- Equates to the value of output (after the valuation of livestock still on the farm at the end of the accounting period) minus the variable costs.
NET MARGIN (before non-cash costs)
- Equates to the value of output minus both variable and fixed costs and represents the net return to the enterprise, before the value of family labour or the imputed rental cost of owner occupied land are taken into account.
- Results have been ranked into “top third” and “bottom third” on the basis of net margin before the deduction of non-cash costs.
FIXED COSTS are defined as follows:
- Regular wages, contract labour and casual wages. The cost of family labour has not been imputed (see unpaid family labour).
Power and machinery
- Machinery repairs, fuel, electricity, general contract and hire, tax and insurance.
- Insurance, office costs (including fees for professional services) and miscellaneous sundries.
- Water, council tax and farm and property repairs.
Land resource costs
- Rent and rented land. The imputed rental cost for land on owner occupied farms has not been included.
Machinery and fixtures
- Machinery depreciation, fixtures depreciation, machinery and equipment leasing.
NON-CASH COSTS are defined as follows:
Unpaid family labour
- Value of family labour that is not paid directly from farm accounts.
Rental value of owner occupied land
- Rental equivalent of owner occupied land based on local land rental values.
Interest on working capital
- Interest at 5% applied to all costs incurred during the production cycle of the beef or sheep enterprise.
Net margin (including non-cash costs)
- Value of output minus variable, fixed and non-cash costs.
HOW THE DATA IS COMPILED
The data (except non-cash costs) has been collected from actual farm cash accounts. There may well be more than one enterprise type on the farm in which case the fixed costs have been apportioned with reference to the number of animals (in livestock unit equivalents) present in the enterprise on a monthly basis.
All the data relates to the financial year ended March 2006. The averages shown are weighted averages produced by weighting individual enterprise information by the number of relevant sheep/cattle present in the enterprise.
The farms covered will include a mixture of tenanted and owner occupied and will equally cover a combination of farms hiring labour and those just making use of family labour. In previous years the data was collected from the actual cash accounts of these farms and that neither the value of family labour nor the imputed rental value of owner occupied land was included in the results. This has changed this year with the inclusion of these costs and interest on working capital as non-cash costs.
Non-cash costs are so called because they have not been collected from actual accounts. The value of family labour has been calculated following a Great Britain wide questionnaire capturing the hours worked and skills of family members. Rental value on owner occupied land is the equivalent rental value of owned land according to producers in the sample. Interest on working capital is based on 5% interest applied to all costs incurred during the production cycle of the cattle or sheep enterprise.
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