Operating & Capital Expenditures: Section 29 (and elsewhere)

Operating & Capital Expenditures: Section 29 (and elsewhere)

Expenditures In the simplest terms, farm income equals gross farm receipts minus farm expenses.

Expenditures - General Two Important Distinctions WHO: WHEN: Only count if purchased in 2017 Whether they use it in 2017 doesn t matter Material purchased in 2016 and used in 2017 is ignored

Expenditures General Total Expenses = Operator + Landlord + Contractor. Be SURE to record the expenses in the Correct Column. DO NOT CONTACT THE CONTRACTORS OR LANDLORDS FOR THESE EXPENSES.

Contractor Expenses Contractor pays for production expenses. Contractor reimburses the contractee for production expenses.

Contractor Expenses Contractor charges the operator for an expense the contractor originally had paid for.

Why are Farm Expenditures collected in such significant detail?

Operating Expenses

Operating Expenses FEED Chemicals Tools Farm Services Insurance Livestock Purchases RENT Irrigation SEED Taxes Fertilizer Fuel Labor I.M. 5.9.2

Seeds/Fertilizer/Chemicals Items 1 3 Expenses that were PAID for in 2017.

Livestock Livestock expenses should be present if there are inventories reported in Sections 11-18.

Livestock Livestock expenses should be present if there are inventories reported in Sections 11-18.

Fuel: Example 1

Fuel: Example 2 =$12,075

Supplies, Repairs & Maintenance Items 13 15: SUPPLIES REPAIRS MAINTENCE of BUILDINGS Item 16: Repairs to Operator s Dwelling (ONLY IF) House is recorded as an asset in record books. Deeded as part of the farm. House is reported in Section 30

Labor Expenses ITEMS 23-31

Cash Wages NOTE: Table at beginning with clear include & exclude instructions: BREAKOUT OF WAGES Exclude Draws by operators & other workers.

Cash Wages - operators If this is a family operation then any operator wages should be cash draws. Spouse would be able to report wage if they are not an operator.

General Business Expense Frequently a combination of items Read the details in the text box Pull out items that don t belong

Marketing Charges Item 33 Almost all operations that sell commodities have marketing expenses. i.e check-off fees If operator reports no marketing charges, probe to find out if anything was subtracted out of the total price before the farmer received the check. Get total quantity and unit sold if operator doesn't know the total marketing charges.

Expenses not located in Section 29 Gross rent for land/buildings: Section 3 Cash Rent Share rent Grazing fees Livestock contract production fees: Section 21 TOTAL FEES RECEIVED in 2017 Section 21, Item 2, final column

Capital Expenditures ITEMS 34-44

Capital Expenditures Purchases of assets for the farm business made during the current year that are normally usable over two or more years Capital assets are usually placed on a depreciation schedule and listed on a statement of assets Is it on the operation s depreciation list? Is it listed on the operation s asset page?

Example Operating expense or capital expense? Overhaul of tractor transmission. Cost: $25,000. If listed on depreciation schedule, then it is a capital expense (Item 44: All other capital expenditures). Overhaul of tractor transmission. Cost: $25,000. If not listed on depreciation schedule (expensed), then it is recorded in repair and maintenance (Item 14). Depends on how the operation records the information for tax purposes.

Wheat Questions

Wheat Items 1, 2, 3, 9, 10, 11, 14, 15, 17, 23, 25, 26, 27, 28 have wheat specific questions How much was for the WHEAT enterprise The percent of the farm gross margin that can be attributed to the targeted commodity Percent wheat gross margin = (value of wheat production - commodity costs) (value of farm production - farm costs)

Data Relationships

You should expect to see particular expenses depending on the type of farm you are surveying. Utilities Taxes Fuel All Farms Farm Supplies Vehicles Insurance Interest Labor

Seed Fuel Fertilizer Crops Labor Chemicals Repair Rent

Feed Seed Veterinarian Fuel Expenses Livestock Fertilizer Purchases Livestock Crops Repairs Labor Bedding & Chemicals Litter Custom Repair Services

Labor Seed Chemicals Fuel Seed Fertilizer Nursery & Crops Greenhouse Fuels Labor Fertilizer Chemicals Utilities Repair

Data Relationships, EXAMPLES Debt Reported (Section 32) ITEM 18: Interest expenses Land Owned (Section 1) ITEM 19: Real estate taxes Real estate taxes paid by the landlord are expected if land rented from others was reported in Section 1. Production Contract (Section 21) Contractor expenses Largest are usually feed and livestock purchases.

Data Relationships, EXAMPLES Dairy operations ITEM 28a: Milk hauling expenses If these expenses were netted out of the operator's milk check, add them back to get the "net" figure If vehicles are owned or leased ITEM 21: Registration fees are expected (Vehicle registration and licensing).

GENERAL COMMENTS Encourage use of farm records Most accurate data when records are used. Shorter interview time if the records are used. The IRS 1040 - Schedule F Tax form contains some information but it will be in summary format and you will have to try to split it out for ARMS III. Operators best estimate is acceptable for responses if no farm records are available.

This is only a guide! Use your best judgement before recording data to the questionnaire! Section 27: 5G Section 27: 2b I - iv Section 27: 1a Section 27: 2c I - v Section 27: 5a Full Schedule F available in School Kit & on NASDA website

ARMS III The Farm Story When the interview is concluded, ask yourself: Does the whole questionnaire make sense? Does it tell a story?

NASS Uses of Expenditure Data

Farm Production Expenditures Summary

Provides annual weights for NASS s computation of the Prices Paid Indexes, a component of the calculation of Parity Prices required by the 1933 Agricultural Adjustment Act. Bureau of Economic Analysis (BEA). Development of U.S. Gross Domestic Product (GDP). Office of the Chief Economist. Office of Energy Policy and New Uses (OEPNU). Calculation of volume of fuels used by type. Fuel expenditures are broken out by type as always.

ERS Uses of Expenditure Data

Farm Income Estimates: Net Farm Income U.S. farm sector financial indicators, 2011-2017F United States Data as of: 11/29/2017 Change 2011 2012 2013 2014 2015 2016 2017F 2015-2016 2016-2017F $ billion Percent Percent Cash income statement a. Cash receipts 365.9 401.4 403.6 424.2 376.9 356.5 365.1-5.4 2.4 Crops 1/ 201.0 231.6 220.8 211.4 187.5 193.7 189.9 3.3-2.0 Animals and products 164.9 169.8 182.7 212.8 189.5 162.9 175.3-14.0 7.6 b. Federal Government direct farm program payments 2/ 10.4 10.6 11.0 9.8 10.8 13.0 11.2 20.1-13.8 c. Cash farm-related income 3/ 30.8 39.3 41.0 36.6 34.4 27.9 30.1-18.9 8.0 d. Gross cash income (a+b+c) 407.1 451.3 455.5 470.6 422.1 397.4 406.4-5.9 2.3 e. Cash expenses 4/, 5/ 283.9 316.1 320.0 339.0 315.9 304.1 309.5-3.7 1.8 f. Net cash income (d-e) 123.2 135.3 135.6 131.6 106.2 93.3 96.9-12.2 3.9 Farm income statement g. Gross cash income (a+b+c) 407.1 451.3 455.5 470.6 422.1 397.4 406.4-5.9 2.3 h. Nonmoney income 6/ 16.5 18.3 17.7 16.9 17.8 17.1 18.2-3.5 6.2 i. Value of inventory adjustment -3.2-19.8 10.6-4.3 0.5-2.5-5.7 NA NA j. Total gross income (g+h+i) 420.4 449.8 483.8 483.1 440.4 412.0 419.0-6.4 1.7 k. Total expenses 306.9 353.3 360.1 390.7 359.0 350.5 355.8-2.4 1.5 l. Net farm income (j-k) 113.6 96.5 123.8 92.4 81.4 61.5 63.2-24.4 2.7

Selected expense items, billion dollars, 2014-2017F Source: USDA, Economic Research Service, Farm Income and Wealth Statistics Data as of November 29, 2017

Production Expenses: By Type of Expense, 2003-13F

Select Production Expenses by Type of Farm Source: USDA, Agricultural Resource Management Survey (ARMS), 2016