South West farming incomes up
PUBLISHED: 16:23 08 January 2009 | UPDATED: 08:29 28 March 2014
JANUARY 8, 2008: South West farm incomes increased markedly last year, but borrowings
soared to cover essential reinvestment, according to a new report from
the Rural Business School.
Dairy and arable farms fared the best, buoyed by better milk and cereal prices. However, grazing livestock farms only showed a slight improvement, to around £7000, and were the most dependant on the single farm payment.
These better incomes sparked a sharp rise in reinvestment, with the average farmer investing more than £15,000 in machinery and capital improvements in 2007/08, net of depreciation and property sales. That was £6000 more than in 2006/07, and higher than recorded for many years.
“It is encouraging to see that farmers are reinvesting in their farms again,” said Richard Soffe, head of the Rural Business School at Duchy College. “Low incomes in recent years have meant there has been very little major investment, but farmers need to invest in their businesses to maintain incomes and secure a sustainable future.”
Dairy farmers spent the most on net machinery and capital improvements, at more than £32,000. Growers in the horticulture sector suffered the worst, with machinery depreciation outweighing capital inputs by £609.
However, although incomes had improved, farmers had to borrow heavily to fund the extra investment and private drawings, said Mr Soffe. “The increase in the level of liabilities is most striking for dairy farms, with borrowings now 80% higher than in 2004/05.”
Average farm liabilities in 2007/08 were £109,355 – a rise of £18,350 on the previous year. Dairy farm borrowings rose from £150,000 to £210,000 over the same period.
“This is a worrying trend – although it is heartening to see farmers investing in the future, farm incomes are not sufficient to cover the necessary level of expansion and capital outlay,” said Mr Soffe. “Profitability needs to continue to improve if that trend is to be reversed.”
After three years in decline, cattle numbers had recovered, said the report, but sheep, pig and poultry numbers continued to fall. Despite this, the South West boasted 32% of England’s cattle, and 21% of its sheep. Half of South West land was designated for its landscape quality, and over 60% was grassland.
The region also punched above its weight in the organic stakes, claiming 44% of all England’s organic and in-conversion land. Although overall average farm business incomes were just 81% of the English average, due to smaller holding sizes, the region produced a total agricultural output of £2bn.
“Agriculture is incredibly important to the South West,” said David Linnell, principal of Cornwall College, of which Duchy College is part. “Not only does it manage the stunning landscape we all enjoy, it provides almost 3% of all employment in the region, and 22% of total agricultural employment in the country. This report highlights the value of agriculture to the West Country and the nation as a whole, and will hopefully shape Defra’s policies in the future.”