Defra also published the latest figures on the overall productivity of the UK farming industry. These have been unspectacular for some years, and the latest, 2016, figures show no signs that taken as a whole the industry is improving its performance.
Total Factor Productivity (TFP) measures how well the industry performs in turning physical inputs into physical outputs. Thus, market movements and prices are taken out of the analysis and what is left is the efficiency of the sector. The figures for 2016 show that TFP declined by 2.5%.Â As outlined above, the volume of outputs fell in the year. Whilst the quantity of inputs used also declined this was not enough to offset the output drop.
The average TFP improvement over the 43 years the series has been running has been around 1.5%. However, improvements in recent years have been modest, with the average for the last decade at just 0.4%. As the chart below shows, any improvement in productivity has been almost all due to using labour more efficiently. The returns from variable inputs (seed, fertilisers, sprays etc.), equipment & machinery, and land have all been flat for many years. This “productivity challenge” will be a key issue for the farming industry over the next few years.