Chapter 2 - The system of economic accounts for food and agriculture

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What are the requirements?
The contents of SEAFA
The relationship of SEAFA to SNA
The agricultural household sub-sector
The sequence of accounts for the agricultural household sub-sector
Accounts for the other sub-sectors
The accounts for agriculture as a productive activity
Agricultural activity accounts
Goods and services accounts
Satellite accounts and supplementary tabulations relating to food (food balances)

What are the requirements?

2.1 The contents and structure of a system of economic accounts depend on the requirements for which the system is being designed. The requirements cover two aspects: which economic activities and transactions; and whose economic activities and transactions? Although general answers to these questions are given by the 1993 SNA for the economy as a whole, in the present Handbook a specific system is proposed to serve analysts and decision makers dealing with food and agricultural activities.

2.2 SEAFA is intended to serve policy-makers dealing with the preparation of production plans for agriculture and food designed to optimize the use of domestic resources, minimize the import of essential agricultural goods and stabilize the level of prices of food and agricultural products, while keeping in view the impact of these policies on the living standards of the rural population dependent on agriculture. The plans may be formulated for product diversification to achieve the desired level of nutrition for the country's population or to maximize the economic benefits. Policy-makers are generally not concerned with other matters, such as the financial assets and liabilities of the units engaged in the activities. The main objectives of agricultural policies can be divided into three broad groups as follows:

(a) securing improvements in the efficiency of the production and distribution of food and agricultural products;
(b) improving the condition of the rural population;
(c) raising people's level of nutrition and standard of living.

The two questions raised in paragraph 2.1 are examined in the following discussion keeping these objectives in view.

2.3 The economic activities covered in SEAFA relate to various aspects of the food and agricultural production of a country or region. Such a system needs to incorporate all the economic statistics relating to agriculture, forestry, fisheries, food and nutrition in one framework. This is necessary because these activities are interrelated and also because it allows the study of the impact of changes induced in the system through various policy measures. Such a framework may include detailed information for making recommendations on subject matters such as improved methods of producing, processing, marketing and distributing food and agricultural products, import substitution, improvement in nutritional intake, financing requirements and conservation of natural resources. The system, therefore, requires the following types of data:

production, productivity and income accruing from the activities of agriculture, forestry, fisheries and food production;
the inputs and labour required for carrying out the activities;
consumption patterns and food habits, along with the nutrient content of the food;
the status of infrastructural development related to agricultural and food production activities and their financing requirements.

2.4 The data included in the system depicts such issues as labour force participation, development of a skilled workforce, extension and research activities or cover the economic, social and scientific aspects of the utilization of natural resources. These data establish the relationships between domestic production and foreign trade (import and export), the relationship of land and other assets with size of holding and production, the relationship of agro-climatic factors with the genetic characteristics of crops and animals and with their production, etc.

2.5 For purposes of economic planning, the system also needs to have clear linkages with other related economic activities such as the processing of agro-based products and the production, import and export of intermediate inputs, machinery and equipment used in agriculture, as well as other activities that have an indirect impact on agriculture. This latter group includes the development of infrastructure (e.g. power, communication and storage) and services activities such as distribution. In view of these requirements, SEAFA (like SNA) is based on the structure of inter-industry transaction tables. This structure links targeted output not only with inputs required but also with the level of consumption, imports, exports and changes in stocks of food and agriculture products as well as with other economic activities not covered by SEAFA.

2.6 The second question from paragraph 2.1 (whose activity and transaction) could more specifically be answered by taking each of the objectives separately. For example in case of the first objective, namely, "securing improvements in the efficiency of production and distribution of food and agricultural products" it is necessary to cover all units that are responsible for taking the decisions to carry out the economic activity, i.e. all institutional units engaged in agricultural activity, as well as the units of location (physical) where the economic activity actually takes place. This also partially satisfies the second objective (improving conditions of the rural population) because it applies to the income of all households with agriculture as their principal activity. In the case of developing countries, for which this objective is relevant, a major share of the total rural population depends on such agricultural activities. A regular set of information for rural areas has not been included in SEAFA as the area that can be described as rural area changes very frequently even if the concept remains the same. To study the third objective (i.e. raising the level of nutrition and standards of living of the people) within the total consumption of the population, it is necessary to study food as one sector. In this respect SEAFA may include the activity of establishments engaged in production of food products as well as in the supply and use of food products. In other words, to take policy decisions on the above questions, the system needs to cover the transactions of two types of units, viz. institutional units and establishments whose principal activity is production of food and agricultural products. These transactions may relate to economic activities of production, income generation and supply and use of food and agricultural products and the composition of food items for the total population along with its nutrition content. While designing SEAFA these aspects have been kept in mind and are discussed in more detail in the following presentation.

The contents of SEAFA

(a) The coverage of economic achvity
(b) Units used in SEAFA
(c) The system of accounts of SEAFA

2.7 The contents and coverage of SEAFA can be presented in terms of economic activities using the ISIC codes, units used in the system and the type of economic accounts that are described below.

(a) The coverage of economic activity

2.8 The System as a whole is concerned with the following types of economic activities:

(1) Crop and animal husbandry: agriculture covering crop husbandry, animal husbandry and related activities (ISIC Division 01);
(2) Forestry, logging and related activities (ISIC Division 02);
(3) Fishing (ISIC Division 05);
(4) Food production: includes (i) food production covered under ISIC Divisions 01, 02 and 05, (ii) production of food covered under ISIC Division 15, i.e. the manufacture of food products and beverages;
(5) Environmental protection activities: such as desertification control, water resource protection, marine pollution control erosion control, flood prevention or control and natural reserves (action to preserve biodiversity).
(6) Other activities: includes (i) research and development relating to crops, livestocks, forestry, fisheries and food production included in ISIC class 7310; (ii) veterinary activities, ISIC class 8520; (iii) technical and vocational and higher education relating to agriculture, forestry and fishery included in ISIC classes 8022 and 8030; (iv) agro industries other than food products covered under ISIC Divisions 16, 17, 19 and 20; (v) production of inputs for intermediate consumption and machinery and equipment for use in the agricultural sector covered under ISIC class 2412 (manufacture of fertilizers and pesticides), ISIC class 2921 (manufacture of agricultural and forestry machinery), ISIC class 2925 (manufacture of machinery for food, beverage and tobacco processing) and ISIC class 3511 (building of fishing boats and fish processing factory vessels, development of infrastructure for rural areas).

(b) Units used in SEAFA

2.9 The following three kinds of units are used both in SNA and SEAFA:

institutional units
products, i.e., goods and services.

A brief description of the 1993 SNA's concepts applied to SEAFA with special reference to agriculture is given below. Although the same units are used for preparing accounts or tables for other activities listed in paragraph 2.8 above, a similar activity-specific description will be included in the proposed supplements to the Handbook.

1. Institutional Units

2.10 An institutional unit is defined as:

"an economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities" (1993 SNA paragraph 4.2).

An institutional unit is therefore a real economic unit. It is an economic agent or transactor. SNA distinguishes four main kinds of institutional unit: households; corporate and quasi corporate enterprises, government units and non-profit institutions (NPIs). It is possible to compile a complete set of accounts, including balance sheets, for an institutional unit because, by definition, it is capable of owning assets and incurring liabilities in its own right. It can receive and spend income, borrow and lend, and so on.

2.11 Sectors and sub-sectors in SNA are groups of resident institutional units and SNA recommends the compilation of a complete set of accounts for each sector. SEAFA proposes to identify a sector of the economy consisting of institutional units whose principal activity is agricultural production. Such a sector is not specifically identified in the 1993 SNA and it is useful to see how the agricultural sector relates to the standard sectors defined in SNA. The agricultural sector consists of three sub-sectors each of which is, in turn, a sub-sector of a standard SNA sector namely:

agricultural households as defined below;
agricultural corporate or quasi-corporate enterprises;
government-owned NPIs by whose principal activity is agricultural production or research.

2.12 Within the agricultural sector, SEAFA's primary concern relates to agricultural households. From the SNA point of view, these constitute a sub-sector of the household sector and SNA defines a household as:

"a small group of persons who share the same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food". (1993 SNA paragraph 4.132)

This definition is essentially the same as that used in population and housing censuses and quoted in paragraph 5.28 of FAO's Programme for the World Census of Agriculture 2000. An agricultural household is one whose principal source of income, whether in cash or in kind, is derived from its own agricultural production (see paragraph 2.20 below for a more precise definition). SEAFA proposes to compile SNA-type accounts for the sub-sector consisting of agricultural households because of the policy interest not only in their agricultural production, but also in their total income and general welfare.

2.13 SNA treats institutional units as integral, indivisible units. For example, the production account for a household covers the productive activities of all the members of the household who may not necessarily all be engaged in the same activity. The production account for an agricultural household is not necessarily confined to agricultural production, although in practice this may often be the only kind of production undertaken. Similarly, the primary income of a household may include wages received by one or more members of the household from outside employment and is not necessarily confined to the income generated by the household's agricultural production. The gross capital formation of an agricultural household covers all its capital formation, including net acquisition of valuables, and not only the gross fixed capital formation in its agricultural activities.

2.14 Apart from agricultural households, the other main type of institutional unit within the agricultural sector consists of a corporate or quasi-corporate enterprise whose principal activity is agricultural production. Most such enterprises are likely to have large production units, such as plantations growing rubber, tea, coffee or cocoa or specialized farms raising turkeys, which may be owned by resident units, including government units, or non-resident units. From the SNA viewpoint, this group of institutional units is a sub-sector of the non-financial corporations sector.

2.15 There may also be some NPIs owned and controlled by government units that are engaged in agricultural production. These would constitute a third sub-sector, which is also part of the SNA general government sector.

2. Establishments

2.16 Establishments are units which are identified only for purposes of measuring production. An establishment is intended to be a unit whose production is as homogeneous as possible and ideally it should be engaged in only a single type of production activity. It may, therefore, correspond to only part of an enterprise where an enterprise is to be understood as an institutional unit engaged in production. It is not itself an institutional unit. An establishment is defined in SNA as:

"an enterprise, or part of an enterprise, that is situated in a single location and in which only a single (non-ancillary) productive activity is carried out or in which the principal productive activity accounts for most of the value added". (1993 SNA paragraph 5.21)

This definition is essentially the same as that given in ISIC Rev. 3 and the concept of the establishment is the same in SNA and ISIC. An agricultural establishment is one whose principal activity is agricultural, as defined in Division 01 of ISIC. As in the case of industrial and service establishments, an agricultural establishment may have one or more secondary activities which it would not be feasible to separate from the principal activity. For example, an establishment engaged mainly in growing cereals or other crops (ISIC 0111) may raise domesticated animals (ISIC 0122) as a secondary agricultural activity. Alternatively, the secondary activity may not even be agricultural; for example, grain milling (ISIC 1531) or slaughtering (ISIC 1511) which are classified as food manufacturing in ISIC. Thus, the total output of a set of agricultural establishments, including Division 01 of ISIC as a whole, will in practice tend to include some non-agricultural products produced as outputs from secondary activities within those establishments.

2.17 In the context of agriculture and SEAFA, the establishment may, in most cases, be equated with the agricultural holding as defined in paragraph 5.7 of FAO's Programme for the World Census of Agriculture 2000. This is the unit traditionally used in agricultural censuses and surveys. However, it is possible that some agricultural holdings ought to be divided into two or more separate establishments if there are two or more different types of agricultural activity, as defined in ISIC, taking place on the holding and if it is possible to compile separate production accounts for them.

3. Products: goods and services

2.18 The third type of unit used in SEAFA consists of a product, i.e. a good or service produced as output by a process of production. Goods and services accounts are compiled for individual products or groups of products. These accounts may also be described as balances of supplies and uses.

2.19 The general classification of products corresponding to ISIC is the Central Product Classification (CPC). Agricultural products may be identified with products in Divisions 01 and 02 of CPC and manufactured food products with Divisions 21 to 23. FAO has its own more detailed draft classification of agricultural and food commodities (FAO, 1994). The goods and services accounts in Part TWO of SEAFA refer to agricultural or food products as just defined.

(c) The system of accounts of SEAFA

2.20 SEAFA consists of three types of accounts or tables for food and agriculture:

Part I Selected accounts for Agriculture defined as a sector of the total economy including, in particular, production and primary income accounts for the sub-sector of the SNA household sector consisting of Agricultural Households, and also their capital formation;

Part II Production and generation of income accounts for all establishments whose principal activity is agricultural production; also goods and services accounts for food and agricultural products;

Part III Satellite accounts and supplementary tabulations relating to food and agriculture.

Each set of accounts or tables is described below. First, it is useful to clarify the relationship between SEAFA and SNA, and to describe the units used in the two systems.

The relationship of SEAFA to SNA

2.21 As a system, the 1993 SNA consists of a complete and interdependent sequence of accounts, namely Production, Income and Accumulation Accounts and Balance Sheets. These accounts may be compiled for sectors or sub-sectors, consisting of groups of institutional units, or for the total economy, i.e. the entire set of resident institutional units. Furthermore, SNA has also recommended that "for analysis of production in which the technology of production plays an important role" it is possible to compile production accounts and generation of income accounts. The 1993 SNA also includes goods and services accounts and supply and use tables which record the total supplies of goods and services produced by domestic industries and imported from abroad and the use of those supplies for intermediate or final consumption, capital formation or export. The industries in the supply and use tables consist of groups of establishments, as distinct from the institutional units used in the sector accounts. SEAFA follows SNA by recommending the compilation of sector accounts for all those institutional units in the economy whose resources derived mainly from agriculture as well as production and generation of income accounts for establishments whose principal activity is agricultural production. It also follows SNA in recommending goods and services accounts for agricultural products. The accounts listed under Parts I and II above corresponds to these recommendations. Similarly, the accounts included in Part III are also according to the 1993 SNA's recommendation

"to expand the analytical capacity of national accounting for selected areas of social concern in a flexible manner (satellite accounts could be used), without overburdening or disrupting the central system....Typically satellite accounts or system allows for:

(a) the provision of additional information on particular social concerns of a functional or cross-sector nature;
(b) the use of complementary or alternative concepts, including the use of complementary and alternative classifications and accounting frameworks, when needed to introduce additional dimensions to the conceptual framework of national accounts;
(c) extended coverage of costs and benefits of human activities;
(d) further analysis of data by means of relevant indicators and aggregates; and
(e) linkage of physical data sources and analysis to the monetary accounting system. " (SNA paragraph 21.4)

The agricultural household sub-sector

2.22 As explained earlier, the reason for compiling these accounts is the policy interest in the production, income and welfare of households engaged in agricultural production where resources are derived mainly, or entirely, from this activity. The 1993 SNA strongly recommends sub-sectoring the household sector but also notes in paragraph 4.158

"There are thus many useful ways in which the households sector may be sub-sectored and statistical agencies are advised to give due consideration to the various possibilities. More than one method may be adopted if there is a demand for different breakdowns of the households sector from different users, analysts or policy-makers."

2.23 Sub-sectoring of the household sector is one area in which the 1993 SNA recommends that the System should be implemented flexibly (see Annex 2.3). In the context of a system of SEAFA, interest is focused on households whose resources are derived primarily from their own agricultural production and it is entirely in the spirit of the 1993 SNA to define a sub-sector of this kind. Following the same kinds of criteria as used in SNA an agricultural household may be defined as a household whose largest source of income consists of mixed income(s) derived from agricultural production, agriculture being defined as in the activity accounts, namely Division 01 of ISIC, Rev. 3. This does not necessarily imply that the total mixed income from agriculture accounts for more than half of the total household income defined as the sum of the primary incomes and the transfer incomes received by all members of the household. In paragraph 4.153, the 1993 SNA distinguishes three types of household income:

mixed incomes;
compensation of employees;
property and transfer incomes.

2.24 An agricultural household is one in which the total mixed income from agriculture is larger than either of the total incomes received under (2) or (3) (or than the mixed income received from non-agricultural production). Mixed income is the balancing item on the generation of income account of a household enterprise (excluding the notional enterprise that produces housing services for own consumption) and is explained more fully below. It replaces the operating surplus of a corporate or quasi-corporate enterprise (see Chapter 3, paragraphs 3.46 to 3.49).

2.25 The following points should be noted about the definition of an agricultural household and the production accounts for the agricultural household sub-sector:

- When the household is engaged on production for own consumption, in particular the production of goods for own final consumption within the household, the value of both the output and the consumption is imputed, and the mixed income derived from the production is a form of income in kind.
The total output and value added produced by all agricultural households may diverge significantly from the total output and value added of all agricultural establishments, even in developing countries where most agricultural production is carried out by households. For example, a lot of production may be carried out in establishments owned by corporate enterprises, or even by non-agricultural households, while conversely agricultural households may have significant nonagricultural output.

2.26 In practice, the total output of agricultural households will often be much less than total agricultural output. The compilation of accounts for the agricultural household subsector is therefore no substitute for estimating total agricultural output from establishment or product data, but must be viewed as an end in itself because of the policy interest in the general economic circumstances of these households, which are often very poor. In some developing countries one-half or more of the population may be found in agricultural households. As the proportion of the population living in agricultural households declines, the need to identify and compile accounts for an agricultural household sub-sector may also decline. In economically advanced countries with relatively very small agricultural sectors, it may not be considered worthwhile to compile such accounts, although there is considerable policy interest in the incomes of agricultural households in even the most highly developed countries because of the common practice of subsidizing agricultural production in those countries.

The sequence of accounts for the agricultural household sub-sector

1. The production account
2. The generation of income account
3. The allocation of primary income account
4. Other (income) accounts
5. Capital account

2.27 SEAFA considers five accounts from the 1993 SNA which are useful for economic analysis. The purpose of this section is to provide a brief description of each of the accounts to be compiled for the agricultural household sub-sector. The format of these accounts is the same as for the institutional sector accounts described in the 1993 SNA. Moreover, the definitions of the individual items contained in the accounts are the same as in SNA. They are given in more detail in Chapter 3 of the present handbook. It is not proposed to describe the entries in the accounts in detail here, but rather to explain the structure of the accounts and their balancing items.

2.28 In SEAFA it is proposed to calculate three current accounts for agricultural households, namely:

1. the production account;
2. the generation of income account;
3. the allocation of income account.

It is, of course, possible to calculate the full sequence of accounts for agricultural households, if desired, but the three accounts just listed should be the first priority. The accounts themselves are presented in Tables 2.1, 2.2 and 2.3.

1. The production account

2.29 The "resources" side of this account consists of only a single item, the total output produced by agricultural households. It should be valued at basic prices or at producers' prices if basic prices cannot be used. These prices are explained in Chapter 3 below. SEAFA recommends that output should be sub-divided in two ways: to distinguish market output from output for own final consumption or own capital formation; and to distinguish the different types of agricultural products, namely:

food goods;
non-food agricultural goods;
agricultural services;
other goods and services.

The fourth category includes the housing services produced for own consumption by owners of dwellings. The distinction between market output and output for own final use is explained in paragraphs 6.45 to 6.48 of the 1993 SNA.

2.30 Intermediate consumption, shown on the uses side of the account should be subdivided into eight types of goods or services as shown in Table 2.1. This breakdown permits intermediate inputs of agricultural products (e.g. seeds and feed) to be distinguished from other inputs.

2.31 The balancing item of the account is value added defined as output minus intermediate consumption. Following the 1993 SNA, value added may be measured gross or net of consumption of fixed capital. In practice, however, it is difficult to estimate consumption of fixed capital at current prices (as distinct from historic costs) and SNA recognizes it may not always be feasible to estimate net value added. For simplicity, it is assumed that consumption of fixed capital will not usually be calculable, and the balancing items in Tables 2.2 to 2.4 are shown "gross".

2. The generation of income account

2.32 This account is shown in Table 2.2. It shows the incomes generated in the course of production carried out by agricultural households. These incomes are all payable out of the value added created by production, the only item on the "resources" side of the account. There are three main categories shown on the "uses" side of this account.

i) Compensation of employees: Note that in this account this item is not a receivable. It is only recorded when there are paid employees from outside the household who work within an enterprise owned by the household.
ii) Taxes on production: These consist of taxes less subsidies on products and other taxes less subsidies on production. The content of this flow depends on whether output is valued at basic or producers' prices (see paragraphs 6.2110 to 6.227 and 7.5 and 7.6 of the 1993 SNA).
iii) Mixed income (gross): This is the balancing item of the account. In the case of household production, it shows the residual income accruing to the owner(s) of an unincorporated enterprise, such as a farm, after deducting from output intermediate costs, compensation of employees and taxes less subsidies on production. Note that interest and rent are not deducted -they constitute charges payable out of mixed income. The term "mixed income" is used because the balancing item implicitly contains an element of remuneration for the work done by the owner(s) and any unpaid family workers in the same household that cannot be separated from the return to the owner(s) in their capacity as entrepreneurs. See paragraphs 7.81, 7.85 and 7.86 of the 1993 SNA. As already explained, agricultural households are defined with reference to their mixed income. They are households whose mixed income from their own agricultural production is larger than either of the other two main categories of income that may be received by household members, namely compensation of employees and property plus transfer income. The mixed income may be mostly in kind and not cash when the output of the farm is used mostly for own final consumption.

2.33 In the case of a corporate or quasi-corporate enterprise, the balancing item in this account is described as the "operating surplus". As the production of housing services for own consumption by their owners does not require any work from them, the balancing item from this kind of production is also not mixed income but operating surplus.

3. The allocation of primary income account

2.34 This account is shown in Table 2.3. The "resources" side of the account shows the primary incomes receivable by agricultural households, primary incomes consisting of the mixed incomes (or operating surplus) carried forward from the generation of income account, compensation of employees and property incomes (interest, rent and other property incomes). The "uses" side of the account shows the property incomes payable by agricultural households.

i) Compensation of employee: This item includes any wages or salaries receivable by members of the households, including the head of the household or the owner of the farm, for work done in other enterprises. Obviously, members of the household may work full or part time for any kind of enterprise, depending on local employment opportunities. If the income from this source were to exceed the mixed income from their own agricultural activity, the household would cease to be classified as an agricultural household. The household would be classified as an "employee household" see paragraph 4.153 of the 1993 SNA.
ii) Property incomes: These are both receivable and payable by households. In practice most poor agricultural households are unlikely to be recipients of property incomes, but they may well have to pay rent on their land and interest on their debts. The interest payable covers interest on all debts incurred by the household, whether to finance production or household consumption. In practice, other kinds of property income are only payable by corporate or quasi-corporate enterprises and may be ignored in this context.
iii) The balance of primary incomes (gross): This balance is equal to the sum of the three kinds of primary incomes receivable by households less the property incomes (rent and interest) payable.

4. Other (income) accounts

2.35 The 1993 SNA makes provision for another income concept or balancing item between the mixed income of the generation of income account and the balance of primary incomes. It is called entrepreneurial income and is only applicable to an institutional unit in its capacity as a producer (corporate, quasi-corporate or unincorporated enterprise). Entrepreneurial income is explained in Annex 2.4. SEAFA does not recommend the calculation of entrepreneurial income as a normal rule because of the practical difficulty of measuring it properly. It was, however, included in FAO's 1974 Handbook of Economic Accounts for Agriculture.

2.36 When data are available, it is desirable to calculate further accounts for the agricultural household sector. In particular, it would be useful to go on to calculate the disposable income of agricultural households, their household final consumption expenditures and their saving. The additional accounts required are the secondary distribution of income account and the use of income account of the 1993 SNA. These accounts can be compiled for agricultural households by utilizing the standard accounts of the SNA.

5. Capital account

2.37 Another account which is particularly important for agricultural households is the capital account of SNA. The "uses" side of this account records the following items:

Gross fixed capital formation;
Changes in inventories;
Consumption of fixed capital (negative use);
Acquisitions less disposals of valuables and non-produced non-financial assets, including land.

2.38 For the purposes of economic analysis and policy-making in agriculture, the first three items are the most relevant, although it would also be useful to obtain data on net acquisitions of land. As already noted, it may not be feasible to estimate consumption of fixed capital, so all the balancing items in the accounts from value added to saving have to be recorded gross.

2.39 In SEAFA, it is recommended to collect information on gross capital formation, including changes in inventories, even though it is not proposed to try to compile the complete capital account. The gross fixed capital formation should be broken down by type of asset, as shown in Table 2.4 to distinguish the main categories of fixed asset used in agricultural production. Similarly, changes in inventories should be sub-divided by type of asset. The various categories of asset are defined in detail in the Annex to Chapter XIII of the 1993 SNA (pp.305-314) which gives a complete classification of all types of asset and their code numbers.

2.40 If a complete set of current accounts from the production account to the use of income account is not compiled for agricultural households, their saving cannot be calculated. If saving is not available, it is not possible to complete the "resources" side of the capital account, even if the "uses" were to be complete. It is therefore not proposed to calculate the "resources" side of the capital account, unless a complete set of current accounts is compiled.

Accounts for the other sub-sectors

2.41 In some countries the agricultural corporations sub-sector consisting of agricultural corporate and quasi-corporate enterprises may account for a significant, or even a large, part of total agricultural production. In such a case, it is desirable to compile SNA-type sector accounts for this sub-sector also within the framework of SEAFA. It may well be possible to compile a complete set of accounts for the sub-sector including disposable income and saving. A complete set of accounts would, of course, include a complete capital account and not simply the gross capital formation of agricultural corporations.

2.42 The sub-sector consisting of agricultural NPIs owned and controlled by government is likely to be extremely small, and it may be neither worthwhile nor feasible to compile accounts for this sector.

2.43 It is desirable to try to estimate a complete capital account for the agricultural sector as a whole, even though the "resources" side of the account would have to be condensed and simplified compared with the standard SNA capital account, assuming that the resources side of the account is not available for agricultural households. At the level of the agricultural sector as a whole, it is important to identify the technical assistance from abroad consisting of capital transfers, in cash or in kind, received from the rest of world and intended to finance gross capital formation in agriculture.

2.44 The remaining resources are derived residually; they consist of a mixture of saving, domestic capital transfers receivable or payable and net borrowing or lending.

The accounts for agriculture as a productive activity

2.45 The Part II accounts in SEAFA consist of the production and generation of income accounts for groups of agricultural establishments and also goods and services accounts for agricultural products.

Agricultural activity accounts

1. Establishments cross-classified by sector of owner and type of productive activity
2. Other data for agricultural establishments

2.46 As already noted, an agricultural establishment may, in practice, be equated with an agricultural holding as defined in FAO's Programme for the World Census of Agriculture 2000. The activity accounts cover all agricultural establishments, or holdings, located on the economic territory whose principal activity is classified under Division 01 of ISIC. An establishment is a local unit as well as an activity unit and is actually described as a "local kind of activity unit" in the European System of Accounts (ESA, Eurostat, 1995).

2.47 The establishments may be owned by households, corporate or quasi-corporate units, government units or NPIs. The owners may belong to any sector or sub-sector of the economy and need not always be resident in the country concerned. If the owner of an agricultural establishment is not a resident institutional unit, that establishment is deemed to belong to a resident quasi-corporate enterprise that is in turn owned by the non-resident unit.

In SNA and Balance of Payments Statistics, all owners of land must be resident institutional units, as any unit owning land is deemed automatically to have a centre of economic interest in the country. If the owner is actually resident abroad, the owner is treated as if ownership were transferred to a notional institutional unit that is resident in the country (see paragraph 14.14 of the 1993 SNA).

2.48 As already explained, the only SNA accounts that can be compiled for establishments are production and generation of income accounts. It is, in fact, possible to combine these two accounts into a single more detailed kind of production account whose balancing item is mixed income or operating surplus. The production account of the 1968 SNA was defined in this way. Accounts for establishments can only be compiled with respect to their productive activities as the establishment is essentially only a production unit. To quote the 1993 SNA, paragraph 5.25:

"Establishments are conceptually quite distinct from institutional units. If an institutional unit contains only a single establishment, the two units coincide in the sense that the production account for the establishment is the same as that for the institutional unit. However, an establishment as such is not an institutional unit of the System, engaging in transactions on its own account, incurring liabilities, entering into contracts and so on. For example, the purchases and sales associated with the productive activities of an establishment are actually made by the institutional unit to which it belongs and not by the establishment itself. It is not possible, therefore, to envisage a complete set of accounts, including balance sheets, being compiled for an establishment, not because of practical data difficulties but because an establishment is not an entity capable of owning goods or assets in its own right or capable of receiving or disbursing income, etc."

2.49 Following SNA, the output of establishments or agricultural holdings in SEAFA must include goods or services produced by one establishment or holding and delivered to another establishment or holding owned by the same institutional unit, i.e. by the same household, corporate enterprise, government unit or NPI. On the other hand, goods which are used up again as intermediate consumption in the same period as they were produced, within the same establishment or holding that produced them, are not recorded either as output or as intermediate consumption. See paragraphs 6.80 to 6.83 of the 1993 SNA for further details on this point.

2.50 Some flexibility has to be permitted on this point within the SEAFA, however, agricultural establishments are different from industrial establishments. It is common, for example, for both crop production and livestock production to take place within the same agricultural holding, even though these are basically different kinds of productive activities and are recognized as such in ISIC (groups 011 and 012). In principle such holdings should be split into two separate establishments but this is often not feasible in practice. Moreover, it is also common for some of the outputs produced by one agricultural activity to be consumed as intermediate inputs by another activity within the same establishment. In particular, some of the output of crops may be used as feedstuffs to produce livestock. Outputs may even be recycled back as intermediate inputs into the same activity (for example, grain used as seeds) a phenomenon which must be rare in industrial establishments.

2.51 Because of the importance of intra-establishment intermediate consumption of own output and because of the practical difficulty of separating this output from other outputs, many countries prefer to use an enlarged concept of output, described as "total output", for agricultural production that includes outputs consumed within the establishment. Total agricultural output including output for own intermediate consumption may also be more suitable for many analytical and policy purposes. Accordingly, total agricultural output may be used instead of SNA output within SEAFA. It is important to note that the use of total, rather than SNA, output does not change value added or any of the flows derived from value added in SEAFA or SNA. Obviously, value added is unchanged if both the output and the intermediate consumption of an establishment are increased by equal amounts. If total output is used, it must also be used for enterprises as well as establishments to ensure consistency between the industry and sector accounts.

2.52 It is possible to define an alternative version of total output in which only the output used as intermediate consumption by a different type of activity within the same establishment is recorded; for example, the grain used as animal feedstuffs, but not grain used as seed. Recording interactivity flows within a single establishment is consistent with the general philosophy underlying the SNA measure of output whereby output from one establishment used as intermediate consumption by another establishment belonging to the same enterprise is recorded both as output and intermediate consumption. In principle, in both SNA and SEAFA, the secondary activity of an agricultural establishment should be split off to form separate establishments and it is only the practical difficulties of separating the activities and compiling separate production accounts for them that prevent the split. If they were to be split, however, the flows of goods or services between the activities would be recorded as output and intermediate consumption for the producer unit as a whole following SNA rules.

2.53 It is generally recognized that SNA needs to be implemented flexibly (see p. xxxiv of the Preface to the 1993 SNA). In this spirit, SEAFA leaves it to each country to decide exactly which concept of output it will use, especially since this does not affect value added and other flows. Within the framework of the SEAFA, either of the definitions of total output could he used according to which the individual country considers more appropriate or practical.

2.54 The contents and format of the production and generation of income accounts to be compiled for agricultural establishments or holdings in SEAFA are the same as those of the accounts for agricultural households described in the previous section. There is no need, therefore, to repeat the description of the individual items and the structure of the accounts. One additional factor to be taken into account, however, is the fact that the balancing item of the generation of income account may be either mixed income or operating surplus depending on whether or not the establishment is owned by a household. It is necessary, therefore, to have two lines for the balancing item of the generation at income account, one for mixed income and and one operating surplus. This procedure is followed in the 1993 SNA. Alternatively, it would be possible to have a single row for the balancing item described as "mixed income or operating surplus" if the two are not separately distinguished.

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