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Articles from 2001 In April

Pork Is World's Most-Eaten Meat

Profile of 2,400-Sow, Farrow-to-Finish Sample Farm

Sample Pork III, USA, applies standrads to 12 months of its financial transactions and production information.

To illustrate the application of National Pork Producers Council (NPPC) Production and Financial Standards in the real world of pork production, let's examine the 1999 production year of a 2,400-sow, farrow-to-finish farm.

This farm, Sample Pork III, USA, is a typical, three-site production unit with separate farrowing, nursery and finishing contract growers. To produce this illustration, 12 months of financial transactions have been converted to the standard financial statements consistent with the NPPC chart of accounts.

Production information for breeding and growing pigs has been transferred from the farm's existing production records system to a format that uses NPPC standard terminology. This work illustrates the application of the standards to a medium-sized, farrow-to-finish entity that uses contract grower partners.

Members of the NPPC Joint Committee of Production and Financial Standards have developed close to 200 standard calculated measures. Measures, equations and sample calculations are reported in the NPPC Production and Financial Standards Technical Resource Manual. Visit for further information or contact Jenny Felt at (800) 767-6888 or .

Over time, pork industry databases will evolve to provide data necessary to test the importance of each measure. New measures found to be reliable indicators of profitability, liquidity, solvency and sustainability will find their way into common usage. Measures found not useful or that fail to discriminate will fall by the wayside.

Sample Farm Background

The land forming the core of the sample farm was acquired in 1972. Management began actively acquiring land beginning in 1988, and the farm grew to the existing ownership of 300 acres by 1996.

In 1994, the corporation was an 800-sow, farrow-to-finish operation with relatively old buildings and poor design. The operation entered a contract with a major packer to provide finished animals under a price-risk share agreement in 1995. This shifted the focus of the farm toward expansion, tripling its size to a 2,400-sow facility built with the help of contract growers.

Products and Markets

The corporation produces hogs under contract to a packer. The basic terms of the agreement are:

  • The corporation supplies 50,000 head annually with options to supply an additional 10,000 head under a risk sharing agreement.

  • The price is market price within a range/hundredweight. Above and below the range, the difference is split 50-50.

  • The contract calls for paying a premium for specified quality characteristics.

The current contract expires in 2002 and is under renegotiation at press time. Management indicates they are in the process of renegotiating the contract to achieve slightly different terms, including an evergreen clause. Ideally, the management also would like to see an absolute floor in pricing as well as an increase in the production quotas and ceilings. Management is optimistic that a new contract will be negotiated and in place before the end of 2001.

Supplier Analysis

The largest supply required by the corporation is feed for livestock. Feed is purchased based on a cost-plus contract. The farm has the opportunity to lock in feed purchase costs for up to six months at any time.

Contracted Facilities

The corporation also has agreements with other individuals to finance and construct pork production facilities on their land. The landowner owns the facilities and typically enters a 10-year agreement with the corporation.

Pigs from nursery sites flow into five finishing complexes according to a dedicated pattern. The corporation provides stock and feed, as well as management, and pays a fee to the landowner for the use of the facilities and labor costs.

These agreements account for nearly 100% of the production capability. At press time, these agreements have an average of five to six years remaining and are renewable by the parties.

Operational Considerations

The corporation continues to strive to produce hogs in the most efficient manner possible and to lower breakeven points to preserve and increase margins in times of declining prices.

In addition, management continues to seek more favorable terms in the contract with the primary purchaser and to pursue expansion of the production capability without the investment in long-term capital. This expansion of production capability will occur through additional contract relationships with producer/landowners as described above.

Data Sources

At press time, the farm and its associated growers use a mixture of proprietary production and accounting software (including PigCHAMP, PigWIN and Farm Business Systems). Several custom spreadsheet templates have been built to record, analyze and report both production and financial data in a consolidated format.

Monthly profit and loss statements and balance sheets are produced as well as a comprehensive borrowing base report for the senior secured credit holder. Annual cash flow forecasts are produced in September-December for the coming year and are used to create a budget-variance management scheme for the swine manager.

Financial Condition

As of Dec. 31, 1999, the corporation reports total assets of $2,178,214 and interest bearing debt of $943,049. Asset totals have fluctuated between $1.8 million dollars and the current level during the last four years. From 1995 to 1999, the farm acquired fixed assets representing a net gain of approximately $1 million.

Earnings Performance

Sales have fluctuated as production capabilities increased from 1995 through 1997. Total revenue declined in 1998 due to market prices reaching the lowest point in 35 years for live hogs. Hog prices dropped below $30/cwt. in September 1998 and did not exceed that level until April 1999. The lowest market price received was $14.60/cwt. in December 1998.

The corporation neared the production cap of the contract with their packer in 1998. They anticipate increasing the cap when expansion is undertaken. The corporation has the capability to preserve some margin through hedging activities and regularly pre-prices grain purchases.

Economic Outlook

After two consecutive years in which pork producers suffered large losses, they now benefit from increased demand, higher prices and lower feed costs.

U.S. commercial hog slaughter totaled 101.5 million head in 1999, up 1% from 1998. About 98% of the 101.5 million head were slaughtered under federal inspection. More than 900 plants operate in the U.S. under federal inspection; an additional 2,400 are under state inspection.

Due to the volume of production and geographic location, this farm is limited to four major packers within a 500-mile radius.

The severity of the health and environmental problems alleged against large-scale swine operations also has had an impact in some states.

Some states have moratoriums on the building of any new hog facilities, while others are developing plans to phase out lagoons or require existing lagoons to be covered. Other proposals would require groundwater monitoring and/or impact statements with respect to protected and endangered species.

The state where this farm operates does not have a moratorium on additional construction, but the types and complexity of required permits have increased.

The principal business objectives of the sample farm are:

  • To consolidate and expand the production of the farm by 2,400 sows, accomplished with contract growers.

  • To acquire additional finishing and nursery facilities from contract growers to manage the total flow from these four farrowing facilities.

  • To renew the contract with packer to establish a long-term, risk-sharing agreement for all hogs produced and to achieve an evergreen provision to ensure the orderly marketing of future flows sufficient to acquire needed capital.

  • To maintain dedicated flows of the pigs to downstream production facilities.

  • To manage the marketing of the finished animals to reduce sort loss and take advantage of the asymmetrical sort-loss premium structure of the packer.

The principal personal objectives of the sample farm include:

  • To simplify and further establish standard operating procedures in order to allow the general partners more time for strategic planning and general management activities.

  • To transfer the assets of the farm over time to the farm heirs.

Balance Sheet

The balance sheet for Sample Pork III shows the financial state of the business as of Dec. 31, 1999.

Assets, liabilities and equity are reported on a cost basis. Nothing is remarkable about the layout of the balance sheet, which should be familiar to most readers. The balance sheet conforms to Farm Financial Standards Council recommendations and was produced from an audited statement for the years indicated. It complies with generally accepted accounting principles (GAAP.)

Whole Entity Report

Inputs from the period-beginning and period-ending balance sheets provide some of the data elements for the Whole Entity Report (page 20). Other data elements pertaining to revenue and income expenses, debt service and taxes and withdrawals also are included.

The CD-ROM of the Technical Reference Manual will allow you to print these pages in color so you can refer to colors when looking at the reports. The output of the whole entity report is consistent with the Farm Financial Standards Council's (FFSC) “Sweet 16” financial measures. (In most Farm Financial Standards Council reporting, inventory is valued at market. However, in the pork standards, inventory is valued at cost. This is not inconsistent with FFSC, but cost is rarely used in FFSC reports.)

Beginning with the whole entity report, the liquidity of the farm is excellent as measured by a current ratio of 2.93. A moderate level of debt is reflected in a debt-to-asset ratio of 0.43 and a substantial equity-to-assets position of 0.57.

The rate of return on farm assets and equity is nearly 10%. The asset turnover ratio for the farm is 1.19. This reflects the contract arrangement of the farm. An average asset turnover for high-performing, farrow-to-finish farms that are wholly owned (no contracting) is about 0.90. The 1.19 value for this farm reflects the fact that most of the fixed assets are carried on the balance sheets of contract entities supplying facilities for the farm.

The farm has been able to operate efficiently and mitigate the effects of relatively low prices in the 1998-99 period by contracting its sales with a packer and by postponing the purchase of new fixed assets.

In order to facilitate the acquisition of new contract growers during the start-up period of the farm five years ago, the owner subsidized the investment in contract facilities by about 10% of new cost. This also aligns incentives and demonstrates commitment to partner farms. The owner believes this also has encouraged the stability of pig flow and the maintenance of pig flows conducive to modern health strategies.

Even though the average price received for this entity in 1999 was in the mid-$30s/cwt. live, the year began with prices below $30/cwt. live and did not rise above $40/cwt., except for very brief periods. The risk-sharing contract with the packer helped to mitigate the absolute bottom faced by cash market sellers. The reasonable rates of profitability and return to assets and equity reflect a strong performance and good cost control in spite of generally low output prices.

Total Pork Report

The Total Pork Report (page 21) data elements summarize the productivity of the stages that comprise the pork production systems of the business entity. In addition to data elements from the financial record system, data elements derived from the production records system also are incorporated.

Pork producers typically record feed disappearance in production records systems and feed purchases in financial records systems. Thus, it is recommended that feed expenses and quantities in each system are compared and discrepancies resolved before generating feed expense data elements. Where it is impossible to resolve discrepancies, the financial record should prevail, as purchase records likely are more accurate than feed use records.

Inspection of the population block of the total pork report “productivity measure” shows that the production system involves breeding, nursery and finisher pig stages.

Measures under the sales information heading indicate that, while no weaned or nursery pigs were sold during 1999, 20.30 finisher pigs/breeding female (owned)/year were marketed. (The appropriate management accounting approach for such a system would be to treat pork sales as a profit center and the breeding, nursery and finishing stages as cost accumulation centers.)

Working capital (pork)/breeding female ($579) is reported on a market basis. Most lenders suggest $400/ breeding female for a farrow-to-finish farm is a safe and stable level of working capital to maintain.

On a cost basis, non-current assets (pork)/breeding female ($149), total assets (pork)/breeding female ($941), non-current liabilities (pork)/breeding female ($151) and equity (pork)/ breeding female ($534) are reported as of Dec. 31, 1999. The relatively low non-current assets/breeding female reflects the low investment in fixed facilities associated with a contract operation.

The total pork report also includes productivity measures indicating head, live weight and carcass weight sold/$1,000 of working capital, non-current assets, total assets, non-current liabilities and equity/year. Although the NPPC chart of accounts supports recording of pig sales on a “per head”or “per cwt.” basis, sales on a carcass weight basis are calculated when the risk of double accounting is not expected.

Most growing pig production records systems accommodate carcass weight data.

While the numbers shown in the body of the total pork report productivity measures appear very competitive, we currently do not have access to comparable data from other farms. However, it is anticipated that these numbers will figure prominently in future benchmarking reports.

Nursery Production

The average inventory in the nursery phase was approximately 7,271 pigs (see productivity measures by production stage report, page 24). Pigs enter the nursery through owned contract production from the sow herd. All pigs entered the nursery facilities at an average weight of 9.9 lb. and left the nursery for contracted and owned finishing facilities averaging 46 lb. Average length of stay in the nursery phase was 54.6 days.

Growth rate in the nursery facilities was 0.65 lb./day consuming 1.55 lb. of feed/lb. of gain on a live-weight (close-out) basis.

Total expense of the nursery phase as a percent of total production cost was 18.5%.

Feed expense was approximately 11.6% of total feed costs. No sales of nursery pigs were recorded in 1999.

Finisher Production

The average inventory in 1999 in the finisher stage is approximately 19,877 head (see productivity measures by production stage report, page 24). This indicates the finisher is turning about 2.37 times/year including down days for cleaning, etc.

Pigs enter the finishing phase at an average weight of 46 lb. and leave at an average weight of 259.4 lb. This sale weight includes the pigs sold out of the finisher at less than ideal weights (substandard finisher pigs); 96% of finisher pigs are sold as standard weight animals. The decision to label a pig substandard was made on the basis of receiving a lightweight sort dock, which is a liberal standard.

The average days in the finisher are 153.7. Average daily gain in the finisher is 1.42 lb./day with an average feed/live weight gain of 2.92.

Feed expenses of $12.85/cwt. of live weight gain reflect the near historic low in feed ingredient prices experienced by the industry during this period; 73.6% of total feed was consumed in the finisher representing about 29.5% of gross revenue.

Approximately 54.1% of total production expense was incurred in the finisher phase.

Breeding Herd Productivity

As indicated by the red, boldface font of the data elements and productivity measures, using data elements from the production records system alone, produces the breeding herd productivity tree report (p. 25).

During 1999, the breeding herd production stage of Sample Farm III, USA, produced 23.76 weaned pigs/mated breeding female/year. Total born/birth litter for 1999 averaged 11.70 with live born at 10.66 pigs/litter.

Preweaning mortality was higher than average at 15%, yielding 8.87 weaned pigs/wean litter. Litters farrowed/breeding female/year was 2.42. This is above average for a successful, modern operation. The average lactation length was 15.9 days reflecting an early weaning strategy.

More Sample Farm Reports

The sample farm reports contain a great deal of information. Some measures, in particular those in the whole entity and breeding herd productivity tree reports, are familiar to most producers.

The Profits, Taxes and Equity Adjustments Report (page 25) offers additional financial information on this sample farm. Likewise, pig flow, pork sales revenue, production expenses, assets (page 28), liabilities (at right) and equity reports for this pork enterprise provides additional details about the operational condition of this sample farm. Production and financial databases containing similar measures from hundreds of farms already exist.

Therefore, many producers are comfortable and confident in speculating how this sample farm might compare with its peers in these areas.

For the first time, the NPPC standard terminology, calculations and reports provide a level playing field for benchmarking performance across all types of pork production systems. Knowing how your operation stacks up against others regarding labor use efficiency, production costs, capital investment, leverage, return on assets and return on equity — in addition to traditional productivity and efficiency measures — can provide you with the competitive edge that will ensure your business success.

Dennis DiPietre, Independent Consultant, Columbia, MO

To request a printed copy of this article and accompanying sample reports and educational spreadsheets, please click here to e-mail Jenny Felt or call (800) 767-6888.

National Production and Financial Database

Database enables comparison of pork operations and helps identify long-term profit opportunities for producers.

The National Production and Financial Database forms the central hub of a coordinated, knowledge-based information strategy developed with checkoff funds. The database was created to receive the standardized production and financial information of pork producers throughout the U.S. Additionally, it is designed to ensure long-term profit opportunities for producers regardless of operation size. Production and financial software vendors have been engaged in this process to make accurate comparisons between different types of operations.

In the past, groups have created databases with either financial or production data exclusively. Standard terms and calculations were not available. Producers commonly submitted data to a service bureau that entered the data. Producers received benchmark-type data after everyone had submitted data.

The National Production and Financial Database has changed all this. The database is outsourced to a firm that builds and manages database applications for Internet use. The National Pork Producers Council (NPPC) administers the program.

Producers access the database through a secure Internet connection to contribute to or view their reports. Data is real-time — it's instantly updated, and current values are used to create reports that can be printed or viewed on screen.

Another benefit of having the database on the Internet is the ease of changing a calculation or adding a new benchmark. All users get all upgrades at the same time.

Big or Small

Producers of any operation size can fulfill the minimum standards necessary to contribute data. Producers' participation will be facilitated by their software, which will automatically organize the appropriate data elements, summarize it in a standardized form ready for uploading to the database.

For the interim, the NPPC has developed Pork Office, a computer program that takes data from existing software systems and assembles it for transmission to the standardized database. The Cooperative Extension Service is adapting spreadsheets to send data to the National Database via Pork Office. Data submissions will undergo a detailed filtering process to prevent errors from entering the database. If producers submit outlying values, they will be prompted to correct or verify them to guarantee their accuracy.

Data definitions and standard calculations are in the Technical Reference Manual and are available from NPPC as hardcopy or on CD-ROM. Software standardization not only allows producers to load comparable data into the database, but it also enables them to switch software without losing historic tracking data because of inconsistencies between software packages.

Production, Financial Elements

The database is divided into more than 70 production data elements and more than 100 financial data elements. These data elements are used in various combinations to produce about 250 production, financial or combination benchmarks. New data elements or benchmarks can be added any time and are available to all users.

Currently, producers are able to enter only production data in the database and therefore can use only the production benchmarks. Examples of reproductive benchmarks are shown in Figure 2. (For more details, see “Benchmarking Analysis Drives Action Plans” on page 14.)

Producers have spent the past year setting up their charts of accounts to match the standards and entering their financial data. A full year of data is required before it can be uploaded into the database for benchmarking.

Database Access

Admission into the database requires a user name and password for secure access. Producers or their consultants can log on to the database, set up, change and manage the structure of their farm and load data. Internet-based access allows producers to load and view their data from home or anywhere at any time of day. The database's address is www.benchmarks

Producers use a program called an Internet browser, such as Netscape or Microsoft Internet Explorer, to view the database. On the first visit, a producer can register by clicking on the word “register,” providing information requested and choosing a login name and password. Once submitted, an e-mail is sent to the database administrator, who then activates the producer's database access and e-mails him an acknowledgement of the activation.

A trial registration is available for producers to have temporary access to sample farm data. An e-mail is sent to the user noting their access will automatically cease on specific date. A producer must meet specific educational requirements before being granted access to the database.

First Step

The first step a producer must take when he logs on as a user is to set up an organization. (Figure 1 shows the first screen after the login.) He can choose how he wants to divide his operation based on how he keeps his financial records.

For example, if a producer keeps financial records as a whole unit, he will only be able to benchmark the operation as a single organization. Their production records will still come in by each phase of production, and they will have production information to benchmark for each production phase. However, certain financial information will not be available.

If a producer has several different operations and keeps financial records for each unit as a separate business, he can enter each unit as a separate organization, and each can be benchmarked as an individual unit.

The database also provides an opportunity for a producer to combine multiple organizations into one group for benchmarking.

Or, a family operation might have several different business organizations. In that case, they can benchmark each operation and then combine them to benchmark the whole operation. If they have three separate finisher sites, for example, they could benchmark each unit separately and then combine all finishing sites into one and benchmark the combined unit.

Similarly, producers in a consulting group could combine their data for benchmarking. This would allow producers to compare their group to the whole database plus compare themselves to the average of their group.

Even with a new level of standardization, the database still does not completely accomplish the goal of comparing all operations on the same terms. Not all operations are alike. The database also includes more than 100 attributes that are specific characteristics assigned to an operation. These attributes are in four categories — general, breeding, nursery and finishing.

The “general” attribute category could include an operation that is part of a marketing cooperative or purchasing cooperative. Or, perhaps, the general attribute could be part of a vertically coordinated system or production network. It also could be defined by the method used in selling the animals (contracted, open market, etc.). This information will help producers determine whether one method of doing business is really better than another.

There are many opinions about whether it is better to be part of a coordinated system or to remain independent. These benchmarking capabilities can help analyze this question.

Another case in which attributes can be beneficial to benchmarking is when facilities are different. The use of attributes allows producers to look at the age of facilities and see if newer facilities are more efficient, for example. There are attributes for whether animals are single source or co-mingled at some point in the production process.

Attributes that could differentiate farrowing facilities might include flooring type, ventilation system, etc. Type of feed processing could be compared. Producers may want to analyze whether home-raised feedgrains are better than purchased.

When using a benchmark for feed cost, it is important to compare it to all operations. However, it also might be valuable to compare your cost to only operations that also raise their feedgrain. Geographic comparisons, by states or regions, also can be benchmarked.

The use of attributes is a good way to make sure you are comparing similar operations or at least identifying specific differences to compare.

Work in Progress

The National Production and Financial Database has been developing for more than five years. It will continue to grow in functionality. It will be used to provide information for all producers to help them identify and capitalize on competitive advantages.

Other agriculture groups are looking at the pork production model, and some are developing standards for their segment.

The National Production and Financial Database developers are involved with these groups and continue to play an active role in developing standards for all of agriculture. It is important to the future of food production in the U.S.

Daniel Uthe, National Pork Producers Council

Managerial Accounting Extends Knowledge Base

Knowing more about your business requires accumulating transactional information for every business segment.

Competitive advantage can take many forms. The number of management options and combinations that may offer our businesses some competitive advantage is nearly infinite.

Examples might include superior production performance in certain areas, such as:

  • A greater number of weaned pigs/mated breeding female/year than is typical for specific genetics or for our area.

  • A more effective wean-to-service interval resulting in a greater number of pigs/litter.

  • More current information on the rate of gain in a nursery or finisher. This may give us the ability to respond more quickly to deviations from planned performance — managing prospectively rather than retroactively.

We may have superior financial performance in certain aspects of our business, such as:

  • Greater than typical amount of working capital allowing us more flexibility in procuring inputs such as feed.

  • Greater amount of sales for the dollars we have invested in our business resulting in superior asset utilization.

  • Lower weaned pig production costs than those who purchase weaned pigs from others.

With all the possibilities, how do we know whether we have a competitive advantage or what that competitive advantage might be?

Presuming we do know our competitive standing in an area of our business, and presuming we wish to improve our position, how do we know what to do about it?

One of the intents of the National Pork Producers Council (NPPC) production and financial standards is to help producers answer these and other questions.

The production and financial standards are about improving the knowledge we have about our businesses. In light of the significantly changing nature of our business environment, improved knowledge is essential.

Some say that in today's business world, doing things right is not sufficient to deliver business success. Today, more than ever, we also must focus on doing the right things. Of course, one of the challenges is doing things right, while also focusing on doing the right things. To meet this challenge requires appropriate use of our business and industry knowledge.

Managerial Accounting

An essential part of the production and financial standards is the use of managerial accounting methods to provide us with greater knowledge of our business.

Managerial accounting, as employed in the production and financial standards, is about accumulating transactional information for manageable segments of our business. These manageable segments are some combination of profit and cost centers.

Managerial accounting methods have been the essential means of handling accounting information for internal management decision-making in all areas of our commerce — except production agriculture.

Managerial accounting has been a key tool used by managers and owners of businesses to gain more knowledge of their businesses and to seek competitive advantage. This is especially true in the manufacturing sectors of our economy. These tools are now available to those of us involved in agricultural production.

Cost Centers, Profit Centers

Profit centers are the parts of our business that comprise our main efforts at generating revenue — generally the various commodities. These parts of our business are the primary source of our profit.

Cost centers are those parts of our business established to provide some form of support for other cost centers or for the profit centers. For example, breeding and finishing production segment cost centers provide support for our pork profit center.

Business Analysis

To effectively employ managerial accounting in our businesses, we must evaluate a number of aspects of our operations.

Some of these aspects deal with our ability to do a quality job of capturing appropriate information along with an assessment of the tools we have available. Another might deal with an issue such as management intent.

We must ask ourselves the reason we have included a specific area as part of our business.

For example, why do we grow corn? Do we raise corn to make a profit by being in the corn business? Or, do we grow corn because we seek a competitive advantage by lowering feed costs while assuring a specific quality of feed?

Is our behavior as a manager consistent with our stated rationale for an area of the business?

The answers to these types of questions help us determine our true management intent. This, in turn, helps us determine if a manageable segment of the business is a profit or cost center.

These questions and many others are addressed in a process used as part of the production and financial standards training program. Participating producers end up with a managerial accounting structure and action plans they have created to meet their unique situation.

Reporting Guidelines

Another aspect of the managerial accounting component of the production and financial standards is reporting guidelines. Specified income statement reporting for profit and cost centers provides, for the first time in agriculture, a separation of the cost of production, the cost of general business administration and the cost of financing.

This innovative reporting approach permits a more complete understanding of cost components of our businesses. When this is combined with the common-sized income statement components of three columns/unit of production information (e.g. dollars/female farrowed, dollars/head sold or dollars/cwt. sold) we have new capabilities of assessing our business performance.

From both an internal and external comparison perspective, we are better able to look at our performance in spite of size differences and are better able to review the viability of different production and financial strategies. These strategies may be technology driven, geographically driven or simply the result of choices made by different managers and owners.

Whatever the reason, interested producers have the opportunity to obtain more complete knowledge of their business, its performance and their competitive advantage.

Internal Communication

Throughout the development and educational programs of the production and financial standards, much of our discussion has focused on the production and financial measures used and how they are reported.

However, internal communications is another area in which the use of a sound managerial accounting approach has enhanced competitive advantage for its users.

The accumulation of information based on production and financial standards methods creates a platform from which more effective internal communication can more easily occur. Communication can be more effective because the information is more complete and coordinated with the way the business is managed.

Similarly, communication occurs more easily when the information is based on well-founded systems and processes. This allows much of the emotion to be removed from the information.

Complete, effective communication is an essential component of establishing and maintaining competitive advantage.

Donald W. Gillings, Ag Education & Consulting, LLC, Savoy, IL and E. Allen Lash, AgriSolutions Inc., Brighton, IL

Production & Financial Standards for the Pork Industry - Introduction

Pork producers charge into the 21st century armed with new capabilities to capture and compile more data and information about the performance of their production systems. With this capability comes the ever-mounting challenge to make more sense of it all.

Fortunately, the need to gain more value from this wealth of information was recognized several years ago. National Pork Producers Council took the critical first steps to assemble industry stakeholders to develop standard definitions, formulas and calculations for key production and financial measures.

The outcome effectively means producers, lenders, consultants and other stakeholders can now compare so-called apples-to-apples. Standardization also means a National Pork Database can be compiled, giving rise to valuable benchmarks from which producers can effectively compare production and financial performance parameters.

This 32nd edition in the Blueprint series is the culmination of those efforts. We present it with our best wishes for your business success.

Management Accounting Guidelines

(Editor's note: Kevin Moss, the immediate past president of the Farm Financial Standards Council, wrote this supplement to National Hog Farmer's Production & Financial Standards, Platinum edition, April 15, 2001.)

The Farm Financial Standards Council (FFSC) is best known as the organization that developed the Guidelines for Agricultural Producers (Guidelines), originally issued in 1991 and updated several times since.

Within the last year the FFSC has started to develop a set of management accounting guidelines as a supplement to the original Guidelines. This effort has broad industry appeal with funding support for the project provided by the National Corn Growers Association (NCGA), National Pork Producers Council (NPPC), National Cattlemen’s Beef Association (NCBA) and the United Soybean Board (USB).

The FFSC is a volunteer organization with a 40-member board of directors composed of agricultural producers, commodity group staff members, accounting professionals, lenders, agricultural supply companies, ag service companies, and university/Extension staff members.

The FFSC mission statement reads: To provide education and a national forum to facilitate the development, review, communication, and promotion of uniformity and integrity in both financial reporting and the analytic techniques useful for effective and realistic measurement of the financial position and the financial performance of agricultural producers.

The FFSC Technical Symposium in August 1995 focused on the integration of production and financial standards. Jim McGrann acquainted us with the NCBA Standardized Performance Analysis (SPA) initiative. Earl Dotson acquainted us with the NPPC effort to pursue development of production and financial standards. During the past few years the corn/soybean production and financial standards initiative has been progressing under the leadership of Paul Havick and the Iowa Soybean Association.

The focus of the FFSC historically has been on whole entity reporting and analysis. Initially we were concerned that as one commodity group developed a standard chart of accounts for their business it might not fit with other commodity businesses. These producer led initiatives to examine and restructure how we accumulate and use knowledge in our agricultural businesses. These efforts are creating challenges and opportunities for all of us involved in agriculture.

The key issue for the FFSC was how to broaden the Guidelines to more effectively cover internal management information needs to make them capable of supporting producer-led initiatives. This effort supports the more sophisticated and comprehensive management information system to which producers are turning.

The FFSC management accounting guidelines project has two primary objectives:

  1. Develop a set of management accounting guidelines that will become part of the Financial Guidelines for Agricultural Producers (Guidelines). As more and more organizations move to address additional analysis and reporting issues beyond whole entity reporting, and as this framework is being provided to agricultural producers in addition to the traditional enterprise and management analysis utilized by agricultural universities, farm recordkeeping services, and other agricultural groups, there is becoming an increasing diversity (and potential inconsistency) in what is being described to agricultural producers as approaches to "management accounting" and internal analysis.

    The Management Accounting Guidelines will also include a basic chart of accounts (to facilitate the organization of financial data elements) and a definition of core integrated financial and production measures.

  2. 2. Develop a standards compatibility review process that can be accessed and utilized by interested commodity groups as part of their own standards development and quality control processes.

The management accounting guidelines project is well under way. A management accounting committee met with representatives from the commodity groups earlier this year. The next meeting is in Kansas City on May 17-18 and, tentatively, July 19. The Annual Technical Symposium is scheduled for August 17-18 in Bloomington, IL.

More information about activities of the FFSC, including the management accounting project, can be found on our Web site at If you would like additional information, please e-mail Kevin Moss, immediate past president, at, Kendal Thompson, president, at or Steve Hofing, chairman of the technical committee, at

Benchmarking Analysis Drives Action Plans

Continuous improvement entails determining where an operation stands and planning how to make it better.

Benchmarking is a process of continual improvement. Through analysis and action, benchmarking provides a systematic approach to improving production efficiency and profitability.

Analysis begins with asking questions, such as: What is the standard level of performance? Who is the best? How do I compare with the best? How do I compare to others across the industry?

Answers to such questions are now available through the National Pork Producers Council (NPPC) Production and Financial Database. In a benchmark percentile table of breeding herd productivity (Figure 1), a popular standard measure of the output of the breeding herd is weaned pigs/breeding female/year. (WP/BF/Y).

Referring to the values in the body of the table, we see that the 90th percentile value for WP/BF/Y is 22.77. This means that less than 10% of herds in the database are producing more than 23 WP/BF/Y.

The value for our farm (org value) is 20.31, shown in the column at the far right. The shaded cell for this standard measure of output provides more information about our farm. Our value of 20.31 is closest to the 60th percentile value of 20.24. By interpolation, we can estimate that our value is at about the 61st percentile. This tells us that our productivity is better than 60% of the 55 farms represented, but it also shows that 39% of the farms are producing more pigs/breeding female/year.

Once we know where we stand, the benchmarking process continues by digging deeper. If 39% of the comparable farms are producing more WP/BF/Y, there is definitely scope for improvement. How, then, can we improve?

Digging Deeper

Inspection of the breeding herd productivity tree (Figure 2) shows that WP/BF/Y is a function of weaned pigs/wean litter (WP/WL) and litters farrowed/breeding female/year (LF/BF/Y).

Referring back to Figure 1, we can see we are at the 61st percentile for LF/BF/Y and at about the 40th percentile for WP/WL. Obviously, both branches of the productivity tree have potential for improvement.

As we continue to follow the productivity tree, we find that our value for total born pigs/birth litter (TBP/BL) is 10.53 (see Figure 4.). This value is even less than the 10th percentile value of 10.85 shown in Figure 1.

At first sight, we may be shocked to find that at least 90% of the herds in this comparison have larger TBP/BL than our herd. But, on the positive side, we are doing pretty well in LF/BF/Y.

If we are already at the 61st percentile for WP/BF/Y, just think how even a modest increase in TBP/BL would affect breeding herd output. Moreover, consider the scope for improvement.

While there are herds producing in excess of 12.3 TBP/BL, our farm would need to produce an extra 0.5 TBP/BL to be at the 20th percentile value of 11.0. Given our current productivity, it seems reasonable to set a goal of increasing TBP/BL to 11 within the next year.

To explain, a “SMART” goal is:

  • Specific (increase TBP/BL to 11)

  • Measurable(pigs are easy to count)

  • Attainable (80% of comparable farms are already doing it)

  • Rewarding (it should be profitable), and

  • Timed (within the next year).

Goals that are SMART and also written down are much more likely to be achieved.

Having established the room for improvement, we need to determine how much that improvement is worth to our operation.

Bottom-Line Impact

The ROE model is used to determine which improvements potentially have the most bottom-line value. We can look at different values from the database and see what a reasonable improvement for our operation might be — based on where we are currently compared to other operations.

After we have considered a feasible level of improvement, we can change our unit's value in the ROE model to see what potential impact a change might have (Figure 3). Typically we might consider several areas for improvement.

After each potential improvement is examined and documented using the ROE model, we would decide which factors are the most important and then rank them accordingly.

Through our investigation, we have found that improvement in TBP/BL is indeed an area that would significantly impact our profitability (refer to Figure 4).

If all other factors remain constant while TBP/BL increases from the current level of 10.53 to 11.0, we could anticipate an increase in net income (pork) of more than $18,000/year after factoring in the cost of feeding the additional pigs to market weight.

While additional non-feed costs, such as vaccinations and supplies, may reduce the potential benefit, the net result would still be a significant improvement in net income from pork operations.

Leverage (the ratio of liabilities to assets) is reduced because the total value of growing pigs flowing through the production system (current assets) is increased.

Net profit margin increases because some of the non-feed costs are now shared by a larger number of pigs sold/year.

Asset turnover increases because the increase in annual revenue is large for a slightly increased asset base. As a result, return on investment, return on assets and return on equity are all significantly improved.

Big Picture Questions

Once we have found that an improvement may have a positive impact on our profitability, we need to look at the “big picture” and ask ourselves some additional questions:

  • Can the improvement be made?

  • Will additional resources be needed to make the improvement?

  • Do I know how to effect improvement?

  • What is the probability of success?

  • And, what is the time required for improvement?

Once we have done this and potential for success appears, we can move on.

Fishbone Analysis

The next step brings more questions:

  • What could I do to improve?
  • How can I take action?

One approach to answering these questions is to use a fishbone diagram (Figure 5) for brainstorming.

The fishbone analysis is a type of cause/effect diagram, which is used to graphically relate the causes of a problem to the problem itself.

The problem is positioned at the “head” of the fish while the potential causes of the problem are located in the “bones” of the fish. It is often useful to get a team of people to brainstorm about the possible causes for each main bone.

Once the fishbone is complete, let the ideas incubate. Come back to the fishbone after a few days. Focus your attention on major bones where there are few items. What items were missed? When you have your fishbone diagram reasonably complete, the next step is to take action.

Data must be gathered and analyzed to find and eliminate causes for the problem. Some problems are easy to solve; others are not. In difficult cases, a more formal, written action plan should be developed.

Action Plans

When a formalized action plan for improvement is needed, it is important to outline general procedures for the plan. This is when you specify particular steps to take, resource requirements, the responsible individual, how performance will be monitored, the timeline for the action and the consequences if the action step is not accomplished.

It is important to share this plan with employees, consultants, educators and others who work with you and your operation. By sharing, others can help ensure you haven't missed any important steps. This also will show those who work with you how and where they fit into the plan for improvement.

After an action plan is developed, it is important to regularly evaluate how the plan is progressing. In this step, you, your employees and consultants check whether your plan is progressing and what it will take to keep things on track. If progress is not being made, what will it take to get things back on track?

The check-up plays an integral part in ensuring that implementation of the action plan is progressing as it should.

Remember that a goal without a plan is only a dream. We want to help you turn your dreams into reality.

The NPPC Production and Financial Standards database, ROE model, your production and financial records and your management skills are all tools to help you create your future in the pork industry. Let's learn to use these new tools and go to work!

Figure 4. Variable Changed: Total Born Pigs/Birth Litter
Initial Value New Value Change Percent Change
Variable: 10.53 11.0 0.47 4.4
Return on Equity 14.26 18.75 4.49 31.5
Return on Investment (%) 7.29 9.66 2.37 32.5
Return on Assets (%) 13.41 15.73 2.32 17.3
Operating Profit Margin (%) 14.29 16.13 1.84 12.9
Net Profit Margin (%) 7.77 9.91 2.14 27.5
Asset Turnover 93.86 97.57 3.71 3.9
Leverage 1.96 1.94 -0.02 -1.0
Net Income (Pork) $54,345 $72,639 $18,294 33.7%

Doris Mold, Consultant, Lauderdale, MN and Will Marsh, FarmWise Systems Inc., Little Canada, MN.

To request a printed copy of this article and accompanying sample reports and educational spreadsheets, please click here to e-mail Jenny Felt or call (800) 767-6888.

Pork Office Unveiled

“Middleware” program understands the diverse formats of existing software and helps exchange information with the National Pork Database.

Moving information from one software program into another has always been a challenge. There is no “standard three-point hitch” that software can plug into to be universally compatible with all other software.

Until recently, the only way for one program to communicate with another was for the software developers to write specific interfaces for those programs with which they chose to interface.

The National Pork Producers Council (NPPC) recognized this as a major barrier to rapid data submission to the Pork National Database. The inability of major production software to communicate with each other was a bottleneck. The industry needed a new program capable of understanding the diverse data formats of existing software programs and capable of electronically matching financial data with production data for accurate transmission to the Pork National Database. The concept of Pork Office was born.

Pork Office operates as middleware — the conduit that links existing production and financial software to the Pork National Database.

The next challenge was to create Pork Office so that the complex tasks were simple to perform. The main menu was designed with only six items (Figure 1.) that fall into two categories — items performed once and items performed monthly.

Items in the performed once category include “Import Org IDs” and “Configure Pork Office.” Both are critical to ensure the user is set up correctly in the Pork National Database, a prerequisite to using Pork Office.

Getting Started

The first step to making Pork Office functional is the program's ability to recognize the organizational IDs created in the Pork National Database. This is accomplished by logging onto the Pork National Database Web site ( and clicking the “Org Info” tab. Currently, class participation is necessary before input of actual farm data. You can, however, register for a two-week trial period to become more familiar with the database's potential.

Continuing through the six steps, you will next locate the menu item in the “Org Info” tab called “Download Org IDs.” That menu item starts the process of downloading the organization's information you have created in the Pork National Database.

This download process allows you to specify where on your hard drive you would like to store this information. You will need to know this location when you press the “Import Org IDs” menu item. By telling Pork Office where this information has been stored, you can ensure that your production and financial information will be transferred into your account and your account only.

Once Pork Office knows the organization IDs that you have created, the next step is to configure Pork Office. This process matches each organization ID created in the Pork National Database with the appropriate production and financial software that Pork Office is compatible with.

You must have the name and version number of the production or financial software program that you are using to configure Pork Office correctly. You also will need to know the name and location on the hard drive where your data is stored. A Pork Office support person can help locate your data.

Importing organization IDs and configuring Pork Office are typically performed once and do not change unless you create a new org ID or change your production or financial software.

Transferring the Data

Once configured, users will want to “Import Farm Data” and “Generate Upload” information on a monthly basis.

Importing farm data is the process of transferring your production and financial data into Pork Office. Once Pork Office understands your raw data, it then can compute each data element that the Pork National Database tracks based on the production and financial standards guidelines.

The “Generate Upload” menu item computes the data elements needed and prepares this information for transmitting to the Pork National Database. Pork Office also allows users to generate any of the standard reports defined in the production and financial standards. The “Reports” menu contains five reports to choose (see Figure 2).

When a report is requested, users are asked for the organizational ID and date range.

The program offers several options for printing the five reports: send them to a printer or to other popular formats such as Microsoft Word or Excel. Reports also can be exported into HTML format for posting on the Web.

The last item on the Pork Office main menu is “Data Integrity.” This item identifies areas of concern and alerts users to possible discrepancies in their underlying data, such as the accuracy of data collection or the way data was entered.

The production software programs compatible with Pork Office include: Herdsman (S & S Programming Inc.), PC Pro and PigCHAMP (PigCHAMP Inc.), PigWIN (FarmWise Systems Inc.), Smart Breeder and Smart Feeder (FBS Systems Inc.) and Swine Graphics (Swine Graphics Inc.). PigCare from PIC also has expressed interest.

The financial software programs that are currently making modifications to be compatible with Pork Office include: Ag Manager (Agri-Solutions Inc.), CPA Accounting (S & S Programming Inc.) and Transaction Plus (FBS Systems Inc.). Others that have expressed interest are Perception (FMS/Harvest), Great Plains Accounting (Great Plains Software Inc.), PC Mars (Iowa Farm Business Inc.) and AgCHEK (Red Wing Business Systems Inc.).

Pork Office is the gatekeeper for the accuracy of information flowing into the Pork National Database. It computes the data elements in exactly the same manner, no matter what underlying production or financial software was used.

For more information, contact S & S Programming Inc. at (765) 423-4472, or e-mail

Keith Schuman, S&S Programming Inc., Lafayette, IN

Get Involved in the Standards Programs

Training classes and support materials are available for pork producers and other industry-related professionals.

Successful pork producers need timely access to the latest technologies to stay competitive.

To many in the industry, the need for apples-to-apples comparisons of production and financial data was increasingly evident. The work of the National Pork Producers Council's Joint Committee on Industry Standards has introduced and refined the standards that will be the industry's new knowledge base.

The production and financial standards, now in place, have undergone extensive review and testing and the educational process has begun.

In order to maintain the integrity of the standards, a standardized curriculum has been developed. Twenty-two producer classes are being conducted. This curriculum consists of six sessions over a nine-month period.

Training classes will be offered to producers on a continuous basis with a minimum of 15/class. Training programs have also begun for extension staff, adult agricultural educators, farm business consultants, veterinarians, lenders, accountants and others.

Producer classes focus on:

  • Production information

  • The Return on Equity (ROE) Model;

  • Production and financial reports;

  • Commodity and activity managerial accounting;

  • Chart of accounts;

  • National Pork Database;

  • Benchmarking

Support materials developed through the standards process include:

  • The Pork Production and Financial Standards;

  • Technical Reference Manual;

  • Return on Equity Software Model;

  • Commodity/Activity Managerial Accounting Manuals and Workbooks;

  • Pork Industry Chart of Accounts Application on CD-ROM;

  • National Pork Database;

  • Pork Office (data matching, conversion, standardization program);

  • Standardized Curriculum;

  • Software Compliance;

  • The Value of Benchmarking

The National Pork Database, now available for use, will permit data collection for historical tracking and comparative analysis of production systems. Once established, both production and financial benchmarks will allow producers and their advisors to better understand the impact of their production practices, the adoption of new technology and the impact of debt, equity and capital in their operations. As their knowledge base deepens, producers will be able to ask more of the right questions to get the information necessary to make good decisions.

As part of the education curriculum, producers begin the benchmarking process that will guide them toward new, meaningful standards.

Once standards are established, producers can compare their operations with others and with the rest of the industry. Producers will learn to set benchmarking criteria based on their needs and their ability to standardize production or financial measures. Without a standard with which to compare, it is difficult to identify areas to improve and initiate plans.

Pork operations in the future will be knowledge based. The National Pork Database, combined with benchmarking activities, will be one of the foundation blocks.

For 2001, producer classes are free. Checkoff dollars support the instructors and materials and provide database access. During training, cooperating sites provide equipment, Internet access, meeting rooms and refreshments.

For more information on how to participate in a producer training class, call Jenny Felt, NPPC special programs manager, at (800) 456-7675 (ext. 771) or e-mail her at

Jenny Felt, National Pork Producers Council

Multi-Commodity Chart of Accounts

Commodity groups work together to build a chart of accounts that is compatible for livestock and crops.

The term “chart of accounts” is one of those references commonly used but difficult to define. I've checked dictionaries, even accounting texts, without success.

A search of the Internet for a definition yields tens of thousands of matches. Yet a quick scan of the listings reveals largely sample charts of accounts from various industries, companies or organizations and accounting systems.

Perhaps those in the accounting business consider the term chart of accounts to be so basic as to be intuitively understood. It would be unwise to make that assumption here.

Business Accounting

The accounting process for a business involves determining and recording the impact of each transaction that occurs with the business. Ultimately, the cumulative affect of these transactions is reported to those interested in how the business is performing.

To make this reporting easier, we generally categorize (or sort) the transactions according to their nature (e.g. labor — wages expense) or function (e.g. animal health — veterinary services expense). This categorization is accomplished by creating a ledger account for each group of transactions we wish to have available for analysis and reporting.

Essentially, if we want specific information readily available, we had better set up a ledger account in which to capture it. Otherwise, the information gets combined with other transactions and is not practically available.

Accounts Listed

The chart of accounts is the listing of the ledger accounts that have been established for use by a business. It defines the most detailed amount of information captured in the accounting system.

Given the core purpose it serves in the accounting process, it is easy to see the importance of establishing an effective chart of accounts. The chart of accounts we choose will impact the amount of detailed information that is readily available, our ability to compare our results to others or to ourselves over time and the extent to which comprehensive analysis can be easily performed. All of this affects the knowledge we obtain about our businesses.

Pork Industry Background

Given the significance of the chart of accounts in any comprehensive accounting system, the pork industry (like many industries) established a standard chart of accounts during the development of its production and financial standards. This standard chart of accounts is essential to realize the benefits of incorporating the production and financial standards into a management process.

Over the years, many sample charts of accounts have been presented for use in agriculture.

However, as the commodity organizations began establishing a standard chart of accounts, some concern arose.

The primary concern was compatibility. As the pork, corn, soybean and beef commodity organizations established their own chart of accounts, what would be the impact on a diversified producer if they did not work together in a single accounting system?

Maintaining good accounting records seems to be a sufficiently difficult process in agriculture without the additional burden of having to assemble similar types of information differently for each commodity produced.

These concerns ultimately surfaced in a resolution by the Farm Financial Standards Council (FFSC) to meet with commodity organizations and discuss the concern and their interest in coordinating a standard chart of accounts.

The first multi-commodity chart of accounts meeting was hosted in January 1999 by the National Pork Producers Council (NPPC). Pork, corn, soybeans, beef and cotton organizations were present. The outcome was that all agreed a coordinated effort was essential to their members' interests.

The next step was a series of work sessions as part of individual commodity initiatives and, ultimately, by the multi-commodity group. By this point, pork had established the first version of its standard chart of accounts.

Corn and soybean groups conducted several meetings, using the pork chart of accounts as a starting point and modifying it to meet their specific needs. Dairy, through the national Dairy Herd Improvement Association (DHIA) Performance Economics Committee, had taken a similar approach in approximately 1997. Beef, which had established a set of accounts as part of its Standardized Performance Analysis (SPA) initiative in the mid-90s, reviewed and updated their material.

In July 1999, the corn and soybean growers hosted work sessions to dig through each organization's chart of accounts seeking compatibility.


As the standards evolved, so have the standard charts of accounts. It became apparent that some formal mechanism to keep the multi-commodity chart of accounts initiative viable over time should be considered.

A second multi-commodity chart of accounts work session was held in July 2000. The FFSC made a proposal for funding by the commodity organizations to review and coordinate chart of accounts compatibility issues. Subsequently, pork, corn, soybean and beef groups provided the funding.

The present multi-commodity chart of accounts (see pages 41-43) represents six commodities — pork, corn, soybeans, beef, cotton and dairy.

The dairy perspective is essentially the work of the DHIA Performance Economic Committee. Although the dairy industry has not been formally represented in the work sessions, participants with considerable dairy experience have spoken up to be sure dairy relevant matters are considered. However, the dairy standard chart of accounts has not been officially approved by a national dairy organization.

The multi-commodity chart of accounts uses the structure set by the pork production and financial standards, including a primary account and up to five sub-level accounts of detail. The example on the following page lists only the “primary” level.

This structure allows much flexibility by accommodating those who want a very simple chart of accounts and others who want a very detailed chart of accounts.

The pork production and financial standards require participation at only the primary level in order to submit information to the National Swine Database. Producers can add as much detail as they wish so long as the additions roll up into the more summary accounts as specified in the standard chart of accounts.

Through the work sessions, all chart of accounts incompatibilities seem to be eliminated between the various commodities. Some inconsistencies in the handling of otherwise similar types of transactions continues, however.

For example, in the “income” section of the chart of accounts, pork places several accounts at the primary level, while the other commodity organizations have chosen to combine their equivalent accounts under common headings such as “crop revenues” or “livestock products.”

Beef has chosen to segregate the sale of purchased and raised livestock into separate, primary accounts. Pork, on the other hand, distinguishes purchased and raised livestock at a more detailed level.

Still, these differences do not prevent a diversified producer from using the standard chart of accounts from each relevant commodity to assemble quality accounting information for their businesses — all under a single accounting system.

Chart of Accounts Overview

The chart of accounts tables on pages 41-43 provide a multi-commodity snapshot of an income statement and balance sheet accounts.

The chart of accounts containing income statement accounts (page 41) shows the list of accounts in the center of the table. Due to space limitations, only “primary” level accounts are listed.

To the left of the accounts listing are the same commodity focused columns as contained in the balance sheet accounts tables that follow (pages 42-43). Entries in the income statement account columns mirror those of the balance sheet accounts table.

(See note at end of story to obtain a copy of the Multi-Commodity and Sample Farm Chart of Accounts - Income Statement Accounts and Multi-Commodity Chart of Accounts Balance Sheet Accounts.)

To the right of the account listing in the income statement accounts are several columns for profit and cost centers. This configuration of profit and cost centers is intended to represent a typical, diversified producer of pork (farrow-to-finish), corn and soybeans. The account selection was achieved through personal experience and by using the NPPC chart of account application, which reflects producers' survey responses. Copies can be obtained by contacting Jenny Felt at NPPC, (515) 223-2771 or

There is a chart of accounts appropriate to each profit and cost center of the business. This mechanism simplifies the chart of accounts. For example, it isn't necessary to have several repair accounts for each focus. Rather, a single “repairs” account tracked in conjunction with a particular profit or cost center provides appropriate detail. In this way, the chart of accounts is reduced from several hundred items to tens of items.

In fact, in this example the income statement is made up of approximately 35 primary accounts. Extending the detail level to “Sub-level 1” (not shown) would add 95 detail accounts to comprise the entire income statement account set for this producer.

The headings for cost centers include breeding, nursery, finishing, general pork, equipment, corn, general and administrative (G&A) and finance. Profit center headings are pork sales and soybeans.

The balance sheet accounts (pages 42-43) consist of the account listing and five columns headed with various commodities. An “X” in a column for a particular account indicates that a commodity organization has determined that particular account is relevant for use by its producers.

Multi-Commodity and Sample Farm Chart of Accounts — Income Statement Accounts
Commodities Accounts Profit
Cost Centers
Pork Soy/Corn Dairy Beef Cotton Area Primary Level Pork sales Soy Breeding Nursery Finishing Gen'l Pork Equipment Corn Gen & Admin Finance
X Commercial Pig Sales X
X X X X X Contract Production X
X X Crop Revenues X
X X X X Custom Services X X X
X Genetic Premium for Pigs
X X X X X Government Payments X
X X X X X Hedge (Gain/Loss) X X
X X X Livestock Products
X X X X X Other Revenue X X X X X X X X X
X X Purchased Livestock Sales
X X Raised Livestock Sales
X X X Animal Health X X X X
X X X Breeding X
X Breeding Cull Pig Sales X
X X X X X Chemicals X X
X X X X X Contract Production
X X X X X Custom Hire X X X X X
X X X Death Loss X X X
X X X X X Depreciation X X X X X X X X
X X X Feed X X X
X X X X X Fertilizer and Lime X
X X X X X Fuel, Oil & Gasoline X X X
X X X X X Insurance X X X X X X X X
X X X Irrigation Water
X X X X X Items Purchased for Resale
X X X X X Labor and Management X X X X X X X
X X X X X Marketing X X
X X X X X Miscellaneous X
X X X X X Production Enhancers X
X X X X X Professional Services X X X X
X X X X X Rent or Lease X X X X X
X X X X X Repairs X X X X X X X
X X X X X Seeds and Plants X X
X X X X X Supplies X X X X X X X X
X X X X X Taxes X X X X X X
X X X Undepreciated Cost of Breeding Animals X
X X X X X Utilities X X X X X X
X X X X X Asset Sales (Gain/Loss) X
X X X X X Dividend Income X
X X X X X Interest Expense X
X X X X X Interest Income X
X X X X X Federal Tax
X X X X X Local Tax
X X X X X State Tax

Donald W. Gillings Ag Education & Consulting LLC Savoy, IL

To request a printed copy of this article and accompanying sample reports and educational spreadsheets, please click here to e-mail Jenny Felt or call (800) 767-6888.