The Scottish Government

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FARM INCOMES IN SCOTLAND 2000/01

APPENDIX

PART I: CLASSIFICATION OF FARMS

1. Type of Farm

The classification is based on detailed sub-types as defined in the EC farm typology, which have been grouped together where required to give the types shown below. These groupings were revised in 1993 throughout the United Kingdom such that types are now comparable between countries.

The classification is based on the relative importance of the various crop and livestock enterprises on each farm assessed in terms of standard gross margin (an economic measure of output less variable costs). The method of classifying each farm is to multiply the area of each crop (other than forage) and the average number of each category of livestock by the appropriate standard gross margin, the proportions of the total contributed by the various enterprises determining the type of farm. The list below defines the main types that are dealt with in this booklet.

2. Standard Gross Margin

The gross margin of an enterprise is its enterprise output less its variable costs. Enterprise output is revenue adjusted for valuation change, plus transfers out and the value of produce used, less transfers in and purchases. Variable costs are those that can be readily allocated to an enterprise and vary in proportion to the size of the enterprise. Standard gross margin is the Scottish average for the years 1987 to 1989.

3. Size of Business

This is defined in terms of total standard gross margin (average value 1987 to 1989), with 1,200 ECU (European currency units) of standard gross margin corresponding to one ESU (European Size Unit). The size groups are:

On Cereals, General Cropping and Mixed farms the large size group is defined as 100 ESUs and over.

Where figures for All Sizes are shown, these refer to the above groups weighted together.

4. Weighted Averages

The figures for All Sizes and All Types are weighted averages based on the 2000census distribution of agricultural holdings in Scotland by type of farming and size of business.

PART II: ACCOUNTING TERMS

Only some of the items making up output and input are shown separately in the Tables, but each is defined to show what comprises the totals.

Crop Output
Sales, including produce to farmhouse and labour, adjusted for debtors at the beginning and end of year and for valuation change. The value of non-fodder crops used on the farm for feed or seed is included. Payments under the Arable Area Payment Scheme and set-aside payments are also included.

Cereals
Wheat, barley, oats and mixed corn.

Livestock Output
Sales, including produce to farmhouse and labour, adjusted for debtors at the beginning and the end of year and for valuation change, plus Hill Livestock Compensatory Allowances, Beef Special Premium, Suckler Cow Premium and Sheep Annual Premium, less purchases of livestock and livestock products for resale. The value of milk from the dairy herd fed to stock is included. Breeding Livestock Stock Appreciation is excluded.

Miscellaneous Output
Miscellaneous produce to farmhouse and labour, revenue from contracting and some other miscellaneous items, but excluding grants and subsidies, adjusted for valuation change.

Other Grants and Subsidies
All grants except those paid in respect of permanent improvements, those deducted from expenditure, and those included in Livestock and Crop Outputs.

Total Output
Crop Output, Livestock Output, Miscellaneous Output, and other Grants and Subsidies.

Inputs
Payments and non-cash inputs (eg unpaid labour, rental value) adjusted for creditors at the beginning and end of the year and for valuation change.

Feeds
Expenditure on feeds adjusted for valuation change. The value is included of (a) milk from the dairy herd fed to stock, and (b) home-grown non-fodder crops fed to stock.

Seeds
Expenditure on seeds adjusted for valuation change. The value of home-grown seed grain and potatoes is included.

Labour
Wages and employer's National Insurance contributions, payments in kind, value of unpaid family labour (excluding that of the farmer and spouse) and salaried management are all included.

Fertilisers
Expenditure on lime and fertilisers, adjusted for valuation change.

Machinery (excluding Depreciation)
Expenditure on machinery repairs, small tools, contract work, and fuel and oil, less allowances for private use.

Miscellaneous
Electricity, vehicle taxes, insurance and secretarial costs, adjusted for valuation change.

Other Livestock Expenses
Veterinary charges, haulage and sundry expenses.

Other Crop Expenses
Crop protection, sundry crop expenses and water for irrigation.

Land and Building Costs
Rent paid by tenants, rental value of owner-occupied farms, imputed rent on tenant's improvements. Rates paid on cottages and the business share of the farmhouse. Repairs by occupiers.

Depreciation
This is calculated on a replacement cost basis.

Net Farm Income
Total Outputs less Inputs. Breeding Livestock Stock Appreciation is excluded. Net farm income represents the return to the farmer and spouse for their manual and managerial labour and for the tenant-type assets they have invested in the business.

Breeding Livestock Stock Appreciation
The part of the change in the value of breeding livestock that is due to changes in price. It is calculated in relation to adult female cattle, sheep and pigs.

Tenant's Capital
Investment in tenant-type assets on a medium or short-term basis. The first comprises machinery (replacement cost basis) and breeding livestock, and is valued at the average of opening and closing valuations. The second comprises trading livestock, crops and other items similarly valued. As investment varies between opening and closing valuations, an average annual investment has been estimated.

PART III: BALANCE SHEETS AND FLOW OF FUNDS

As was noted in Section B, the tenure definitions have been changed this year. The new tenure definitions are as follows:

Balance Sheets

The figures presented in the tables are weighted averages based on the 2000 census distribution of holdings by tenure category, type of farming and size of business.

The balance sheets relate to the business rather than the farmer and therefore any other assets belonging to the latter are excluded.

For land and buildings, crops and livestock, the basis of valuation is conservative market price, while for machinery and equipment it is depreciated replacement cost. Particularly in the case of land and buildings, the balance sheet entries need to be treated with some caution in respect both of the absolute level and of the year to year trend, and it follows that this caveat extends to dependent figures such as net worth.

Flow of Funds

The figures presented are for the same sample of farms as are used in the balance sheet analysis and are weighted in the same way.

Net farm income is shown exclusive of breeding livestock stock appreciation. Inputs not involving cash outlay are imputed charges (eg the rental value of owner-occupied land) and depreciation of plant and machinery, less valuation changes for livestock, crops etc. Interest relates only to borrowings for farming purposes including those for the purchase of farms or parcels of land. Net investment spending is expenditure on land, buildings, improvements, plant and machinery, less sales and capital grants. Cash from non-farming sources represents funds of various kinds from outside the farming business including capital introduced less capital withdrawn. Increase in borrowing indicates the net change in the external credit position of the farm business, being the increase in external liabilities less any increase in liquid assets.

PART IV: NON-FARMING INCOME

Farmers are asked to indicate into which of ten income ranges the joint non-farming income of the farmer and spouse falls for each of seven separate sources of income. The sources of income are listed below:

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