Farm business income significantly declines, government statistics show
Defra statistics highlight a significant drop in farm business income for 2023/24 and show that rural business profitability depends on diversified activities. The CLA’s land use team delves into the data
Defra’s recent Farm Business Income statistics show a significant drop in farm business income for all the main farm types in England for 2023/24.
The data, which shows business income by farm type for England and covers the 2023 harvest year, does not make for cheerful reading, particularly in the context of a challenging 2024 and the October budget announcements affecting agriculture funding and inheritance tax reliefs.
The analysis is part of a long-running programme based on detailed financial, physical and environmental data collected through the Farm Business Survey. The figures are based on farm business income, which is equivalent to net profit. The figures set out:
- Average profits for different farm types in England
- Analysis of each farm type under four cost centres – agriculture, Basic Payment Scheme, agri-environment schemes and diversification
- Assessment of the profit variability within each type of farm
What the data shows - headlines
The standout point is a significant drop in farm business income for all the main farm types, albeit following two relatively buoyant years.
The average income for cereal farms was £39,400, and lowland grazing £17,300 for example. More concerning is that, on average, core farming activity was loss making for cereal farms, lowland grazing farms and upland grazing farms (see figure 1).
Within each farm type, typically around 30% are making a loss across the business, ranging from 23% of dairy farms to 40% of mixed farms (see figure 2). This figure is particularly concerning given that Basic Payment Scheme (BPS) made up 40% of profit, and its removal over the next three years will take another £20,000 out of the average business.
Increasingly, business profitability is dependent on diversified activities, which have shown an increasing proportion across the main farm types, although there were some notable decreases in diversified income in dairy, pigs, poultry and horticulture.
Perhaps not surprisingly given the phasing out of BPS and introduction of the Environmental Land Management schemes (albeit slowly), there has been an increase in income from agri-environment schemes across all farm types except horticulture. Across all farm types, net income from agri-environment activities increased by an average of 14% to £10,600.
See table 1 below for a summary by sector.
| Farm Type | Farm Business Income 2023/24 | Change |
Comment and summary of changes with comparisons to previous year data |
|---|---|---|---|
| Cereal | £39,400 | -73% | Previous two years were exceptionally high. Lower area, yields and sale prices and high inputs costs. Drop back to profit levels of 2015/16. Average loss of £26,400 on farming activities. Average BPS £26,100. Average AES 13,200, +18%. Average diversified income £26,500, +4%. |
| General cropping (includes potatoes and sugar beet) | £95,300 | -24% | Lower yields and output prices for cereal partially offset by increases for potatoes and sugar beet. Average profit of £30,000 on farming activities. Average BPS £24,000, - 22%. Average AES 12,000, -8%. Average diversified income £26,500, +4%. |
| Dairy | £70,900 | -68% | Previous two years were high; lower prices. Average profit of £34,700 on farming activities. Average BPS £17,700. Average AES £8,200, +14%%. Average diversified income £10,400, -25%. |
| Lowland grazing | £17,300 | -24% | Mainly due to lower output. Average loss of £11,200 on farming activities. Average BPS £10,700. Average AES £8,200, +22%. Average diversified income £8,000. |
| LFA grazing | £23,500 | -12% | High fixed costs, but increased output. Average loss of £15,000 on farming activities. Average BPS £17,100. Average AES £14,700, +5%. Average diversified income £2,400, +75%. |
| Mixed | £22,700 | -66% | Lower output, prices, and higher costs. Average loss of £32,900 on farming activities. Average BPS £21,600. Average AES £11,500, +21%. Average diversified income £22,500, +23% |
|
Pigs (caution on small sample size; includes contract rearers) |
£135,800 | +87% | Higher prices compared to some very poor years. Average profit of £40,000 on farming activities. Average BPS £17,000. Average AES £7,800, +200%. Average diversified income £65,000. |
| Poultry (caution on small sample size) | £143,600 | +25% | Higher output. Average loss of £75,000 on farming activities. Average BPS £10,000. Average AES £7,200, 200%. Average diversified income £40,000, -19%. |
| Horticulture (caution on small sample size) | £59,100 | -38% | Reduced income across cost centres. Average profit of £40,000 on farming activity. Average BPS £1,700. Average AES £2,600, -31%. Average diversified income £14,600, -66%. |
What does this mean for individual businesses
Ultimately, it is your figures that are the only ones relevant for your business planning, but industry and farm type averages are indicators of the health of the industry and a guide for policymakers.
The figures are based on real farm business data collected under the government funded Farm Business Survey covering England and Wales. More than 2,300 farm businesses take part in the survey each year by providing data and receiving reconciled management accounts and tailored feedback on business performance, including benchmark reports. If you are interested in knowing more or taking part in the survey you can contact info@farmbusinesssurvey.co.uk.
Information from the survey is used by the government and others for research to inform policy making. Farmers and advisers can use the survey data to inform decisions around investment and diversification. Various tools are derived from it, including Farm Benchmarking, Projection Calculators, and a range of other reports - all available online.
If you are concerned about the financial health and resilience of your business, Defra’s free advice programme – the Farming Resilience Fund – can provide help with business analysis, opportunities from government funding and more.
What does this mean for policy?
The figures make sobering reading for policymakers.
The results indicate the increasingly risky operating environment and year-to-year volatility that many farming businesses face, as well as the increasing disparity between different sectors’ performance. The government is developing a long term plan for the farming sector to be profitable and sustainable, with national food security as a guiding light, and these figures, along with other information, provide insights on how best to help the sector meet that ambition.
The CLA will work with Defra on this plan in the coming months. On two very live areas, it also demonstrates the challenges of affordability around the planned changes to inheritance tax affecting the sector, and the potential impacts of the accelerated cuts in delinked Basic Payment Scheme.