Estimation of sectoral CAP payment 'envelopes' 2019

Annex 1 – Methodology for estimating sectoral envelopes using Standard Outputs

23. The data used included selected variables from the June Agricultural Census and CAP payment data by scheme for all businesses in Scotland 2019. The data was made available to SRUC in accordance with data sharing agreement No.53 between The Scottish Government – Agriculture and Rural Economy (ARE) and Rural and Environmental Science and Analytical Services (RESAS) and Scotland's Rural College – Academic Division. The data use and joining of CAP payment and June Agricultural Census variables is described in an appropriate Data Protection Impact Assessment.

24. Estimation of "sectoral envelopes" provides an approximate amount of CAP support likely allocable to individual sectors if CAP support payments were considered coupled. Whilst some payments, such as the SUSSS, SSBSSM and SSBSSI are indeed coupled, many of the payments received (such as the Basic Payment Scheme, Less Favoured Area Support Scheme and Greening) are decoupled area-based payments that are not explicitly tied to any given enterprise. The calculation of a sectoral envelopes to reallocate these decoupled payments to agricultural activities requires some assumptions and modelling choices – an analogy may be drawn with the disaggregation of overhead costs to different enterprises.

25. For the purposes of this exercise, 2019 funding was allocated at a business (BRN) level based on Standard Outputs (SO) extracted from the JAC. These SOs combine physical activity levels (i.e. number of different categories of livestock, area of different crops) recorded for individual businesses with average 2010-15 farmgate prices to estimate the value of specific outputs produced in a given year.

26. Although sectoral-average prices may misrepresent actual prices received by individual farms, these standardised estimates are routinely calculated and used in the JAC and underpin the classification of farms into different types (e.g. cropping, dairy, LFA beef), including for the reporting of farm incomes. Data extracted from the JAC for 2019 was used to calculate Standard Outputs (expressed in € using 2013 SO coefficients^[16] that are adjusted to Sterling using the 2019 official exchange rate)^[17] for each individual BRN in receipt of CAP monies. To ensure consistency with the business-level data on support payments, calculations were conducted at the level of the farm or croft business rather than individual holding, to account for businesses comprising two or more holdings.

27. The SO allocation deviated from that used by RESAS in order to take the pragmatic approach of allocating dairy cattle present on businesses with smaller herds (less than 50 breeding cows) to the beef sector – using the beef SOs for cows and progeny rather than the higher dairy SOs for the breeding cows.

28. Calculated SOs for individual items within a business were then aggregated into sectors (e.g. beef, poultry, cropping, sheep, dairy, pigs). The relative proportions of total grazing livestock SO from dairy, beef and sheep was utilised to allocated area based SOs from grazing and fodder crop areas.^[18]

29. Where coupled payments had been received by a business, these were allocated directly to the relevant sectoral envelope. These sectoral SO proportions from the JAC were then used to allocate decoupled area-based CAP scheme payments received by individual sectoral envelopes – meaning businesses could be in receipt of payments from multiple envelopes. It was assumed that no support as directly allocable to pigs, poultry and fruit and veg crops under glass/polytunnel. Further, for the allocation of LFASS payments it was assumed that these were only available for beef cattle and sheep and were therefore allocated based on the contribution of each sector to total the proportion of beef and sheep SO for individual businesses.

30. Once the sectoral envelope allocations were made at a business level, they were aggregated to provide national level sectoral CAP payment envelopes.

• Beef Envelope Payments = £BES + £SSBSSM + £SSBSSI + ((£BPS + £GREENING) * Beef Envelope SO%) + (£LFASS* Beef Envelope LFA SO%)
• Dairy Envelope Payments = (£BPS + £GREENING) * Dairy Envelope SO%
• Sheep Envelope Payments = £SUSSS + ((£BPS + £GREENING) * Sheep Envelope SO%) + (£LFASS* Sheep Envelope LFA SO%)
• Crop Envelope Payments = (£BPS + £GREENING) * Crop Envelope SO%