Economic Report on Scottish Agriculture 2015

1. Introduction

1.1 Overview of agriculture in Scotland in 2014

The year 2014 started with reasonably favourable weather conditions. Unlike the previous winter, the wheat and winter barley did well. The lambing season also fared much better, with a five per cent increase in lambs on 2013. The June agricultural census results showed a halt in the downward trend in the number of livestock, with increases in dairy cattle, sheep, pigs and poultry numbers, though in some cases possibly only due to this being relative to the very poor 2013.

Until the remnant of Hurricane Bertha hit in August, the summer had been an excellent one, warm but showery, with the fourth warmest June and the sixth sunniest July on record. The good weather generally extended into September, which was the second driest and fifth warmest September on record, meaning farmers generally had little difficulty bringing in the harvest. It proved to be the biggest cereal harvest ever. Unfortunately cereal prices were dropping worldwide, as were potato and milk prices, hitting the profitability of farms. The less favourable euro exchange rate applied to Single Farm Payments, and the reduction in the original payment amount, also led to smaller incomes.

The year ended with a relatively wet and stormy December. Data from the December Survey show however that winter crop areas maintained those levels seen in the previous year, helped by favourable weather in the autumn planting season.

2014 was dominated by the independence referendum debate, and by finalisation of details for the new Common Agricultural Policy (CAP) for Scotland, in particular relating to the level of coupled support covering beef and sheep, the method and length of the transition period, and the greening regulations.

The Land Reform Review Group published its findings, particularly highlighting the need for better data on land ownership. Meanwhile the Review of Agricultural Holdings Legislation also came to an end, with the results of various surveys of tenants and landlords published throughout the year, the Interim Report published in June^[1], and the final recommendations, including the setting up of tenant farming commissioner, and the use of the productive capacity of a farm in setting rent levels, consulted on before publication in January 2015^[2].

The total area of agricultural holdings and common grazing in Scotland at the time of the June 2014 agricultural census was 6.2 million hectares, equating to 78 per cent of Scotland’s total land area. Just under sixty per cent of this comprised rough grazing (including 580,000 hectares of common grazing), with about a fifth taken up by grass, and about ten per cent used for crops or left fallow. The rest consisted of woodland, ponds, yards or other uses.

Amongst the crops grown in Scotland (excluding grass), cereals accounted for 78 per cent of the land area, with 71 per cent of that being barley (327,000 hectares). There were also considerable areas growing wheat (109,000 hectares), oilseed rape (37,000 hectares), oats (25,000 hectares) and potatoes (29,000 hectares). Amongst fruit and vegetables, a total of 913 hectares of strawberries were grown, mainly under cover, which was the largest source of income amongst horticulture crops (see section 4).

With the exception of cattle, livestock numbers went up in 2014, with 6.7 million sheep, 316,000 pigs and 14.7 million poultry all higher figures than the previous year (though poultry figures have tended to fluctuate around 14 million over the last 25 years (see section 5)). Despite the rises this year, longer term trends point to a decline dating back to the turn of the millennium (in the case of pigs and sheep). The number of cattle, meanwhile, fell to 1.79 million, continuing the trend seen since the mid-1970s.

Total Income from Farming (TIFF) was estimated at £823 million in 2013, being made up of £3.1 billion in outputs and £581 million in support payments, offset by £2.9 billion in costs. The initial estimate of TIFF for 2014 was £688 million, though this figure will be revised in January 2016. The decrease in 2014 relative to 2013 was linked to lower prices, particularly in cereals, which outweighed changes in volumes. The longer term trend in TIFF has been rising since the turn of the century, but with fluctuations from year to year. TIFF per annual work unit decreased to £26,000, similar to the value in 2010 (see sections 3.1 and 3.7).

Income from agriculture made up about one per cent of the Scottish economy^[3].

The Farm Accounts Survey of economically active farms, based on the 2013 crop year, showed that average income remained largely unchanged in 2013-14 (decrease of £600), at £31,000, and decreased by £11,000 over the last five years. This is equivalent to a Farm Business Income (FBI) per unit of unpaid labour (those with an entrepreneurial interest in the farm business) of £21,000 (see sections 3.2).

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 43 per cent of businesses wouldn’t have been enough to meet the minimum agricultural wage. This includes the one in five farm businesses that made a loss (see sections 3.6).

It was a mixed picture for incomes across the farming sectors with dairy, other cattle and sheep (LFA), specialist sheep (LFA) and lowland cattle and sheep businesses showing an increase in income and general cropping, mixed, specialist cattle and cereals all showing a decrease (see summaries in sections 4 and 5). Dairy farms had by far the highest average FBI in 2013-14 at £80,000, with other farm types averaging between £36,000 and £23,000.

The figures suggest that some farm businesses rely on sources of income other than from farming, including: contracting work; hosting mobile phone masts; provision for tourism and recreation; and financial support from grants and subsidies. Analysis of the Farm Accounts Survey suggests that, excluding support from grants and subsidies, the average farm made a loss of £16,000 in 2013. However, calculations from TIFF suggest that, excluding support, the agriculture sector as a whole still made a small profit (see sections 3.1, 3.3 and 6).