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Data Gaps and Recommendations. — Primary concerns about supply, use and price data are generally expressed as needs for improved accuracy, improved timeliness, and more item or geographic detail. Another concern sometimes voiced by farmers is that the abundance of data on farm commodities places them at a competitive disadvantage with input suppliers or buyers and processors of their products. There needs to be a continuing effort to make the statistics and analysis usable for the individual farmer's decision-making as well as to keep the farmer informed on the importance of these statistics in providing orderly markets and informed public policy decisions to reduce his uncertainties and economic risks.
The major emphasis in ESCS statistics program improvements during the past ten years has been on improvements in accuracy and timeliness of farm commodity production forecasts and estimates. Thus, the quality of production statistics are generally very good. One gap that needs to be closed is the lack of an annual measurement of greenhouse and nursery products.
The disposition and use statistics for farm commodities are much less adequate than the production data. Monthly distributional data on marketings of crops need to be available quarterly for the farm income accounting work. Improved data on interfarm sales of commodities, separated between interstate and intrastate, are needed annually for most major commodities and quarterly for stocker and feeder cattle. These are also needed to improve the accuracy of the farm income accounts.
Two important data gaps exist in the inventory statistics for farm commodities. Recommendations in the report by the Advisory Committee on Gross National Product Data Improvement are aimed at correcting these problems. First, all commodities owned by farmers need to be included in the estimates of inventories owned by farmers until they actually sell them. Steps are being taken to correct these data series which formerly only counted the commodities stored on farms as still owned by farmers.
Second, quarterly surveys to inventory cattle and calves are needed. These are now surveyed semiannually which is insufficient for accurate quarterly estimates of farm inventories.
Foreign country commodity statistics have received increased attention in the past five years. Significant increases in exports of U.S. farm products and in prices of imported commodities such as sugar and coffee have helped to emphasize the need for improvement in these data. Supply and use data provided by statistical programs in many of the
major trading countries are reasonably good. And a long term trade agreement with the U.S.S.R. has helped to reduce market uncertainties caused by inadequate statistics on current production in the Soviet Union. Finally, the Foreign Agriculture Service has made significant improvements in its use of computer technology to make these statistics more timely and accessible.
Major improvements are still needed to make these data more adequate for appraisals of international market conditions and trade potentials. The U.S. should support long-term improvement in the quality and objectivity of agricultural statistics programs in foreign countries through projects of the Agency for International Development and the Food and Agriculture Organization of the United Nations. Also, research and development of remote sensing technology should be continued as long as these new techniques offer a viable alternative for estimating crop production around the world.
Improving price data for farm commodities is the objective of current statistical program improvement projects of ESCS. Point-of-sale surveys, improvement in list frames of purchasers, and use of probability surveys of purchases are all techniques being introduced to improve the data on prices received by farmers. Use of these improved methods should be expanded to include all major farm commodities.
A program to collect prices paid under various terms of production contracts needs to be developed by ESCS. The contracted marketing channel is becoming increasingly important for some commodities. Integrated production between the farm and processing sectors is also increasing in importance for some commodities. When a producer or farm-level price is not observable for a commodity, any estimates of such a price should be dropped from the published statistics on prices received.
A stronger program of data on commodity prices in foreign countries should be developed. This would be of great help to analysis of international markets and trade prospects. A recently initiated ESCS program to collect data on operating margins of food wholesale and retail firms should be developed to its full potential. These data are needed for assessment of the performance and pricing practices of these firms. Many data users now use price spread data to reach conclusions on equity of profits and pricing practices in this part of the food system even though these data are inadequate in concept and design for such a use.
A number of data gaps and improvement needs have been identified for the supply, use and price data
prove these price data should be developed and implemented. Such a program improvement is needed to reflect changing marketing structure and purchasing points of farm inputs. Discounts and special allowances granted to larger agricultural operations need to be accounted for and coverage needs to be extended to contracting and leasing of services and equipment and pricing of major farm services.
Wage data has been improved recently along with other labor data improvements. However, data on interest rates paid need to be improved. These data are often only the quoted rates on new loans by different categories of financial institutions.
Data gaps in the third category of supply, use and price data are as important as the many gaps identified for farm commodities and inputs. There is a major need for statistical survey estimates of food consumption. These data are needed to identify shifting consumption patterns and to update price and income elasticities of demand for farm commodities.
on resources and farm inputs. A more complete and detailed program of supply and use data on fertilizer and pesticides needs to be developed. These improvements are needed to aid price analysis and forecasting as well as assessment of impacts of current or proposed environmental programs,
Analysis of environmental issues also requires filling other gaps in the agricultural data system. Data on water quality, soil loss and erosion rates, and productivity of related conservation measures and production practices are needed to evaluate environmental programs.
Land data is the least adequate of the information on the basic resources used in farm production. Data on shifts in land use, investment in land improvements and ownership of land are needed to fill current gaps. Land supply and productivity estimates would be improved by these data as well as the ability to address other policy issues like the importance of alien ownership of land.
Data on labor used on farms has been significantly improved in the past three years by ESCS. Remaining gaps that should be filled are measurement of total labor used in farm production and distributional detail on labor used to produce different commodities. These data are needed for productivity analysis and analysis of potential supplies and production costs of commodities.
Capital data improvements are also needed for the agricultural data system. To improve the income and product accounts for the farm sector, annual data should be collected on the value of depreciable, nonland capital improvements and quinquennial data should be collected on the market or replacement costs of residential and non-residential buildings. Additional data on capital improvements made with on-farm resources should be collected to improve the income and product accounts.
Another improvement that should be made in capital data is annual collection of the amount of debt owed to merchants and dealers. Current five year estimates of this source of capital are far less adequate than estimates of debt owed to banks and other lending institutions. Significant revisions in this data series have been required when the five year estimates become available from the Census of Agriculture. Finally, conceptualizing, identifying and measuring new sources of capital being used in the farm sector such as equipment leasing, limited partnerships, and contract production should be included in the data programs.
Price data on farm resources and inputs are provided by ESCS. A comprehensive program to im
The need for indicators and accounts that provide a frame of reference for assessing the economic performance, viability and equity in agriculture are even greater today than they were when originally designed. However, the list of policy issues to be addressed has become much broader and more complicated and the economic structure of the sector has changed dramatically, making equity questions much different from those that occurred when this part of the data system was designed.
These changes result in a problem of conceptual obsolescence for the economic indicators and sector accounts. These data do not measure some of the right things and do not provide information for addressing some of the important economic policy questions. Instead of clearly indicating who gains and loses as farm programs, production and prices change, the system provides incomplete data at best and misleading information at worst.
Some of the more important information problems caused by incorrect structural concepts used in the indicator and sector account data are: 1. All income from farming goes to individual
landowners or to farm operator families. Instead, the situation is that some unknown portion of income from farming goes to large corporate firms who own farmland, operate a farm, or contract with farmers for the produc
tion of commodities. 2. All income from farming goes to the farm pop
ulation, which consists of households that operate farms. The situation is that farm population is a residential definition rather than an occupational or business definition and the two are increasingly divergent. Many people living on farms do not operate farms while an increasing number of farm operators do not live on farms. This fact, plus the importance of other sources of income to farm operators, makes a comparison between per capita incomes of the farm and nonfarm population a very poor indicator of the need for changes in
farm price and income programs. 3. Average netfarm income per farm is a
frequently used indicator of the adequacy of returns to farm operators and to the resources used in farming over time. However, the changes that have taken place in the structure of the sector make this a very weak indicator to use. One reason is the unknown portion of income from farming that is going to the nonfarm corporate sector. A second reason is the greatly increased concentration of farm production on large operations. Thus, the size of the numerator of this indicator is primarily influenced by the management of the large farm operations while the denominator includes the relatively large number of very small operations.
The farm sector was the major concern when the economic indicators and sector accounts were designed. Now the issues relate to a broader food and fiber sector including agriculture service, farm input, food processing and food distribution industries. The greatly increased importance of these other industries in providing food for the consumer make their economic performance an issue today. The equity questions today include the market power and level of returns to each of these industries in relation to
od prices. The equity questions also include the relative level of returns to each of these industries in relation to the return received by the farmer from the consumer's food dollar.
The equity issues within the farm sector have also shifted as the structure of the sector has changed. The widely diverse types of farm operations require new distributional data to measure the returns to large and small, corporate and sole proprietorship, and single establishment and multi-establishment types of businesses as different target groups.
Concept Problems, Data Gaps and Recommendations. — Since most of the indicators and accounts were designed for the farm sector, the most significant concept problems are related to this sector. Concepts and standard classifications used for farm sector data perpetuate incorrect descriptions of the economic structure of farming. The resulting information from the indicators and accounts data thus fails to clearly show the distributive impacts of program and income changes.
4. Each farm business has one and only one
operator household related to it. This concept has long been outdated because of formation of partnerships and family or other closely held corporations. Continued use of this concept in derivation of farm income per operator figures provides an inaccurate picture of the relationship between business and household incomes:
5. Farm operations consist of an inseparable
business establishment and household unit. While this is true for many farm operations it is not true for nearly all of them, as it was when the indicator and sector account data were designed. One important change has been the relatively large amounts of wage, salary and other income sources earned by farm operator households. The majority of farm operator households do not have to rely only on income from farming for their well-being. A second change making this concept obsolete is that farm production has become an integrated or diversified activity for a significant number of nonfarm business corporations. Concern for the welfare of a farm operator household as prices or incomes change is not transferable to
this type of economic structure. 6. Food and fiber production is the only
economic activity that takes place on farms which are characteristically independent, small, single-establishment and family-owned businesses. Again, this is true for many farm operations but the extent and change of nonfarm corporate involvement in farming is not measured well by the indicator and sector account data. Nor is the importance of secondary business activities on farms
adequately measured by the data system. One final major concept problem for the farm sector is encountered when trying to determine what price levels provide a fair return to the farmer. One indicator used for this purpose is net income for the farm sector relative to the historical trend. Two other indicators used, for which weaknesses have already been discussed briefly, are the historical trend in net farm income per farm and the comparison of per capita income between the farm population and the nonfarm population.
Another indicator that has long been used for this purpose is the parity price ratio. This is based on prices paid and received by farmers in a base period assumed to be a time when farmers received a fair return from their business operation. The parity ratio, based on a 1910-14 base period, is badly out of date because of the drastic changes in production practices and even in what commodities are produced. An indication of this occurred in the 1973-75 period when farm prices near 100 percent of parity resulted in profits large enough to bring extremely large increases in land prices and rents to the land resource. Changes in the economic structure of the farm and farm input sectors make the 1910-14 period obsolete as a base for determination of a fair price or return to farming activity.
In recent years a new concept based on cost of production has been partly substituted for parity prices. This concept also has a number of problems
associated with it. Statistical measurement of costs across a large number of producers with different production methods is difficult. Wide variance in efficiency of farming operations makes average cost figures a rough guide at best. Then questions ist about what to include in the measure for return to land since profits get reinvested in land causing a ratcheting effect on farmland prices.
These very significant concept problems that have been discussed require major investment in renewal of the economic indicator and sector account part of the agricultural data system.
One major change that should be made in the farm sector accounts is to separate the business and household sectors. Separate income and wealth accounts are needed that represent the business activity only. This procedure would require the income estimates to be compiled and published as income from farming, rather than as the current concept of farm operator's income; the latter implies who receives the income.
As a second necessary step, income from farming should be disaggregated to the several major groups who receive it. A useful set of categories or groups would be farm operators receiving self-employment income from farming, nonfarm business firms that operate farms as a minor activity, nonfarm business firms that contract for farm production, and nonoperating landowners. The group receiving selfemployment income from farming could be further disaggregated into two groups based on whether farming is or is not their primary occupation. Average income per farm could be calculated for volume of sales categories in each of these two subgroups as useful indicators over time of the farm price and income impacts on these more homogeneous business operations.
Self-employment income from farming cannot be properly transformed into a per farm operator basis (implying an income level per household) without more adequate information on the number of households receiving self-employment income from farming. Income for the household sector should be separately accounted for through existing, planned, or modified household surveys. The subgroup of households of primary interest are those receiving self-employment income from farming. Although several household surveys exist or are planned for income data, they may not include a large enough sample for estimating the income of this target group. Samples should be augmented to provide the data needed on this minor portion of the population.
A second major change that should be made in farm sector data is to update the standard classifications used for generating statistics about relevant subgroups. The need for statistics distributed by target subgroups is not being met because the classification system has not been renewed.
One part of the need is to develop new categories for classifying data by economic structure. Legal form of organization is one classification used currently but is not sufficient by itself. One proposal developed in recent years is to implement use of a system that labels all farm operations as primary, part-time, or business associated according to the major occupation of the self-employed operator or the major income source of the corporation. Other ideas need to be developed. These could include concentration and specialization ratios and other concepts of economic structure and control. Careful consideration of whether establishments with a farming activity should all be called farms or classified by major economic activity, as is now done for other economic sectors, is an important part of classification system renewal.
A second need is to evaluate the current use of demographic characteristics of the household for classifying production data for the business sector. One problem this creates is to perpetuate the concept of a one-to-one linkage between a farm establishment and a household. Characteristics such as age, race, and ethnic origin of a self-employed farm operator are relevant for classifying the household income data but are questionable for classifying production or business data.
A related topic that has received significant attention in recent years is what statistical definition to use for a farm. This also has been an issue because of the inability of the agricultural data system to provide information needed on relevant target groups. This resulted in the frequent use of an aggregate indicator, net farm income per farm, so proposals were made to make this a more meaningful economic indicator. This would be accomplished by excluding more of the very small operations from the statistical count of farms used in the denominator for income per farm calculations. The justification was that these small units were more like home garden or household subsistence operations and contributed very little to total sales of farm products. Thus, it was misleading to use them in the count of farms for deriving an indicator that was used in assessing the adequacy of major farm price and income programs.
The proposal adopted in August of 1975 by the Departments of Agriculture and Commerce was to count a unit as a farm only if it sold $1,000 or more of product. Some type of minimum size criterion has been in use since 1850 and been changed eight times
since. The criteria used since the last change in 1959 were (a) a place with 10 or more acres and $50 of product sales or (b) a place under 10 acres which had at least $250 of product sales.
The new definition of a farm was adopted for the final tabulations of data from the 1974 Census of Agriculture. Data collected from the small units were also published to enable data users to adjust historical data series. But the issue is not closed because of opposition to the change from rural development and rural fundamentalist groups. The issue was considered by the 94th and 95th Congress because of the opposing arguments.
Recommendations discussed earlier would improve the information on who receives farm income and would eliminate calculation of net income per farm across the diverse types of operations. However, the statistical definition of a farm adopted in 1975 should be fully implemented unless an alternative definition is required by law. This change in minimum sales value cutoff is justified by price inflation and improved efficiency of statistical programs.
The income accounts are the most important of the farm sector accounts. Some concept problems related to these accounts were discussed above and some data gaps related to these accounts were discussed in the supply, use and price data section. However, several other concept and data gap problems also need correction.
There have been a number of studies that recommend that income accounts for the farm sector be more nearly like the national income accounts in concept and definition. This would require a clean separation of capital items from the current account and accounting more directly for value added in the sector. These important improvements should be made so there will be more comparable measures of gross output and economic activity for the sector.
Several data gaps for the farm income accounts are identified in the Gross National Product Data Improvement Project report. One of the most important recommendations from that report is to collect current quarterly data on farm production expenses for major cost items. Others are to collect annual survey data on cash rents and in-kind share rents separated for dwellings and land, and data on current costs for farm dwellings.
To fill these economic data gaps a more comprehensive establishment data program needs to be developed. The Census of Agriculture has traditionally been the only periodic survey providing economic information for farm establishments. But even this survey is largely devoted to detailed land use and pro