THE importance of non-agricultural income and support payments for the survival of hill farms is made clear in a new report.

Newcastle University researchers analysed the financial results from 225 grazing livestock farms in the Less Favoured Areas (LFA) of England and found top performing hill farms received 44 per cent of their income from non-agricultural sources.

The results form part of the official Farm Business Survey (FBS) and are included in the latest publication of Hill Farming in England.

LFA farms account for 17 per cent of England’s total farmed area and over 44 per cent of England’s breeding flock – 64 per cent of which is in the North of England.

Classified as areas where challenging climate, soils and terrain make farming more difficult, upland farms are a crucial part of England’s rural economy and landscape, generating a national revenue of £643 million last year.

Although agriculture generates the majority of revenue on LFA grazing livestock farms, it is generally loss-making.

The average LFA grazing livestock farm income was £19,000 last year, yet the agriculture aspect averaged a net loss of £10,800 per farm.

Charles Scott, Newcastle University researcher, said: “Perhaps more than any other sector, grazing livestock farms in the LFA are reliant on non-agricultural sources of income.”

Last year, agri-environment schemes, including Uplands Entry Level Stewardship, averaged 52 per cent of LFA farm income – £9,800 per farm.

Similarly, BPS payments averaged £17,700 per farm – 93 per cent of the average LFA farm income – highlighting their reliance on income that is the result of EU legislation.

Profitability varies greatly between LFA farms.

Specialist sheep farms in the Severely Disadvantaged Area (SDA) averaged the highest farm income of all LFA farms last year. However, this reflected their ability to recoup more from environmental payments rather than agriculture.

Mr Scott said: “Income from agri-environment schemes was 71 per cent higher for specialist sheep farms in the SDA, at £16,800 per farm.

“This makes a huge difference to the financial viability of the business; especially as environment schemes make up a higher proportion of total income on top performing farms in the LFA.”

He said a top 25 per cent LFA farm generally receives 16 per cent of its annual revenue from agri-environment schemes, compared to 12 per cent on the average LFA farm.

Diversification on LFA sheep farms contributed just £1,500, or four per cent of total revenue, compared to seven per cent on the average English farm.

On top performing LFA farms revenue from diversification was twice that of the average LFA farm. Yet agriculture still makes up 56 per cent of top performing LFA farm revenues.

Top 25 per cent farms generate higher margins from farming, spend less on variable costs per livestock unit, and less on fixed costs such as labour, machinery and property.

“This is when benchmarking really comes in, the difference in spending may only be a few pounds per head, but it adds up,” said Mr Scott. “The agriculture gross margin is 45 per cent higher for farms in the top performance group.”

Top performers also run more ewes on more acres, averaging a farmed area of 201ha, in comparison to 135ha on the average LFA farm. They also have about 940 sheep – 200 more than the average.