A welcome return to profitability - NPA responds to farm income forecasts

The NPA has called for continued support from the supply chain and consumers as Defra forecasts a further rise in income in the current financial year.

Defra is forecasting a modest rise in average incomes on pig farms in England in 2017/18, despite the steady drop in pig prices since the summer. Average Farm Business Income is forecast to increase on specialist pig farms by 5% from £57,800 in 2016/17 to £61,000. This represents a 3% rise in real terms, taking into account inflation.

The latest figure is, however, almost three times the level of £21,000 recorded in 2015/16 when prices hit rock bottom. It is slightly below the recent high of £65,200 in 2013/14.

Finished pig prices have been around 17% higher in 2017/18 than the previous year, despite the downturn in recent months, although throughput has fallen slightly. Weaner, store and cull sow prices have also increased.

Defra acknowledges that its forecasts do not fully reflect the price increases on some types of farm as contract rearers are well represented in the FBS sample of pig farms. The business models for contract rearing operations are varied, but it has been assumed that the enterprise output on these farms will not be impacted to the same extent by the increase in pig prices, Defra said in its statistical notice.

Input costs on specialist pig farms are also expected to increase, particularly feed which represents a substantial proportion of their costs. This is assumed to track the increased value of feed wheat and barley, but will be dampened by cheaper soya.

Output is also expected to be reduced due to the change in livestock valuation as the value of weaners and growing pigs is estimated to be lower at closing, compared to opening valuation. This reflects some weakening of pig prices towards the end of 2017 and the early part of 2018.

NPA response 

NPA chairman Richard Lister said: “There has been a welcome return to profitability over the past 18 months or so, although for many businesses this has only been filling the hole left by the previous sustained period of desperately low prices. It is also worth noting that these figures mask significant variation between farms.

“Looking forward, as plentiful supplies continue to put downward pressure on prices, demand for British pork at home and abroad will be critical to ensuring prices stay at reasonably healthy levels. We continue to call for backing from across the supply chain and for consumers to seek out high quality Red Tractor Assured British pork produced to the very highest standards.”  

Other notable forecasts from the survey, which will be updated later in the year, include a 48% income rise for cereal farms and a 98% increase for dairy farms.