PART I: CLASSIFICATION OF FARMS
1. Type of Farm
The classification is based on detailed sub-types as defined in the EC farm typology, which have been grouped together where required to give the types shown below. These groupings were revised in 2002 throughout the United Kingdom such that types are now comparable between countries.
The classification is based on the relative importance of the various crop and livestock enterprises on each farm assessed in terms of standard gross margin (an economic measure of output less variable costs). The method of classifying each farm is to multiply the area of each crop (other than forage) and the average number of each category of livestock by the appropriate standard gross margin, the proportions of the total contributed by the various enterprises determining the type of farm. The list below defines the main types that are dealt with in this booklet.
Specialist Sheep ( LFA)
Farms in the less-favoured areas with more than two-thirds of the total standard gross margin coming from sheep.
Specialist Beef ( LFA)
Farms in the less-favoured areas with more than two-thirds of the total standard gross margin coming from cattle.
Cattle and Sheep ( LFA)
Farms in the less-favoured areas with more than two-thirds of the total standard gross margin coming from sheep and beef cattle together.
Farms where more than two-thirds of the total standard gross margin comes from cereals and oilseeds.
Other farms where more than two-thirds of the total standard gross margin comes from all crops.
Farms where more than two-thirds of the total standard gross margin comes from dairy cows.
Lowground Cattle and Sheep
Farms NOT in the less-favoured areas with more than two-thirds of the total standard gross margin coming from sheep and beef cattle.
Farms where no enterprise contributes more than two-thirds of the total standard gross margin.
2. Standard Gross Margin
The gross margin of an enterprise is its enterprise output less its variable costs. Enterprise output is revenue adjusted for valuation change, plus transfers out and the value of produce used, less transfers in and purchases. Variable costs are those that can be readily allocated to an enterprise and vary in proportion to the size of the enterprise. Standard gross margin is the Scottish average for the years 1998 to 2002.
3. Size of Business
Since 2003/04, this has been defined in terms of standard labour requirements. Standard labour requirement is equal to 1900 hours of labour per year. The size groups are:
0.5 < 2.00 SLR
This represents broadly a one- two person full-time farm.
2 < 3 SLR
This represents broadly a two- three person full-time farm.
3 + SLR
This represents approximately full-time farms with more than three people full-time.
Note: Actual farm employment may be above or below the labour requirements listed in the table above; the values quoted refer to an average position.
On all farms the large size group is defined as 3 SLRs and over.
Where figures for All Sizes are shown, these refer to the above groups weighted together.
4. Weighted Averages
The figures for All Sizes and All Types are weighted averages based on the 2007 census distribution of agricultural holdings in Scotland by type of farming and size of business.
PART II: ACCOUNTING TERMS
Only some of the items making up output and input are shown separately in the Tables, but each is defined to show what comprises the totals.
Sales, including produce to farmhouse and labour, adjusted for debtors at the beginning and end of year and for valuation change. The value of non-fodder crops used on the farm for feed or seed is included.
Wheat, barley, oats and mixed corn.
Sales, including produce to farmhouse and labour, adjusted for debtors at the beginning and the end of year and for valuation change, less purchases of livestock and livestock products for resale. The value of milk from the dairy herd fed to stock is included. Breeding Livestock Stock Appreciation is excluded.
Miscellaneous produce to farmhouse and labour, revenue from contracting and some other miscellaneous items, but excluding grants and subsidies, adjusted for valuation change.
Subsidy and Payments
Includes Single Farm Payments ( SFPs) and LFASS payments and all grants except those paid in respect of permanent improvements and those deducted from expenditure.
Crop Output, Livestock Output, Miscellaneous Output and other Grants, Subsidy and Payments.
Payments and non-cash inputs (eg unpaid labour, rental value) adjusted for creditors at the beginning and end of the year and for valuation change.
Expenditure on feeds adjusted for valuation change. The value is included of (a) milk from the dairy herd fed to stock, and (b) home-grown non-fodder crops fed to stock.
Expenditure on seeds adjusted for valuation change. The value of home-grown seed grain and potatoes is included.
Wages and employer's National Insurance contributions, payments in kind, value of unpaid family labour (excluding that of the farmer and spouse) and salaried management are all included.
Expenditure on lime and fertilisers, adjusted for valuation change.
Machinery (excluding Depreciation)
Expenditure on machinery repairs, small tools, contract work and fuel and oil, less allowances for private use.
Electricity, vehicle taxes, insurance and secretarial costs, adjusted for valuation change.
Other Livestock Expenses
Veterinary charges, haulage and sundry expenses.
Other Crop Expenses
Crop protection, sundry crop expenses and water for irrigation.
Land and Building Costs
Rent paid by tenants, rental value of owner-occupied farms, imputed rent on tenant's improvements. Rates paid on cottages and the business share of the farmhouse. Repairs by occupiers.
This is calculated on a replacement cost basis.
Net Farm Income
Net Farm Income ( NFI) represents the return to the farmer and spouse for their manual and managerial labour and on the tenant-type capital in the farm business. It is intended as a consistent measure of the profitability of tenant-type farming. NFI is not a proxy either for farm business income or for farm household income.
- To represent the return to the farmer and spouse alone, a notional deduction is made for any unpaid labour provided by non-principal partners and directors, their spouses and by others; this unpaid labour is valued at average local market rates for manual agricultural work.
- To confine the measure to the tenant type activities and assets of the business, an imputed rent is deducted for owner occupied land and buildings and for landlord-type improvements made by the tenant; no deduction is made for interest payments on any farm loans, overdrafts of mortgages and any interest earned on financial assets is also excluded.
Breeding Livestock Stock Appreciation
The part of the change in the value of breeding livestock that is due to changes in price. It is calculated for adult female cattle, sheep and pigs.
Investment in tenant-type assets on a medium - short-term basis. The first comprises machinery (replacement cost basis) and breeding livestock, and is valued at the average of opening and closing valuations. The second comprises trading livestock, crops and other items similarly valued. As investment varies between opening and closing valuations, an average annual investment has been estimated.
PART III: BALANCE SHEETS AND FLOW OF FUNDS
The tenure definitions are as follows:
Farms on which all of the area used for agriculture is owner-occupied.
Farms on which all of the area used for agriculture is tenanted.
Farms with any other tenure arrangements. This includes farms with landlord-tenant partnerships and farms on which the area used for agriculture is split between 2 or more different tenure types.
The figures presented in the tables are weighted averages based on the 2007 census distribution of holdings by tenure category, type of farming and size of business.
The balance sheets relate to the business rather than the farmer and therefore any other assets belonging to the latter are excluded.
For land and buildings, crops and livestock, the basis of valuation is conservative market price, while for machinery and equipment it is depreciated replacement cost. Particularly in the case of land and buildings, the balance sheet entries need to be treated with some caution in respect both of the absolute level and of the year-to-year trend, and it follows that this caveat extends to dependent figures such as net worth.
Flow of Funds
The figures presented are for the same sample of farms as are used in the balance sheet analysis and are weighted in the same way.
Net farm income is shown exclusive of breeding livestock stock appreciation. Inputs not involving cash outlay are imputed charges (eg the rental value of owner-occupied land) and depreciation of plant and machinery, less valuation changes for livestock, crops etc. Interest relates only to borrowings for farming purposes including those for the purchase of farms or parcels of land. Net investment spending is expenditure on land, buildings, improvements, plant and machinery, less sales and capital grants. Cash from non-farming sources represents funds of various kinds from outside the farming business including capital introduced less capital withdrawn. Increase in borrowing indicates the net change in the external credit position of the farm business, being the increase in external liabilities less any increase in liquid assets.
Net profit is arrived at before charging non-cash items such as farmer's manual labour, partners' and/or spouses' salaries or imputed rent for owner-occupiers. Interest charges and ownership income/expenditure have also been taken into account.
Cash Income is the difference between total revenue and total expenditure. Revenue is receipts adjusted for debtors and expenditure is purchases adjusted for creditors. It is assumed therefore that all end of year debtor and creditor payments are settled in full, even though this may happen beyond the end of the accounting year. Cash income represents the cash return to the group with an entrepreneurial interest in the business (farmers and spouses, non-principal partners and directors and their spouses and family workers) for their manual and managerial labour and on their investment in the business.
PART IV: QUARTILES
To produce performance bands by quartiles, FAS results were ranked by NFI and averages produced for the output and input values categories reported for the top 25 per cent and bottom 25 per cent by farm type and reported against the full analysis for that particular farm type.
PART V: NON-FARMING INCOME
Farmers are asked to indicate into which of ten income ranges the joint non-farming income of the farmer and spouse falls for each of seven separate sources of income. The sources of income are listed below:
Source of Income
On-farm non-agricultural income
Any on-farm income of the farmer and spouse not entering into the net farm income data stream. Includes small-scale bed and breakfast businesses that use farm resources.
Paid employment off the farm.
Businesses (other than another farm) owned or operated away from the farm holding. Director's fees are included here.
Interest receipts on personal bank, building society and similar accounts. Rental income deriving from property off the farm and some dividends on shares are also included here.
Includes income from retirement, widow's and disability pensions as well as from occupational and state pensions.
Includes payments such as child benefit and family credit.
Other off-farm income
All other off-farm income. Various commissions, and retainers, come into this category.