Market livestock refers to animals that are raised or purchased and intended for sale. These animals are usually in turn used primarily for their meat, milk, eggs, or other products.
These animals are typically kept for a specific period until they reach a marketable size, weight, or age, at which point they are sold to processors, wholesalers, or directly to consumers. Market livestock is an important component of a farm’s operations and revenue generation. Thus, any farmer or rancher selling market livestock should keep a good accounting of their value on the farm balance sheet.
In This Section
What is Market Livestock?
Market livestock refers to animals that are raised with the primary purpose of being sold for their meat, milk, eggs, or other products. These animals are integral to the agricultural economy and are a significant source of revenue for farms. The category of market livestock includes a variety of animals such as cattle, pigs, poultry, sheep, goats, and sometimes more specialized animals like rabbits or bison. Each type of market livestock is managed and raised according to specific industry standards to ensure they meet market requirements in terms of size, weight, and health.
Cattle raised for beef, known as beef cattle, are one of the most common types of market livestock. These animals are typically sold once they reach a desirable weight and are processed into various beef products. Dairy cattle, while primarily used for milk production, may also be included as market livestock when they are no longer productive for dairy purposes and are sold for beef. Pigs, another crucial component of market livestock, are raised for pork production. They are managed intensively to ensure they grow rapidly and healthily to reach market weight efficiently.
Poultry, including chickens, turkeys, and ducks, forms a significant part of market livestock. Chickens, for example, are raised either for their meat (broilers) or for their eggs (layers). The management practices for poultry are designed to maximize productivity while maintaining the health and welfare of the birds. Similarly, sheep and goats are raised for multiple purposes including meat, milk, and fiber. Sheep provide both meat (lamb or mutton) and wool, while goats can provide meat, milk, and specialty fibers like mohair and cashmere.
Market livestock requires specific management practices to ensure they meet the standards and expectations of the market. This includes appropriate feeding, healthcare, housing, and handling to optimize growth and productivity. The valuation of market livestock on a farm’s balance sheet typically falls under current assets if they are expected to be sold within the operating cycle of the farm. The value of these animals is calculated based on the costs incurred in raising them, such as feed, veterinary care, labor, and housing, or their market value, whichever is lower.
The financial health and operational success of a farm can be heavily influenced by the effective management and sale of market livestock. These animals not only provide direct income but also contribute to the overall sustainability and productivity of the farming operation. Proper accounting and disclosure of market livestock values help in maintaining transparent financial records, aiding in strategic planning and decision-making for the farm.
Types & Examples of Market Livestock
Market livestock include any type of animal which is expected to be sold. There are hundreds of potential species of market livestock, however, the most common examples include:
- Cattle – This includes beef cattle, dairy cattle, and calves raised for various purposes, typically for meat production.
- Poultry – This includes chickens (for meat and eggs), turkeys, ducks, geese, and other domesticated birds raised for meat, eggs, feathers, or breeding purposes.
- Hogs & Swine – Swine refers to domestic pigs raised for pork production.
- Sheep – Sheep are raised for their wool, meat (lamb or mutton), and sometimes for milk production.
- Goats – Goats are raised for meat (chevon or cabrito), milk (for cheese or other dairy products), fiber (mohair or cashmere), and sometimes for vegetation control.
- Horses – Horses may be raised for various purposes, including riding, racing, breeding, or as work animals on farms or ranches.
- Other Livestock – Depending on the region and specific farming practices, other types of livestock may be included, such as llamas, alpacas, rabbits, or even exotic animals raised for specialty markets.
Remember that not all livestock are considered market livestock! Any livestock not held for eventual sale in the near future should be reclassified as a long-term asset.
Market Livestock on the Balance Sheet
Market livestock is an asset which is usually intended for resale within a short period of time – often less than a year. As such, market livestock is considered a current asset on the balance sheet.
Any livestock owned which cannot be sold, or is not intended to be sold, within a year should be classified under long-term assets.
Purpose of Market Livestock
For many farmers and ranchers, livestock represent significant portion of the assets owned by the producer. As such, it is important to track livestock owned which are intended for sale at a future date.
Proper management and tracking of livestock and associated financial data are critical in understanding the financial performance of the agricultural operation and the operations management of the operation as well.
Livestock can be converted into cash through sales, making it an important component of a company’s liquidity management strategy. By tracking livestock levels on the balance sheet, businesses can assess their ability to sell products and generate cash. This in turn helps meet customer demand and manage cash flow effectively. Sold livestock may be reinvested in the operation in the form of purchasing and raising new livestock, purchasing new equipment, buildings or real estate, or enabling the producer to take a distribution to cover personal expenses.
How to Record Market Livestock on Balance Sheet
Livestock and poultry are typically valued on an agricultural balance sheet based on their market value or production cost, depending on the accounting method used by the farm or agricultural business. Here are two common approaches:
- Market Based Value Livestock products are valued at their current market prices. This means the products are valued based on what they could be sold for at the time the balance sheet is prepared. Market prices can fluctuate due to factors such as supply and demand, seasonal variations, and market trends. The market value approach provides a more accurate reflection of the actual worth of the products if they were to be sold immediately.
- Cost Based Value: Alternatively, livestock products can be valued based on the cost incurred to produce them. This includes expenses such as feed, veterinary care, labor, and other direct costs associated with raising and maintaining the livestock. The production cost approach provides a measure of the resources invested in producing the products rather than their potential market value.
Depending on the specific circumstances and accounting practices of the farm or agricultural business, either approach may be used to value livestock on the balance sheet. It’s essential to maintain consistency in valuation methods from one reporting period to another for accurate financial analysis and decision-making. Additionally, disclosure of the valuation method used should be included in the balance sheet’s notes or accompanying financial statements for transparency and clarity.
Click Here to Learn More About Valuation Methods on Farm Balance Sheets
Exclusions from Market Livestock on the Balance Sheet
When preparing the farm balance sheet, preparers should take caution not to inaccurately value their Market Livestock.
The following should not be included in market livestock:
Breeding Livestock: Animals kept for reproduction purposes, such as breeding bulls, cows, rams, ewes, and breeding sows, are not included in market livestock. They are classified as non-current assets under breeding livestock, either under Raised Breeding Livestock or Purchased Breeding Livestock.
Work Animals: Animals used for labor or other farm operations, such as draft horses, oxen, or guard dogs, are not included in market livestock. These are considered non-current assets.
Unborn or Unweaned Animals: Animals that are unborn or still dependent on their mothers, such as calves, piglets, or lambs, are typically not included in market livestock. They are usually classified under breeding livestock or as part of the livestock inventory at a different valuation stage.
Non-Marketable Animals: Animals that do not meet market standards or cannot be sold, such as diseased animals or those intended for internal farm use, are excluded from market livestock. These animals might be written off or recorded as part of waste.
Internal Transfers: Animals used internally within the farm for purposes other than sale, such as those retained for herd replacement or further breeding, are not included in market livestock.
Leased Animals: Livestock that is leased out to other farmers is not included in market livestock. These are recorded separately under lease receivables or another appropriate category.
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