Scottish Government

Farm Income Outlook Survey 2004/05

A survey focusing on the perceptions and intentions of farmers at a time of industry change.

Main Findings

• More respondents expected their output value to decrease rather than increase in the 2004 crop year, with the exception of the cattle sector where the reverse was true.
• A notable difference was reported by respondents from the cattle and cereal sectors, where the proportions expecting an increase in output value was 38% and 4% respectively.
• Similarly, more respondents anticipated a fall in total farm income (37%) than forecasted an increase (28%).
• The vast majority of respondents indicated they expected their input costs to rise by between zero and 10% during the 2004 crop year.
• The specific inputs costs mentioned most by respondents as likely to increase were, fertilisers and lime, fuel and oil and feeding stuffs.
• 6% of respondents indicated that they intended to pursue new non-agricultural activities in the 2004 crop year.
• The majority of respondents forecasted no change in the amount of hired and family labour in the 2004 crop year.
• The bulk of the respondents did not expect to change their plans in the 2005 crop year.
• Of those who thought their plans would change, more (11%) planned a fall in production than expected a rise (6%)
• Similarly, of those expressing an opinion (other than no change) regarding their plans for the years 2006-2010, more expected a decrease (9%) than an increase (6%). Another 10% of respondents indicated at least some thoughts about retrial.
• 18% of respondents planned additional investment in the near future.
• The Single Farm Payment was expected to alter farming decisions made by 29% of respondents; 33% did not expect the SFP to have an influence and the balance were unsure.
• A larger proportion of respondents from Cereal (48%) and Other Crops (50%) farms did not expect the SFP to alter their farming decisions. The early decoupling of AAPS and the need to consider the effects of change earlier may have contributed to this result.
• Only a minority of respondents (3%) regarded the SFP as non-farm income. A further 7% were unsure and the majority (90%) viewed it as farm income.

Introduction, Why an Outlook survey?

1) This report outlines the key findings of the Outlook 2004/05 Survey. This is the first wave of a short term annual survey, the focus of which is to examine the perceptions and intentions of farmers at a time of industry change.

2) From January 2005 the nature of agricultural support will be changing with the introduction of the Single Farm Payment ( SFP). Unlike previous support schemes, the SFP is not tied to production activities. So long as land is maintained in Good Agricultural & Environmental Condition ( GAEC), historical entitlements will generate a payment without the need to necessarily keep livestock or grow crops. In return for support (based on historic activity), farmers and crofters will be expected to respect statutory management requirements and maintain land in Good Agricultural & Environmental Condition ( GAEC), without the need to continue existing farming activities.

3) The introduction of the SFP presents farmers and crofters with an opportunity to restructure their businesses, if they wish to. Such a decision may depend upon a number of factors, including the profitability of different enterprises and the importance of non-farming income to the farm household. Restructuring of individual farms may affect the level of agricultural and related activities in rural Scotland. Consequently, we are interested in learning more about the impact of the SFP on the attitudes and intentions of farmers.

Methodology and sampling

4) This survey was conducted alongside the 2003/04 Farm Accounts Survey. Data were collected by the Scottish Agricultural College ( SAC) and submitted anonymously to the Department. Of the 444 farms in the 2003/04 FAS, 228 also contributed to this study.

5) The Farm Accounts Survey takes a sample representing full time farms of all the main types in Scotland (excluding horticulture, specialist pigs and poultry farms). The sample achieved in the Outlook survey provided a fairly even profile of response and is therefore largely reflective of the random sample drawn under the FAS (which was in turn broadly representative of the proportion of main farm types in Scotland). Like any sample survey, the results should be seen as indications of the views of the wider population of farmers.

6) The Outlook survey will be run again this year alongside the 2004/05 FAS to attempt to ascertain any changes in views as the Single Farm Payments begin to be finalised and paid. The results will be collated and compared against those from this survey.

Related studies

7) The Outlook survey does not provide a complete picture of the intentions of the whole agricultural community in Scotland, focusing as it does on a sample drawn from farms within the FAS. A Small Farm Survey has been undertaken to collect the associated views of farmers from crofts and smaller farms. Both surveys depend on the willingness of participants to report their views accurately.

8) The results of the Lloyds TSB Scottish Agricultural Survey 2005 are generally consistent with the findings of this survey. There was agreement that leading factors which could inhibit Scottish agricultural prosperity are depressed farm prices and higher input costs, however the Lloyds TSB survey also highlighted greater supermarket power and increased imports to the UK.

9) In the Lloyds TSB survey, where retirement was raised in a specific question, 31% of farmers indicated they would consider retirement within the next 5 years. The Outlook survey did not explicitly ask about retirement, however it did obtain some information about retrial intentions in an open ended comments section. Within this sections of the Outlook survey, 10% of respondents mentioned retirement in the next 5 years.

10) A finding of the Lloyds TSB study was that 20% of farmers were not optimistic about the future prospects of Scottish Agriculture. Although this question was not asked in the Outlook survey, there was a general tendency within both surveys, and generally across most farming sectors, for farmers to anticipate reduced activity over the next 5 years.

Profile of Respondents

The 228 respondents to the Outlook survey are split by farm type as given below:

Respondents by farm type