The Scottish Government

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Farm income estimates 2009

28/01/2010

Scotland's Chief Statistician today published the Aggregate Estimates for Total Income from Farming (TIFF) for 2009 and the Estimates of Average Farm Business Income (FBI) for 2008-09.

The statistics show that Total Income From Farming (TIFF) decreased by £20 million to £589 million between 2008 and 2009. This represents a fall of 3.2 per cent before inflation is accounted for and a fall of 2.6 per cent in real terms.

In real terms, TIFF almost tripled between 1990 and 1995. The fall from 1995 to 1998 was primarily due to a strong pound, weak world commodity prices and the impact of BSE and then Foot and Mouth Disease. Since 1998, TIFF has doubled, recovering to 60 per cent of the 1995 peak. High inflation in the mid 1970s resulted in high TIFF values in real terms.

Aggregate Estimates: Total Income In Farming (TIFF)

• The TIFF estimates for 2009 are provisional, and are based on the latest information that is available towards the end of 2009. A final position relating to some components is not available until later in the year, therefore the 2009 figures must be treated as estimates

• In 2009, the value of Outputs has fallen by £63 million (2.7 per cent), whilst the value of Inputs have increased by £47 million (3.0 per cent). Other Costs to farmers have fallen by £27 million (6.3 per cent) and the value of de-coupled Payments and Subsidies has increased by £72 million (12.8 per cent). These factors, along with an increase in the Consumption of Fixed Capital of £8 million (2.7 per cent), combine to produce an overall decrease in Total Income From Farming of £20 million (3.2 per cent)

The underlying details of this, focusing on the main changes between 2008 and 2009 are presented below.

Outputs from Scottish farms

• Gross Output decreased by £63 million (2.7 per cent). This is mostly due to decreases in the value of cereals, potatoes and milk , which were only partially countered by increases in sheep, cattle and horticultural output

• The value of wheat from Scottish farms fell £48 million (36.5 per cent) and barley fell £88 million (35.8 per cent). Prices for all cereals decreased substantially and this is the main reason for the falls in the value of output
• A fall in production and weaker prices for ware potatoes are the main reasons for a £16 million (8.1 per cent) fall in the value of potato output. Oilseed rape production and prices decreased leading to a fall of £7 million (24.3 per cent) in the value of output of that crop
• The value of horticulture output rose £18 million (8.1 per cent) due to rises in the value of protected crops and field grown vegetables. The value of fruit output declined due to weaker prices
• Strong prices and significant numbers of sheep slaughtered in the first half of 2009 meant sheep output rose £44 million (29.9 per cent). Finished cattle prices remained strong throughout 2009 leading to an increase in output of £27 million (5.9 per cent)
• Milk prices declined through the first half of the year but recovered later in the year; this led to a an overall fall in the value of milk output of £29 million (9.5 per cent)

Input costs faced by Scottish farmers

• Gross input costs increased in 2009 by £47 million (3.0 per cent). Increased costs for fertiliser and lime and other farm costs were only partially countered by decreases in costs for feedingstuffs and fuel and oil

• Livestock populations fell and there was a slight easing in the price of concentrates, resulting in a decrease in the cost of feedingstuffs of £30 million (6.9 per cent) to £408 million
• The very high prices of fertiliser in autumn 2008 has a significant impact on the costs of fertilisers used in 2009 which rose £65 million (30.5 per cent) to £280 million. This means fertiliser costs are 96 per cent higher in 2009 then in 2007
• The additional cost of vaccinating against bluetongue in 2009 meant veterinary expenses and medicines rose £7 million (14.4 per cent)

Other Costs faced by Scottish farmers

• Interest costs fell £48 million (43.0 per cent) as total borrowing by the industry rose but interest rates were substantially lower. Hired labour costs rose £23 million (7.7 per cent) because of increases in average wages paid to hired workers.

Total Payments and Subsidies

• Single farm payments rose £69 million (15.5%) due to a more favourable exchange rate with the Euro in September 2009 compared to a year earlier. The value of payments from the Less Favoured Areas Support Scheme (LFASS) rose £5.1 million (8.7 per cent), reflecting the 19% increase in LFASS rates being paid to active farmers in fragile and very fragile areas.

Revisions to Previous TIFF estimates

• Revisions have been made to the TIFF series since publication last year. The 2008 TIFF estimate has been revised down by £21 million (3.5 per cent) and there have also been changes of this magnitude to some of the previous years.
• Revisions to 2008 are mostly associated with the receipt of additional data which was unavailable this time last year. Availability of the 2008/09 Farm Accounts Survey data means that previous forecasting of many of the 2008 input costs have been replaced by actual data. The availability of the 2008 December Survey results replace previous assumptions, especially in relation to livestock and machinery numbers.
• Revisions to earlier years can also result from improvements and refinements to TIFF methodologies and the correction of any previous errors.
• For 2008, the largest revisions have been to: Total Miscellaneous Expenses (up £45.7 million), Feedingstuffs (down £10.2 million), Single Farm Payments (up £11.7 million), Livestock Capital Formation (down £13.6 million).
• There has been an upward revision to the scale of Single Farm Payments of about £11 to £12m in each year between 2005 and 2008. This revision more accurately reflects payments relating to each scheme year. Less Favoured Area Support Scheme (LFASS) totals for 2007 and 2008 have also been revised slightly downwards to more accurately reflect total payments relating to these scheme years.

Further information on revisions is available on request.

Additional information and analysis

In order to provide more information on TIFF an additional table has been released showing the detail of the TIFF account for 2000 to 2009.

Further detailed tables showing price and volume components of the TIFF estimates for 2009 and previous years, along with other related analysis and charts will be published in the Spring 2010 report titled : 'Scottish Agriculture Output, Input and Income Statistics.'

SECTION B: Farm Level Estimates - Farm Business Income (FBI)

• Estimates of Farm Business Income (FBI) come from the Farm Accounts Survey for Scotland, which is based on a sample of 478 farms in 2008/09 and 468 farms in 2007/08. The survey only includes full-time farms above a certain size (over and above 0.5 Standard Labour Requirements) and covers most main farm types in Scotland, excluding horticulture, specialist pig and specialist poultry producers
• The FBI measure is closely aligned to Total Income From Farming (TIFF) and provides a sectoral breakdown of incomes by 8 different farm types. The FBI results, which are based on accounting periods,. lag TIFF results, which are based on calendar years. This is most prominent in the crop sector, where 2008/09 FBI results are based on the 2008 harvest, whereas the 2009 TIFF results take account of the 2009 harvest. The 2008/09 FBI results are most closely related to the 2008 TIFF results
• Overall, FBI decreased by £2,200 from £40,900 in 2007/08 to £38,700 in 2008-09.

The following table shows FBI results by farm type between 2007-08 and 2008-09:

The large decreases in FBI for Specialist Cereal and General Cropping farms were mainly due to a large rise in the cost of inputs, particularly for fertiliser and fuel. Specialist Cereal farms also experienced a reduction in the value of cereal output.

Dairy farms experienced an increase in FBI, as the value of milk and cattle output more than offset corresponding increases in animal feed, fertiliser, fuel and other input costs.

The decrease in FBI for LFA Specialist Sheep farms is due to an increase in input costs, particularly feed and land and building costs, outweighing the increase in the value of sheep output. There was also a decrease in grants and subsidies, mainly due to the fact that the 2007/08 figures include the one-off Scottish Ewe Scheme payments.

The increases in FBI for LFA Specialist Beef and, to a lesser extent, LFA Mixed Cattle and Sheep farms was due mainly to a higher value of cattle and sheep output, along with higher grants and subsidies.

Lowland Cattle and Sheep farms showed an increase in FBI, primarily due to an increase in cattle and sheep output. However, as these results are based on a very small sample of farms they need to be treated with additional caution.

The FBI increase for Mixed farms was primarily due to increases in the output value of cattle and sheep and the increase in grants and subsides outweighing the fall in the value of cereal output and the increase in input costs.

Estimates of FBI by farm type should be treated with some caution as they are based on relatively small sample sizes. Trends for most farm types are also subject to annual sample variations, as a small number of farms join and leave the survey each year.

Revisions have been made to the 2007/08 FBI estimates published in August 2009. These revisions are due to the inclusion of an additional 26 farms in the results, whose accounts have been finalised since the previous publication. Revisions are also due to updates in the classification of farm types for farms in the survey.

FBI Definition

26. FBI is derived from management accounting principles rather than financial accounting principals. FBI represents the return to all unpaid labour (farmers, spouses and others with an entrepreneurial interest in the farm business) and to their capital invested in the farm business, including land and buildings.

Additional Information

FBI was introduced in August 2009 and replaced Net Farm Income (NFI) as the headline measure of farm incomes, following a public consultation in 2006-07.

More detailed information and analysis from the Farm Accounts Survey will be published in Spring 2010 in the 'Farm Incomes in Scotland' publication.

Official statistics are produced by professionally independent statistical staff.