1. METAC Workshop December 14-17, 2015 Beirut, Lebanon National Accounts Compilation Issues Session 3: Agriculture

2. Agriculture Agriculture in METAC countries Agricultural units and agricultural activity Measuring production in agriculture – Reference period – Time of recording – Valuation Economic Accounts for agriculture Data sources and compilation practice

3. Agriculture in METAC countries

4. Statistical units A variety of agricultural farms, small scale holdings and subsistence farming: – Institutional unit: Non-financial corporations\enterprises, and Households – Establishment: … some institutional units/enterprises must be partitioned into smaller and more homogeneous units, which the SNA defines as establishments In the SNA, production account is compiled both by industries/activities and by institutional sectors Needs for consistency between the two set

5. Agricultural units and their activity Principal and secondary activity – Principal activity: defined in ISIC Rev. 4\Section A\ Division 1: : … at 3 digit groups level: 011 Growing of non-perennial crops; 012 Growing of perennial crops; 013 Plant propagation; 014 Animal production; 015 Mixed farming; 016 Support activities to agriculture and post-harvest crop activities … excludes activities of agronomists, veterinary services, vaccination of animals, renting of animals…

6. Agricultural units and their activity Principal activity: ISIC Rev 3, and ISIC Rev 4:

7. Agricultural units and their activity Secondary, inseparable activities: when the establishment’s accounting system does not allow a separation and further allocation of certain activities: – Agricultural – Non-agricultural intended for sale or barter, own final use, or as payment in kind (including compensation in kind paid to employees); two main types: – As a result of continuation of agricultural activity using agricultural products: processing, grading and packing the agricultural products; – involving the agricultural holding: agro-tourism; farm shops (concerning products other than those from the holding); sports and rural recreation; renting and repair of agricultural machinery, agricultural advisory services…, irrigation projects provided to third parties

8. Agricultural units and their activity Identification of the principal and secondary activities: top down approach

9. Agricultural units and their activity Agricultural activities/producers within the NA production boundary: – … the production of agricultural goods or services that are supplied (or intended to be so supplied) on the market: … formal, … informal, typical for households, … illegal, – … the own-account production of all goods that are retained by their producers for their own final use (consumption or gross capital formation)

10. Production account Reference period – Calendar year for the annual accounts Adjustments needed when the agricultural year is not a calendar year The sum of the quarterly estimates within the calendar year should coincide annual results

11. Transactions Market output – … consists of the following accounting items: goods and services sold; – own produced goods and services; – goods purchased for resale, adjusted by the purchased value of the goods sold, as a secondary inseparable activity; goods or services bartered; goods or services supplied by one establishment to another belonging to the same market enterprise; changes in inventories of finished goods and work-in- progress.

12. Transactions Output for own final use: products retained by the producer for his own use, as final consumption or capital formation… – … it is determined as the sum of the following items relevant for agricultural units: goods produced and consumed by the same household; own-account gross fixed capital formation; changes in inventories of finished goods and work-in- progress of some of the above activities.

13. Transactions Intermediate consumption (IC): value of the goods and services used in the process of production, excluding fixed assets Borderline cases between IC and other NA categories, as regards the agricultural activity: – Small tools used mainly at work as IC, not gross fixed capital formation (GFCF) and not compensation of employees; – Clothing or footwear used mainly at work as IC; – Ordinary, regular maintenance and repair of a fixed asset used in production, not GFCF; … when maintenance and repairs do not change the fixed asset, but simply maintain it in good working order or restore it to its previous condition – Research and development - as GFCF, 2008 SNA requirement

14. Transactions Time of recording: – Gross output: when production is completed, not when sold – … requires adjustments of sales with changes in inventories of finished goods; when it takes a long time to produce a unit of output, it is recorded as “work-in-progress” – … requires reclassification of accumulated work in progress before the harvest into stocks of finished goods after the harvest – … one of the issues of the compilation practice – Intermediate consumption: when the good or service enters the process of production, as distinct from the time it was acquired/purchased by the producer – … requires adjustments of purchases with changes in inventories of raw materials and supplies.

15. Transactions Valuation: – Market output – at basic or producer’s prices; – Output for own final use – at basic prices of the same goods or services sold on the market – Intermediate consumption - at purchaser’s price prevailing at the time it enters the process of production Relationship between basic price, producer price, and purchaser price, 2008 SNA, 6.69: Basic prices + Taxes on products, excluding invoiced VAT - Subsidies on products = Producers’ prices + VAT not deductible by the purchaser + Separately invoiced transport charges + Wholesalers’ and retailers’ margins = Purchasers’ prices

16. Basic Agricultural Statistics Economic Accounts for Agriculture, EAA – … focused to analyze the production process and primary income generated by agriculture; – … the scope is similar to the SNA, although their compilation requires the formulation of appropriate rules and methods; – … the sequence of accounts in accordance with the SNA is limited to: Production account, Generation of Income account, Entrepreneurial income account, and Capital account

17. Basic Agricultural Statistics EAA framework for measurement of agricultural gross output Some minor exceptions from the SNA principles: – Intra-unit consumption (6q), limited in certain conditions – EAA covers some processing activities, for producing vine and olive oil;

18. Basic Agricultural Statistics EAA: the output of agricultural activity

19. Basic Agricultural Statistics Agriculture product balance, based on EAA definitions

20. Basic Source data Agricultural Census – … aiming to cover all agricultural holdings; – … designed to collect information on the structure, input and output of the agricultural sector, for all activities within the agricultural year – …. to provide basic information for updating the register of agricultural producers, and to adopt benchmark national accounts for agriculture; – … but also: expensive in collecting, processing and in analyzing the data: the lack of adequate finances could make a census impossible; lack of technical and administrative resources in some countries; effective supervision of the operation is often not achievable with implications for uncontrollable and huge non-sampling errors; – … in some countries, attached to a population census bringing down the overall cost for each of the exercises – New world agriculture census round to begin in 2016

21. Basic Source data Regular agricultural surveys: – Scope: formal agricultural activities within the agricultural year mainly quantitative information about main crops and livestock; – Limited information is collected for expenditures and in some extend on prices

22. Other source data Demographic sources: sample households surveys, … conducted irregularly, …in 5 years Household budget surveys: – Household Income and Expenditure Survey (HIES); – Poverty, Income, Consumption and Expenditure Survey (PICES); – Living conditions monitoring survey (LCMS); Other household surveys: – Labor Force Survey; – Informal sector survey; – Continuous multi-purpose household survey

23. Other source data Administrative sources: – Ministry of agriculture, MoA In some countries MoA conduct census of agriculture strategic food balances Livestock department registry information based on permits issued for agriculture and food production; – Veterinary authorities – Agricultural Research Units, Institutes… – VAT returns for revenues and expenditures of big farms, registered according to the VAT Act; – Customs data, respective HS/SITS categories; – Syndicate/s of agricultural producers, food producers: …meet and meet products;

24. Compilation practice Direct approach: – … benchmark estimates, based on the agricultural censuses, demographic surveys, administrative data; – … regular annual/quarterly estimates of agricultural output for major crops and livestock products, using the information from the annual/quarterly surveys and administrative sources Extrapolation of the benchmark estimates, based on the available regular information/indicators, for: – … other crops and livestock products, in some extent some other activities of the agricultural holdings; – … informal households activities following the trends of formal agriculture; based on the annual average growth rates from the last two household surveys – … intermediate consumption Fixed proportion to the output from the benchmark year Based on analytical studies about input costs in agriculture, important for quarterly measuring of work in progress ; – … price changes.

25. Compilation practice Main features/issues: – Reference period: agricultural year vs. calendar year; – Coverage: Subsistence farming Agricultural services Measuring inseparable non-agriculture secondary activities Illegal production of crops – “Quantity x Price” method, not always sufficient in particular for measuring intermediate consumption; – “Work in Progress”, if not measured, would lead to inconsistency between gross output and intermediate consumption; – Weak price statistics…

26. References System of Economic Accounts for Food and Agriculture, FAO, 1996

27. Thank you