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Assessing Farm Level Viability

This study evaluates farm-level viability by examining financial and biophysical indicators, crucial for sustainable agricultural development. Using data from the Farm Account Survey (2000-2011), the analysis distinguishes between short-term and long-term viability based on income metrics. It identifies three states of viability, employing Markov transition probabilities to understand changes over time. Biases in data entry are acknowledged, and future work will involve integrating viability indicators with CAP reform scenarios and regional analyses to inform agricultural policies effectively.

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Assessing Farm Level Viability

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  1. Assessing Farm Level Viability Andrew Barnes, Shailesh Shrestha, Steven Thomson, Bouda Ahmadi (SRUC Policy Analysis Team)

  2. Farm Level Viability • Sustainable development of the industry relies of farms being financially viable • CAP reform and local policy is informed by derivation of fragility indicators across both biophysical and financial vectors • Aim: to identify farm viability over long time period to understand change and drivers of change

  3. Data Used • Farm Account Survey • Unbalanced Panel (2000 – 2011) • Average of 461 (+/- 23) farms per year • Biases involved (Minimal size to entry into the FAS, voluntary, though mostly maintain presence over a number of years). • Though dropped farms with less than 3 years continuous entry in order reflect viability over time.

  4. Short term and Long-term Viability • Short-Term Viability:Cash Income/hrit≥Min AvWaget • Long-Term Viability : Net Farm Income/hrit3 ≥ Min AvWaget3 [three year moving average]

  5. Three States of Viability (%)

  6. Markov transition probabilities from one state to a different state over time

  7. Explaining Change Relative Risk Ratios (RRR) measured against viable group Note: <1 means more likely to be in viable group Short-term viable / Long term non-viable

  8. Survival estimates by farm size

  9. Survival estimates by LFA status

  10. Further Work • Adjusting ST and LT viability indicators for CAP reform scenarios (build up from FAS data) • Inform CAP level modelling work (farm level models) • Linking with the Census to regionalise assessments of viability

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