Yesterday saw official confirmation that 2015 was a rotten year for farming with figures issued by the UK Department for Environment, Food & Rural Affairs (Defra) showing the profitability of farming fell by a staggering 29 per cent – the equivalent to a loss of more than £1.5 billion.
This is the biggest year-on-year fall since the millennium and the latest official statistics also show that farming profitability is at its lowest level since 2007, underlining the cash flow crisis facing the industry.
According to the English NFU, the cocktail of higher production around the world, subdued demand due to slowing economies, the strength of sterling in 2015 and over 24 months of falling farm gate prices across the sectors all contributed to the plummeting profitability.
In addition, cash flows have been badly impacted by delayed delivery of basic payment scheme payments.
NFU chief economist Gail Soutar described the figures as alarming. “They remind us that farmers up and down the country and across the majority of sectors are dealing with the impact of devastating cuts in the value of their products,” she said.
“Lots of farm businesses find themselves in a loss-making situation.
“If prices and profitability don’t change, it is not just those farms that are at jeopardy, but our food processing sector, our rural communities and the environment.
“The numbers must serve as a wake-up call to others in the supply chain and government. We need everyone in the food supply chain to intensify their efforts to back British farmers.”
Yesterday also saw the release of a survey carried out for the Prince’s Countryside Fund which showed bank borrowing in businesses in the west of England and Wales had doubled in the past decade.
As a result, one in six farms now faces major financial problems being unable to pay off short-term debt. Those surveyed indicated they were using more trade credit and they expected this to continue through the current year.
In order to mitigate the problems, more than half the farms no longer make a living from farming alone.
Farm consultants Andersons, who carried out the survey for the Trust, offer a range of recommendations to alleviate the financial problem including improved communication and collaboration between suppliers, banks and farm businesses.
They also believe the financial pressures now being experienced require farmers to have a higher level of business skills than has been necessary in the past and opportunities to improve skills in business planning and financial management should be taken.