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The prices paid to NI farmers for their products over the past four decades have increased in line with costs, leaving farmers often reliant on direct payments to stay in business.
Figures published by DAERA last week show that across farming sectors in NI, average input costs were 2.1 times higher in 2018 than they were in 1981, while average producer prices are 1.9 times higher.
The two indexes used by DAERA are based on the average of input costs and producer prices each year, and are relative to their levels in 2015, which is given an index value of 100.
As shown in Figures 1 and 2, producer prices and input costs have tracked each other closely over the last 38 years.
The biggest cost within NI agriculture is feedstuffs, which accounted for 42% of total farming expenses in 2018.
According to DAERA figures, the average cost of feedstuffs in NI last year was £290/t, which is over twice the average price in 1981 of £136/t. Another benchmark is the cost of fertiliser, which has also more than doubled in price since 1981 (£116/t compared to £251/t last year).
Comparing these increases to the prices that farmers receive for their products, the average price of milk has more than doubled over the same period from 13.3p/l to 28.7p/l. Beef prices in NI averaged £3.49/kg in 2018, which is 2.18 times the 1981 average of £1.60/kg. Lamb prices have risen at a slower rate, up 2.05 times, from £2.08/kg to £4.27/kg.
However, the arable sector has not experienced price increases in line with fertiliser costs or DAERA’s input cost index. Last year, the average NI barley price was £186/t, which is 1.81 times its value in 1981, when it stood at £103/t. Barley prices also dropped significantly during this 38-year period and, after falling throughout the 1990s, reached a low point of £58/t in 2002.
Incomes
Figure 3 shows that in recent years, NI farmers have had to increasingly rely on direct payments for income.
DAERA’s benchmark of total income from farming (TIFF) is a measure of total returns from the business of farming in NI, including direct payments. When TIFF falls below total direct payments (as it has in five of the past 10 years), it effectively means that NI farmers are subsidising losses from their businesses with these payments.
Last year, direct payments equated to 84% of TIFF in NI. However, over the past decade, NI farmers on average used £12.1m of direct payments each year to cover losses from their farms.
Uneconomic
The figures confirm that if direct payments are reduced or phased out after Brexit, the prices farmers receive from the market would need to increase significantly, or else it would be uneconomic to farm.
In addition, the closure of various schemes in recent years has meant total direct payments in NI are already reducing. For example, in 2013 payments under the Countryside Management Scheme were worth £18.6m and payments under the Areas of Natural Constraint Scheme (formerly LFACA) were worth £23.7m.
Money invested in NI farms every year
Despite facing pressure from rising costs and tighter margins, NI farmers continue to invest in their businesses each year.
According to figures from DAERA’s farm business survey, £240m was invested in NI farms last year. This includes £139.8m spent on plant and machinery, £88.9m on buildings and other works, and £11.5m on vehicles.
The total level of investment on NI farms tends to follow total income from farming (TIFF). The data confirms that most farmers do not hold on to spare cash and tend to invest it back into their businesses by spending it in the local economy.
Capital grant schemes also influence investment on farms. For example, farm investments in NI peaked at £378m in 2009, which followed on from £93m being paid out the year previous as part of the Farm Nutrient Management Scheme.
Average NI dairy herd size at 94 cows
The average dairy herd in NI last year had 94 cows, up from 92 cows in 2017. The figure is exactly twice the EU average of 47, is ahead of the Republic of Ireland (ROI) average of 75 and is marginally ahead of the UK average of 93.
The average milk yield per cow in NI was up by 3% last year to 7,620 litres, which is a 50% increase in yield over the past 25 years.
DAERA figures also show that the average suckler herd in NI had only 18 cows in 2018, with 43% of herds carrying less than 10 cows. Only 6.5% of herds had 50 cows or more.
The average suckler herd in ROI has 15 cows, whereas the EU and UK averages are 22 and 28 respectively.
The average breeding sheep flock in NI stood at 98 ewes last year and the average breeding pig unit had 181 sows. The number of farms in NI growing cereals has continued to reduce, and stood at 1,961 last year.
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