Description of farm operating expenses

The estimates present gross expenses and rebates (where applicable) for each item. Gross expenses, net expenses and rebates are available.

Estimates of farm operating expenses represent business costs incurred by farm operators for goods and services used in the production of agricultural commodities. All expense information is on a calendar-year basis. If direct rebates are paid to farmers to reduce the cost of particular inputs, then the net expense estimates are used in the preparation of net income, although both gross and net expenses may be displayed. As the objective is to produce provincial estimates of net income, within-province flows from one farm to another are excluded from the estimates. The province can be viewed as one large farm.

Property tax estimates include municipal and school taxes on agricultural land and buildings owned and operated by farmers. They exclude property tax on land rented to others as this is not the business of producing agricultural goods. Taxes on land rented from others are also excluded as these are accounted for in rent expenses. The personal share of property taxes on the farm house is excluded.

Cash rent expenses are estimated for rent paid for land and buildings rented from the government or private sector, including other farmers. Taxes paid on property rented from others and community pasture or grazing fees are included. Quota rental and machine rental costs are excluded. Share rent expenses are estimated for the value of rent, which is paid on a share-crop basis.

Cash wages and room and board estimates include farm wage and salary expenses for hired labour. Wages for the family, including the spouse and children, are also part of this estimate. Wages are split into family and non-family using data from the most recent Census of Agriculture. An increase in family wages would decrease net farm income but leave family income unchanged. Employer contributions for Worker's Compensation, Employment Insurance and the Canada Pension Plan are included. A separate estimate was made for room and board expenses prior to 1986.

Interest expense estimates are made for interest paid on all farm business loans such as mortgages or credit from suppliers and private individuals. Payments on the principal are excluded. Interest paid on land rented to others or on the personal portion of the farm house are excluded using information on land tenure from the most recent Census of Agriculture and tax allowances.

Repairs to buildings and fences expenses include all of the costs associated with the repair and maintenance of farm buildings and fencing, including the farm business share of the farm house. Expenses associated with capital improvements, such as renovations, alterations and new building or fence construction are excluded. A separate estimate was made for repairs to fences expense prior to 1986.

Electricity and telephone expenses are estimated for the farm business only. The personal use portion of these expenses and installation costs are excluded using information from the most recent Census of Agriculture and tax allowances.

Heating fuel expenses include heating and grain drying with oil, propane, natural gas, wood and coal. The personal share of home heating is excluded using information from the most recent Census of Agriculture and tax allowances.

Fuel expenses include petroleum, diesel oil and lubricants used for all types of machinery and equipment from tractors and combines to generators and irrigation pumps. The personal shares of these expenses are excluded using information from the most recent Census of Agriculture and tax allowances.

Machinery repair and other machinery expenses are estimated for repairs and maintenance, licence, registration and insurance costs for farm vehicles and machinery. These estimates include the cost of parts, labour and the farm business share of automobile and truck maintenance.

Fertilizer and lime expenses include all costs associated with the purchase of fertilizer and lime including spreading, if it is part of the cost. A separate estimate was made for lime expense prior to 1986.

The estimate for pesticides represents farm expenditures for all pesticides, herbicides, insecticides and fungicides. If the application of pesticides is part of the cost, it is also included.

Commercial seed expenses include the value of seed and seedlings purchased by farmers through commercial channels, such as elevators, seed houses and seed dealers. The estimates exclude expenses for seed purchased from other farmers as this is an inter-farm transfer in the provincial accounting system. The value of home-grown seed and the value of seed bought for resale are excluded. Seed cleaning and treatment costs are included if they are part of the purchase cost. Prior to 1973, purchases also included nursery stock. From 1973 to 1982, farmers' purchases of nursery stock have been deducted from nursery stock receipts in the farm cash receipts account. Since 1983, only nursery stock purchases from within the same province have been deducted.

Irrigation expense estimates are for the purchase of water or water rights, and exclude the operation or purchase of irrigation equipment.

Twine, wire and containers expenses include farmers' costs for the purchase of baler twine, binder twine, baling wire, plastic wraps and containers. Containers include burlap and plastic bags, wood and cardboard boxes, plant pots and flats, egg cartons and trays, etc. Large containers, such as grain bins, are not included since these are considered capital expenditures.

Crop and hail insurance expenses include the premiums that farmers pay towards both private and government programs. Prior to 1971, crop insurance and business insurance expenses are combined in a total insurance expense. Crop insurance indemnities have been included in the cash receipts account since 1971.

Commercial feed expenses are estimated in the same manner as those for seed. Only the cost of feed and feed supplements purchased by farmers through commercial channels is included—the value of feed bought from other farmers and the value of home-grown feed are therefore excluded. Hay and straw costs are included.

Livestock purchase estimates represent only interprovincial and international trade of cattle, calves, weanling pigs and lambs moving directly to farms. Stock bought and sold between farmers in the same province are not included. From 1971 to 1996, livestock purchase estimates included poultry purchases. Poultry purchases represented the cost of purchasing chicks, pullets, turkeys, geese, ducks, and all other types of poultry from hatcheries. Prior to 1997, hatcheries were considered outside of the agricultural sector. With the inclusion of hatcheries in the agricultural sector, beginning in 1997, under the North American Industry Classification System (NAICS), expenses for poultry purchases have decreased. Movements of birds between farms - including purchases from hatcheries - within the same province are not included.

The artificial insemination fees and veterinary expenses estimates represent all costs that farmers incur when obtaining these services, such as medicine, semen, and technical or professional assistance.

Business insurance expenses for 1971 to date represent the gross amount of premiums paid to protect the capital employed in agricultural production. Estimates for earlier years are net of indemnities and are included with crop insurance expenses.

Custom work expenses are net and represent the difference between custom work expenses and custom-work receipts. They include custom work, contract work, machine hire expenses, and the rental and leasing of farm machinery, equipment and vehicles. Expenses with benefits spread out over many years (such as land clearing) are excluded.

Stabilization premiums are expenses that farmers pay to belong to stabilization programs that support either farm income or prices for selected commodities.

Legal and accounting fees that are pertinent to the farming operation are included. Prior to 1990, legal and accounting fees were a part of other expenses.

Other expenses include items that are not covered elsewhere in the accounts such as office and promotion expenses. Legal and accounting fees were part of other expenses before 1990. They are now a separate item.

Description of depreciation charges

Depreciation charges against the farm business are intended to account for economic depreciation or the loss in fair market value of the capital assets. Generally, depreciation is considered to occur as a result of aging, wear and tear, and obsolescence. It represents the value of capital that is no longer available for future use. Economic depreciation should not be confused with accounting depreciation, tax depreciation, or capacity depreciation.

Building depreciation estimates the depreciation of farm buildings on owner-occupied farms, including the farm business share of houses. The charge for building depreciation on tenant-occupied farms is assumed to be included in the cost of cash or share rent. Machinery depreciation estimates the depreciation of the farm business share of autos and trucks and the depreciation of other machinery that are owned by the farm business. Autos, trucks and machinery leased by the farmer are not depreciated.

Description of rebates

National and provincial estimates of rebates paid directly to farmers represent a reduction in business costs incurred in the production of agricultural commodities. Rebates, paid by various governments, are calculated on a calendar-year basis.

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