Farm business survey

Farm Benchmarking

Compare the financial performance of your farm to similar and top performing farms here:

Gross Margins (Crops or Livestock) Profit and Loss Account Balance Sheets (Assets & Liabilites) Performance Ratios

Why Should I Benchmark?

Benchmarking helps you to compare your business to farms that are similar to yours. Our researchers visit over 2000 farms every year and the data provided here is the most comprehensive of it's kind in the UK. You can compare your farm with average or top performing businesses from the Farm Business Survey.

Benchmarking & Projections

Use these pages to compare your business to farms in the Farm Business Survey (FBS), with year ends between 31 December 2016 and 5 April 2017. Or, make projections of business performance for 2019/20. Projections are made with accurate FBS data and forward market values. Find 2019/20 assumptions here.

01 Gross Margins

Use this page to compare your enterprise Gross Margins to farms in the FBS.

Gross Margins
Cereal gross margins improved with higher prices and reduced costs of seed and fertiliser

02 Profitability

Use this page to compare your profit and loss account to farms in the FBS.

Profitability
The weakening value of sterling led to improved farm profitability for most farm types

03 Balance sheets

Use this page to compare your Balance Sheet to farms in the FBS.

Balance Sheet
Lower land prices led to reduced net worth for some farm types

04 Performance Ratios

Use this page to explore balance sheet and farm profitability Ratios to farms in the FBS.

Performance Ratios
High asset values ensured that most farms remained financial robust

05 EU-2015

Use this page to compare your Farm Profitability to farms in the EU Farm Accountancy Data Network. This is the equivalent survey to the FBS for farms across the EU.

EU 2015
Compare you farm with farms across the EU

FBS Definitions

These are definitions and guidance for the FBS (Farm Business Survey).

Click "here to go to the FBS farm business benchmarking - gross margins guidance"

Conventional or Organic farms

Organic farms are classified as those which have more than 70 per cent of their utilized agricultural area reistered as fully organic (no longer 'in conversion'). The vast majority of these are 100 per cent organic. Conventional farms are all others (with less than 70 per cent of their utilized agricultural area registered as organic). With an extremely small number of exceptions, these conventional farms have no organic land at all. And most of the exceptions would be typical of their farm type (rather than typical of organic farms).

Total farmed area

This is the area that is farmed by the business, including land hired in for less than one year and land farmed under a contract farming agreement for another party and land that you farm under a share farming agreement with another party. It does not include: farm buildings, woodland, all farmland let out by your business (even if let out for less than one year) and land that is farmed under a contract farming agreement by another party.

"Total area of farm" - used only the Balance Sheets pages - is a different measure and includes, in addition to the above, woodlands, buildings, gardens, roads, water and other areas not used for agriculture. Total area of farm is typically the area that is quoted when a farm is bought or sold (where no land is rented in or farmed on contract).

Sales

Livestock sales plus crop sales plus total financial output from miscellaneous activities (see list below) provided these activities are integrated into the farm business:

1. Processing and retailing of farm produce

2. Agri-environment type payments, e.g. management agreements, agri-environment scheme payments (e.g. ESA, Countryside Stewardship),

3 Any other miscellaneous subsidies.

4. Any rents received on farm house, cottages and buildings .

5. Recreation, tourist accommodation and catering, rural crafts.

6. Revenue from hiring out machinery or labour.

7. Any other miscellaneous receipts.

Subsidies

Livestock subsidies plus crop subsidies plus single farm payment.

Cost of sales

Opening valuation plus purchases less closing valuation.

Opening valuation

Opening value of crops, by products and fodder in store plus opening value of feedstuffs, agrochemicals, fertiliser, and vet and med materials plus opening value of livestock.

Purchases

Purchases of livestock, crops, by products, fodder (including keep for less than one year and agistment or away wintering), feedstuffs, agrochemicals, fertiliser, vet and med expenses, livestock purchases.

Closing valuation

Closing value of crops, by products and fodder in store plus closing value of feedstuffs, agrochemicals, fertiliser, and vet and med materials plus closing value of livestock.

Gross profit

Sales and subsidies less cost of sales

Fixed costs or overheads

These are described below. Use these descriptions as a guide to what each cost item covers when the FBS results are displayed.

Wages and salaries

(This includes casual as well as regular labour and also includes the farm manager)

It includes:

a) The cash payment made to the worker including overtime plus premia, bonuses and the employer's and employee's shares of social security contributions and employer's common law liability insurance.

b) The cost of perks such as payment of council tax, cottages or board, milk, potatoes etc, which are provided for farm workers and their families, whether they form part of the contract wage or not.

Machinery repairs

These are the cost of repairs and servicing (including replacement parts) to implements, machines, vehicles and equipment (including farm cars, electric motors, petrol engines, tools with a value over £200 at purchase, coolers, bulk tanks, tenant-type poultry houses and incubators, spray lines, cold frames and glass cloches). The costs are net of any insurance receipts. It also includes small tools, tyres etc.

Machinery fuel and oil

Petrol, diesel oil, paraffin, lubricating oils and greases.

Contract work

Total expenditure on work carried out by agricultural contractors. Cost of materials is also included here, unless it can be estimated reasonably accurately (in which case it is recorded separately under crop protection, fertiliser or other crop costs). Contract labour is only included under this heading when associated with the hiring of a machine. Otherwise contract labour is included under "casual labour".

Other machinery and motor expenses

Equals machinery rental (i.e. cost of hiring machines driven or used by the farm's labour, and machinery under contract hire or similar rental agreements) plus vehicle tax.

Rent

The actual rent paid less any allowances given by the landlord by way of reduction of rent. Where rent is paid partly by transfer of farm produce or services, the value of the farm produce or services should be included in rent and as a contra item in sales and subsidies above. Rent includes any charges the landlord makes on new equipment, new buildings or improvements before these charges are incorporated in the normal rent for the farm. Any sum paid by the tenant but normally the responsibility of the landlord, e.g. fire insurance premia for farm buildings, is also included in rent. Rent paid for land under an agreement for less than one year is also included, (eg grass keep rented for less than one year and other 364 day agreements).

Rates

Includes:

  • Council tax payments paid by the farm business, eg in respect of cottages let to farm workers. Does not include personal council tax payments, eg as paid by the farmer or members of the farmer's family, as they are private expenditure.

  • Uniform Business Rate of an activity - if the income from that activity is included in Farm Income (eg a farm shop or a caravan site).

  • Rates to local councils or water authorities for regional drainage schemes or effluent disposal.

Power, electricity and heat

Includes:

All electricity used in the farm business including that used for heating glasshouses, drying cereals etc.

All the heating fuels (except electricity) for all farm purposes, including the fuel used for heating glasshouses, drying cereals etc.

Property repairs

This includes the cost of repairs to tenant type items such as hedges, fences (including fencing wire), ditches, gates etc. and the estimated cost of all landlord type repairs, including the cost of major structural repairs to buildings (e.g. the re-instatement of roofs and walls).

Labour costs should only be included if the labour is provided by non-farm labour.

The cost of repairs carried out by the landlord on tenanted property is not included.

Professional fees

These include:

  • Safe custody fees
  • Accountants/auditors fees
  • Valuation fees
  • VAT recording and secretarial charges (including travelling secretaries)
  • Legal fees (relating to business activities)
  • Land agent fees (relating to business activities)
  • Advisory and consultancy fees (if not specifically allocated to crop or livestock costs).

Bank interest and charges

Interest

Interest on bank overdrafts, hire purchase, leasing agreements, merchants' and other trade credit and interest on bank loans, loans from AMC, building societies, insurance companies, and similar institutions, and loans from private sources and from the family.

Bank charges

Include:

  • Bank commission on current account (but not interest)
  • Management fees relating to loan accounts
  • Overdraft charges

Insurance costs (excluding labour)

Insurance premia covering farm risks, such as the holder's third-party liability, vehicle insurance, fire, flood, insurance against death of livestock and damage to crops etc, hail and fire insurance of buildings, premises, glasshouses and frames on an owner-occupied farm and for any buildings owned by a tenant on a tenanted farm. Excludes: premia covering accidents at work and private insurances of the farmer and family.

Depreciation of machinery

In addition to general agricultural machinery and tractors, machinery depreciation includes farm cars, electric motors, petrol engines, tools with a value over £200 at purchase, coolers, bulk tanks, tenant-type poultry houses and incubators, spray lines, cold frames and glass cloches.

With machinery depreciation, you have two options: you can either allow the program to calculate deprecation for you to make sure the value is comparable with machinery depreciation as recorded in the FBS. If you choose this approach the program calculates the machinery depreciation charge for your business over the last 12 months.

Alternatively you can enter the value for machinery depreciation direct from the accounts for your business. If you do this, however, there is a strong probability that the value in the accounts will not be on the same basis as the FBS and will therefore not be comparable with the FBS. This is because depreciation in the FBS is on the current replacement cost basis, whereas in financial accounts it is often on an historic cost basis.

Calculate machinery depreciation

If you want the program to calculate machinery depreciation for you on the same basis as the FBS you will need to click on 'Calc' (on top of the box in which to enter your value). There are then two methods by which you can enter your data:

Method 1
By entering values for each machine category.

Method 2
This is the most accurate method. Under this option you click on an underlined machine category to display a form that enables you to enter values, machine by machine. This method also allows for situations where machinery is shared with other farmers or is used, in part, for private use, eg farm cars.

Method 1

This form lists five machinery categories and comprises of a set of boxes into which you enter the following:

Opening value of machinery:
The market value of machinery at the opening valuation. This is the market value at 12 months ago. For example, if you are using the program at 1st June 2008, it would be the market value of machinery at 1st June 2007. All machinery that the business owned at that point in time should be entered, including that under hire purchase, lease purchase/finance leasing agreements. Market value is the value on the open market taking into account the age and condition of the machine.

Machinery under contract hire or similar rental agreements should not be entered here (see description of 'other machinery and motor expenses').

Purchases:
The purchase cost of any machinery purchased in the last 12 months is entered in the second column.

Sales:
The sale value of any machinery sold is entered in the third column.

By clicking on the 'Total' button the total depreciation will then be calculated.

Clicking the 'OK' button will then place this value into the box for machinery depreciation on the comparative analysis page.

Clicking the 'Cancel' button ignores all entries and totals and closes the form.

Method 2

This form is similar to that in Method 1 except that you are now entering values for individual items of machinery that fits the category. More significantly, for each item of machinery you will also indicate the percentage used on business to allow for situations where machinery is shared with other farmers or is used, in part, for private use, eg farm cars.

As in Method 1 you will see a set of boxes into which you enter the following:

Opening value of machinery:
The market value of machinery at the opening valuation. This is the market value* at 12 months ago. For example, if you are using the program at 1st June 2004, it would be the market value of machinery at 1st June 2003. All machinery that the business owned at that point in time should be entered, including that under hire purchase, lease purchase/finance leasing agreements. Market value is the value on the open market taking into account the age and condition of the machine.

Machinery under contract hire or similar rental agreements should not be entered here (see description of 'other machinery and motor expenses').

Purchases:
The purchase cost of any machinery purchased in the last 12 months is entered in the second column.

Sales:
The sale value of any machinery sold is entered in the third column.

Percentage used on business:
This is to allow for situations where machinery is shared with other farmers or is used, in part, for private use, eg farm cars.

For each machine you will need to enter the 'percentage used on business'. This will normally be '100%'. If the machine's ownership is shared with at least one other business the percentage used on business is entered accordingly. For example, if a machine is half owned by another farm business, then the share would be 50%.

With Cars, utilities and commercial vehicles, the 'percentage used on business' reflects the approximate share of the vehicles use that is for farm business. For example, if the 'farm car' is used for the farm business 60% of the time, and private use 40% of the time, then '60%' is selected.

By clicking the 'Enter more' button a total of the values you have entered, according to the percentage used on business, will be displayed. Your entries will then be cleared for you to continue with additional items.

Clicking the 'OK' button totals all the entries just like the 'Enter more' button but then closes the form and places the totals into the respective machinery category row for the form in Method 1.

Clicking the 'Cancel' button ignores all entries and totals and closes the form.

NB: Once the form has been closed or you click the 'Enter more' button, it will not be possible to go back to the values you have entered.

Depreciation of buildings and works

This covers buildings, premises and land improvements, e.g. fencing, draining, irrigation for buildings, premises and land improvements owned or paid for by the occupier.

Depreciation of glasshouses

This covers glasshouses and walk-through polythene tunnels (including any associated boilers and irrigation lines) which are owned or paid for by the occupier.

Depreciation of permanent crops

These are crops with a life of not less than 5 years, such as orchards, vineyards, hop gardens and hardy nursery stock stock-plants (i.e. hardy nursery crops which stay in the ground and from which output is taken in the form of cuttings, fruit etc). Hardy nursery stock with a production cycle of more than 5 years, where the mature plant is eventually sold, is not included here, nor are strawberry plants and rhubarb (which have a life of less than five years.

Other overheads

Includes:

Water charges: covers cost of water for irrigation, drinking, cleaning, cooling etc. on the farm, also includes all charges and licences payable for connection to a water supply and for the abstraction of water for irrigation where they relate to the farm business.

All other overheads: all taxes and other dues relating to the farm business, subscriptions, advertising, telephone and postage stamps, periodicals, pest clearance and shot-gun expenses (farm share), travel and subsistence (farm share), stationery, sporting costs (if there are any sporting rights), general chemicals, fines and compensation paid to a third party arising from civil and criminal legal action relating to farming activities, cost of hiring a building for less than one year for some other purpose than for keeping crops or livestock.

The following are excluded from 'all other overheads':

  • Drainage rates payable to Local Authorities or River Boards (these are recorded under 'rates')
  • Vehicle tax (this is recorded under 'other machinery and motor expense')
  • VAT
  • Taxes etc levied on labour such as Social Security contributions (these are included in 'wages and salaries')
  • Personal taxes of the farmer (this is regarded as private expenditure)
  • Council Tax paid by the farmer (this is also regarded as private expenditure)

Total overheads

Total overhead costs

Tenant-type capital

Includes closing valuations for: machinery, livestock, glasshouses, permanent crops, crops, forage, cultivations, stores, liquid assets, and Single Payment Scheme entitlements

Single Payment Scheme entitlements

SPS entitlements - market valuation of all Single Payment entitlements, for all categories (moorland, SDA, other) and payments (normal, set-aside, and other). (discounted)

Total assets

Assets are anything of value in the possession of the business and claims on anything of value in the possession of others. In valuing the assets of a business, current market value is the preferred approach.

Total fixed assets of which:

Total fixed assets include milk and livestock quotas, as well as land, buildings, breeding livestock, and machinery and equipment. For tenanted farmers, assets can include farm buildings, cottages, quotas, etc., where these are owned by the occupier.

Land and buildings

Buildings and land are valued on a replacement cost basis, less accumulated Depreciation to date of valuation.

Breeding livestock

Breeding livestock are valued at market value, net of marketing expenses. The closing value will include an element of Breeding Livestock Stock Appreciation, which is the change in value due to movements in market prices between the opening and closing valuation. It is necessary to identify the BLSA in order to calculate herd depreciation. Therefore a methodical approach to valuation is required. To do this it is probably worth dividing the herd into different age groups. Each group can be valued according to the age of the animals and how the quality and average age of the herd has changed between the opening and closing value. BLSA should be considered at the time the valuation is made. The aim should be to get a realistic market value of the herd at the opening and closing valuation and to then decide how much of the change in value is due to BLSA, so as to derive a plausible figure for herd depreciation.

Machinery

Plant and machinery (including plant and machinery on hire purchase or finance lease). Vehicles, machinery and implements (equipment) are valued at current replacement cost (net of grants), less accumulated Depreciation to date of valuation. The value so derived should approximate to the market value in it's current condition.

Permanent crops

Orchards, Asparagus, Miscanthus, Short Rotation Coppice (eg Salix), etc.

Basic Payment Scheme entitlements

Market value of BPS entitlement (discounted at 20%, straight line)

Miscellaneous assets

 

Total current assets of which:

Crops; trading; and livestock

Temporary assets normally intended for conversion into cash within a short space of time (generally a year or less). Examples are livestock (other than breeding stock), harvested and growing crops, stocks of livestock produce.

Stores

Other stocks of purchased materials, such as seed, feeding stuffs and fertilisers


Total external liabilities of which:

Bank loans

Includes mortgages and bank term loans, not liable to early recall under normal circumstances.

Non-Bank loans

Hire purchase, finance leases, private and family loans (whether bearing interest or not), not liable to early recall under normal circumstances.

Bank overdraft

Non-Bank short term loans

Hire purchase, finance leases, private and family loans (whether bearing interest or not)

Current Liabilities

Are claims on the business which may have to be met within a short period of time, usually not longer than a year. Examples include sundry creditors, bank overdrafts and short-term loans.


Net worth as % of total assets

Net worth (or, in other words, owner equity) divided by total assets (as a percentage).

Liquid assets

Includes cash (either in hand or at the bank), deposits, short term loans, and monies owed (debtors - including suspended debtors), pre-payments.

Net worth

Total assets less total external liabilities. Net Worth represents the residual claim or interest of the owner in the business. It is the balance sheet value of assets available to the owner of the business after all other claims against these assets have been met.

Gearing ratio

Total liabilities as a percentage of net worth. (Ratio of Debt to net worth)

Liquidity ratio

Current assets as a percentage of current liabilities. Also known as the 'current ratio'. Current assets include inventories (and are calculated in Balance Sheets). Current liabilities include: hire, leasing, trade creditors, bank overdraft, and other.

Return on tenants capital

Farm business income as a percentage of tenant-type capital (assets such as machinery, equipment, glasshouses and permanent crops)

Return on total capital

Farm business income as a percentage of total assets

Labour costs per £100 turnover

Wages and Salaries per £100 Farm business turnover

Machinery costs per £100 turnover

Machinery costs (including: 'repairs'; 'fuel and oil'; and 'depreciation') per £100 Farm business turnover

Standard Livestock Units

Livestock Units are 'Metabolic Equivalents' of one standard dairy cow. Estimated from average livestock numbers over the year, using coefficients given below.

  • Pigs Livestock Unit = 0.35*boars + 0.44*breeding.sows + 0.20*(gilts in pig) + 0.18*(maiden gilts) + 0.17*sows.for.slaughter + 0.17*store.pigs + {0.01*weaners only if breeding.sows are zero}
  • Poultry Livestock Unit = 0.017*laying.flock + 0.003*(pullets not in lay and other poultry) + 0.0017*broilers + 0.004*(other table chickens) + 0.005*turkeys
  • Dairy cows Livestock Unit = 1.00*dairy.cows + 0.8*heifers.in.calf
  • Grazing Livestock Unit = 1.00*dairy.cows + 0.8*heifers.in.calf + 0.75*beef.cows + 0.8*other.cattle.over2years + 0.65*bulls + 0.65*other.cattle.1to2years + 0.34*other.cattle.under1year + 0.11*lowland.ewes + 0.06*lfa.ewes + 0.06*ewe.hoggs + 0.08*rams + 0.08*other.sheep.over1year + 0.04*store.lambs + 0.8*horses + 0.16*breeding.nanny.goats + 0.11*all.other.goats

Rate of Electricity Consumption

Estimated electricity consumption (estimated from standard price coefficient - kilo Watt hours per standard Livestock Unit (LU) or per Utilised Agricultural Area (hectares)).

Rate of Fuel and Heating Oil Consumption

Estimated fuel and oils consumption (estimated from standard price coefficient - Litres per standard Livestock Unit (LU) or per Utilised Agricultural Area (hectares)).

Farm business turnover

Total output from all crops and livestock enterprises plus set-aside payments, Single Payments, and other income from agriculture and related activities, plus income from semi-integrated non-agricultural activities: [Sales + Subsidies]

Farm business income

Farm Business Income represents the financial return to all unpaid labour (farmers and spouses, non-principal partners, directors and their spouses and family workers) and on all their capital invested in the farm business, including land and buildings.

Farm business turnover, less farm business costs, plus profits from sale of farm business assets

Farm Business Income (sometimes referred to as Farm Business Profit) is Total Farm Gross Margin less the sum of the Fixed Costs incurred, before any charges for unpaid labour or notional rent on owner occupied land. Alternatively it is Total Farm Output less the sum of Variable and Fixed Costs. It therefore represents the surplus or deficit before imputing any Notional Charges such as Unpaid Family Labour Costs and Rental Value. In terms of broad definition, farm business income is very similar to net profit as used in financial accounts.

Farm Business Income is derived from management accounting principles. Unlike Net Profit, which is based on financial accounting where for example output stocks are usually valued at cost of production, whereas in management accounting they are usually valued at market price. In financial accounting depreciation is usually calculated at historic cost whereas in management accounting it is often calculated at replacement cost. A further difference is that Net Profit includes breeding livestock stock appreciation but Farm Business Income excludes it.

Net profit

Gross profit less total overheads

Profit before rent, interest and bank charges

Net profit plus rent plus interest and bank charges

Compare with FBS

For 'All Performers' the FBS data displayed for comparison with your data will be average results estimated for the entire FBS population. If you select 'High Performers' the FBS data displayed will be for farm businesses which are estimated to be within the top 25% of the population of farms with that enterprise (for enterprise gross margins) in terms, of gross margins (per hectare, or per head as appropriate); or in the top 25% of the population of that type (for profitability, balance sheets, and performance ratios) in terms of ratio of total output to total input.

Once you have chosen which category you want the comparison to be based on, i.e. 'all performers' or where there are enough farms in the sample, 'high performers', the program will compare your results with the FBS and it will describe how your figures compare with the FBS results by using one of five terms; 'low', 'low to average', 'average', 'high to average' and 'high'. It will do this for each of the items for which you enter data.

What do these terms mean? Lets look at a couple of examples. With 'sales and subsidies' for example, a 'low' comment means that the level of sales and subsidies in your accounts falls within the range estimated to be shown by the 25% of farms in the population of the FBS with the lowest level of sales and subsidies. If your score was 'low to average', the level of 'sales and subsidies' in your accounts falls within the range shown by 15% of the population with the next highest sales and subsidies. If 'average', your sales and subsidies figure falls within the range shown by the next 20% and so on up to the 'high' group which is estimated to be in the final 25% of the population with the highest sales and subsidies.

Similarly with costs, in the case of 'contract work' for example, a 'low' comment means that the level of contract costs in your accounts falls within the range shown by the 25% of farms in the FBS with the lowest level of contract costs - for farms that have contract costs. If your score was 'low to average', the level of contract costs in your accounts falls within the range shown by 25th to 40th percent of farms with the next highest contract costs. If 'average', your contract costs figure falls within the range shown by the next 20%. 'Average to high' is estimated to fall in the 60th to 75th percent of the population. And up to the 'high' group which is estimated to be in the final 25% of farms with the highest level of contract costs.

Remember, if you are doing the comparison on the basis of 'high performers', the comments will describe how your figures compare with those from the 'high performers' sample, i.e. farm businesses which came within the top 25% (as above).

All the figures that the program displays are important, including 'net profit', but the most important one is the 'profit before rent, interest and bank charges'. This figure will provide a more meaningful comparison with the FBS results because it is before rent, interest and bank charges are deducted and thereby enables your results to be compared on a 'level playing field' with farms in the FBS, regardless of whether they are tenanted or owner occupied.

FBS: Terms in Farm Business "Gross Margins"

Crop Sales

the value of sales from the crop plus the market value of any part of the crop used on farm

Straw & Sugar Beet Tops

Sales of secondary product (eg straw) and value if used on farm

Seeds and Young Plants

the gross expenditure net of sales of seeds and young plants, except for forest tree seedlings (but before any subsidy on bought seeds). It also includes the cost of cleaning and dressing home saved seeds by contractors or merchants and any royalty payments incurred. And, the estimated ex-farm value of home produced seeds and young plants used on the holding for the current crops.

Fertilizers

Expenditure, after deductions for discounts. Fertilizers include all straight compounds and organic manures together with farmyard manure, lime and chalk, peat, soil composts and combined fertilizer / insecticides, sewage, soot, and all waste products.

Crop Protection

Expenditure, after deductions for discounts but before any subsidies. All herbicides, fungicides, insecticides, slug pellets and dusts.

Drying & Heating

all the heating fuels for the crop, including the fuel used for heating glasshouses, drying cereals etc. Any fuel used for chilling produce, or chitting of seed potatoes, on farm is included here. For fuels used for heating, the gross expenditure (inclusive of heating fuel tax) less sales is included.

Variable Costs

Variable Costs are costs that are readily allocated to an enterprise and which will vary in approximately direct proportion to the scale of the enterprise. Examples of Variable Costs are fertilisers, pesticides, seed, concentrate feeding stuffs (purchased or home-grown), and fodders.

Gross Margin

Output from the enterprise less the Variable Costs, including the allocated variable costs of grass and other forage

Finished Livestock Sales

Sales of all fat sheep under 1 year. All finished cattle sold for slaughter, except for cull cows, cull bulls and all calves sent for slaughter. Excludes bull beef cattle.

Store Livestock Sales

All ewe and wether lambs under 1 year sold or purchased for further fattening. All cattle sold except fat (finished) cattle (above).

Milk Sales

This covers all liquid cows' milk whether sold by wholesaler or retailer producers, consumed by the farmer or farm workers or used on the farm (e.g. for feeding calves), but excludes direct suckled milk. Includes the value (as wholesale, to the farmers usual wholesale buyer) of all milk used for processed farm products such as cream, butter, cheese, etc.

Herd or Flock Depreciation

Depreciation is defined for mature breeding animals* as: (closing valuation, plus sales, plus transfers out) minus (opening valuation, plus purchases, plus transfers-in) minus Breeding Livestock Appreciation (BLSA). (* Only applies to: bulls and cows; boars and sows; rams and ewes)

Concentrates

The cost (and ex-farm market value) of all bought (or homegrown) compounds and straights consumed; these include all compound feeds, cereals and other grains, beans, soya and other proteins, dry sugar beet pulp, maize gluten, milk powder, additives, minerals, vitamin supplements, etc. Wet feeds, such as wet sugar beet pulp and brewers grains are not included here but are recorded under coarse fodder along with bulk feeds.

Coarse Fodder

The cost of purchased bulk feeds consumed, such as hay, silage, straw for feeding, wet brewers grains, wet sugar beet pulp, stock feed potatoes and other vegetable residues. And, payments for agistment and expenditure on the use of common pastures and grazing land. Does not include any forage produced on the holding (except for internal transfers of straw and other by-products for which a market exists - which are included under "own produce used on farm"). Changes in stocks of all homegrown forages are included under 'cropping enterprises'.

Veterinary & Medicine Costs

The cost of all veterinary fees and medicines. The costs of treating farm or household pets are not included.

Crop Costs for Livestock

Includes cropping costs of forage produced for this enterprise on the holding (excluding internal transfers of straw and other by-products, for which a market exists - which are included under "own produce used on farm"). Changes in stocks of all homegrown forages are included under 'cropping enterprises'.

FBS Farm Business Benchmarking - gross margins guidance

These notes can be accessed at any time from the 'Definitions' page on FBS Farm Business Benchmarking.

What is a gross margin?

It is the value of output from an enterprise less the variable costs of producing that output

What is an enterprise?

A part of the farms production, eg dairy cows, wheat, sheep, potatoes are all 'enterprises'

What is output?

Crops
For crops it is the value of everything produced, (i.e. grain plus straw in the case of cereals) plus the area payment (where applicable).

Breeding livestock
For breeding livestock it is the value of milk plus progeny (calves or lambs) plus any subsidy, less the cost of replacing the breeding animal. With the breeding livestock enterprises (dairy cows, suckler cows and sheep) , the cost of replacing the breeding animal is the annualised cost as the animals normally last more than one year.

For non breeding livestock (eg finishing beef animals) it is the value of the finished animal plus any subsidy less the cost of replacing the animal (eg purchasing a store or a calf).

What are variable costs?

Costs that are sensitive to change in the size of the enterprise, in terms of crop area or livestock numbers, or sensitive to a change in the yield of the enterprise, eg milk yield per cow or crop yield per hectare.

‘Fixed’ costs (eg rent, labour, machinery) are relatively insensitive to such changes.

Which are the main variable costs?

Livestock enterprises: Concentrate feed (purchased and home grown), purchased fodder, vet and med costs, other livestock costs (eg haulage and other marketing costs, ear tags, bedding, freeze branding, disinfectant), forage costs (eg seed, fertiliser, agrochemicals, silage wrap, baler twine).

Crop enterprises: fertiliser, plant protection, seed, other crop costs (eg haulage and other marketing costs, bird scarers, pest control, soil analysis, agronomist fees for ‘crop walking’).

What is the point of gross margins?

  • 1. They enable the farmer to compare the profitability of similar enterprises (i.e. enterprises that have similar fixed costs). For example, wheat, barley and oilseed rape all have similar fixed costs and the relative size of the gross margins helps the farmer decide which one(s) to grow.
  • 2. They indicate the potential for increasing farm profitability by improving productivity from the enterprises already on the farm. This may be by increasing yields, reducing inputs or a combination of both.

What physical unit do gross margins normally relate to?

Per hectare in the case of crops, per head in the case of livestock.

Are they annual?

Most of them are, apart from rearing and finishing enterprises, eg broilers, pig rearing and finishing, beef rearing and finishing. These are per finished animal and this may be anything from a few weeks in the case of broilers, to several months in the case of finished beef.

What are the shortcomings of gross margins?

Because they exclude fixed costs they cannot be used to compare the profitability of enterprises that have different fixed costs. For example, there is little value in comparing the gross margin from wheat with potatoes because potatoes have much higher fixed costs.

So which measure does show the true profit of an enterprise?

Net margin (i.e. gross margin less fixed costs), but these are much harder to derive because it is not easy to allocate fixed costs (such as rent, labour, admin costs, machinery) to individual enterprises.

What will happen to gross margins now that subsidies are decoupled and the farmers get the single payment.

From 2005/06 FBS year onwards, the gross margin will fall for enterprises that have received subsidies (support payments) because the output will no longer include the support payment.

Does the new (decoupled) single payment get counted within the gross margin?

No, the single payment is not attributable to any particular enterprise, and therefore does not appear in the gross margin.

Does that mean gross margins might be very low from 2005/06 onwards?

In some cases yes – which is why it is important for people to see the 2004/05 figures on the current benchmarking program and judge for themselves how much their gross margins will be once the support payments are excluded.