Total Income From Farming 2017 – good news or bad?

Good news for farming?

Figures released by DEFRA in May showed that Total Income from Farming (TIFF) in the UK is estimated at £5.7bn.

TIFF represents the return to the farmer after paying all expenses and charging depreciation, but without any deduction for proprietors’ wages or any notional rent on owned land. As such it is closely akin to the figures shown in the typical set of farm accounts and, since it is based on a calendar year, broadly captures the results of harvest 2017.

TIFF 2017 shows an increase of 41% over 2016 reflecting better prices for both cereals and livestock but relatively static overheads. This is perhaps unsurprising when looking at a simple “marker” such as the wheat price which rose by about £20/tonne year on year. Beef showed a similar gain. Using the same simplistic approach, we might expect another significant rise in TIFF for 2018.

Or bad news?

However, when drilling down into the detail and the implications, the news is not quite so good. Firstly, TIFF for an average farm partner has risen to just under £29,800. Assuming a conservative 2500 hours per annum (most will work more) it comes out at just under £12 per hour. That figure includes notional rent on land which is owned and notional return on capital invested. If these elements were removed, the figure would probably be under £10, which is not far above the minimum wage. It also needs to be considered that the hourly figures are averages. By definition, half the farming population will be achieving less than the average.

Secondly, the contribution of EU subsidy to TIFF is huge. At £3.2bn it represents 56% of farm income. Or putting it another way, with no subsidy the real return to the average farmer would be less than half the minimum wage and a significant number of farmers would be working for nothing.

What this means for the farming industry post-Brexit

Finally, and perhaps most importantly, TIFF in 2017 is the highest it has been since 1997. As we enter post-Brexit and branch reform of the industry and its subsidy regime, there is a great danger that those who are unsympathetic to the industry, or who wish to earmark government spending to other areas. will focus on the highlights from a single set of figures. They may disregard both the lacklustre return in absolute terms and the fact that these are the best results in twenty years.

Over the next few months, and as the results from the “Health and Harmony” consultation are digested, a new Agriculture Bill will take shape. It is to be hoped that the statistics from TIFF will be broken down to a human level, and will be seen in their historical context and not as a level which will be automatically be achieved annually in future.

If you would like to benchmark your farming business in the context of these results, please contact our Agriculture and Rural Business team on 01903 234094.

A version of this blog originally appeared on the website of one of our MHA association member firms, MHA Monahans.