Farm Product Price Index (FPPI)

Detailed information for January 2010

The Farm Product Price Index (FPPI) is a monthly series that measures the changes in prices that farmers receive for the agriculture commodities they produce and sell.

Data release - September 22, 2010

• Description
• Data sources and methodology
• Data accuracy

Description

The Farm Product Price Index (FPPI) is a monthly series that measures the changes in prices that farmers receive for the agriculture commodities they produce and sell. The price index has separate crop and livestock indexes, a variety of commodity-group indexes such as cereals, oilseeds, specialty crops, cattle and hogs and an overall index - all available monthly and annually for the provinces and for Canada.

The FPPI is an important indicator of the economic activity in the agriculture sector. The series is used by agriculture economists and analysts interested in the health of the agriculture sector, deflating agricultural commodity prices and policy development. The information provided by FPPI is useful to producers, producer groups, commodity analysts from the private sector such as grain companies and meat processors, international exporters, the banking sector and government agencies responsible for agriculture policies.

The index expresses current farm prices from the Farm Product Prices Survey (record number 3436) as a percentage of prices prevailing in the base period, 1997=100.

Reference period: The time period for which the FPPI equals 100; currently this is the year 1997.

Subjects

• Agriculture and food (formerly Agriculture)
• Agriculture price indexes
• Prices and price indexes

Data sources and methodology

Target population

The universe includes all Canadian agriculture operations as defined by the Census of Agriculture.

Instrument design

This methodology does not apply.

Sampling

This is a sample survey with a longitudinal design.

The basket construction for FPPI is based on the Farm Cash Receipts series CANSIM table 002-0002, which measures all agriculture commodities, produced and sold outside the sector and farm-to-farm sales between provinces; all inter-farm sales within a province are excluded from farm cash receipts estimates. However some of the prices series, which are used in the Farm Cash Receipts and FPPI construction, are based on the Farm Product Prices Survey which includes sample surveys. For further information see record number 3436.

Data sources

Responding to this survey is mandatory.

Data are extracted from administrative files and derived from other Statistics Canada surveys and/or other sources.

Prices are based on either administrative data sources, or monthly surveys of agricultural producers or commodity purchasers. Administrative price data come from a wide variety of sources. Many are collected directly from marketing boards, for example, the Ontario Wheat Producers Marketing Board and the Nova Scotia Grain Marketing Board; market associations such as CANFAX. Some data are collected and processed by provincial agricultural or statistical departments. Some data are generated from the regulatory activities of Agriculture and Agri-Food Canada and the Canadian Wheat Board.

Where administrative data are not available, prices are collected using the monthly Farm Product Prices Survey (record number 3436), which consists of a series of surveys. There are two farm surveys: the monthly farm Potato Prices Survey and the quarterly farm Ontario Tame Hay and Straw Prices Survey.

There are two monthly company surveys: the Non- Board Grains and Speciality Crops Survey in the Prairies and the Grain Survey in the Maritimes. Administrative data, the Non-Board Grains and Specialty Crops Survey and the Maritime Grain Survey cover activity for the whole reference month, producing average weighted prices that reflect grades marketed.

Error detection

In the day-to-day collection and processing of the prices, great emphasis is placed on the examination and evaluation of prices. Subject matter officers monitor developments in the market, and review price changes both to validate them directly, and to ensure that changes are representative of the product price movement as a whole. In addition to the error detection methods applied to the FPPS, the index values are reviewed for outliers or unusual changes. A combination of judgment and outlier detection techniques is used to detect errors. In cases where unusual changes are not explained, follow up investigations are made.

Imputation

Imputation is generally used in instances for missing data. A price may be missing due to late reporting, or a commodity breaks its seasonal marketing pattern and was not sold in a particular month. Most commonly, the last reported price is used or an estimate is made based on the price trend observed for the same commodity in other provinces.

Estimation

Prices
For the Potato Prices Survey and the Ontario Hay and Straw Survey, simple averages of the prices reported are calculated. Respondents to the Grains and Specialty Crops Survey in the Prairies and the Grains and Oilseeds Survey in the Maritimes provide data on quantities purchased and total dollars paid to producers, thus enabling weighted average prices to be calculated.

Commodities are priced at point of first transaction, where the fees deducted before a producer is paid are excluded (e.g., storage, transportation and administrative costs), but bonuses and premiums that can be attributed to specific commodities are included. Commodity-specific program payments are not included in the price.

Weights and Linking
The FPPI is based on a five-year basket that is updated every year. This captures the continual shift in agricultural commodities produced and sold. The annual weight base is derived from the farm cash receipts series. There is a two-year lag in the years used to construct the basket because of the availability of farm cash receipts data and to reduce the number of revisions made to the index. Therefore, the years used to construct the basket for year y are y-6 to y-2.

The seasonal weighting pattern was derived using the monthly marketings from 1994 to 1998. This weighting pattern remains constant and will only be updated periodically, for instance during intercensal revisions or when the time base is revised.

Quality evaluation

The quality of this index is maintained through the expertise of the analysts assigned to it. The commodity price data are monitored and examined through trend analysis and outlier detection. Some of the administrative source data are already audited by source organizations. Much time and effort is devoted to detecting and following up unusual fluctuations over time in the pricing patterns of commodities. Prior to dissemination, the price indexes are analyzed and historic trends reviewed.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects which could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Revisions and seasonal adjustment

The FPPI is not adjusted for seasonality, but the seasonal basket is used since the marketing of virtually all farm products is seasonal. The index reflects the mix of agriculture commodities sold in a given month. The FPPI allows the comparison, in percentage terms, of prices in any given time period to prices in the base period, which at present is 1997=100.

Data accuracy

The accuracy of the quality evaluation depends on price and farm cash receipts based weight data. The methodologies of the index and the price series, which construct the index, have been designed to control error and to reduce the potential effects of these. However, both administrative and survey data are subject to various kinds of error. Administrative data may contain non-sampling error such as data capture errors, while survey data may suffer from both non-sampling and sampling error.

The statistical reliability of composite price indexes is more difficult to assess than that of most other statistical series due to the complex nature of the index, as well as the statistical problems associated with estimating composite price changes. Confidence intervals are not calculated due to the longitudinal nature of price index series. The published index series is believed to be sufficiently accurate for most practical purposes. Accuracy is best at higher geographic and commodity group levels due to the larger price sample sizes. Generally, data accuracy for a commodity group is higher at the Canada, East and/or West levels than at the provincial level. The FPPI as an indicator of change is more accurate when used to measure change over several months or a year, rather than from one month to the next.