Bad weather sees East Midlands farm incomes fall by 18%

An annual survey of farms in the East Midlands has found farm incomes have fallen by 18% in the last year
An annual survey of farms in the East Midlands has found farm incomes have fallen by 18% in the last year

A survey of farms in the East Midlands region has found that net income from the latest harvest season fell by nearly a quarter.

The survey, which covers a total of 20,000 acres of farmland in the region, was carried out by accountancy firm Duncan & Toplis.

It found the average net farm income for the 2020 harvest fell to £109 per hectare, down from £133 the year before.

However, this 18 percent fall was better than the 30 percent predicted a year ago.

Every year, Duncan & Toplis surveys farms in the region with year ends between September and January to identify the overall trends across the sector.

This year's survey shows that the main cause of the income reduction was the wet winter and flooding of 2019/20, followed by a extremely dry spring.

The flooding across parts of the East Midlands, including Lincolnshire and Nottinghamshire in late 2019, meant farmers were unable to drill much of their winter wheat.

This left large areas of land unused until spring crops could be planted, and a dry spring followed which led to difficult growing conditions, limiting yields further.

Increases in commodity prices helped to offset the cost of the reduced yields, but gross margins still fell from £665 to £627 per hectare, making this the third year in a row in which profit margins have tightened.

Mark Chatterton, head of agriculture at Duncan & Toplis said: “While net income is still far better than the low-point in 2016, it has been a difficult year for many.

"Fuel saw a considerable fall due to a price reduction and a change in cropping mix to more spring crops and fallow. Machinery repairs and contract and hire costs also fell.

“Meanwhile, depreciation increased slightly. This figure is net of profit on sale and this had a greater impact in 2019 when there were more trade-ins.

"Property repairs also reduced back to 2018 levels as farmers did not carry out as many planned projects because they anticipated a poorer year.

"Other overheads remained consistent, but rent and finance costs increased as the fall in profits increased overdrafts," he added.

Looking ahead to the 2021 harvest, the firm expects average yields to be below the five year average once again because weather patterns have not been favourable.

More winter crops were sown last autumn than in the previous year, but many farmers report having bare patches in their fields as a result of poor drainage.

Fortunately, crop prices remain high: “Most farmers budgeted realistic prices for wheat of £155 per tonne and £375 per tonne for oilseed rape," Mr Chatterton said.

"Forward prices are now a lot higher, but many have locked into a selling strategy already and so they will not reach these higher prices on average.

"On average, farms will also experience the effects of an 15% drop in the Basic Payment subsidy."

He said farm gross margins for the upcoming harvest could be £50/ha higher at £677/ha, but net profits would depend on the ability for farms to control costs.

"This might be more difficult to achieve this year, because many investments will have been postponed due to the poor harvests of recent years and there may be new challenges in securing seasonal workers due to Covid and Brexit," he said.