Scottish Government

2. INTRODUCTION

This study represents a continuation of the rolling programme of Enterprise Cost Studies undertaken by the Rural and Environment Research and Analysis Directorate ( RERAD) of the Scottish Executive. The objective of the study is to identify the gross margins for organic enterprises in Scotland in 2006 and provide an interpretation of the physical and economic factors contributing to the results.

The study covers the period 1 January 2006 to 31 December 2006. Participants were selected from databases supplied by The Scottish Executive which detailed fully organic enterprises in non- LFA areas and fully organic units in LFA areas of Scotland. They were then telephoned to obtain their willingness to participate in the study. At the request of The Scottish Executive, Low-ground units were included in the study in preference to those in LFA areas. Therefore the majority of enterprises on the study are in low-ground areas of Scotland. However, three of the participants did receive an LFASS payment.

Gross margins were calculated for the individual organic enterprises on each farm as detailed in the results section. In addition, tables showing the relative performance of each enterprise in the study against the others of the same type have been completed. Within each enterprise type, the various factors contributing to gross margin performance have been analysed in order to identify the key indicators of performance.

The gross margins present on each farm were then amalgamated to ascertain gross margin performance at farm level both before and after the inclusion of Organic Aid. The participants were then ranked on a gross margin per hectare basis with the results presented in tabular form.

Fixed costs were also collected from a sample of participants to allow a sample of net margins to be calculated again at enterprise and whole farm level.

Throughout the report, the methodology used has been in accordance with the Special Studies Methodology Manual produced by The Scottish Executive.

Sixteen units took part in the study, giving a total of 57 enterprises. The size and type of enterprises in the study varied greatly. Table 2.1 shows the variation in enterprise type and their geographic location.

Table 2.1- Number, Type and Geographical Spread of Enterprises in the Study