On 3rd March DEFRA released the first forecast of farm profitability for harvest 2022 (covering the 2022 harvest and BPS income).
As expected, the results show a very mixed picture. The most profitable farms were those in the dairy sector, where income is forecast to increase by some 75% to £249,000 per unit. Clearly this reflects significant rises in milk prices, which have been more than sufficient to cover the 17% rise in input costs. The milk price has, of course, already fallen from those exceptional levels, but nonetheless after some difficult years the industry has at last had a reasonable result to restore battered balance sheets.
Cereal farms have also had a good year, with profits improving by 11% to £134,000. In this sector there was not only a significant rise in output prices, but also extremely favourable weather and higher yields across the board. Input prices also rose sharply, particularly fertiliser, which almost doubled, and the concern is that grain prices have now returned to a more normal level but falls in input prices do not seem to be following suit. Even within the sector there is likely to be a wide divergence of actual results as price volatility will be different for each business depending on specific selling and purchasing patterns.
General cropping farms and mixed farms, on the other hand, have shown a modest decline in profitability, suffering the same input price rises as the mainstream cereal units, but with both yield and price for root crops, vegetable and pulses performing less well and a static contribution from livestock. Overall profitability is expected to decline by some 14%.
Finally, the most disappointing sector was livestock, with both lowland and moorland farms suffering from relatively static income but increased costs. Sheep tended to perform slightly better than cattle, but overall profitability fell by 50-65% across the sector. In these businesses the reduction in BPS payments was proportionately much more significant – on lowland grazing farms, for example the reduced level of BPS still represents 80% of Farm Business Income.
Clearly these figures are, at this stage, provisional and final numbers are not expected until the late autumn, but they do seem to be in line with industry expectations and circumstantial evidence.
The full details on DEFRA's first forecast of farm profitability for harvest 2022 can be found here.
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