Inflation looks set to flatten rising incomes for cattle and sheep farms

Welsh Government figures show how farm incomes in Wales for 2020-21 are expected to have increased for cattle and sheep farms in Less Favored Areas (LFAs) and Lowland Wales amid change and instability caused by Brexit and the pandemic.

But this period, of course, has not been affected by the dramatic increases in the cost of key agricultural inputs such as feed, fuel and fertilizer, which are now weighing heavily on turnover.

The annual Welsh Farm Income Forecast, published by the Welsh Government, provides an overview of the long-term trends in farm income in Wales. It reveals that the average entrepreneurial income from a beef and sheep farm in the LFA is expected to have increased by 32% over the year to £29,900 per farm; an increase for a second consecutive year and the highest average recorded since 2011/12.

Hybu Cig Cymru – Meat Promotion Wales (HCC) data analyst Glesni Phillips focuses on this forecast in his latest monthly market bulletin, now available for download on the HCC website.

She says:

“A steady increase in farm income is good news and is the result of an increase in agricultural production, combined with similar business costs year over year.

“It was also good to see a 38% increase in projected income for lowland cattle and sheep farming in Wales over the same period, following two years of declining income. At the same time, a high proportion – 12.5% ​​– of farms recorded income of at least £50,000, while 10% of farms recorded negative income during the year.

“This variable revenue distribution is to be expected and is the same across all industries. However, forecasting and managing farm income can be quite a challenge for red meat producers because there is always such volatility within the industry that can alter a company’s profit margins.

This year promises to be particularly volatile, with rising costs and inflation already affecting all farms.

Glenn added:

“Significant increases in fuel and fertilizer prices and the disruption of trade flows for certain commodities following Russia’s invasion of Ukraine will inevitably put pressure on the profitability of the red meat market. Additionally, there are early signs of changing consumer behavior with a 10% drop in grocery sales volume in the 4 weeks ending March 20, 2022 (Kantar).

“At the moment, however, producer prices remain firm. Average deadweight prices for premium cattle and cull cow prices were above historical averages, with averages for premium lambs and cull ewes holding steady in recent weeks as consumers celebrated Easter and Ramadan. But as inflation continues to rise, it is difficult to predict whether this will continue.

The full analysis included in the Market Bulletin can be viewed online here: https://meatpromotion.wales/en/news-industry-info/market-bulletin