Introduction
Background
This report contains the latest financial results from the Farm Accounts Survey ( FAS) relating to the farming years 2003/4 and 2004/5. The information is collected annually for the Environment & Rural Affairs Department by the Scottish Agricultural College ( SAC) and individual records are submitted anonymously to the Department. The results are used to aid administrative and policy decisions and the Department are very grateful to the participating farmers for their continued co-operation with SAC and for the detailed information that they provide.
Changes to the farm accounts survey sample
The NFI estimates are produced from an analysis that relates to two samples of farms of 469 in 2003/04 and 460 in 2004/05, representing full-time farms of all of the main types in Scotland (excluding horticulture, specialist pigs and poultry farms). The majority of farms participated in both years, although there were some small changes to the sample of farms in 2004/05, which introduces a small amount of sample variability. This is different to previous years when results were presented on the basis of an identical sample of farms in each year.
The Time Period Covered by the Survey
The survey is based on a farm's financial year. The exact period covered by the survey, for any given year, will vary across the sample depending on individual businesses' accounting year ends - although they all centre on the same cropping period (see diagram in Annex 1). For example, the 2004/5 accounts all centre on the 2004 production and subsidy year. The spread of closing valuation dates, from the autumn of one year to the spring of the next, means that (unavoidably) some of the 2004/5 accounts relate to the 2003/4 winter whilst others relate to that of 2004/5 (and the corresponding split applies to the 2003/4 accounts as well).
Measures of Income
The main income measure reported is Net Farm Income ( NFI). NFI is defined as the returns to the farmer and spouse for their manual and managerial labour, and for the tenant-type assets invested by them in the business (see flow-chart in Annex 2); before the deduction of any interest payments. All farms are assumed to be tenanted in order to put them on the same basis when assessing their performance, and so an appropriate rent has been imputed and charged on owner-occupied holdings. The principal advantage of NFI as an indicator is that it can be compared across all farms as it takes account of the different tenure, labour supply and finance arrangements of different farms. Machinery depreciation is calculated on current values, and breeding livestock stock appreciation is excluded from net farm income in accordance with established practice. NFI is a narrower income measure than the aggregate-level Total Income From Farming ( TIFF) estimate, and as a consequence the annual percentage change in NFI is more volatile, especially at relatively low levels of income.
NFI is a very different concept to Net Profit, which is a measure commonly used by farm businesses for management purposes. Net profit (or loss) equals the total farm gross margin minus fixed costs (where farm gross margin = total output - total variable inputs). NFI can be reconciled to Net Profit by:
- adding back imputed labour for family and partners, rental value, imputed rent on improvements and ownership income.
- deducting interest payments, depreciation on tenant's improvements and ownership expenses.
Agriculture in the United Kingdom 2005 was published on 30 March 2006 (available from the Stationery Office and also on the Internet at www.defra.gov.uk). It will highlight the main events of the year, include balance sheets for each of the main commodities and provide full details of the aggregate agricultural account.
Notes
1. Due to rounding, sub-totals in the tables may not exactly equal the sum of the component items.
2. Some of the size groups contain only small numbers of farms, and the results may not be very reliable. Results are not shown for size-groups of fewer than five. Where this is the case the symbol " is used.