DEFINITIONS OF TERMS

Acres: Tillable acres farmed by the operator.

Age: Age of the FBFM cooperator.

Assets: The fair market value of operator's assets included on the balance sheet.

Beef farms: Farms on which the value of feed fed was more than 40 percent of the crop returns and the beef enterprise received more than half of the value of the feed fed.

Current assets: Current assets generally include items that can be quickly converted to cash without loss of value or items that are used up during the normal business cycle of the farm operation. For this study, current assets include the fair market value of the following items:

• Cash
• Hedging account balances
• Savings account balances
• Marketable stocks and bonds
• Accounts receivable
• Crop and feed inventories
• Market livestock
• Prepaid expenses
• Other current items

Current liabilities: Obligations that are payable within the following 12 months. Current liabilities include the following items:

• Short term operating notes
• Accounts payable
• Accrued taxes
• Accrued interest
• Principal on intermediate and long term notes due in 1 year
• Other current liabilities

Dairy farms: Farms on which the value of feed fed was more than 40 percent of the crop returns and the dairy enterprise received more than one third of the value of the feed fed.

Depreciation: The allocation of the cost of assets over the projected life of the assets. In 2003, Illinois FBFM changed the depreciation calculation method from a tax depreciation to an economic depreciation. Economic depreciation does not include additional bonus depreciation, expense election, or rapid acceleration of depreciation currently allowed by the Internal Revenue Service. The change in methods was used to more closely reflect the actual decline in depreciable assets from year to year.

Farm assets: Total fair market value of total assets excluding the following items:

• Marketable stocks and bonds
• Other and non farm current assets
• Cash value life insurance
• Home furnishings and personal items
• Retirement accounts
• Notes receivable I.T.
• Contracts and notes receivable L.T.
• Non farm real estate
• Personal residence

Farm equity: The difference between fair market value of farm assets and the amount of liabilities.

Fixed assets: Fixed assets are items that are used or held in the business over a long period of time. A general rule of thumb is a period of 10 years or more. The land valuation procedures are discussed below. Fixed assets include the fair market value of the following items:

• Farm real estate
• Buildings and improvements
• Personal residence
• Other non farm real estate
• Contracts and notes receivable
• Other fixed assets

Grain farms: Farms where the value of the feed fed to all livestock enterprises was less than 40 percent of the crop returns.

Hog farms: Farms on which the value of feed fed was more than 40 percent of the crop returns and the hog enterprise received more than half of the value of the feed fed.

Interest expense: Cash interest paid plus or minus any change in accrued interest.

Intermediate assets: Intermediate assets are those assets that are used or held in the farm business over several years. Many of these assets are depreciated and replaced over a period of time, typically two to ten years. Both cost and fair market values of assets are kept in the records. Cost values are maintained with the tax depreciation records while fair market values are determined by the farmer and field staff based on the estimated current market value of the asset. Intermediate assets in this study include the fair market value of the following items:

• Notes receivable
• Machinery, equipment and auto
• Breeding livestock
• Cash value life insurance
• Home furnishings, personal items
• Securities not readily marketable
• Farm Credit System stock
• Retirement accounts
• Other intermediate assets

Intermediate liabilities: Intermediate liabilities are obligations typically having an original maturity of 2 to 10 years. These include the following items:

• Deferred portion of intermediate term notes
• Life insurance policy notes
• Other intermediate liabilities

Labor charge: The charge for unpaid family and operator labor. Labor was charged at $2,750 per month in 2004 and and $2,800 per month in 2005.

Land valuation: A basic value on bare land is established for each farm according to the soil rating.

The fair market value is entered directly by fieldstaff.

The modified cost value of land is entered directly by fieldstaff.

Long term liabilities: Long term liabilities are obligations having an original maturity exceeding 10 years. These include the following items:

• Deferred portion real estate mortgages
• Deferred portion land contracts
• Other long term liabilities

Net farm income (NFI) from operations: The sum of the operator's share of gross sales plus net change in inventories less all expenses for items purchased, including interest paid and annual depreciation.

Net worth: The fair market value of assets less the amount of liabilities.

Soil Productivity Index: The average index representing the inherent productivity of all tillable land on the farm. Individual soil types are assigned an index ranging downward from 100.

Tenure: The proportion of the operator's owned acreage divided by the total acreage used in the farm operation.

Value of farm production (VFP): The total for cash value of sales of products and services, less the cost of purchased feed and livestock, plus the change in inventory values for grain and livestock, plus the change in accounts receivable, plus government payments, plus the value of farm products used on the farm.

Value of feed fed: Value of on the farm and commercial feed fed to livestock. The prices used for on the farm grains and pasture fed are standardized for all farms in the Illinois FBFM service. Commercial feeds are priced at the original cost.