Results of the Royal bank of Scotland's Agricultural Survey, published on Tuesday, show that, although profitability over the last financial year was middling, optimism in farming was relatively high.

According the RBS, pre-tax profit from farming exceeded expenditure for 60 percent of participants in the survey – down from last year's 62 percent, but above average in the survey's eighteen year history.

Optimism for the future was equal 3rd highest in the past 18 years, though this too was down on last year. Expectations for future profits were well up.  However, with the prospect of an EU referendum looming, the survey revealed that the percentage of farmers whose business was profitable without Single Farm Payment (SFP) fell to 30 percent.

Around half of the respondents were against linking SFP payments to public benefits. A slight majority were supportive of introducing a cap on SFP payments.

In terms of diversity, the survey showed that 45 percent of farm businesses also have income from non-farming sources. Actual investment in 2013 far exceeded forecast made a year ago and respondents said they expected 2014 investments to be similar to 2013 levels.  

Forecast 2014 crop prices are close to levels at which farmers said they would reduce production

Renewables

With a significant number of farmers diversifying into renewables production, the RBS survey found that the prime choices are wood fuel heating, wind and solar power. In Fact, 11 percent of survey respondents (16 percent in 2013) said they plan to invest in wind power in the next year.

However, over two thirds of those investing in wind power said they had experienced difficulties obtaining planning consent. 80 percent of those investing in solar power said they had little or no difficulty in financing the investment whilst only 49 percent of wind power investors said they had no trouble with wind projects.

Government figures indicate recovery of farm incomes

Statistics from the Scottish Government published on Wednesday indicate agriculture was worth £700 million to the Scottish economy in 2012, a fall of 18 per cent on the previous year. However, early estimates for 2013 suggest income levels bounced back to about £830 million.

Commenting on the Total Income from Farming Estimates for Scotland 2011-2013, Rural Affairs Secretary Richard Lochhead said, "These latest statistics reflect the challenging conditions our farmers have had to face in recent years, and it is good news that farm income levels are now going in the right direction. In fact, farm income in Scotland 2013 is estimated to be the second highest in a decade, which can only be welcome news for Scottish farmers."

Mr Lochhead continued, "The figures show strong growth in some sectors reflecting strong demand for our premium products and higher prices. I am aware, however, that other sectors are not performing quite as well and this may be partly due to the impact of the extreme weather we have experienced over the past couple of years."

Particularly good performers in 2013 appear to be potatoes, which commanded high prices at the start of the year and had a much better harvest in 2013. Income from milk also saw an increase, with average prices rising from 27.9p per litre in 2012 to 31.3p per litre in 2013. However, livestock, which accounts for well over a third of farm output in Scotland, did less well, seeing an estimated four per cent fall in value. Likewise cereals, which account for about 15 per cent of output, also saw a decrease.

Total costs were estimated to have risen in line with inflation, but there was a large increase in the cost of feedstuffs for the second year running. Feed now accounts for 24 per cent of costs, compared to only 17 per cent a decade ago. However, labour costs do not appear to have risen in 2013, and there have been price reductions in red diesel and other fuel.

In the longer term, income from farming has been rising steadily since a dip in the late nineties, according to the Scottish government figures. Income in 2012 was the sixth highest in the past ten years, with 2013 looking like the second highest.