FARM profits in 2017 look set to bounce back from the lows of 2016 – and the prospects for 2018 also look reasonably favourable.

But, Andersons Farm Business Consultants, say businesses need to use the better returns, and the calm before Brexit is felt, to make necessary changes to set themselves up for the next decade.

It is one of the main messages in Andersons Outlook 2018 which has just been published.

Richard King, one of the contributors, estimates farm incomes for the 2017 calendar year will be significantly higher than last year – perhaps by 30 per cent.

“While returns may reduce slightly for 2018 they are still likely to be well above those seen in 2015 and 2016,” he said.

According to Defra’s latest estimate the Total Income from Farming (TIFF) was £3.61 billion in 2016 – the lowest figure in real terms since 2007 and 35 per cent down on the high of 2013.

According to Outlook 2018 the UK’s aggregate farm profit for 2017 could increase to nearly £4.7bn – partly through an increase in the output, but mainly due to the year’s higher prices.

Looking to 2018, Outlook forecasts a slight fall in TIFF, down eight per cent to £4.3bn partly due to a forecast weakening of output prices in some sectors, but also an inflation in costs.

However all this is highly dependent on currency; it assumes that the key Pound/Euro rate remains at around today’s level.

Any strengthening of Sterling would have a detrimental effect on farm incomes.

“Beyond 2018 we start to enter the realm of Brexit. Forecasts on how this might affect returns in UK agriculture are, at present, highly speculative. Much will depend on the future trading relationships with Europe and the rest of the world,” said Andersons.

Other issues such as regulation, access to labour and support are also crucial to farming.

The company says it is becoming clear that future support policy will be different from that under the CAP.

“Whilst this may seem a significant threat to UK farming profits, what is evident is that ‘income support’ has in many cases held back productivity and simply increased farmers’ cost of production.

“This conversion of subsidy into increased costs needs no better illustration than the unrealistically high short-term rents that some UK farmers are prepared to pay for the right to farm land.”

Andersons believe there are opportunities for improvements in productivity, and reductions in the costs of production, in all sectors of agriculture.

Outlook 2018 says: “Crucially, there is no need to wait until the effects of Brexit begin to bite to start this process.

“Undertaking such changes now in a measured and considered manner can both boost profits in the short-term and set a business up to be resilient into the future.

“It is easy for the industry to become focused on external events over which it has little or no control.

“In fact, the biggest determinant of business profitability is how the business itself is set up and operated.”

Free copies of Outlook 2018 can be obtained from 01664 503200 or downloaded from ‘Publications’ section.