Farm Household Income and Household Composition: Results from the Farm Business Survey: England 2009/10

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1 Published 12 May 2011 Farm Household Income and Household Composition: Results from the Farm Business Survey: England 2009/10 The latest National Statistics produced by Defra on farm household incomes from the Farm Business Survey were released on 12 May 2011 according to the arrangements approved by the UK Statistics Authority. This release shows the final estimates of household income from the 2009/10 Farm Business Survey which covers the 2009 harvest. Earlier household publications can be found at: In 2009/10, there were around 56,000 farms in England of a size considered sufficient to occupy a farmer for at least half their time. The information in this release relates to these farms. Although this is only half of the total number of farms in England, these farms account for 91% of land area farmed and 96% of agricultural production. The key results from the survey are given below: Sixty nine percent of the total income of principal farmers households in 2009/10 was from farm business income, which includes farm diversification (it was seventy three percent in 2007/08 and 2008/09); Almost all of the remainder came from the off-farm income of the farmer and their spouse. (Table 1) Average household income of principal farmers households was 47,400/household ( 55,600/household in 2008/09). (Table 1) Across those households that have these sources of income: average off-farm income of the farmer and spouse was 13,500/household ( 13,800/household in 2008/09); and average income of other household members was 18,200/household ( 15,200/household in 2008/09). (Table 2) There were 4,000 principal farmer s households (around 7% of the population) that had no household income except that from the farm. While the average (mean) household income was 47,400 in 2009/10, over 25% of principal farmers households have had an income below 20,000 in each of the last 3 years. (Table 3) Regionally, average farm household income was highest in the East of England ( 58,800) and lowest in the North West ( 34,500). (Figure 1) Over each of the last three years over half of farms had a profit (farm business income) that exceeded drawings for the business. (Figure 4)

2 Where farm profits are low there seems to be more dependence on nonfarm income. For example, in 2009/10, farms that have not had a negative profit in any of the previous 5 years had average non-farm income of 12,700, compared to 22,700 for farms with a negative profit in 3 or more of the last 5 years. (Table 5) 36,100 farm businesses (64%) comprised a single household. (Table 6). Analysing these businesses according to their household income, shows that, while those in the bottom quartile for household income had an average income of below 20,700 over the period, the median net worth for these businesses was 444,000. (Table 7) Enquiries to: Neville de Souza, Department for Environment, Food and Rural Affairs, Area 4E Millbank, c/o 17 Smith Square, London SW1P 3JR. Tel: (0) , fbs.queries@defra.gsi.gov.uk 2 A National Statistics publication. National Statistics are produced to high professional standards. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. For general enquiries about National Statistics, contact the National Statistics Public Enquiry Service: tel ; info@statistics.gov.uk You can also find National Statistics on the internet at

3 Note on results Information on farm household income and farm household composition was collected in the Farm Business Survey for England for the first time in 2004/05. Collection of household income data is restricted to households of principal farmers and, for practical reasons, does not cover households of other farmers and partners. This was for reasons of practicality and cost. However, over two-thirds of farm businesses have an input only from the principal farmer s household (see table 6). Details of household composition however are collected for households of all farmers and partners in the business, but not employed farm workers. This release gives the main results from the income and composition of farm households and the off-farm activities of the farmer and their spouse sections of the FBS, including information on the household income of the principal farmer s household, off-farm income sources for the farmer and spouse and incomes of other members of their household and the number of working age and pensionable adults and children in each of the households on the farm (the information on household compositions is found in Appendix A). Data on the income of farm households is used in conjunction with other economic information on the agricultural sector (e.g. farm business income) to help inform policy decisions and to help monitor and evaluate current policies relating to agriculture in the United Kingdom by Government. It also informs wider research into the economic performance of the agricultural industry. Survey Methodology The Farm Business Survey (FBS) is an annual survey providing information on the financial position and physical and economic performance of farm businesses in England. It covers all types of farming in all regions of the country and includes owner-occupied, tenanted and mixed tenure farms. It is restricted to farms of size ½ Standard Labour Requirement (SLR) 1 or more and is based on a sample of around 1,900 farm businesses with the data being collected by face to face interview with the farmer. The sample covers all regions of England and all types of farming. Results are weighted so as to represent the whole population of farm businesses with a minimum size of ½ SLR which accounts for 56,000 farms. More detailed information about the Farm Business Survey and the data collected can be found at In 2009/10 a sub-sample of around 1,000 farms with a size greater than or equal to ½ SLR in the FBS took part in both the additional survey on the income and composition of farm households and on the off-farm activities of the farmer and their spouse. This was lower than in the previous years that the additional surveys have been run, during which the sub-sample had included over 1,600 farms. As such, caution should be taken in comparing this year s results to earlier years. All results in this release are weighted so as to give estimates for the whole population of farm businesses with a minimum size of ½ SLR. In order to take 1 A size considered sufficient to occupy a farmer half time under typical conditions for enterprises of average size and performance; see definitions under Data collection and methodology at 3

4 account of non-response and obtain results representing the overall FBS target population for this sub-sample the main FBS weights have been redistributed, so as to preserve the marginal population totals for robust farm types and farm size groups. As such, farm population totals for other classifications (e.g. regions) will not be in-line with results using the main FBS weights), nor will any results produced for variables derived from the rest of the FBS (e.g. FBI). The household income position on farms of size less than ½ SLR not covered by the survey is likely to differ markedly from that of farms represented in these results, not least because farming income must be a minor, and in some cases a very minor, part of their household income. Nevertheless, the main policy interest is in the farms covered by the survey which account for 91% of the agricultural land area and 96% of agricultural production. Definition of household income of the principal farmer Principal farmer s household income has the following components: the share of farm business income 2 (including income from farm diversification 3 ) attributable to the principal farmer and their spouse; principal farmer s and spouse s off farm income from employment and self-employment, investment income, pensions and social payments; and non-farming 4 income of other household members. The share of farm business income and all employment and self employment incomes, investment income and pension income are recorded as gross of income tax payments and National Insurance contributions, but after pension contributions. In addition, no deduction is made for council tax. However it should be noted that, in some years, farm business income may be sufficiently negative for some businesses to give rise to negative household income. This is an inevitable consequence of having an income based, rather than a drawings (i.e. consumption) based, definition. It could be expected that, over the long term, farm business income is sufficient to cover drawings, but farm household income figures for any one year can give a misleading impression of the longer term. A comparison of farm business income and private drawings is given in aggregate for the period 2003/ /10 in Figure 4. In order to take account of fluctuating incomes, results for tables 7 and 8 were based on a 3 year average of output variables, for a sample in which the farms were present in each year. 2 The principal farmer s share of the income is taken as his share of drawings, rather than the legal share defined in partnership agreements which frequently reflect tax considerations. 3 The difference between diversification and other forms of self-employment is that diversification includes only those activities which use farm resources. 4 The term farming here is used in an entrepreneurial sense, so non-farming income includes wages and salaries from paid farm work. 4

5 Definition of mean, median and quartiles Mean: Mean household income of individuals is the average, found by adding up the weighted household incomes for each individual farm in the population for analysis and dividing the result by the corresponding weighted number of farms. Percentiles: These are the values which divide the population for analysis, when ranked by an output variable (e.g. household income or net worth), into 100 equalsized groups. E.g. twenty five per cent of the population would have incomes below the 25th percentile. Median: Median household income divides the population, when ranked by an output variable, into two equal sized groups. The median of the whole population is the same as the 50 th percentile. The term is also used for the midpoint of the subsets of the income distribution In this report average is usually taken to refer to the mean, but in tables 3, 6, 7, 8 and 9 the terms mean and median are specified. Quartiles: Quartiles are values which divide the population, when ranked by an output variable, into four equal-sized groups. The lowest quartile is the same as the 25th percentile. The divisions of a population split by quartiles are referred to as quartiles in this publication, although are often called quarters. Accuracy and reliability of the results We have shown 95% confidence intervals in table 1 and as error bars around the averages presented in figures 1 and 2. These show the range of values that may apply to the figures. They mean that we are 95% confident that the true value lies within this range either side of the estimate. They are based on the Standard Errors (SE) multiplied by 1.96 to give the 95% confidence interval (95% CI). The standard errors only give an indication of the sampling error. They do not reflect any other sources of survey errors, such as non-response bias and interviewer errors. 5

6 Detailed Results Average farm household income Table 1 sets out the average income per farm business by component of household income in 2009/10. The average total household income was 47,400 ( 55,600/household in 2008/09), of which: farm business income made up the majority (69%); off farm income of farmer and spouse contributed 26%; and other members of the household contributed 5%. Table 1: Average household income of principal farmer s household, England 2009/10 Total Income ( million) Average Income ( /household) 95% confidence intervals for average income ( /household) Total household income 2,700 47,400 44,600 50,200 of which: Principal farmer's share of farm 1,800 32,900 30,300 35,500 business income (a) off-farm income of farmer and spouse income of other household members (a) including profits from farm diversification ,300 11,100 13, ,200 1,600 2,800 The average income of other household members in Table 1 is taken over all households, irrespective of whether they have other household members and whether other household members have an income. However, only 6,800 households have other household members with an income, while 4,000 principal farmers households have no other income except from that of the farm. Table 2 gives the averages for the last two lines of Table 1 for those households that have these sources of income only. It shows: the average off-farm income of farmer and spouse was 13,500 ( 13,800/household in 2008/09); the average income of other household members was 18,200 ( 15,200/household in 2008/09); and at individual adult level, the average off-farm income of farmer and spouse was 6,700 and other members of the household had an average income of 8,000. 6

7 Table 2: Average non-farm income of principal farmer s household, England 2009/10 Source of household income: Off-farm income of farmer and spouse Other adult household members with income Other adult household members without income Number of households Number of adults Total Income ( million) Average Income (a) ( /household) Average Income (a) ( /adult) 51, , ,500 6,700 6,800 15, ,200 8,000 2,400 (a) Average taken over only those households or adults with this source of income Mean household income and quartiles of household income, England 2007/08 to 2009/10 Table 3 shows quartiles of principal farmers household income compared to the mean. Data in table 3 shows that while the actual mean household income was 47,400 in 2009/10, over 25% of principal farmers households have had an income below 20,000 in each of the last 3 years, with little fluctuation in the level of the first quartile over the period. The fall in principal farmers household mean income between 2008/09 and 2009/10 was driven by a decrease in farm business income over the period. Table 3: Mean household income and quartiles of household income, England 2007/08 to 2009/ /08 ( /household) 2008/09 ( /household) 2009/10 ( /household) Principal Farmers' household (actual) Mean 53,900 55,600 47,400 First quartile 17,900 19,800 19,900 Median 36,800 40,100 37,500 Third quartile 68,900 71,400 61,300 Note: Data for 2007/08 and 2008/09 was based on a sample of over 1,600 farms, with data imputed for the remaining farms to cover the whole FBS Regional results Figure 1 sets out the components of average farm household income by region. Of the regions: the East of England had the highest average farm household income of 58,800 ( 83,100 in 2008/09 when it also had the highest average farm household income); and the North West had the lowest average farm household income of 34,500 ( 43,800 in 2008/09) and has been the region with the lowest average farm household income over the last three years. 7

8 Figure 1: Average income of principal farmers households by region, with 95% confidence limits for the overall average income, England 2009/10 Average Houshoeld Income ( /household) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 income of other household members off farm income of farmer and spouse share of farm business income 10,000 0 North East North West Yorkshire & Humber East Midlands West Midlands East of England South East South West Note: Due to small sample sizes caution should be taken with data on average income for other household members in Yorkshire & Humber, North East, East Midlands and West Midlands. Results by type of farm Figure 2 sets out the components of average household income by farm type. Of the farm types: Dairy farms had the highest average principal farmers household income of 58,700 ( 67,400 in 2008/09); Lowland Grazing Livestock farms had the lowest average household income of 34,800 ( 32,200 in 2008/09). While the absolute level of non-farm income is broadly similar for most farm types, in relative terms it is highest for lowland grazing farms at 42% of overall household income. 8

9 Figure 2: Average income of principal farmers households by farm type, with 95% confidence limits for the overall average income, England 2009/10 80,000 70,000 income of other household members off farm income of farmer and spouse share of farm business income Average Household Income ( /household) 60,000 50,000 40,000 30,000 20,000 10,000 0 Dairy LFA Grazing Livestock Lowland Grazing Livestock Cereals General cropping Mixed Horticulture Note: Due to small sample sizes caution should be taken with data on average income for other household members for horticulture, mixed and general cropping farm types. Results for specialist pig and poultry farms have been excluded to prevent disclosure. Distribution of household income Looking at average (mean) household incomes can hide information about the wide range of incomes they comprise and does not necessarily provide an indication of the experience of a typical farm household. Figure 3 shows the range of household income of principal farmers households for the last three years. It shows that: Around 5% of farm households had negative household income in each of the last three years; this is quite uncommon for the population as a whole; Around a third of principal farmers households had an income of 50,000 or more in 2009/10, with over 8% having an income of over 100,000. 9

10 Figure 3: Distribution of household incomes of principal farmers households, England 2007/08 to 2009/10 Percentage of households (%) 30% 25% 20% 15% 10% 5% 2007/ / /10 0% <0 0 <10 10 <20 20 <30 30 <50 50 <70 70 < '000s Note: Data for 2007/08 and 2008/09 was based on a sample of over 1,600 farms, with data imputed for the remaining farms to cover the whole FBS Volatility of farm household income from year to year Analysis in tables 4 and 5 was based on an identical sample of farms present in the FBS for each of the last 5 years, where these farms were also present in the subsample for non-farm income sources in 2009/10. Weights were derived for a subsample of around 600 farms in line with the method described in the survey methodology section (e.g. to preserve the marginal population totals for robust farm types and farm size groups). The wide variation of farm household incomes and, in particular, the appreciable incidence of negative income is accounted for by the fact that the largest component of household income, farm business income (which is measured before payments to farmers and partners), is volatile from year to year, and not uncommonly negative. 10

11 Table 4: Frequency of negative farm business income 2005/ /10 Number of times in last 5 years that farm business income was negative % of farm businesses (a) Not negative in last 5 years 74% Negative in 1 year of last 5 13% Negative in 2 years of last 5 6% Negative in 3 or more years of last 5 7% TOTAL 100% (a) Excluding businesses which started up more recently than 2003/04 Looking at all non-farm income (i.e. off-farm income of farmer and their spouse and other family members as a whole) according to the frequency with which they had negative farm business income (or profit) shows that non-farm income tends to be highest, on average, for farms with a higher frequency of negative profit. In 2009/10: Farms that have not had negative profit in any of the previous 5 years had average non-farm income of 12,700, compared to 22,700 for farms with negative profit in 3 or more of the last 5 years. Table 5: Non-farm income in 2009/10, according to frequency of negative farm business income 2005/ /10 Number of times in last 5 years that farm business income was negative Non-farm income ( ) Not negative in last 5 years 12,700 Negative in 1 year of last 5 16,000 Negative in 2 years of last 5 15,600 Negative in 3 or more years of last 5 22,700 All farm businesses 14,000 Because of the year to year volatility in farm business income, it can be misleading to consider data for any one year. In years of low farm business income farmers commonly draw more from the farm business than the income generated (in effect borrowing from the business), to be repaid in better years by drawing less than the income generated. A comparison of drawings from the farm business, by farmers and partners, with farm business income in the last five years is given in Figure 4 (based on the full FBS sample of around 1,900 farm businesses). It shows that: average farm business income exceeded average private drawings in each of the last three years; for over half of farm businesses income exceeded drawings in each of the last three years. 11

12 Figure 4: Comparison of Private Drawings and Farm Business Profit 2003/ /10 /farm 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Average FBI Average Private Drawings % of farms where FBI exceeds drawings 2003/ / / / / / /10 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Analysis of the incomes and wealth for farm businesses with sole proprietorship based on an identical sample for 2007/ /10, with a 3 year average taken for output variables For the analysis in tables 6, 7 and 8 an identical sample of farms present in the FBS for each of the last 3 years and also in the sub-sample for non-farm income sources in 2009/10 was obtained (around 800 farms) and the mean across the 3 years taken for each of the output variables: the objective being to smooth out the inter-year volatility in income. Weights were redistributed for this sub-sample in line with the method set out in the section on survey methodology (e.g. to preserve the marginal population totals for robust farm types and farm size groups). By restricting the analysis to households with sole proprietorship data on incomes for principal farmers households can be directly compared with that for the assets and net worth of the overall business. Table 6 shows that there are 36,100 farm businesses in England comprising a single household, so these have sole proprietorship of the business. The analysis shown in tables 7 and 8 refers to these households only. Table 6: Number of households with interest in farm business, England 2009/10 Number of farm businesses % of farm businesses 95% confidence intervals for previous column Farm businesses with: 1 household 36,100 64% 61% 68% 2 household 15,300 27% 24% 31% 3 or more households 2,200 4% 2% 5% All farm businesses ½ SLR 56, % 12

13 Table 7 presents the farm household income, business profit, drawings, net worth and total assets by quartiles of principal farmer household income. Assets include milk and livestock quotas, as well as land, buildings (including the farm house), breeding livestock, and machinery and equipment. For tenanted farmers, assets can include farm buildings, cottages, quotas, etc., where these are owned by the occupier. Personal possessions (e.g. jewellery, furniture, and possibly private cash) are not included. Net worth represents the residual claim or interest of the owner in the business. It is the balance sheet value of assets available to the owner of the business after all other claims against these assets have been met The data show that: principal farmers households in the bottom quartile had an income below 20,700; the associated businesses had a median net worth of 444,000. principal farmers households in the top quartile had an income above 62,100; the associated businesses had a median net worth of around 1m. Table 7: Farm business profit, net worth, total assets and drawings by principal farmer household income quartiles, England average 2007/ /10 Farm household income range ( ) Median household income ( ) Median FBI ( ) Median drawings ( ) Median net worth ( 000s) Median total assets ( 000s) Quartile Bottom <20,700 13,000 5,500 10, Second 20,700<38,400 28,600 21,400 18, Third 38,400<62,100 48,200 36,800 25, Top >62,100 86,700 67,600 42,200 1,006 1,105 All farms 38,400 24,500 21, See Appendix B for corresponding farm size and tenure arrangements Table 8 presents the farm household income, business profit, drawings, net worth and total assets by tenure type. The data show that: Mixed mainly tenanted farms had the highest median household income ( 49,800), compared to a median of 33,600 for owner occupied farms and 38,400 for all farms; and Mixed mainly owner occupied farms had the highest median net worth of 787,000, compared to a median of 146,000 for tenanted farms and 583,000 for all farms. 13

14 Table 8: Farm business profit, net worth, total assets and drawings by farm tenure type, England average 2007/ /10 Median household income ( ) Median FBI Median ( ) drawings ( ) Median net worth ( 000s) Median total assets ( 000s) Tenure type Owner occupied 33,600 21,900 20, Tenanted 38,400 22,400 21, Mixed - mainly owner occupied 39,900 25,500 22, Mixed - mainly tenanted 49,800 37,500 25, All farms 38,400 24,500 21,

15 Appendix A Corresponding household compositions for the analysis of farm businesses with sole proprietorship based on an identical sample for 2007/ /10, with a 3 year average taken for output variables Tables 7 and 8 present information on farm business profit, principal farmers household income, net worth, total assets and drawings. Tables A1 and A2, present corresponding information on household compositions to give some indication of associated living standards for the groups covered by the analysis. Table A1 shows that, on average: there are, on average, fewer working age adults per household in the bottom quartile (1.41) than in the top (2.26); there are, on average, more adults of pensionable age per household in the bottom quartile (0.62) than in the top (0.24); and there are, on average, fewer children per household in the bottom quartile (0.33) than in the top (0.89). Table A1: Number of adults of working age and pensionable age, and children (per farm household) by principal farmer household income quartiles, England average 2007/ /10 Farm household income range ( 000s) Mean number of adults of working age Mean number of adults of pensiona ble age Mean number of children Quartile Bottom <20, Second 20,700<38, Third 38,400<62, Top >62, All farms Table A2 shows that, on average: there are, on average, more adults of pensionable age per household in owner occupied farms (0.60) than in the overall farm population (0.42). 15

16 Table A2: Number of adults of working age, pensionable age, and children (per farm household) by farm tenure type, England average 2007/ /10 Mean number of adults of working age Mean number of adults of pensionable age Mean number of children Tenure type Owner occupied Tenanted Mixed - mainly owner occupied Mixed - mainly tenanted All farms Appendix B The following tables provide an indication of the distribution across size groups and tenure types of farms according to the average of the principal farmer s household income in the years 2007/ /10, corresponding to the analysis presented in tables 7 and 8. Table B1: Farm size by principal farmer s household income quartiles, 2007/ Whole population Principal farmer household income quartiles Bottom 2nd 3rd Top All farms Part-time 59% 38% 31% 14% 36% Small 29% 37% 36% 25% 32% Medium 6% 14% 16% 20% 14% Large 4% 9% 12% 17% 11% Very large 2% 2% 4% 24% 8% All farm types 100% 100% 100% 100% 100% Table B2: Farm tenure type by principal farmer s household income quartiles, 2007/ Whole population Principal farmer household income quartiles Bottom 2nd 3rd Top All farms Owner occupied 49% 41% 40% 29% 40% Tenanted 20% 19% 18% 22% 20% Mixed - mainly owner occupied 21% 26% 27% 24% 24% Mixed - mainly tenanted 10% 15% 16% 25% 16% All farm types 100% 100% 100% 100% 100% 16