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Written Statement - Farm Business Incomes

Alun Davies, Deputy Minister for Agriculture, Food, Fisheries and European Programmes

There are over 30,000 farm businesses in Wales producing world-class food, providing employment on farm and along the supply chain, taking good care of Wales’ unique landscape and supporting rural communities.

Statistics, including those issued last week, show that average farm incomes are lower in 2012/13 than they were in the previous four years. However, incomes are higher than they were between 2003/04 and 2007/08. Average farm incomes can change dramatically year to year and in four out of the previous five years we saw annual increases of at least 15 per cent.

The fall in income reported last week is not the result of one issue but rather a combination of many factors; bad weather and current exchange rates have not helped and although Welsh agriculture felt less of an impact from the 2008/09 recession than many other industries, with the UK economy slipping back into recession in early 2012 there remain many economic uncertainties for our farmers and other business people. Many of the reasons for the fall in farm incomes appear to be short term issues rather than demonstrating an underlying systemic weakness in Welsh agriculture. This also demonstrates the importance of resilient farm business models.

Over recent months, the market price received by Welsh lamb producers has been lower than at the same period in 2012 although prices are now returning to levels near to those of 2011. This volatility is due to the impact on the supply of lambs due to bad weather over the summer and autumn and lamb imports which are significantly cheaper than the home product.  An additional consequence of the poor weather has been that lamb producers have had to rely more heavily on brought in winter fodder and feed concentrates in the last year, and the cost of these has increased markedly over the last 24 months.

The factors described are together impacting on farm business profitability and I understand the concern and frustration this is causing for our producers. The Welsh Government remains committed to support the industry through these difficult times and is providing support to help producers achieve the efficiency, profitability and market-focused approach that we all agree is required if the farming industry in Wales is to grow and thrive.

Last Thursday I chaired the first meeting of the Dairy Task Force for Wales which I announced in the Plan for Milk. I will work with the industry to develop a programme of actions that will be published later this year to drive forward a profitable dairy industry for Wales.

I am aware of the pressures being placed on farm incomes and I was very pleased that my officials have so far in this payment period delivered over 99% of 2012 Single Payment Scheme payments – the direct income support subsidy for farmers in Wales - to the value of over £243 million.

In so far as established farmers and farm businesses are concerned, Farming Connect provides a range of services which are available to respond to the current needs of producers and I am anxious that producers access these important services to help improve their efficiency through effective business planning. I encourage all producers to access the support, much of it subsidised, that is currently available through Farming Connect.

Hybu Cig Cymru is doing an excellent job in supporting the Welsh red meat sector through industry development and promotional activities, and providing market information. Business management advice and training is provided to ensure the sector is in a position to improve quality, increase cost-effectiveness and add value to red meat products.

The Common Agricultural Policy is a vital plank in the socio-economic, environmental and cultural vitality of rural Wales with its direct subsidy payments to farmers and wider support under the Rural Development Plan (RDP). This funding is critical, helping to underpin not only individual farm businesses but the wider rural economy. For that reason I opposed the UK Government’s policy to seek significant reductions in CAP payments to the farming community and I am now seeking views that will enable me to take decisions that will guarantee a level of financial support to farmers from the taxpayer for the next seven years. I hope that the whole industry will use the next seven years to plan and to put their businesses on a footing which relies less on public support and more on profit and on providing what the ever changing market demands.

The Welsh Government is committed to the continuing success of the agricultural industry in Wales and will continue to support it to gain market advantage ensuring resilient farm businesses and a sustainable rural economy for Wales.