A significant drop in commodity prices is a major factor contributing to falling farm incomes, the NFU said today.
Data from Defra, which focuses on income from March 2014 to February 2015, shows a decline in the profitability of almost all farming sectors and emphasises the volatility challenges for farm businesses.
Crucially, the NFU points out that these figures only paint part of the picture.
They do not reflect the more recent shifts in commodity prices which have hit our members hard since February, as pressure on farmgate prices intensified through 2015.
This has been seen most notably in the dramatic downturn in the fortune of the UK’s dairy industry.
NFU Deputy President Minette Batters said: “While the short term focus is on income and cash flow, Government must prioritise working with the NFU and its partners throughout the food chain ensuring that we achieve a better functioning supply chain, only then will farmers have the confidence to invest in the future and build resilience.
“The opportunities for UK farming are clear – in the longer term global and domestic demand will increase. But for British farmers to benefit, we need the right policy and fiscal environment across government which encourages the sector to increase efficiency, develop and embrace technological advances, and take a long-term balanced view to investment.
“It's critical that others in the food chain now recognise the financial pressures that farmers, as suppliers of raw materials, are facing. There are some positive initiatives out there. More widely the supply chain can help by working to put in place the mechanisms that help farmers manage volatility.
“During these challenging times, it is crucial that there are no delays to CAP payments, which would only compound cash flow concerns. This includes ensuring BPS is paid in a timely manner early in the payment window and also making pillar 2 payments as early as possible. The NFU is disappointed that the options of paying enhanced rates for the initial pillar 2 agri-environment payment this autumn or allowing up to 70% of the BPS payment to be made from 16 October, as allowed by the European Commission, were not implemented.”
Commodity prices are in a markedly different place than they were as recently as two years ago. UK farmgate milk prices have now fallen for 21 consecutive months while lamb prices failed to reach early season highs in 2015. The May/June average lamb price was at its lowest level since 2008, down some 20% on 2014 levels.
Other farming sectors are also feeling the squeeze with wheat prices falling by almost a third over the past two years. Pig prices are currently at their lowest levels for six years. Similarly, the sugar beet price for 2016/7 will be its lowest in nearly a decade at £20.30 per tonne.
