Agribusiness News April 2023 – Management Matters: Scottish Farm Business Income 2021 – 2022

• Average FBI is at its highest for the last 10 years, at £50k, and it’s also the first year that the average farm is profitable without support payments at an average FBI of £5,100.
• The main drivers for this apparent rosy picture are the large increases in FBI seen on dairy and cereal farms. This is due to higher prices for milk, wheat and barley in this year. Overall agricultural output on all farms is up by 10%, which more than offsets the rise in input costs, which here are up by an average of 6%.

Published recently on March 30th, Farm Business Income Estimates for Scotland 2021-2022, is the Scottish Government’s definitive economic analysis of over 400 Scottish farms in the traditionally supported sectors. Farm Business Income (FBI) is equivalent to net profit for a business, and these results include figures up to the end of May 2022. They therefore do not include the sustained period of high inputs costs in 2022-2023. These statistics have value for all in the industry: they help the industry establish long-term trends and they are a window to understanding the economic evidence that Scottish Government uses to inform its Agricultural policy.

Support Payments

However, the average livestock farm remained loss-making without support. The role of support payments is particularly evident not only in LFA livestock farms, but also to a lesser extent in lowland livestock farms. There is also a sustained number of farms across the board whose FBI is less than £0 even with support. The average figure both this and last year, remains at approximately one fifth of these farms. This is borne out by the ranges of FBI found within the sample, and although dairy and cereal farms have the highest FBI this year (avg £162,100: dairy, £84,600: cereals) they also have the widest ranges of FBI.

Diversification

In the last 5 years, 350 farms have remained in the sample. In this subset those farms that have diversified activities show a sustained higher FBI. Just because a farm diversifies does not mean it is necessarily profitable, however there is something here suggesting that opportunities present themselves in a diversified farming setting. Indeed, looking closer, mixed farms, out of all the farm types, have the largest percentage of their overall FBI attributable to diversified activities at 17%.

Looking Ahead

So, what does the future hold? Sustained high input costs through 2022-23 has brought its challenges. In addition, the volatility within those price rises makes the timing of purchases of inputs difficult to get right. Defra publish forecasts based on industry prices and their FBS data up to February 2023. This may provide a view of what is to come next year in Scotland. Although a less robust analysis, and Scotland has retained its BPS payment, it demonstrates an even more polarised year for profitability between sectors. Dairy incomes rise further by over two thirds with a concomitant significant drop in grazing livestock FBI DEFRA England FBI 2022-2023 forecast.

Although the rising prices for livestock seen in recent weeks are a boost, that increase has not come before time, and its continuation has the potential to reverse this trend.

Sascha.Grierson@sac.co.uk, 07557 661316