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“New” Community Typology of Agricultural Holdings & the Calculation of Standard Outputs (SO)

“New” Community Typology of Agricultural Holdings & the Calculation of Standard Outputs (SO) . A.Kinsella . Introduction. In EU there is wide diversity of production structures & systems

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“New” Community Typology of Agricultural Holdings & the Calculation of Standard Outputs (SO)

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  1. “New” Community Typology of Agricultural Holdings & the Calculation of Standard Outputs (SO) A.Kinsella

  2. Introduction • In EU there is wide diversity of production structures & systems • To ease analysis of the structural characteristics & economic results of the agricultural holdings, an appropriate Community classification of the agricultural holdings • per type of farming • & economic size class has been developed.

  3. Introduction • Farms classified into farming systems & size based on EU farm typology • “Old” EU Farm Typology Classification based on Standard Gross Margins (SGM) • “New” EU Farm Typology Classification based on Standard Output (SO)

  4. Why EU Farm Typology ? • Method for standardised comparisons of farm data across EU • “harmonised data” • used by Farm Accountacy Data Network (FADN) • & CSO (Census) & EUROSTAT Source: Official journal of the European Communities 85/377/CEE

  5. “Old” EU Farm Typology • Assigned SGM to each type of farm animal and to each hectare of tillage crops • Farms classified into systems according to % of total SGM of the farm coming from the main enterprises • SGM classifies farms by Economic Size Units (ESU) 1ESU = €1200 SGM Source: Official journal of the European Communities 85/377/CEE

  6. 2004 SGM €/head - Dairy Cow • Output = Value of milk + calf value • Direct costs = Replacement value + concentrates + coarse fodder + vet & med + miscellaneous

  7. 2004 SGM €/head - Suckler & Dairy Cow Source: Teagasc National Farm Survey

  8. Total SGM & System type Sample FarmTotal SGM € • 10 Dairy Cows (€974*10) 9740 • 14 Sucklers (€212*14) 2968 • 20 Ewes (€68*20) 1360 • 5 Male Cattle > 2 years (€402*5) 2010 • 5 Female Cattle > 2 years (€183*5) 915 Total SGM €16993 • System: Dairy & Other (57% Total SGM Dairy Cows) • Size: 14 ESU (16993 / 1200 = 14 ESU)

  9. “New” Typology – Why? • CAP drastically changed - majority of DPs decoupled • Since 2005 not possible to maintain the previous typology (Commission decision 85/377/EEC) based on SGM • SGM without subsidies could be negative • Cannot be used as classification criteria

  10. “New” Typology – Main innovations Main innovations“New” Typology are: • Use of the Standard Output (SO) instead of the SGM. • A 3-level "type of farming" classification (from 4 levels in the previous one). • Expression of the economic size of the holdings directly in Euro (rather than ESU – Economic Size Units) • Introduction of a new classification variable reflecting the importance of the other gainful activities (OGA) directly related to the holding.

  11. “New” Typology – Basic Principles and Definitions • Member States to apply the methodology to establish an appropriate & harmonised typology in the EU & to implement the new typology in a homogeneous way The basic principles to be followed are: • Simplification • Harmonisation between the Member States • Comparability between the Member States

  12. “New” Typology – Basic Principles and Definitions The Community typology of agricultural holdings • is a uniform classification of holdings in the EU based on their type of farming and economic size • determining these 2 elements based on the SO of the various types of agricultural production • In addition holdings can be classified also according to the importance of the OGA of the holding • & typology is arranged in a way that homogeneous groups of holdings can be assembled in a greater or lesser degree of aggregation.

  13. Definitions • Standard output" (SO), of an agricultural product (crop or livestock) is the average monetary value of the agricultural output at farm-gate price. The SO excludes DPs, VAT & taxes on products. Member States calculate regional SO coefficients for each product as average values over the reference period.

  14. 2004 SGM V SO €/head - Dairy Cow Source: Teagasc National Farm Survey

  15. Definitions • The "economic size of a holding" is the value of its total SO. It is the sum of the individual SO of all the agricultural products present on the holding, expressed in Euro - there are 14 economic size classes • The "type of farming of a holding" is the production system of a holding which is characterised by the relative contribution of different enterprises to the holding's total SO. • 3 nested levels of type of farming: 9 general types, 21 principal types and 62 particular types

  16. Definitions • The "importance of the Other Gainful Activity of the holding" is defined as the share of the OGA turnover in the total turnover of the holding (including direct payments). Depending on this estimated OGA share, the farms are classified according to three percentage bands (from 0 to 10%, from 10% to 50%, more than 50%).

  17. Why SO? For practical reasons – SO an economic criterion • the classification of farms cannot be based on financial information recorded individually for each holding • Therefore, the classification is based on a financial coefficient calculated as a regional average: i.e the SO & on the structural information (hectares and heads) collected in the Farm Structure Survey (FSS) and in the Farm Accountancy Data Network (FADN).

  18. SO co-efficients & Classification • SO coefficients used to calculate the typology, i.e. to classify the farms • This classification is used to; • display the results of the FSS and the FADN • to weight the FADN results & • to facilitate the analyses and comparison between Member States • The SO can also be used by Member States as indicators

  19. Basis for Calculation of Classification The classification of agricultural holdings by type of farming is based on: (1) the definition of the five main groups of specialist agricultural holdings: • field crops (general cropping) • horticulture (vegetables and flowers) • permanent crops (vines and fruit trees) • grazing livestock (bovine animals for milk and for meat, sheep, goats) • granivores (pigs, poultry and also rabbits)

  20. Basis for Calculation of Classification The classification of agricultural holdings by type of farming is based on: (2) the acknowledgment of the importance of mixed holdings, which has two consequences: • the choice of a 2/3 threshold below which a holding is deemed not to be specialised; • the definition of three mixed groupings with various combinations: • a combination of crop products, a combination of livestock products & • a combination of crop and livestock products.

  21. Basis for Calculation of Classification The classification has three levels of types of farming: • 9 general types, including a type for non-classifiable holdings, • 21 principal types, • 62 particular types.

  22. Determining the Type of Farming The type of farming of an agricultural holding is determined by • the importance of each enterprise in the total SO of the farm: i.e. by the share of certain predefined partial SO in the total SO of the farm • The "poles" P1 to P5 correspond to the five main groupings of specialist holdings, i.e. the five general types of farming: P1 specialist holdings with field crops P2 specialist horticultural holdings P3 specialist holdings with permanent crops P4 specialist grazing livestock holdings P5 specialist granivores holdings

  23. Determining the Type of Farming P1 specialist holdings with field crops Example Is: P1 > 2/3 * total SO? • YES: The general type of farming of the holding is 1. SPECIALIST FIELD CROPS Is: (P15 + P16 + 2.01.02.) > 2/3 * total SO? • YES: The principal type of farming of the holding is 15. SPECIALIST Cereals Oilseed & Protein Crops

  24. Determining the Importance of the OGA Directly related to the holding • The RATIO is not to be calculated precisely • An order of magnitude is enough because the holdings are to be classified in 3 classes with wide range of limits: ClassesLimits in percentage I From 0% to 10% II From more than 10% to 50% III From more than 50% to less than a 100%

  25. Work in Progress – where are we now • New Typology handbook has been reviewed and methodology/definitions applied to the Irish situation • The SO per head of livestock and per Ha of crop have been calculated using NFS data for 2 Regions – Leinster/Munster & Connaught/Ulster • These SO calculations - forwarded to CSO • SO coefficients are being used to calculate the typology, i.e. to classify the farms • CSO will reclassify farm population by size/system into new typology groupings

  26. Work in Progress – where are we now • On receipt of new population groupings from CSO, NFS will optimise farm sample based on new population • New selection plan will be forwarded to FADN • Farm classification based on SO will be used to; • display the results of the FSS and the FADN • to weight the FADN results & • to facilitate the analyses and comparison between Member States

  27. Thank You

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