MHA | Total Income from Farming 2020 - Disappointing results

Total Income from Farming 2020 - Disappointing results

Sarah Dodds · August 4th 2021 · read

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At the end of May DEFRA released their first estimate of Total Income from Farming (TIFF). This replaces the estimate made in December (the difference being that it is now based on facts rather than guesswork), and the results are, as expected, disappointing.

TIFF represents the return to the business owner after deductions of direct and indirect costs and depreciation, but before drawings and proprietor’s wages – as such it is very similar to the annual accounts which a business will produce (rather than a Cashflow summary). For 2020, the key result is a reduction in TIFF of 15.7% (£786m). This is the lowest result since 2016 and is somewhat below the income figures which DEFRA used when assessing the impact of subsidy removal following the Health and Harmony consultation in 2018. It is also the lowest value in real terms since 2007.

The practical background to the poor result is well known. The autumn of 2019 was unrelentingly wet and as a result much winter wheat land was undrilled, and eventually went into lower yielding spring barley, which itself suffered from poor planting conditions, followed by drought, followed by a wet harvest in places. This analysis is evidenced within the report, with wheat outputs down by 36% compared to a reduction in barley sales of less than 2%. DEFRA had previously reported that the wheat acreage was down by 22%, rape acreage was down by 27% and barley was up by 54%.

The oilseed rape crop was also significantly lower, down by nearly 40%. To some extent this may be weather related, but it will also reflect the move away from the crop altogether in the absence of an effective solution to the problems of cabbage stem flea beetle following the banning of neonicotinoid seed treatments.

Finally, the operating problems in the arable sector were compounded by the impact of Covid on “inseparable non-agricultural activities” (diversifications), income from which fell by 20% (£310m) which accounted for a fairly significant part of the overall TIFF reduction. Like the headline figure, this will cover a range of outcomes with some diversified activities completely closed for the year with others, such as farm shops, experiencing something of a boom.

There are, however, some brighter spots within the report. The livestock sector performed well, contributing an increase in output of £490m (3.4%). Unit prices for both crops and livestock were higher and direct costs were generally lower, despite increased grain prices which are reflected in both seed costs and livestock feed. Some overhead costs actually dropped, with wages down 3%, external rents down nearly 8% and interest down by 10%, following a trend which has been developing over the last three years, and possibly indicating some restructuring ahead of the subsidy reform which will start to bite in 2021.

Commenting on the figures, MHA agricultural partner Sarah Dodds said:

What the report does not show is the range of results within the crude averages. The split between arable and livestock gives some detail, but much will depend on individual circumstances – some farms will have drilled their winter crops before the bad weather and will have obtained quite reasonable yields at exceptional prices, whilst others will have suffered in every direction and perhaps sold badly too. It is likely that this year, perhaps more than any, is one where the average lies between extremes rather than around a mean

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