17 August 2001

Scottish small farms efficient image queried

By Shelley Wright

SMALLER is definitely not better when it comes to efficiency and competitiveness in Scottish agriculture, according to a new study.

Analysis by Lloyds TSB Scotland shows "substantial evidence" that the same output of Scottish agriculture could be produced from significantly fewer Scottish farm businesses.

This could be achieved through more efficient use of inputs and more competitive farm businesses that can compete on an EU and world market stage.

In contrast to the handful of multiple food retailers, agriculture remains an industry dominated by small businesses, says the report. There are almost 20,000 VAT registered farm businesses in Scotland.

And, although multinational agricultural businesses are now common in commodity trading and food retailing, there is nothing to match their size in terms of primary production.

Even so the majority of agricultural output is still produced by just a few farm businesses and the report suggests that a similar level of total farm output could be produced from far fewer farms.

Using figures from the Scottish Executive, averaged over four years to eliminate seasonality, the report shows that, for dairy farms, the ratio of outputs to inputs ranges from 68 for a small unit with 34 cows, through to 109 for a large-scale dairy farm milking 135 cows.

"This means that as dairy farms become larger, the same level of outputs are produced from less inputs," the report says.

On arable farms, total inputs a hectare were 38% lower on large farms of about 300ha, compared with small farms growing 65ha or less. Similar trends were shown for all farm types in Scotland.

"Recent farm data provides strong evidence that there are economies of scale in Scottish agriculture."

Between 1995/96 and 1998/99 in each of the main farm types, larger farms regularly outperformed smaller ones.

Policy makers have to achieve sufficient economies of scale and implement the restructuring needed by the industry. That is their challenge, says the report. &#42