Scottish Government

SUMMARY OF SCOTTISH
AGRICULTURAL INCOME ESTIMATES 2006

1. The aggregate results for the 2006 agricultural accounts are provisional, and are based on the latest information available. While information on outputs tends to be complete, full information on inputs normally becomes available later than the publication deadline. The 2006 estimates are, therefore, subject to revision in the next Annual Review using later information.
2. As a result of the methodological changes made 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 for both UK national accounts and Eurostat.
4. The main results of the account show an estimated increase in TIFF of around 19.6% (£94.6 million) from last year. In real terms this represents a rise of around 16.0%. The details underpinning the increase in TIFF are summarised below:

• Total level of payments and subsidies in 2006 remained similar at £556.6 ¹ million. Single Farm Payments ( SFP) were estimated at £414.5 million, an increase of £18.1 million (4.6%) on the 2005 levels, mainly due to an increase from the EU. The SFP total has been arrived at by netting off 8.5 per cent for EU and National modulation. This rate of modulation has been applied to account for the "franchise effect", i.e. the first €5,000 of a farmer's payment is effectively exempt from EU modulation.
• The value of gross output (net of subsidies) is estimated to increase by 8.0% (£140.1 million) in 2006. The biggest increase was in the Other Crops sector (those crops not classed as cereals) mostly due to potatoes rising by 66.3% (£71.8 million), reflecting the average annual market price for maincrop ware potatoes which increased by 63.3% in 2006.
• Cereals output (net of subsidies) increased by 14.6% (£26.7 million). This increase is due to market price increases for all cereals, in particular wheat where the average wheat price rose in 2006 by 20.8% to £84.52 per tonne (Table 3). This has resulted from demand for cereals continuing to outstrip production on the global market. Global stocks for wheat and other grains have been falling in recent years and pushing prices up. The implications for agriculture is that productivity or area planted will have to increase in order to keep up with increasing demand.
• Within the Cereals sector, there was a decrease in area from 411,773 hectares to 398,513 in 2006 (down 3.3%). However, average yields achieved in 2006 increased by 6.7 tonnes per hectare (up 2.9%).
• Horticulture output value has increased by 12.1% (£20.8 million). This included increases of 22.7% (£15.2 million) in vegetables, 5.0% (£2.3 million) in flowers and nursery stock and 5.6% (£3.3 million) in fruit. These rises were primarily due to increases in area and prices received for brussels sprouts, carrots and strawberries. The main driver for the increase in flowers and nursery stock was an increase in the value of protected crops.
• The output value of store and finished cattle has increased in 2006 mainly through higher prices. The number of slaughtered steers, heifers and young bulls decreased from 533 to 523 '000 head with the meat available reducing from 182.5 to 177.0 (000 tonnes), however the average price for clean meat increased from £1.93 to £2.13 pence per kilo. 2006 has also seen the return of cows and bulls to the food chain with 35 '000 head being slaughtered compared to 2,000 in 2005. The average price achieved per head for cull animals slaughtered for the food chain in 2006 was £476.80 compared to those put through the Older Cattle Disposal Scheme ( OCDS) where average payment was £244.81.
• There was also an increase in the number of calves slaughtered and the average price increased from £76.23 in 2005 to £144.06 in 2006. The number of store animals increased by 3.7% and prices also improved, with 2006 average prices for store cattle up 7.1% and average prices for store calves up by 12.2%.
• The value of finished sheep and lambs has also increased by 3.7% (£4.8 million). However, the values of both pig and poultry sectors have decreased by 9.9% (£6.2 million) and 15.6% (£13.1 million) respectively.
• A decrease in the average price paid per litre for milk has contributed to a fall of 2.5% (£6.3 million) in the value of milk and milk products. Overall, the value of total livestock products decreased by 4.0% (£11.6 million).
• Capital formation (i.e. the asset value) of incoming/retained livestock also shows a decrease of 14.9% (£11.9 million), reflecting a 10.8% decrease for cattle and a 43.9% decrease for sheep. The decreases are due to changes in the valuation of animal stocks, essentially, the price difference between animals entering and leaving the herd/flock. Specifically, in 2006 there was an increase in the value of cull animals slaughtered for the food chain. This drove up the exit price that is used to calculate the overall value of capital formation, therefore, if more 'value' is attached to animals leaving the herd for slaughter then this reduces the overall value of the capital formation. In addition to this, the capital formation value of sheep was also affected by a decrease in the value of ewes joining the flock in 2006.
• There was an overall increase in input items in 2006 of 3.9% (£45.3 million). Fuel and oil costs increased 12.2% (£7.7 million). The effect of a 20.2% annual price increase in red diesel is consolidated by increases in contract work costs (6.5%), veterinary expenses (5.9%) and other farm costs (4.2%), which may also be indirectly related to increases in fuel costs. Fertilisers and lime increased 3.8% (£5.1 million) due primarily to higher prices for these inputs.
• Very few input costs fell in 2006. The most notable decrease was in crop protection, which reduced by 5.2% (£2.4 million). This was due mainly to a decrease in the area of cereal crops.
• The value in interest paid has increased by 4.3% (£4.3 million) reflecting both changes in interest rates during 2005 and 2006 and an increase in lending for farming purposes up 4.2% (£1,281 million). Hired labour costs have also increased by 6.1% (£15.5 million), due to increased wage costs for farm workers.