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ECONOMIC REFERENCES COLLECTION

Eveline Fortier, agronomist, M.Sc., and Sophie Martel, agronomist

Centre de référence en agriculture et agroalimentaire du Québec (CRAAQ)

Abstract:

This presentation provides an overview of what constitutes the Economic References, and the reasons

why the financial and management advisors and others stakeholders may be concerned by the product.

First, a description of the content of the fact sheets collection based on dynamic examples will allow

people to be informed as to the content. We will discover among others the new online service

« Monitoring Tool on input prices» which will allows a quick and easy access to large amount of updated

information and gain in autonomy in the development of budgets.

With several types of products gathered in a single location, it is easy to analyze the trends in price

changes. We will discuss thereafter methodology and ways to establish the references.

Finally, a section on current users explains how we respond to their needs.

The objective of the presentation is to aim to the forefront the way we work to establish these

references while hoping to make it transferable for congress customers.

1. Introduction

1.1. The Economic References

The Economic References are defined as a unique source of access to the expertise of hundreds of

advisors and stakeholders that provides reliable data on the majority of the Quebec agricultural productions

for the past 35 years. Project managers supported by sectorial validation committees are the source of the

renowned content. The information gathered is found on nearly 250 fact sheets with over 75 productions (e.g.

dairy ewe, wild boar, broad beans, haskap berry, vine, organic crops, beekeeping, vegetable greenhouse,

Christmas trees, rabbit breeding, etc.).

The library contains technical and economic fact sheets covering eight sectors in agriculture and

agrifoods:

• Cash crops

• Horticulture

• Forestry

• Livestock production

• Soil stewardship

• Insects and diseases

• Agricultural Engineering

• Agricultural Economics

Among the fact sheets, we can find operating budgets and budgets by hectare. To develop these budgets,

several related data analysis are collected. This translates by sale price compilations, input prices, crop yields

and asset costs. Finally, the collection is enhanced by various other documents including comparative

analysis and a variety of technical and economic information. To help visualize it, Figure 1 shows the various

categories of fact sheets.

20th International Farm Management Congress, Laval University, Québec City, Québec, Canada

Vol.2 Non-Peer Review Papers & Posters

July 2015 - ISBN 978-92-990062-4-5 - www.ifmaonline.org - Congress Proceedings Page 1 of 4

86 EVELINE FORTIER SOPHIE MARTEL

Figure 1. Portrait of the Economic References Collection

Two types of budgeting tools are the center of the compilation. Enterprise budgeting reflects a given type

of production, while those based on acreage describe secondary productions and can be used, among other

things, in a complementary fashion with the enterprise model. Combined, they provide a picture of high

performance-oriented farming operations.

Finally, here are a few examples of other information offered in the collection:

• The price of agricultural products

• Evaluation (economic/price/cost of use) of farm equipment and machinery

• Construction costs, leasing fees for specialized equipment, implementation costs for riverbank buffer

strips, handling and storage fees

• Lost of use and rates for custom work

• Annual rents for land base, buildings, machinery and equipment

• Check-offs from joint plans

• Crop yields

• Models to calculate animal units, board-feet measurements, silo capacity

• Density by volume of agricultural products

To complete the collection, the Economic References have put on line some tools to support users. These

will be presented later.

I immediatly draw your attention to the « Monitoring tool on input prices » because it fits into the content

of the collection. The objective of this tool is to give quick access to the stakeholders searching for sale prices

or agricultural input prices by referring directly to the base data. Unlike fact sheets of the collection, these

data can be exported in a spreadsheet where the user can manipulate them as he pleased. The tool also offers

the advantage of being able to query more than one year. The base data is updated continuously. The

technical and economic data collection is a continuous process all throughout the year. The collected data

analysis are entered into the database as and when they have been validated and processed.

Budget

Sale price

Input prices

Crop yields Asset costs

Technical and

economic information

20th International Farm Management Congress, Laval University, Québec City, Québec, Canada

Vol.2 Non-Peer Review Papers & Posters

July 2015 - ISBN 978-92-990062-4-5 - www.ifmaonline.org - Congress Proceedings Page 2 of 4

ECONOMIC REFERENCES COLLECTION 87

1.2. The methodology

The budgets are characterized firstly by modelized results and not by observed results. Unlike the

production costs of the CECPA (Centre d’études sur les coûts de production en agriculture – Centre for

studies on the costs of production in agriculture) or the comparative analysis of agricultural advisory groups

management, which are a producers data collection, the Economic References show a likely result taking into

account underlying assumptions in relation with the context of Quebec businesses.

The budgets of the Economic References are representative of reality since they are established on a basis

of data from both producers and literature. The product selling prices generally come from La Financière

agricole du Québec, the Institut de la statistique du Québec or from Statistics Canada, who compile producers

data. As for them, the technical results (yields of crops, number of animals sold, etc.) come from production

or data compilation guides with a judgment made by the members of the working group who adapts them to

the business model selected.

For each budget, a working group composed of experts in the field is formed. It is with this group and its

network of contacts that we are able to approve the data references to put on paper. The working group first

uses the available data in the literature and adds its technical and economic expertise to establish a

representative model of the studied production. The selected data, the way to present them and the

methodology used for the written budgets are set in the Frame Budgeting Tool. This tool can be found on the

CRAAQ site at this e-mail address www.craaq.qc.ca/oeb.

Each budget starts with a summary including a sensitivity table on yield and price. At the end of each

budget, we can find a selection of notes containing a maximum amount of information so that producers or

advisors can adapt the budget to a specific company.

The Economic References team is composed of two project managers. Those are supported by an

advisory committee composed of volunteer members from various institutions (university, government,

management consulting groups, financial institutions, expertise centres, etc.). Its role is to ensure the updating

of the collection, to intervene in the methodology, to validate the fact sheets and to guide all of the project.

1.3. Users support

The current users of the Economic References are management advisors, financial advisors, schools,

private advisors, contractors and producers.

To help users to adapt the budgets to their needs or to a particularly situation, the Economic References

make use of a range of dynamic tools:

• Monitoring Tool on input prices

• Management Budgeting Tool

• Methodological Guide and Templates spreadsheets

• Evaluation Module for costing machinery

• Evaluation Module of credit assessment

Crop Rotation Tool

The Monitoring Tool on input prices, which allows users to query the database of the Economic

References on input prices and sales prices on agricultural products, has been described in section 1.

The Management Budgeting Tool provides a methodologic guide and templates in Excel format to easily

produce budgets in animal and plant productions. The spreadsheets structure follows the one of the fact sheets

published in the collection. The user can produce his own budget by using reference data or its own

information. We can also find in the downloading section of the tool three complimentary modules. The first

one is a tool to guide the user in his effort to assess the need for a credit line for a business. It is based on the

credit line granted by a financial institution. The user must adjust it to the financial situation of the company

(liquidity).

20th International Farm Management Congress, Laval University, Québec City, Québec, Canada

Vol.2 Non-Peer Review Papers & Posters

July 2015 - ISBN 978-92-990062-4-5 - www.ifmaonline.org - Congress Proceedings Page 3 of 4

88 EVELINE FORTIER SOPHIE MARTEL

The second tool, which is commonly used, allows assessment of the use cost of farm machinery. The

user can change a used tractor, the conditions in which the work is done and the average duration of the use

of the equipment. He can see directly the result on the suggested power for operation, fuel consumption,

variable costs, fixed costs and thus the total cost of the operation. Those results are expressed in $/h or in

$/ha. The data fixed rate without profit represents a minimal rate that a company can charge to accomplish a

given cultural activity. It is possible to add an amount to include a profit margin for the contractor. This

calculation can also be used to determine a price for a fixed price cultural operation or it can help the user to

judge whether the asking price holds up. However, we have to keep in mind that the offer and demand can

cause the price to fluctuate substantially like many other one-time factors.

The last module is a tool to guide the user in his approach to help evaluate the fair market value of a

building. Figure 2 sketches the evaluation process of the fair market value.

Figure 2. Assessment process

The economic life and the building age are used to calculate the physical obsolescence. The functional

obsolescence is the loss of utility resulting from the failure of a construction element or a piece of equipment

to fulfill its duties considering modern standards and requirements (normally it should strive towards 100%

for a well-built building). The economic obsolescence is calculated from the contributory value representing

the excess of the market value that a building brings to a piece of land. By combining the effect of those

obsolescence, we arrive at a fair market value.

To access this tools and modules, visit the CRAAQ website in the web services section at

www.craaq.qc.ca/Services-en-ligne and on the OEB website at www.craaq.qc.ca/oeb .

The crop rotation tool is an ongoing project which will be available in autumn 2015. This support tool for

agri-environmental pratices improvement will allow assessment of the impact of crop rotations in order to

make long-term decisions. The tool will compare four simulations to the current situation of the company.

Finally, the Economic References have also contributed to the realization of tools and economic projects,

through project managers’ expertise and validated reference data from the collection. The latest one of which

are a diagnostic tool for goat husbandry and a comparative financial evaluation of agroforestry, agriculture

and afforestation. In both cases, it was due to needs from the sector for which the Economic References have

been built on.

The Economic References are recognized in the agricultural field since for over 35 years for the quality

and credibility of the information conveyed. This is the only collection of documents which includes so many

diversified economic information in agriculture. It certainly will evolve over time to follow the needs of

stakeholders and producers, but the reference will remain present.

Mrs. Eveline Fortier, agronomist, M.Sc., has a work experience of more than nine years as project

manager for the CRAAQ Economic References. She has actively participated at the update of the collection

of 250 fact sheets. She has trained and monitored multiple working groups composed of experts from several

sectors, while providing an economic expertise to achieve the production of accurate and reliable economic

references.

Replacement value for which

you have to substract :

Physical obsolescence Functional obsolescence Economic obsolescence

Fair market value (FMV)

20th International Farm Management Congress, Laval University, Québec City, Québec, Canada

Vol.2 Non-Peer Review Papers & Posters

July 2015 - ISBN 978-92-990062-4-5 - www.ifmaonline.org - Congress Proceedings Page 4 of 4