Total income from farming: estimates for Scotland 2014-2016

6. Input costs faced by Scottish farms

Total costs for Scottish farms fell from £2.75 billion in 2014 to £2.68 billion in 2015, and dropped further to an estimated £2.61 billion in 2016. Changes in costs will be due to both changes in volume and in prices.

Chart 7: Share of costs, 2015 and 2016 source: Table 1

The cost of feed was estimated as £532 million in 2015 (20 per cent of costs; down £49 million, eight per cent or ten per cent real terms) and £515 million in 2016 (20 per cent of costs; down £18 million, three per cent or four per cent real terms). Figures based mainly on the Farm Accounts Survey showed a nine per cent reduction in the value of concentrates for sheep and cattle for 2015 and a 14 per cent reduction in roughages. There was also an 11 per cent fall calculated in granivore feed. Initial estimates for 2016, based on Agricultural Price Indices, livestock numbers and consideration of the grass harvested, suggest a further three per cent reduction in costs.

Consumption of fixed capital, which in financial terms recognises the economic cost of using up a farm's previous capital investment (in livestock, buildings, plant and machinery), was estimated as £432 million in 2015 (16 per cent of costs; down £5 million, one per cent or three per cent real terms) and £435 million in 2016 (17 per cent of costs; up £3 million, or fairly level in percentage terms).

The cost of labour was estimated as £378 million in 2015 (14 per cent of costs; up £29 million, eight per cent or six per cent real terms) and £381 million in 2016 (15 per cent of costs; up £2 million, fairly level in percentage terms). Also included in this category is the cost of specialist contract work which was estimated as £4.5 million in 2015 and £5.1 million in 2016.

Chart 8: Input costs, in real terms, 2006 to 2016 source: Table 3

The cost of fuel was estimated as £119 million in 2015 (four per cent of costs; down £24 million, 17 per cent or 18 per cent real terms) and £119 million in 2016 (five per cent of costs ; no change on 2015). The prices of red diesel and other fuels fell in 2015 but increased in 2016. Other machinery repairs and expenses amounted to about a further £120 million in both years.

The cost of fertiliser usage was estimated as £187 million in 2015 (seven per cent of costs; up £2 million, little change in percentage terms) and £153 million in 2016 (six per cent of costs; down £33 million, 18 per cent or 18 per cent real terms). The estimated fall in 2016 was due mainly to price reductions, particularly for nitrogen.

Expenditure on seed, which only accounts for about two per cent of costs, was estimated as £67 million in 2015 and £62 million in 2016.

The cost of borrowing, split in the tables into FISIM (the costs of financial services) and interest (though both of these would appear, in practice, as interest payments) rose slightly in 2015, due to increases in bank advances, but fell back in 2016 due to the reduction in interest rates.

All other expenses, including maintenance, veterinary fees, crop protection, rent and other miscellaneous expenses, fell £22 million to £735 million in 2015, and a further estimated £4 million to £730 million in 2016.