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Lake Erie Grape Farm Cost Study (LEGFCS) Using Tax-based Records For Cost of Production Barry Shaffer Lake Erie Regional Grape Program Cornell Cooperative Extension Fredonia NY [email protected] LEGFCS Genesis In 1993, we assembled a committee to design a simple form to get the most information with skimpy financial records. Most Lake Erie Grape Belt Growers are now specialized grape growers. Very little in the way of inventories Cooperative members would likely have large accounts receivable. Cash market growers would likely have low to no accounts receivable. Lake Erie Grape Farm Cost Study (LEGFCS) started for the 1991 tax year. The committee decided to use farms that had a minimum of 85% of crop receipts from grapes. This probably eliminated no more than 20% of the grape farms in the Lake Erie Region. We erred on the side of getting a larger sample size instead of more detail on fewer farms and based much of the information from Schedule F’s. LEGFCS Guidelines We also gathered production information such as: Bearing acreage Business organizational type (mainly sole proprietors, a few corporations, and very few partnerships) Yields (tons per acre farm wide) How many operations were using Sec. 179 expensing Nitrogen rates (starting in 2006) LEGFCS Process I developed a simple 5-page worksheet to gather the data. Normally make farm visits for data collection after taxes are done (push to finish most in March and April) Compile the averages and then prepare individual farm analyses for LEGFCS cooperators. Then sit down again with cooperators usually starting in July to go over the results. LEGFCS Software Originally I had the records on MS Excel. After 2 or 3 years, I transferred over to Filemaker Pro. This was a good database to use because I used Macs up until 1998 and then switched to PC’s. I was able to transfer to the PC with no problems with Filemaker Pro files. The individual farm analyses include graphs from MS Excel spreadsheets. Cost of Production Benchmarks The information received allows us to establish benchmarks for American grape production for NY, PA,OH, and MI. We use the information in Newsletters Informal meetings Conferences Publications Information Example Average Annual Costs, by Category, 2001-2005 43 Fertilizer Taxes 68 Insurance 78 Supplies 78 100 Repairs Interest 114 Operator labor 116 Chemicals 117 Depreciation 213 Other costs 356 Paid labor 380 0 50 100 150 200 $ per acre 250 300 350 400 LEGFCS Limitations Missing Net Worth I have an idea where net worth is trending but no definitive numbers. Liabilities and debt restructuring aren’t captured directly. Tax Depreciation Where Could Tax-based Cost of Production Studies Fit? Farms with little or no ending inventories. Some vegetable growers Farm stands Some fruit farms Some greenhouse operations Industries with spotty financial records Others? Tax-based Farm Records Better to get half a loaf than nothing at all. Multiple year averages help to give a more complete picture. Cost of production can help growers of all sizes to help evaluate their operations. Easier data collection!