New figures published by Defra this week show that UK farming is playing an important part in stabilising the economy.
UK farming contributed £7.2bn to the wider economy in 2010, representing a 6.2 per cent year-on-year increase for its gross value added (GVA).
The total value of UK agricultural production also remains buoyant with £20.7 billion estimated gross output in 2010 representing a 5.3 per cent growth on 2009 levels.
Increases in the value of production from oilseeds, poultry and milk were among the factors contributing to overall output growth.
But the NFU has warned that while farming’s importance to the economy should not be underestimated the bottom line for farm incomes is not so positive.
Aggregate figures for 2010 show a 4.3 per cent drop in Total Farm Incomes with rising input costs and a lower level of direct support, due to exchange rates, being blamed for more than offsetting the increases in the value from agriculture production.
NFU chief economist Phil Bicknell said: “The TIFF is a widely-recognised indicator of industry performance but for the second year in a row we’ve seen the TIFF fall.
“We are some 12 per cent down on the recent high of 2008 in real terms.
“Agriculture has been inevitably linked with the headlines focusing on booming global commodity prices and rapid food inflation.
“However, with the total value of UK farm output rising just 5.3 per cent year-on-year, these latest statistics show that the world market peaks aren’t being seen at a UK farm level.
“There are a number of reasons; a significant proportion of the 2010 harvest was sold forward at prices far from the current market highs and the farm gate price paid to dairy farmers for their milk has been very slow at reflecting commodity market returns. Even now there have only been marginal improvements, and from unacceptably low levels.
“Prices for livestock also remained under pressure through much of the last year.
“More importantly the Defra figures highlight rising costs in 2010 for farm inputs. Feed, fuel and fertiliser have seen price rises continue into 2011, meaning that many farmers will remain extremely cautious about the year ahead. In particular, the scale and speed of higher feed costs will have hit pig, poultry and dairy producers last year.
“It is worth remembering that although the TIFF data looks at the performance of the farming industry as a whole it is not representative of trends across all agricultural sectors.
“Against the context of a falling TIFF and rising costs, the Common Agricultural Policy becomes even more critical to UK agriculture.
“The reality is that if the single payment was removed completely, a large proportion of farming businesses would not be financially viable despite the strong commodity prices we have seen in global markets.
“All this demonstrates the real challenge farmers and growers face in generating profitable returns from food production.
“For policy makers, it provides a clear indication of the on-going need for a strong CAP.
“One that underpins the economics of farm production, while incorporating measures to correct the distortions of the supply chain, and helps farmers realise profitable returns from their marketplace.”