In the first sentence of its News Release it states "Total Income From Farming in Northern Ireland rose by 46%".Positioned in first place this statement is bound to attract attention, but further analysis reveals a less euphoric picture.

Total Income From Farming (TIFF)

The TIFF was £233 million in 2007. TIFF represents what there is to cover own labour, management input and return on capital invested for all those with an entrepreneurial involvement in farming.

Single Farm Payment (SFP)

The SFP is included as part of the farm output in the aggregate TIFF figures, and the total value of SFP in NI was £231 million. There is also a further £31 million approximately in other payments (LFACA, ESA, CMS etc) that is normally included in the farm output but was not detailed in the provisional figures. This means that agricultural production lost approximately £30 million in 2007.

Income per farmer

If we just use the figures that have been published i.e. £233m TIFF and £231m SFP, then there was £2m income from production agriculture. The 2007 June census determined that there were 31,200 farmers and 6,300 spouses working on farms, a total of 37,500. Dividing the £2m production income by 37,500 gives an income for each farmer and working spouse of £53 for the year.

Other Costs

The DARD News Release points out that in calculating the Net Farm Income there is no deduction in the costs for interest payments on any farming loans, overdrafts or mortgages (or any income included for any interest earned on financial assets). The News Release gives the total cost of borrowings in 2007 as £58 million, a 28 per cent increase on 2006 as a result of a combination of higher interest rates and a 14 per cent increase in the level of borrowings.

Farm Business Income (FBI)

DARD has introduced this year a new measure of FBI as the headline indicator of farm incomes for different types of farms. In this measure the SFP is not included in the individual commodities output as previously occurred with direct production payments, as it is a payment that has been decoupled from production. Nonetheless the FBI given for Cattle and Sheep farms in 2007 is £12,237 per farm in the LFA and £9,403 per farm in the lowlands. These incomes are down three per cent and 12 per cent respectively on 2006 figures. FBI is the income that has to cover all unpaid labour, not just that of farmer and spouse, so it has to pay for family labour and any labour provided by partners in and directors of the farm business. It also has to provide a return on the capital invested in the farm business including land and buildings for all those that have a financial interest in the business.This will apply to Northern Ireland's farms as most are owner-occupied.

Net Farm Income (NFI)

NFI is the measure that is being replaced, but it is going to be continued for an interim period. The NFI given for Cattle and Sheep farms in 2007 is £5,525 per farm in the LFA and -£231 per farm in the lowlands. NFI is what is left to pay for just the farmer and spouse manual and managerial labour, and provide a return on the tenant-type capital invested in the farm business i.e. family, partner and directors' manual labour, and the rental equivalent for all owner occupied land and buildings, have been imputed into the costs. As this is the majority situation in Northern Ireland, NFI here in the main represents the return to the farmer and spouse for their own labour.

Conclusion

It pays to look behind the headline statistics to determine the real financial position of beef and sheep farming.

Further Reading

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