Rising costs put future farm earnings under pressure

In a stark contrast to the unprecedented levels of inflation currently being seen in the sector, lower prices saw average farm incomes rise during 2020, according to Scottish Government figures released yesterday.

Approaching levels last seen in 2012, after adjusting for inflation, the average income figures for farm businesses rose by £10,000 to £39,300 during the 2020/21 financial year, the first year of the Covid pandemic.

The National Statistics publication found that the main driver for this increase was the fact that total costs had decreased by five per cent to £207,900.

A mirror image of the current situation where farm costs – including fertilisers and fuel - have spiralled out of control. NFU Scotland said the figures highlighted both how quickly things could change and how change had to be managed through policy and practice.

“The figures are a stark reminder of key issues that Scottish agriculture must manage better,” said the union’s policy chief, Jonnie Hall.

“The extraordinary rises in input costs we are witnessing now compared to the lower costs of 2020 that yielded improved margins vividly illustrate how exposed we are to volatility, especially input costs.”

Hall said this meant that building resilience would be key with the sector now operating outside the EU in a more exposed environment.

However, the figures showed that while around 81 per cent of all farms made a profit in 2020-21, discounting support saw this fall to just over a third of all farms – with livestock farms, particularly those in Less Favoured Areas (LFA), the most reliant, with only 7 per cent of sheep farms in those areas being profitable without support.

Hall said that reliance on support payments in some sectors underlined how important the development and delivery of future support beyond the CAP would be in Scotland.

“It is more apparent than ever that we must get future support spot on if we are to ensure sustainable food production alongside climate and nature objectives”, he said.

Dairy farms continued to top the list for income – with an average income estimated at £99,600. The figures also showed that diversification continued to be an important factor for farm income – with such units generating an additional £16,100 more income per year.

Rural affairs cabinet secretary, Mairi Gougeon said that her administration was committed to transforming how farming and food production was supported to allow the sector to become a global leader in sustainable and regenerative agriculture.

“Crucially, that includes an ongoing commitment to direct payments and supporting farmers and crofters to produce more of our food more sustainably,” she said.

“A new Scottish Agriculture Bill will be brought forward in 2023 to provide a replacement for the Common Agricultural Policy and this will include future farming support payments.”

She also said that boosting less favoured area payments back to their previous levels had helped those in marginal areas.