Scottish farm business income: annual estimates 2013-2014

1. Summary - 2013-14 Crop Year

2013-14 was a mixed year for farming with poor weather conditions early in the year which became more favourable during the latter part of the year. This resulted in some spring crops being planted in favour of winter crops and livestock benefiting with better pastures than in 2012-13.

Profitability
In 2013-14 the average Farm Business Income (FBI) was £31,000, the lowest level in the last five years. This has remained largely unchanged from the previous year; down one per cent (£600).

While output values have improved over the longer term these have been outweighed by a rise in input costs, largely due to livestock costs such as feed, combined with a decline in value of grants and subsidies.

From the farm accounts sample two in five farms (43 per cent) generated income roughly equivalent to less than the minimum agricultural wage, per hour of unpaid labour. This includes the one in five farm businesses that make a loss.

All lower quartile farms (farm businesses with the lowest 25 per cent of FBI values) made an overall loss in terms of FBI. These losses ranged from a loss of -£22,000 for cereal farms to -£6,000 for dairy farms. Dairy farms had the highest average farm business income in 2013-14, at £80,000 followed by general cropping farms at £36,000. The upper quartile farms (farm businesses with the highest 25 per cent of FBI values) had incomes ranging from £63,000 for specialist cattle (LFA) farms to £205,000 for dairy farms.

Components of profitability
In 2013-14 losses from agricultural farming activities were comparable to those the previous year (-£21,000 on average), the average farm business still made a loss after accounting for diversification (£3,000), contracting (£3,000) and agri-environment activities (£8,000) as farm businesses were reliant on subsidies (£38,000) to make a profit.

Half of all farms in 2013-14 received additional income from diversified activities. Almost half (43 per cent) of diversified activities were renting out buildings for uses other than tourist accommodation although it was income from land used for mobile phone masts that generated the greatest margins from diversification.

Productivity (Output/ Input Ratio)
The overall average output to input ratio is 1.16, meaning that for every £1 spent on inputs, Scottish farm businesses are generating £1.16 worth of outputs. The average for high performing farms is around £1.46, while for lower performers it is around £0.92; an average loss of £0.08 for every £1 spent.

Financial strength (Assets and Liabilities)
The net worth of farm businesses has remained largely unchanged at £1.3m in 2013-14. Liabilities increased by around five per cent (£6,000), resulting in an overall increase of two per cent (£27,000) in net worth. The average debt ratio is relatively low, with liabilities equal to nine per cent of assets.