Enterprise Gross Margins Tool
The Scottish Farm Business Survey is completed annually to accurately measure the performance of the main farm types found in Scotland. Check how your own business compares to the benchmarks below.
Winter Wheat - 2018 Crop Year
Includes 65 Farms | |||
Key Performance Indicators | Lower 25% | Average | Upper 25% |
Area grown (ha) | 35.33 | 44.24 | 36.85 |
Grain yield (t/ha) | 7.05 | 8.96 | 10.43 |
Grain price (£/t) | 165 | 171 | 181 |
Gross margin per hectare (£/ha) | 761 | 1,154 | 1,617 |
Margin Detail | £/ha | £/ha | £/ha |
Crop sold in financial year | 695 | 1,072 | 1,244 |
Crop fed in financial year | 6 | 20 | |
Crop for private or wages in financial year | |||
Crop in store for future sale / own feed | 453 | 442 | 612 |
Crop in store for own seed | 14 | 14 | 13 |
Total crop revenue | 1,162 | 1,535 | 1,889 |
Straw sold in financial year | 45 | 86 | 157 |
Straw used by own livestock | 16 | 20 | 47 |
Straw closing valuation | 28 | 23 | 15 |
Total straw revenue | 88 | 130 | 219 |
Output | 1,251 | 1,665 | 2,108 |
Seeds | 88 | 85 | 80 |
Fertiliser | 211 | 219 | 208 |
Crop chemicals | 162 | 186 | 181 |
Sundry Crop Expenses | 29 | 21 | 22 |
Variable Costs | 490 | 511 | 491 |
Gross Margin | 761 | 1,154 | 1,617 |
Total Enterprise Gross Margin | 26,890 | 51,054 | 59,587 |
Winter Wheat - 2018 Crop Year
Winter Wheat - 2018 Crop Year
Winter Wheat - 2018 Crop Year
Winter Wheat - 2018 Crop Year
Winter Wheat - 2018 Crop Year
Overview
Read the overview by clicking ‘Read More’ below
1. The enterprise benchmarks are based on an unweighted sample drawn from the Scottish Farm Business Survey. Used correctly, gross margins are a helpful tool for improving farm performance. However care must be taken in their use, so keep the following in mind when using these benchmarks.
- A livestock farm with an excellent gross margin per head or per hectare may not necessarily achieve excellent overall profitability. Remember gross margins only include the cost of variable inputs (eg, concentrates, vet & med).
- A high gross margin per head will not result in a high gross margin per hectare if stocking rate is low. Furthermore, a lower level of per head performance is likely where running large flocks or herds as performance per labour unit is typically more relevant. Hence the identification of the “upper” 25% group based on per head performance is for convenience only.
- The relationship between per hectare crop gross margins and overall profitability is stronger, but not fool proof. So again, view crop gross margins in the context of overall farm performance.
- Gross margin performance in a single year can vary markedly because of both good (eg, sold on the right day) and bad fortune (eg, localised heavy rainfall, disease outbreak).
- Gross margins must therefore be considered in the context of overall farm performance, size, stage of development, number of labour units, objectives and your luck in that year. They are best viewed over a number of years.
2. No upper 25% benchmark is calculated where the sample is small. There are also no organic enterprise benchmarks available due to the limited number of such farms in the survey.
3. Specific points to remember;
- Crop output and main inputs are adjusted to the crop year. Future “crops in store for sale” are based on the actual sales.
- Where grain and/or straw are used on own farm, the value is based on local ex-farm prices.
- The convention is to measure grain at 15% moisture. However, grain for own use is typically not dried to this level especially where an additive like propcorn is used. While we aim to adjust to a common moisture basis, this is not always possible. As a result, yields where grain is used on farm are sometimes overestimated.
- Drying fuel is not included as a Sundry Crop Expense, but included in Power & Machinery, which would be reflected in net rather than gross margins. The cost of contracting (eg, combining, silage harvesting, livestock haulage) is also counted as a fixed cost to allow fair comparison with farmers that complete these operations with their own machinery.
- The suckler cow enterprise options include the sale of calves at various stages including finished (ie, rearer finishers). The cattle finishing enterprise typically covers farms that buy in suckled calves or older stores for finishing.
- Forage costs (seed, fertiliser, lime, sprays, and sundries; eg. bale wrap) are shown for each livestock farm type and allocated based on that enterprise’s share of total grazing livestock units.
4. Remember that benchmarking has limitations. Some variation within farm type will reflect farming in a kinder area or for instance being contracted to a milk buyer offering a better milk price. Performance will also vary between years thanks to simply being unlucky with the weather or selling at the wrong time. Therefore when benchmarking try to establish “current performance” based on the past few years.
5. If you need further explanation please call Lorraine Strawhorn 01292 525045.
Acknowledgements
Thanks for the Scottish Farm Business Survey
SAC Consulting gratefully acknowledges the assistance of co-operating farmers and in many cases their accountants, who have allowed access to sensitive farm business records and given of their time on a voluntary basis.
The Farm Business Survey is funded wholly by the Rural and Environment Science and Analytical Services (RESAS) team of the Scottish Government and completed on their behalf by SAC Consulting.
Due acknowledgement should be made to RESAS when these benchmarks are used for any purpose.
Glossary
The following is a glossary of terms used in the Enterprise Gross Management tables
Crop output
For crop enterprises (Cereals, Other Crops) is revenue adjusted for valuation change plus the market value of any part of the crop used on the farm. For cash crops, closing crop valuations are based on what the crop is eventually sold for (not its cost of production), or its subsequent home-use (feed or seed). For forage crops, the value of home-grown usage is not included. “Other crops” includes: other cash crops, other cash crops land let, standing crops sold, fodder crops and by-products and cultivation valuation change.
Crop sprays / chemicals
The cost of crop protection materials in the form of sprays; granules; pellets; dust etc, including fungicides; herbicides; crop insecticides; slug pellets etc applied to the growing crop. Storage protection costs such as smoke fumigants and preservatives that are applied to the crop for storage (propcorn; hay and silage additives; potato sprout suppressants etc) are included with Sundry Crop Expenses.
Enterprise Gross Margins
The financial and physical performance of the farm’s individual enterprises (eg, spring barley, potatoes, dairy herd, breeding flock). Only variable costs are included with allocation between enterprises based on farmer guidance where not obvious from invoice details.
The outputs of cash crops grown for home use (eg, barley) are valued at conservative, local market prices. By implication, home grown grain and straw used by a farm’s livestock enterprises show as costs in these enterprises.
Livestock enterprises are classified according to farm and stock type (eg, hill suckler herd). For dairy farms, any calves are “sold” from the dairy herd to the other dairy enterprise at birth, with replacement heifers “sold” back into the herd at the point of calving. Again, these transfer values are based on realistic market values. For suckler beef herds and sheep flocks all replacements remain within the breeding enterprise.
Fertiliser and lime
The cost of both chemical and organic fertilisers (purchased FYM such as hen manure), peat composts, combined fertilisers/insecticides and trace element dusts and sprays applied to make good a mineral deficiency in crops or herbage. Also includes cost of haulage to farm. These are distinct from possible crop protection applications of such compounds, which should be recorded elsewhere.
For lime, where spreading only (ie, excluding the cost of the lime) the cost is charged to crop contract work, but for inclusive delivery and spreading costs where the material costs cannot be identified separately, enter the full amount as lime.
Forage costs
The cost used in livestock gross margins to show the use of; seed, fertiliser, lime, sprays and sundries (like bale wrap) for each livestock type that uses forage. Generally, forage costs are allocated between grazing livestock enterprises based on that enterprises share of “total grazing livestock units”.
Grazing Livestock Units (GLU’s)
Represents the average number of grazing livestock, converted to a standard basis, carried on the farm over the year. For example, one dairy cow is equivalent to one GLU.
Gross margin
Enterprise output less total variable costs.
Homegrown concentrates
The cost of harvested grain and protein crops produced and fed on the farm, with cost based on the opportunity cost of what that feed could have been sold to a neighbour (ie, ex-farm or net of haulage). Includes the cost of mill and mixing if completed by a contractor.
Homegrown straw
Covers the cost of straw from crops grown on the farm and costed at local ex-farm values based on what it could have been sold to a neighbour (ie, excludes haulage cost element).
Keep taken
Includes the cost of; wintering (eg, of ewe hoggs), agistment (eg, summer grazing of cattle on a payment per head basis), contract rearing where main feed is grazing or forage and a building provided for temporary shelter only, and seasonal grazing where no silage taken. The area is not added to the farm’s area.
Agistment is the temporary grazing/rearing of livestock on another farm in return for a payment per head per day (week or month or set period). It is most commonly done with ewe hoggs by hill farms that have a shortage of winter grazing or unfavourable winter weather. It is similar to contract rearing in that the animals are on another farm being reared by another farmer who does not own them.
Where such animals are away from the recorded farm at the end of the financial year, their value and numbers are to be included in the valuations, but the average numbers (ALN) refer only to the actual time spent on the recorded farm. Any sales, deaths or purchases whilst away are recorded as part of the farm account.
Where contract rearing is more formalised (includes significant sums for concentrates and housing) do not include in Keep Taken. Instead, split the cost between “concentrates”, “roughages” and “sundry livestock expenses” [to cover the hire of the shed plus the machinery and labour services of the contract rearer]. The contract rearer includes the ALN of the grazier’s stock. However, if the main source of feed is grazing or forage, with a building provided as temporary shelter, the total cost may be included here as Keep Taken.
Livestock output
For each livestock enterprise (Milk, Cattle, Sheep and Wool, Other Livestock) is revenue adjusted for valuation change plus the market value of production consumed on the farm less purchases’ of livestock. The market valuation changes for cows, ewes, sows and gilts – breeding livestock appreciated (BLSA) – is excluded to remove any element of “paper profits or losses”.
Purchased concentrates
All purchased concentrate type feeds, excluding roughages, for grazing livestock. Concentrates include compound feeds; straights (soya, cereals, dry brewer’s grains, dried grass etc); milk replacement powder for calves; vitamins; minerals; as well as by-products such as beet pulp. Includes liquid feeds such as pot ale syrup or molasses. Also include cost of tote bags. Food for working dogs is charged to “sundry livestock expenses”.
Roughages (purchased)
Includes the cost of hay; haylage; straw for fodder or edible litter; roots; stock-feed potatoes; other vegetable residues; draff; forage improvers/enhancers applied to forage at the time of consumption. Additives for silage or hay applied at harvest are included with “sundry crop expenses”. If a standing fodder crop is purchased and not sold on, it should be included here. Also include here any straw bought as part of a standing crop for use rather than resale.
Scottish Farm Business Survey (previously known as Farm Accounts scheme)
A survey of the accounts of 500 Scottish farms completed annually. The information helps the Scottish Government and European Commission understand how Scottish farming is faring and provides a basis for testing future policy development. The survey is based on management rather than tax accounting methods. While not suitable for tax purposes, the report provides useful information for farm management.
Seeds
The value of home grown crop saved for seeding future crops.
Sundry livestock expenses
Includes disinfectants; detergents; inedible litter such as sawdust; stud fees; artificial breeding (eg, AI, synchronisation, laparoscopic AI, sponging); bull hire; freeze branding; ewe scanning; QMS subscription; breed society fees; show expenses; advertising livestock, vet costs for working farm dogs, miscellaneous dairy expenses (eg liners, filters, dairy detergents); small items of specialist livestock equipment; marketing expenses (except haulage); commission on sales; disposal of livestock related chemicals bought in the year and packing materials for livestock products etc.
The amount paid for the hire of a building is to be included when the buildings are used to house animals and/or store products used in connection therewith (eg, fodder). Where keep is provided with building hire, the feed, concentrate and roughage elements are to be recorded to their specific codes above.
Costs of contract work, inclusive of labour and equipment for specific animal husbandry operations, (eg shearing; dipping; foot rot treatment; hoof trimming etc) are included here. However cost of casual workers engaged to assist farm staff in these and other tasks should be recorded as “casual labour”.
Sundry/Other crop expenses
Costs incurred directly in connection with the production, storage and marketing of crops that are not allocated elsewhere. Enter marketing charges (including any cost associated with meeting shortfall in the tonnage/quality of a crop contracted); packing materials; soil analysis; show expenses; crop protection, processing and preserving materials; British Potato Council levy; potato inspection charges; baler twine; baler wire; potato roguing, etc.
Other charges to be included are production costs such as: plastic sheets for mulching or low polythene tunnels of limited life; crop processing for storage; seed dressing prior to sale (but not seed for home-use, to be included with seed costs); propcorn, maxamon, haymaster and silage sprays that have no direct feed value (otherwise roughages); wrapping, bags and nets for hay, haylage or silage; stakes/wire for raspberry establishment; crop covers; specific crop advice (including advice on spraying); potato box hire; security guards for crops; cereal roguing for wild oats and disposal of crop related sprays bought in the year.
Costs of repairing potato boxes are included in Machinery Repairs , and purchases of potato boxes are posted to Other Machinery bought. The amount paid for the hire of a building is to be included when the buildings are used for marketable crops eg the storage of cereals. Soil Association (organic) fees are not included here but in Miscellaneous.
Total enterprise gross margin
The gross margin per unit (ie, ha, head) multiplied by total number of units.
Variable costs
Those items of cost most readily allocated to specific farm enterprises. Though contracting, casual labour and haulage could be termed variable; these costs are treated as fixed to ensure fair comparison between farms using contractors/hauliers/casuals and farms undertaking the same operations with their own machinery and staff.
Vet and medicines
All veterinary fees; medicines; dips; doses and drenches (whether oral, vaccination or pour-on); and other involuntary intakes.