Arable Matters by Brian Henderson

It was interesting to see the reaction to the figures released by the Scottish Government last week showing that farm incomes had bucked the recent downwards spiral – and for the first time in six years had actually shown an improvement on the previous year.

I guess most industry’s would have been cock-a-hoop to find that their income had risen by the indicated 94% over the course of 12 months – but it didn’t take our own one more than a two shakes of an orphan lamb’s tail to point out just how bad things actually were.

While it would be easy to call us a bunch of misery guts for immediately pouncing on what should have been good news in this way, a look at underlying figures did, indeed, reveal that there was no real reason to be hanging out the bunting.

For starters, this had been the first increase in income figures for the industry since 2011 and over this period there had been considerable drops in incomes in every sector of farming in Scotland.

It was a measure of the state of affairs that the good news was that our actual farming activities had made slightly less of a loss than they had the previous year. And that the process of growing crops or producing livestock, wool or milk – effectively the job which we spend most of our time and energy doing – on average left us £21,300 out of pocket.

In fact, even after various other income streams generated on-farm were taken into account – such as diversification activities, which brought in an average figure of £3400, contracting which added, on average £3300 to income and agri-environment activities which brought in £6500 – farm businesses were still reliant on their direct support payments. That averaged around £34,500 and was just enough to push businesses to the right side of the not so thin red line.

For readers of this section of the paper, though, it was a sobering thought that even after our 'subs' are added into the equation, the cereal sector income fell by the largest percentage between the 2016 cropping year and the baseline of 2011 – standing at only a third of the income made five years before.

While the average figure of just over £20,000 might be more than double what we achieved from the 2015 harvest, we were only getting back to what we’d earned in 2014 and still well below the income levels of 2012 and 2013.

Whack the sub payments out of the equation for the cereal sector though and we were looking at an average loss of £11,400. While arable cropping is widely believed to be less reliant on support than other sectors – and there was a positive income without subs in 2011 – every other year since then has seen the average figure stand in the red to the tune of between £10,000 and £25,000.

Even after you add the support into the top line figure, the average cereal grower earned pretty much spot on the minimum agricultural wage for the year. While this might have been a considerable improvement on the previous year’s figure, it surely doesn’t represent much of a return for the time, stress and capital invested in a business.

Of course, as with all official figures, there is no escaping the dreaded comparison of high and low performers – and while more than half of all cereal growers generated less than 50% of the minimum workers wage for themselves, the top 9% generated more than five times that figure.

So, just in case you thought there was any danger that you might think that your own figures maybe weren’t all that bad in comparison, at an average income of £78,100, the top 25% of cereal farms generated incomes roughly four times the overall average FBI for cereal farms. Sadly, the lowest performing 25% managed to make a loss of £24,700.

While the figures were pretty poor for those classified as cereal growers, though, the 'general cropping' sector – which, I guess pretty much means add in some potatoes and a few other crops, saw a considerably better return with the high price of tatties from the 2016 harvest. But we all know what happened to that the following year.

But the figures, which are published by Scotland’s chief statistician, aren’t just plucked out of thin air though – they’re based on the actual annual accounts of nearly 500 commercial farms in Scotland with the aim of gauging the financial health of the various farms using actual farms accounts which covered the 2016 crop year.

So, if you cast your memory back to the events of that year, it was probably no surprise that there was a bit of a boost to incomes – brought about by lower input prices and higher output prices, together with an increase in the value of support.

For that was the year in which we saw the UK vote at the end of June to leave the EU.

And while fertilisers had been reasonably priced at the beginning of the year, with a relatively strong pound and a poor harvest the year before, both support payments and most commodity prices got a hell of a boost with the big fall in the exchange rate in the second half of the year, as sterling took a real kicking in the months following the shock outcome of the EU membership referendum.

So, taking a step back, the really scary thing is that although the upswing in farming’s fortunes shown in the statistics was, in truth, actually pretty pathetic, the reality was that the improvements had nothing at all to do with our own efforts. They can only be laid at the door of a big fluctuation in exchange rates.

And that can only make you wonder what fate will hold in store for us next …