Farm profits down 26pc (From Gazette & Herald)

Farm profits down 26pc

A NEW survey has found that farm profits are continuing to fall.

And the study, by the Institute of Chartered Accountants' farming and rural business group, shows that the age of the farm workforce is rising.

The survey covered 255 farms with a total area of more than 115,000 acres (46,700 hectares) in some 36 English and Welsh counties and included farms of all types. It covered the accounting period May 1, 2002, and April 30, 2003.

The average profit per farm of those surveyed was down by 26pc to £23,484 or £10,800 per farmer. For the tenant farmer, in most areas of the country, a market rent would have absorbed almost two-thirds of this profit, leaving perhaps £30 per acre to cover both the proprietor's labour and also his return on capital.

This picture of falling profits was fairly uniform across the farms in the survey, affecting the arable, dairy, beef, pig and horticulture sectors with only poultry showing a rise.

The survey also explored how much capital was being introduced to the farm in order to "prop up" the balance sheet and cover the decline in profitability. Seventeen per cent of the farms in the sample introduced capital into the farm from the sale of farming assets. Amongst these farms, the average amount of capital introduced was over £53,000 per farm. In 56pc of the farms about which information was received, money was being introduced from outside farming at an average of £29,000 per farm.

The survey also looked at the level of borrowings, and this has remained remarkably constant, an average of £204,000, virtually unchanged from last year.

The study examined a number of "non-financial" statistics and some of the results are extremely worrying for the long-term future of the industry, said the institute. In almost half the farms surveyed, no family succession had yet been established. The average age of the youngest full-time working member of the family unit was 43 years and the average age of the oldest member on the farm was 60 years. In one case, an 89-year-old was still working full-time.

According to the survey, little comfort can be offered to those who see the future of the industry resting with deeper co-operation between farmers and diversification away from core agricultural activities. In only 17pc of cases were farmers selling in co-operation with their neighbours, although slightly more farmers were co-operating in their purchasing policy (19pc). When asked about diversification, it was clear that most diversification income still continues to arise from "agricultural related" activities.

The survey confirms what chartered accountants with farming clients have been reporting for a number of years, said institute member Peter Bradbury, of Bradbury & Co, Driffield.

"There is obviously concern over falling profits, and the fact that the workforce age profile is so high. Farmers are, however, showing great determination and a tremendous commitment to the future survival of the industry but the main worry must be that so few young people are considering farming as a career."

North Yorkshire National Farmers' Union chairman Rosey Dunn said that despite depressing statistics such as these, many farmers were cautiously optimistic for the future.

She said many farmers are concerned with the reform of the Common Agricultural Policy and not all diversification projects were proving a success.

She added: "Generally we are a little bit brighter but we would not like to go mad about it and say we are on the road to recovery or anything daft like that."

Updated: 10:20 Wednesday, July 09, 2003