# 10.3 Business investment in farm inventories

10.56 Business investment in farm inventories can be broken down into three main categories: grain, other farm-held inventories and grain in commercial channels. Table 10.5 shows the levels of publication, the level of analysis and their values for 2000. The source data are quarterly and come from the Agriculture Division, the Canadian Wheat Board and the Canadian Grain Commission.

Table 10.5
Business investment in farm inventories, 2000

## Estimation methods, non-benchmark years

10.57 For business investment in farm inventories, the annual estimates represent the sum of the quarterly estimates. Levels for benchmark years are established following annual revisions conducted by the Agriculture Division in November of each year.

## Estimation methods, quarterly estimates

10.58 Quarterly estimates of business investment in farm inventories in Canada are obtained by summing the quarterly provincial estimates.

## Estimation methods, provincial estimates

10.59 The Agriculture Division provides quarterly estimates of market prices and farm-held inventories. This information is available by province.1 For grain in commercial channels, information on prices and level of inventories is available from the Canadian Wheat Board and the Canadian Grain Commission.

10.60 Following are descriptions of the estimation methods for crops, livestock and poultry and grain in commercial channels. In each case, estimates are produced by product and by province. Aggregates at current prices are obtained by summation. Aggregates in chained dollars are obtained using the chain Fisher formula.

### Crops

10.61 This method applies to grain, potatoes, tobacco and special crops. To obtain the value of the business investment in farm inventories (or the value of physical change (VPC)), the value of production (VP) and the value of depletion of inventories (VDI) are calculated, on a quarterly basis, from the quantities multiply by the average quarterly prices as shown in the following equation:

VPC t = VPt + VDIt

where,

• VP t = Pt × PRt, where value of production = production in metric tonnes × average quarterly prices;
• DIt = Ie − Ib − Pt  , where depletion in metric tons = end-of-quarter inventories − beginning-of-quarter inventories − production during the period;
• VDI t = DIt × PRt , where value of depletion = depletion in metric tonnes × average quarterly prices.

10.62 Business investment in farm inventories is equal to the change in inventories in volume multiplied by the average price during the period. The calculation is equivalent to the method referred to in the following Livestock and poultry section (paragraph 10.64). However, both estimates of the value of production and the value of depletion are prepared, as the value of production is provided to the Industry Accounts Division for use in calculating the monthly GDP.

10.63 For seasonally adjusted estimates, the annual value of production is distributed among the quarters using a minimum sum-of-squared-changes criterion.2 This procedure minimizes the breaks between the fourth quarter of a year and the first quarter of the following year. The technique also gives special treatment to years with bumper crops or droughts by reflecting most of the production excess or shortfall in the harvest quarter. Industry Accounts Division makes this adjustment for its estimates of the monthly GDP at basic prices. Since production is concentrated in the third and fourth quarters, harvests are evaluated using the prices for those periods. In contrast with production, withdrawals on inventories are distributed throughout the entire year and are seasonally adjusted using the X-11 ARIMA method.

### Livestock and poultry

10.64 The estimates of livestock and poultry inventories (number of head) and the average market price during the quarter are obtained from Agriculture Division's Livestock Survey.3 To obtain the value of business investment in farm inventories in current prices, which corresponds to the value of physical change (VPC) for non-seasonally adjusted series, the calculation consists of simply taking the difference between inventories at the end (Ie) and at the beginning (Ib) of the quarter and multiplying it by the average price (PR) for the period, as illustrated by the following equation:4

VPC t = (Ie − Ib) × PRt

10.65 Seasonally adjusted series are obtained using the X-11 ARIMA method.

### Grain in commercial channels

10.66 This method applies to grain held off-farm in commercial channels.5 The calculation of investment in farm inventories is done using the same method as the one described in the section livestock and poultry except that the quantities are expressed in metric tonnes. Information on inventoriesand market prices comes from the Canadian Wheat Board and the Canadian Grain Commission. Seasonally adjusted series are obtained using the seasonal movements of grain exports and grain withdrawals from inventories.

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## Notes

1. There is no information available for farm inventories in the territories. It should be noted that agricultural activity is very limited in the northern part of Canada.

2. For further details, see the technical paper Treatment of Grain Production in the Quarterly Income and Expenditure Accounts, catalogue no. 13-604, no. 2.

3. Survey no. 3460, published in Cattle Statistics, catalogue 23-012; Hog Statistics, catalogue 23-010; Livestock Statistics, catalogue 23-603; and Sheep Statistics, catalogue 23-011.

4. This calculation corresponds to steps 4 to 6 of the 10-step method used to estimate business investment in non-farm inventories (see Table 10.4). The only difference between the non-farm and the farm inventories calculations is that for farm inventories, beginning and end of period inventories are expressed in terms of units and prices in terms of dollars per unit, whereas for non-farm inventories they are expressed in constant dollars.

5. Grain in commercial channels estimates are compiled for wheat, oats, barley, rye, flaxseed and canola.