Balance Sheets for HouseholdFirms in Agriculture

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Balance Sheets for Household-Firms in Agriculture

• Mitch Morehart Jim Johnson
• Economic Research Service, USDA
• 1800 M Street NW
• Washington DC 20036

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FARM SECTOR BALANCE SHEET

• The farm sector balance sheet excludes assets
  and liabilities attributable to farm operator
  households that are not related to production
  activities.
• The exclusion of assets from the sector balance
  sheet that are for non-farm purposes involves
  estimating the value of operator dwellings,
  household equipment, the portion of automobiles
  and trucks allocated for family use, and time
  deposits and savings balances that are
  distinct from the farm business.
• Home mortgages and the households share of
  non-real estate debt are subtracted so that
  farm sector debt represents only business-
  related obligations.
• This separation of household assets and
  liabilities only pertains to those areas
  where the commingling of farm and personal
  items is likely to occur. The farm sector balance
  sheet makes no attempt to fully account for
  farm household assets and liabilities.

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FARM HOUSEHOLDS AS THE UNIT OF ANALYSIS

• Micro-level financial analysis conducted by
  USDA is designed to represent the financial
  position of the farm as a business separate
  from personal assets and liabilities associated
  with the farm operators household.
• Data necessary to support firm and household
  level analysis are collected annually in the
  Agricultural Resource Management Survey
  (ARMS).
• The separation of farm business and farm
  household balance sheet components is
  achieved during the data collection process.
  Respondents are asked to assign a current market
  value to farm and household assets, specify
  the amount of debt owed to various lenders,
  and identify whether or not the specific asset
  or liability belongs to the business the
  primary operator, but still have a share of
  the equity of the farm.

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ARMS Content Farm Business Financial Structure
Farm Equity
Assets
Land and buildings
Liabilities
Machinery and equipment
Crop inventory
Outstanding balance
Livestock inventory
Interest rate
Input inventory
Term of loan
Accounts receivable
Investments in growing crops
Percent for farm use
Other assets (cash, checking
accounts, etc)
Owned ManagedAssets
Owners of production resources
Operator household ( of assets and debt)
Partners/share holders ( of assets and debt)
Non-operator landlord (land and buildings)
Contractor/integrator
Lessors
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ARMS Content Farm Household Finances
Household Income
Farm
Non-Farm
Household Share of Net Farm Income
Income
gt All off-farm
gt All off-farm (cash wages,, etc.)
gt Net-cash income from another farm
Household Share of Farm Business Net Worth
gt Net-cash income from another business
gt Net income from land rentals
gt Interest and dividends
gt Disability, retirement, social services
gt Other non-farm services
Household Net Worth
Owned by Operator Household Non-Farm
Assets Non-Farm Debt
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Detailed Assessment of Non-farm Assets in 1999
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Farm household balance sheet components by
collapsed farm typology group, 1999
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Distribution of farm households by household net
worth category, 1999
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Farm households, much like their non-farm
counterparts, are diversified in their portfolio
of financial assets.
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COMPARABILITY WITH NON-FARM HOUSEHOLDS
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DISCUSSION POINTS
Compatibility of national account estimates
and survey-based balance sheet estimates.
Reliability of survey-based approach in terms
of the valuation of assets and the division of
balance sheet components between the business
and the household. Alignment between income or
value added measurement and balance sheet.