The latest Defra farm income figures show the total value of UK farm output has increased by 15 per cent to £23.7billion in 2011. Farming’s contribution to the wider British economy also increased 25 per cent year-on-year in gross value added (GVA) terms to £8.8billion, representing the strongest performance by the farming industry since the mid-90s.

This was reflected by a 31 per cent increase in the bottom line for UK agriculture, as the total income from farming (TIFF) increased by £1.4billion to £5.7billion. In real terms, after adjusting for inflation, total income from farming is estimated to have increased by £1.1billion.

NFU chief economist Phil Bicknell said: “The positive headline performance by the industry is undoubtedly good news and a marked change to the decade-long lows we witnessed before 2008. Profitability underpins industry confidence and that generates investment in the agri-food supply chain, which in turn boosts the British economy by creating jobs and economic growth.

“However, all farmers will have noted dramatic increases in their cost base in recent times. The 2011 figures show a 10 per cent overall increase in farm costs year on year. For key inputs, the cost rises have been significantly higher. Fertiliser and animal feed prices increased by 26 and 21 per cent last year for example, and NFU members flagged rising input costs as their key concern when asked about business prospects.

“Farming’s costs are some 53 per cent higher than they were just five years ago and continued rises in inputs will squeeze sector profitability. The industry already faces a challenge to maintain the improvements in output, with recent price cuts by milk processors and the post-harvest cereal prices on offer both putting pressure on future growth potential.

“Defra figures later this year will give a more detailed insight on performance by specific farming sectors, and in particular their resilience to rising costs. Nonetheless, the headlines point to an industry that is both thriving and growing its contribution to the UK economy.”

To read the full Defra report please click here