Appalling UK weather impacts on profits

THE dreadful wet weather of 2012 has played a key part in driving down forecasted farm profits.

A flock of sheep
A flock of sheep

THE dreadful wet weather of 2012 has played a key part in driving down forecasted farm profits.

Defra Farm Business Income forecasts for the year to the end of February are predicting that profitability will drop in most farming sectors, because of a combination of the effects of the weather on output and the higher prices of inputs.

Livestock producers are likely to be among the hardest hit, with both higher feed costs and an increased feed use to contend with.

The forecasts show profitability for the pig sector dropping by 50% and dairy by 42%. Beef and sheep producers in the lowlands will suffer falls of 44% but the situation will be worse in the hills, where drops of 52% are forecast.

The only sector not expected to see a plummet in profitability is poultry. NFU chief economist Phil Bicknell said: “The figures make sobering reading but will be no surprise for many in the industry.

“Wheat yield and quality were hit by the weather, while it’s been well documented that rising costs outstripped farmgate price changes for dairy and pork producers at times over the last year. More recently, we can add the plummeting lamb price to the list of challenges the industry faces.

“The weather caused chaos across the board and has laid bare the importance of CAP payments.

“With profits squeezed, a larger number of farmers will again be forced to rely on CAP’s direct payments to underpin their business in the year ahead.”

He said the data put paid to the myth that high commodity prices would equal profits.

“Farmers cannot produce at little or no profit indefinitely; they need to turn a profit and they need to reinvest,” said Mr Bicknell.

“The reality is that price volatility, low profitability and falling confidence does not provide a secure framework for a sustainable food industry. These figures should be a wake-up call for us all.

“Managing risk and volatility are key and that must be recognised by both the Government in its CAP negotiations and in pricing decisions taken by the food chain.”

The figures come as the latest Eblex calculations reckon that English sheep producers are experiencing their biggest losses since 2006 at £26 per animal. It said costs of production have spiralled from an average of £68 per lamb in 2007 to an estimated £91 per animal today, a rise of more than a third.

This comes as the deadweight lamb has dipped by 25% since January 2012.

Eblex chairman John Cross, said: “The industry is experiencing a perfect storm of depressed farmgate prices and increasing costs, creating the worst trading conditions the industry has known for over half a decade.

“There are a number of factors contributing to this situation. Some decline in demand, particularly in Europe, has caused a weakening in worldwide lamb prices. However, of far greater concern is the effect of a significant increase in the quantity of low-priced New Zealand lamb imports arriving in the UK.

“If we continue seeing large quantities of cheap imported product on the shelves, the lamb market is unlikely to recover in the way we would usually expect it to.

“It is essential we operate in a free worldwide market; however, everyone must bear in mind their wider responsibility to nurture a more stable trading environment in order to create a sustainable global lamb supply chain.”


David Whetstone
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