Recently released government figures appear to confirm a strong year for the farming industry, which will be welcome news to many farmers, although rises in input costs, the continued crisis in the eurozone and threats that retailers and processors may continue to squeeze producers’ margins with no sign of an ombudsperson to arbitrate matters, means that there is no room for complacency in the farming sector.

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According to the Defra figures, dairy farmers are expected to see a 27 per cent increase in incomes. Grazing livestock farms should also see incomes improve, with a 30 per cent rise predicted for lowland grazing units and seven per cent for farms in less favoured areas, albeit to still modest areas. A marginal increase is also expected in cereal farm income. But the intensive livestock sectors have suffered, with incomes on pig farms forecast to be down by 20 per cent and on poultry farms by 8 per cent, principally due to feed costs.

NFU Chief Economist Phil Bicknell focused on the positive aspects of the forecast, which show that aspects of the farming sector have proven resilient in the economic downturn. He said, “These forecasts are in contrast to the performance of the wider economy. They follow on from the improved confidence that we’ve seen in some farming sectors and build on other recent indicators that have underlined agriculture’s contribution to the wider economy. This is undoubtedly positive news for parts of the industry.

Rises in input costs are not unique to the livestock sector, all farmers have faced significantly higher operating costs over the last year, with the 18 per cent increase in fuel costs and the 20 per cent rise in fertiliser prices the most significant. Earlier in the week a report by French MEP and farmer José Bové which outlined the invidious position in which farmers find themselves, squeezed between rising raw materials costs and increasing pressure from retailers, won almost unanimous support in the European parliament.

Commenting on the breakdown of the results, Mr Bicknell continued, “It’s also reasonable to expect that these forecasts conceal much variation. Some parts of the country struggled with drought conditions in 2011. The impacts were relatively localised, but will have affected crop and fodder yields on individual farms.

“The farming industry remains susceptible to a range of factors. Even with some of the improvements indicated by these forecasts, we’re still talking about returns on assets in the range of three to six per cent across farm types. Amidst continuing Eurozone uncertainty, farmers will be conscious of the link between farm profitability and changes in currency. Nonetheless, these figures and the long term drivers for agricultural markets give cause for optimism, certainly when compared to other areas of the economy.”

Speaking at the Oxford Farming Conference earlier in the year, Australian organic dairy farmer Terry Hehir advocated that farmers should form cooperatives to increase their weight in the supply chain. European farmers’ organisation Copa-Cogeca has also touted the benefits of organising to increase farmers’ representation. The union named 2012 as year of the cooperative.    

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