payment of which began on 16 November.
Of cattle and sheep farms in LFAs, the percentage of those failing to make a profit is nearly 20 per cent, for lowland sheep and cattle farms it is around 17 per cent. Overall 19 per cent of all farms did not make a profit in 2014-15.
A summary of The Farm Business Survey of 2014-15, undertaken in Wales by the Institute of Biological, Environmental and Rural Sciences (IBERS) at Aberystwyth University also records a significant difference in profitability between the average farm in a category, and a farm in the top third of its category. The top third of the most profitable hill sheep farms made twice as much per hectare as the average farm in that category, while in dairy farming the figure is more extreme with the top-third most profitable being six times as much as the average.
View this post in Welsh
Darllenwch yr erthygl yma yn Gymraeg