How does a farm make a profit, what support and technology help it, and what is farm diversification?
The terms income, cost and profit and how to calculate profit margins, the principal costs of an animal production system, farm support schemes such as NIFQA and the Countryside Management Scheme, the adoption of technology, and farm diversification.
A focused CCEA GCSE Agriculture and Land Use answer on farm economics, covering income, cost and profit and calculating profit margins, the costs of an animal production system, farm support schemes such as NIFQA and the Countryside Management Scheme, the adoption of technology, and farm diversification.
Reviewed by: AI editorial process; not yet individually human-reviewed
Have a quick question? Jump to the Q&A page
Jump to a section
What this dot point is asking
CCEA wants you to define income, cost and profit and calculate profit margins, identify the principal costs of an animal production system, explain farm support schemes (such as NIFQA and the Countryside Management Scheme) and EU support, explain how technology has been adopted, and explain farm diversification.
Income, cost and profit
If costs are greater than income, the farm makes a loss. A profit margin is the profit made on an enterprise, and farmers calculate it to see whether each part of the farm is paying.
Costs of an animal production system
The principal costs of keeping animals include:
- Feed (often the biggest cost).
- Housing and bedding.
- Veterinary care and medicines.
- Breeding (AI, bulls).
- Labour.
- Machinery, fuel and electricity.
A farmer uses real income and cost data to work out the profit of an enterprise (for example milk production per year).
Farm support schemes and EU support
Technology and diversification
Farmers have adopted technology to improve efficiency and records:
- Electronic ID collars/tags and pedometers for heat detection.
- Computer-based record keeping and APHIS (the Animal and Public Health Information System) to keep animal records.
- Robotic milking and electronic weigh scales.
Diversification brings extra income, spreads risk so the farm is less dependent on uncertain farm prices, and can use spare buildings or land and add value to the farm's produce.
Examples in context
Example 1. A farm shop diversification. A dairy farmer opens a farm shop selling their own ice cream and milk plus local produce. This brings in extra income, adds value to the farm's milk, and makes the business less dependent on the milk price alone, though it needs investment and time to run, showing the benefits and demands of diversification.
Example 2. Robotic milking technology. A farmer installs a robotic milking system. The technology lets cows be milked automatically, records data on each cow's yield and health, and can detect problems such as mastitis early. This improves efficiency and record keeping, key benefits to the farm business, though it is costly to install.
Try this
Q1. A farm has an income of 4000 pounds and costs of 2500 pounds. Calculate the profit. [2 marks]
- Cue. Profit = income minus costs = 4000 minus 2500 = 1500 pounds.
Q2. Give one benefit of farm diversification. [1 mark]
- Cue. Extra income, spreading risk, using spare buildings or land, or adding value to produce.
Exam-style practice questions
Practice questions written in the style of CCEA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
CCEA Unit 2 style4 marksDefine income, cost and profit, and calculate the profit if a farmer's income is 5000 pounds and costs are 3200 pounds.Show worked answer →
Three marks for the definitions and one for the calculation.
Income is the money a farm receives from selling its produce (for example milk, animals or crops). Cost is the money the farm spends to produce that output (for example feed, fertiliser, fuel, labour). Profit is what is left when costs are taken away from income.
Profit = income minus costs = 5000 minus 3200 = 1800 pounds.
So the farmer makes a profit of 1800 pounds. If costs were greater than income, the farm would make a loss. Markers reward correct definitions of all three terms plus the correct profit of 1800 pounds.
CCEA Unit 2 style4 marksExplain what is meant by farm diversification, giving two examples, and explain one benefit to the farmer.Show worked answer →
Two marks for the meaning and examples, two for a benefit.
Farm diversification means the farmer developing a new business or income on the farm alongside, or instead of, traditional farming.
Examples in Northern Ireland include opening a farm shop, providing tourism or accommodation, or making niche premium products such as ice cream, cheese, yoghurt or meat (any two).
A benefit is that diversification provides an extra source of income, so the farm is less dependent on the uncertain prices of traditional farm produce; it can spread risk, make use of spare buildings or land, and add value to the farm's own produce.
Markers reward the definition, two valid examples, and a clear benefit such as extra income or spreading risk.
Related dot points
- Consumer food choices and demand and their influence on farm production, the difference between intensive and extensive farming including organic methods, and how products are processed, preserved and transported from farm to supermarket shelf.
A focused CCEA GCSE Agriculture and Land Use answer on food production and processing, covering consumer food choices and demand, the difference between intensive and extensive farming including organic methods, and how food is processed, preserved and transported from farm to supermarket.
- How to approach animals and carry out routine health checks safely, the safe storage, use and withdrawal periods of agrichemicals and medicines, the dangers of slurry and machinery, and the key features of a risk assessment.
A focused CCEA GCSE Agriculture and Land Use answer on farm health and safety, covering approaching animals and routine health checks, the safe storage, use and withdrawal periods of agrichemicals and medicines, the dangers of slurry and machinery, and the key features of a risk assessment.
- The main sources of farm pollution, the Nitrates Directive and Nitrate Vulnerable Zones, eutrophication using Lough Neagh, how farmers reduce pollution including technology, water quality using BOD and indicator species, and energy from anaerobic digestion.
A focused CCEA GCSE Agriculture and Land Use answer on pollution and farm waste, covering the sources of farm pollution, the Nitrates Directive and Nitrate Vulnerable Zones, eutrophication of Lough Neagh, reducing pollution including technology, water quality using BOD and indicator species, and anaerobic digestion.
- The importance of the agri-food industry to the Northern Ireland economy, the range of careers in the agri-food and land use sectors, the skills and qualifications needed for them, and the need for ongoing training in the industry.
A focused CCEA GCSE Agriculture and Land Use answer on the agri-food industry and careers, covering the importance of the agri-food industry to the Northern Ireland economy, careers in the sector, the skills and qualifications needed, and the need for ongoing training.
- The production of one common farm crop from site selection through to distribution, the main costs at each phase, the main types of farm machinery used, and the differences organic methods would make to that crop.
A focused CCEA GCSE Agriculture and Land Use answer on growing a farm crop, covering the production of one crop from site selection to distribution, the costs at each phase, the main types of farm machinery, and how organic methods would differ.