FARM VALUATIONS. The term farm valuation is fre quently used in a limited sense, to describe the statement drawn up by a professional valuer of the various items for which an outgoing tenant of a farm is entitled to be paid by the incoming tenant. This is more properly termed a tenant-right valuation. It comprises all those matters for which compensation is payable under custom, agreement or statute, including the value of hay and straw left on the farm, growing crops, tillages and the un exhausted value of fertilizers and feeding stuffs. (See LAND TEN URE: Economic Aspects.) A farm valuation in the wider sense is analogous to the stock taking in a factory or shop. It is a complete inventory of the live and dead stock on the holding, growing crops, and also labour ex pended in the preparation of the land for prospective crops. In other words it is a statement representing, item by item, the amount of working capital sunk in the farm. It thus forms the basis of farm accounts, and it is usually made once a year at the date to which the accounts are made up. The main headings of the valuation are (I) Live stock, (2) Implements, (3) Gathered crops—corn, hay, straw, etc., (4) Growing crops, (5) Cultiva tions, unexhausted manures, etc.
In the case of a farmer taking a farm for the first time and consequently having to buy the whole equipment the valuation is simple. Everything is naturally entered at cost price. At the end of the year the question arises as to the basis of the valua tion. A common practice among farmers is to enter the value of live stock at current market prices and similarly to enter hay, straw and corn in rick at selling value.
There has been much discussion on this subject. It is con tended, on the one hand, that by taking the prices which would be realized in the open market, the amount of the capital actually invested in the farm on that date is shown. In other words by taking market prices farmers ascertain "what they are worth" at the time.
On the other hand it is argued that the object of introducing the valuation into the farm accounts for the year is to show with greater precision than is indicated by income and expenditure ' alone what has been the profit or loss on the year's working. If the object of the valuation were to show the amount which would be realized if the farmer were giving up farming it is agreed that current market prices must be taken. But it is evident that fluc tuations in prices from one year to another would have the effect of increasing or decreasing the nominal value of live stock and produce. A simple instance will illustrate how this method of valuation works out. The selling price of hay may be L2 per ton in one year and L5 per ton in the next year. If in each year the farmer had 1 oo tons of hay in rick the valuation would show a fictitious profit of £300, and the balance of the year's accounts would exist only on paper and would not represent the actual facts. The correct method, it is claimed, is to value the hay as nearly as possible at its cost—i.e., labour, plus rent and interest on capital.
The system of cost-accounting on the lines widely adopted in commerce has been vigorously advocated in recent years. The principle of the system is to allocate to each department of the farm the expenditure chargeable to that department with the object of ascertaining the actual cost of each item of produce. If this is done the figures entered in the valuation for crops, etc., represent the real value to the farmer at the time. In the case of breeding stock current market prices are frequently taken but if the herd or flock remains constant in number it is contended that a better plan is to take a fixed value per head. As regards ma chinery, implements and tools the principle of valuation is fairly clear, viz., to write off from the original cost a percentage for de preciation each year. The principle, however, must be applied with discretion, as if it were strictly applied it would reduce the value of some articles to nil long before they were in fact worn out.
Farm valuations have long been made on more or less tradi tional lines and the principles on which they should be con structed form an important branch in the study of agricultural economics. At present there is no general agreement on the subject. (R. H. R.)