Section A
Aggregate Output, Input and Income in 2007
Introduction
The 2006 estimates of agricultural output, input and income for the UK are described in 'Agriculture in the United Kingdom 2006', published by The Stationery Office ( TSO) on 29th March 2007 on behalf of the UK Agriculture departments. The Scottish estimates given in this report correspond to those in the combined UK publication. The aggregate income figures reflect the estimated value of outputs from, and inputs to, Scottish agriculture over the calendar year. Subsidy payments are also incorporated into output and income estimates on an accruals basis, i.e. they are shown in the year in which they became due to be paid. Normally this is the year in which the farmer carries out the production to which the subsidy relates.
Commentary
Aggregate Results
The 2006 estimates are provisional. They were calculated between -November 2006 and January 2007 and were based on the latest available information at the time. While information on outputs tends to be complete, data on inputs normally becomes available later in the year. The forecasts are, therefore, subject to revision in the next Annual Review in January 2008.
The 2006 forecasts for Scottish agricultural output, input and income are shown in Table A1. 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 estimated to increase by around 19.6 per cent (£94.6 million) over the previous year before inflation is taken into account. In real terms, this represents a rise of around 16.0 per cent.
Farm Crops
Cereals output (net of subsidies) increased by 14.6 per cent (£26.7 million). This increase is due to market price increases for all cereals, in particular wheat where the average wheat price per tonne has risen by over 20 per cent in 2006. 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 per cent). However, average yields achieved in 2006 increased to 6.7 tonnes per hectare (up by 2.9 per cent).
Livestock and Livestock Products
The value of finished cattle and calves has increased by 3.4 per cent (£13.4 million). The value of finished sheep and lambs has also increased 3.7 per cent -(£4.8million). However, the values of both pig and poultry sectors have decreased by 9.9 per cent (£6.2 million) and 15.6 per cent (£13.1 million) respectively. Capital formation (i.e. the asset value) of incoming/retained livestock also shows a decrease of 14.9 per cent (£11.9 million), reflecting a 10.8 per cent decrease for cattle and a 43.9 per cent decrease for sheep (down £8.3 million from £19.0 million in 2005). The decreases in capital formation are mainly due to changes in the price that is used to calculate the value of animal stocks - essentially, the price difference between animals entering and leaving the herd/flock. The output value of total livestock products (milk and its associated products, eggs for food, clipwool and other livestock products net of subsidies) decreased by 4.0 per cent (£11.6 million). A decrease in the average price paid per litre for milk has contributed to a fall of 2.5 per cent (£6.3 million) in the value of milk and its associated products.
Payments
Total level of payments and subsidies has remained similar in 2006 at £556.0 1 million. The Single Farm Payment ( SFP) was valued at £414.5 million, an increase of £18.1 million (4.6 per cent) 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.
Inputs
There have been increases and decreases in input items in 2006 with an overall increase of 3.9 per cent (£45.3 million). Fuel and oil costs increased 12.2 per cent (£7.7 million). The effect of a 20.2 per cent annual price increase in red diesel is compounded by increases in contract work costs (6.5 per cent), veterinary expenses (5.9 per cent) and other farm costs (4.2 per cent), which may also be indirectly related to increases in fuel costs. Fertilisers and lime costs increased 3.8 per cent (£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 per cent (£2.4 million). This was due mainly to a decrease in the area for cereal crops.
The amount of interest paid in 2006 has increased by 4.3 per cent (£4.3 million) reflecting both changes in interest rates across the year and an increase in bank advances for farming purposes of 4.2 per cent (£51.8 million) in 2006. Hired labour costs have also increased by 6.1 per cent (£15.5 million).
Balance Sheets
Overall the total value of assets are estimated to increase by £170 million to £14.5 billion. This is mainly due to increases in the value of land and buildings and in crops and stores.
Total liabilities are estimated to decrease by £25 million to £2,080 million. The estimated net worth of the industry in 2006 (calculated by subtracting total liabilities from total assets) has increased by 1.6 per cent to just under £12.5 billion. Net worth as a percentage of total assets increased slightly to 86 per cent.