Twelve months of office, accountant, telephone and association dues add up to a figure almost no farm has ever written down, and the reason is built into the figure: this is the one cost category with nothing arriving that carries the farm’s name and a value on it. Producing it takes an afternoon. Twelve months of bank statements, one line per recurring item, and beside each line a column saying what share of it belongs to the farm and not to the household.
Every piece of the pile is small enough to skip. The accountant leaves monthly by direct debit and stops being read after the second month. The telephone serves the farm and the house at the same time and the bill arrives as one bill. The association fee goes out once a year and is invisible for the other eleven months.
Internet, the computer, paper, the registry office, the trip to town to sort out a document, the crew’s coffee. No single item looks like it has earned a line of its own. Added together they end up in no activity budget at all, and when the cost per unit of two cycles refuses to reconcile, this is the pile the difference was sitting in.
Why does no instrument hand you this figure?
Because the pile is defined by what cannot be assigned, and every instrument that produces a cost per unit assigns. The Oklahoma Cooperative Extension Service says it plainly in its fact sheet on enterprise budgets, written by Roger Sahs and Courtney Bir: the costs that are “difficult to allocate to individual enterprises” are the overhead costs, and the examples it gives are telephone, taxes and accounting services, and electricity. Then comes the admission that explains the missing number. Overhead is included in whole farm budgets, “but are sometimes excluded from enterprise budgets”.
The same gap appears in the international statistical method. FAO’s handbook on cost of production statistics sorts the inputs a farm cannot book to one product into three forms, and the third one is “General farm management and overhead expenses, such as office space and trade association fees”. A statistician who has to publish a cost per tonne treats that third form as a problem of allocation. A farm that has never added it up has a problem one step earlier, because allocation needs a total and the total does not exist yet.
How big is the pile that nobody adds up?
Big enough that leaving it out changes the answer, in the one country where somebody has been measuring it for years. Christian Gazzarin and Markus Lips, reviewing how farm-branch accounting distributes shared cost in the Austrian Journal of Agricultural Economics and Rural Studies in 2018, bring together what the Swiss farm-accounting work shows: farms there run an average of 5.7 branches of activity, and the share of common costs in total cost sits in the range of 60 to 70 percent, reaching 85 percent in organic suckler cow production in the mountain region.
The sentence they add on their own account is the one that survives the border: even counting nothing but the costs paid to outsiders, with the family’s own work charged at zero, the share can still sit above 50 percent.
Read that range for what it is. Common cost in their sense covers everything that cannot be booked to a single activity, buildings and machinery included, and office and accountant are one part of it, not the whole. The figures are Swiss accounting on Swiss farms, and no farm anywhere else should expect to land on them. What they settle is a different question, and it is the only one that had to be settled before you open the statements: whether the residue everybody treats as too small to bother with is in fact where most of the cost lives on an operation that runs more than one activity.
Which lines go on the sheet?
The ones four public methodologies already name, one by one, in four countries. The lists differ at the edges and agree in the middle, and the middle is the accountant, the telephone, the electricity of the office and the dues.
| Source | What it calls the pile | Lines it names |
|---|---|---|
| USDA Economic Research Service, Agriculture Handbook 671 | General farm overhead | Electricity for general farm use, telephone, office supplies, fees and dues, water drainage fees, liability insurance, fence repairs, general business expenses |
| FAO, Handbook on Agricultural Cost of Production Statistics | General farm management and overhead expenses | Office space, trade association fees; and for reporting, office and office supplies, heating fuel |
| Oklahoma Cooperative Extension Service, AGEC-243 | Overhead costs | Telephone, taxes and accounting services, electricity |
| Conab, Norma 30.302, Brazil | Despesas administrativas | Electricity of the property, telephone, accountant’s services, radio, consumables, computer, internet, passenger vehicle and its fuel, magazine and newspaper subscriptions, training with travel, lodging and registration |
The American series is the longest list of the four. Its volume on costs of production, written by Robert McElroy for the Economic Research Service, puts electricity for general farm use, telephone, office supplies, fees and dues, water drainage fees, liability insurance, fence repairs and general business expenses inside a single line called general farm overhead. Copy the list, cross out what the farm does not pay, and add what it pays that nobody listed. The Brazilian norm, for one, names the accountant’s fee, the internet connection and the training trip with its lodging and registration, which the older American list has no reason to carry.
The column nobody can fill for you
Farm or household, line by line, as a percentage you write and sign. No published table settles this, and the one instrument here that draws the line draws it for its own purposes and says so. Conab’s methodology, which fixes how the Brazilian public agency builds cost of production, treats the owner’s drawing as an administrative expense and then refuses it: the pro-labore withdrawal is considered an administrative expense and is not admitted into production costs, because that kind of spending is based on the gross profit of the activity.
What that proves is not where your line goes. It proves that an institution publishing cost figures for a whole country had to write its boundary down, in a numbered clause, before it could add anything up. A farm needs the same sentence and needs it in its own words, because the telephone that serves the house and the tractor shed at once has no natural percentage, and because whoever files your return has an opinion about it that is worth asking for. Write the share, write one line of reason whenever it is not 100 percent, and then hold that criterion still. Two cycles compared under two different splits are not two cycles, they are two documents.
The percentage that stands in for the receipts you already have
Three percent of operating cost, in the country that publishes the parameter. Conab’s norm defines administrative expenses as the spending, paid or incurred, for the management of the rural enterprise, with a stated allowance of 3 percent over the total of operating cost, applied as a formula in reais per hectare. That number exists because a national survey panel does not have your bank statements and has to publish something anyway.
A reader outside Brazil should expect to find the same shape at home: in the public cost tables of their own country, this line is a percentage or a regional average, not a measurement of their farm. FAO’s handbook is candid about how far any of it goes, noting that while there are many approaches to allocating joint costs, “none are perfect and all of them can result in biased or faulty estimates”. The farm holding twelve months of statements is in a better position than the panel, and it is the only party in the whole arrangement that is.
The hours that will not appear on the sheet
Own and family time, which the receipts do not carry and the total will not include. The work itself has been measured. Christian Ritzel and colleagues at Agroscope, the Swiss federal agricultural research agency, surveyed 808 farmers by postal questionnaire in 2019, and one of the things they put a ruler on was time: how long it usually takes to provide all the documents for a direct-payment inspection, on an answer scale running from less than 2 hours to more than 6 hours per inspection.
The other was weight. Asked to rate how burdensome the current administrative workload is, and then to rate it against five years earlier, those farmers landed on the burdensome side of the first scale and on the heavier side of the second.
Swiss direct payments are an instrument of that country’s agricultural policy, and the paperwork those farmers were rating is the paperwork that instrument creates. What travels is the shape of the finding rather than the ratings: administrative work is a load people can count in hours and rate on a scale, and it is not an impression. Your sheet counts money that left the account. Write the hours on the same page as a line of what was left out, so that the person reading the sheet next cycle knows the total is a cash figure and not the whole cost of running the office.
How hard the exercise is depends on the farm, and FAO names the two things it depends on: the difficulty becomes less acute as the degree of specialization of the farm increases, and it is also reduced as farm recordkeeping practices improve. One activity and tidy records make it an hour. Four activities and a shoebox make it an afternoon. Neither of those is a fact about how much ground the farm covers.
What the total is for, once it exists
Four documents that already exist on the farm are waiting for it. The split of this pile between activities happens in a declared split rule, which needs a total before it can distribute anything, and the bank charges inside these statements belong on exactly one of two sheets, this one or what the money cost, never on both. Overhead is one of the categories that the break-even price declares it does not work out, and it is the line most often missing from the list that a declared margin target subtracts. All four sit in the same place, which is the finance axis and the marketing one beside it.
The decision the total enables is not to spend less. It is to compare. Comparing a declared standard against what actually happened is the control function, the fourth of the four functions of management, and it needs the same measurement twice. That means the sheet’s real product is not this cycle’s figure at all. It is the criterion beside the figure, written down where the person doing next cycle’s sheet will find it, with a name against it and a date on which it comes back to the table.
Where to start
Two to three hours with twelve months of statements on the screen, and the only part that calls for judgment is the share column.
The office is the only cost on the farm whose size is partly a decision rather than a fact, because someone has to say what share of the telephone belongs to the business. That makes it the only line of the cost sheet that cannot be audited against a document, only against a criterion, which is precisely why the criterion has to be written and dated. A farm that has done this once owns something none of the public tables can hand it: a number for the office that came from its own bank, and a sentence saying who decided where the house ends.