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SUMMARY OF SCOTTISH AGRICULTURAL INCOME ESTIMATES 2005

1. The aggregate results for 2005 are provisional, and are based on the latest information available. While information on outputs tends to be complete, information on inputs normally becomes available later. The 2005 estimates are, therefore, subject to revision in the next Annual Review using later information.
2. As a result of the methodological changes enforced in 1998, the agricultural account now includes 'inseparable non-agricultural' activities. Some transactions within the agricultural industry are included as both outputs and inputs. Subsidy payments are incorporated into output (and incomes) estimates on an accruals or "as due" basis.
3. Total Income From Farming ( TIFF) measures business profits plus income to workers with an entrepreneurial interest (farmers, partners, directors and their spouses, and most other family members who work on the farm). TIFF is the preferred income measure, conforming to internationally agreed accounting principles required by both UK national accounts and Eurostat.
4. The main results of the account show a estimated decrease in TIFF of around 8.4% (£39.9 million) from last year. In real terms this represents a fall of around 10.9%. The details underpinning the fall in TIFF are summarised below:

• Total level of payments and subsidies has remained similar in 2005 at £536.0 million. A number of subsidy schemes directly linked to the production of specific product, for example the Arable Area Payments Scheme, the Sheep Annual Premium Scheme and several Cattle subsidy schemes, ceased with effect from 2004.
• The Single Farm Payment ( SFP), which was introduced in 2005 was valued at £398.1 million. The SFP total has been estimated taking account of EU and National modulation.

• The value of gross output is forecast (net of subsidies) has decreased by 2.5% (£43.4 million) in 2005. The biggest decrease has been Other Crops sector (those crops not classed as cereals) mostly due to potatoes falling 27.1% (£39.0 million), largely due to a 24.1% fall in the average annual price.

• Cereals (net of subsidies) have fallen by 10.7% (£22.1 million). Average yields in 2005 were generally up on 2004 (up 0.8% overall), though the area cropped decreased 5.5% to 417,400 hectares contributing to a fall (of 4.8%) in cereal production to 2.7 million tonnes. In addition, prices received for cereals have fallen by 6.3% in 2005.
• Horticulture has increased by 7.2% (£9.8 million). This includes increases of 13.1% (£7.7 million) in vegetables and 12.4% (£5.1 million) in flowers and nursery stock, but a decrease of 8.3% (£3.0 million) in fruit.
• Livestock and livestock products (net of subsidies) increased by 0.9% (£9.8 million). The value of finished cattle and calves has increased by 6.4% (£21.5 million). The value of finished sheep and lambs however has decreased 12.1% (£17.8 million), due to a 2.3% drop in slaughtering and a 7.4% drop in price per kg for finished sheep. Capital formation of livestock has increased by 11.7% (£7.8 million). Reflecting a 22.5% increase in withdrawal price of sheep, which is the difference between sheep entering and leaving the flock. Lower prices in the first half of the year have contributed to a fall of 1.3% (£3.4 million) in the value of milk and milk products.
• There have been increases and decreases in input items in 2005 with an overall decrease of 0.2% (£2.1 million). Fuel and oil costs increased 23% (£11.4 million). The effect of a 37.9% annual price increase is offset by reductions in both the area of crops (cereal area down 5.9% in 2005) and machinery numbers (down 3.4%) as measured by the December 2004 agricultural census. Fertilisers and lime increased 4.0% (£5.1 million) due to higher prices. Other machinery expenses, which includes farm car fuel, licences insurance increased by 5.0% (£1.1 million).

• Input costs that have fallen include leasing in of quotas which fell 98.7% (£17.4 million), due largely to a 93.9% fall in the volume of milk leased in during the 2005/06 scheme year. Feedingstuffs are down by 1.1% (£3.5 million), due mainly to reductions in the feed agricultural price indices. Seeds have fallen by 7.9% (£4.7 million) due to the combined effect of lower prices and a 5.7% decrease in the area of the most widely grown crop barley.
• The value in interest paid has increased by 8.5% (£7.8 million) reflecting both changes in interest rates during 2004 and 2005. Hired labour costs have decreased by 1.9% (£4.8 million), although this is partially offset by an increase in contract work of 2.4% (£1.7 million).

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