Farmers could be set for a higher profit in 2014, according to estimates from agri-consultancy Andersons.
The firm’s research economist Graham Redman said although Total Income From Farming (TIFF) in 2013 is likely to be down around 15% on 2012 to £4.1billion in real terms, the outlook for 2014 is brighter.
However, he warned the recovery in farm profitability was dependent on currency and the performance of global commodity markets.
He said Single Farm Payment remained a key driver to profitability on Scottish farms – making up 70% of profit last year – with income from non-agricultural activities such as tourism and contract farming becoming more important.
“Profitability is likely to step up in agriculture in 2014, but maybe less so in arable,” said Mr Redman at a seminar in Perth.
The firm’s head of business research, Richard King, said growers were unlikely to see a hike in feed wheat price any time soon, with 2014 harvest price predictions of £150 a tonne delivered and £140-£145 a tonne ex-farm.
“We really don’t see any major factors in the market to shift things massively back to the high levels we have seen of £200 a tonne,” said Mr Redman.
“Most of the predictions for harvest 2014 suggest a good crop for cereals which is likely to have a pretty dampening effect on prices over the next 18 months.”
He said dairy farmers should make hay while the sun shines and invest their current profits wisely ahead of an anticipated drop in milk price later this year.
“We do think the market is at a peak at the moment and we certainly think there will be correction in the market,” said Mr King.
“Producers need to understand the profits at the moment are unusual so they should use the profits wisely in their businesses. We hope that the period of profitability we are in at the moment will allow some of the longer-term strategic thinking to happen.”
Andersons said there was a mixed outlook for the livestock sector, with poultry meat proving the most popular among consumers, followed by beef. However, consumption of lamb continues to decline due to its high retail price.
The consultancy predicted a well-supported beef market throughout 2014, on the back of continued tight supply, and a small improvement in sheep prices as a result of a smaller lamb crop than originally forecast.