Previous enterprise financial data published by EBLEX related to information gleaned from the farm's accounts while the physical performance was obtained from farm records.

This year additional information was gathered to include a number of non-cash or imputed costs. To maintain consistency with previous year's information, ranking of business to the top or bottom third groups has been done on the basis of their net margin before the inclusion of these non-cash costs.

Family labour

Previous datasets included information on paid labour, but didn't capture any information on family labour nor try and place a value on that. This year when information was gathered, the time each family member worked on each enterprise was captured for each business within the sample.

During summer 2006 a questionnaire covering more detail on family labour was carried out. The questionnaire covered Great Britain and provided additional information, mainly in relation to the skills of those family members undertaking unpaid work on many livestock farms. This information was then compared with equivalent jobs in other sectors to arrive at on hourly rate for the family labour.

A Human Resource specialist was used to undertake this work. The hourly rate of £11.18 an hour is, therefore, a weighted average based on the questionnaire results which split the skills between manual work, administration and finally management tasks.

Rental value on owner occupied land

Within the sample, there is a mix of tenant farmers and owner occupiers just as there is a similar mix within the industry. In previous years, the Business Pointers land resource costs were based on the actual rents paid by tenants on their tenanted units as well as any short-term grazing lets taken by both tenants and owner occupiers.

This year EBLEX has captured information to reflect the equivalent rental value of owner occupied land. While not an actual cost incurred by the business, it does reflect the opportunity cost of using this land for beef or sheep meat production. Its inclusion is similar to the methodology used by DEFRA when assessing farm incomes in the UK. It also removes the potential distortion between the financial performance of tenanted units and owner occupiers.

Interest on working capital

This measure is introduced to reflect on a consistent basis the resources tied up during the annual cattle and sheep production cycles. It has been calculated at a rate of 5% for 2005/06.

Essentially, the value of animals is taken at the start of the production cycle and a 5% notional interest rate applied over the 12 months period (or finishing period if shorter than 12 months for instance for store lambs). Interest for all costs incurred during the production period, such as variable and fixed costs, are also included. EBLEX is using the same interest rate, but allowing for the fact that these are incurred gradually over the production period.

For those without borrowings it therefore reflects the opportunity cost associated with the production of either beef or sheep meat. For those who borrow money, it reflects the situation where all the money is borrowed. In circumstances where producers use a mix of their own resources and borrowings, EBLEX has stripped out actual finance costs incurred to ensure consistency with the other groups.