SIGNIFICANT rises in the cost of inputs have led to mixed fortunes for English farm incomes during 2010/11 according to the NFU, following publication of Defra’s Farm Business Income (FBI) report.

It revealed that while the cereal sector enjoyed a significant increase, livestock and horticulture sectors suffered falls year on year, with the cost of fertiliser and animal feed rising by nearly 30 per cent each.

Cereal incomes in real terms rose by 97 per cent and dairy by seven per cent.

However, livestock farm incomes fell 29 per cent in lowland and 19 per cent in upland areas, with horticulture down 27 per cent.

NFU chief economist Phil Bicknell said it was good news for the cereal sector which had suffered losses in 2009/10 when prices fell below production costs for the average cereal farm.

Despite firmer cattle and sheep prices, livestock farmers saw a fall in income as the impact of higher feed costs made turning a profit difficult.

Mr Bicknell said: “Revenues through the Single Payment Scheme and Environmental Stewardship, along with diversification income, are critical to ensuring the average livestock farm remains in the black.

“Although the dairy industry experienced a seven per cent rise in income, it wasn’t only the improved price of milk that made the difference.

Defra point to the increased cropping output on some dairy units as the reason farmers were partly able to offset higher feed and fertiliser costs. This underlines the on-going need to ensure dairy farmers get a fair return at the farm gate for their milk.”

Horticulture incomes had declined. “An alarming 24 per cent of growers have seen their business fail to turn a profit, more than any other sector in 2010/11,” he said.

“While prices in some sectors have increased slightly this year, few growers will have received enough to cover the escalating cost of production or allow for reinvestment.

They are also experiencing mounting price pressure from their customers, which is eroding margins and confidence.”

Mr Bicknell said lower profitability meant some farmers would be more reliant on their direct payments this year.

“CAP continues to play a crucial part in supporting agriculture and its Single Payment Scheme is an effective tool that helps farm businesses cope with market volatility,” he said, “Farm gate prices might be stronger, but this isn’t reflected in the bottom line for some sectors.”

The big challenge was to produce more and impact less. “That requires efficiency gains and productivity increases, and in turn that needs investment,” said Mr Bicknell. “Farmers will only invest if they’re profitable.”