Scottish farm business income: annual estimates 2015-2016

7. Sector Results

7.1 Specialist Sheep ( LFA) Farms - 2015-16 Crop Year

Profitability

When adjusting for inflation, the average FBI of specialist sheep ( LFA) farms decreased by 74 per cent between 2010-11 and 2015-16. This was due to a fall in revenue from outputs and a rise in spending on inputs, specifically livestock and other non-labour inputs.

The FBI value of specialist sheep ( LFA) farms was £7,400 in 2015-16. In the last year, a decrease in both inputs and outputs for specialist sheep ( LFA) farms led to FBI decreasing by 51 per cent. Although grants and subsidies increased in the last year, the overall decrease in outputs was due to a drop in crop, livestock and miscellaneous outputs.

Drivers of profitability

The total average revenue, including income from diversification and subsidy payments for specialist sheep ( LFA) farms was £84,800. Spending on inputs averaged at £77,400. The largest portion of the input costs were due to other inputs such as machinery, land and buildings costs and those related directly to livestock production (such as feed).

Losses were recorded in each of the last six years when excluding subsidy payments from the FBI calculation. There is a generally downward trend, with losses increasing from £13,300 in 2010-11 to £28,600 in 2015-16.

Over the last year, cost centres for specialist sheep ( LFA) farms show an increase in losses from agricultural and a decrease in profits from agri-environment and contracting activities. There was a 13 per cent and 19 per cent increase in profits from diversification and direct payments respectively.

Return to unpaid labour

The average FBI/ FTE for specialist sheep ( LFA) farms was £6,000 in 2015-16, which is roughly equivalent to an hourly wage of £3.15 for unpaid labour, less than half of the minimum agricultural wage ( MAW) in Scotland. Around 56 per cent of specialist sheep ( LFA) farms generated incomes equivalent to less than the MAW, whereas four per cent generated more than five times MAW.

Relative performance

At £42,700, high performing specialist sheep farms generated incomes roughly six times the overall average FBI. Low performing farm businesses made an average loss of £28,500.

Financial strength

The average net worth (assets minus liabilities) of specialist sheep ( LFA) farms was £795,200 in 2015-16. The average debt ratio (liabilities: assets) was six per cent overall and ranged between four per cent for owner-occupied farms and 13 per cent for tenanted farms.

Specialist Sheep ( LFA) Farms - FBI (2015-16): £7,400

7.2 Specialist Cattle ( LFA) Farms - 2015-16 Crop Year

Profitability

Between 2010-11 and 2015-16 the average FBI of specialist cattle ( LFA) farms decreased by 42 per cent when taking into account inflation. This decrease was due to a rise in spending on inputs and a fall in crop and miscellaneous revenue, as well as grants and subsidies.

The FBI value of specialist cattle ( LFA) farms was £22,500. In the last year spending on inputs as well as revenue for specialist cattle ( LFA) farms both decreased, resulting in an overall 11 per cent decline in profits for 2015-16.

Drivers of profitability

The total average revenue, including income from diversification and subsidy payments for specialist cattle ( LFA) farms was £175,500. The average spend on inputs was £153,000. The largest portion of the input costs was due to feed and other inputs such as machinery and land and buildings.

Losses were recorded in each of the last six years when excluding subsidy payments from the FBI calculation. The losses ranged from £15,400 in 2011-12 to their highest level of £30,600 in 2013-14. In 2015-16 losses of £23,200 were recorded.

In the last year, specialist cattle ( LFA) farms had a decrease in income from all cost centres other than diversification, which increased by 75 per cent. Direct payments had a small decrease (one per cent) in 2015-16.

Return to unpaid labour

The average FBI/ FTE for specialist cattle ( LFA) farms was £15,600 and was roughly equivalent to an hourly wage for unpaid labour of £8.21, around 14 per cent more than the minimum agricultural wage ( MAW) in Scotland. Fifty three per cent of specialist cattle ( LFA) farms generated incomes equivalent to less than the MAW, whereas six per cent generated more than five times MAW.

Relative performance

High performing specialist cattle ( LFA) farms generated an average income of £65,000, around three times the overall average FBI. Low performing farm businesses made an average loss of £19,700.

Financial strength

The average net worth (assets minus liabilities) of specialist cattle ( LFA) farms was £1.1m in 2015-16. The average debt ratio (liabilities: assets) was ten per cent for all tenures of specialist cattle ( LFA) farms but ranged between nine per cent for owner-occupied and 18 per cent for tenanted farms.

Specialist Cattle ( LFA) Farms- FBI (2015-16): £22,500

7.3 Specialist Cattle and Sheep ( LFA) Farms - 2015-16 Crop Year

Profitability

When adjusting for inflation, the average FBI of specialist cattle and sheep ( LFA) farms decreased by 49 per cent between 2010-11 and 2015-16. This decrease was mainly due to a rise in spending on inputs, especially machinery, land and buildings and depreciation costs.

The FBI value of specialist cattle and sheep ( LFA) farms was £20,900 in 2015-16. In the last year, reduced spending on inputs for specialist cattle and sheep ( LFA) farms and reduced revenue, notably subsidy payments and livestock outputs, led to a 25 per cent decrease in the average FBI for these farms.

Drivers of profitability

The total average outputs, including income from diversification and subsidy payments for specialist cattle and sheep ( LFA) farms was £160,000 and spending on inputs averaged at £139,100. The largest portion of the input costs was due to livestock costs such as feed, as well as machinery and land and buildings costs.

Over the last six years, losses were recorded in each year when excluding subsidy payments from the FBI calculation. They ranged from losses of £21,400 in 2011-12 to the highest loss of £37,100 in 2012-13. Since 2012-13, FBI without subsidy payments has seen the losses recovering to £29,100 in 2015-16.

Specialist cattle and sheep ( LFA) farms have seen a decrease in income from all five cost centres over the last year. Agricultural activities had the largest numerical decrease of £2,600, equivalent to a nine per cent increase in losses since 2014-15.

Return to unpaid labour

In 2015-16 the average FBI/ FTE for specialist cattle and sheep ( LFA) farms was £12,600 which was roughly equivalent to an hourly wage for unpaid labour of £6.63, eight per cent less than the minimum agricultural wage ( MAW) in Scotland. Around 46 per cent of specialist cattle and sheep ( LFA) farms generated incomes equivalent to less than the MAW and no farms in the survey generated more than five times MAW.

Relative performance

High performing specialist cattle and sheep ( LFA) farms generated average incomes of £69,500, more than three times the overall average FBI. Low performing farm businesses made an average loss of £14,700 in 2015-16.

Financial strength

The average net worth (assets minus liabilities) of specialist cattle and sheep ( LFA) farms was £1.1m in 2015-16. The average debt ratio (liabilities: assets) remained unchanged at 11 per cent for all tenures of LFA cattle and sheep farms but ranged between nine per cent for owner-occupied and 18 per cent for tenanted farms.

Specialist Cattle and Sheep ( LFA) Farms - FBI (2015-16): £20,900

7.4 Cereal Farms - 2015-16 Crop Year

Profitability

When adjusting for inflation, between 2010-11 and 2015-16 the average FBI of cereal farms decreased by 88 per cent. This was due largely to the decreased value of subsidy payments and revenues from crop outputs.

In the last year, spending on inputs and revenue for cereal farms decreased resulting in a 60 per cent decrease in overall FBI to £7,400 in 2015-16. The decrease in revenue was mainly due to a reduction in value from crop outputs and grants and subsidies.

Drivers of profitability

The total average revenue in 2015-16, including income from diversification and subsidy payments for cereal farms was £204,100. Spending on inputs averaged £196,700. The largest portion of the input costs was from fertilisers and other inputs such as machinery and land and buildings costs.

Over the last four years, FBI without subsidy payments has been a loss. The range in income without subsidy payments over the six year series was from a loss of £21,800 in 2012-13 to a profit of £16,500 in 2011-12. In 2015-16 the FBI without subsidy payments was a loss of £21,700.

Cost centres for cereal farms show an 11 per cent increase in income from contracting work, but increased losses from agricultural activities and decreased income from agri-environment, diversification and direct payments.

Return to unpaid labour

The average FBI/ FTE for cereal farms was £5,400 in 2015-16, which is roughly equivalent to an hourly wage for unpaid labour of £2.86, 40 per cent of the minimum agricultural wage ( MAW) in Scotland. Around 68 per cent of cereal farms generated incomes equivalent to less than the MAW, whereas four per cent generated more than five times MAW.

Relative performance

At an average of £62,400, high performing cereal farms generated incomes roughly eight times the overall average FBI. Low performing farm businesses made an average loss of £49,200.

Financial strength

In 2015-16, the average net worth (assets minus liabilities) of cereal farms was £1.9m. The average debt ratio (liabilities: assets) remained unchanged at nine per cent for all tenures of cereals farms but ranged between eight per cent for owner-occupied and 25 per cent for tenanted farms.

Cereal Farms - FBI (2015-16): £7,400

7.5 General Cropping Farms - 2015-16 Crop Year

Profitability

Between 2010-11 and 2015-16 the average FBI of general cropping farms decreased by 69 per cent when taking into account inflation. This was mainly due to a decrease in the revenue value of crops as well as a decrease in the value of subsidy payments.

In the last year, both spending on inputs and revenue (output) for general cropping farms has increased. However, as inputs increased by a greater amount, the effect has been an overall decrease in income for 2015-16. This resulted in the FBI value of general cropping farms being £24,100.

Drivers of profitability

The total average revenue, including income from diversification and subsidy payments for general cropping farms was £249,500. Spending on inputs averaged at £225,400, with the largest portion of the input costs being machinery (including depreciation), land and buildings costs and fertilizers.

Over the last six years, FBI without subsidy payments has been on a general downward trend, with a partial recovery in 2012-13. Recently, it has recorded losses since 2013-14. Over the time series, the figures ranged from a profit of £28,400 in 2010-11 to the lowest level in 2015-16, a loss of £6,400.

In 2015-16, cost centres for general cropping farms showed increased losses from agricultural activities and decreased income from direct payments. The other cost centres all had increased income, with contracting work experiencing the largest increase of 82 per cent.

Return to unpaid labour

The average FBI/ FTE for general cropping farms was £18,000 which is roughly equivalent to an hourly wage for unpaid labour of £9.46, 32 per cent higher than the minimum agricultural wage ( MAW) in Scotland. In 2015-16, 49 per cent of general cropping farms generated incomes equivalent to less than the MAW whereas 12 per cent generated over five times MAW.

Relative performance

High performing general cropping farms generated average incomes of £81,200, more than three times the overall average income. Low performing farm businesses made an average loss of £16,700.

Financial strength

The average net worth (assets minus liabilities) of general cropping farms was £2.0m in 2015-16. The average debt ratio (liabilities: assets) was nine per cent for all tenures of general cropping farms and ranged between seven per cent for owner-occupied to 25 per cent for tenanted farms.

General Cropping Farms - FBI (2015-16): £24,100

7.6 Dairy Farms - 2015-16 Crop Year

Profitability

When adjusting for inflation, the average FBI of dairy farms decreased by 98 per cent between 2010-11 and 2015-16. Incomes for dairy farms have fluctuated considerably over the six year series and fell to the lowest level in 2015-16 when the FBI value for dairy farms dropped 97 per cent to £1,900. The latest decrease in income was due to a decrease in the revenues from livestock outputs as well as a drop in income from subsidy payments. The decrease in revenue from livestock was largely due to the decrease in the price of milk to an average of £0.21 per litre.

Drivers of profitability

The total average revenue, including income from diversification and subsidy payments for dairy farms was £415,000. Spending on inputs averaged at £413,100. The largest portion of the input costs was due to livestock costs such as feed and other inputs such as machinery and land and buildings.

When looking at FBI without subsidy payments over the last six years, 2015-16 was the first year where dairy farms made a loss, the average loss was £29,000. The highest value was £42,400 in 2011-12.

Over the last year cost centres for dairy farms showed a large decrease in income from agricultural activities resulting in a loss of £31,300. Agri-environment and direct payments had a decrease in income, while income from contracting work increased by 17 per cent. Diversification had a reduction in losses and moved towards breaking even.

Return to unpaid labour

The average FBI/ FTE for dairy farms dropped to £900 in 2015-16 and is roughly equivalent to an hourly wage for unpaid labour of £0.46, 94 per cent lower than the minimum agricultural wage ( MAW) in Scotland. Around 65 per cent of dairy farms generated incomes equivalent to less than the MAW whereas five per cent generated more than five times MAW.

Relative performance

At an average of £112,000, high performing dairy farms generated incomes around 59 times the overall average FBI. Low performing farm businesses made an average loss of £85,600.

Financial strength

The average net worth (assets minus liabilities) of dairy farms was £1.8m in 2015-16. The average debt ratio (liabilities: assets) increased by two percentage points to 14 per cent for all tenures of dairy farms. The tenant tenure type is not available for dairy farms due to small sample sizes.

Dairy Farms - FBI (2015-16): £1,900

7.7 Lowland Cattle and Sheep Farms - 2015-16 Crop Year

Profitability

When adjusting for inflation, the average FBI of lowland cattle and sheep farms decreased by 73 per cent between 2010-11 and 2015-16. This was due to an increase in the spending on inputs and a decrease in the value of subsidy payments as well as a decrease in the revenue from crop and livestock outputs.

In the last year spending on inputs increased and revenue for lowland cattle and sheep farms decreased leading to a 54 per cent decrease in the FBI value of lowland cattle and sheep farms to £12,300. The main rise in input costs came from livestock input and the decrease in revenue was due to a reduction in subsidy payments and livestock outputs.

Drivers of profitability

The total average revenue, including income from diversification and subsidy payments for lowland cattle and sheep farms was £166,900 while spending on inputs averaged at £154,600. The largest portion of the input costs was due to feed and other inputs such as machinery and land and buildings.

Over the last six years, FBI without subsidy payments has been a loss. It has ranged from a loss of £24,100 in 2012-13 to a loss of £6,400 in 2010-11. In 2015-16 the FBI without subsidy payments was a loss of £20,100.

Over the last year cost centres for lowland cattle and sheep farms showed an increase in income from diversification and contracting activities. Agri-environment and direct payments had a decrease in income and agricultural activities had an increase in losses.

Return to unpaid labour

The average FBI/ FTE for lowland cattle and sheep farms of £8,200 in 2015-16 is roughly equivalent to an hourly wage for unpaid labour of £4.32, 40 per cent lower than the minimum agricultural wage ( MAW) for Scotland. Around 80 per cent of lowland cattle and sheep farms generated incomes equivalent to less than the MAW whereas four per cent generated more than five times MAW.

Relative performance

High performing lowland cattle and sheep farms generated average incomes of £38,500, roughly three times the overall average FBI. Low performing farm businesses made an average loss of £16,800.

Financial strength

The average net worth (assets minus liabilities) of lowland cattle and sheep farms was £1.2m in 2015-16. The average debt ratio (liabilities: assets) dropped one percentage point to eight per cent for all tenures of lowland cattle and sheep farms. The tenant tenure type is not available for lowland cattle and sheep farms due to small sample sizes.

Lowland Cattle and Sheep Farms - FBI (2015-16): £12,300

7.8 Mixed Farms - 2015-16 Crop Year

Profitability

Between 2010-11 and 2015-16, the average FBI of mixed farms decreased by 96 per cent, when inflation was taken into account. This decrease was due to a reduction in the value of subsidy payments and revenues from crop and livestock outputs.

In the last year, a decrease in revenue resulted in the FBI value of mixed farms falling 81 per cent to £2,300. The decrease in revenue was due to a reduction in revenue crop and livestock outputs, coupled with a decrease in the value of subsidy payments.

Drivers of profitability

The total average revenue, including income from diversification and subsidy payments for mixed farms was £204,300. Spending on inputs averaged at £202,000. The largest portion of the input costs was due to spending on machinery (including depreciation), feed and land and buildings.

Over the last six years, FBI without subsidy payments has been on a declining trend, with losses recorded in each year, with the exception of 2010-11 when it recorded a small profit of £100. In 2015-16 it reached the lowest level over the series, recording a loss of £33,100.

Over the last year cost centres for mixed farms showed increased income as part of diversification and contracting activities. Agri-environment and direct payments recorded a loss in income and agricultural activities had an increase in losses.

Return to unpaid labour

The average FBI/ FTE for mixed farms was £1,500 in 2015-16 which is equivalent to an hourly wage for unpaid labour of £0.79, 89 per cent lower than the minimum agricultural wage ( MAW) in Scotland. Around 67 per cent of mixed farms generated incomes equivalent to less than the MAW, whereas three per cent generated over five times MAW.

Relative performance

At £41,500, on average, high performing mixed farms generated incomes roughly 18 times the overall average FBI. Low performing farm businesses made an average loss of £43,600.

Financial strength

The average net worth (assets minus liabilities) of mixed farms was £1.6m in 2015-16. The average debt ratio (liabilities: assets) remained unchanged at 13 per cent for all tenures of mixed farms but ranged between 11 per cent for owner-occupied farms and 23 per cent for tenanted farms.

Mixed Farms - FBI (2015-16): £2,300