Estimation of State-Level
Balance Sheets Has Been Suspended
ERS will continue to publish aggregate sector wide balance sheet estimates
at the National level. However, data needed to construct State level balance
sheets are no longer available. Based on a thorough review of data used to
construct aggregate sector wide farm balance sheets at the State level, ERS
has concluded that insufficient data are available to continue to make reliable
estimates. For those who wish to examine allocation factors that have been
used to develop State-level estimates of debt and assets, the final versions
are available in spreadsheet form for assets, real
estate and non-real
estate debt.
ERS remains committed to producing farm financial data and will continue to
publish farm-level balance sheets constructed from data collected through the
Agricultural Resource Management Survey (ARMS) for both the U.S. and the 15
States for which a large enough sample exists to produce defensible estimates.
Farm-level balance sheets are developed for the farm as a business establishment,
which are different from sector wide balance sheets in that they do not include
assets owned or debt owed by nonoperator landlords or other participants in
the farm sector who are not a part of the ownership structure of the farm business.
Estimates of farm business income statements, financial ratios, and debt repayment
capacity are developed from annual ARMS data and available for a wide range
of farm types and geographic regions through the ARMS
web-based data delivery tool, which may be accessed from the ARMS briefing
room.
Background
Aggregate sector-wide balance sheets refer to balance sheets constructed to
include assets and debts held by operators, landlords and others who provide
assets or debt capital for use in farm businesses. All assets or debts are
included in the estimate regardless of ownership. This differs from the balance
sheet typically constructed for an individual, firm, or household in that it
includes assets and debts of multiple parties.
Aggregate sector-wide balance sheet estimates are constructed using a variety
of USDA survey and institutional data, which are available for the most part
only at the national level. While providing sector level trend statistics,
financial indicators developed from the sector-level balance sheets do not
provide information about the distribution of either assets or debt among farms,
or the financial position of farms or sub-sectors of the agricultural economy.
The Agricultural Resource Management Survey (ARMS) and its predecessor, the
Farm Costs and Returns Survey, were developed to fill an information void regarding
the distribution of assets, debts, and incomes to support debt service commitments.
ARMS is a farm-level establishment survey that does not provide information
about assets or debt of land owners, contractors or other participants. Thus,
while providing a distributional perspective regarding assets, debts, and financial
performance indicators for farm businesses, ARMS does not support the development
of all inclusive sector-wide estimates.
Farm Structure and Institutional Changes Reduce the Information Content
of some State-level Data Series
Farm businesses have become
larger and, as a consequence, use more complex business arrangements such
as contracts and joint business ventures since sector-based balance sheets
were first estimated. These changes affect who owns assets, who holds debt,
and where and how assets and debt are acquired for use in production. The
distribution of assets and debt is skewed with larger farms holding a disproportionate
share. The 1 percent of farms with $1,000,000 or more in sales owned about
5 percent of acreage and owed over 16 percent of debt in 2003. Meanwhile,
farms with less than $100,000 in sales (over 80 percent of all farms) accounted
for over half of land owned and owed 42 percent of debt. Households that
operated these smaller farms also held over 80 percent of non-farm debt.
These distributions have implications for measurement. For example, households
with smaller operations tend to engage, as a group, more in off-farm activities.
When considering off-farm sources of income, the tendency may be to think
about wage or salary income, but over one in ten farm households also operate
a non-farm business and around 12 percent of household income in 2003 was
from such businesses. It is not clear how the non-farm debt of farm households
may be related to their farm business or to business debt reported by lending
institutions. If non-farm business assets are secured with farm assets, then
household debt for non-farm purposes may be included in debt reported by
farm lenders.
Institutional changes have also affected the availability of data to support
estimates of sector-wide balance sheets. For example, banking legislation in
the 1990s created the opportunity for mergers of financial institutions
across State lines. These changes enabled an institution making loans in one
area to be headquartered in another area, even another state. This is important
to the estimation of sector-wide balance sheets because Call Report data generated
by the Federal Reserve System for banks are consolidated at the headquarters
office of a bank, even if it has many branches in multiple states. Thus, loans
made to farmers in one State may be reported in another.
Many Types of Source Data for Aggregate Sector-based Balance Sheet
Estimation do not exist at the State Level
The aggregate
farm sector balance sheet is prepared using data from a variety of USDA and
other sources for both assets and liabilities. Data used in constructing
estimates of farm assets are taken primarily from National Agricultural Statistics
Service (NASS), Economic Research Service (ERS), and other USDA sources.
Data used to construct estimates of farm sector debt are acquired from both
USDA and institutional sources. Many data sources used in constructing estimates
of asset values and farm sector liabilities are available only at the national
level.
Real Estate
This component is based on NASS value per acre
of land and buildings and land in farms. Land value data are at the State level.
However, land and building values are adjusted to remove the value of operator
dwellings from the total. The share of total land and building values comprised
of operator dwellings is not available on an annual basis at the State level.
Crop Inventories The value of annual change in crop inventories
is taken from the farm sector income accounts and exists at the State level.
Machinery and Equipment The estimate of total value is derived
from national level estimates of the values of machinery and equipment used
to estimate capital consumption costs in the farm sector income accounts. The
total is value of machinery and equipment is developed at the national level.
Financial Assets The estimate is taken from the latest Agricultural
Economics and Land Ownership Survey and is updated based on changes in financial
assets in the U.S. economy. Annual data are not available on a State basis.
Investment in Cooperatives National and State level data
are obtained from institutional sources. ERS uses the most recent data available.
Purchased Inputs Estimates of the value of purchased inputs
of principal farm operators are derived from ARMS. These data exist for in
ARMS only for 15 States.
Livestock Inventory Estimates of the value per head and
numbers of animals come from NASS and the farm sector income accounts. Data
are available at the State level.
Farm Credit System Debt These data are taken from Farm Credit
Funding Corporation reports which are available at the national level.
Farm Service Agency Debt Data are from Farm Service Agency
Reports and are reported on a State level.
Commercial Bank Debt Data are from Call Report data obtained
from the Federal Reserve System. State-level data, however, are based on where
the headquarters of a bank is located and not on where farmers or other borrowers
exist that took loans.
Life Insurance Company Debt Data are reported at the State
level.
Individuals and Others Debt Base data for the estimate come
from Farm Finance Surveys. Data for annual updates are not available for all
States.
CCC Storage and Drying Loans Data are reported on a national
level.
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