Methodology and information notes

Data source: 

Farm Accountancy Data Network (FADN) )https://agriculture.ec.europa.eu/cap-my-country/performance-agricultural-policy/studies-and-reports/analytical-briefs/agricultural-and-farm-economics_en#beefsector)  

EUROSTAT for Agricultural prices and price indices (apri) (https://ec.europa.eu/eurostat/data/database)

Meat Market Observatory (https://agriculture.ec.europa.eu/data-and-analysis/markets/overviews/market-observatories/meat_en)

Notes:

Data available as of 2007 to 2021. 

In this dashboard, a farm is treated as a specialised farm when minimum 50% of the output comes from a beef production.

Three types of the beef specialised farms are distinguished: breeders, breeders-fatteners and fatteners.

In certain years, data for some Member States and some types of beef specialisation are not available due to too small sample size (less than 15 farms) to disclose results. However, they are included in EU-27 averages.

The UK data is presented, but EU-27 excludes the UK (but includes HR as of 2013).

Data displayed as averages. 

Method:

General introduction to FADN

The Farm Accountancy Data Network (FADN) is a European system of sample surveys that take place each year and collect structural and accountancy data relating to farms; their aim is to monitor the income and business activities of agricultural holdings and to evaluate the impacts of the Common Agricultural Policy (CAP).

The scope of the FADN survey covers only those farms exceeding a minimum economic size (threshold) so as to cover the most relevant part of the agricultural activity of each EU Member State, at least 90% of the standard output and 90% of utilised agricultural area (UAA) covered in Eurostat’s integrated farm statistics (IFS; former FSS). For 2020, the FADN sample consists of around 80 000 holdings in the EU27, which represent around 3.5 million commercial farms out of the approximately 9 million farms included in the 2020 agriculutral census.

The applicable rules are aimed at providing representative data along three dimensions: Member State and region level, economic size and type of farming. FADN is the only harmonised source of micro-economic data, which means that the accounting principles are the same in all EU Member States.

The most recent FADN data available for this dashboard are for the 2020 accounting year; however, the 2020 data are still preliminary as their validation by the Commission is still ongoing.

The model for estimating beef production costs and margins

The FADN database contains information about output, specific costs and subsidies per product, but as far as non-specific costs are concerned it only provides information relating to the farm as a whole. Hence, the direct contribution of each enterprise to the farm income is not available. This means that the production costs by product have to be estimated. Several models were built in order to estimate costs and margins for the various products: beef as well as arable crops, milk, pigmeat and permanent crops. These models allocate farm costs to a particular product using different ratios.

Opportunity costs for unpaid family factors

Imputed costs for unpaid family factors have been estimated. The aim is to enable a comparison to be made between Member States with different structures in terms of labour (share of family and paid labour), land (rented/owned) and capital.

Definitions of margins

The gross margin (over operating costs)^[1] is generally used when making comparisons with alternative types of production for which it can be assumed that factor costs are identical (labour, land and capital costs still have to be paid whichever type of production is chosen).

The net margin (before own factors) is calculated as the gross margin minus depreciation and external factors (wages, rent, interest paid).

The net economic margin (after own factors) allows assessment of the residual revenue obtained from the production after remuneration of all production factors, including own land costs, own capital costs and family labour (imputed family factors).

The FADN does not gather data on the weight of the animals. Therefore, only the costs and margins per head can be analysed. It should be taken into account that these head counts could be for animals of different breeds, weights and age categories.

Income indicators

Income indicators of specialised beef farms are derived at the level of the whole farm. Therefore, they incorporate the results of other activities that may be carried out on the farm. The following income indicators are studied in this report:

Farm Net Value Added (FNVA) equals total output (total production value), plus direct payments minus intermediate consumption and depreciation. It represents the amount available to remunerate all fixed production factors (land, labour and capital), either owned by the farm or external. It is relatively comparable between Member States, but it gives only a partial picture of the farms’ results as not all costs are covered.

Farm Net Income (FNI) equals FNVA minus external factors, plus the balance of subsidies and taxes on investment. It is the amount available to remunerate family factors (labour, land and capital).

Remuneration of Family Labour (RFL) is calculated only for family farms.^[2] It equals FNI minus the opportunity cost for own capital. It represents the amount available to remunerate family labour. It can be used to compare income levels between different activities in agriculture, given that period under review is characterised by shared macroeconomic parameters.

These indicators are expressed per Annual Work Unit (AWU) for FNVA and FNI, or per Family Work Unit (FWU) for RFL, to take account of the differences in the labour force remunerated on the holding. All income indicators are calculated before deduction of income taxes and expressed in euro at its current value unless otherwise stated.

The model

Specific costs

Home-grown forage

One feature of FADN accounts is that they assign no value to the production of fodder areas in some countries (generally those in the north of the EU).^[3]

In order to take into account the differences in data-gathering and to facilitate comparison between Member States, fodder production consumed on the farm is valued as equal to the cost of the inputs used to cultivate the fodder area.

The share of fodder crops in specific crop costs (seeds, fertilisers and crop protection) is estimated from the share of fodder area in the total area. As not all types of fodder crop benefit from the same inputs (e.g. there is no crop protection on temporary grassland), the area taken into account — both the forage part and the total area — depends on the input. This cost item is known as ‘specific forage costs’.

Method of allocating costs

Costs have to be estimated because FADN accounts, like many others, are not based on analytical accounts. This means that costs are not recorded separately for the various enterprises on the holding. The specific costs of crop products and animals are recorded separately (not by product, but by group of products) and all the other costs are recorded for the entire holding only.

It is therefore necessary to lay down rules for allocating the different costs recorded at farm level to each enterprise.

Costs are allocated to beef production on the basis of three criteria (see the table below):

1. the proportion of livestock units (LU): for the livestock-specific costs (mainly feed);
2. the proportion of area: for the costs of forage produced on the farm;
3. the proportion of output and coupled direct payments (DP): for the other costs.

‘Beef cattle’ means all cattle except dairy cows and a share of total breeding heifers and young females equal to the proportion of suckler cows in the total number of cows (dairy cows, cull dairy cows and other cows).

As ‘output and VCP (voluntary coupled support)’ is used to construct the scale, certain precautions must be taken to avoid problems with the estimates:

• output and VCP (voluntary coupled support) on beef and total production should be positive;
• beef output and VCS should not be greater than total output and VCP (voluntary coupled support).

Farms that do not meet these conditions are excluded from the sample.

Margin and cost indicators

Coverage of costs

• Operating costs include:
  • specific costs: purchased feed, home-grown feed, animals purchased and other specific livestock costs (such as veterinary costs);
  • non-specific operating costs: maintenance of machinery and buildings, power (fuels and electricity), contract work, taxes and other dues, taxes on land and buildings, insurance for farm buildings and other direct costs (e.g.: water, other insurance, other farming overheads).
• Depreciation
• External factors include:
  • wages
  • rent
  • interest
• Imputed unpaid family factors include:
  • family labour cost
  • own capital cost (own land cost + estimated cost for own capital except land minus interest paid)

Own capital cost

• Own land cost: estimated on the basis of the rent that farm owners would have to pay if they had to rent the land they are using.

This is estimated as the owned area multiplied by the rent paid per hectare on the same farm or, if there is no rented land on the farm, by the average rent paid per hectare in the same region and for the same type of farming.^[4]

• Cost of own capital (except land): the cost of own capital (permanent crops, buildings, machinery and equipment, forest land, livestock and crop stocks) is estimated at its ‘opportunity cost’, i.e. how much farmers could earn if they were to deposit the equivalent of the capital value in a bank.

The interest paid on the capital is not known, as this information is optional in the FADN farm returns. Nevertheless, to take into account the actual interest rate paid by a farm, a ‘weighted’ interest rate is calculated as the weighted average of this interest rate for debts, and the harmonised index of consumer prices (Estat, HICP), for net worth. If the ‘weighted’ interest rate is lower than the HICP (which means that the calculated rate of interest paid is lower than the HICP), the HICP is used instead of the ‘weighted’ interest rate.

Own capital value (excluding land and land improvement) is estimated as the average value of the assets (closing plus opening valuation divided by 2) multiplied by the real interest rate. The figure is adjusted by subtracting the inflation rate from the nominal interest rate. Where the inflation rate is higher than the interest rate, the real interest rate may be negative, leading to a negative cost of capital, which will add to profits (i.e. it is more profitable to invest in farm assets than to put the money in the bank). The total circulating capital is not valued because of the unreliability of this variable in some Member States. Nevertheless, the value of crop stocks is taken into account.

To calculate unpaid capital costs, we avoid double counting by deducting the interest paid from the sum of the own land cost and the cost for own capital except land:

Own capital costs = own land cost + estimated cost for own capital except land - interest paid

All margins are displayed with or without VCS. The VCS are not attributed to products by definition. They are taken into account when studying income indicators.

Gross margin (over operating costs): total beef output – total operating costs

Net margin (before own factors): total beef output – total operating costs – depreciation – external factors

Net economic margin (after own factors): total beef output – total input (including imputed unpaid family factor costs)

For more information on FADN, please refer to the website: 

https://agriculture.ec.europa.eu/data-and-analysis/farm-structures-and-economics/fadn_en 

 [1]  Gross margin = total beef output minus specific production costs (such as feed and animal purchase) and non-specific production costs (machinery, buildings, energy, contract work, taxes, etc.).

[2] For the purpose of this report, ‘family farms’ are defined as farms employing an unpaid labour force, which usually corresponds to family labour.

[3] This stems mainly from the difficulty of estimating forage production and value. Therefore, based on the principle that forage production is just an input for animal production and that not recording it — neither on the crop output side, nor on the animal costs side — does not affect income, no effort is made to estimate it. In other countries, generally those where fodder production is more expensive, a value is allocated to production from the fodder areas. Even though this difference should not affect margins, it leads to biases when comparing costs between Member States.

[4] If there are not enough farms (fewer than 15) in a given type of farming, the national rent per hectare for that type of farming is used (TF8). The TF8 classification is a standard grouping developed by the unit responsible for FADN within the Commission and consist of (1) Fieldcrops (2) Horticulture (3) Wine (4) Other permanent crops (5) Milk (6) Other grazing livestock, (7) Granivores, (8) Mixed.