London and the South East Region Commentary 2011/2012 The

London and the South East Region Commentary 2011/2012

This report includes data collected from the Farm Business Survey for the 2011 to 2012 financial year, relating to the 2011 crop harvest.

The Farm Business Survey is conducted on behalf of, and financed by the Department for Environment, Food and Rural Affairs, and the data collected in it are Crown Copyright.

The Nature of Farming in London and the South East Region

The varied soil types of the South East of England give rise to a range of farming systems. Average land quality throughout the region is only moderate with 12 per cent of the land being classified as grade 1 and 2 compared with 16 per cent for England. However, the amount of grade 4 and 5 land is also below the average for England at just 12 per cent compared with 21 per cent for the whole of England. The extensive chalk downland of the North and South Downs supports arable and grazing livestock production. The soil conditions of the weald, comprising silty soils and well drained coarse loamy soils, have given rise to the development of a strong horticultural industry in the South East. For example, deep soils around Canterbury favour top fruit production. The High Weald remains one of the areas traditionally associated with growing hops for beer-making as well as supporting a number of successful vineyards. Field vegetable production is carried out in Kent and coastal areas of Sussex and the growing of brassica crops is practiced in East Kent. In Hampshire, the shallow well drained calcareous silty soils, over chalk, provide good land for cereal growing. Arable, livestock and horticultural production also takes place within outer London. The deep-water port at Southampton provides an important outlet for cereals produced in the South East.

The proximity to London of many producers in the South East has provided opportunities for retailing of farm produce through farmers markets and other outlets, as well as supplying hotels and restaurants in the city. Other types of diversification also benefit from this ready market, for example, the letting of farm buildings for storage, light industry and offices.

Within the South East, the New Forest achieved National Park status in 2005. In March 2009 the creation of a South Downs National Park was approved and it officially came into being on the 31st March 2010. The landscape of the South Downs is best known for its ancient chalk downland, a man-made feature resulting from constant grazing by livestock over thousands of years. Unlike other National Park landscapes, around 85 per cent of the South Downs are farmland with a high proportion of arable cropping. One third of the South East Region is designated as Areas of Outstanding Natural Beauty (AONB) and there are 74 kilometres of Defined Heritage Coasts (DHC) in the South East. None of the land is classified as Less Favoured Area (LFA) but there are areas of the Chilterns and the South Downs that meet the criteria applied to other areas of the country to qualify as such. Figure 1 illustrates the land quality and use found in the South East of England.

Figure 1. Land Quality and Use in London and the South East Region of England (Source: Defra)

The Contribution made by the Farming Sector in London and the South East Region of England

The London and South East Region represents 15.8 per cent (20,641 km2) [1] of the total land area in England and supports a population of 16 million (mid-2009 estimate), 7.7 million of whom live in London [1]. The South East is the most densely populated region of England. Agricultural holdings represent 11,409km2 or 56 per cent of the land area [2].

The total workforce in the South East was approximately 7.9 million in 2010, up from 7.8 million in 2009 [3]. In 2010 38,000 people were employed in agriculture in the South East, 0.42 per cent of the total employed. Nationally, agriculture accounts for 1.2 per cent of the workforce [4].

Whilst the contribution made by farming to the economy and employment is negligible, agriculture in the South East also provides non-economic benefits such as tourism and protection and restoration of the natural environment as well as providing local food to the London population.

The Contribution made by Farming in London and the South East of England to Farming in England

In 2011 Total Income from Farming (TIFF) in the South East region (including London) was £480M. This represented 10.5 per cent of the English TIFF of £4,562M. Agriculture in the South East occupies 16 per cent of the total agricultural land in England. Thirty five per cent of the region is permanent grass, followed by 21 percent of the region in wheat. In the South East the greatest contribution to total agricultural output, in 2011, was; wheat (£281M), plants and flowers (£249M), fruit (£226M) and milk (£172m). In comparison for the whole of England, the biggest contributions to total agricultural output were; milk (£2,493M), wheat (£2,019M), cattle (£1,804M), and poultry (£1,663M)[5].

Figure 2 illustrates the distribution of holdings between farm types in the South East.

Figure 2. Number of Holdings by Farm Type in London and the South East Region, 2010

No. of Farm Type Holdings Cereals 2,329 General Cropping 2,422 Horticulture 981 Specialist Pigs 137 Specialist Poultry 209 Dairy 405 Lowland Grazing Livestock 5,792 Mixed 1,111 Other 203 Total 13,589 Source: June Agricultural Survey, Defra [2]

Figure 3 shows the cropping and stocking found in the South East in 2010. Cereal cropping is prevalent in the region occupying 62 per cent of the cropped land area. Horticulture is important, particularly in Kent, West Sussex and Hampshire; the South East Region accounts for 15.7 per cent of the total land area used for horticultural production in England. Kent is famous for its orchards whilst many large glasshouses may be found on the West Sussex coast and the Isle of Wight. A significant number of nursery stock producers are also present supplying the relatively large population (32 per cent of the English population live in London and the South East Region[2]). The national decline in pig and poultry numbers is particularly seen in the South East with the pig herd contracting to just 5.7 per cent of the national herd. The South East poultry flock has decreased to 7.5 per cent of the national flock.

Figure 3 Agriculture in London and the South East Region 2010 Land Use Hectares % of England Crops 498,741 13 Bare Fallow 26,796 18 Grass under 5 years old 72,328 12 Grass over 5 years old 395,359 12 Sole right rough grazing 21,383 4 All other land 48,816 16 Woodland 77,455 26 Total area on agricultural 1,140,878 13 holdings

Crops Hectares % of England Cereal crops 328,031 13.1 Other arable crops 147,670 13.5 Potatoes 3,709 3.7 Horticulture 22,710 15.7

Livestock Numbers % of England Cattle and calves 443,232 8.0 Sheep and lambs 1,177,386 8.3 Pigs 204,756 5.7 Fowl 8,564,514 7.5

Labour Numbers % of England Workforce in agriculture 46,178 15.8 Regional workforce 7,859,417 32.2 Source:June Agricultural Survey, Defra [2]

The total area of crops grown in 2010 decreased by 1.3 per cent compared with 2009. Within this reduced area, the cereal area was down by 1.6 per cent and potatoes down 5.1 per cent whilst other arable crops were up by 2.7 per cent. Horticultural crops increased by 4 per cent to represent 15.7 per cent of the total horticultural area in England. Bare fallow was down by 31.3 per cent.

Cattle numbers changed little between the 2009 and 2010 harvest years, with all other livestock groups decreasing in line with national trends. Sheep and lamb numbers declined 5 per cent, reducing the South East proportion of the national flock to 8.3 per cent. The numbers of fowl decreased by 6 per cent, reducing the proportion of birds in the South East to 7.5 per cent of England; in 2009 it was 8.8 per cent. The regional workforce employed in agriculture remained at 16 per cent of the total employed across England in agriculture.

Figure 4 shows the distribution by size in hectares of the same population of farms shown in figure 2. The number of commercial farms <5 ha has reduced from 1,869 in 2009 to 1,112 in 2010 (down 41 per cent); this may indicate a significant proportion of those in the sample have fallen below the commercial holding threshold as stated by DEFRA [2] between 2009 and 2010.

Figure 4 Commercial Farms by Size (ha) in London and the South East Region, 2010

No. of Farm Size Commercial Band Holdings % of England

<5ha 1,112 12 5 <20ha 4,391 15 20 < 50ha 2,974 13 50 <100ha 1,910 10 >100ha 3,202 12 Total 13,589 13 Source: June Agricultural Survey, Defra [2]

2011/12 FBS Year (Harvest 2011)

Weather

Autumn 2010 was generally mild and dry. September saw mean temperatures above average for the time of year and a maximum temperature of 24.6°C was recorded at Gravesend (Kent) on the 22nd. Throughout the autumn rainfall in the region was below average, but not by a great amount. September to November saw 97 per cent, 94 per cent and 96 per cent of the average for the month. Despite a generally mild first half to November, temperatures for the month were 1.5oC to 2.0oC lower than average due to the very cold northerly flow that developed at the end of the month and November was recorded as the coldest since 1993[6].

The early part of the winter of 2010/2011 proved to be a continuation of the weather experienced at the end of November and the month of December proved to be an exceptionally cold month with mean temperatures some 5oC below the 1971-2000 average, with the month being the coldest December in over 100 years. January saw a change in the prevailing weather and with mean temperatures around average experienced, with above average rainfall, in line with the westerly airflow; sunshine hours were low at 86 per cent of the average for the month. February saw a continuation of the dull dreary weather, temperatures were 2oC above average and it was the mildest February since 2002. Despite the mild conditions the month saw just 58 per cent of the usual sunshine hours and 10 per cent more rain than normal [6].

The spring of 2011 proved to be a mild one. The period of March to May saw mean temperatures of 0.6oC, 4.2oC and 1.2oC higher than the mean for each month. March started on a cold note with a low of -7.2oC being recorded at South Newington. The month also proved to be very dry with little rain apart from at the month end. As spring progressed the weather was relatively settled, sunshine hours were consistently above average for each month with rainfall being just a fraction of that normally experienced during the period. March saw just 27 per cent of the average rainfall; April recorded just 7 per cent of the average rainfall and just 52 per cent of average rainfall was recorded in May. April saw high temperatures in the region with 24oC recorded at Solent on Sea on the 25th. May however, saw a change in weather patterns with westerly airstreams bringing in plenty of cloud [6].

June began on a fine warm note but the weather gradually became more unsettled with showers and some longer spells of rain. The nights of the 10/11th and 11/12th saw unusually low minimum temperatures, falling to below 5oC with a few areas recording an air frost, such as South Newington in Oxfordshire with -0.2oC early on the 12th. Towards the end of the month high pressure once again dominated and a high of 33.1oC was recorded at Gravesend, Kent, which was the highest UK temperature since July 2006. As the summer progressed weather patterns broke down to some extent. For the months of July and August mean temperatures were 1.1oC and 0.5oC lower than normal for the time of year and rainfall was above average at 109 per cent and 139 per cent respectively. The below average temperatures made July the coolest since 2000 [6].

Figure 5. Temperature (oC) Anomalies - 2011 Growing Season [6]

5 4 3 2 1 0 -1 -2 Temperature -3 -4 -5 -6 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug oC -0.1 0.2 -1.1 -5 0 2.1 0.6 4.2 1.2 0.1 -1.1 -0.5

Source: Met Office [6]

Figure 6. Sunshine and Rainfall Anomalies - 2011 Growing Season (Source: Met Office) [6]

1990) 250

200

150

100

0 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sun 93 107 78 61 86 58 129 147 116 102 88 80 Rain 73 94 96 49 123 109 27 7 52 144 109 139 - (1961 Average Term Long of %

Sun Rain

Source: Met Office [6]

Husbandry Issues during the 2011 Harvest Year

Bovine tuberculosis (TB) remains the biggest disease threat to livestock farmers engaged in the dairy and beef industry. In 2011, the number of reactors identified and slaughtered in England rose to 26,407. TB reactors within Eastern England, which includes the South East region, totalled 1,349 or 5 per cent of the English total [7]. Sussex is now considered an area of high risk and is subject to annual testing with a recognised established wildlife reservoir for the disease. The British Government continues to afford high importance to the controlling of bovine TB.

2011 saw an outbreak of the Schmallenberg Virus (SBV), the introduction of this to the UK was most probably the result of wind-blown insect vectors. On January 23, the disease was diagnosed

6 following the testing of deformed lambs, on four sheep farms in Norfolk, Suffolk and East Sussex. Throughout the year, the South East region remained one of the areas of the highest risk. In the first months of 2012, SBV infection had been identified on 121 farms. Eight of the cases occurred in cattle and 113 in sheep. No other species has been affected to date [8].

Great Britain was officially declared free of Bluetongue virus in July 2011, a disease affecting all ruminants. This resulted in the lifting of restrictions on exporting sheep and cattle. Livestock are now no longer required to be vaccinated against bluetongue under EU law [9].

Total foliar disease severity was not as low in 2011 as that of the 2010 harvest, with a rise in the incidences of rust this harvest. Yellow rust was recorded in more crops than in any year since 1999. Brown rust, which had not been recorded at all in 2010, was found in nearly 8 per cent of crops in 2011 [10].

The incidence of Fusarium Ear Blight (FEB) decreased, a destructive fungal disease which has become increasingly problematic by reducing yield and producing poisonous mycotoxins. Ear blight symptoms were recorded in only 21 per cent of samples, a significant reduction from half of all samples recorded to have symptoms in 2010. It is thought the re-emergence of this foliar disease is driven by climatic changes and agronomic practices such as minimum tillage as well as growing other susceptible grains like maize [10].

Figure 7 Combinable Cropping in the South East [11]

Crop Area 2010 (ha) 2011 (ha) Change % Wheat 240,425 242,761 1% Winter Barley 24,577 22,971 -7% Spring Barley 40,238 46,682 16% Oats 19,141 16,512 -14% Oilseed Rape 82,990 90,369 9%

Figure 7 provides details of the areas of combinable crops grown in the South East, which increased by 3 per cent, in 2011. Winter wheat remains the main combinable crop grown accounting for 58 per cent of the area grown. The spring barley area grown increased significantly by 16 per cent; this followed a 34 per cent reduction in area grown in 2010, which could be a result of crop rotation. This could also explain the 14 per cent decrease in the area of oats grown this harvest. The area of oilseed rape grown continues to increase across the region, as it did in the previous year.

The 2011 harvest had a slow start despite the crops being up to 10 days more mature at the end of May, as a result of the driest spring in over 100 years in the South East. The wet and cooler weather experienced in mid-July slowed crop ripening. However, harvesting of winter barley and winter oilseed rape in the southern regions started much earlier than other regions of England. Progress remained ahead of average for most crops throughout the season. Most of the early harvested wheat was in the South East where at the start of harvest there were variable yields but overall averages were favourable for farmers in the region [12].

Figure 8 illustrates the crop yields achieved in the South East compared with the UK for the 2011 harvest. All combinable crops grown in the South East achieved yields that were higher than the average across the UK. Spring barley was the most significant, with a 0.3 t/ha higher yield to that of the average yield of all the spring barley produced in the UK.

Figure 8 Combinable Crop yields in London and the South East Region and the UK 2011 [11]

Crop T/ha South East UK Wheat 8.0 7.7 Winter Barley 6.4 6.1 Spring Barley 6.0 5.4 Oats 5.8 5.6 OSR 4.0 3.9

During 2011, frosts that occurred late in the season caused anxiety amongst fruit producers, but the long dry period, benefited from rain in mid-summer and resulted in the earliest recorded start to the picking season of a good crop of quality apples and pears [13]. During the growing season, English growers sold 20 per cent more fruit to the supermarkets than for last year [14].

Overall fruit production was down by 3 per cent [14]. Top fruit investment in new apple orchards stocked with modern varieties continued in response to changing consumer demand. In July of 2011 an intensive, seven hectare orchard was planted consisting of nearly 18,886 sweet sensation trees, alongside 4,000 conference pear tree pollinators, in East Malling in Kent. Thus illustrating that the South East is leading the way for intensive fruit production in England [15].

Soft fruit production had a difficult season, with the very cold December and late frosts in May affecting a number of crops. In the case of strawberries this led to many crops being delayed, leading to the early season premium being lost [16].

Overall, vegetable production in 2011 was 6 per cent lower than in 2010 [14]. Consolidation in this sector of the industry continues as it comes to terms with higher costs, particularly for fuel, packaging and labour resulting in smaller margins being earned on the products sold.

Economic Issues during the 2011 Harvest Year

The UK economy grew 1.1 per cent in 2011 with the services sector contributing 1.0 per cent of this growth. Agriculture output decreased 2.3 per cent but did not have an effect on overall growth [16]. The Consumer Price Index (CPI) overall rose 5.1 per cent during 2011 however, between May and June 2011 the CPI, fell, for the first time since 2003, by 0.1 per cent. Since 2001, food price has increased at a higher rate compared to CPI, 2011 continued this trend increasing by 6.4 per cent [17].

In spite of the efforts of government to free up the movement of funds in the economy, anecdotal reports indicate the banks are still reluctant to lend to small businesses and affecting the farming community where overdraft limits needed to be reviewed or new loans being sought. Bank of England figures show that annual outstanding loans to the agriculture sector continued its 11 year trend increasing in 2011 to £12.24 billion compared with £11.72 billion in 2010 [18].

As figure 9 shows; grain prices in 2011 started out significantly higher than in the previous year. In January of 2010, prices per tonne were near £100; by February 2011 this had doubled to average £200 per tonne. The prices remained high throughout the season, before dropping during harvest. In the beginning of 2012, the price increased steadily, in comparison to the year before, when it fluctuated between £150 and £160 per tonne [19].

Figure 9. Feed Wheat Prices Harvest 2010, 2011 & 2012 [21] 220.0

200.0

180.0

160.0

140.0

120.0 per £ tonne 100.0

80.0

60.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012

DEFRA, GB Animal Feed, DEFRA, Editor. 2012 [21]

Big bale hay prices in the South East started 2011 at £127 per tonne, due to limited supply caused by the drought conditions in the previous year. After June 2011 spot market prices for hay reduced to £85 per tonne. Big bale wheat straw price in the open market remained at around £40 per tonne until after harvest at which point it rose steadily to a peak of £60 per tonne in March 2012. It is important to note the majority of hay and straw is sold direct to the end user. The price received for small hay and straw bales, sold to private customers, remained upwards of £6 per bale (approximately £300 per tonne) [20].

Figure 10 shows the average price of compound feed by category of livestock. Throughout the time scale being illustrated prices of feed increased steadily. During the summer months of 2011, prices reached their peak and then fell in the autumn months, with the exception of cattle and calf feed which remained steady. Poultry feed was the most expensive, followed closely by pig feed. Cattle and Sheep feed prices were similar, following the trends of previous years [21].

Figure 10. Average Compound Feed Prices by Main Livestock Categories [23] 300

275

250

225

200

175 £per Tonne 150

125

100

Quarter

Cattle and Calf Feed Pig Feed Poultry Feed Sheep Feed

EBLEX. Sheep Market Outlook. 2011;cited 2012 30/11/2012 [23]

Figure 11 illustrates the changes in fertiliser price between January 2010 and November 2011. Fertiliser prices started out much higher this year than the previous year. When the season commenced in mid-May 2011, the world nitrogen market experienced an exceptional increase in prices. Farmers who had not bought their fertiliser forward were most affected, as the market saw prices increase throughout the year. European price hikes were delayed, not occurring until October whilst the UK experienced much earlier price changes with for example, Nitram, up by £8/t between June and August [22].

Figure 11. Fertiliser Prices 2010/11 [23] 400

350

300

250 £per Tonne 200

150

100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Nitrogen 2010 Nitrogen 2011

EBLEX. Sheep Market Outlook. 2011;cited 2012 30/11/2012 [23]

The value of UK red meat exports increased by a quarter during 2011, due to tight global supplies; increasing demand for higher volumes of product and driving the unit prices higher. Beef export value increased by 32 per cent and the value of sheep meat exports increased by 19 per cent. This was due to increased exporting to non-EU markets, lower supplies of New Zealand lamb and a shortage of beef across the markets of the continent [23, 24].

Finished cattle prices reached an all time high, reaching over 300p/kg deadweight throughout the summer of 2011 [25].

The average clean sheep price (standard Quality Quotation) peaked in May, almost reaching 540p/kg deadweight, the annual decline in price into the summer was experienced but prices still remained higher than those received in 2010 [23].

Dairy cow numbers in the UK, continued to fall. In 2011 there was a decrease of 33,000 animals [26]. Replacement dairy cattle increased in price, to average £1,509 per head. Freshly calved cows averaged £1,464 per head in 2011 compared with £1,181 in 2010 [20]. Despite the declining numbers of dairy farmers, yields and efficiency have increased. However, the average price paid to British farmers in July 2011 was around 4ppl below the EU average paid. In April, the average farm gate price stood at 26.26 ppl, which was the lowest price received in the EU-27 [27].

Policy and Regulation issues during 2011 Harvest Year

The Campaign for the Farmed Environment (CFE) was launched in November 2009, to act as a voluntary measure to increase and maintain in-field options, and retention of un-cropped land, following the removal of compulsory set-aside. The targets that the CFE scheme is aiming for are:

• an increase in the in-field ELS options of 40,000 ha • 179,000 ha of un-cropped land across England, improving the management of at least one third of this to support habitats for birds, insects and mammals • an increase above the current national level of voluntary environmental management of at least 30,000 ha

In May 2011 there was an estimated 130,374 ha of un-cropped land across England, a 25,000 ha reduction on the previous year and 27 per cent below target. It was estimated that 33,912 ha of land was in voluntary environmental management outside of any campaign measures [28].

In the South East there are currently 5,634 live environmental agreements, 1,067 of which are HLS agreements [29] covering 745,077ha of land which is 62.3 per cent of the UAA.

The new coalition government has resulted in a change of policy towards controlling Bovine TB with a proposal for the targeted culling of badgers as a means to control the disease in designated hotspots. Extensive consultations revealed a division of opinion, with many animal charities vociferously opposed to any form of cull. Farming organisations are supportive of a science-led cull, to control a disease viewed as out of control [28]. With debate and strong opposition on the control of TB continuing throughout 2011, and no proposed date for the cull to commence, alternative methods of control were discussed such as vaccination. The National Trust and the Badger Trust are carrying out trial vaccination programmes, to provide evidence to support their argument against the cull [30].

The European ban on conventional battery cage laying systems has led many egg producers to either invest heavily in upgrading their system to free-range or enriched cages, or leave the industry completely. UK egg producers that have altered their systems to comply with the new law fear the industry will be impacted by imports. With many countries in the EU not yet altering their systems, without the financial investment that UK farmers have made, they will be able to under-cut UK producers on price. There is a demand for new coding, such as the British Lion stamp to distinguish which eggs meet the new EU demands and tighter restrictions on imports to stop illegal eggs from being purchased [31].

The government has set ambitious targets to produce 15 per cent of all energy requirements from renewable sources by 2020. As a result renewable energy feed-in tariffs were introduced by the Government in April 2010 to provide a set rate per KWH produced, with decreasing rates as the energy generation capacity increased up to a maximum of 5MW. Investment and uptake was much higher than expected, as farmers and growers saw a secure return on their investment [32].

FBS Results by Farm Type 2011/12 (2011 Harvest)

Note: The following commentary refers to tables available at: www.farmbusinesssurvey.co.uk/regional/

All Farms

Average Farm Business Income (FBI) increased by 25 per cent to £74,801 per farm on the sample of 234 South East farms surveyed in 2011. The two farm groups that had the most significant increase in FBI were dairy farms with a 68 per cent increase and the Lowland Grazing Livestock with a 67 per cent increase compared to 2010. Cereal farms FBI continued to increase this year from £99,913 to £110,330, up 10 per cent, which was in contrast to the 114 per cent increase of the previous year. The only decrease in FBI occurred in the General Cropping group, which fell by £3,641 (4 per cent) per farm.

Table 9 – Business Output, Input Costs and Income – shows how the farm business can be viewed by different cost centres. The cost centres used are agriculture, agri-environment, diversification and single payment scheme (SPS). On average 31 per cent of output on farms in the South East is derived from agriculture.

Figure 12 shows the distribution of farm output by the four cost centres and by farm type. Cattle and sheep lowland grazing farms obtain the largest proportion of output from non-agricultural sources (38 per cent), whilst the poultry and pig farms generate 97 and 95 per cent respectively of output from agriculture, gaining very little from SPS, diversification and agri-environmental activities. The average farm in the South East GOR obtains 79 per cent of output from agriculture compared to the England average of 83 per cent; output derived from diversification activities is 4.5 per cent higher in the South East.

Figure 12. Distribution of Farm Output by Cost Centre and Farm Type

The average FBI across all farms in the South East sample of £74,801 breaks down between cost centres as follows:

2010/11 2011/12 Farm Business Income £59,772 £74,801 (FBI) Of which, by cost apportionment: FBI Agriculture £10,086 £23,257 FBI Agri-Environment £5,689 £6,191 FBI Diversification £14,892 £15,878 FBI Single Payment £29,106 £29,476 Scheme

When disaggregated in this way it shows that agricultural activity accounts for an increased percentage of the FBI, than in 2010. It now accounts for nearly double that of the previous year, increasing from 16.8 per cent to 31.09 per cent.

Cereal Farms

Table 3 shows the cropping and stocking on a sample of 52 farms. In 2011, 49 per cent of the total tillage was down to wheat, oilseed rape occupied 22 per cent and all barley covered 9 percent of the area. Peas and beans, fallow and arable fodder crops, and other crops covered 20 per cent.

Total labour units for cereal farms at 1.84 was 53 per cent of the all farm average (3.5) and a reduction of 0.21 from the previous year indicating more efficient use of labour on cereal farms. Farmer and spouse labour contributes 48 per cent to this figure, while regular paid labour provides 29 per cent.

Table 9 – Business Output, Input Costs and Income by cost centre shows agricultural activity made a profit of £38,443 in FBI terms on cereal farms (35 per cent of total farm FBI). £41,226 (37 per cent) of FBI is generated from the SPS and diversification accounts for 22 per cent or £24,381.

Table 11 gives balance sheet details for the cereals farms surveyed and it can be seen that they had an average closing net worth of £2.3 million. Net worth increased on average by 8 per cent during the year for this group with the value of land and buildings up by 11 per cent, whilst machinery assets value increased by 10 per cent. Table 12 illustrates the flow of funds for the sample of cereal farms.

Dairy Farms

Cropping and stocking on the dairy farms in the South East can be seen in Table 3. In 2011, dairy farms in the sample utilised 256 ha for agriculture, which consisted of 42 per cent cropped land (including arable fodder crops), 34 per cent temporary grazing and 24 per cent permanent grazing. Of the cropped land, only 35 per cent was used for arable fodder crops, indicating a diversified approach to cropping.

Dairy farms in the South East are labour intensive requiring on average 5.51 labour units compared with the national dairy average of 3.5 per farm. The main reason is that South East dairy farms are more than double the size of the average dairy farm in England (256 ha compared with 144 ha), and herd size is 26 per cent greater in the region (187 dairy cows and heifers in milk compared with 148).

Tables 4, 5, 6, 7 and 8 show the time series for the different income measures from 2005 to 2011. Average dairy FBI increased significantly to £79,340, an increase of 68 per cent on the previous year and £10,589 higher than the peak in 2008.

Table 9 – Business Output, Input Costs and Income – shows that at £44,399 over half (56 per cent) of FBI was derived from the SPS. Agriculture on average was a loss making activity with average FBI of -£26,502, whilst diversification enterprises generated 26 per cent of FBI (£20,544), and agri-environment schemes contributed 10 per cent of FBI to the average dairy business in the South East.

Table 10 – Detailed Output and Input Costs –shows how the account for 2011 is made up for each broad category of income and expenditure by the different cost centres. Milk and milk products contributed 70 per cent to agricultural output, whilst 19 per cent of agricultural output is derived from crop output. Of the £45,402 output from diversified activity from dairy farms, £14,644 is generated from food processing and retailing whilst 54 per cent is generated from rental income (£24,391).

The net worth of dairy farms increased in 2011 by 12 per cent to £1.6 million. This was derived from an increase in land and building values of 12 per cent and a net investment in machinery and equipment of £37,354, leading to a 12 per cent increase in valuation. External liabilities increased by 15 per cent to an average of £439,864 per farm.

Table 12 – the Flow of Funds statement shows an average investment, of £57,968 in landlord capital type improvement indicating the level of investment required to comply with nitrate vulnerable zone legislation which came into force on 1st January 2012.

General Cropping Farms

This group of farms is made up of a sample of 12 farms this year, compared with 14 in 2010. The average total area of farm increased 24 per cent from 182.6 ha to 221.6 ha. However, this was 9 per cent smaller than the all England average. Winter wheat occupied the largest area (44 per cent) of the farmed area in the South East, other crops (26 per cent), and oilseed rape (10.5 per cent) were the next largest. In comparison, the cropping areas for the England sample was much more diverse, the largest crop area was winter wheat (36 per cent), and oilseed rape (10 per cent).

Total labour units of 9.18 on the average general cropping is significantly higher than for the all farm types of 3.5 labour units.

Table 9 shows FBI at £96,757 in 2011, a decrease on the £100,398 recorded the previous year. Forty per cent (£38,280) of which is obtained from the SPS, followed closely by income generated from the agriculture cost centre (£31,664).

The net worth of general cropping farms was up 9 per cent on 2010, from £2.1 million to £2.3 million, with the increase (8 per cent) in the value of land and buildings to £2.4 million the main contributors to the increase.

Horticulture

This group is made up of 58 businesses engaged in a wide range of horticultural activity in the South East of England. It includes growers of top fruit, soft fruit, salads, ornamentals, flowers and vegetables. These crops may be grown outside, in poly-tunnels or under glass. The average size of these businesses is 44 ha of which 77 per cent is owner occupied; 65 per cent of the area is actually in production.

There are significant areas of many different types of horticultural production in the South East. The proportion of land area is greater for outdoor vegetables, top and soft fruit, whilst outdoor ornamentals and glasshouse crops are less prevalent than the average for England. Annual labour units average 8.8 per cent business for horticulture in the South East; this is 26 per cent higher than the national average for horticultural businesses and compares with 3.5 per cent business for the combined sample of all farm types in the South East.

The time series for Farm Business Income, Net Farm Income, Cash Income, Management and Investment Income and Family Farm Income can be seen in tables 4 to 8. Average FBI for

14 horticultural businesses has continued to increase from the low of 2008, rising 124 per cent since 2008 to £57,527.

Table 9 – Business Output, Input Costs and Income – shows the limited total output derived from SPS (1.65 per cent). However, including costs associated with the four cost centres this increases to 11 per cent of income. Agri-environment schemes contribute 5 per cent to FBI and diversification activities amounted to £8,768, 45 per cent less than the all farm average in the South East.

Net worth increased by 8 per cent to £950,622. Land and buildings, which represent 85 per cent or £829,414 of the average business fixed assets, increased in value by 6 per cent.

An average of £22,519 was spent on new machinery and equipment, £15,650 on property purchases and £9,308 spent on landlord capital type improvements. Table 12 gives full details of the flow of funds.

Lowland Cattle and Sheep Farms

Lowland cattle and sheep farms are a common feature in the South East. The sample in 2011 consisted of 45 farms with an average size of 131.4 ha; this was marginally larger than the whole England average of 107 ha. On average 8 per cent of the farms were cropped with the rest down to grass, 81 per cent of which is permanent grass.

All Cattle average numbers fell compared with the previous year, however, sheep average numbers increased. Total livestock units decreased by 4.1 per cent to 95.8 per farm. The stocking rate averaged 0.77 livestock units per hectare which is less intensive than the all England average 0.94 LU per ha

The total annual labour units per farm was 2 percent lower than the previous year. Farmer and spouse labour made up 58 per cent of this total, compared with the national average of 66 per cent.

Table 9 – Business Output, Input and Income - shows how FBI is divided between the four different cost centres. Fifty-four per cent (£21,782) of FBI is derived from the SPS, 20 per cent (£8,191) from diversification activities, 16 per cent (£6,593) from agri-environment schemes, and agricultural enterprises produced a FBI of £3,923 contributing 10 per cent to total FBI. The net worth for this group of farms increased by 11 per cent during 2011; predominantly this is the result of increasing valuations of land and buildings. Land and buildings valuations represent 90 per cent of the fixed assets of the average farm. Between 2010 and 2011, bank term loans decreased by £3,552 to £17,706 per farm. The average England lowland grazing farm has an average of £22,444 in bank term loans.

Table 12 shows the flow of funds for the year – a net inflow of £2,157. During the year £10,173 was spent on new machinery and equipment and £2,863 was invested in property with £6,061 spent on landlord capital type improvements.

Table 15, which provides Outputs, Inputs and Income figures, shows that rearing and fattening cattle generates 70 per cent of total livestock output (£45,709), whilst sheep and wool generate 28 per cent (£18,152). Total livestock output was 3 per cent lower than the national average for grazing livestock farms. Whereas, miscellaneous output totalling £55,330 was 42 per cent higher than the national average. The greatest contributor to this figure was the SPS receipt; however diversified activities totalled £18,277, 111 per cent greater than the national average. Overall, total farm output was 8 per cent higher on these farms in the South East than the average for England.

Mixed Cropping and Stocking Farms

The average farm size of mixed cropping and stocking farms in the South East in 2011 was 198 ha, 18 per cent larger than the national average. Within this figure, 5 per cent is made up of woodland and other non-agricultural areas compared with 4 per cent nationally.

Cropped land totalled 101.5 ha or 52 per cent with the remainder consisting of grassland. Winter wheat covered 42 ha which represented 41 per cent of the cropped land whilst oilseed rape accounted for 17 per cent of this area. Total livestock units (LU) averaged 108 LU per farm, averaging 0.55 LU per ha, 25 per cent lower than for the England sample.

Tables 4 to 8 show the income for this mixed group of farms in 2011/12 by the different income measures. FBI in 2011 averaged £83,348 per farm, 26 per cent higher than the average for mixed farms nationally (£66,049). Forty-three per cent of average FBI on mixed farms in the South East is derived from SPS, 23 per cent is derived from agricultural activity, an increase from 12 per cent in the previous year. Diversified activity accounts for 24 per cent of FBI with agri-environment making up the remaining 10 per cent. Table 10 shows the outputs and costs of these four main costs centres.

Table 11 shows an increase in net worth of 12 per cent to £1,902,698 per farm with land and buildings amounting to £1,836,940 of the fixed assets. Total external liabilities also rose by 13 per cent to £137,982. Expenditure on new machinery and equipment was similar to the previous year. However, expenditure on property purchases and landlord capital type improvements both reduced by over 50 per cent in the year.

Table 15 – Outputs, Inputs and Income – Crop output totalled £130,969. The largest single contribution to crop output was derived from winter wheat (£61,079) followed by oilseed rape (£26,554). In total, crop output was 14 per cent higher than the English average output. Livestock totalled £77,900 a reduction in output of 27 per cent compared to the previous year and 26 per cent lower than the national average. Variable costs were much lower totalling £82,981 (15 per cent lower than the average for England). The farm gross margin of £226,632 was 16 per cent higher than the national average of £194,802. The single largest item in the variable costs was purchased concentrate feed and fodder at £17,181 per farm; however, this cost is down 54 per cent compared to the previous year.

Pigs (England)

This commentary is based on the national sample of 74 pig farms across England. Our report includes all types of producers; independent and contract units, and all combinations of breeding through to finishing. The average pig farm was stocked with 2,362 pigs, little changed on the previous year. However the average size of farm increased from 44.7 ha to 63.4 ha with more land used for home produced feed and cereals grown for straw.

The FBI of Specialist Pig farms averaged £37,980 in 2011/2012 (£44,439 in 2010/2011). Pig output at £419,787 was lower than the £424,270 achieved in 2010/2011. The deadweight average pig price (DAPP) [35] was £144.27 pence per kilogram at the end of April 2012, having peaked at over 145 pence in July 2011 and fallen to a low of below 137 pence in February 2012.

Overall, pig producers have faced high production costs again this year, with high grain prices having the biggest impact. However British pig weaner prices remained relatively stable throughout this period at £43.75 per head end of April 2011 to £45.35 per head at the end of April 2012. With the lowest price dipped to £ 39.98 per head in October 2011 (DAPP) [35].

The capital position of Specialist Pig farms was reasonably stable again this year with a healthy increase in stock levels and investment in machinery and equipment. Overall, the closing net worth of £795,705 per farm compared favourably to the opening figure of £733,326.

With the ban of sow stalls in the EU coming into force in January 2013 it is expected that several member states will not be fully compliant, with only 12 out of the 27 on course to meet the deadline [36]. Pig meat production in the EU is expected to fall as some European farmers might see this as an opportunity to leave the industry avoiding investment in new equipment [37]. This is expected to place the British pig industry in a much stronger position, with prices to match, following a run of difficult years since the ban took effect in Britain in 1999.

Poultry (England)

The 2011/2012 poultry sample included 96 farms (97 last year) representing all types of poultry farming, but principally egg and table chicken production. The average farm size was smaller; numbers of hens and pullets in lay were 44 per cent lower per farm and broilers and other poultry were 22 per cent lower. There were fewer tenanted businesses in the sample in 2011/2012.

The average FBI for this sector was £41,110 representing a 40 per cent reduction on the previous year figure. The nature of this sector means that the income of individual farms can change considerably from year to year. This, along with the relatively small size of the sector and of the sample in the survey, means that our estimates are subject to greater levels of fluctuation and uncertainty than in other sectors.

The livestock output was £578,702 of which 26 per cent was from eggs and 74 per cent was from broilers (32 per cent of this came from eggs and 68 per cent from broilers in 2010).

Egg Production

Egg production was dominated by the transition from caged to enhanced pens under the 1st January 2012 ban. The impact was greatest for those choosing to cease production or reinvest in enhanced pens, but the price fluctuations impacted those continuing in production with free range or enriched cages. The UK cost of moving to enhanced cages has been quoted as £400 million; more than £25 per hen housed [38].

Ahead of the cage ban, there was a continued gradual reduction in the UK flock during 2011 and the strategy of earlier culling of older flocks meant the size of the UK layer flock dropped to 31 million birds in January 2012 [39]. Production fell; in 2011 26.9 million cases of eggs were packed a decrease of 2 per cent on the previous year [40].

The average price per dozen eggs also fell slightly to 69.9p in 2011, from 70p in 2010 [41]. In early 2012, the market rallied due to reduced supply. Rapid culls in Europe to meet the cage ban are illustrated by the case of Spain which was 120 per cent self sufficient and exported 20 per cent to the UK, but is now a net importer [42]. Eggs classed as seconds have seen a price increase, for example Stonegate packers gave an additional 14p per dozen to reflect processor demand [43]. We wait to see if these rises are sustained or just a feature in the shift of production as markets adjust after the cage ban. Pressure from imports remains strong with confusion over caged eggs from other EU countries entering the UK as processed product.

Sainsbury’s have announced that all eggs used for all its own-brand food as well as its shell eggs now come from cage free hens [44]. Other supermarkets and retailers are taking a similar stance. Higher feed prices were a matter of considerable concern to the industry in 2011. In turn these also led to higher costs of production for pullets and so increased prices to egg producers.

Poultry Meat

Wholesale prices for chicken meat have remained reasonably stable in the face of rising input costs [37].

Demand has grown for speciality birds such as wild guinea fowl and poussin, the fastest growing meat on sale in the UK, as more consumers seek roast dinner alternatives [45].

Costs

Costs to the poultry sector continue to increase, feed accounted for 61 per cent of overall agricultural costs and 86 per cent of livestock specific costs making it very difficult to find any cost saving measures that have any real impact.

References

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