Scottish farm incomes

The incomes of commercial farms in Scotland are estimated to have decreased by 48 per cent in the last year. The latest reduction in farm business income, a measure of the return to unpaid labour on commercial farms, continues a five year decline in average income.

The latest figures, released today by Scotland’s Chief Statistician, examine a number of financial indicators for the accounting period 2015-16, which focuses on the 2015 crop year. The results are based on annual audits of 500 commercial farms in Scotland.

Estimates from the Scottish Government’s annual Farm Business Survey (FBS) show that the average Farm Business Income (FBI) was £12,600 in 2015-16, representing a drop of £11,500 from the previous year. Since a peak in income in 2010-11, commercial farms income has decreased 75 per cent in real terms.

There was less spending on inputs in 2015-16 compared to the previous year, however, there was a bigger decrease in crop and livestock production on average for all farm types. This, combined with a reduction in grants and subsidy payments and less favourable market prices, especially for dairy farms, created a downward pressure on profitability from agriculture.

Between 2014-15 and 2015-16 revenue from diversified activities increased by 19% to £2,800. Diversified farm businesses achieved incomes, on average, £11,000 higher than non-diversified farms. The most common diversified activity was renting out buildings (other than for tourist accommodation).

The Basic Payment Scheme (BPS) replaced the Single Farm Payment Scheme (SFP) in 2015 as the method of allocating funding through Direct Payments. The average value of all grants and subsidies in 2015-16 was £38,100, a fall of six per cent on the previous year.

General cropping farms had the highest average FBI in 2015-16, at £24,100. However this was still an 11 per cent decrease on the previous year. Between 2014-15 and 2015-16 all eight farm types experienced a decrease in overall FBI. Dairy farms had the largest decrease with average FBI down 97 per cent. This was largely due to the drop in milk prices over the last year from an average of £0.30 per litre in 2014-15 to £0.21 per litre in 2015-16. Mixed farms had the second largest percentage decrease in average FBI, down 81 per cent.

Converting the income estimates to hourly income for unpaid labour, such as farm owners, family members and business partners, shows that the income generated from 59 per cent of farm businesses wouldn’t have been enough to meet the legal minimum agricultural wage for paid workers.

Farm business income is the primary measure of farm level income in the UK but has only been calculated since 2009. A related measure, Net Farm Income, has a longer series and shows the average net farm income in 2015 was the lowest since 1999-00, when accounting for inflation.

Balance sheets from Scottish farms are also examined in the report. These show that farm businesses are capital intensive and typically have high asset values which are not included in income measures. Average debt levels are fairly low, with liabilities equal to 10 per cent of the value of assets. The average net worth of Scottish farm businesses is estimated at £1.3 million.

Provisional national level income estimates (Total Income From Farming – TIFF) released in January showed a £122 million decrease in income from the farming industry in 2015 and an estimated increase in 2016 of £96 million, including a £53 million increase in subsidy levels. Whilst cattle and milk prices have decreased, cereal prices have recovered since a decrease in 2015 and potato and lamb prices have increased. There is also an estimated decrease in input costs and an increase in subsidies for 2016.

The report is based on the findings from the Farm Accounts Survey which is used to inform, monitor and evaluate European, UK and Scottish agricultural policy. The survey does not include information on pig, poultry and horticulture sectors.

The figures released today were produced by statistical staff in accordance with professional standards set out in the Code of Practice for Official Statistics.

Background

This publication contains farm business level estimates of average incomes for the accounting year 2015-16, relating to the 2015 crop year. Other financial indicators are also presented.

Farm Business Income (FBI) is the headline business-level measure of farm income, or profit, in the UK.  FBI represents the total income available to all unpaid labour and their capital invested in the business.  Returns from diversified activities are included in overall FBI.  FBI figures are derived from the results of the Farm Business Survey (FBS, previously known as the Farm Accounts Survey (FAS)). The Farm Business Survey does not include information on small farms or pig, poultry and horticulture sectors.

Total Income From Farming (TIFF) released in January 2017 is an estimate of national-level farm incomes and is based on to calendar years

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The primary use of FBS data is to inform policy decisions and to help monitor and evaluate current policies, especially their impact on different agricultural sectors. FBS results also contribute to the compilation of Total Income from Farming (TIFF) estimates.

The data is also used to meet the European requirements of the Farm Accountancy Data Network (FADN). The FADN is the only source of micro-economic data that is harmonised across all EU countries and is used for the formulation and evaluation of agricultural policy.

The prominent profile of FBS in policy issues relates to the nature of the information collected and the scarcity of alternative sources.

Official statistics are produced by professionally independent statistical staff – more information on the standards of official statistics in Scotland can be accessed at: http://www.gov.scot/Topics/Statistics/About