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UK Total Income from Farming


14 May 2014

Total Factor Productivity of the UK Agricultural Industry 2013 – 1st EstimateTotal Factor Productivity of the UK Agricultural Industry 2013 – 1st Estimate

This release presents the first estimate of total factor productivity of the UK agricultural industry and volume indices for 2013.
Total Income from Farming in the UK

Total factor productivity of the agricultural industry in the United Kingdom is an indicator of how well inputs are converted into outputs giving an indication of the efficiency and competitiveness of the industry. Year to year variations in total factor productivity may be due to factors outside the farmer’s control, such as, weather conditions or disease outbreaks. A second estimate, incorporating data that becomes available later, is to be released on 27 November 2014.

Key points:

  • Total factor productivity of the agricultural industry in the United Kingdom is estimated to have marginally fallen (0.1%) between 2012 and 2013.

  • The volume of final output at market prices rose by 0.5%; however this increase was more than offset by a 0.7% rise in the volume of all inputs and entrepreneurial labour used in the production process.

  • Over the longer period, the volume of final output has remained largely unchanged between 1988 and 2013 while the volume of all inputs and entrepreneurial labour fell by 18%, leading to total factor productivity increasing by 20%. Total factor productivity stayed relatively unchanged during the mid-80s to mid-90s, increased by 18% between 1997 and 2005 and has since remained mostly level with year to year variations.

Long term trends

While weather conditions or other factors such as disease outbreaks may have short term impact on agricultural productivity, it is developments in productivity over a longer period that constitute one of the main drivers of agricultural income. Productivity growth means that more value is added in production and more income is available to be distributed.

Figure 1 show the trends in total factor productivity, final output at market prices and all inputs and entrepreneurial labour between 1988 and 2013.

Over the longer period, the volume of final output has remained largely unchanged between 1988 and 2013 while the volume of all inputs and entrepreneurial labour fell by 18%, leading to total factor productivity increasing by 20%. Total factor productivity stayed relatively unchanged during the mid-80s to mid-90s, increased by 18% between 1997 and 2005 and has since remained mostly level with year to year variations.

During 1997 to 2005 the increase in total factor productivity was due to a sharp reduction in the volume of inputs. There was a 30% reduction in both fertiliser and energy use as well as a 26% reduction in labour whilst the volume of final outputs fell by just 1.5%.

In this period an additional 350,000 hectares of less productive arable land was taken out of production as part of the set-aside scheme. In 2001 foot and mouth disease hit the UK. Following the outbreak not all the farmers restocked and some stopped farming. For those that remained in livestock farming there was a notable improvement in productivity. Despite a 20% fall in the dairy herd there was only a 2% fall in total milk production. Similar improvements were seen in the sheep industry with 18% fall in the breeding flock and only a 1% fall in the production of meat. Similar improvements were not seen in the pig industry where there was 40% reduction in both the pig herd and pig meat production. During this period there were also financial pressures on farmers as total income from farming fell by 24% in real terms during this period.

Looking back just 5 years to 2008 total factor productivity fell by 3.9 %, as all inputs and entrepreneurial labour rose by 3.7% while final output at market price changed little. A 4.8% fall in the volume of crop outputs was offset by a 5.2% increase in the volume of livestock outputs. Total intermediate consumption is estimated to be 8.1% higher than in 2008. This was driven by large increases in plant protection products, agricultural services and energy expenses, in particular motor and machinery fuels. All of this reduction in productivity is related to the fall seen in the last two years on the back of the bad weather during 2012.

Latest figures

Total factor productivity of the agricultural industry in the United Kingdom is estimated to have fallen by 0.1% between 2012 and 2013. Compared to 2012 there was an increase of 0.5% in the volume of outputs but a larger increase of 0.7% in the volume inputs.

This is the second year in a row that total factor productivity has fallen. The effects of the poor weather in 2012 also impacted on the 2013 figures. Autumn planting for wheat and oilseed rape were down and the lack of forage crops produced in 2012 led to increased volumes of animal feed used in 2013.

Table 1 shows output and input volume indices derived from the aggregate agricultural accounts. Values are expressed with a reference year of 2010 = 100.

Outputs

Crop output recovered slightly in 2013 following the poor harvest in 2012 a result of the difficult weather conditions. Cereals were a mixed picture, the volume of barley output rose by around a third compared to 2012 as spring plantings increased following problems in sowing autumn crops due to the wet weather conditions. In comparison the volume of output of wheat fell by 10%, with a reduction in the area harvested offsetting any improvements in yield and quality.

The volume of oilseed rape output fell by 17% between 2012 and 2013. Due to the poor planting conditions in the autumn of 2012 the harvested area was down by 12% and the yields were at their lowest since 2004.

The volume of output of potatoes rose by 7%, with the 2013 potato harvest back to normal levels and stocks replenished following the difficulties seen in 2012.

Output volumes of forage crops rose by 45% in 2013 as they bounced back strongly after the drop seen in 2012.

The output volume of fruit also recovered after the fall in 2012 and rose by 6.5% in 2013; however the volumes are not back to the levels seen in 2011.

Overall there was a 0.9% increase in livestock output with increases seen in most sectors. The exception being cattle with production lower as feed availability and higher costs affected weights.

Inputs

Additional feed was required in 2013 due to limited forage stocks caused by the poor forage harvest in 2012, as well as poor early season grass/fodder growth, increased pig and poultry numbers and the need for extra rations to maintain milk production following milk price rises. This led to a 7.8% increase in the volume of animal feed in 2013.

Increased spring plantings and drilling resulted in an increase in seed inputs in 2013 compared to 2012 when autumn plantings were affected by the poor weather.

In contrast use of plant protection products fell by 10% due to the improved weather conditions and a reduced area of wheat and oilseed rape crops.

May 2014

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