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UK Total Income from Farming


12 December 2013

Total Factor Productivity of the UK Agricultural Industry 2012 - 2nd EstimateTotal Factor Productivity of the UK Agricultural Industry 2012 - 2nd Estimate

This release presents the second estimate of total factor productivity of the UK agricultural industry and volume indices for 2012.
Total Income from Farming in the UK

Total factor productivity of the agricultural industry in the United Kingdom is an indicator of how well inputs are converted into outputs giving an indication of the efficiency and competitiveness of the industry. Year to year variations in total factor productivity may be due to factors outside the farmer’s control, such as, weather conditions or disease outbreaks. The second estimate incorporates data that has become available since the first estimate and revisions may have also been made to previous years.

Key points:

  • Total factor productivity of the agricultural industry in the United Kingdom is estimated to have fallen by 2.9% between 2011 and 2012, its lowest level since 2007. This is the largest single year fall in total factor productivity since 1985. The fall in total factor productivity reflects the impact of poor weather on the agricultural production process during 2012.

  • Over the longer period, the volume of final output has remained largely unchanged between 1986 and 2012 while the volume of all inputs and entrepreneurial labour fell by 19%, leading to total factor productivity increasing by 21%. Total factor productivity was broadly level between the mid-1980s and mid-1990s, increased by 18% between 1997 and 2005 and has since remained mostly level with year to year variations.

  • This is the first release to use 2010 as the base year for total factor productivity. Previous releases used 2005 as the base year.

Latest figures and long term trends

Figure 1 and Table 1 show the trends in total factor productivity, final output at market prices and all inputs and entrepreneurial labour between 1986 and 2012.

Total factor productivity of the agricultural industry in the United Kingdom is estimated to have fallen between 2011 and 2012 by 2.9% to its lowest level since 2007. This is largely driven by a fall of 3.2 % in the volume of final output at market prices, whilst the volume of all inputs and entrepreneurial labour used in the production process fell marginally (0.2%). This fall in total factor productivity reflects the impact of poor weather during 2012 on agricultural activity.

This is the largest annual decrease in productivity since 1985 when there was a 3.7% decrease in productivity. The decrease in 1985 was also due to poor weather conditions but 1985 followed a particularly productive year in 1984 when growing conditions were favourable. The decrease in productivity in 2012 was larger than that seen in 2001 when there was an outbreak of Foot and Mouth Disease in the UK. In 2001 there was a larger fall in outputs of 3.8% but also a larger decrease in inputs of 1.9%.

Crop output was particularly affected by poor weather during 2012, with the volume of wheat output falling by 9.4% compared to 2011 to its lowest level since 2001. The volume of oilseed rape output fell by 7.3% between 2011 and 2012 following very poor weather during spring and summer 2012, partly offset by an increase in area following favourable planting conditions in autumn 2011, but remained 28% higher than in 2007. The volume of output of potatoes was down 23% compared to 2011 as poor weather interrupted planting in the spring and led to low yielding potato crops and increased wastage. Output of sugar beet, down 14%, and fruit, down 8.5%, were also affected by cold and wet weather.

Livestock output was generally less impacted by the poor weather in 2012 other than sheep output, down 4.5%, where poor weather in the second half of the year hampered the marketing of lambs resulting in a large carryover of the 2012 lamb crop into 2013.

While weather conditions or other factors such as disease outbreaks may have short term impact on agricultural productivity, it is developments in productivity over a longer period that constitute one of the main drivers of agricultural income. Productivity growth means that more value is added in production and more income is available to be distributed.

Over the longer period, the volume of final output has remained largely unchanged between 1986 and 2012 while the volume of all inputs and entrepreneurial labour used in the production process fell by 19% leading to total factor productivity for the agricultural industry in the United Kingdom increasing by 21%. Total factor productivity was broadly level between the mid-1980s and mid-1990s, increased by 18% between 1997 and 2005 and, has since remained broadly level with year to year variations.

The volume of total crop output is 5.9% higher than in 2007 while the volume of total livestock output is 2.2% higher. However theses increases in outputs were virtually mirrored by the increases in inputs with total factor productivity only increasing by 0.6% over the period. Total intermediate consumption is estimated to be 6.7% higher than in 2007. This was driven by large increases in plant protection products, agricultural services and veterinary expenses. In contrast to most of the other inputs, the volume of fertiliser used has fallen by 11% and entrepreneurial labour fell by 1.2% over the same period.

December 2013

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