The impact of farming

1. The impact of farming

2. Learning objectives To appreciate the contribution of farming to the UK economy. To understand the present day status and impact of British dairy farming. To recognise the contribution of British dairy farming to the economy. To raise awareness of employment opportunities and careers in farming. To understand the role of farming, and dairy farming, to the environment.

3. Welcome To explore this topic, click on the following icons. These are located at the bottom of each screen. Go back to the home screen Go to the previous Go to the next page

4. Main menu (home) Click on the section you wish to explore. Questions are also available for each section. Section 1: Farming in the UK Questions Section 2: The dairy farming industry Questions Section 3: The contribution to the economy Questions Section 4: The contribution to employment Questions Section 5: The contribution to the environment Questions End

5. Section 1: Farming in the UK In 2011, the agri-food sector contributed £95 billion to the UK economy, around 7% of the national gross value added. Within this, manufacturing, retailing and non-residential catering accounted for around one quarter each. Food wholesaling covered 9.6% of the sector and agriculture 9.1%.

6. In 2012 total income from farming was £4.7 billion, a 14% decrease in real terms from 2011 after adjusting for inflation. Similarly the total income from farming per agricultural work unit of entrepreneurial labour also fell by 14 per cent in real terms to £25,175 in 2012. A key factor in the fall of total income was the weather conditions experienced in 2012. The total number of people working on farms increased by five thousand workers between 2011 and 2012 and now stands at 481,000. Small increases were seen across most labour types with the largest increase in the number of casual workers, which rose by 6.9% to 67,000. Agriculture in the UK, Defra (2012) https://www.gov.uk/government/publications/agriculture-in-the-united-kingdom-2012

7. The industry The agriculture, forestry, fishing and veterinary activities sector is important to the UK economy as it is responsible for the supply of food and contributes to the care of our physical environment, while contributing significantly to the low carbon, sustainability and climate change agenda. There are 145,000 business establishments and the sector is principally made up of businesses with between two and four employees, with more workers self-employed than employed. In terms of the gender make-up of the sector, males significantly outnumber females in the sector; however this is not consistent across all industries as veterinary activities has more females than males employed.

8. It’s just about food production? Food production from farms in the UK not only provides the major part of the nation’s diet, but it also provides essential inputs to food manufacturing, wholesale, retail, catering and export, and the market for the agricultural supply industry. Agriculture employed 1.67% of the UK workforce, but employment in the agri-food sector accounted for 13.69% of the workforce in 2011.

9. In 2011, exports of food, feed and drink were 6.1% of total exports by value - although most of these were ‘highly processed’ (3.46%) or ‘lightly processed’ (2.08%), with 0.56% ‘unprocessed’ (i.e. by implication directly from the farm). The agricultural supply industry contributed approximately 0.08% of gross value added and employed 0.04% of the workforce. In addition, farmers work to maintain and improve the countryside, work in partnership to support work in increasing biodiversity on farms, pilot and implement strategies for sustainable food production and ensure high quality standards of animal welfare.

10. While there is evidence to show that there is strong support for farmers, equally there is evidence that indicates that consumers have a poor knowledge of farming. For example, results from a YouGov poll indicate: 72% of respondents do not know much, or know nothing, about farming; 10% knew, to within 10%, the actual amount of land that is farmed nationally, with the mean estimation being about 35% (compared with the actual figure of 74%). Farming’s value to society, Oxford conference report 2013 http://www.ofc.org.uk/files/ofc/papers/ofcreportfulllow.pdf

11. Section 2: The dairy farming industry Milk from 1.81 million cows looked after by over 50,000 farmers and farm workers is made into dairy products by 26,000 people working at British dairy manufacturing sites. Milk and dairy products are then sold to British consumers through 85,720 retail shops and 262,000 foodservice outlets and enjoyed by millions in Britain and around the world to deliver a total value of £9.81 billion in annual sales. Dairy Roadmap, 2013 Dairy Roadmap 2013 http://www.dairyco.org.uk/resources-library/research-development/environment/dairy-roadmap-2013/#.Uuefw_nFLs0

12. Overview of the industry The number of UK dairy farms fell at a slower rate in 2012 than in 2011. In June 2012, there were 14,549 dairy farms in the UK – 1.7% (244) less than in 2011. In the past ten years, the number of dairy farmers in England and Wales has fallen by 43%. In Scotland, the number of dairy farmers has fallen by 29% and by 42% in Northern Ireland. While the number of farms has declined, there has been an increase in the average milk yield. This is due to enhanced working practices and better yield through animal genetics, diet and animal welfare. In 2002, the average was 6,493 litres/cow/annum compared to 7,445 in 2012 - an increase of 14.6%. UK Dairy farm numbers

13. In 2012/13, UK milk production was 3.9% (520 million litres) lower than the previous milk year and the lowest since 2009/10. This was due to the poor weather experienced by the UK during the year. GB milk production fell by 4.1% in 2012/13 versus the previous milk year. Northern Ireland milk production also decreased in 2012/13 but by a smaller percentage 2.6%, (53 million litres).

14. Milk production fell in 2012 despite little change in dairy herd numbers. Poor weather conditions  in the second half of the year impacted on both quality and quantity of forage, resulting in lower yields and milk production, offsetting the higher production levels in the first half of the year. The price of milk can fluctuate throughout the year, due to the impact of weather, poor crop growth, animal feed price increases and other production costs. Poor weather conditions is the reasons why cows are kept indoors, ensuring that they are safe, can access food and water and continue producing milk. This is a key reason for houses systems. UK average farm gate milk prices (ppl = price per litre)

15. Despite lower milk availability, the value of production rose in 2012. ‘The Voluntary Dairy Code of Practice’ was agreed in August, meaning future contracts between farmers and dairy processors being freely negotiated, fairer and more transparent, encouraged price increases towards the end of the year, with record high prices recorded in November and December. Profit margins remained tight however, as greater reliance on feed due to the poor grazing conditions, and other associated rising costs impacted on profitability.

16. The UK milk market The UK milk market was approximately 13.5 billion litres in 2012. Milk for liquid consumption accounted for 6.8 billion litres and 6,089 billion litres for manufacture, e.g. cheese, yogurt. On a global level, milk production continues to increase and reached 588 billion litres in 2011. The EU accounted for nearly a quarter (24.8%) of total world milk supply in 2011 (145.8 billion litres). The UK remains the 9th largest milk producer in the world (2.4% or 13.8 billion litres). The five largest producers are the US, India, China, Russian Federation and Brazil.

17. Overview of dairy farming - the stats UK dairy cow numbers UK average herd size UK dairy farm numbers What conclusions can be drawn from these charts?

18. Profitability of dairy farming Research into dairy farm profitability has identified and analysed three key enterprise types: Cows at grass - predominantly grass-based and operating at lower milk yield levels. Composite - maximum use of family labour and a mixed approach to feeding and housing. High-output cows - cow’s are generally housed for more of the year with more intensive use of major inputs. Milk yields are higher per cow – 8,465 litres per cow compared to 5,741 to predominantly grass-based.

19. In 2012, research showed: The range in milk price was half the range in total cost of production and net margin. Four specific cost areas explain a minimum of 60% of the difference in net margin between the top and bottom 25% farms. The best farms fed less feed per litre and made better use of forage. The top 25% of farms had lower herd replacement rates as a result of lower mortality and culling rates. In both the Cows at grass and Composite systems, fixed costs explain 70% of the difference in total costs of production between the best and worst farms. In the High-output cows system, differences in feed cost had the biggest effect. Significantly more labour hours are spent per cow on manual tasks in the bottom 25% of herds in all enterprise types.

20. Conclusions There is no golden bullet which ensures profitability; cost control through effective management is the key. Achieving the most cost-effective performance level requires regular recording and monitoring of performance and effective use of the data. There is no ideal herd replacement rate, understanding the reasons for replacement is more important that the number. It is important to maintain a level of fixed costs appropriate to the level of output. Investment should aim to improve production efficiency and decrease unit cost of production.

21. Dairy farming business income For dairy farming, the average business income in 2012/13 was £50K per farm (England), £52.4K (Wales), £80.2K (Scotland) and £27.5K (NI). Defra, Farm business income The average farm business income is forecast to fall substantially. Average milk prices increased by around 1% over the 12 month period and prices for cull, store and finished cattle have also increased. However these are expected to be offset by higher costs, notably feed. The fall in dairy farm incomes is forecast to be more substantial in Northern Ireland as milk prices decreased by around 5 per cent in 2012/13. Defra, 2012

22. Farm Business Survey data from 2011/12 shows that the average Farm Business Income (FBI) from dairying was £608/hectare (ha), which at the average farm size equates to an FBI of approximately £86,750  , representing an increase of 31% from 2010/11. Management and Investment Income (MII) in dairy farming increased by £135/ha to £292/ha in 2011/12. This equates to an average MII of £41,663 per farm The findings from the Farm Business Survey (2011/2012) suggest that in general, the larger herds are more profitable and operate relatively high input-output systems. The report also highlights the marked differences in economic returns and technical efficiency between the top and bottom performers. Profitable producers will seek opportunities to expand their business as they exploit their good technical efficiencies and profit margins, whilst producers from within the lowest performing groups will continue to leave the industry based on income levels that are not sustainable. Farm Business Survey 2011/2012 - Dairy farming in England http://www.fbspartnership.co.uk/documents/2011_12/Dairy_Farming_2011-12.pdf

23. What is a successful dairy farm? Analysis of dairy farm performance indicates a number of factors that explain the variation in efficiency between farms. These factors include : Debt: low efficiencies are strongly associated with high debt. Farmer age: farm business performance increases slightly with age, potentially due to experience. Tenure: owner-occupied farms perform better than tenanted farms on Full Agricultural Tenancies, which in turn perform better than those on Farm Business Tenancies. Moorland area: farm containing moorland have lower agricultural efficiencies, but there is no significant difference for the farm business as a whole. Specialisation: on average, farms with a range of agricultural activities (including those growing their own fodder crops and rearing dairy calves) perform better than those focused entirely on milk production, although the magnitude of the difference varies between years.

24. Diversification: diversification outside agriculture is associated with reduced agricultural efficiency, but has no significant impact on business-level efficiency. Foot and Mouth Disease (FMD): farms culled for FMD had reduced agricultural performance between 2003 and 2005, whilst the harmful effect on the business as a whole seems to be longer lasting. Unpaid family labour: there is no significant relationship between the proportion of family labour and efficiency when ‘unpaid’ labour is costed at its full economic value. When it is costed at the minimum wage, farms with greater proportionate use of family labour perform better in terms of agricultural outputs. DAIRY FARMS: ECONOMIC PERFORMANCE AND LINKS WITH ENVIRONMENTAL PERFORMANCE https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/183529/defra-stats-foodfarm-environ-obs-research-cattle-dairy-130205.pdf

25. What makes a high performing dairy farm? Business management practices are linked to economic efficiency, with high performing businesses being more likely to: use management accounting practices; have a PC and use the internet for submitting forms electronically; have a business plan; plan ahead using information from the farming media and discussions with other farmers; adopt risk management strategies, particularly selling on contract basis with agreed price.

26. Farms ceasing to produce milk were more likely to: be older than average; be in an area with fewer other dairy farms; have proportionately less income from SPS and agri-environment schemes; receive a lower than average price for their milk; have lower agricultural performance; have lower veterinary costs.

27. Where farms continued in agriculture, a majority become grazing livestock farms, with smaller numbers being classified as mixed, cereals or general cropping farms. Analysis of costs suggests that control of costs is critical in ensuring a positive net margin, with the best producers keeping costs low in all areas. DAIRY FARMS: ECONOMIC PERFORMANCE AND LINKS WITH ENVIRONMENTAL PERFORMANCE https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/183529/defra-stats-foodfarm-environ-obs-research-cattle-dairy-130205.pdf

28. Section 3: The contribution to the economy The agricultural industry made a contribution of 0.65 per cent to the national economy of the United Kingdom in 2011 as measured by the gross value added of the agriculture industry. Dairy farming is the single largest agricultural sector in the UK, accounting for around 17% of UK agricultural production by value. In 2012/13, just over half (50.8%) of raw milk produced in the UK went into the production of liquid milk and 27.4% into cheese. In addition, milk is also processed into other foods, such as powdered milk, yogurt, cream and butter. These products all support economic activity, including employment opportunity. For example, in 2012, £128.9 million was spent on advertising dairy products in the UK - another measure of economic activity, not just dairy farming. Dairy farming (Rural Business Research) http://www.fbspartnership.co.uk/documents/2011_12/Dairy_Farming_2011-12.pdf UK Milk utilisation - dairy stats, pg 39 (inc. chart) Advertising industries - dairy stats, page 70 http://www.lantra.co.uk/Downloads/Research/Research-reports/Agriculture,-Forestry-and-Fishing-SSA-2012.aspx

29. Factors affecting a dairy business Farmers were asked to give details on what they felt were the main factors which will impact their business in the next 12 months. Input costs were the biggest concern with 49% of all GB dairy farmers giving this answer. This can be seen by the input costs of animal feed, fertilisers, oil, land and rent prices from 2007 to 2012 - all of which have increased. The next two most frequently cited factors were milk prices and the weather, with response rates of 38% and 35%, respectively. Compared to responses given in the 2012 survey, these factors were of concern to a larger proportion of the sample.

30. Weather gained in prominence in the 2013 survey, with 35% of respondents mentioning it as a major factor compared to less than a 3% response rate in 2012. Issues such as supermarket power, red tape and legislation, and industry consolidation were not as commonly mentioned. Farmers who were optimistic in their business outlook for the next year mentioned weather as the most predominant factor affecting their business while the more pessimistic farmers were more likely to indicate input costs and milk prices than weather.

31. Investment over next five years The events of 2012/13 seem to have had a major impact on investment plans. There has been a marked reduction in the number of farmers intending to invest in their dairy business over the next five years compared to last year. 29% of GB farmers intend to invest nothing in their business while 36% are undecided. This compares to only 12% and 13% of farmers giving these responses, respectively, last year. Those investing nothing or who are undecided tend to be older farmers and have smaller herds, although those in the largest herd size category of over 200 cows also showed a high degree of uncertainty with regard to future investment plans.

32. Both mixed farms and organic farms were less likely to invest, while those on retailer-aligned contracts were more likely to make some investment in their business over the next five years. Areas of investment: equipment and buildings. Intended investment is down on the previous year regardless of level. The proportion intending to invest between £0 and £50,000 over the next two years, however, has only shown a relatively small decrease compared to larger investment levels. As this level of investment is likely to be only sufficient to cover maintenance costs, it is perhaps expected. Farmer intention survey, 2013 - page 33 http://www.dairyco.org.uk/resources-library/market-information/farmer-intentions/farmer-intentions-survey-2013/

33. Section 4: The contribution to employment The agri-food sector employed 3.75 million people, or 14 per cent of all employees in Great Britain in 2012. This proportion has been broadly the same since 2001. Agriculture accounts for less than half a million employees or 12 per cent of the agri-food sector. Agriculture in the UK, defra 2012 The 12 largest occupational groups in the agriculture, forestry and fishing sector are shown in the table. The most common groups are farmers (30 per cent), farm workers (14 per cent) and farm managers (7 per cent). Lantra

34. On a local level, farming supports sustainable rural communities by providing vital employment. This is turn means people renting or buying properties, using local facilities, services, shops and restaurants. It supports the local countryside community and economy. However, dairy farming also provides for a vast array of employment opportunities, not just working on the farm. Consider the impact on the local community if the farm went out of business. What would be the likely impact on employment, local services and the economy?

35. On farm The dairy farm: land (purchase, maintenance, improvement, environment support, agronomy, fencing), buildings (including upkeep and repair), vehicles, e.g. tractors, equipment (purchase, maintenance and repair), management, finance, research, staff training, clothing,marketing and advertising. The cow: vet, animal nutritionists, feed suppliers, bedding, ear tags, passports, hay. Milking: milking parlour equipment (including robotic), cleaning materials, IT (monitoring milk production), storage equipment, tanker visiting (driver), safety and quality checks and tests. Consider the impact of these activities on a dairy farm in relation to other employment opportunities, as well as other industries, e.g. equipment manufacture. For further information about careers and farming, go to: www.brightcrop.org.uk

36. Off farm Processing dairy: storage, pasteurisation, packaging and labelling. Retail: storage, display, product information, marketing, advertising and sales. Food service: catering, school meals and restaurants. The consumer: storage, use of milk with other food commodities (e.g. breakfast, smoothies). The potential impact of a dairy farmer being more productive and profitable, or equally going out of business, can have knock-on consequences for employment opportunities and other manufacturing/retail industries. Click here to download the poster

37. Employment overview In farming generally, the workforce is ageing, with 55% of individuals in the sector aged over 45 years. The number of individuals in the sector aged over 60 increased from 57,000 in 2002 to 84,000 in 2010. The under-25 age group declined over the period by 1.9% per annum on average. Further reading http://www.lantra.co.uk/Downloads/Research/Research-reports/Agriculture,-Forestry-and-Fishing-SSA-2012.aspx

38. Findings from the CHILDWISE survey in 2011, looking at the career aspirations of 1,581 children aged 12-18 years, 4% included agriculture on the list of careers they might consider. The main reasons given for not considering agriculture as a career were lack of interest (64%), lack of knowledge (38%) and a belief that it would be repetitive and boring (26%). The main stated reasons for interest in agriculture (among the small group who would consider it as a career) related to interest in the role of science, working with animals, independence, working outdoors and caring for the environment.

39. Future skills needs An analysis of skills needs emphasises the requirement for business and management skills, such as business planning, project management and risk management. Knowledge and appreciation of the sciences and application of ICT are key future skills needed to deliver sustainable intensification and precision farming, particularly in the face of issues around food security and growing global populations.

40. The sector is expected to have greater shares of employment in managerial, professional and technical occupations, mirroring the broad trends across the UK economy. Skilled trades are expected to decline in volume as the sector becomes increasingly professional. The sector deviates from national trends in the proportion of elementary occupations expected, which is set to decline in the sector in the context of increasing shares nationally. However, replacement demand remains high with an ageing population, which will have a significant influence on skill requirements. (Lantra, 2012)

41. The future The 2013 Farmer Intentions Survey indicated that fewer UK dairy farmers are planning on increasing production in the next two years compared to last year, up from 30% in the 2012 survey to 36% this year. While there has been an increase in the proportion intending on leaving the industry from 7% to 8% since the last survey, the numbers leaving remain in line with trends seen in the past five years of the survey. Although dairy farmers are leaving, production is increasing due to enhanced production, better feed and improved housing. It is estimated that approximately 1,300 dairy farmers will leave the industry within the next two years, potentially taking the number of UK milk producers to 14,250. However, it is key to note that there are many opportunities in farming due to world population growth, food demand and international exports. Farmer intention survey, 2013 http://www.dairyco.org.uk/resources-library/market-information/farmer-intentions/farmer-intentions-survey-2013

42. Section 5: The contribution to the environment Agriculture accounts for around 70% of land use in the United Kingdom. The land management practices help to shape the landscape and may have a profound impact on soils, water bodies, air quality, biodiversity and ecosystem services. Over the last ten years the key drivers for changes to environmental pressures have been declines in the number of livestock, specifically ruminants, and reductions in fertiliser applications, particularly to grassland. Agriculture makes a relatively small contribution to the United Kingdom’s economy but provides around three-quarters of the food we eat and is the dominant form of land use. Along with other land management practices and activities, agriculture helps to shape the landscape and provide habitats for wildlife.

43. Responsible agriculture Responsible agriculture can have a positive impact on enhancement of biodiversity and land management. Farmers also contribute to preservation of natural landscape and maintenance of recreational green space. The report into Farming’s value to society suggested that farmland’s social and cultural value is expressed through landscape, nature and place. Landscape: Society highly values the UK’s diverse and distinctive landscapes, and their historical and cultural associations. These landscapes have been formed mostly by farming and are appreciated for both their natural and agricultural content - but the balance is a fine one, and the continued delivery of landscape value depends on stewardship of both the natural and cultural components of farmland.

44. Nature: Farmland provides contexts to connect with nature. Farmland biodiversity is highly valued, and like landscape, its continued delivery depends on stewardship of farmland. As a natural amenity, farmland attracts somewhere between 3.7% and 19.5% of the population for a recreational visit every week and increases the value of nearby property. Place: As place, farmland contributes to national and local identities. The importance of farmland to national identity is revealed in art, literature, music and the senses of place embedded in national cultures. Farming shapes local identities through distinctive landscapes and artefacts, and through its continuity and memories.

45. Opportunity Biodiversity is integral to the value to society of farmland, and biodiversity loss has been a major influence on public attitudes toward farming. In the past decade, progress has been made to improve the environment and dairy farmers have been part of this change. The Dairy Roadmap, 2013, has a target for 65% of dairy managed farmland being in environmental stewardship schemes by 2015. The actual amount is currently 69%. This has been helped by a series of environmental stewardship schemes, which, as recent research shows, not only help to preserve biodiversity, but also generate wider local economic and social benefits. DEFRA, Agriculture 2013 Farming’s value to society - Realizing the opportunity 2013 http://www.ofc.org.uk/files/ofc/papers/ofcreportfulllow.pdf

46. Greenhouse gas emissions In 2011 agriculture accounted for 43 per cent of total methane emissions in the United Kingdom. Methane emissions from agriculture arise mainly from enteric fermentation (digestive processes) in ruminating animals and manure management practices. Between 1990 and 2011, methane emissions from agriculture are estimated to have fallen by 20% due to decreasing livestock numbers and farm practices. In 2011, UK methane emissions, excluding those from natural sources, were 2.2% below 2010 and 58% below 1990 levels.

47. Dairy farmers have worked hard to reduce their environmental impact. As a result greenhouse gas emissions from UK dairy farms have declined sharply over the last 20 years and today represent 2% of the UK's total emissions. This is much lower than other sources of UK emissions, for example UK transport is responsible for 25% of the UK’s total emissions. The dairy industry is still working towards reducing these levels further through the Dairy Roadmap, an initiative originally developed with the Department for Environment, Food and Rural Affairs. The project, now led by the dairy industry, aims to reduce the environmental impact of the dairy industry as a whole. Concerns about climate change are also being addressed by dairy farmers on a global scale, through the Global Dairy Agenda for Action on Climate Change.

48. Dairy farming Part of the work of a dairy farmer is to help preserve, maintain and enhance (where necessary) the local environment. Often, they are called custodians of the countryside. Some hedges in Britain date back to the Bronze age - so it's easy to understand why they're an integral part of the British landscape. As custodians of the countryside, farmers have an important role to play in conserving them.

49. The work of the dairy farmer includes: maintaining hedgerows, protecting the grazing herds (as well as acting as natural weather and wind barriers) and providing an excellent breeding ground for birds and other wildlife; providing a natural boundary between pastures; trimming hedges, out of nesting season, to provide a breeding ground for birds and other wildlife; creating 'wildlife corridors' by leaving a strip of grass around the edge of the pastures; planting trees and wooded areas and establishing ponds to attract wildlife; Some farmers will leave maize stubble in fields over winter, for ground nesting birds, so they can nest amongst the stubble. Around the farm, fields, gateways, fences and hedgerows are maintained - this results in the countryside that we see and enjoy.

50. Section 1 Questions: Farming in the UK Start