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Director of Policy Blog - 31 January 2017

Jonathan Hall
Headline farm income figures may suggest things are turning around but they always require careful interpretation writes NFU Scotland's Director of Policy Jonnie Hall.
According to the Scottish Government, Total Income from Farming (TIFF) is estimated to have increased by £96 million in 2016, after two years of decline.
The Chief Statistician in the Scottish Government today published Total Income from Farming Estimates for Scotland 2014-2016 - - which contains near-final estimates of Total Income from Farming (TIFF) for 2015 and an initial estimate of 2016 TIFF. The figures show income fell by 16 per cent in 2015 compared to the previous year, but initial estimates for 2016 suggest an increase of 15 per cent.
Agriculture was worth £653 million to the Scottish economy in 2015, down from £775 million in 2014, with subsidies, milk and barley all seeing big falls. TIFF for 2016 is estimated to have bounced back to about £749 million, which, once inflation is taken into account, is the fourth highest since 2000. 
The weakening of the pound following the EU referendum led to improved prices for grain, beef and lamb, resulting in a boost to the value of outputs. Another important effect of the exchange rate was the increase in the value of EU support payments. The 17 per cent change in the exchange rate resulted in total payments increasing by £53 million.  See:  
While TIFF is the headline national-level measure of farm income, drilling down on the figures shows worrying trends continuing for Scottish farm output in general and just how challenging 2015 and 2016 have been for those producing milk, cereals and eggs.     
One thing that does stand out is the impact of the exchange rate shift following the EU referendum last summer.  That has been an important factor in helping beef and lamb prices to rally.  However, support payments are also included in the calculation and here the impact of the exchange rate change has been stark and a big factor in TIFF increasing.
Greater efficiency at farm level, and falling prices for some key inputs – feed, fuel, fertiliser – have helped farmers and crofters significantly reduce costs for the second year in a row, also contributing to the turnaround in TIFF.
There is a clear indication of a contraction of Scottish agriculture, and that is further borne out by productivity indicators which suggest we have fewer farm businesses but they are getting more efficient in terms of input use.  However, TIFF figures relate to all aspects of Scottish agriculture and these headline figures can disguise significant variations between sectors, farm sizes and farm types.
The TIFF figures do, however, underline the importance of public support to the viability of Scottish agriculture.  In the months ahead, we will be pressing at a Scottish and UK level the need for a post-Brexit agricultural policy that is both adequately funded and better targeted at active farmers and crofters in a way that encourages them to take their businesses forward.

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