Short term improvement forecast

Originally from: Farmtalking
                        
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Originally from – http://www.farmtalking.org/news landwriter.html

Farm profits this year showed few signs of recovery but things may just be getting better.

Deloitte Food and Agriculture Group's 14th annual farm report predicts better profits next year, with incomes rising to £70 a hectare.

"While farming fortunes improved little in the past year, a much stronger performance is expected for 2003/4," says Deloitte.

"However, this upturn is likely to be short-lived and farmers will need to continue increasing efficiency, adding value and diversifying."

The report shows the national average net farm income for 2002/2003 to be £17/acre (£43/hectare) compared to £18/ac (£46/ha) the previous year.

"Although farmers are maintaining pressure to keep overheads down and area aid increased during the year, most commodities continue to sell at very low prices," say the accountants, citing average wheat prices down to £64/t with many selling well below £60/t.

But low profits is something farmers are getting used to, according to Deloitte.

"Close scrutiny of our figures shows that farmers are becoming accustomed to profits of around £20/acre rather than the £100/acre enjoyed in the mid-90s," said Mark Hill, the partner leading Deloitte Food & Agriculture Group.

"Five years of low profits has increased dependency on income from non-food producing activity and many farms have become dependent on it."

Fortunately, non-farm income was £5/ha to £170/ha this year while farmers lost more money producing food and sustained their income by renting property, contracting and other diversification.

Next year's predicted increase in profits is not likely to last, warns Deloitte.

"The dramatic increase in profits should be seen as a one-off, not a return to the good old days," said Mr Hill.

While a combination of shifts in the exchange rate and exceptional weather across Europe has dramatically affected both crop prices and aid rates, the accountants say that combination is unlikely to be repeated.

"We can also expect to see the impacts of lower aid packages in two years as a result of the Common Agricultural Policy Reform," said Mr Hill.

Recommending that farmers use the coming year's profits to help finance restructuring, Mr Hill said: "Success in farming depends on efficient production focused on minimum cost of production; involvement further up the food chain to capture a share of the value added; plus a broad business base to maximise all opportunities to generate revenue from resources."

EFRA shadow secretary David Lidington said the Government must help farmers take advantage of the breathing space of next year's expected income rise to encourage them to develop the market place in Europe and the global economy for British food.

"Minister's must overhaul competition rules so that farmers work together on a more equal basis with supermarkets and food processors; make sure that food labelling is taken more serious by introducing country of origin labelling, and finally to take a tough line on food imports that carry a risk to human and animal health," he said