Total Income from Farming for the UK in 2022
Joe Spencer · August 17th 2023 · read
Total Income from Farming (TIFF) for the UK
On 26th May DEFRA published the first estimate of Total Income from Farming (TIFF) for the UK. TIFF represents the net profit for all UK farming businesses but does not include notional wages for proprietors nor notional rent on owner occupied land. To the extent it will closely match the bottom-line profit shown in a set of partnership or company accounts.
TIFF 2022 is now predicted to stand at £7.9bn, up by 1.1bn from 2021 and up by 2.3bn from the five-year average. This is an exceptional figure, comfortably the highest this century, although it is only an estimate at this stage – given that estimated TIFF for 2021 has now been increased by some £800m (13.5%) one should not therefore read too much into these figures.
Scratching beneath the surface reveals a more nuanced picture.
- Revenue from both arable and livestock income rose by some £2.4bn and £2.7bn respectively. As usual, increased cereal values fed through into increased livestock costs, with animal feed prices increasing by almost £1bn, despite a volume decrease of 4.5%.
- In the arable sector, cereals benefitted from both an increase in yield (wheat production being some 10% higher) and also price increases of 35% for wheat and 45% for barley. To some extent this was offset by higher costs, particle for fertilisers which rose by 79% to cost over £1bn more.
- Taking these figures together it would appear that the increased profitability of the year was roughly equal for the two sectors.
- Within the livestock industry there were marked differences between sectors. Milk sales comprised the bulk of the increased gross income, increasing by £1.8bn, with beef sales also rising by £0.4bn however, egg sales dropped by £0.2bn. No further analysis is given, but it would appear that there will have been modest increases in lamb and pig meat turnover. However, feed costs will have impacted more on the poultry and pig sectors and there will have been some impact of fertiliser prices in grass feed production so beyond concluding that it was a very good year for milk producers, the scope for further analysis is limited.
The dangers of an early interpretation of these figures, particularly by those outside the industry, are very real. First and foremost, they represent the period when the full impact of the invasion of Ukraine dominated pricing. In June 2022, wheat was over £300 per tonne. At the time of writing, it is slightly above £160. Fertilizer prices have fallen back, but not to the same extent, and more generally overheads have continued to rise, reflecting inherent inflationary pressures. Those with substantial borrowings will see significant increases in their finance costs and, of course, these figures only show an element of the falling flat rate subsidy payments.
Industry predictions of TIFF 2023 are that there will be a drop of some 30-40%. Given that milk and wheat, the key components of the 2022 gain, have already shown significant price reductions, this seems entirely probable. Sadly, as the state of the farming industry is analysed in the mainstream press, it will probably be the 2022 figures which will make the headlines for some year to come.
With increased profitability will, for many, result in increase tax take by HMRC. With a baulk of this likely to land in January 2024, careful thought and planning should be given to the cashflow requirements through the winter of 2023/24 and into Spring 2024.
Agricultural Partner, Joe Spencer recommends undertaking cashflow forecasting in order to identify where the pinch points might be, especially considering the proceeds from Harvest 2023 will likely be lower.
Ensure you are asking your accountant to consider utilising two or five years averaging (subject to eligibility) and get your tax projections/liabilities as early as possible and taking a good look at your payments on account as to whether they are required to the same level, with profits expected to decrease. This is ever so more important considering the increased costs for arable and livestock sector and falling milk prices. The expectation is that profits will be lower for 2023 – the challenge for many will be managing cashflow through to July 2024.