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A manual on farm accounting and methods of financing for British Columbia farms Matchett, Robert Gordon 1955

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A MANUAL ON FARM ACCOUNTING AND METHODS OF FINANCING FOR BRITISH COLUMBIA FARMS by ROBERT GORDON MATCHETT A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN AGRICULTURE i n the Department of A g r i c u l t u r a l Economics We accept t h i s t h e s i s as conforming to the standard r e q u i r e d from candidates f o r the degree of MASTER OF SCIENCE IN AGRICULTURE Members o f the Department of A g r i c u l t u r a l Economics THE UNIVERSITY OF BRITISH COLUMBIA A p r i l , 1955 ABSTRACT The present thesis i s a study compiling farm management information to be used as the basis for extensive l i t e r a t u r e for d i s t r i b u t i o n to B r i t i s h Columbia farmers. The phases of farm management which are presented here are farm accounting, the use of farm accounts i n making production plans for the farm business, and the methods of acquiring and financing farm businesses i n B r i t i s h Columbia, An introductory chapter containing data with respect to the position of the a g r i c u l t u r a l industry i n B r i t i s h Columbia precedes the chapters on farm management practises, A system of farm accounting, which i s p a r t i c u l a r l y adapted to the f i l i n g of the Federal Income Tax returns i s described i n the second chapter. In addition, a description of other useful farm records i s given there. The t h i r d chapter i s concerned with the use of the farm records i n the analysis of the present farm business operation and i n the formulation of future farm production plans. The f i n a l chapter i s devoted to a description of the methods used i n appraising a farm for purchase or leasej the procedure followed i n acquiring Crown land i n B r i t i s h Columbia; the sources of loan funds available to B r i t i s h Columbia farmers, A sample accounting and physical records form together with a suggested lease form i s appended to the t h e s i s . ACKNOWLEDGMENT The writer wishes to thank Dr. W.J. Anderson, of the Department of Agricultural Economics for his helpful suggestions, direction and criticism. Thanks are also expressed to the Members of the Faculty of Agriculture, who composed the committee under which this thesis was written; their suggestions and encouragement are appreciated. Mr. E.L. Menzie of the Department of Agri-cultural Economics kindly gave the writer advice with regard to the study and thanks are tendered herewith to him for his helpfulness and co-operation. TABLE OF CONTENTS CHAPTER PAGE I INTRODUCTION 1 The Purpose of the Manual 1 The P r e s e n t a t i o n of the M a t e r i a l 1 The A g r i c u l t u r a l I n d u s t r y i n B r i t i s h Columbia . . 3 The P a t t e r n of A g r i c u l t u r a l Production i n B r i t i s h Columbia 8 The Lower Mainland and Vancouver I s l a n d . . . 8 The Okanagan-Mainline and the Kootenays . . . 10 The Cariboo 11 C e n t r a l B r i t i s h Columbia 11 The Peace R i v e r 12 The Marketing of Farm Products i n B r i t i s h Columbia 12 The M i l k Board 13 F r u i t and Vegetable Marketing Boards 14 The Canadian Wheat Board 15 L i v e s t o c k Marketing . 15 Other Marketing 16 The Number, S i z e , and Value of Farms, B r i t i s h Columbia and Canada 16 Farm Income i n B r i t i s h Columbia and Canada . . . 18 Farm Expenses i n B r i t i s h Columbia and Canada . . 23 The P h y s i c a l Volume of Production i n B r i t i s h Columbia and Canada 25 TABLE OF CONTENTS (Continued) CHAPTER PAGE I (Continued) Future Production of the A g r i c u l t u r a l I n d u s t r y i n B r i t i s h Columbia 26 I I FARM RECORDS 29 F i n a n c i a l Records 29 Objec t i v e s and Purposes 29 Form 30 Double E n t r y 30 S i n g l e E n t r y 30 The Recommended System of Accounting 31 When to Prepare I n v e n t o r i e s 34 Recording the P h y s i c a l A s s e t s . 35 E n t e r i n g the Items i n the Account Book 36 V a l u i n g the Items 37 Pr e p a r a t i o n o f the Balance Sheet 38 Cash Income and Expense E n t r i e s 40 Pr e p a r a t i o n o f the P r o f i t and Loss Statement . . 41 Supplementary Accounts . . . . . . . 42 Using the Supplementary Accounts 43 How the System Meets the Intended Objectives . . 43 S i n g l e E n t e r p r i s e Accounts 44 S p e c i a l Problems i n Keeping F i n a n c i a l Records . . 45 V a l u a t i o n 45 TABLE OF CONTENTS (Continued) CHAPTER PAGE II (Continued) Depreciation 46 Income Tax Returns 48 Physical Records 50 Objectives and Purposes 50 Form 51 Farm Haps 51 Land Use Record 51 Crop Records 53 Pasture Records . . . . . . . . . 53 Livestock Records 53 Labour Records 54 Other Physical Records . . . . . . . . . . . 55 Problems in Keeping Physical Records 55 III MANAGEMENT AIDS OBTAINED FROM FARM RECORDS . . . . 57 Analysis of the Farm Business 57 Measures of Solvency 57 Net Capital Ratio 59 Working Ratio 59 Current Ratio 59 Measures from the Profit and Loss Statement . . 60 Farm Capital Turnover 60 Net Farm Income 60 Labour Returns 61 Return to Capital 61 TABLE OF CONTENTS (Continued) CHAPTER PAGE I I I (Continued) Measures from P h y s i c a l Records 62 Crop Records . . . . . . . . . . . 62 L i v e s t o c k Records 63 Labour Records 65 Machinery Records 66 Budgeting „ ... . . . 66 Inventory of Resources 66 P r i c e Expectations . 67 Production Plans 68 Crop Plans 68 Li v e s t o c k Plans . . . . . . . . . . 69 Expected Expenses 69 Summary o f Receipts and Expenses 70 A l t e r n a t e Plans Should Be Prepared 71 IV THE ACQUISITION AND FINANCING OF A FARM BUSINESS. . 72 Purchasing a Farm 72 S e l e c t i o n of a Farm 72 Es t i m a t i n g the Value of a Farm . 75 F i n a l Steps i n Purchasing a Farm 76 Leasing a Farm 77 A p p r a i s i n g a Farm to Rent 78 Cash Rental 79 Share Rental 81 Wr i t t e n Leases 84 TABLE OF CONTENTS (Continued) CHAPTER PAGE IV (Continued) Crown Lands 85 Pre-emptions • . 85 Purchases 87 Leasing . • 89 L o c a t i n g a Farm i n B r i t i s h Columbia . . . . . . . 89 Sources of Information f o r S e t t l e r s 89 The Farming Areas and the Climate 90 The Arable and P o t e n t i a l l y A r a b l e Acreage . . . . 92 Land Values 33 The F i n a n c i n g of Farm Businesses 94 Long Term 94 Canadian Farm Loan Board Mortgages 94 Intermediate Term 96 Farm Improvement Loans 96 Machinery C r e d i t 97 Short Term 98 Feed and Supplies . 98 F e r t i l i z e r 98 L i v e s t o c k f o r Feeding 98 Bank Loans . . . . . . . . . . . . 99 Other Sources of Short Term Loans . . . . . . . 99 BIBLIOGRAPHY 1 0 0 TABLE OF CONTESTS (Continued) APPENDIX A. F i n a n c i a l Records B. Suggested P h y s i c a l Records C. A F l e x i b l e Farm Lease INDEX OF TABLES TABLE PAGE 1. Percentage of Land Area in Farms, Population on Farms, Total Value of Net Production from Agriculture, Canada and Nine Provinces, 1951; Rank in Value Farm Gross Income by Provinces, 1951 4 2. Farm Numbers, Area, Improved Acreage, Average Size, Value of Land, Buildings, Machinery and Livestock, Canada and British Columbia, 1941 and 1951 17 3. Net Farm Income Per Farm and Per Dollar of Farm Investment Value British Columbia and Canada, 1941 and 1951 18 4. Net Farm Income Per Person in the Agricultural Labour Force, 1941, 1946-1953, Canada and British Columbia 19 5. Farm Cash Income from the Sale of Livestock and Livestock Products, Canada and British Columbia, 1953 20 6. Farm Cash Income from the Sale of Fruit, Vege-tables, and Potatoes, Canada and British Columbia, 1953 21 7. Farm Net Income As Percentage of Farm Cash Income Canada and Nine Provinces, 1953 24 8. Hired Labour, Feed and Seed Costs As Percent-ages of Total Farm Operating Expenses, Canada and British Columbia, 1926-1953 25 INDEX OF TABLES (Continued) TABLE PAGE 9. Land Use Record 52 10. Net Worth Values of Two Farms 58 11. Crop P l a n 68 12. L i v e s t o c k P l a n 69 13. Summary of Expected Receipts and Expenses . . . 70 14. Land Tenure i n B r i t i s h Columbia 1951 . . . . . . 77 15. Determining a Cash Rent by the Budget Method . . 80 16. Landlord's and Tenant's C o n t r i b u t i o n s t o the Fac t o r s of Production 83 17. D i s t r i b u t i o n of Net Farm Income According to To f o l l o w C o n t r i b u t i o n s .p. 83 18. Land Values, B r i t i s h Columbia 93 . . . . A MANUAL ON FARM ACCOUNTING AND METHODS OF FINANCING FOR BRITISH COLUMBIA FARMS CHAPTER I INTRODUCTION THE PURPOSE OF THE MANUAL This manual i s an attempt to c o n s o l i d a t e , i n t e r -p r e t , and make a v a i l a b l e under one cover, i n f o r m a t i o n on farm accounting, and methods of a c q u i r i n g and f i n a n c i n g farm b u s i -nesses i n B r i t i s h Columbia. The m a t e r i a l contained i n the manual i s an i n t e r p r e t a t i o n of m a t e r i a l , much of which i s a v a i l a b l e i n farm management t e x t s , government p u b l i c a t i o n s , and other a g r i c u l t u r a l l i t e r a t u r e . These sources of informa-t i o n , however, may be somewhat i n a c c e s s i b l e to farmers and i n some inst a n c e s are not d i r e c t l y a p p l i c a b l e t o B r i t i s h Colum-b i a . The procedure i n t h i s study, t h e r e f o r e , has been to gather i n f o r m a t i o n from these sources and t o s e l e c t and adapt some of the in f o r m a t i o n i n a way that w i l l make i t u s e f u l i n improving the management on B r i t i s h Columbia farms. THE PRESENTATION OF THE MATERIAL I n order to accomplish t h i s purpose the study i s presented i n f o u r p a r t s as f o l l o w s : 1 2 (1) An introductory chapter describes the agricul-tural industry of British Columbia in general terms, i n d i -cates some methods of marketing peculiar to British Columbia, and presents s t a t i s t i c a l data with respect to the position of the agricultural industry of British Columbia relative to the industry i a Canada. The future production pattern of the industry in British Columbia and the contributions which the particular phases of farm management described i n this manual can make to increase the efficiency of production i n the industry are discussed at the end of this chapter. (2) The second chapter indicates the advantages accruing to farmers from keeping records. Special emphasis i s given to describing a system of financial records which i s suited to the needs of the farmers of British Columbia; this system of records i s designed to simplify the f i l i n g of income tax returns and to provide the farmer with a record of his farm business for the year. Problems found in record keeping and a description of physical records to supplement the finan-c i a l records are also presented in this chapter. (8) The third chapter deals with the use of farm records in measuring the financial safety of the farm business, the returns to the farmer from capital and labour invested, and the making of future production plans for the farm busi-ness. (4) The f i n a l chapter describes the methods of pur-chasing and leasing farms, together with the procedure to f o l -low i n acquiring Crown lands. The sources of capital available for financing farm businesses coacludes the chapter. 3 THE AGRICULTURAL INDUSTRY IN BRITISH COLUMBIA B r i t i s h Columbia i s the t h i r d l a r g e s t i n area and p o p u l a t i o n of the ten Canadian pr o v i n c e s ; i t s l a n d area of 229,938,560 acres i s 9.5 percent of the land area of Canada and i t s population of 1,165,210 persons i s 8.3 percent of the Canadian population."** B r i t i s h Columbia ranks t h i r d of the provinces i n the t o t a l value of primary and secondary produc-t i o n but i s s i x t h i n the value of i t s a g r i c u l t u r a l production. 2 E x c l u d i n g Newfoundland, a g r i c u l t u r e forms a lower p r o p o r t i o n of the province's economy, than does a g r i c u l t u r e i n the economy of the other e i g h t provinces. B r i t i s h Columbia has the low-est p r o p o r t i o n of t o t a l l a n d area i n farms, the lowest propor-t i o n of t o t a l p o p u l a t i o n on farms, and has the lowest propor-t i o n of the t o t a l value o f the net production of primary and 3 secondary i n d u s t r i e s a t t r i b u t a b l e to a g r i c u l t u r a l production. Table 1 compares B r i t i s h Columbia's a g r i c u l t u r a l i n d u s t r y w i t h the i n d u s t r y i n Canada and the Provinces. Dominion Bure u of S t a t i s t i c s , Ninth Census of Canada 1951, V I , Part 1, Table 1 (Canada), Ottawa, Queen's P r i n t e r , TI953). o Because of the s c a r c i t y of data r e g a r d i n g a g r i c u l t u r e i n Newfoundland and because the i n d u s t r y i s small i n that p r o v i n c e , Newfoundland i s disregarded i n t h i s study. 3 Dominion Bureau of S t a t i s t i c s , Survey of Production 1938-1951. pp. 4, 9, 25-30, and 31, Ottawa, Queen's p r i n t e r , (1953). ""Net production i s computed by deducting from the t o t -a l value of output ( e x c l u d i n g i n d i r e c t taxes) f o r each indus-t r y , the c o s t s of m a t e r i a l s , f u e l , purchased e l e c t r i c i t y and process s u p p l i e s consumed i n the production process Op-e r a t i n g expenses on a l l farm l a n d , net farm r e n t , wages to labour and i n t e r e s t on mortgage and other debt are deducted from gross farm production ( l e s s house r e n t ) t o give the net value of a g r i c u l t u r a l p r o d u c t i o n . " 4 TABLE 1 PERCENTAGE OP LAND AREA IN FARMS, POPULATION ON FARMS, TOTAL VALUE OF NET PRODUCTION3 FROM AGRICULTURE, CANADA AND NINE PROVINCES, 1951; RANK IN VALUE FARM GROSS IN-COME BY PROVINCES, 1951 Percentage of Can. B.C. A l t a . Sask. Man. Ont. Que. N.B. N.S. P.E.I. Land area i n farms 7.5 2.0 27.9 40.5 12.6 9.0 5.0 19.7 47.6 78.4 Population on farms 20.8 10.3 36.7 48.0 28.2 15.3 19.5 29.1 18.0 47.6 T o t a l net production from a g r i -c u l t u r e 20.8 6.7 53.8 80.8 43.1 12.6 11.4 17.1 13.5 62.2 Rank i n value farm gross income 6 3 2 5 1 4 1 7 8 9 a Primary and secondary i n d u s t r i e s . Sources: Nint h Census of Canada 1951. V I , Part 1, Table 1 (Canada); Survey of Production 1938 - 1951, Farm Net Income 1953 (Dominion Bureau of S t a t i s -t i c s ) . There are numerous reasons why the a g r i c u l t u r a l i n -d u s t r y i n B r i t i s h Columbia i s sma l l e r r e l a t i v e to other indus-t r i e s than i t i s i n the other provinces. Among the c h i e f r e a -sons are the mountainous topography of the pro v i n c e , the high cost of c l e a r i n g l and and the costs of i r r i g a t i o n , drainage and f e r t i l i z a t i o n necessary to produce many of the s p e c i a l i z e d 5 crops grown; a l s o c o n t r i b u t i n g i s : the high wage r a t e p r e v a i l -i n g f o r farm labour , the d i f f i c u l t y i n adapting labour saving machines to the production of many of the s p e c i a l i z e d crops and the competition f o r the use of a g r i c u l t u r a l l a n d by i n d u s t r y and housing. At present, there remains l i t t l e or no la n d s u i t a b l e f o r a g r i c u l t u r a l settlement which does not r e q u i r e c l e a r i n g . This i s e s p e c i a l l y the case i n the Peace R i v e r Block and Cen-t r a l B r i t i s h Columbia. Much of the l a n d being brought i n t o production i n the o l d e r s e t t l e d areas r e q u i r e s the i n s t a l l a t i o n of drainage or i r r i g a t i o n systems before a g r i c u l t u r a l produc-t i o n can be c a r r i e d out. C l e a r i n g l a n d i s expensive, as t h i s q u o t a t i o n * shows: TABLE OF AVERAGE COSTS PER ACRE Lig h t - Medium- Heavy« Cover Cover C o v e r 0 $15.00 $35.00 $45.00 2.00 2.50 5.00 10.00 15.00 15.00 Root-picking and working down... 10.00 15.00 20.00 $37.00 $67.50 $85.00 L i g h t cover has trees of 6 inches i n diameter or l e s s , although there may be a few 8- to 10-inch t r e e s per acre without adding t o the cost s u b s t a n t i a l l y . Medium cover ranges from 8- to 10-inch trees i n ge n e r a l , with some 12-, 14-, or 16-inch trees that are u s u a l l y pushed over by the p i l e r s . These l a r g e r t r e e s can increase the cost by as much as $1 per t r e e . Province of B r i t i s h Columbia Lands S e r v i c e , The F o r t F r a s e r - F o r t George B u l l e t i n Area. B u l l e t i n Area No. 7, p. 22, V i c t o r i a , Queen's P r i n t e r (1954). 6 Heavy cover has l a r g e numbers of 12-, 14-, and 16-inch t r e e s , and c u t t e r s cannot be used to advantage. Such t r e e s must be cut by saw and axe o r , b e t t e r walked down by a p i l e r . The costs i n t h i s type of cover are too great to make farming an economic e n t e r p r i s e , except i n s p e c i a l cases. The distance i n v o l v e d and the consequential high cost of r a i l and highway t r a n s p o r t a t i o n tends to keep the a g r i c u l t u r a l i n d u s t r y r e l a t i v e l y small i n B r i t i s h Columbia. With over one-h a l f of the province's population concentrated i n the Lower Fra s e r V a l l e y , the Greater Vancouver Area, and Southern Van-couver I s l a n d , producers i n the Peace R i v e r Block and the other remote d i s t r i c t s are precluded from marketing t h e i r products i n these populous areas, because of long hauls and high t r a n s p o r t a -t i o n charges. Many p a r t s of B r i t i s h Columbia are semi - a r i d and i r r i -g a t i o n i s necessary to produce crops there. Some i r r i g a t i o n i s used to increase crop and pasture y i e l d s i n the Coastal Areas, even though the annual r a i n f a l l i s high. The need f o r i r r i g a -t i o n i s due to the heavy winter p r e c i p i t a t i o n and the r e l a t i v e l y dry summers. B r i t i s h Columbia had 138,382 acres under i r r i g a -t i o n i n 1951, the second l a r g e s t i r r i g a t e d acreage of the nine provinces; A l b e r t a with 447,032 a c r e s , had the gre a t e s t i r r i -gated acreage. 1 The Coastal s o i l s of B r i t i s h Columbia r e q u i r e lime and most of them r e q u i r e f e r t i l i z e r . Labour i n B r i t i s h Columbia enjoy the highest wage Ninth Census of Canada. V I , Part 1, Table 15 (Canada). 7 r a t e s i n Canada. This i s true of farm l a b o u r , because farmers must compete with i n d u s t r y f o r t h e i r l a bour requirements. The l a r g e i n d u s t r i a l expansion and the continued high employment i n the l o g g i n g i n d u s t r y of the past few years has kept the demand f o r labour high. The f o l l o w i n g t a b l e i l l u s t r a t e s the higher wage r a t e p r e v a i l i n g i n B r i t i s h Columbia f o r farm h e l p : 1 TABLE 2. AVERAGE WAGES PER DAY OP MALE FARM HELP IN CANADA, BY PROVINCES, AS AT JANUARY 15, 1952, 1953, AND 1954 With board Without board 1952 1953 1954 1952 1953 1954 Maritime $ $ $ $ $ $ Provinces 4. 30 4.30 4. 30 5. 40 5.40 5. 40 Quebec 4. 70 4.70 4. 60 5. 70 5.70 5. 70 Ontario 4. 70 4.70 4. 90 5. 90 6.20 6. 20 Manitoba 4. 40 4.50 4. 60 5. 40 5.50 5. 80 Saskatchewan 4. 10 4.70 4. 90 5. 30 6.10 6. 10 A l b e r t a 4. 50 5.20 5. 50 5. 50 6.20 6. 80 B r i t i s h Columbia , 6. 60 6.80 6. 20 7. 90 8.60 8. 30 Canada 4. 60 4.70 4. 60 5. 70 5.80 5. 90 E x c l u d i n g Newfoundland f o r which data are not a v a i l a b l e . Many of the h i g h l y s p e c i a l i z e d crops make i n t e n s i v e use of labour at c e r t a i n seasons of the year. Although machines are being developed to perform tasks i n the production of some of these crops, there s t i l l remains a number of processes which must be performed by hand. Dominion Bureau of S t a t i s t i c s , Q u arterly B u l l e t i n of  A g r i c u l t u r a l S t a t i s t i c s , January - March 1954, p. 3, Ottawa, Queen's P r i n t e r (1954). 8 Ind u s t r y and housing are competing s u c c e s s f u l l y with a g r i c u l t u r e f o r the use o f land i n the Greater Vancouver Area, p a r t s of the Lower Fraser V a l l e y , the Saanich P e n i n s u l a , and the Okanagan V a l l e y . Some of the most pr o d u c t i v e a g r i -c u l t u r a l land has been put to other uses; a s t r i k i n g example i s the u r b a n i z a t i o n o f Lu l u I s l a n d . B r i t i s h Columbia's d i v e r s i t y of s o i l s and c l i m a t e enables the production of n e a r l y a l l types of Canadian farm products. Some of the a g r i c u l t u r a l products, produced here, are not produced elsewhere i n Canada. Despite the d i v e r s i t y of i t s a g r i c u l t u r a l p r o d u c t i o n , B r i t i s h Columbia i s a net importer of many farm products. Products that are produced i n s u f f i c i e n t q u a n t i t i e s f o r home consumption and export are tree and sm a l l f r u i t s , vegetables i n season, and o c c a s i o n a l l y eggs. S p e c i a l i z e d crops such as f l o w e r s , bulbs, and h o l l y are exported a l s o . S e l f s u f f i c i e n c y has been a t t a i n e d i n f l u i d m i l k production but l a r g e q u a n t i t i e s of feed g r a i n s , f l o u r , b u t t e r , cheese, and meats are imported each year. The P a t t e r n of A g r i c u l t u r a l Production i n the  Major A g r i c u l t u r a l A r e a s 1 The f o l l o w i n g paragraphs des c r i b e b r i e f l y the c h a r a c t e r i s t i c s of a g r i c u l t u r a l production g e n e r a l l y c a r r i e d B r i t i s h Columbia Department of A g r i c u l t u r e , Some Facts  about B r i t i s h Columbia Canada, pp. 18-24, V i c t o r i a , Queen's P r i n t e r (1952). A comprehensive d e s c r i p t i o n of a g r i c u l t u r a l production i n B r i t i s h Columbia i s contained i n t h i s p u b l i c a t i o n . 9 on i n the major a g r i c u l t u r a l areas of B r i t i s h Columbia. I n each of these d i s t r i c t s , there are other a g r i c u l t u r a l enter-p r i s e s engaged i n by some farmers and the p a t t e r n i s changing c o n t i n u a l l y as new v a r i e t i e s of crops are developed, and as new markets develop f o r the farm products of each d i s t r i c t . The Lower Mainland and Vancouver I s l a n d Farming i n the Lower Mainland and on Vancouver I s l a n d i s r e l a t i v e l y i n t e n s i v e i n c h a r a c t e r . There are many small farms i n these areas. Production i s s p e c i a l i z e d , mainly i n pro-ducts f o r which there i s a ready demand i n the urban markets of the area. Some crops are grown f o r export. D a i r y i n g i s the c h i e f l i v e s t o c k e n t e r p r i s e . There i s some hog and sheep production and i n the past few years beef production has been entered i n t o by a number of farmers. The m a j o r i t y of the goats kept i n B r i t i s h Columbia are i n t h i s area. Fur farming (mostly mink) and r a b b i t r a i s i n g , f o r f u r and meat, i s mostly concentrated i n t h i s area. P o u l t r y are kept i n great numbers i n the Lower Main-land and on Vancouver I s l a n d . I n a d d i t i o n to the usual farm f l o c k o f hens kept as a s i d e l i n e , there are many s t r a i g h t p o u l t r y e n t e r p r i s e s . Most of these p o u l t r y e n t e r p r i s e s are s p e c i a l i z e d , with production i n one of these f i e l d s : (a) Eggs f o r market; (b) hatching eggs; (c) breeding s t o c k ; (d) meat; (e) commercial h a t c h e r i e s . Turkey breeding i s c a r r i e d on as a s p e c i a l e n t e r p r i s e . Ducks and geese are r a i s e d as a s i d e l i n e , 10 but there i s one duck farm on Vancouver I s l a n d , which s p e c i a l -i z e s i n meat and "guano" production. F i e l d crop production c o n s i s t s of hay, fodder crops, potatoes and some g r a i n . Nearly a l l of the concentrate feeds and l a r g e amounts of hay are imported. There i s a l a r g e potato growing i n d u s t r y and many farmers s p e c i a l i z e i n growing potato seed. Over 80 percent of the s m a l l f r u i t grown i n B r i t i s h Columbia i s produced i n t h i s area. Strawberries are the most important of these but there i s considerable production of r a s p -b e r r i e s , l o g a n b e r r i e s , and other s m a l l f r u i t s . These f r u i t s are s o l d l o c a l l y as f r e s h f r u i t or f o r processing and the s u r -plus i s exported. The production of vegetables f o r market and p r o c e s s i n g i s a l s o c a r r i e d on i n t h i s area. In a d d i t i o n to the above, there are a number of h i g h l y s p e c i a l i z e d crops produced i n t h i s area. Among them a r e : f l o w e r and vegetable seeds j bulbs jj f l o w e r s and h o l l y ; nuts; and tobacco. The Okanagan-Kainline and the Kootenays These areas are famous f o r t h e i r t r e e f r u i t i n d u s t r y . The Okanagan V a l l e y has the l a r g e s t acreage i n orchards i n B r i t i s h Columbia and produces apples, peaches, pears, c h e r r i e s and plums; the Kootenays' f r u i t production i s s m a l l e r and i s c h i e f l y apples. There i s some small f r u i t production i n these areas. Vegetables, e s p e c i a l l y tomatoes, are grown i n the Okanagan; peas f o r canning are produced i n the North Okanagan. Vegetable seed production, as w e l l as seed and t a b l e potatoes are grown i n these areas commercially. In the North Okanagan, there i s an expanding d a i r y i n d u s t r y ; there i s not much s p e c i a l i z e d d a i r y farming i n the Kootenays. Hogs are r a i s e d i n the North Okanagan and a number of c a t t l e ranches are l o c a t e d at M e r r i t t , Kamloops and P r i n c e -ton. There are a l s o a few sheep ranches i n the Southern I n t -e r i o r . Grain i s grown i n the North Okanagan and on the Creston F l a t s i n the Kootenays. A l f a l f a i s the major hay crop i n the North Okanagan. Much of the a l f a l f a grown there i s shipped to the Coast. The Cariboo The Cariboo area i s the main b e e f - c a t t l e ranching area of the Province. Most of the ranges are leased from the Crown. The a r a b l e l a n d i n t h i s area i s mostly i n the v a l l e y s and i t s production i s p r i n c i p a l l y hay. Nearly a l l of the range lands are taken up and there i s not much room f o r expansion i n t h i s area. C e n t r a l B r i t i s h Columbia Farming, i n many s e c t i o n s of C e n t r a l B r i t i s h Colum-b i a i s s t i l l i n the pioneer stage. Many of the farms are p a r t time e n t e r p r i s e s . Production i s mostly of the mixed g r a i n -l i v e s t o c k combination. Forage crop seed and seed potatoes are the e n t e r p r i s e s engaged i n , on s p e c i a l i z e d farms. 12 There i s a l a r g e amount of p o t e n t i a l l y a r a b l e l a n d i n t h i s area but c l e a r i n g c o s t s are h i g h . Considerable c a p i t a l i s necessary, i f a g r i c u l t u r e i s to be the main source of income f o r the f i r s t few years a f t e r the l a n d has been s e t t l e d . The Peace R i v e r Grain growing i s the p r i n c i p a l farm e n t e r p r i s e i n the Peace R i v e r area. S p r i n g wheat i s the most important c r o p , fo l l o w e d by oats and b a r l e y . Forage crop production i s i n c r e a s -i n g both f o r seed p r o d u c t i o n , and hay and pasture. A l f a l f a , sweet c l o v e r , altaswede, brome grsss and timothy are a l l grown s u c c e s s f u l l y here. L i v e s t o c k production i s i n c r e a s i n g i n the Peace R i v e r area; beef production being more important than d a i r y i n g . Hogs are kept i n considerable numbers but p o u l t r y production i s l i m i t e d . The Marketing of Farm Products i n B r i t i s h Columbia The marketing of farm products i n B r i t i s h Columbia, as elsewhere i n Canada, i s done to a great extent by marketing agencies r a t h e r than by i n d i v i d u a l farmers. These agencies are more s u i t e d to modern food merchandizing p r a c t i s e s , which r e -quir e graded, standardized and packaged food products. These p r a c t i s e s are such that they make i n d i v i d u a l marketing impos-s i b l e f o r most farmers, l e a v i n g the d i s t r i b u t i o n of farm pro-ducts more and more i n the hands of commercial e n t e r p r i s e s , farmers' co-operatives, and marketing boards operating under Federal and P r o v i n c i a l l e g i s l a t i o n . The M i l k Board M i l k marketing i s c o n t r o l l e d i n c e r t a i n areas of B r i t i s h Columbia by a board s e t up under p r o v i s i o n s of the 2 P u b l i c U t i l i t i e s A c t . This board i s appointed by the P r o v i n -c i a l Government and c o n s i s t s of a chairman and two members. I t i s known as the M i l k Board and i t c o n t r o l s the marketing and d i s t r i b u t i o n of f l u i d m i l k i n the areas designated. I t f i x e s the p r i c e p a i d to m i l k producers by m i l k d i s t r i b u t o r s . D e l i v e r i e s to d i s t r i b u t o r s by producers are c o n t r o l l e d by means of quotas. These quotas r e g u l a t e the q u a n t i t y of m i l k produced i n a d a i r y e n t e r p r i s e that may be d e l i v e r e d f o r f l u i d m i l k s a l e s ; the balance of the m i l k produced must be s o l d f o r pro-c e s s i n g and brings a lower p r i c e than the m i l k going i n t o the f l u i d market. Producers' quotas may not be s o l d but may be t r a n s -3 f e r r e d i f a herd i s s o l d . Any person contemplating e s t a b l i s h -i n g a d a i r y e n t e r p r i s e i n areas under M i l k Board c o n t r o l should make sure that they can acquire a quota, otherwise the only 1 A l l marketing boards i n B r i t i s h Columbia operate under The Natural Products Marketing A c t , R.S.B.C., 1948, Chap. 200; The A g r i c u l t u r a l Products Marketing A c t , 13 George V I , Chap. 16, 1949, or i n the case of the M i l k Board, The P u b l i c U t i l i t i e s A c t , R.S.B.C., 1948, Chap. 277. 2 The Lower F r a s e r V a l l e y , Greater Vancouver, and Vancouver I s l a n d . 3 The M i l k Board, "Sharing the Market," F l u i d M i l k Market-i n g Information B u l l e t i n , No. 1, Vancouver, (1954). 14 market open to them i s the processing one. In a l l cases the M i l k Board must approve a l l such t r a n s a c t i o n s . F r u i t and Vegetable Marketing Boards C o n t r o l l e d marketing of f r u i t and vegetables i s i n e f f e c t i n some areas of B r i t i s h Columbia. Marketing of these products i s c a r r i e d out by marketing boards set up under the p r o v i s i o n s of the N a t u r a l Products Marketing A c t . The B r i t i s h Columbia F r u i t Board r e g u l a t e s the mar-k e t i n g of tree f r u i t s grown i n the Okanagan V a l l e y , the Creston-Grand Forks area, Salmon Arm and the Kamloops d i s t r i c t . Growers i n these areas may d e l i v e r t h e i r tree f r u i t s to e i t h e r co-operative or independent packing houses--several l a r g e growers do t h e i r own packing. Sales by the packing houses are made through a c e n t r a l s e l l i n g agency, B r i t i s h Columbia Tree F r u i t s L i m i t e d . The r e t u r n s from t r e e f r u i t s a l e s are a l l pooled. Growers r e c e i v e i n i t i a l payments on d e l i v e r y and f i n a l payments when the crop i s s o l d . Two boards r e g u l a t e the s a l e of vegetables and potatoes. The I n t e r i o r Vegetable Marketing Board operates i n much the same area as the F r u i t Board, and the B r i t i s h Columbia Coast Vegetable Marketing Board operates i n the Lower Mainland and Vancouver I s l a n d . D e l i v e r i e s of vegetables and potatoes can be made d i r e c t l y to s t o r e s and wholesale houses by growers but the Board must approve of such d e l i v e r i e s and t h e i r tags must be on the sacks a t the time o f d e l i v e r y . The Coast Board 15 operates warehouses i n Vancouver and on Vancouver I s l a n d . P o o l i n g of s a l e s i s accomplished through a co-operative which operates i n conjunction with the Board. The Canadian Wheat Board Wheat grown i n the Peace R i v e r and the Creston-Wynndel areas i s marketed under the r e g u l a t i o n s of the Can-adian Wheat Board. L i v e s t o c k Marketing L i v e s t o c k marketing i n B r i t i s h Columbia i s done through drovers, d e l i v e r i e s to packing p l a n t s and st o c k y a r d s , and by a u c t i o n s . An outstanding f e a t u r e of the B r i t i s h C o l -umbia b e e f - c a t t l e i n d u s t r y i s the dis t a n c e the ranches are from the stockyards and packing p l a n t s at Vancouver. The B r i t i s h Columbia Live Stock Producers* Co-operative* o f f e r a s e r v i c e to t h e i r members t o overcome the d i f f i c u l t y which distance from markets imposes on ranchers. The Co-operative maintains a fieldman s e r v i c e by which s a l e s o f c a t t l e may be made at the ranches. When a rancher has c a t t l e f o r s a l e , he n o t i f i e s the Co-operative, which, i n t u r n , advises the packers; the packers send t h e i r buyer to the ranch where he i s met by a fieldman of the Co-operative, who a c t s as an intermediary between the rancher and the buyer. 1 J.S. Carmicheal, and T.S. Rackham. L i v e s t o c k Marketing  i n Western Canada, p. 55, Regina, Province of Saskatchewan, Department of Co-operation and Co-operative Development. 16 Cattle auctions are held at several centers in B r i t -ish Columbia each year; feeder and fat cattle are sold at these sales. Bull sales are held annually at Kamioops. Other Marketing Small f r u i t growers in the Lower Mainland and on Vancouver Island use various forms of marketing; co-operative and independent packing houses are u t i l i z e d and some growers s e l l directly to stores or do their own sel l i n g in road side stands. Poultrymen may make deliveries of eggs to egg whole-salers or have their own egg routes in towns and c i t i e s . Specialized products such as flowers, holly, tobacco and furs have their own special outlets. The Number. Size, and Value of British Columbia and Canadian Farms In the ten years between the 1941 Census and the 1951 Census, the total acreage in farms remained almost constant but the number of farms decreased in Canada, while in British Colum-bia both total farm acreage and the number of farms increased. The average farm size increased in Canada by 23 acres of 9.0 percent; British Columbia farms decreased i n average size by 7 acres or 3.3 percent. The decrease in the average size of farms in British Columbia can be attributed to the increase i n the numbers of part time and small scale farms. The value of land, buildings, and livestock increased in the lnter-censal p e r i o d by 123.3 percent i n Canada and by 172.1 percent i n B r i t i s h Columbia. Table 2 presents Canadian and B r i t i s h Columbia farm numbers, areas, improved acreages, average s i z e , and the values of l a n d , b u i l d i n g s , machinery, and l i v e s t o c k f o r the two ce n s a l years. TABLE 2 FARM NUMBERS, AREA, IMPROVED ACREAGE, AVERAGE SIZE, VALUE OF LAND, BUILDINGS, MACHINERY AND LIVESTOCK, CANADA AND BRITISH COLUMBIA, 1941 and 1951 Item 1941 Canada Percent 1951 Increase) 1941 British Columbia 1951 'ercent ncrease No. of farms Farm area (,000 a c r e s ) Improved area (,000 acres) ! Average s i z e (acres) Value l a n d , b u i l d i n g s , machinery, l i v e s t o c k ($000) 677,500 e 173,563 91,636 256 623,091 174,046 96,852 279 4,241,476 9,470,876 -8.3 0.3 5.2 9.0 21,800 4,034 893 185 a 26,406 4,702 1,148 178 21.2 1.6 28.5 -3.8 123.3 150,063 408,266 172.1 1941 Census f i g u r e s r e v i s e d i n Canada Year Book 1954, to conform with the d e f i n i t i o n of a farm used i n 1951 Census. Source: Nint h Census of Canada 1951. V I , Part 1, Table 1 (Canada). 18 Farm Income i n B r i t i s h Columbia and Canada The net farm income per farm i n B r i t i s h Columbia was above the n a t i o n a l average i n 1941 but was below t h i s average i n 1951; s i m i l a r l y the net farm income per d o l l a r o f t o t a l farm investment was greater i n B r i t i s h Columbia i n 1941 and lower i n 1951, than f o r Canada as a whole. Table 3 presents t h i s d ata: TABLE 3 NET FARM INCOME PER FARM AND PER DOLLAR OF FARM INVESTMENT VALUE BRITISH COLUMBIA AND CANADA, 1941 AND 1951 Item Year B r i t i s h Columbia Canada Net farm income 1941 1245 763 per farm 1951 2052 3474 Net farm income 1941 0.18 0.12 per d o l l a r farm 1951 0.13 0.23 investment Sources: Nint h Census of Canada 1951. V I , P a r t 1, Table 1 (Canada): Farm"Net Income 1953; Handbook of  A g r i c u l t u r a l St.atistic§. Part 2 (Dominion Bureau of S t a t i s t i c s ) . Comparing net farm income on an average per farm b a s i s does not do j u s t i c e to B r i t i s h Columbia's a g r i c u l t u r a l i n d u s t r y because of the high p r o p o r t i o n of small s c a l e and par t time farmers w i t h i n the i n d u s t r y ; 44.2 percent of the t o t a l number of farms i n B r i t i s h Columbia were sm a l l s c a l e and part time i n 1951, while Canada as a whole had only 24.4 19 percent of i t s farms i n these c a t e g o r i e s i n t h a t y e a r . 1 The net farm income per person i n the a g r i c u l t u r a l labour f o r c e i n B r i t i s h Columbia compares fa v o u r a b l y with that of the i n d u s t r y n a t i o n a l l y . The f o l l o w i n g t a b l e shows these s t a t i s -t i c s f o r 1941 and from 1946 to 1953: TABLE 4 NET FARM INCOME PER PERSON IN THE AGRICULTURAL LABOUR FORCE,a 1941, 1946-1953, CANADA AND BRITISH COLUMBIA Year Canada B r i t i s h Columbia D i f f e r e n c e B.C. and Canada 1941 $427 $653 $+226 1946 901 1657 +656 1947 1035 1276 241 1948 1426 1447 21 1949 1483 1472 -11 1950 1405 1794 389 1951 2159 1748 -411 1952 2057 1659 -398 1953 1853 1901 +48 a Labour f o r c e as at June 1. Sources: Canada Year Book. 1954; Labour Force. November. 1945. - March. 1952; Labour Force. V o l . 9, Nos. 5 and 6; Handbook of A g r i c u l t u r a l S t a t i s t i c s . P a r t I I ; Farm Net Income. T953 (Dominion Bureau of S t a t i s t i c s ) . Ninth Census of Canada 1951. V I , Part 1, Table 25 (Canada). The t o t a l farm cash income from the s a l e of farm products i n 1953 f o r B r i t i s h Columbia was $103,400,000. A n a l y s i s of t h i s income shows that the major source of re v -enue to B r i t i s h Columbia farmers was l i v e s t o c k and l i v e s t o c k products. The value of s a l e s o f these items i n 1953 were $62,420,000; t h i s was 60 percent of the t o t a l farm cash i n -come. The f o l l o w i n g t a b l e compares B r i t i s h Columbia's s a l e s of l i v e s t o c k and l i v e s t o c k products with those of Cam da f o r 1953: TABLE 5 FARM CASH INCOME FROM THE SALE OF LIVESTOCK AND LIVESTOCK PRODUCTS, CANADA AND BRITISH COLUMBIA, 1953 Item Canada B r i t i s h Columbia B.C. as per-cent of Canada. C a t t l e and Calves $000 330,705 $000 11,080 3.6 Sheep and Lambs 9,633 679 6.9 Hogs 300,537 2,608 0.9 P o u l t r y 134,233 10,783 9.5 Da i r y Products 413,127 26,392 6.3 Eggs 123,774 9,744 7.6 Wool 2,310 112 4.8 Fur Farming 8.844 1.022 11.6 T o t a l 1,323,163 62,420 4.8 Source: Farm Cash Income. 1953, No. 4 (Dominion Bureau of S t a t i s t i c s ) . L i v e s t o c k and l i v e s t o c k products have c o n t r i b u t e d the major share of B r i t i s h Columbia's farm cash income f o r many years; on the average, t h e i r s a l e s have formed 55 percent (range 46 to 67 percent) of the t o t a l farm cash income f o r the 28 year per-i o d 1926-1953. F r u i t and vegetable s a l e s were next i n value to l i v e s t o c k and l i v e s t o c k products i n 1953; t h e i r value was $27,142,000 or 26.4 percent o f the cash income of B r i t i s h C o l -umbia farmers l a s t year. B r i t i s h Columbia's f r u i t s a l e s value was 16 percent of the p r o v i n c i a l t o t a l farm cash income; t h i s value was 39.6 percent of the n a t i o n a l t o t a l f o r f r u i t . F r u i t and vegetable s a l e s were as i n Table 6: TABLE 6 FARM CASH INCOME FROM THE SALE OF FRUIT, VEGETABLES, AND POTATOES, CANADA AND BRITISH COLUMBIA, 1953 Item Canada B r i t i s h Columbia B.C. as percent of Canada F r u i t $,000 41,807 $,000 16,570 39.6 Vegetables 61,899 8,102 13.1 Potatoes 31.707 2.407 7.8 T o t a l 135,413 27,142 20.0 Source: Farm Cash Income. 1953, No. 4 (Dominion Bureau of S t a t i s t i c s ) . 22 F r u i t and vegetable s a l e s value i n B r i t i s h Columbia ranged from 20.0 percent t o 41.0 percent f o r the 28 year p e r i o d 1926-1953 and averaged 35.0 percent o f the farm cash income f o r the province. Grains, seeds, and hay formed approximately 5 per-cent of the t o t a l farm cash income of B r i t i s h Columbia i n 1953; t h e i r s a l e s value was $5,296,000. Tobacco, honey, mis-cellaneous farm products, and farm f o r e s t products made up the remainder of the farm cash income. B r i t i s h Columbia's t o t a l farm cash income of $103,400,000 f o r 1953 was 3.8 percent of the n a t i o n a l t o t a l of $2,741,252,000. The 28 year average (1926-1953) of B r i t i s h Columbia's farm cash income was 4.1 percent of the farm cash income of Canada (range 2.8 to 4.8 p e r c e n t ) . During the same p e r i o d the net farm income averaged 4.2 percent (range 2.1 to 9.6 percent) of the net farm income of Canada. I n 1953 B r i -t i s h Columbia's net farm income was $39,913,000, which was 2.4 percent of the net farm income of Canada. The percentage o f Canada's farm cash income a c c r u i n g to B r i t i s h Columbia farmers v a r i e s from year to year, mainly because of the e f f e c t of the value of the P r a i r i e P r o v i n c e s ' farm cash income. The P r a i r i e s * farm revenues are the most v a r i a b l e i n Canada; f o r example, the farm cash income of Saskatchewan ranged from 13.4 percent to 30.5 percent, and averaged 22.5 percent o f the farm cash income of Canada from 1926 to 1953. The c o e f f i c i e n t of v a r i a t i o n i s 18.4 percent f o r Saskatchewan, while that of B r i t i s h Columbia i s 3.3 percent, when farm cash income percentages are compared. Farm Operating Expenses i n B r i t i s h Columbia and Canada Operating expenses of farms i n B r i t i s h Columbia averaged 60.2 percent of the farm cash income of B r i t i s h Columbia i n the 28 year p e r i o d 1926-1953, while i n Canada as a whole the average f o r operating expenses was f i v e percent l e s s or 55.2 percent. I t i s more s i g n i f i c a n t , however, th a t the o p e r a t i n g expenses of B r i t i s h Columbia farms increased from 61.2 percent i n 1951 to 73.8 percent i n 1953, while i n Canada as a whole, the increase was from 44.8 percent to 47.6 percent i n these years. B r i t i s h Columbia farm operat-i n g expenses were 5.8 percent of the t o t a l operating expenses of Canadian farms i n 1953 and operating expenses and dep-r e c i a t i o n charges were 5.3 percent of the n a t i o n a l t o t a l . From 1926 to 1953, the 28 year averages were 4.6 percent and 4.2 percent r e s p e c t i v e l y f o r these charges. The high operating and d e p r e c i a t i o n expense charges which were deducted from the farm cash income gave the f a r -mers of B r i t i s h Columbia a net income of 38.6 percent of t h e i r cash income i n 1953. This was the second lowest percentage for the nine provinces and much lower than the n a t i o n a l percen-tage. Table 7 presents t h i s data: TABLE 7 FARM NET INCOME AS PERCENTAGE OF FARM CASH INCOME CANADA AND NINE PROVINCES, 1953 Province Percent Canada 51.9 B r i t i s h Columbia 38.6 A l b e r t a 54.8 Saskatchewan 60.2 Manitoba 46.0 Ontario 48.1 Quebec 52.7 New Brunswick 44.0 Nova S c o t i a 34.7 P r i n c e Edward I s l a n d 42.5 Source: Farm Net Income. 1953 (Dominion Bureau of S t a t i s t i c s ) . The two dominant cost f a c t o r s i n the high o p e r a t i n g expenses on B r i t i s h Columbia farms are h i r e d l a b o u r , and seed and feed. These two in p u t s have c o n s i s t e n t l y comprised the l a r g e s t percentage of expenses throughout the 28 year p e r i o d 1926 to 1953. These percentages are f a r above the n a t i o n a l percentages f o r the same items f o r the same p e r i o d . The f o l l o w i n g t a b l e compares h i r e d l a b o u r , and feed and seed cost percentages f o r Canada with those of B r i t i s h Columbia: TABLE 8 HIRED LABOUR, FEED AND SEED COSTS AS PERCENTAGES OF TOTAL FARM OPERATING EXPENSES, CANADA AND BRITISH COLUMBIA, 1926-1953 Item Canada B r i t i s h Columbia Percent Percent H i r e d Labour (average) 18.2 25.5 Range 13.7 - 23.8 17.9 - 30.7 Feed and Seed (average) 17.2 30.0 Range 5.7 - 30.2 . 17.4 - 48.1 Hi r e d Labour and Feed 35.4 55.5 and Seed (average) Range 23.5 - 45.4 43.1 - 67.9 Sources: Handbook of A g r i c u l t u r a l S t a t i s t i c s . Part 2; frarm Net Income 1953. (Dominion Bureau of S t a t i s t i c s ) . B r i t i s h Columbia's h i r e d labour, and feed and seed costs were 22.6 percent and 32.6 percent of the t o t a l o p e r a t i n g expen-ses r e s p e c t i v e l y , while i n Canada as a whole t h e i r c o s t s com-p r i s e d 13.7 percent and 21.5 percent r e s p e c t i v e l y i n 1953. The P h y s i c a l Volume of Farm Production i n  B r i t i s h Columbia and Canada The foregoing s t a t i s t i c s have d e a l t with the mone-t a r y value of B r i t i s h Columbia's a g r i c u l t u r a l production. Comparison of the p h y s i c a l production of t h i s province's 26 a g r i c u l t u r a l production with that of Canada shows that B r i -t i s h Columbia's production i s comparable to the n a t i o n a l i production. The trend of the p h y s i c a l production index of Canadian a g r i c u l t u r e i s expressed by the equation, y = 124.8 + 3.1x (19 year p e r i o d 1935-1953, 1935-39 = 1G0), while the trend of the index of p h y s i c a l production i n B r i t i s h o Columbia i s expressed by the equation, y = 122.8 + 2.8x. Future Production i n B r i t i s h Columbia's A g r i c u l t u r a l I n d u s t r y B r i t i s h Columbia's a g r i c u l t u r a l i n d u s t r y has t h e r e -f o r e kept pace with the i n d u s t r y of Canada i n p h y s i c a l produc-t i o n ; i t would seem, too, that f u r t h e r expansion of production may be brought about by i n c r e a s i n g farm l a n d acreage, by the use of f e r t i l i z e r , by i r r i g a t i o n , by improved crop r o t a t i o n , by i n c r e a s i n g the labour i n p u t on the present l a n d area, and by i n c r e a s i n g the use of labour s a v i n g machines. The use of Dominion Bureau of S t a t i s t i c s , Index of Farm Production 1953, Ottawa, Queen's P r i n t e r (1954). 9 y = 124.8 + 3.1x i s the equation of a s t r a i g h t l i n e f i t t e d to the data by the method of l e a s t squares to express the trend i n the volume of p h y s i c a l farm production f o r Canada from 1935 to 1953. I n t h i s equation the value of y expresses the index of farm production i n any year of the s e r i e s computed by adding to the constant 124.8 (the value i n the year of o r i g i n ) , 3.1 times the value of x (x being the number of years from the year of o r i g i n , p o s i t i v e values are given to the years succeeding the year of o r i g i n and negative values to those preceding) e.g. the value of y f o r 1946 would be computed thus: y = 124.8 + 3.1 (2) = 124.8 + 6.2 =s 131. The equation f o r B r i t i s h Columbia i s computed i n the same manner. The year of o r i g i n i s 1944 i n both equations. each of these factors of production w i l l be increased as British Colombia's agricultural industry meets the increas-ing demand for foodstuffs by her increasing population. Hew land i s being brought into agricultural produc-tion as housing and industry encroach on the present agri-cultural land; new farm communities are developing to supply food to the new industrial centres being created by industries locating in British Columbia. New r a i l links and highway con-struction are opening up such areas as the Peace River Block and Central British Columbia. Labour use at present i s not increasing but the use of labour saving machines i s increas-ing greatly. Increases in the use of f e r t i l i z e r , irrigation, drainage, and crop rotation are much in evidence and these practises w i l l continue to increase. It would appear that increased production of pork, beef, and dairy products offer better opportunities for ex-pansion than does increased production of f r u i t and vegetables. The continuance of the Freight Assistance Plan for feed grains puts British Columbia farmers in a competitive position with the Prairies in the production of animal products. Unless new outlets are found for the products, which British Columbia has as surpluses, expansion of their production seems less favour-able. Improved farm management can increase the net returns to agriculture in British Columbia. The efficiency of produc-tion may be increased by better enterprise combinations; by farmers using t h e i r records to analyse t h e i r business opera-tions; and by the use of records and market information i n the preparation of future production plans. CHAPTER II FARM RECORDS Farm records are a prerequisite to good farm manage-ment. Ho single system of keeping records can be devised that w i l l f i t the detailed requirements of every farm but certain general principles are common to a l l systems. Farm records are of two types. Financial records record the financial aspect of the business; physical records record production, consumption and other quantitative s t a t i s -t i c s of the farm operation. FINANCIAL RECORDS Objectives and Purposes Financial records must be designed so as to provide the farmer with: (a) An adequate system of accounting that i s reasonable for the amount of time required on the part of the farm operator; (b) A record of the transactions of the farm business; (c) A knowledge of the financial status of the business; (d) A basis for analysis of the farm business and budgeting for the future; (e) Information to f a c i l i t a t e mak-ing income tax returns; (f) Information to f a c i l i t a t e obtain-ing credit; and (g) Information needed in case of insurance claims or i n the settlement of an estate. 30 Form Systems of farm accounting have been advocated by many farm management workers. But i n keeping h i s f i n a n c i a l records the farmer must make a choice between a double entry or a single entry system. Double Entry Double entry accounting, despite i t s universal use by business firms i s not the system recommended to the average farmer f o r the following reasons: (a) I t i s a complex system requiring expert know-ledge of the subject. (b) I t i s time consuming and may require several hours per day i n making the entries and posting. Large farms and ranches, where bookeepers are em-ployed, can keep t h e i r f i n a n c i a l records under the double entry system but the majority of farmers require a system Which i s simple, comprehensive, and understandable. Single Entry Single entry accounting as i t s name implies, i s a system i n which an item i s entered only once. I t i s the system used i n nearly a l l farm account books d i s t r i b u t e d by govern-ment agencies or as advertising media by commercial firms. These ready-made account books have c e r t a i n l i m i t a t i o n s . One of the main c r i t i c i s m s of them i s that they are too i n f l e x i b l e f or the p a r t i c u l a r needs of many farmers. Another i s that 31 they are not designed with an eye to income tax accounting. The Recommended System of Accounting The following system i s recommended to farmers in British Columbia. It i s a flexible system, adaptable to most farm businesses, easily kept and readily provides the informa-tion for f i l i n g of income tax returns. 1 At the same time, i t provides the farmer with the basic data necessary to the suc-cessful operation of his farm. The equipment required for the system recommended o consists of an account book, a pocket notebook, several f i l e s , and a copy of the Farmer's and Fisherman's Guide, for the pre-paration of T l General, Income Tax Returns. There are four main parts to the system recommended, namely: 1. List of assets and l i a b i l i t i e s , (Inventory). 2. Balance sheet. 3. Cash Income and expenditure. 4. Profit and loss statement. These are supplemented with an account of capital expenditures and receipts and an account for personal withdrawals from the farm business. For f i l i n g income taxes on a cash or accrual basis. 2 See Appendix A for sample account system. Farmer's and Fisherman's Guide available from the Taxa-tion Division, Department of National Revenue or at nearly a l l Post Offices. 32 The l i s t of assets and l i a b i l i t i e s must include the real estate, machinery, feed and supplies, and cash and other assets on hand at the beginning and end of the year. The values of these assets are different because of depreciation (wear, tear and obsolescence) and to purchase and sales of livestock, buildings and equipment. For buildings, drains and fences the following information i s required; the year acquired, value when acquired and the rate of depreciation. The same applies to machinery. The value of buildings, drains, fences and machinery i s the new value less depreciation to date. For example, a tractor purchased in January, 1950 for $2,000 can be depreciated at a maximum rate of 15 pereent or $300 per year. Its value at the beginning of 1953 i s $1100 ($2,000 less $900) and at the end of the year the value i s $800 ($1100 less $300). Land i s valued at i t s market value without buildings and improvements. Livestock on hand at the beginning and at the end of the year i s valued at begin-ning of the year market prices. Feed, seed and supplies are valued at current prices. The balance sheet i s a summary of the assets and l i a b i l i t i e s . The net worth figure obtained from the balance sheet represents the operator's equity i n the business. Cash income and expenditures are itemized l i s t s of cash receipts and expenses. To assist i n making out the income tax return (Tl General) the items entered should be classed to correspond to the categories used on the income tax form. The following system i s recommended. Assign a number to each category of income used on the income tax return as follows: Crops and seeds (1) Canadian Wheat Board Payments (2) Livestock and livestock products (3) Bees, honey, wax, maple products (4) Fruits and vegetables (5) Custom work (6) Patronage dividends, rebates (7) Wood, sand, ice, ha i l insurance (8) Other (9) Do the same for the expense items as follows: Salaries and wages (1) Rent paid (2) Interest (8) Taxes and licenses (4) Insurance (except l i f e ) (5) Repairs and maintenance (6) Auto and truck expenses (7) Farm machinery expenses (8) (Gas, o i l , etc., except repairs) Livestock purchased (9) Seed and plants purchased (10) Feed and straw purchased (11) Containers and twine (12) Fer t i l i z e r s and sprays (13) Other expenses (14) 34 These numbers are placed at the top of the appro-pr i a t e columns f o r the income and expense items. By adding up the income amounts marked (1) the amount to be entered on the income tax form under income from crops and seeds w i l l be obtained. The same applies to the other items of income and expense. As a f i n a l step the p r o f i t and loss statement should be prepared. This w i l l show the net return to the operator f o r his work on the farm during the year. The c a p i t a l account i s used to enter purchases and sales of machinery and equipment, p r i n c i p a l payments on mort-gages and on machines. The account f o r personal withdrawals from the business keeps track of the amount of money taken from the farm income f o r personal use. When to Prepare Inventories Farmers using t h i s system are advised to take t h e i r inventories at or near the beginning of the year. Stocks of feeds and other supplies may be higher at t h i s time than i n the spring but i t has the advantage of coinciding with the tax year and there i s generally more time av a i l a b l e to take stock at t h i s time of the year. The end of year inventory serves as the beginning of year inventory f o r the succeeding year; after an inventory has been taken once i t i s only a yearly occurrence thereafter. 35 Recording the Physical Assets The f i r s t step i n taking an inventory i s to take stock of the physical assets of the business. The best way to do t h i s i s f o r the farmer to provide himself with a pad of paper or a notebook and p e n c i l ; (Another person to write down the figures w i l l shorten the time required to take the inven-to r y ) ; then he should make a physical check of a l l buildings, improvements, machines, l i v e s t o c k , feed and supplies that he has on hand. While making the check the following d e t a i l s should be written down: (a) Buildings - t h e i r age, s i z e and kind of mater-i a l they are constructed of. (b) Improvements - the date, type and extent of improvement s. (c) Machines and tools - the age and number of machines and tools of each kind. (d) Livestock - the numbers and ages of breeding and work stock; the number and weight of each c l a s s of l i v e -stock being fed f o r sale. (A scale should be available to weigh the animals, so that a r e l i a b l e estimate can be made of t o t a l weights). (e) Feed and seed- the number of bales or sacks of each kind of baled hay or packaged feed and seed; the volume of loose hay, straw, silage and grain i n bins i n cubic feet. ( f ) Supplies - the quantity of each item of supplies. E n t e r i n g the Items i n the Account Book A f t e r the p h y s i c a l count of the a s s e t s has been taken, the items must be entered i n the record book. The farmer u s i n g t h i s system w i l l make the e n t r i e s on one or more of the columnar sheets i n h i s account book. S e c t i o n s must be a l l o t t e d f o r the f o l l o w i n g c l a s s e s of a s s e t s : I . Real E s t a t e - Land, b u i l d i n g s and improvements, I I . Machinery and Equipment - Trucks, autos, machines, t o o l s and equipment. I I I . L i v e s t o c k (Production) - Work s t o c k , breeding stock, s t o c k kept f o r the production of l i v e s t o c k products. IV. L i v e s t o c k (Fattening) - L i v e s t o c k being f e d f o r s a l e . V. Crops h e l d f o r s a l e . VI. Feed, Seed, S u p p l i e s . V I I . Cash - On hand and bank balance. V I I I . Other Assets - Bonds, accounts r e c e i v a b l e . S i x columns w i l l be needed f o r r e a l estate and machinery and equipment; they w i l l be headed as f o l l o w s : Year Coat v»l«e Deprec. Value D e p r e c i a t i o n Acquired U 0 S T Beg. year Rate end year Allowed L i v e s t o c k w i l l r e q u i r e f o u r columns headed as f o l l o w s : Beginning of year End of Year Number Value Number Value 37 Crops for sale and feed, seed and supplies require four columns also: these are headed: Beginning of year End of Year Amount Value Amount Value Cash and other assets w i l l only require two columns, beginning of year value and end of year value. Space should be l e f t in each section for l i s t i n g depreciable assets acquired during the year. (In recording these items the month of purchase should be noted). Sections must also be allotted for recording the l i a b i l i t i e s . They should be li s t e d under three classes: long term (e.g., mortgages and agreements of sale); intermediate (farm improvement loans, machinery debts); short term (bank loans, accounts payable). Beginning of year values and end of year values are recorded in two columns. Valuing the Items When the entries have been made the farmer must place values on the items. If he i s making his f i r s t inven-tory, he w i l l have to calculate the beginning of year values of the buildings, improvements, machinery and equipment from the original cost of these items, less the depreciation accumulated to date. It i s probably best in most cases to use the straight line rates of depreciation 1 set out under Part XVII of the Income Tax Regulations. If an asset has 1 The diminishing balance method i s discussed later in this chapter. 38 been f u l l y depreciated i t should be l i s t e d with a zero value. Livestock, crops, feeds, seed and supplies w i l l be valued at market prices at the farm. Quantities of bulk feed and grains w i l l have to be estimated using tables f o r converting volumes into tons, bushels, etc.* The amount of cash on hand and i n the bank w i l l be entered quite r e a d i l y ; bonds should be valued at face value and accounts 2 receivable at face value. L i a b i l i t i e s w i l l be entered at face value. A sample form f o r the l i s t i n g of assets and l i a b i -l i t i e s i s i n Appendix A. Preparation of the Balance Sheet When a l l the items of the inventory and t h e i r value have been entered, the t o t a l value of each section should be calculated. These t o t a l s are used i n preparing the balance sheet, which should be on a sheet i n the book and i n the form of the sample sheet i n Appendix A. The balance sheet at t h i s stage w i l l only show the values f o r the beginning of the year. At the end of the year another inventory must be taken i n order to record changes which have occurred i n the inventory. New acqui-s i t i o n s w i l l have to be added i n and depreciation f o r the year w i l l be deducted from the beginning of year value of 1 See Appendix A. 2 See "Problems i n Valuation" l a t e r i n the chapter. d e p r e c i a b l e a s s e t s s t i l l on hand. D e p r e c i a t i o n f o r the f r a c t i o n of the year t h a t a new a c q u i s i t i o n i s owned must be deducted from i t s cost p r i c e . When the end of year i n v e n t o r y i s taken and en-te r e d , the farmer can enter the d e p r e c i a t i o n a l l o w a b l e column; t h i s column i s used to enter the amount o f depre-c i a t i o n a l l o w a b l e under the Income Tax Regulations. Only one-quarter of the d e p r e c i a t i o n of the farm d w e l l i n g and a maximum of two-thirds o f the d e p r e c i a t i o n on an auto-mobile i s a l l o w a b l e ; only these amounts should be entered i n the d e p r e c i a t i o n allowed column. The farmer should not for g e t to c l a i m d e p r e c i a t i o n f o r the le n g t h of time he owned dep r e c i a b l e assets s o l d d u r i n g the year. These amounts w i l l go i n the " a l l o w a b l e " column.'*' Numbers of l i v e s t o c k and q u a n t i t i e s o f f e e d , seed, s u p p l i e s e t c . w i l l probably have changed and there may have been p r i c e changes i n these items a l s o . Such changes w i l l have to be taken account of i n the i n v e n t o r y f o r the end of the year. Changes i n cash and other a s s e t s may have taken place and l i a b i l i t y values w i l l be changed i f payments have been made on past debts or i f new debts have been assumed. This column i s not used i n the balance sheet but i s used i n preparing the income tax r e t u r n . 40 Cash Income and Expense Entries The columns f o r cash income items w i l l depend on the i n d i v i d u a l farmer's production program. I f the farmer i s producing several kinds of crops or has several liv e s t o c k enterprises he may wish to record the income from each of these sources i n separate columns i n order to assess the con-t r i b u t i o n of each crop or l i v e s t o c k enterprise to h i s busi-ness. A twelve column sheet should be s u f f i c i e n t to meet the requirements of most farmers, i n that some of the items which occur infrequently can be grouped and placed i n one column. 1 The numbers appropriate to the tax categories of the items are placed at the top of the columns. Where more than one category i s recorded i n a column the tax category number i s bracketed after the value of the item. Expense items are treated s i m i l a r l y ; grouping of infrequent items may also be done i n entering expenses. I f desired, more than one column may be used f o r expenses which are i n the same income tax category but which the farmer wishes to separate f o r his own convenience; e.g., separate columns might be used f o r dairy feeds and hog feeds where these two enterprises form major portions of the farm business. Included i n expenditures f o r income tax purposes i s the value of board and lodging supplied to hired labour; these values are entered as expenses and are included with the wages i n category (1). See Appendix A. 41 The cost of r e p a i r s to the d w e l l i n g and the auto-mobile expenses r e q u i r e s p e c i a l treatment because o n l y one-quarter of the cost of r e p a i r s to the farm home and a maximum of two-thirds of the automobile expenses are allowable under the tax r e g u l a t i o n s . I t i s recommended that o n l y these amounts be entered i n the appropriate columns; the t o t a l amounts of such cost s can be put i n brackets a f t e r the it e m e n t r y , e,g., gaso-l i n e purchase f o r auto: Date Item (7) Jan. 4 Gasoline (auto) (6.00) 4.00 Receipts and expenditures may be t o t a l l e d each month or they may be t o t a l l e d a t the end of the year. P r e p a r a t i o n o f the P r o f i t and Loss Statement When the end of year i n v e n t o r y i s taken and the r e -c e i p t s and expense items are t o t a l l e d f o r the year, the p r o f i t and l o s s statement i s prepared. This statement i s a summary of the farm business f o r the year and i s recorded on a page i n the account book i n the form of the sample page i n Appendix A. The average net. value o f the p h y s i c a l assets i s used as the ba s i s f o r a s s e s s i n g the operator's c a p i t a l investment on the p r o f i t and l o s s statement. The net value of the p h y s i c a l a s s e t s i s the t o t a l value of these a s s e t s l e s s amounts owing on mortgages, notes on machinery and short term indebted-ness that i s not i n the form of monthly accounts owing. Supplementary Accounts 42 Supplementary accounts are s e t up to provide informa-t i o n regarding c a p i t a l r e c e i p t s and expenses, and personal withdrawals from the farm business. These accounts a l s o serve as means of checking the accuracy of the accounting system; they show how the net farm income i s used by the farmer. C a p i t a l expenditure and r e c e i p t s — a page of the ac-count book i s used to re c o r d c a p i t a l expenditures and r e c e i p t s . C a p i t a l expenditures c o n s i s t of the f o l l o w i n g : (1) P r i n c i p a l payments on mortgages, agreements of s a l e , im-provement loans (except l i v e s t o c k purchases), machinery, equipment and improvement o b l i g a t i o n s of the farm business; (2) Payments f o r purchases of l a n d , machinery and equipment, and f o r the purchase o r c o n s t r u c t i o n of b u i l d i n g s and im-provements f o r the farm business. C a p i t a l r e c e i p t s c o n s i s t of payments r e c e i v e d from the s a l e of l a n d , b u i l d i n g s , machinery and equipment which are part of the farm business a s s e t s . (Trade-in values of machinery and equipment are entered as c a p i t a l r e c e i p t s ) . Personal withdrawal account—may be kept i n a sep-arate book or i n the account book. I t i s simply a r e c o r d of the amounts of money withdrawn from the farm business f o r the 1 See Appendix A. L i v e s t o c k purchases are entered i n the cash expense columns. q See Appendix A. personal use of the operator and h i s f a m i l y ; the personal share of automobile expenses and house r e p a i r s are entered i n t h i s account. The account i s t o t a l l e d at the end of the year f o r use i n checking the p r o f i t and l o s s statement. Using the Supplementary Accounts The supplementary accounts are used to check the accuracy of the p r o f i t and l o s s statement i n the f o l l o w i n g manner: (A page of the account book i s a l l o t t e d f o r t h i s pur-pose and e n t r i e s are made as shown i n Appendix A ) . The net cash farm income, c a p i t a l r e c e i p t s , cash on hand and i n the bank at the beginning of the year are entered as r e c e i p t s ; the c a p i t a l expenditures, personal withdrawals and cash on hand and i n the bank a t the end of the year are entered as expenditures. These accounts should balance. How the System Meets the Intended O b j e c t i v e s I n the o p i n i o n of the w r i t e r , t h i s system of farm accounting i s adequate f o r the use of the m a j o r i t y of B r i t i s h Columbia farmers. The system i s f l e x i b l e ; i t can be used f o r most types of farming. The time r e q u i r e d i n keeping the records i s not great except f o r t a k i n g the i n v e n t o r y , p r e p a r i n g the balance sheet, and p r o f i t and l o s s statements, one or two hours per week should be s u f f i c i e n t time f o r making the e n t r i e s . A complete r e c o r d of the t r a n s a c t i o n s of the farm business i s maintained. The balance sheet and the p r o f i t and l o s s s t a t e -ment provide adequate i n f o r m a t i o n of the f i n a n c i a l s t a t u s of the business. The f i l i n g of Income Tax r e t u r n s i s s i m p l i f i e d by i t s use; the m a j o r i t y of farmers make t h e i r r e t u r n s on a cash b a s i s . The balance sheet and p r o f i t and l o s s statement a l s o provide i n f o r m a t i o n f o r e s t a b l i s h i n g c r e d i t . An e x t r a copy of the i n v e n t o r y can r e a d i l y be made and kept i n a f i r e -proof place to be a v a i l a b l e i n case o f f i r e o r other l o s s . An A n a l y s i s of the farm business can be made from t h i s system of f i n a n c i a l records. A number of measures of business success and f i n a n c i a l s a f e t y can be obtained from i n f o r m a t i o n a v a i l a b l e from the f i n a n c i a l r e c o r d s ; these methods are discussed i n Chapter Four. S i n g l e E n t e r p r i s e Accounts The recommended system of accounting i s adequate f o r the e n t e r p r i s e accounting requirements of most farmers. How-ever, some farmers with a number of e n t e r p r i s e s i n t h e i r farm business may wish to do more exact accounting f o r each of these e n t e r p r i s e s . S i n g l e e n t e r p r i s e accounting i s not used by the maj-o r i t y of farmers f o r a number o f reasons. I t i s a very d i f -f i c u l t system of bookkeeping because farm e n t e r p r i s e s are so c l o s e l y i n t e g r a t e d ; the a l l o c a t i o n of the cost of labour and machines t o each e n t e r p r i s e cannot r e a d i l y be done; the propor-t i o n of housing, power, l i g h t and water costs of separate l i v e -s tock e n t e r p r i s e s , u s i n g these f a c i l i t i e s i n common, i s d i f f i -c u l t to charge to the separate e n t e r p r i s e s . V a l u a t i o n of r e s i d u a l values of seed and f e r t i l i z e r remaining a f t e r the 45 year of planting or applica t i o n i s not a simple process. There are so many costs that are general to each enterprise, that separating them out i n enterprise accounting i s not worthwhile. Farmers keeping single enterprise accounts must be prepared to spend a considerable amount of time on bookeeping and must have considerable knowledge of accounting; a n a l y t i c a l methods described i n Chapter Four are adequate f o r most farm businesses. Special Problems i n Keeping F i n a n c i a l Records Valuation Several problems face a farmer i n valuing h i s assets, (e.g., how should a change i n land values be handled). The best method i s to make a conservative estimate of value, i f he has owned the asset for some time; i n the case of a recent purchase i t i s valued at i t s cost price. Improvements made to the land should be recognized; the value of r e a l estate should be ap-preciated i n amounts equal to the cost of such improvements. Valuation of work and breeding animals may be a problem. Depreciation of animals i s generally ignored due to the fact that as the older ones depreciate i n value, young stock are appreciating i n value and the appreciation o f f s e t s the depreciation. F a i r market value i s the best basis f o r valu-ing such l i v e s t o c k . The valuation of home grown feeds, such as silage and straw, which are not normally marketed may also trouble 46 farmers. One method of valuing s i l a g e i s to add the cost of en-s i l i n g to the sales value of i t s components. An alt e r n a t i v e method i s to approximate i t s feeding value with comparison to hay which has a sales value; straw may he valued i n t h i s manner also. Accounts receivable that are not of a current type, such as egg and milk returns, may be discounted f o r the length of time that w i l l elapse before they are co l l e c t e d . Some of them may have to be valued as t h e i r c o l l e c t i b i l i t y and provis-ion made f o r c o l l e c t i o n costs i n some cases. Depreciation The choice of a method of depreciating assets may prove troublesome to farmers. One of two methods may be used i n claiming depreciation f o r Income Tax purposes; each of these methods has advantages and disadvantages. The simplest and most e a s i l y calculated i s the s t r a i g h t l i n e method. Using t h i s method, an asset i s assumed to have a cert a i n number of years of use; the annual depreciation i s c a l -culated by d i v i d i n g the cost of the item at a c q u i s i t i o n by the estimated number of years of use. The annual depreciation i s changed each year u n t i l the asset i s f u l l y depreciated; (e.g., a machine expected to have a useful l i f e of ten years, costing $100, i s depreciated as follows: years of us e ^ l O = $ 1 G annual depreciation or at a rate of 10 percent). The rates of depreciation given on page 5 of the "income Tax Guide" are on a straight l i n e basis and serve the purpose very w e l l on the 47 whole. If a farmer feels that his assets are going to last longer than these rates assume, he may depreciate them at a lower rate; the rates given are maximum ones. The chief criticisms of the straight line method are: the asset eventually reaches a zero book value; the method f a i l s to recognize that depreciation i s greatest i n the earlier years of an asset's l i f e . While i t i s true that machines, equipment, and buildings often last longer than the l i f e expectancy under the maximum rates given i n the "Guide,** most farmers w i l l find l i t t l e difference i n their tax position because of this. The assets are s t i l l l i s t e d i n the farm i n -ventory with a zero book value. Machines, unless of an ex-perimental design, do not become obsolete i n a few years. A machine i s generally worth more to a farmer than he can s e l l i t for. The diminishing balance method of calculating depre-ciation i s the alternative method allowed by the tax regulations. When this method i s used receipts from sales of depreciable assets must be accounted for. Farmers using this method must classify their assets. Maximum rates are given for each class on page 5 of the Guide under Part XI. The amount of annual depreciation i s never the same in any year of the asset's l i f e ; i t gets less each year, e.g., a mower, which i s in Class 8, costing $200, depreciated at the maximum rate of 20 percent would be depreciated 1 0Q o r $40 the f i r s t year. The second year's depreciation i s at a rate of 20 percent but on a value of $160, being the depre-ciated value for the second year; the depreciation would amount 48 to $32. The amount of depreciation diminishes each year as the depreciated value diminishes. The asset never reaches zero value under this method. Although this method does allow for greater depre-ciation i n the earlier years of an asset's l i f e and the asset i s never f u l l y depreciated, i t i s not recommended for the use of farmers because i t i s a more cumbersome procedure than the straight line method. The simplicity and ease of application of the straight line method makes up for i t s shortcomings. Income Tax Returns The f i l i n g of income tax returns presents a number of problems to farmers. A thorough study of the Farmer's and Fisherman's Guide, for the Preparation of T l General Income Tax Returns, i s of great benefit i n preparing tax returns. The amount of depreciation and the proportion of expenses allowable for the repair of farm houses and for the repair and operating expenses of the automobile are apt to be confusing to the farmer when he makes up his inventory and operating statement. Farm dwellings and automobiles are con-sidered as partly business and partly personal assets under the taxation regulations. The farm home i s not readily separated from the rest of the farm business assets and should be en-tered at i t s f u l l value in the farm inventory. Automobiles pose a different problem; some farmers use their automobiles almost entirely in the farm business; others, who have trucks, may use their automobiles nearly a l l for personal purposes. In 49 such cases, the farmers must use t h e i r own judgment i n e v a l u a t -i n g them i n t h e i r i n v e n t o r i e s . I n any event, not more than one-quarter of the d e p r e c i a t i o n and cost of r e p a i r s to farm houses, and a maximum o f two-thirds of the d e p r e c i a t i o n and running expenses o f automobiles may be claimed as deductions. Small t o o l s having a l i f e of f i v e years or l e s s and c o s t i n g not more than $50 each may be claimed as expenses f o r the year o r they can be added t o the i n v e n t o r y . C l a s s i n g these as expenses saves time i n the accounting procedure. Farmers u s i n g the recommended system of f i n a n c i a l records are able to f i l e t h e i r t a x r e t u r n s w i t h minimum e f f o r t . I f i n v e n t o r i e s are c l o s e d i n the l a t t e r part of December and t e n t a t i v e t o t a l s o f r e c e i p t s and expenses are made at the same time f i l i n g of the T7B form can be done r e a d i l y . I f i t i s not convenient to take the inven t o r y then t h i s form may be f i l e d u s i n g the previous year's tax r e t u r n . Two-thirds of the e s t i -mated tax payable f o r the curren t year o r two-thirds o f the tax payable on the ta x a b l e income f o r the previous year must be remitted with the form. T h i s r e t u r n i s due on or before December 31 each year. The in f o r m a t i o n necessary f o r f i l i n g T4 Summary and T4 Supplementary forms i s a v a i l a b l e from the expense records category ( 1 ) , wages and value of board s u p p l i e s to employees. T4 Supplementary s l i p s must a l s o be d e l i v e r e d t o the employees. These forms are due on o r before the l a s t day of February each year. A l l of the i n f o r m a t i o n r e q u i r e d f o r f i l i n g the T l form i s obtained from the f i n a n c i a l r e c o r d s , w i t h the exception of the value of the farm produce consumed i n the home. This value i s g e n e r a l l y estimated due to the great d e t a i l t h a t i s r e q u i r e d i n keeping t r a c k of a l l the items used i n the home from the garden, d a i r y and p o u l t r y house. Farmers should not overlook the s e c t i o n s i n the "Guide d e a l i n g with l o s s e s and the averaging of income. I f income tax payments can be reduced by c l a i m i n g f o r l o s s e s o r by averaging income, the time spent i n making the c a l c u l a t i o n s i s w e l l spent. Receipts f o r c h a r i t a b l e donations and medical expenses should be kept i n order to c l a i m them as deductions. PHYSICAL RECORDS Objectives and Purposes P h y s i c a l records should be kept i n such a way as to provide farmers w i t h : (a) A re c o r d of the use of l a n d , acreages and y i e l d s of crops, and the numbers, feed consumption, and pro-duc t i o n of l i v e s t o c k . (b) Information f o r a s s e s s i n g the e f f i c i e n c y i n the production of crops and l i v e s t o c k . (c) Information to supplement the f i n a n c i a l records i n a n a l y s i n g the farm business f o r the purpose of planning pro-d u c t i o n and i n c r e a s i n g the e f f i c i e n c y of production. 51 Form P h y s i c a l records d i f f e r from f i n a n c i a l records i n that they a r e concerned with p h y s i c a l q u a n t i t i e s only. Phy-s i c a l records may be kept of crops, l i v e s t o c k p r o d u c t i o n , labour use and machine use and i n f a c t of a l l the a c t i v i t i e s making up the t o t a l farm operation. A d e s c r i p t i o n of the more u s e f u l records i s given below. These records may be kept s e p a r a t e l y from or i n the same book as the f i n a n c i a l records. Farm Maps A map of the farm serves s e v e r a l purposes. I t i s u s e f u l f o r r e c o r d i n g how the v a r i o u s f i e l d s are used, the c u l -t u r a l p r a c t i c e s f o l l o w e d on them, and the y i e l d s from them. A map i s a l s o u s e f u l f o r p l a n n i n g changes i n the, f i e l d layout of the farm. Farm maps should be prepared on a sheet of paper r u l e d i n 1 i n c h o r l a r g e r squares and should be drawn to s c a l e . Maps should be l a r g e enough so th a t d e t a i l s of the shape and s i z e of the f i e l d s show up and so that there i s s u f f i c i e n t space f o r e n t r i e s r e g a r d i n g the use o f the l a n d . Measurement of the acreages of the f i e l d s should be as accurate as pos-s i b l e i n order to o b t a i n accurate y i e l d data. A sample map i s i n c l u d e d i n Appendix B, Land Use Records A r e c o r d of l a n d use, c o n s i s t i n g of a summary of how the l a n d i s d i v i d e d and used, can be made to supplement the 1 See Appendix B f o r examples of p h y s i c a l records. 52 farm map. The summary i s made i n two p a r t s : (1) Arable a c r e -age; (2) Non-arable acreage. An example of a l a n d use r e c o r d of a one-hundred acre farm f o l l o w s : TABLE 9 LAND USE RECORD Arable Acres Permanent Pasture 30 Hay 20 F i e l d crops 15 Orchard and sm a l l f r u i t s 5 T o t a l 70 Non-arable Farmstead, l a n e s , e t c . 5 Native pasture 20 Wood l o t 5 Waste 0 T o t a l 30 T o t a l Farm Acreage 100 Separate l a n d use records are made f o r owned and rented l a n d , i f the farm i s operated under two tenures. 53 Crop Records Crop records are s e t up so as to r e c o r d the acreage of each crop grown, the q u a n t i t i e s of seed, f e r t i l i z e r , and i r r i g a t i o n used, the c u l t u r a l p r a c t i c e s f o l l o w e d , and the y i e l d of crops harvested. Where s p r a y i n g i s done, d e t a i l s of such spraying are recorded a l s o . Pasture Records Records s i m i l a r to crop records are used f o r seeded pastures. A l l pasture records should c o n t a i n d e t a i l s of a p p l i c a t i o n s of f e r t i l i z e r and i r r i g a t i o n water, the k i n d and number of l i v e s t o c k pastured, and the number of days the pas-ture i s used. Records of r o t a t e d pasture should have d e t a i l s of the l e n g t h o f time and numbers and kinds of l i v e s t o c k pas-tured i n each p e r i o d of the r o t a t i o n . L i v e s t o c k Records There are a great number of l i v e s t o c k records that may be kept and the choice o f the records depends on the type of l i v e s t o c k production f o l l o w e d on the farm. A l l l i v e s t o c k records must record the q u a n t i t i e s of feed fed to the l i v e s t o c k concerned and the production such as the weight of m i l k pro-duced by d a i r y cows, the gain i n weight of animals i n the feed-l o t , and the numbers of eggs l a i d i n the case o f a d a i r y enter-p r i s e . Dairymen are advised to keep records of the d a i l y m i l k production of each cow i n the herd. This can be done by 54 weighing the milk given by the cow at each milking and the quantities recorded on a form kept i n the barn or milking parlour. The form should provide spaces f o r each cow's name or number and columns f o r recording the quantity of milk given at morning and evening milkings each day of the month. A record of the quantities of feed to each cow should be kept a l s o . Breeding records are useful to provide dates of calving. Records of l i v e s t o c k i n the feedlot should contain the date, the number, and the weight of the animals at the com-mencement of the feeding period, the quantity of feed fed to the animals during the feeding period, and the weight of the animals at the end of the feeding period. Poultrymen should record the number of hens or pul-l e t s i n the l a y i n g pens, d a i l y egg production for each pen, and the quantity of feed fed to each pen. Daily production and feed consumption records should be kept i n the bam or poultry house and entered i n t o the phys-i c a l records i n the account book at monthly i n t e r v a l s or at the close of a feeding period. Labour Records Labour records involve more time and e f f o r t on the part of farm operators than any other record they may keep, es p e c i a l l y i f they record the use of labour i n each enterprise. Labour records must be entered d a i l y . The farmer and his em-ployees can keep track of the time spent on various jobs by entering the information i n pocket note books. These note 55 book e n t r i e s are then t r a n s c r i b e d i n t o the labour r e c o r d . Other P h y s i c a l Records I n a d d i t i o n to the records described above, records of the use of machines, the consumption o f f u e l i n t r a c t o r s and t r u c k s , and records of many other operations connected with the farm may be kept. Farmers must choose f o r themselves which are worthwhile keeping. Problems i n Keeping P h y s i c a l Records Although p h y s i c a l records are concerned with p h y s i -c a l q u a n t i t i e s o n l y , these q u a n t i t i e s are o f t e n transformed i n t o monetary values when the farm business i s being analysed. I t i s t h e r e f o r e necessary f o r p h y s i c a l r e c o r d s t o be as ac-curate as p o s s i b l e . Farmers may have to estimate q u a n t i t i e s such as the number of bushels of g r a i n i n a b i n , the number of tons of loose hay or straw i n stacks or mows, the number of tons of s i l a g e i n a s i l o , or the acreage of a f i e l d . Methods have been worked out f o r e s t i m a t i n g such q u a n t i t i e s and t h e i r use should never be s u b s t i t u t e d f o r by guesses. The use of s c a l e s i s recommended f o r weighing r a t i o n s fed to l i v e s t o c k . Standard measures are u s e f u l i f d a i l y weigh-i n g of g r a i n r a t i o n s i s not d e s i r a b l e or f e a s i b l e . Scales are of great value i n f e e d l o t operations. I f l a r g e numbers of a n i -mals are being fed i t i s only necessary to weigh r e p r e s e n t a t i v e animals or s e v e r a l from each c l a s s i n order to get a c l o s e e s t i -mate of the average weight. The t o t a l weight i s then c a l c u l -ated from these averages. CHAPTER I I I MANAGEMENT AIDS OBTAINED FROM FARM RECORDS Good business management, as w e l l as good husbandry, i s needed i n the s u c c e s s f u l o p e r a t i o n of a farm. E f f e c t i v e farm business management does not stop w i t h the keeping o f reco r d s . Records, l i k e t o o l s , w i l l show r e t u r n s o n l y with use. T h e i r g r e a t e s t use can be i n the a n a l y s i s of the farm business and usi n g the a n a l y s i s f o r making production plans f o r the f u t u r e . The marketing of the produce of the farm deserves study. Consumer's buying h a b i t s and p r i c e trends should be considered i n making production p l a n s . ANALYSIS OF THE FARM BUSINESS An a n a l y s i s of the e n t i r e farm business may be made from the system of f i n a n c i a l records recommended i n Chapter I I . More p a r t i c u l a r analyses may be obtained by combined use of the f i n a n c i a l and p h y s i c a l r e c o r d s . Measurements can be made of a farm business which w i l l show the solvency, and the e f f i c i e n c y o f the business. Measures of Solvency Balance sheet r a t i o s are measures of the solvency or f i n a n c i a l s a f e t y of the farm business. The net worth or the farmer's e q u i t y i n the business appears on the balance sheet. 58 Net worth f i g u r e s of themselves mean very l i t t l e as f a r as f i n -a n c i a l s a f e t y i s concerned. Farms may have equal net worth f i g u r e s y e t the degree of f i n a n c i a l s a f e t y might be much d i f -f e r e n t . Two farms with equal net worth values are compared i n the f o l l o w i n g t a b l e : TABLE 10 Net Worth Values o f Two Farms Item Farm A Farm B T o t a l Assets $35,000.00 $15,000.00 T o t a l L i a b i l i t i e s 25,000.00 5,000.00 Net Worth 10,000.00 10,000.00 Farm B, though s m a l l e r , i s the more so l v e n t or has the greater degree o f f i n a n c i a l s a f e t y . Measurements of the degree of f i n -a n c i a l s a f e t y are made by computing r a t i o s to show the value of the a s s e t s r e l a t i v e to the value of the l i a b i l i t i e s of the business. Three r a t i o s are commonly a p p l i e d to farm businesses: the net c a p i t a l r a t i o gives the long term solvency; the working r a t i o shows the intermediate term solvency; the current r a t i o shows the degree of f i n a n c i a l s a f e t y i n the short term or current p e r i o d . 59 Net C a p i t a l R atio Net c a p i t a l r a t i o i s computed by d i v i d i n g the value of the t o t a l assets by the value of the t o t a l l i a b i l i t i e s of the business. Farm A i n the example above would have a net c a p i t a l r a t i o of $35,000 « $25,000= 1.4, while the net c a p i t a l r a t i o of Farm B would be $15,000 • $5,000 =3.0. A 50 percent d e c l i n e i n the value of the assets o f Farm A would bankrupt the farm business; l i a b i l i t i e s would exceed the value of the a s s e t s ; Farm B would s t i l l be solvent a f t e r a 50 percent d e c l i n e i n the value of i t s a s s e t s . Experience has shown t h a t the net c a p i t a l r a t i o should be two or more i n order t o provide a s a f e margin of f i n a n c i a l s a f e t y to the business. Working R a t i o The working r a t i o i s computed by d i v i d i n g the value of the working a s s e t s ( t o t a l a s s e t s - f i x e d a s s e t s ) by the value of the intermediate and short term l i a b i l i t i e s . T h i s r a t i o should have a value of two o r more. Current Ratio The current r a t i o i s computed by d i v i d i n g the value of the cur r e n t a s s e t s by the value of the short term l i a b i l i t i e s . T his r a t i o w i l l vary depending a great deal on the type of farm-i n g being c a r r i e d out; i t should never be l e s s than 1 and higher r a t i o s are d e s i r a b l e . 60 Measures from the P r o f i t and Loss Statement The p r o f i t and l o s s statement provides a b a s i s f o r measuring the r a t e o f turnover, the r a t e of r e t u r n to c a p i t a l , and r e t u r n s to the farmer f o r h i s labour and management f o r the year. Farm C a p i t a l Turnover Farm c a p i t a l turnover i s a measure that i n d i c a t e s the e f f i c i e n c y i n the use o f c a p i t a l i n the farm business. I t i s computed by d i v i d i n g the average amount of c a p i t a l by the t o t a l farm r e c e i p t s f o r the year. Turnover measures show the number o f years that are necessary f o r the t o t a l r e c e i p t s to equal the t o t a l investment; (e.g., i f the t o t a l value of a farm business i s $15,000 and the t o t a l value of r e c e i p t s i s $3,000, the r a t e of turnover i s 5 or i t would take f i v e years f o r the r e c e i p t s to equal the investment). Turnover f i g u r e s that show many years are r e q u i r e d f o r r e c e i p t s to equal investment are i n d i c a t i v e of i n e f f i c i e n t use of c a p i t a l . Net Farm Income The value of the net farm income i s found by deducting from the value of the cash r e c e i p t s and i n c r e a s e s i n i n v e n t o r y , the value of the cash expenses and i n v e n t o r y decreases. This sum represents the r e t u r n t o the c a p i t a l investment, wages to the farmer f o r h i s labour and management and the value of un-p a i d f a m i l y labour f o r the year's o p e r a t i o n . Labour Returns Labour r e t u r n s may be c a l c u l a t e d from the net farm income by deducting from i t the value that should be returned as i n t e r e s t on the net investment i n the business and the value of unpaid f a m i l y labour. The amount of i n t e r e s t charged should be based upon the i n t e r e s t which would be r e c e i v e d from an a l t e r n a t i v e investment. I n general the r a t e used i s that pre-v a i l i n g f o r farm mortgages. Unpaid f a m i l y labour i s valued a t the going r a t e s f o r s i m i l a r work. The value thus found w i l l represent the income a c c r u i n g to the labour and management of the farm o p e r a t i o n . To a r r i v e a t h i s labour earnings the value of the produce used i n the home and an imputed r e n t a l value f o r the farm house i s added to the labour income. Asses-sment of management r e t u r n s may be made by deducting from the labour earnings a sum equal t o the wages or s a l a r y which the farmer could earn i n a l t e r n a t i v e employment. To be considered s u c c e s s f u l the farm business should r e t u r n f a i r wages to the operator f o r h i s labour and management and r e t u r n to c a p i t a l should be a t the p r e v a i l i n g r a t e f o r s i m i l a r e n t e r p r i s e s . Return t o C a p i t a l The r e t u r n to c a p i t a l may be c a l c u l a t e d by deducting from the net farm income, the value of the operator's c o n t r i -b u t i o n to labour and management and the value of unpaid f a m i l y labour. To express t h i s as a r a t e , the r e t u r n to c a p i t a l i s d i v i d e d by the average net value of the p h y s i c a l assets and m u l t i p l i e d by 100; e.g., A farm net income i s $5,000, the value 62 of the operator's labour and management, and unpaid f a m i l y labour i s $3,500 and the average net value of the p h y s i c a l assets i s $30,000. The r a t e of r e t u r n i s (5,000 - 3,500) ^ 1 5 0 g 0 X Q Q Q ° =s 5 percent. Low r a t e s of c a p i t a l r e t u r n i n d i c a t e that the c a p i t a l investment i s too high o r the farm income i s too low. Measures from P h y s i c a l Records P h y s i c a l records provide data f o r c a l c u l a t i n g the production e f f i c i e n c y of crops, l i v e s t o c k , labour and machines. By a s s i g n i n g monetary values to the items i n the p h y s i c a l records estimates of the f i n a n c i a l success of various enter-p r i s e s i n the farm business may be made. Crop Records The s i m p l e s t measure that can be made i s the y i e l d per acre of crops. The t o t a l y i e l d of each crop i s d i v i d e d by the number of acres sown to the crop to give the y i e l d per acre. Farmers who keep crop records and make note of the c u l t u r a l p r a c t i s e s f o l l o w e d i n growing t h e i r crops, can use them to good advantage f o r f i n d i n g the best combination o f seed, f e r t i l i z e r , i r r i g a t i o n and c u l t i v a t i o n . The cos t o f a p p l y i n g more f e r t i l i z e r , water o r other f a c t o r s should be considered before doing so, i n order to be sure such expendi-t u r e s may r e s u l t i n a l a r g e r net r e t u r n from t h e i r use. L i v e s t o c k Records L i v e s t o c k records are used i n o b t a i n i n g a number of e f f i c i e n c y measures. The m i l k production of d a i r y cows, egg production of p o u l t r y and the meat pro d u c t i o n of meat animals may be measured e i t h e r on an animal u n i t b a s i s or from u n i t s of the feed f e d to such animals. From such data i n e f f i c i e n t producers i n the herds and f l o c k can be i d e n t i f i e d and a c t i o n taken to e l i m i n a t e them. A measure that may be a p p l i e d to l i v e s t o c k enter-p r i s e s i s the value of production per $100 worth of feed f e d . 1 This measure can be used by dairymen, poultrymen, f e e d l o t operators and i n f a c t by n e a r l y a l l l i v e s t o c k producers. Home grown feed must be valued i n c a l c u l a t i n g t h i s measure. The formula i s as f o l l o w s : Value of l i v e s t o c k products produced „ - n n vaTuT-o? feed K X 1 0 0 " r e t u r n s per $100 worth of feed. Dairymen must i n c l u d e the feed f e d t o t h e i r e n t i r e d a i r y herd to a r r i v e a t t h i s value. Feedlot operators use the gain i n value of the animals f e d as the value o f the product produced. This value may be found as f o l l o w s : Value o f animals at end of f e e d i n g p e r i o d Value o f animals at beginning of feeding p e r i o d Gain i n Value A J.A. Hopkins and E.O. Heady, Farm Records. T h i r d E d i t i o n p. 179, Ames, The Iowa S t a t e C o l l e g e Press 11949). 64 Farmers who do not keep feed records f o r each enter-p r i s e can measure the feed r e t u r n from t h e i r operations from t h e i r i n v e n t o r y , r e c e i p t and expense r e c o r d s , and a re c o r d of the feed grown during the year. The procedure i s as f o l l o w s : The beginning i n v e n t o r y value of l i v e s t o c k plus the value of l i v e s t o c k purchased during the year are subtracted from the c l o s i n g i n v e n t o r y of l i v e s t o c k p l u s the value of l i v e -stock and l i v e s t o c k products s o l d and consumed i n the home during the year; t h i s i s the value of l i v e s t o c k and l i v e s t o c k products produced i n the year. The value of feed i s found by s u b t r a c t i n g the end of year i n v e n t o r y feed value from the value of feed i n the beginning year i n v e n t o r y p l u s values of purchased feed and home grown feed f e d during the year. The schedule i s as f o l l o w s : Return per $100 Forth o f Feed Fed L i v e s t o c k Feed (1) Beginning i n v e n t o r y (3) Beginning Inventory Purchases Purchases T o t a l (1) Home Raised T o t a l (3) (2) Sales ( L i v e s t o c k and Pro- (4) C l o s i n g Inventory ducts) T o t a l (4) Used i n home C l o s i n g i n v e n t o r y T o t a l (2) Value of l i v e s t o c k and l i v e s t o c k products - T o t a l (2) - (1) Value of feed T o t a l (3) - (4) ~ . ( t m n Value o f l i v e s t o c k and products x 100 Return per $100 feed = Value of feed This measure shows the r e t u r n per $100 worth feed f o r the t o t a l farm operation. 65 The r e t u r n per $100 worth o f feed f e d must be s u f f i -c i e n t to cover a l l the other expenses of the l i v e s t o c k enter-p r i s e s and i n a d d i t i o n give r e t u r n s to c a p i t a l and the opera-t o r ^ labour. I f r e t u r n s are low, the operator should look f o r poor producers i n h i s herd, examine the r a t i o n s being f e d and the work methods being used. Labour Records > Labour use may be analysed from labour records o r by use of a labour guide. A labour guide form showing the number of days* work r e q u i r e d per year per animal u n i t or per acre of crop may be found on the f o l l o w i n g page. 1 (This guide does not make allowances f o r time spent on r e p a i r s and maintenance of b u i l d i n g s , improvements, and machinery). I n u s i n g the guide the farmer f i l l s i n the number of each k i n d of l i v e s t o c k kept or the acres of each k i n d of crop grown on the farm; these numbers are m u l t i p l i e d by the work days per animal to f i n d the number of work days r e q u i r e d on h i s farm; e.g., A herd of twenty d a i r y cows i n f l u i d m i l k production would r e q u i r e 20 x 15 = 300 work days per year. The work days f o r the farm are c a l c u l a t e d f o r each e n t e r p r i s e c a r r i e d on; these are t o t a l l e d to f i n d the t o t a l work days r e q u i r e d f o r the farm f o r the year. Average l a b o u r e f f i -2 c i e n c y i s 225 to 250 work days per worker per year. Lower 1 H. R. Hare, Farm Business Management, p. 118, Toronto, Ryerson Press (1946JI \ 2 I b i d * . p. 119. GUIDE IN DETERMINING LABOUR REQUIREMENTS ON CANADIAN FARMS Farm E n t e r p r i s e s No. of Work Days 1. C a t t l e Animals Per Animal Farm D a i r y c o w s — f l u i d m i l k 15 » « — m i l k f o r manufacture 12 Beef cows or feeder s t e e r s on farm 3.5 A l l other c a t t l e on farm 2 Ranch c a t t l e a l l ages and c l a s s e s 1 2. Hogs Brood sows 3 Market pigs .5 3. Sheep .5 Market Lambs .2 4. P o u l t r y (per 100 mature b i r d s * Hens and ducks 20 Chickens r a i s e d f o r market 5 Turkeys and geese 40 5. Bees (per colony) .5 6. F i e l d Crops # acres Per acre G r a i n — P r a i r i e s (Peace R i v e r ) 1 G r a i n — O t h e r areas 2 Hay—one c u t t i n g 1 two c u t t i n g s 2 Forage crop seed 2 F i e l d peas 3 F i e l d beans and soy beans 4 Corn f o r fodder 5 Corn f o r husking 6 Potatoes 10 F i e l d r o o t s 12 Sugar beets 12 Vegetable seeds 22 7. F r u i t s and Vegetables V e g e t a b l e s — t r u c k crops 15 Orchards & v i n e y a r d s — i r r i g a t e d 25 n o n - i r r i g a t e d 12 (not i n c l u d i n g packing & marketing) Small f r u i t s and b e r r i e s 40 8. M i s c e l l a neous Tobacco 25 F u e l and pulpwood per cord .2 Other e n t e r p r i s e s T o t a l # Summerfallow - No allowance i s made f o r summerfallow s i n c e i t i s a l r e a d y i n c l u d e d i n day's work per crop acre. * Truck crops i n c l u d e the f o l l o w i n g crops: asparagus, c e l e r y , l e t t u c e , onions, tomatoes, c a u l i f l o w e r , cabbage, sweet corn, e t c . , when grown under f i e l d c o n d i t i o n s . 66 labour e f f i c i e n c i e s than these averages should prompt the f a r -mer to i n v e s t i g a t e the use of labour saving machines or make changes i n h i s l a y o u t and work methods. Machinery Records Records of machine and t r a c t o r use and records of r e p a i r and f u e l expenses may be used i n e s t i m a t i n g cost per acre of operat i n g them. Farmers who c a l c u l a t e machine and power costs must i n c l u d e d e p r e c i a t i o n , housing, and i n t e r e s t on the investment i n the machine as w e l l as f u e l and r e p a i r c o s t s . I n t e r e s t i s computed at the p r e v a i l i n g r a t e on one-h a l f of the new c o s t ; housing of machines has been estimated at 1 percent o f h a l f the new c o s t of machines.* BUDGETING Budgeting or planning the farm operation from a b u s i -ness viewpoint i n v o l v e s the use of re c o r d s , a n a l y s i s , and out-look i n f o r m a t i o n . Records are used to show past r e t u r n s , budget a n a l y s i s to determine where the o r g a n i z a t i o n can be improved, and outlook i n f o r m a t i o n to provide data f o r e s t i m a t i n g p r i c e s . Inventory of Resources Budgeting i s c a r r i e d out i n steps or stages. The f i r s t step c o n s i s t s of t a k i n g stock of the resources a v a i l a b l e f o r production. Land use records and i n v e n t o r i e s provide most 1 Wm. K a l b f l i e s c h , Cost of Operating Farm Machinery (Eastern Canada), Farmers 1 B u l l e t i n 118, p. 9, Ottawa, King's P r i n t e r (1950). 67 of t h i s i n f o r m a t i o n but a survey of labour resources, and sources of c a p i t a l should be i n c l u d e d . P r i c e Expectations P r i c e expectations f o r farm products are taken i n t o c o n s i d e r a t i o n i n making the budget. Expected p r i c e s can only be estimated; records of past p r i c e s and outlook i n f o r m a t i o n are used i n making the estimates. There i s l i t t l e outlook i n -formation published i n Canada; the Fe d e r a l Department of A g r i -c u l t u r e ' s p u b l i c a t i o n , the Current Review of A g r i c u l t u r a l Con-d i t i o n s i n Canada contains such i n f o r m a t i o n and some has been published by the Extension Department, The U n i v e r s i t y of B r i -t i s h Columbia, i n s p e c i a l f i e l d s . 1 Market i n f o r m a t i o n i s a v a i l a b l e from numerous sources. Radio broadcasts, newspaper and farm j o u r n a l s , and Government p u b l i c a t i o n s are sources which farmers may make use of to ob-t a i n market i n f o r m a t i o n . The Federal Government has a v a i l a b l e f o r d i s t r i b u t i o n market i n f o r m a t i o n with regard to many of the 2 farm products produced i n Canada. Farmers u s i n g outlook and market i n f o r m a t i o n w i l l be b e t t e r informed as to market trends and consumer preferences and can use t h i s knowledge i n f o r m u l a t i n g t h e i r production plans. 1 W. J . Anderson and S. L. Medland, The P o u l t r y Outlook 1954. Vancouver, The U n i v e r s i t y of B r i t i s h Columbia (1953). 2 Information S e r v i c e , Department o f A g r i c u l t u r e , Ottawa. P u b l i c a t i o n s a v a i l a b l e a r e : The Current Review of A g r i c u l t u r a l C onditions i n Canada (bi-monthly), The Economic A n n a l i s t ( b i -monthly), L i v e s t o c k Market Report (weekly), D a i r y Produce Mar-ket Report (weekly), Crop and Market Report ( F r u i t , Vegetables and Honey) (weekly), Egg and P o u l t r y Market Report (weekly). 68 Production Plans When the resources o f the farm business have been sur-veyed and the probable p r i c e s f o r farm products have been e s t i -mated, the production plans can be made. Crop Plans The crop plan i s g e n e r a l l y made f i r s t . Crop plans should be made with s o i l c onservation and f e r t i l i t y maintenance i n mind. Crop plans should a l s o be made so that the use of labour can be spread over a lo n g p e r i o d r a t h e r than having crops competing f o r labour use at one time. Crop plans should have three o b j e c t i v e s : o b t a i n i n g the maximum net r e t u r n s from crops; combining crops e f f i c i e n t l y with other e n t e r p r i s e s ; maintaining s o i l f e r t i l i t y . Expected y i e l d data may be made from past y i e l d s or i n the case of new v a r i e t i e s from p u b l i s h e d experimental r e s u l t s . With y i e l d data and expected p r i c e estimates, the crop p l a n can be drawn up as f o l l o w s : TABLE 11 CROP PLAN Ki n d of Crop Acres Expected y i e l d /acre t o t a l D i s p o s i t i o n Feed Seed Sales Value 69 L i v e s t o c k Plans L i v e s t o c k plans are g e n e r a l l y drawn up a f t e r the crop plan . Most farms market some of t h e i r crop production i n the form of l i v e s t o c k or l i v e s t o c k products. L i v e s t o c k plans must incl u d e the numbers of each c l a s s of l i v e s t o c k k ept, expected feed consumption and production estimates. The f o l l o w i n g i s a recommended form of l i v e s t o c k p l a n : TABLE 12 LIVESTOCK PLAN Kind of L i v e s t o c k Number Feed ConsuR l p t i o n Production Home grown Purchased Amount Value Expected Expenses Expenses are e a s i e r t o budget than r e c e i p t s . F i x e d expenses, such as taxes, insurance, and d e p r e c i a t i o n do not vary much from year to year nor do they vary g r e a t l y with d i f f e r e n t production plans. Estimates of expenses connected d i r e c t l y w ith the production plans must be made. Expenses f o r seed, f e r t i l i z e r and h a r v e s t i n g are e s t i -mated f o r crops: l i v e s t o c k purchase, feed and supply c o s t s are 70 estimated f o r l i v e s t o c k . Labour, f u e l , and r e p a i r costs may be estimated f o r each e n t e r p r i s e o r may be estimated f o r the whole operation. Summary of Receipts and Expenses The summary of r e c e i p t s and expenses i s the f i n a l step i n preparing a budget. The summary may be made as f o l l o w s : TABLE 13 SUMMARY OP EXPECTED RECEIPTS AND EXPENSES Receipts L i v e s t o c k D a i r y products Beef Hogs Other P o u l t r y T o t a l Crops Grain Hay F r u i t Potatoes Other T o t a l Products used i n home M i l k Eggs Meat Other T o t a l Value Expenses Operating Machinery (upkeep) Truck and auto Tractor Labour Crop expense L i v e s t o c k expense Miscellaneous T o t a l Feed Purchases Home Grown T o t a l F i x e d Expenses Taxes I n t e r e s t Insurance B u i l d i n g r e p a i r s D e p r e c i a t i o n T o t a l Value T o t a l r e c e i p t s T o t a l expenses Expected income 71 A l t e r n a t e Plans Should Be Prepared Several production plans should be worked out and compared; the plan that appears to be most favourable should be adopted. The o b j e c t i v e of the budget i s the maximization of the farm net income. Current records are made use of i n f o l l o w i n g the bud-get; they show whether the performance i s approaching the plan or d e v i a t i n g from the pl a n . Budgets should not be r i g i d l y ad-hered to i f c o n d i t i o n s change a f t e r they are made; new plans or adjustments to the o l d ones w i l l be necessary to meet the new c o n d i t i o n s . CHAPTER IV THE ACQUISITION AND FINANCING OF A FARM BUSINESS PURCHASING A FARM The s e l e c t i o n of a farm i s most important. The value of l a n d and b u i l d i n g s forms the l a r g e s t p a r t of the t o t a l investment i n most farm businesses. (Land and b u i l d i n g s com-p r i s e d 68 percent of the t o t a l investment i a B r i t i s h Columbia farms i n 1 9 5 1 M i s t a k e s made i n s e l e c t i n g a farm may be c o s t l y . R e s e l l i n g a farm may be d i f f i c u l t without a l o s s i n c a p i t a l ensuing; moving i s always inconvenient and i s of t e n expensive; changes i n the lay o u t of the f i e l d s and b u i l d i n g s nay e n t a i l c o n siderable expense. M o d i f i c a t i o n s i n the s i z e of a farm, i n case expansion or c o n t r a c t i o n of the business i s de-s i r e d , may be d i f f i c u l t and uneconomical; the purchase of a d d i -t i o n a l l a n d or the d i s p o s a l of s u r p l u s l a n d cannot always be accomplished. S e l e c t i o n of a Farm The type of farming, which the purchaser wishes t o engage i n w i l l determine what p h y s i c a l f a c t o r s he w i l l look f o r i n choosing a farm. 1 Ninth Census of Canada 1951. V I , Part 2, Table 1, ( B r i t i s h Columbia). The d i s t r i b u t i o n of the la n d area and the layout of f i e l d s should be c a r e f u l l y considered; a schedule of l a n d use and a map of the farm are u s e f u l f o r t h i s purpose. The topo-graphy of the farm i s an important f a c t o r . The purchaser should ask himself how the topography w i l l a f f e c t the use of machines and i f i t i s conducive to e r o s i o n . The s t a t e of t i l t h and the f e r t i l i t y of the s o i l must be taken i n t o c o n s i d -e r a t i o n . He should ask to see the crop records of the farm. S o i l maps should be consulted. These maps give d e t a i l e d i n f o r -mation with regard to s o i l types, water t a b l e s and t h e i r use w i l l i n d i c a t e whether the s o i l i s capable of m a i n t a i n i n g a g r i -c u l t u r a l p r o d u c t i o n ; they are a v a i l a b l e f o r many areas of B r i -t i s h Columbia. 1 B u i l d i n g s , fences, drainage and i r r i g a t i o n systems should be c a r e f u l l y i n s p e c t e d . Notes should be made of the c o n d i t i o n of foundations, r o o f s and chimneys. B u i l d i n g s should not be overvalued; they should be appraised as to t h e i r u s e f u l -ness i n the farm business. A r e l i a b l e source of water i s a l s o an important f a c t o r on most farms. In a d d i t i o n to these aspects o f the farm i t s e l f , i t s l o c a t i o n with respect to markets, roads, schools and other amenities must be considered. These are important f a c t o r s , both i n the farm as a business and as a place to make a home. A farm a p p r a i s a l form i s valuable when the purchase of a farm i s being considered. Several farms may be compared 1 P u b l i c a t i o n s Branch, Department of A g r i c u l t u r e , Province of B r i t i s h Columbia, V i c t o r i a and 635 Burrard S t r e e t , Van-couver o r , through D i s t r i c t A g r i c u l t u r i s t s ' o f f i c e s at various centers throughout the Province. by u s i n g a form such as the f o l l o w i n g : Sample A p p r a i s a l Blank f o r Farms 1 Farm "AJJ "B1* l o c a t i o n  D e s c r i p t i o n Land Crop l a n d Grade A Grade B Grade C Pasture T i l l a b l e Rotated Permanent Wooded Woodland I d l e l a n d Farmstead, roads, e t c . B u i l d i n g s , e t c . Dwelling Barn Other b u i l d i n g s Fences Drains I r r i g a t i o n Water supply Farm l a y o u t : S i z e o f f i e l d s Shape of f i e l d s Arrangement P o s s i b i l i t y of improvement T r a n s p o r t a t i o n Type of road Distance to hard surface Character of neighborhood Educational R e l i g i o u s Labor supply Remarks P r i c e asked Estimated worth a Based on n a t u r a l f e r t i l i t y , general c o n d i t i o n , drainage, topography, and a l l e g e d y i e l d s . G. W. F o r s t e r , Farm Organization and Management. T h i r d E d i t i o n , pp. 196, 197, New York, J ^ e n T T c e ^ l a l l , I n c . (1953). 75 E s t i m a t i n g the Value of a Farm The estimated worth of a farm as a business venture can be measured by a p p l y i n g a formula which c a p i t a l i z e s the estimated annual net r e t u r n to the investment i n r e a l e s t a t e . The estimated r e t u r n t o investment i s found by e s t i m a t i n g the expected net r e t u r n t o the farm business and deducting from t h i s amount values f o r the operator's wages f o r h i s labour and management, wages f o r unpaid f a m i l y l a b o u r and r e t u r n s to h i s investment i n working a s s e t s . C a p i t a l i z a t i o n of t h i s sum i s c a l c u l a t e d as f o l l o w s : Present Value = B s ' t i m a ' t e d Annual Net Return from Real Estat e l Current Rate of I n t e r e s t (Farm Mortgages) For example, i f the annual income from the land and b u i l d i n g s was estimated to be $1000 and the current r a t e of i n t e r e s t was 5 percent, the present value would be c a l c u l a t e d as f o l l o w s : Present Value $ 1 Q 0 ^ g ° $20,000 The p r i c e of the farm should be i n the neighbourhood of $20,000. A buyer of farm l a n d , who i s u n f a m i l i a r with farming and farm land values should a v a i l h i m s e l f of the s e r v i c e s of a l a n d a p p r a i s i n g f i r m to assess the value and production poten-1 John D, Black, et a l . , Farm Management, p. 737, New York, The Macmillan Company, (1947). 7 6 t i a l of a farm before he purchases i t . A buyer should never r e l y on statements made by the s e l l e r or h i s agent, unless they can support them with a u t h e n t i c records of the past performance of the farm. Information regarding farms being considered f o r purchase may o f t e n be gathered from neighbours or the l o c a l bank manager. The settlement s e r v i c e of the Department of C i t i z e n -s h i p and Immigration w i l l make i n v e s t i g a t i o n s f o r and give advice to immigrants who are purchasing farm l a n d . The Depart-ment of Veterans* A f f a i r s appraises each of the farms before veterans buying farms under the p r o v i s i o n s of the Veterans' Land Act are s e t t l e d on them. F i n a l Steps I n Purchasing a Farm When the buyer has made a thorough i n v e s t i g a t i o n i n t o the farm, he should then consider whether the farm f i t s h i s plan of o p e r a t i o n , i f i t i s the proper s i z e f o r him to operate e f f i c i e n t l y , i f i t i s i n a d i s t r i c t where he would l i k e to l i v e . I f he i s s a t i s f i e d on a l l these p o i n t s , there remains one important t h i n g f o r him to do and tha t i s t o r e t a i n a lawyer to search the t i t l e and to give advice with r e g a r d to any agreement that may be made with the s e l l e r . Money spent f o r the s e r v i c e s of a lawyer at t h i s time may save the expendi-ture of a greater sum of money and needless worry l a t e r on. The o l d saying "Let the buyer beware" i s worth remembering when buying property. 77 LEASING A FARM Ownership of the farm operated i s t r a d i t i o n a l i n Canada, as opposed to tenancy which i s t r a d i t i o n a l i n Great B r i t a i n . However, there are s i g n i f i c a n t acreages of farm land rented i n Canada. The p r o p o r t i o n that rented land i s of the t o t a l farm area i n B r i t i s h Columbia i s l e s s than the pr o p o r t i o n i n the P r a i r i e provinces and greater than the pro-p o r t i o n i n the Eastern provinces. Farm land tenure i n B r i -t i s h Columbia i n 1951 was as f o l l o w s : TABLE 14 LAND TENURE IN BRITISH COLUMBIA 1951 By Area Acres Percent T o t a l farm area Farm area operated by owner Farm area operated by tenant 4,702,274 3,714,231 988,043 100 79 21 By Number of Farms Number Percent T o t a l farms Operated by owners Operated by tenants Operated by part owner, part tenant Operated by manager 26,406 22,328 1,524 2,119 435 100.0 84.5 5.8 8.0 1.7 Source: Ninth Census of Canada 1951. V I , Part I , Table 16 (Canada). Renting a farm o f f e r s an opportunity to those with l i m i t e d c a p i t a l to engage i n farming. Modern farming r e q u i r e s a considerable amount of c a p i t a l , because of the mechanization of a g r i c u l t u r a l production and the comparatively high p r i c e s f o r l i v e s t o c k . There i s l i t t l e f r e e land a v a i l a b l e that can be put i n t o production without c l e a r i n g . Farmers who own some land may p r e f e r r e n t i n g r a t h e r than buying more la n d . By r e n t i n g they can put t h e i r resources i n working c a p i t a l r a t h e r than f i x e d c a p i t a l . A p p r a i s i n g a Farm to Rent The s e l e c t i o n of a rented farm e n t a i l s the considera t i o n of the same f a c t o r s which determine the s e l e c t i o n of a farm being purchased. However, unless the farm i s being rented with a view to i t s u l t i m a t e purchase or i s being leased f o r a lon g term of years, not a l l of the f a c t o r s w i l l need to be i n v e s t i g a t e d as thoroughly. Leases are g e n e r a l l y f o r a l i m i t e d time and i f a tenant i s not s a t i s f i e d with the farm, he can make a change without the s e r i o u s losses which a purchase might i n c u r . A tenant i s i n t e r e s t e d p r i m a r i l y i n l e a s i n g a farm that i s i n a good s t a t e of c u l t i v a t i o n with adequate b u i l d i n g s i n a good s t a t e of r e p a i r of a s i z e which f i t s h i s equipment, herd and labour supply and l o c a t e d w i t h i n s u i t a b l e d i s t a n c e s from markets, schools and the other d e s i r a b l e amenities. A tenant should make i n q u i r i e s with respect to h i s f u t u r e l a n d -l o r d , f o r good lan d l o r d - t e n a n t r e l a t i o n s can be achieved onl y when each of the p a r t i e s i s prepared to act i n good f a i t h . An i n v e n t o r y of the value of the resources being c o n t r i b u t e d by each p a r t y should be made and an equitable c o n t r a c t drawn up which c l e a r l y s t a t e s the r e s p o n s i b i l i t i e s of the tenant and the l a n d l o r d . Cash and share r e n t a l are the two main ki n d s of farm land r e n t a l c o n t r a c t s . Sometimes, they are a combination of both. Cash Rental Cash r e n t a l c o n t r a c t s are g e n e r a l l y uncomplicated. The length of the l e a s e , the due dates and the amount of rent to be p a i d , together with the s t a t e d r e s p o n s i b i l i t i e s of each p a r t y to the lease i s a l l that has to be w r i t t e n i n t o them. The r e s p o n s i b i l i t i e s of the tenant are i n regard to the hus-bandry methods to be f o l l o w e d , while those of the l a n d l o r d are concerned with the maintenance of b u i l d i n g s i n most cases. These c o n t r a c t s i n v o l v e l e s s r i s k on the p a r t of the l a n d l o r d than i n the case of share c o n t r a c t s ; with a s t i p u l a t e d cash r e n t the tenant accepts the r i s k of the l o s s e s or w i n d f a l l gains a s s o c i a t e d with v a r i a t i o n s i n crop y i e l d s and p r i c e changes. Cash r e n t a l s are determined by the income-yielding power of the farm. There are two methods, which a tenant may use i n judging i f a cash rent i s a f a i r p r i c e f o r the use of the r e a l e s t a t e , namely, the o b s e r v a t i o n a l method and the bud-get method. A tenant attempting to determine the amount of cash rent he should pay f o r a farm by the o b s e r v a t i o n a l method would f i n d out the r e n t being p a i d f o r s i m i l a r farms i n the d i s t r i c t ; he then would compare these r e n t s with the rent being asked f o r the farm that he i s i n t e r e s t e d i n and make h i s d e c i s i o n as to the f a i r n e s s o f the r e n t . The budget method of determining a rent f o r a farm i s more p r e c i s e than the o b s e r v a t i o n a l method. A tenant u s i n g t h i s method draws up a schedule of expected r e c e i p t s and ex-penses to a r r i v e a t an expected net income f o r the farm; the la n d l o r d ' s expenses, such as taxes, r e p a i r s and d e p r e c i a t i o n of b u i l d i n g s are ignored, only the net income a c c r u i n g to the tenant i s considered. Deductions are made from the farm net income f o r estimated values of f a m i l y l a b o u r , the tenant's labour and management and a r e t u r n on the c a p i t a l i n v e s t e d i n h i s machinery, equipment and l i v e s t o c k . The balance rep-r e s e n t s the amount of rent that can be p a i d without reducing h i s r e t u r n s to c a p i t a l and labour. The budget method i s i l l u s t r a t e d by the f o l l o w i n g : .1 TABLE 15 DETERMINING A CASH RENT BY THE BUDGET METHOD Expected r e c e i p t s Expected expenses Expected farm net income $5000.00 1500.00 $3500.00 Estimated value f a m i l y labour 300.00 1000.00 500.00 250.00 Estimated operator's labour Estimated management labour I n t e r e s t on c a p i t a l at 5% ($5000.00) T o t a l Estimated amount of cash rent 2050.00 1450.00 Adapted from F o r s t e r , op. c i t . . p. 245. The l a n d l o r d may not agree with the tenant's estimates but the budget method provides a y a r d s t i c k f o r bargaining. Cash r e n t i n g of farms has an advantage over share l e a s i n g i n t h a t , the rent i s a f i x e d cost to the farm b u s i -ness and any p r o f i t s due to good management on the part of the tenant are not shared w i t h the l a n d l o r d , as i n the case of share r e n t a l s . When the re n t i s p a i d i n cash farmers tend to apply the v a r i a b l e f a c t o r s of production (seed, f e r t i l i z e r , l abour) to the f i x e d f a c t o r (land) i n such q u a n t i t i e s as to give the maximum r e t u r n s to each e n t e r p r i s e ; the tendency i s toward the most e f f i c i e n t combination of the f a c t o r s of pro-du c t i o n . Share Rental Share r e n t a l s are l e a s i n g c o n t r a c t s i n which the product of a farm business i s shared between the owner of the farm and the tenant who operates the farm. There are many v a r i a t i o n s i n the pr o p o r t i o n s of the farm income which each p a r t y r e c e i v e s ; g e n e r a l l y the farm income i s shared i n accordance with the customary r a t e that p r e v a i l s i n the d i s -t r i c t i n which the farm i s l o c a t e d . The r i g i d adherence to custom may not provide a f a i r economic b a s i s f o r share l e a s -i n g . Leases should be formulated with both p a r t i e s agreeing to the values of the f a c t o r s of production which they con-t r i b u t e t o the farm business and the p r o p o r t i o n of the farm income that should be returned to these f a c t o r s . 82 Elements that influence the shares which land-lords and tenants receive are: 1. the amount of the factors of production furnished by each party; 2. the quality of the factors of production furnished by each party; 3. the demand for and the supply of farm land; 4. the wage rates and avail-a b i l i t y of farm labour. Experienced tenants, who have a l l the working assets necessary for operating the farm, should receive a larger share than inexperienced tenants, with limited capital. Highly pro-ductive land should receive a greater return than land of low productivity. Enterprises requiring intensive use of labour should give a larger share to the tenant. When the demand for land i s high and farms to rent are scarce, landlords can drive harder bargains than when there i s a wide choice of farms available to tenants. When wage rates are high, land owners may prefer to share lease their farms rather than operate them; tenants may make better bargains under these conditions. The problem of making an equitable contract can only be solved by mutual agreement between the landlord and tenant as to the value of their respective capital contributions; the rate of return on their capital, the value of the labour sup-plied by the tenant. If the landlord assumes part of the man-agement of the farm, the value of his managerial labour should be assessed. The procedure followed in formulating an equitable share lease contract between a landlord and tenant i s shown below. In the example the landlord supplies the land and 83 b u i l d i n g s and assumes some of the management; the tenant con-t r i b u t e s the productive l i v e s t o c k , the machinery and t o o l s , the labour and the cash expenses of the farm b u s i n e s s . 1 TABLE 16 LANDLORD'S AND TENANT'S CONTRIBUTIONS TO THE FACTORS OF PRODUCTION Facto r Contributed by Landlord Tenant T o t a l Land and B u i l d i n g Productive l i v e s t o c k Machinery and Tools Labour Expenses (estimated) TOTAL $15,000 300 (mana 700 (taxe repa 1,500 3,500 geroent) 1,500 s, i r s ) 1,500 ( e r a t i $15,000 1,500 3,500 1,800 op-ng)2,200 $16,000 8,000 24,000 The l a n d l o r d and tenant being i n agreement t h a t each should r e -cei v e a r e t u r n of 5 percent on t h e i r c a p i t a l , a d i s t r i b u t i o n 2 schedule of the farm income i s drawn up as shown i n Table 17 on the f o l l o w i n g page. The l a n d l o r d and tenant should f u r t h e r agree that records be kept o f the farm business and i f major d i f f e r e n c e s occur between the estimated expenses and the a c t u a l expenses, adjustments can be made i n the share p r o p o r t i o n s to compensate 1 Adapted from F o r s t e r , op. c i t . . p. 225. 2 I b i d . . p. 227. TABLE 17 DISTRIBUTION OP NET FARM INCOME ACCORDING TO CONTRIBUTIONS Landlord's Claim Tenant's Claim Land & b u i l d i n g s 5% on C a p i t a l , 5% on $15,000 $750 $5,000 $250 Taxes & r e p a i r s (estimated) 700 Estimated expenses 1,500 Labour (Management) 300 Labour 1.500 T o t a l $1.750 $3.250 T o t a l c l a i m of both p a r t i e s $5,000 Landlord's share i n percent 1750 x 100 BIER) 35% Tenant's share i n percent 3250 x 100 S1J0"0 65% 84 f o r such d i f f e r e n c e s . U s u a l l y , no charge i s made by the ten-ant f o r h i s labour i n e f f e c t i n g r e p a i r s t o the b u i l d i n g s and other improvements, nor i s any value placed on the produce used i n the tenant *s home. The above example should serve only as a guide i n making share r e n t a l c o n t r a c t s ; each c o n t r a c t should be f o r -mulated by c o n s i d e r i n g the c o n t r i b u t i o n s that are p e c u l i a r to i t . When an agreement has been reached i t should be w r i t -ten i n t o the l e a s i n g c o n t r a c t . W r i t t e n Leases A w r i t t e n lease of farm property should be as con-c i s e as p o s s i b l e , w r i t t e n i n simple, e a s i l y understood l a n g -uage and l e g a l l y acceptable. The s e r v i c e s of a lawyer to advise with regard to the l e g a l i t y of a l e a s e are worth the fee he w i l l charge. A lea s e must i n c l u d e : 1. an accurate d e s c r i p t i o n of the property to be leased; 2. the term of the l e a s e ; 3. the agreement as to the share of products or the amount cash r e n t t o be p a i d ; 4. the time and place of such d i v i s i o n o r payment; 5. the signature o f both p a r t i e s , witnessed and n o t a r i z e d . A sample form of a f l e x i b l e l e a s e c o n t r a c t 1 i s given i n Appendix C. J.R.S. Jorgens, "Suggested Form f o r F l e x i b l e Type of Share Leases." The Farm Lease i n A l b e r t a . Ottawa, Marketing S e r v i c e , Department of A g r i c u l t u r e (1947). CROWN LANDS C e r t a i n s p e c i f i e d Crown Lands are open f o r a g r i -c u l t u r a l settlement, by pre-emption or purchase. C e r t a i n other Crown lands are a v a i l a b l e f o r l e a s i n g f o r g r a z i n g and hay making. The c o n d i t i o n s under which Crown land may be pre-empted, purchased o r leased a r e provided i n the Land A c t , 1 which i s administered by the B r i t i s h Columbia, Depart-ment of Lands and F o r e s t s . The Superintendent of Land's o f f i c e i s i n V i c t o r i a ; l o c a l s e r v i c e i s provided at centers i n each Land Recording D i s t r i c t by Land Commissioners ( a l s o known as Government Agents). Pre-emptions Pre-emptions are f r e e . (There i s a $2 r e c o r d i n g fee and a $10 fee f o r the Crown Grant). The f o l l o w i n g quo-t a t i o n s t a t e s b r i e f l y : what l a n d may be pre-empted; who may pre-empt and the extent of such pre-emptions: Any of the vacant unreserved surveyed lands of the Crown, not being p a r t of an Indian settlement may be pre-empted. Who May Pre-empt Any B r i t i s h s u b i e c t being: (a) The head of a f a m i l y ; (b) a widow; (c) a s i n g l e Woman who i s over 18 years of age and s e l f supporting; (d) a woman deserted by her husband; (e) a bachelor over the age of 18 y e a r s — may, f o r a g r i c u l t u r a l purposes onl y , pre-empt l a n d t o the extent of 160 ac r e s , o r , i n case of a survey made 1 Province of B r i t i s h Columbia, "Land A c t , " R.S.B.C., 1948, Chapter 175; 1950, Chapter 37; 1951, Chapter 43. 2 Land Commissioner's o f f i c e s are l o c a t e d a t : A l b e r n i , A t l i n , Burns Lake, Cranbrook, F e r n i e , P r i n c e George, Golden, Kamloops, K a s l o , C l i n t o n , Nanaimo, Nelson, New Westminster, under subsection (6) of s e c t i o n 6 o f the "Land A c t " may be increased by any area l e s s than 40 acre s . Such r i g h t s h a l l not extend to foreshore o r t i d a l l a n d s , or to the bed of the sea, or lands covered by navigable waters, or s t a t u t o r y f o r e s t l a n d s , o r lands deemed un-s u i t a b l e f o r a g r i c u l t u r e . An a l i e n , upon making a d e c l a r a t i o n of h i s i n t e n t i o n to become a B r i t i s h s u b j e c t , may a l s o acquire the r i g h t to pre-empt....Any chartered o r i n c o r p o r a t e d com-pany may, by a s p e c i a l order of the Lieutenant-Governor i n c o u n c i l , pre-empt l a n d . l A p p l i c a t i o n s must be made i n person or by m a i l to the Land Commissioner of the Land Recording D i s t r i c t i n which the l a n d i s s i t u a t e d , by the person a p p l y i n g f o r a pre-emption. To o b t a i n t i t l e to the la n d pre-empted, the s e t t l e r must f u l f i l l the residence and improvement p r o v i s i o n s that are r e q u i r e d under the "Act." Normally, these requirements are residence f o r at l e a s t ten months of each year f o r f i v e years, and improvements to the value o f $10 per a c r e , i n c l u d -i n g the c l e a r i n g and c u l t i v a t i o n of at l e a s t f i v e acres. Pre-emptors, who do not f u l f i l l the f u l l requirements may ob t a i n t i t l e by a term of residence of not l e s s than two years and improvements of greater value. P r o v i s i o n i s made f o r grant-i n g t i t l e to pre-emptors, who through i l l n e s s or misfortune cannot f u l l y meet the requirements. P u l l i n f o r m a t i o n r e g a r d i n g the pre-emption of land may be obtained from Land Commissioners' o f f i c e s or from the Vernon, Pouce Coupe, P r i n c e Rupert, Quesnel, Revelstoke, P e i i t i c t o n , Smithers, Telegraph Creek, Vancouver, and V i c -t o r i a . Correspondence should be addressed to the Government Agent at the above p o s t - o f f i c e s , except V i c t o r i a where i t should be addressed to the Superintendent of Lands. 1 How to Pre-empt Land. B u l l e t i n No. 1 (Land S e r i e s ) , Province of B r i t i s h Columbia Lands S e r v i c e , p. 3, V i c t o r i a , Queen's P r i n t e r , (1952). Superintendent of Lands at V i c t o r i a . Persons i n t e n d i n g to pre-empt should obtain pre-emptor's maps, showing the vacant lands i n the d i s t r i c t which they wish to s e t t l e , and a copy of the booklet "How to Pre-empt Land. 1* Purchases Purchases of Crown lands are made through the Land Commissioner's o f f i c e s . Purchases f o r a g r i c u l t u r a l purposes, may be made by persons over 21 years o f age; to the extent of not l e s s than 40 acres or over 640 acres of vacant unreserved, surveyed o r unsurveyed Crown land deemed f i t f o r a g r i c u l t u r e . Purchasers of surveyed land must deposit 50 cents per acre with t h e i r a p p l i c a t i o n which i s refundable i f the a p p l i c a t i o n i s not allowed or p r i c e and terms are not accept-able to the purchaser. Surveyed lands are c l a s s i f i e d i n t o three c l a s s e s , namely: (a) f i r s t - c l a s s open t r a c t s s u i t a b l e f o r a g r i c u l t u r a l purposes, or wild-hay meadow lands; (b) second-class l a n d capable of being brought under c u l t i v a t i o n ; (c) t h i r d - c l a s s l a n d wholly u n f i t f o r a g r i c u l t u r a l pur-poses which cannot be brought under c u l t i v a t i o n and does not c o n t a i n hay meadows.1 The minimum p r i c e f o r f i r s t - c l a s s l a n d i s $5 per acre and f o r second-class l a n d i s $2.50 per acre. Payment may be r e q u i r e d i n f u l l , upon the acceptance of the a p p l i c a -t i o n or i f the amount i s l a r g e enough a down payment of one-1 Purchase and Lease o f Crown Lands, B u l l e t i n No. 10 (Land S e r i e s ) , Province of B r i t i s h Columbia Lands S e r v i c e , p. 3, V i c t o r i a , Queen's P r i n t e r (1953). quarter of the purchase price i s required and terms of three or nine years arranged f o r the balance. Interest i s charged at a rate of 4 a percent annually. Improvements to the value of not less than $5 per acre may be required within four years of the sale as a condition f o r the granting of t i t l e . Purchasers of unsurveyed lands have a more compli-cated procedure to follow. They must stake the land they wish to purchase, post and publish notices of th e i r intentions, and i f the purchase i s allowed, they must have the land sur-veyed at t h e i r own expense. The surveyor i s required to c l a s s i f y the land and report such c l a s s i f i c a t i o n to the Depart-ment of Lands and Forests. I f a sale i s decided on by the "Department," they w i l l publish a notice i n the " B r i t i s h Colum-bia Gazette" f o r t h i r t y days, giving a description of the land and the name of the person applying f o r purchase of i t ; then i f no other person claims a p r i o r r i g h t to purchase, the a p p l i -cant i s advised of the price he must pay for the land. As i n the case of surveyed land f u l l payment may be required or i f the Department considers i t advisable terms up to nine years may be arranged. Interest i s at 4-g- percent. Hay meadows may be purchased under certa i n condi-tions; information regarding t h e i r purchase can be obtained from Land Commissioners. The booklet "Purchases and Leases of Crown Lands" contains useful information for prospective purchasers of Crown lands. Leasing Leases of Crown lands must be a p p l i e d f o r through the Land Commissioners* o f f i c e s . They are granted by the Department f o r the purpose of c u t t i n g hay and g r a z i n g i f the extent of the area t o be leased does not exceed 640 acres. Leases of areas g r e a t e r than 640 acres may be granted by Order i n C o u n c i l . The procedure i s more complicated i n l e a s -i n g unsurveyed lands than i n l e a s i n g surveyed lands. Informa-t i o n r e garding the l e a s i n g of Crown lands i s a v a i l a b l e i n the booklet mentioned above or i f more d e t a i l i s r e q u i r e d from the l o c a l Land Commissioner or from the Department of Lands and F o r e s t s . LOCATING A FARM IN BRITISH COLUMBIA Sources of Information f o r S e t t l e r s P r o s p e c t i v e buyers and r e n t e r s of farms may obtain i n f o r m a t i o n r e g a r d i n g property that i s a v a i l a b l e f o r s a l e or r e n t from many sources. Real e s t a t e f i r m s , l a n d departments of f i n a n c i a l companies, advertisements i n farm p e r i o d i c a l s and newspapers, l o c a l Boards of Trade and other o r g a n i z a t i o n s are a l l sources of such i n f o r m a t i o n . The type of farming, which the prospective B r i t i s h Columbia farmer intends t o engage i n w i l l i n f l u e n c e h i s choice as t o the d i s t r i c t and area of B r i t i s h Columbia he w i l l s e t t l e 90 i n . 1 The Farming Areas and the Climate The farming areas of B r i t i s h Columbia are dispersed and discontinuous; they are mostly confined to r i v e r v a l l e y s . A d e s c r i p t i o n of the topography of the p r o v i n c e , the l o c a t i o n of the major a g r i c u l t u r a l areas and the v a r i a t i o n s i n c l i m a t e i s given i n the f o l l o w i n g q u o t a t i o n : Most of the land area i s mountainous and rugged. Four major mountain ranges t r a v e r s e the Province i n a general north-south d i r e c t i o n , i n t e r l a c e d with f a s t f l o w i n g streams and r i v e r s , and dotted with c o u n t l e s s l a k e s . These l a k e s take up a t o t a l of n e a r l y 7,000 square mi l e s . S c a t t e r e d throughout are f e r t i l e v a l l e y s and plateaux, while toward the north-eastern p a r t of the Province l i e s a r e g i o n of l i g h t l y wooded a g r i c u l t u r a l land comprising the Peace R i v e r Block. ....The major a g r i c u l t u r a l areas of the Province may be roughly l o c a t e d as f o l l o w s : The Lower Mainland, which embraces the d e l t a o f the F r a s e r R i v e r and ad-jacent l a n d extending about 100 m i l e s eastward; the P r o s p e c t i v e s e t t l e r s of farm l a n d i n B r i t i s h Columbia may o b t a i n i n f o r m a t i o n from a number of booklets that have been pub-l i s h e d by the P r o v i n c i a l Government. The f o l l o w i n g are recom-mended: 1. Some Facts about B r i t i s h Columbia, Canada. A g r i c u l -t u r a l Settlement S e r i e s C i r c u l a r No. 1. This booklet contains general i n f o r m a t i o n r e g a r d i n g a g r i c u l t u r e i n B r i t i s h Columbia and i s obtainable from the De-partment of A g r i c u l t u r e . 2. Peace R i v e r D i s t r i c t . B u l l e t i n No. 25 (Land S e r i e s ) . This booklet contains s p e c i f i c i n f o r m a t i o n about the Peace River area. I t may be obtained from the Department of Lands and F o r e s t s . 3. The F o r t F r a s e r - F o r t George. B u l l e t i n Area. No. 7. This booklet i s concerned w i t h C e n t r a l B r i t i s h Columbia and i s obtainable from the Department of Lands and F o r e s t s . 91 eastern and southern coastal f r i n g e of Vancouver Island. The Okanagan Mainline d i s t r i c t , a T-shaped area bounded by the South Thompson River and Shuswap Lake country i n the north, and extending eastward through the Okanagan Valley to the United States Border; The Kootenays, which cover a wide area reaching from Kootenay Lake to the Alberta Boundary i n the south-eastern part of the Pro-vince; the Cariboo, a vast plateau area l y i n g north-west of the Okanagan-Mainline d i s t r i c t ; Central B r i t i s h Columbia, comprising the valleys of the Upper Fraser, Nechako, and Bulkley Rivers; and the Peace River Block l y i n g west of the Alberta Boundary on both sides of the Peace River. Apart from the Peace River Block, there i s v i r -t u a l l y no a g r i c u l t u r a l land i n that portion of the Province l y i n g north of the Central area. Because B r i t i s h Columbia covers a large area i n which there are considerable differences i n l a t i t u d e , a l t i t u d e , and distance from the sea, there are great variations i n c l i m a t i c conditions. The P a c i f i c seaboard has the mildest climate i n Canada. In the summer the changing t i d a l waters tend to keep the day temperatures moderate, while the nights are usually cool. The r a i n f a l l i s moderate and pro-longed f i n e s p e l l s frequently occur, p a r t i c u l a r l y i n the southern areas. During the winter months the pre-valence of moisture-laden winds from the ocean causes heavy rains on the western slopes of the mountains which extend i n a north-south d i r e c t i o n near the coast on the Mainland and on the neighbouring islands. The eastern and southern sections of Vancouver Island also receive most of thei r p r e c i p i t a t i o n at t h i s season. Passing inland to the eastern side of the Coast Range of mountains much greater ranges i n temperature prevail between summer and winter and considerably less p r e c i p i t a t i o n occurs. In some d i s t r i c t s (e.g. Okanagan-Mainline) the r a i n f a l l i s so l i g h t that dry belts exist and i r r i g a t i o n i s necessary i n order to bring the land under f u l l y productive c u l t i v a t i o n . Owing to the diverse topography of much of the I n t e r i o r , c l i m a t i c conditions there are variable. In the Southern I n t e r i o r and the Kootenays the summer tem-peratures are high, while i n winter the temperatures r a r e l y f a l l much below zero. In the Central and North-ern I n t e r i o r ( i . e . , Cariboo. Bulkley Valley, Nechako Valley, and the Peace River) the winters are clear and cold, the summers short and warm. Summer fr o s t s are 92 experienced o c c a s i o n a l l y i n v a r i o u s parts of these d i s -t r i c t s . At higher a l t i t u d e s i n these regions the sum-mers are r e l a t i v e l y c o o l and the s n o w f a l l i n winter i s o f t e n heavy. 1 The Arable and P o t e n t i a l l y A r a b l e Acreage Estimates of arable and p o t e n t i a l l y a r a b l e l a n d range 2 from four and one-quarter m i l l i o n acres to over s i x m i l l i o n 3 acres f o r B r i t i s h Columbia. Of the occupied farm l a n d , the improved area i n 1951 was s l i g h t l y more than one m i l l i o n 4 acres. I n a d d i t i o n there were about two m i l l i o n acres of grass land being used i n 1951; the remaining acreage of farm land was i n woods and pasture. The more a c c e s s i b l e and e a s i l y c l e a r e d land has f o r the most part been s e t t l e d ; the bulk of the p o t e n t i a l l y a r a b l e land i s i n the c e n t r a l and north-eastern s e c t i o n s of the province, although there are s c a t t e r e d areas s t i l l a w a i t i n g development i n the lower c o a s t a l r e g i o n , on Vancouver I s l a n d , and i n the southern I n -t e r i o r . Some Facts about B r i t i s h Columbia. Canada, pp. 5, 6 No. 1 (Revised E d i t i o n ) . 2 F.O. Mulholland, The Forest Resources of B r i t i s h Columbia. V i c t o r i a , King's P r i n t e r (1937). 3 W.J. Anderson, "Na t i o n a l and I n t e r n a t i o n a l Aspects of A g r i c u l t u r a l Development," Transactions of the F i f t h  N a t u r a l Resources Conference of B r i t i s h Columbia. V i c t o r i a "nwn—T 4 Ninth Census of Canada 1951. V I , P a r t 1, Table 16 (Canada?. Land Values Farm land values i n B r i t i s h Columbia range from $2.50 per acre f o r raw Crown l a n d to over $1800 per acre f o r w e l l developed orchard land. The f o l l o w i n g t a b l e shows l a n d values i n some areas of B r i t i s h Columbia: TABLE 18 LAND VALUES, BRITISH COLUMBIA D i s t r i c t Value (per acre) Lower Mainland, Vancouver I s l a n d $50 to $1000 Okanagan V a l l e y Farm land Orchard land $50 to $ 500 $600 to $1800 Fo r t F r a s e r - F o r t George Raw land. Improved $3 $20 to $ 60 Peace Ri v e r Raw land Improved (grey wooded s o i l ) ( b l a c k s o i l ) $5 $20 to $ 25 $40 Sources: Some Facts About B r i t i s h Columbia Canada. (B.C. Dept. of A g r i c u l t u r e ) ; F o r t - F r a s e r - F o r t George B u l l e t i n  Area. (B.C. Lands S e r v i c e ) ; Peace R i v e r D i s t r i c t , (B.C. Lands S e r v i c e ) ; Farm Organization i n the NortKern Skanagan V a l l e y . (Marketing S e r v i c e , Economics D i v i s i o n ; Canada, Department of A g r i c u l t u r e ) ; A Study of Apple Production i n the Okanagan  V a l l e y of B r i t i s h ~ C o l u m b i a . (Marketing S e r v i c e , Economics D i v i s i o n , Canada, Department of A g r i c u l t u r e ) . THE FINANCING OF FARM BUSINESSES Farm businesses are seldom financed by means of share c a p i t a l . Long term f i n a n c i n g i s g e n e r a l l y provided by agreements f o r s a l e or mortgages; intermediate term f i n a n c i n g i s provided by c h a t t e l mortgages, Farm Improvement Loans, and machinery c r e d i t . Short term f i n a n c i n g i s obtained by bank lo a n s , personal finance l o a n s , and c r e d i t f o r feed and sup-p l i e s . Long Term The l a n d and b u i l d i n g s can be u s u a l l y purchased by making a down payment and an agreement of s a l e being made to arrange the terms of the balance payable. Sometimes a s e l l e r wants to get h i s money a l l i n cash and a mortgage i s arranged to provide the balance due him. Mortgages are o f t e n placed on l a n d to provide funds f o r purchasing more l a n d or e r e c t -i n g b u i l d i n g s . There are s e v e r a l sources of mortgage funds; among them are l i f e insurance companies, mortgage and t r u s t companies, and p r i v a t e i n v e s t o r s . Mortgages are g e n e r a l l y repayable over periods from f i v e to twenty years. I n t e r e s t r a t e s are from f i v e to s i x percent a t present. Canadian Farm Loan Board Mortgages I n 1929 the Government of Canada s e t up the Cana-95 dian Farm Loan Board. The Board was to make a v a i l a b l e funds to farmers f o r the purpose of paying debts, to purchase l i v e -stock and farm implements, to erect new b u i l d i n g s , to r e p a i r b u i l d i n g s , to provide f o r expense of farm o p e r a t i o n , and to a s s i s t i n the purchase of a d d i t i o n a l farm l a n d . The Canadian Farm Loan Board i s s t i l l i n operation and loans are made to bona f i d e farmers f o r the same purposes. Long term f i r s t mortgage loans are l i m i t e d to not more than 60 percent of the appraised value of the farm (land and b u i l d -i n g s ) o f f e r e d as s e c u r i t y f o r the loan and a maximum of $10,000. Intermediate term second mortgages may be obtained i n amounts to b r i n g the t o t a l of f i r s t and second mortgages to 70 percent of the appraised value of the farm; the maximum t o t a l of both loans i s $12,000. F i r s t mortgage loans are repayable i n annual or semi-annual instalments over periods of 5, 10, 15, 20 or 25 years; second mortgages are repayable i n f i v e annual i n s t a l m e n t s . I n t e r e s t i s charged at a r a t e of 5 percent per year on f i r s t mortgages and 5-j§- percent per year on second mortgages. P r o v i s -s i o n i s made f o r prepayment of the loans without p e n a l t i e s 2 a f t e r they have been i n e f f e c t f o r two years. 1 Canadian Farm Loan Board, "Information f o r A p p l i c a n t s f o r Loans," Report of the Canadian Farm Loan Board f o r the Year Ended March 31. 1953. pp. 16-18, Ottawa, Queen's P r i n t e r , T1953). 2 B r i t i s h Columbia farmers i n t e r e s t e d i n o b t a i n i n g loans from the Canadian Farm Loan Board should address i n q u i r i e s t o : The Manager, Canadian Farm Loan Board, 25-6th S t r e e t , New Westminster, B r i t i s h Columbia. 96 Loans made to B r i t i s h Columbia farmers i n the twelve month period A p r i l 1, 1950 to March 31, 1951 amounted to $331,200 includi n g f i r s t mortgage loans to the value of $318,950 and second mortgage loans to the value of $12,250. Intermediate Term The obtaining of credit f o r operating c a p i t a l f o r periods of several years has often been d i f f i c u l t f o r f a r -mers. As a consequence the Federal Government i n 1944 passed the Farm Improvement Loans Act i n order to make intermediate c r e d i t more available to farmers. Farm Improvement Loans The Farm Improvement Loans Act provides f o r loans to be made to farmers by the chartered banks; the Government guarantees each bank against l o s s up to 10 percent of the value of the loans made by the bank. 1 When i t was o r i g i n a l l y enacted, the act was to be i n force for three years and the t o t a l amount of loans to be guaranteed was set at $250,000,000; the maximum amount to one borrower was l i m i t e d to $3000. Since i t s enactment, the act has been extended three times. The l a s t extension was for three years e f f e c t i v e from A p r i l 1, 1953. The amount of loans, affected by the 10 percent guar-antee was raised to $300,000,000 f o r t h i s period and the maxi-mum loan to an i n d i v i d u a l borrower at any one time was increased Dominion Bureau of S t a t i s t i c s , Canada Year Book 1954. p. 372, Ottawa, Queen's Printer (195471 to $4000. Loans are a v a i l a b l e f o r the f o l l o w i n g purposes? (a) the purchase of machinery; (b) the purchase of l i v e s t o c k (foundation o r breeding); (c) the purchase and r e p a i r of equipment, such as e l e c t r i c a l systems; (d) r e p a i r s , a l t e r a -t i o n s or c o n s t r u c t i o n of farm b u i l d i n g s ; (e) f e n c i n g , d r a i n -i n g and other developments t o improve the farm. Loans may be r e p a i d over p e r i o d s as long as seven years and the i n t e r e s t r a t e i s not to exceed 5 percent per year. Borrowers must supply from 20 to 33 percent of the purchase p r i c e or the cost of the p r o j e c t themselves. 1 More than two thousand loans were made under the "Act" i n B r i t i s h Columbia i n 1952; these loans amounted to n e a r l y 2 l / 4 m i l l i o n d o l l a r s . Machinery C r e d i t Although the l a r g e machinery companies have c r e d i t f a c i l i t i e s a v a i l a b l e to farmers f o r the purchase of farm machinery, they have found l i t t l e demand f o r c r e d i t i n the 2 past few years. Farmers are e i t h e r t a k i n g advantage of Farm Improvement Loans or are f i n a n c i n g t h e i r purchases through l o c a l f i n a n c e companies. I n t e r e s t r a t e s are lower when the 1 L o c a l bank managers can supply f u l l i n f o r m a t i o n r e -garding Farm Improvement Loans. 2 Mr. J.M. Smith, C r e d i t Manager, I n t e r n a t i o n a l Har-v e s t e r Co. L t d . , Vancouver, Telephone I n t e r v i e w , September 23, 1954. 98 funds are borrowed at the banks under the "Act"; f i n a n c e compan-i e s ' r a t e s are higher but these companies provide f a s t e r s e r -v i c e to buyers. Short Term Short term c r e d i t i s g e n e r a l l y of a cu r r e n t nature but sometimes extends to peri o d s of a year. Short term c r e d i t i s concerned with the f i n a n c i n g of feeds, f e r t i l i z e r , s u p p l i e s and feeder l i v e s t o c k . Feed and Sup p l i e s C r e d i t of one month i s normally extended by feed and supply houses to dairymen and poultrymen. 1 F e r t i l i z e r Purchases of f e r t i l i z e r may be made on c r e d i t f o r terms of f i v e to s i x months by f e r t i l i z e r d e a l e r s ; a discount o of $2 per ton i s made f o r cash. L i v e s t o c k f o r Feeding Banks are the main source of funds f o r the purchase of feeders. I n t e r e s t r a t e s are g e n e r a l l y 6 percent on these loans. *" Mr. E. Peden, Sc o t t and Peden L t d . , V i c t o r i a , I n t e r -view, Aug. 30, 1954. 2 I b i d . Bank Loans A number of farmers finance t h e i r feed, f e r t i l i z e r and supply purchasers by borrowing from chartered banks. Int erest rates on bank loans vary depending on the s e c u r i t y the farmer o f f e r s ; funds are cheaper when bonds or insurance p o l i c ies are used as c o l l a t e r a l . Other Sources of Short Term Loans Short term loans may also be obtained from private lenders, c r e d i t unions and personal loan finance companies. Interest rates on loans obtained from personal loan finance companies are often at high annual rates. 100 4 BIBLIOGRAPHY Anderson, W.J., "National and I n t e r n a t i o n a l Aspects o f A g r i -c u l t u r a l Development," Transactions of the F i f t h  B r i t i s h Columbia N a t u r a l Resources Conference. V i c t o r i a , The B r i t i s h Columbia N a t u r a l Resources Conference, 1952. Anderson, tf.J.,and Hedland, S.L., The P o u l t r y Outlook i n  1954. Vancouver, The U n i v e r s i t y of B r i t i s h Columbia, 1953. Black, John D., et a l , Farm Management. New York, The Macmillan Company, 1947. Canada, Department of A g r i c u l t u r e , Marketing S e r v i c e , Economics D i v i s i o n , Farm Account Book. Ottawa, King's P r i n t e r , 1948. Canada, Department of N a t i o n a l Revenue, Taxation D i v i s i o n , Farmer's and Fisherman's Guide f o r the P r e p a r a t i o n  of T l General Income Tax Returns. Ottawa, Queen's P r i n t e r , 1954. Canada, Dominion Bureau of S t a t i s t i c s , Canada Year Book 1950. Ottawa, King's P r i n t e r , 1950. Canada Year Book 1954. Ottawa, Queen's P r i n t e r , 1954. Farm Cash Income 1953. No. 4, Ottawa, Queen's P r i n t e r , ±9U. Farm Net Income 1953. Ottawa, Queen's P r i n t e r , 1954. Handbook of A g r i c u l t u r a l S t a t i s t i c s . Part 2, R.No.25, Ottawa, Queen's P r i n t e r , 1951. Index of Farm Production. 1953, Ottawa, Queen's P r i n t e r , 1954. Labour Force. November 1945-March 1952. R. No. 35, ftttawa, Queen's P r i n t e r , 1 9 O X Labour Force Monthly. IX, Nos. 5 and 6, Ottawa, Queen's P r i n t e r , 1953. Ninth Census of Canada 1951. V I , Ottawa, Queen's P r i n t e r , 1953. 101 Canada, Dominion Bureau of S t a t i s t i c s , Q u a r t e r l y B u l l e t i n  of A g r i c u l t u r a l S t a t i s t i c s . X V I I , No. 1, Ottawa, Queen's P r i n t e r , 1954. Survey of Production 1938-1951. Ottawa, Queen's P r i n t e r , 1953. Carmicheal, J.S., and Rockham, T.S., L i v e s t o c k Marketing i n Western Canada. Regina, Province of Saskatchewan, Department of Co-operation and Co-operative Develop-ment. E f f e r s o n , J.N., FaratRecords and Accounts, New York, John Wiley and"~3ons, Inc. , 1949. F o r s t e r , G.W., Farm Organization and Management. New York, P r e n t i c e - H a l l , Inc., 1953. Hare, H.R., Farm Business Management. Toronto, The Ryerson Pre s s , 1946. Hopkins, J.A., and Heady, E.G., Farm Records. Ames, The Iowa State College P r e s s , 1949. K a l b f l i e s c h , Wm., The Cost of Operating Farm Machinery (Eastern Canada). Farmers' B u l l e t i n 118, Depart-ment of A g r i c u l t u r e , Ottawa, King's P r i n t e r , 1950. Mulholland, F.D., The Forest Resources of B r i t i s h Columbia. V i c t o r i a , King's P r i n t e r , 1937. Province of B r i t i s h Columbia, Department o f A g r i c u l t u r e , Some Facts about B r i t i s h Columbia Canada. V i c t o r i a , Queen's P r i n t e r , 1952. Province of B r i t i s h Columbia, Department of Lands and F o r * e s t s , Lands' S e r v i c e , How to Pre-empt Land. B u l -l e t i n No. 1, (Land S e r i e s ) , V i c t o r i a , Queen's P r i n t e r , 1952. ^ ^ ^ ^ ^ Purchase and Lease of Crown Lands, B u l l e t i n No. 10, (Land S e r i e s ) , V i c t o r i a , Queen's P r i n t e r , 1953. __________ The F o r t F r a s e r - F o r t George B u l l e t i n Area. ~ B u l l e t i n Area No. 7, V i c t o r i a , Queen's P r i n t e r , 1954. Peace R i v e r D i s t r i c t . B u l l e t i n No. 25, (Land S e r i e s ) , V i c t o r i a , Queen's P r i n t e r , 1953. Province o f B r i t i s h Columbia, The M i l k Board, "Sharing the Market," F l u i d M i l k Marketing Information B u l -l e t i n . No. 1, Vancouver, February, 1954. Trevor, H.W., and Ware, D.W., Farm Organization i n the North-ern Okanagan V a l l e y B r i t i s h Columbia. Ottawa. Marketing S e r v i c e , Economics D i v i s i o n , Department of A g r i c u l t u r e , 1952. Ware, D.W., et a l , A Study of Apple Production i n the Okanagan V a l l e y of B r i t i s h Columbia, Ottawa, Marketing S e r v i c e Economics D i v i s i o n , Department of A g r i -c u l t u r e , 1932. APPENDIX A FINANCIAL RECORDS Rules f o r Estimating Quantities of  Grains and Roughages, and Land Areas 1. To f i n d the number of bushels of grain i n a b i n : Mul-t i p l y length by width by depth ( a l l i n feet) and multiply by .8 (eight-tenths). Example: A bin 10 feet long by 10 feet wide i s f i l l e d with grain to a depth of 4 feet — f i n d the number of bushels i n the bin. Volume of grain i n cubic feet 10 x 10 x 4 = 400 Bushels of grain i n 400 cu. f t . 400 x .8 =320 bushels. 2. To f i n d the number of tons of hay i n a mow:1 M u l t i p l y length by width by height ( a l l i n feet), and divide by number of cubic feet i n a ton of hay. t Canada, Department of A g r i c u l t u r e , Farm Account Book. Ottawa, Queen's Pri n t e r (1948). Cubic feet i n a ton of hay Settled S e t t l e d 1 - 3 months over 3 months A l f a l f a hay 485 470 Clover hay 512 500 Timothy 640 625 Wild hay 600 450 Example: A mow of clover hay, s e t t l e d three and one-half months, measures 20' x 15' x 8' - f i n d the number of tons of hay i n the mow. Volume of hay i n mow 20 x 15 x 8 = 2400 cu. f t . Tons of hay i n 2400 cu. f t . =4.8 tons 3. To f i n d the number of tons of hay i n a s t a c k : 1 Multiply the overthrow (distance from the ground on one side over the top of the stack to the ground on the other side) by the length by the width a l l i n feet; multiply the r e s u l t by .3 (three-tenths) to f i n d the volume i n cubic f e e t , and then divide by the number of cubic feet per ton of hay. Canada, Department of Agriculture, Farm Account Book. Ottawa, Queen's Pri n t e r (1948). 4. To estimate quantities of corn sil a g e the following table i s used: - -Approximate Capacities of C y l i n d r i c a l S i l o s Inside Diamet. of S i l o Weight Per Depth"' :" 10 f t . 12 f t . 14 : f t . 16 f t . 18 f t . 20 f t . Cu. Ft. # Feet Tons Pounds 1 1 1 1 2 2 3 1 8 . 7 2 2 2 3 4 5 6 1 9 . 6 3 2 3 5 6 8 9 2 0 . 6 4 3 5 7 9 11 13 2 1 . 2 5 4 6 9 11 .14 17 2 2 . 1 6 5 8 11 14 17 21 2 2 . 9 7 7 9 13 17 21 25 23 .8 8 8 11 15 20 25 31 24 .5 9 9 13 18 23 29 36 2 5 . 3 10 10 15 20 26 33 41 26 .1 11 12 17 23 30 38 46 2 6 . 8 12 13 19 25 33 42 52 27 .6 13 14 21 28 37 47 58 2 8 . 3 14 16 23 31 41 52 64 2 9 . 1 15 18 25 34 45 57 70 29 .8 16 19 28 38 49 62 77 30 .5 17 21 30 41 53 67 83 31 .2 18 23 32 44 58 73 90 3 1 . 9 19 1 24 35 48 62 79 97 3 2 . 6 20 26 38 51 67 85 105 3 3 . 3 21 28 40 55 72 91 112 3 3 . 9 22 30 43 59 77 97 120 34 .6 23 32 46 63 82 103 128 35 .3 24 34 49 66 87 110 135 35 .9 25 36 52 70 92 116 143 36 .5 26 38 55 74 97 123 152 3 7 . 2 27 40 58 79 103 130 160 37 .8 28 42 61 83 108 137 169 3 8 . 4 29 44 64 87 114 144 178 3 9 . 0 30 47 67 97 119 151 187 3 9 . 6 Depth of sil a g e two days a f t e r f i l l i n g . Average weight per cubic foot f o r whole depth. Useful i n estimating tons i n rectangular s i l o s . Silage at bottom of the s i l o w i l l weigh more than the same volume at the top of the s i l o . Source: Efferson, Farm Records and Accounts, p. 45 . To estimate the number of tons remaining in a s i l o when taking inventory the following example i s given: A c y l i n d r i c a l s i l o was f i l l e d to a depth of 26 feet. At inventory 12 feet remained, therefore 14 feet had been fed. From the t a b l e , 26 feet would be approximately 97 tons and 14 feet would be approximately 41 tons; the quantity remaining would be 97 - 41 = 56 tons. 5 . To f i n d the acreage of f i e l d s : M u l t i p l y the length by the width i n yards and divide by 4 , 8 4 0 (The number of square yards i n an acre). Example: A f i e l d i s 500 yards long and 300 yards wide -f i n d i t s acreage. Area i n square yards 500 x 300 = 1 5 , 0 0 0 Area i n acres "^''Q^Q = 3 . 0 9 or approximately 3.1 acres. F i n a n c i a l Records Inventory ^Year TCost a l | Kate oT Acquired A c q u i s i t i o n pepre- Beg. ol -Year r-ga-luo— End of Year depreciation "Allowable Assets Item 1. Real-Estate Land B u i l d i n g s — Improvement s. ._ Total r e a l - e s t a t e Macb-i-nery and Equipment -U. -Total- machinery—and-e qpt. jx., Livestock (Production) Beginning Number Total production l i v e s t o c k of-Year Value End —o Number Y e a r Value: 4.. t • f L i vesiock _ (Feeding) 1 Total-feeding l i v e s t o c k - Quanti-ty Crops-for_ Sale-J3uanti.ty_ Total crops f o r sale 4»-16. 7. 8.. Feed, Seed-,--and-S.uppli.es-- Total - feed-,—seed,- supplies Cash o n—hand -and- i n bank Other—Assets Total other Assets -—>-•> 1. 2-. |3v L i a b i l i t i e s Long Term,,. Intermediate. Short—Term— Net Worth Statement (Balance Sheet) ie ginning of Year Knd of Year — Assets - _ | -^y.-A -— — . _ . 1 • i | — ! 1 ] ; --Re.a! .Es.taJte Machinery and Equipment Liye.s_t o.c.k.._(pr_od.ucii.on.). Livestock (feeding) — • — — — -, „ — — — — — . ,--, 1 Crops for sale V - — - — z — j i -Peed,_Se ed, Supplies Total Physical Assets — — -— - - — — — Cash — — — : - _ i i -^th^r Ags^ts T Total Assets — ~ -v- • ,_ 1 ( t ; ! : 1 1 T i l ahi 1 i ti e^ — — ~ - - -—-— ^ . - - — - — . -e>.— **—r~• i •-*—l JL. O t . U J L J U -<*-JL"v \_7 —^ » - • - — — • — " • • — Lone Term — — — j i 1 1 Tnt ermediat ** Short Tprm ,1 P« C: — — „ _Y— • — — — — — >- — • — i 1 i i -— T o t a l — L i - a b i l i - t i - e s ... — ; _ i r — — — - ~ — i. -Net Worth - — — — — — > _ T ! ! : 1 ! ! 4 . \^ W — JL 1/ A J —^ •  —•— ii m* ~i i-—t- • * - --^ n + ^ l A r c p + o 1 rtoc T ^ + ^ l I -1 « h - i 1 i + O i . V/ _ __ D V- - -- - -— J . U I d JL—il&OTS-trO—JL POO X U L c t x — J L i J L u U l X - L I A <s a —1—1— ; j . . _ _ _ w . — — — > -, — * -— ! 1 , 1 i j | i — — — — — - — j r — _ , - — - - — Yv- _ I • ; i I — « 1 Receipts Crops Seeds K^he.at Board Pmnts. Livestock & Livestock Products Item Bees, Honey, Wax, Mapl.e-Syrup^ F r u i t & Vegetables =Ve=ere= / Custom /Wood / Work / Sand Patronage/ H a i l -PJL.VJ.- Ansnrance^ .Oifeher—= T o t a l (2) (3) (4) tSl |(6) 7) (8) (9) Total Receipts-Expenses Wages, j Board of l Repairs Auto help. I and and I n t e r e s t Mainten- Truck T a x e s i i n i ance ; Expense "surance-Farm Machin-ery Expenses .Except L i v e s t o c k Purchases Feed and Straw Purchases Ircome For Category Date Item ( 1 ) ( 2 ) ( 3 ) _UX(.5)_ (6) (7) .Repairs.: (8) ICaJCtle: IHogs. (9) (9) 'Other—Dairy WE "Other11 c o n t a i n -ers Twine ° t h e r F e r t i l i - Expenses z e r =Sprays= (9) ( 1 0 ) ( 1 0 ) ( 1 0 ) ( 1 2 ) ( 1 3 ) ( 1 4 ) T o t a l (!) (21 (4 -T.o_tal_Exp.ens.es <4  ( 5  <6I <71 ( 8 f ( 1 0 } ( 1 1 ) I II ( 1 2 ) i II ( 1 3 ) i ii iiA) P r o f i t and Lo s s S t a t e m e n t ! i - t !-1 i • \ -1 1 -- t -i 1 * • Cash r e c e i p t s --— • 1 1 i i — 1 i — i ~ ! -<—i— t j Cash expenses _;>- - — Farm Cash-Income - . _„ — —.._ -A. — 1 p l u s - I n c r e a s e - i n I n v e n t o r y - — -or 1 ess Decrease—in—Inventory ——•— --- -• i - <• —|—• : i < ' Kfot Farm Income i — • i I ; L a e a -Tn-teres-t~i-on aver*ace net -— N— i — — —. -1  —- — — —>~ ' 1 — _ —_ — • value o f p h y s i c a l — a s s e t s - a t - 5 ^ - -Labour Trleoine — — _ • " t > - | ^  consumed i n home (estimated) ~ ?• — -—i- <• 1 . I --L a b o u r - E a r n i n g s -— •- — —— — . —L_ j .— — —:—^• • — —— 1 1 ! —•- ~•—— . 1 — — - •->-_. .. —<— 0 • 1 — — —_ ' i -— - — 1 1 i I • - j ' "t i "T ! i — . — — — I i — ._H— — — -w _ V — t — — t — ¥ — . i .1 _ —._ ' 1'—— — — — ^ • -r4-C a p i t a l Account Receipts I I Expend! ture 1 I Receipts i ' i — —• _ - . — -— — — — _ i 1 — ;. -I ; 1 i — — + — [ mimMmf \r ' —-> pdF — V* %V«- — - - — - — - • — - — • —-—— - » - — - - - -— — — - --ii -— Land Sales I i r * i .J Rni1d i«« l » e : 4.-. — — - 1 —i-4-- . Machinery Sales _ A — 1 — — — 1 i 1 -} — i — -. t — - . — . , — — " _ 1 . . . J . - . , . _ z 1 - — 1 j — J — . —>—>— — — — — - — s-— — T o t a l C a p i t a l Receipts • i ! . 1 ! ! ! t - • • -• 4-Expenditures - -> • >— I — — — ; ! i «•• • • • P r i n c i p a l Payments Mortgage ____ - L o a n s - — T._n/1 Di*vis* V%r% i I — -- — — - • — — - — - •-<--— ; 1 ; j — — 1 1 1 ± ~ - — - - .. ixcikiKA rm oiJclcFtSo T _ . - _ 1 M •• r j 1 1 1 , — | • uuxxuin^-i t Machinery —" ____ i . -. v. - — — j — , — . <v*_ ' 1 - - ^  - 1 — — ——-— 1 — - ' — j .. 1 -- 4 -i — — L - • - — i i TiT T o t a l C a p i t a l Expenditure s ! 1 t" i - + - - -- t • 1 i • — _ . _ I \ 1 : 1 —4, ) i_ i j 1 1 t — j ' 1 t f------ - — .— — — „ — - — — — T - - - - < ~ —-— j i i i —. i i : -Personal Withdrawals - • P a r t i c u l a r s of Withdrawal Cash Cheque Personal share of c a r expense It ft W h A i i q c (•fiT-.'i f l i • 1 ": t i . i * ; * i j > 4 - t 1 j 1 • - \-\— ... i -j i . . i I ; 1 — ' i i — i ! 1 \ 1 • I j 1 - . j • . 1 ;: — ~ * ii j; •i — - ---ij i — > — — l! _ . • - - - - — _ — - - • • - ! : l • i ii i i " . . - - - -i; i' 1! 1 ;i i| II '1 - - - - - • . — • • T o t a l Withdrawals — i • r - i H-_Balance_Checfc^ Capital-Expendilt.nr.e_and-Ca3h-Balance3 Receipts Expenditures Receip.ts Net- Farm-Cash Income C a p i t a l - R e c e i p t s PJLus-Cash -on-hand and i n — bank, end of year To.tal_Receipts.____ Expendit ur.es  Personal Withdrawals._ - — C a p i t a l - E x p e n d i t u r e s ELus Cash.. on hand and i n — bank.,__end_of~year_ _ _ T o t a l J4- T i i 4--• - - 4— — •ii---4-4-. 1 i APPENDIX B SUGGESTED PHYSICAL RECORDS Hap of Farm North W e E a s t South Record of Land Use Arable Acres Permanent Pasture Hay Meadows Fie l d Crops Orchard and Small Fruit Total Non-arable Farmstead, Lanes, etc. Native Pasture Wood Lot Waste Total Total Farm Acreage I _ __ ___ Crop-Record. ! A CTIT-.TTTRAT- » I » - C T i S K _ PkODuCTiou Disposi T I G J S K i n d of Crop. D e t a i l s of C u l t i v a t i o n \ 1 Seed 1 f e r t i l i z e : , I r r i -. .ration. Sprays T o t a l Y i e l d Y i e l d /acre Seed Feed Sa l e s f — _ _ _t_i_. -— — r . — t - — — — - — : . _ — — _ _ , - _ _ r_ _ : — . . . . c— — — i - r f T j " . i _ . . . • — — — — > — — _ _ — . , • __ > — i j " ~ . — — _ _ _ _ _ — , . _ i I -t — r , - — — • — 1 1 1 — — > — -1 i t , i -— ', ,1 — 1 i 1 ~ ' i i_ — . _ _ —-L- ) — - — ~ — _ - > — - - — _ _ , ^ — —L i ' 1 ;' 1 — _ - * - . — _ _ • i _ « — j . . . — i • 1 - - ~ t " _ < _ . + _ i . 1 — 1 _ ..J _ — • — -- — — - — t •—• — f — _ — .-.4-— * — * . , | j _-. ' ! - — — _ . - . ; — — — i — - ! • -i 1 • ! - . i 1 [ : Tl • • i —<--t-— t — - — — • . . _ — : — — — • _ - — — _ _ ._ -— — . . _ ~ - — _ _ — _ — „ _ — — -] 1 i =*4= Monthly D a i r y P r o d u c t i o n , Feed and D i s p o s i t i o n Record 1 Mot xth Number of Cows M i l k e d T o t a l Average I l b s . J/cow lbs_.| Zon* U—t-l sen- Hay S i l a g e Bedding Sales , Lbs Hon ae Use Lbs •Tai 1 ! , — — . _ i ; 1 1 t ; — i i -i 1 ; i 1 — -- i -1 • ! i | i ! i 1 F e i ...Mair. .. A p r i l May • i 1 : i ' — i ; ----- — — _ _- , j — . . 1 v - — I — ^ i 1 — r — i : • . . . 1 June J u l y Augus -Sept. Q j T L -1 1 1 : i j — 0 — — - — — _ -t — — — — — "• j : 1 ! " t " f • ! | —we-*. —Nov-. -Dec. < I ! i I i 1 • 1 j — 1 . — — > _ - — - — - 1 1 i A i r o r r i > XT—i A * P r_ v i _ T © TfcM 1 l r c - . ^ a Y C F o g e fly, U l - w 0 N 8 l a x x j v c u Tn+ ft'i <3 f n t < V o i r ._4_ — » fl—. i o L a l o i u r 1 C e l l i ' T t ! j — i ' i — >- — • i i " i • 1 1 1 -t"" I t J—J - — — — --»_*_ 1 1 I • — — — ; - — — > „ _ — ; ! ! : 1 —1—r— i ( 1 I \~ " 1 . : J j . | 1 • i — f — _ . • — — — - — - — t — _ _ _ _ — -\ — -; ! . 1 1 Monthly D a i r y P r o d u c t i o n , Feed and D i s p o s i t i o n Record Jr_oducTtion_ lEeed- -D-ispo3-i.t4-on. Month Number of Cows M i l k e d T o t a l l b s . Average /cow Iba", Zoncen-=trat—s= Hay S i l a g e Bedding Sales l b s Home Use Jan Feb Mar. A p r i l May_ •-r-June J u l y August Sept. !_JL_ No v.-Dec. Average-No .—of— Cows -Mi-lked-- — — - _ — T o t a l s - for—Year--!-4-Feed Lot, Record Kind of L i v e s t o c k "WeTghT at s t a r t Prodi* n= eig: at enc Gain i n weight Concen-_Jtrja_tesL =F-eed= Hay S i l a g e Bedding _Di& p O:si-tion Sales Home Use — A ,— I APPENDIX C SUGGESTED FORM FOR FLEXIBLE TYPE OF SHARE LEASE Suggested Form f o r F l e x i b l e Type of Share Lease (Date, Name and Address of P a r t i e s ) This lease made t h i s day of , 19 between Landlord (Lessor) of and Tenant (Lessee) of WITNESSETH Se c t i o n I ( D e s c r i p t i o n of Property) The Landlord hereby l e a s e s to the Tenant, to occupy and use f o r a g r i c u l t u r a l purposes, the f o l l o w i n g described property c o n s i s t i n g oY~_~J~_~acres7 more~or TessT TogeTher~witH a l l b u i l d -i n g s and improvements thereon, s i t u a t e d i n the Province of B r i -t i s h Columbia, Canada. A l l t h i s p r o p e r t y together i s h e r e i n -a f t e r r e f e r r e d to as the "farm". SECTION I I (Term of Lease and Renewal) The term of t h i s lease s h a l l be from the day of 19 to the day of 19 ~",~and from year to year t h e r e a f t e r u n t i l w r i t t e n n o t i c e of termination i s given by e i t h e r p a r t y t o the other on or before day of before e x p i r a t i o n of t h i s l e a s e , which date i s not Tess~than s i x months before t e r m i n a t i o n of t h i s Agreement. SECTION I I I (Extent of Agreement) The terms of t h i s l e a s e s h a l l be b i n d i n g on the h e i r s , executors, a d m i n i s t r a t o r s and assigns o f both Landlord and Tenant i n l i k e manner as upon the o r i g i n a l p a r t i e s except by mutual agreement otherwise. SECTION IV (No Pa r t n e r s h i p Created) T h i s lease s h a l l not be construed as giving r i s e to a p a r t n e r s h i p , and n e i t h e r p a r t y s h a l l be l i a b l e f o r debts o r o b l i g a t i o n s i n c u r r e d by the other without w r i t t e n consent of the other. SECTION V (The Landlord C p n t r i b u t i o n ) (a) The Landlord s h a l l f u r n i s h the above described property i n c l u d i n g f i x e d improvements thereon. The in v e n t o r y of the Landlord's improvements and equipment i s as f o l l o w s : (b) The Landlord s h a l l f u r n i s h m a t e r i a l s necessary f o r normal r e p a i r s and maintenance, and f o r improvement to b u i l d i n g s , fences and w e l l s . ( c ) The Landlord s h a l l provide s k i l l e d labour employed i n making w e l l s or r e p a i r s c o s t i n g more than $ __• . (d) The Landlord s h a l l c a r r y f i r e insurance on a l l b u i l d i n g s used by the Tenant; he s h a l l r e p l a c e b u i l d i n g s des-troyed by f i r e or a c c i d e n t , which are e s s e n t i a l to the opera-t i o n of the farm, as soon as p r a c t i c a b l e t h e r e a f t e r . (e) The Landlord s h a l l pay of the taxes on r e a l e s t a t e . ( f ) The Landlord s h a l l provide of wheat, oa t s , b a r l e y , f l a x , g rass, c l o v e r , a lfal?a7 Z Z °f other seed r e q u i r e d on t h i s farm during the term of t h i s ~ l e a s e . (g) The Landlord s h a l l f u r n i s h of the con-centrated f e r t i l i z e r m a t e r i a l s as may be~purchased outside of the farm f o r use on the farm i n amounts accepted by good r u l e s of husbandry common t o t h i s d i s t r i c t . (h) (ir_~"_~~ zzzzzzzzzzzzzzzzzzzzz SECTION VI (The Tenant C o n t r i b u t i o n ) (a) The Tenant s h a l l f u r n i s h a l l labour to operate the farm e f f i c i e n t l y . Exceptions, i f any, are as f o l l o w s : (b) The Tenant s h a l l f u r n i s h a l l work s t o c k , other power machinery and equipment and s h a l l pay op e r a t i n g c o s t s and expenses f o r the same. Exceptions, i f any, are as f o l l o w s : (c ) The Tenant s h a l l bear a l l s p e c i a l o p e r a t i n g c o s t s such as custom h a u l i n g , g r i n d i n g , b i n d i n g , t h r e s h i n g o r combining. Exceptions, i f any, are as f o l l o w s : (d) The Tenant s h a l l provide f o r h a u l i n g to~the~farm "~ of a l l m a t e r i a l which the Landlord f u r n i s h e s f o r making r e p a i r s and improvements, and the performing of la b o u r , except s k i l l e d , r e q u i r e d f o r such r e p a i r i n g and improving, except: (e) I n a d d i t i o n to the above a r t i c l e s of t h i s l e a s e the Tenant agrees: ( i ) t o p r a c t i s e accepted e r a d i c a t i o n methods of noxious weeds. The e r a d i c a t i o n of noxious weeds r e q u i r i n g extensive operations s h a l l be provided f o r as f o l l o w s : ( i i ) to~perform~cultivating7 harvesting""and~other farm p r a c t i c e s a t the time and i n the manner that conforms to the standards o f good husbandry. To f o l l o w as c l o s e l y as p o s s i b l e the f o l l o w i n g crop and s o i l programme: _ _ ( i i i ) t o ~ f o l l o w standard disease treatment f o r a l l diseases of small grains ( i v ) to p r a c t i s e s t r i p cropping and other c u l t i v a t i o n p rac-t i c e s which w i l l a i d i n reducing wind and water er o s i o n (v) not to burn any straw stubble or other crop r e s i d u e on the farm, n e i t h e r to s e l l or a l l o w any manure or straw to be hauled o f f the farm without consent of the Landlord. ( f ) The Tenant agrees: (1) not to a s s i g n t h i s l e a s e o r s u b l e t any p o r t i o n of the farm without the w r i t t e n consent of the Landlord ( i i ) t o permit the Landlord and/or h i s agent t o enter the farm at any reasonable time f o r r e p a i r s , improvements and i n s p e c t i o n . ( i i i ) t o y i e l d possession of the farm at the end of the term of t h i s l e a s e or any renewal o r extension thereof. (g) The Tenant agrees to devote not more than _ acres to growing produce f o r use of h i s own f a m i l y and Board" f o r h i r e d l a b o u r , such as potatoes, garden and f r u i t . The Tenant may cut from the dead timber or from t r e e s designated by the Landlord such wood as he may need f o r f u e l up t o cords each year. Exceptions, i f any, are as f o l l o w s : ~ Z Z SECTION V I I (Rent and D i v i s i o n of Farm Income) (a) The Tenant hereby agrees that a l l income o r r e c e i p t s from the s a l e of l i v e s t o c k , l i v e s t o c k products, crops e r o t h e r income from operation of the farm w i l l be d i -v i d e d and d i s t r i b u t e d between the two p a r t i e s as designated below: Crops: (1) ^ of the wheat t o the Landlord (2) Z Z Z Z Z Z Z o f the oats t o the Landlord (3) Z Z Z Z Z Z Z o f t h e b a r l e y to the Landlord (4) Z Z Z Z Z Z Z o f the rye to the Landlord (5) ~" of the f l a x to the Landlord (6) ~ Z Z Z Z Z Z o f the hay to the Landlord (7) of the to the Landlord L i v e Stock (1) to the Landlord (2) Z Z Z Z Z Z Z t o the Landlord (3) to the Landlord (b) The Tenant agrees to care f o r and d e l i v e r to ( s t a t i o n o r s h i p p i n g p o i n t ) the Landlord's share of Tive"stock""and l i v e stock products, g r a i n crops and other crops, with the p r o v i s i o n , however, that the tenant has the p r i v i l e g e of purchasing the Landlord's share of crops f o r f e e d i n g purposes at the market p r i c e . (c) The Tenant f u r t h e r agrees to pay cash r e n t as f o l l o w s : $ _ _, f o r use of the farm each year, payable raonthTsT p r i o r to the end of each l e a s e year. The cash~rent of $ _ s h a l l be secured by promissory note of $ to~be due a t the time the cash r e n t i s payable and t o bear~_.nterest at per cent t h e r e a f t e r u n t i l p a i d . SECTION V I I I (Tenant's Right to Make Improvements and Receive Reimbursements f o r Unexhausted Improvements) (a) The Tenant may, a t h i s own d i s c r e t i o n , make minor improvements and r e p a i r s of a permanent nature which do not de t r a c t from the appearance o f the premises nor m a t e r i a l l y change the arrangement of the farm, and s h a l l not r e c e i v e compensation f o r improvements so made. (b) The Tenant, a t h i s own expense, may, with the w r i t t e n consent of the Landlord, make improvements of a non-permanent nature, such as new b u i l d i n g s , a d d i t i o n s o r r e p a i r s to b u i l d i n g s , non-permanent household f i x t u r e s and equipment, new fences and other improvements of t h i s nature under the terms of w r i t t e n consent of the Landlord. Upon ter m i n a t i o n of t h i s l e a s e , the Tenant s h a l l r e -c e i v e from the Landlord a reasonable compensation f o r the un-exhausted value o f such improvements on the b a s i s of co s t to the Tenant ( i n c l u d i n g value of h i s own la b o u r ) l e s s agreed deduction f o r d e p r e c i a t i o n and use. I n l i e u of compensation f o r such s t r u c t u r a l or non-permanent improvements, the Tenant, at h i s own d i s c r e t i o n and provided he has given t h i r t y days' n o t i c e of h i s i n t e n t i o n before e x p i r a t i o n of the l e a s e , may w i t h i n s i x t y days a f t e r the t e r m i n a t i o n of the tenancy remove such s t r u c t u r e s , provided he le a v e s the ground from which such improvements were moved i n as good farming c o n d i t i o n as i t was p r i o r to the e r e c t i o n of such improvements. SECTION I X (Compensation f o r Damage to the Farm) I n the case of the Tenant f a i l i n g t o perform farm p r a c t i c e s at the time and i n the manner that conforms to s t a n -dards of good husbandry and accor d i n g t o the terms as set out i n t h i s l e a s e , and i n the case of extreme negligence p e r m i t t i n g unusual d e t e r i o r a t i o n i n land and improvements, such as f a i l u r e of the Tenant t o c o n t r o l weeds o r d i s r e p a i r of b u i l d i n g s and fences, the Landlord may enter the premises and perform the necessary operations or make r e p a i r s and charge the c o s t s thereof t o the Tenant. The Landlord may c l a i m compensation o n l y f o r unusual d e t e r i o r a t i o n and d e p r e c i a t i o n i n land and improvements a f t e r due allowance has been made f o r damage r e s u l t i n g from o r d i n a r y wear and d e p r e c i a t i o n , or from causes beyond the Tenant's c o n t r o l . SECTION X ( A r b i t r a t i o n ) Any d i f f e r e n c e s between Tenant and Landlord under t h i s l e a s e , such as disagreements as t o the values of improvements, damages and the l i k e , s h a l l be r e f e r r e d to a committee of three d i s i n t e r e s t e d persons, one s e l e c t e d by each p a r t y to t h i s l e a s e and the t h i r d by the two thus chosen. The d e c i s i o n of the a r b i t r a t i o n committed s h a l l be accepted by and s h a l l b i n d both p a r t i e s except i f a matter o f law or a sum exceeding $ i s i n v o l v e d . SECTION XI (Sale Clause) I t i s hereby agreed by and between the p a r t i e s of t h i s lease that a t any time d a r i n g the l i f e of t h i s lease the Tenant has an option to purchase t h i s farm under the f o l l o w -i n g terms: SECTION X I I (Other Agreements and Arrangements) (a) This l e a s e supersedes a l l w r i t t e n or v e r b a l agree-ments made by the c o n t r a c t i n g p a r t i e s p r i o r to the date of t h i s l ease and not i n accord with i t . (b) Any a d d i t i o n a l w r i t t e n agreements r e l a t i v e t o t h i s l e a s e s h a l l r e f e r to t h i s l e a s e by date, s h a l l be signed and witnessed j u s t as the o r i g i n a l lease and s h a l l be considered a p a r t o f t h i s l e a s e (c) A d d i t i o n a l Agreements: _ _ IN WITNESS WHEREOF, we a f f i x our s i g n a t u r e s , t h i s day o f , A. D. 19 . Owner or Autho r i z e d Agent Tenant o r Au t h o r i z e d Agent Address Address Witness as t o Signature of Owner Witness as to Signature of Tenant Address Address 

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