Scottish farm business income: annual estimates 2015-2016

6. Long term trends - Net Farm Income (NFI)

( Table 11)

While FBI is the headline business-level measure of farm income, it is a relatively new measure of income, going back to 2009, with this publication showing comparisons over the last six years. Net Farm Income ( NFI) has a much longer time series available for comparing income levels and examining trends. This measure places all farms on a tenanted basis, with imputed rent costs applied to owner occupiers. It is quite a different measure from FBI, estimating the return only to the farmer and spouse for their managerial input to the farm business.

Looking at the general trend over the last 25 years in actual prices (Figure 12) for the average over all farm types, suggests that farm incomes are subject to a considerable level of fluctuation. Farm incomes fell in 1997-98 due to the ban on beef exports following the outbreak of bovine spongiform encephalopathy ( BSE), a strong pound and weak world commodity prices. They did not start to increase again until 2000-01 and were at their highest level in 2010-11. Since 2012-13 farm incomes have declined and reached their lowest level (£3,000) in 2015-16.

Figure 12 - NFI for all farm types in actual and 2015-16 prices

However, when accounting for inflation the picture is slightly different. When the time series is converted into 2015-16 prices - the equivalent value of incomes in today's economy - we see that the decline in farm incomes in the mid-1990s was more severe and the decline in income from 2012-13 to 2015-16 was similar when converted to 2015-16 prices.

Trends vary by farm type, but the general trend described above is witnessed across all farm types and 2015-16 farm incomes are the lowest level across the 25-year series for mixed, dairy and cereal farms.

Long Term Trends - Net Farm Income by farm type