tNVESTMEN? OPPORNMTIES ON MECOSTA COUNTY FAME» ThosisforfhtDogrudMS. MECHEGAN STATE UNIVERSITY Edgar Fred Lord. 1958-. mVESTMENT OPPORTUNITIES 0N MECOSTA COUNTY FARMS by Edgar Fred Lord AN ABS'mAC'l’ Submitted to the College of Agriculture of Michigan State. University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of WOFSCIEME Department of Agricultural Econmnice 1958 Approved by {j 1% [W it ‘3 s ._ a. “L”; Edgar Fred Lord ABSTRACT The lack of resources and the lack of means to acquire more resources plague many farmers in the country today. The need for’more adequate resources has been greatly accentuated hy rapid technological develop- ment. Although new technologies may save labor, reduce costs, and increase output, many of them require investments that would be prehibitive for low income farmers. If farmers in low income areas are to increase their productivity enough to be financially independent of government subsidies, and if they are to use the country's agricultural resources effectively, they will need investment funds for the:maJor adjustments necessitated by changing technologies and.market situations. The guiding mpothesis followed in this thesis was that farmers with low incomes do have remunerative Opportunities to invest capital in additional resources and to improve their management practices. The effects that would result from three levels of investment--$S,OOO, $7,500 and $12,500 per manpdwere estimated; then the investment plans were evaluated.by comparing differences in net incomes. The eight farms were selected from a 1955 survey of 133 Economic Class I to IV farms in Hecosta.County. The results of the survey indicated that about half of the farm operators were in a position to make forward looking plans. Similar results would probably have been found for the 3,880 Economic Class I to IV farms in six nearby counties. Altogether, 2,200 farm operators in.Mecosta County and the nearby counties may be ready to plan aggressively for the future. Additional investments at levels of $5,000, $7,500 or $12,500 per operator on the eight Hecosta County farms can in general be expected to increase the net incomes of the operators after paying normal Edgar Fred Lord interest and replacement charges. An investment of $5,000 on each of the five, one-man farms will increase the average net income Of the farm operators by $1,770. The increases range from $1,200 to $2,280. Two of these five operators are part-time farmers. At the medium and high levels of investment, they would give up their off-farm jobs. With investment of $7,500 on each farm, the two Operators could expect an average increase on $2,350 in net farm income. With investments of $12,500 on each farm, the two operators could expect an average increase of $3,390 in net farm income. Neither of these investment levels would increase net farm income more than enough to Offset the loss of off-farm imam. The full-time Operators of the other three, one-man farms could expect increases in net income of $2,330, $2,620 and $2,260, respectively, with a $7,500 investment per fem. With investment of $12,500 per fem, these Operators could expect increases of 8h,200, $3,720 and $3,260, in net income, respectively. With the same three levels of investment per operator on the three, two-man farms, the Operators could expect average increases in net farm income per man of $1,960, $2,790 and $3,890, reapectively. The dairy enterprise on the case farms presented the most promising investment Opportunities. Two factors making expansion of the dairy enterprise attractive were the farmers ' familiarity with dairying and I their present ownership of dairy resources. Three areas for additional investment in dairy fanning were buildings, machinery and equipment and livestock. A potato enterprise and a poultry laying flock were examined for several of the case farms. However, these enterprises did not appear as rewarding as equal investments in dairy. iii Edgar Fred Lord Total production would probably increase on six of the case farms if their Operators had ready access to funds for taking advantage of the plans outlined in this thesis. In terms of total milk production, this would.mean doubling or tripling their present output. Corresponding increases might be expected on similar farms in the area. However, one or two of the sample farms and other small dairy units ‘would be likely to discontinue milk production altogether. In Census Economic Area ha, which includes Mecosta County, the farmers in Economic Classes IV to V1 produce Over 60 percent of the milk output. The decrease in milk pro- duction resulting from the disappearance of some of these farm operating units will go a long way to offset the increased production on other farms adopting the investment plans outlined in this thesis. As a result, milk production for the county as a whole would probably increase only a quarter to a.half even if the investment plans were followed. This increase would not be large in terms of the expanding demands for f1uid.milk from this area. Changes in the present credit structure that would make available larger quantities of capital to farmers would help to make possible the development of more successful farm businesses. To make sound changes in the credit structure, both farmers and credit agencies need to seek out and develop wise investment programs for farms. Then with this information as a guide, they could formulate changes that would make available larger quantities of capital. iv INVESTMENT OPPORTUNITIES ON MECOSTA COUNTY FARMS by Edgar Fred Lord A THESIS Submitted to the College of.Agriculture of Michigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics 1958 ACKNOWLEDGEMENT The author wished to express gratitude to Dr. Richard.G. Wheeler for his helpful guidance during the study and thoughtful criticism of the manuscript. TABLE OF CONTENTS Chapter I. mPROBImOCOOOOOCOOOOOOIOOOOOOOOOOOOOOOOOOOOOOOOOOOOOIOO R‘pid TeChmlogiCa'l Developments........................ Uneven Rates of New Investment.......................... Significance of Investment Opportunities on Farms in Low Imome AreaSOCOOCOOOOOOOO0.0.0....0.0.0.0...00.0.00... The Stu” AreaOOOOOC'OOOOOOOOOOOOOOOOOOOODOOOOOOOOOOOOOOO II. MONA-NDPRmEDUR-Eeeeoeoeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Selection of Case Study Farms........................... Information Needed for Budgeting........................ Fem UsedOOOOOOOOOOOOOCOOOCOCOOOOOOOOOOOOOOOOOOOOOOOOO. Alternative Levels of Investment........................ III. RESULTS OF. ANALYSISOOO0.0.0.00.0...OOOOOOOOOOOOOOOOOOOOOOO Net Farm Incomes Can Be Increased by Additionalr Investment............................................ The Mbst Attractive Opportunities for.Added Investment Are in the Dairy Enterprise"......................... Equal Investments in a Dairy Enterprise and a Poultry laying HOOkIOI.OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO Equal Investments in a Dairy Enterprise and in a Potato Enterprise................................... Three Promising Areas in Dairy for Additional ImestmentOOOOOOOOOOOOOOOO00.0.0.0.0......000.00.... Limited Opportunities for Additional Investment......... ‘Investments in Part-Time Farming........................ Other Farm Situations................................... IV. SUMMARY AND CONCLUSIONS................................... APPENDIX A........................................................ APPENDIX B........................................................ APPENDIX C..........................;..............:.............. SEIECTED BIBLImBAP'E'IYeeOOOeeeeeeeeeeeeeeeeeeooeeeoee eeeee eeeeeeeee Pag (m (ht? UJP‘ pJe 15 16 17 17 33 35 1:3 51 d 73 81 83 8b 86 Table l. 2. 3. h. 5. 9. 10. LIST OF TABLES A Description of Eight Case Farms in Hecosta County........ A Classification of the 133 Preliminary Survey Farms and the Eight Case FaMCCOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO Summary of Investment Opportunities Explored for Farm A.... Comparative Financial Summary, Farm A...................... Added Net Income from.Three Levels of Added Net Investment on Eight MCCOSta; County Fmeeeeeeeeeeeeeeeeeeeeeeeeeeee Summary of Investment Opportunities Explored for Farm.B.... Summary of Investment Opportunities Explored for Farm.C.... Average Added Investment per'Farm in Livestock, Machinery and Buildings Under Various Dairy Investment Plans Proposed for Eight Mecosta County Farms.................. Summary of Investment Opportunities Explored.for Farm D.... Summary of Investment Opportunities Explored fbr’Farm.E.... viii Page 12 13 21 2h 33 38 1:6 52 56 63 CHAPTER I TIE PROBLEM A combination of added investment and management changes is a powerful tool for more successful farming. This thesis will endeavor to point out some of the opportunities for additional investment cou- pled with management changes on farms in Mecosta County, Michigan, at low farm income area. The 1951; Census reported 78 percent of Mecosta County's commercial farms had a gross income less than $5,000, a fairly common net income for factory workers. These low farm incomes follow partially because new agricultural technologies are being adopted rapidly in the county as a whole, whereas Mecosta County farmers are making changes only slowly. As a result, farmers in Mecosta County face difficult choices. Many of the adjust- .ments which might lead to more successful farming would require substan- tial additional investments. This poses the questions, "What are the oPpcrtunities for additional investment on Mecosta County farms!" "Will adclitional investment in these opportunities contribute importantly to more successful farming in Mecosta County?" "What management changes are needed to permit effective use of additional physical resources?" Rapid Technological Developments Since World War II, agriculture in the United States has experi- enced a technological revolution of a greater magnitude than at any cfisher time in its history. At the start of the period, Black noted that the productivity of many farms in this country could be in- creased a fourth.or more by some of the following methods: draining portions of the farms, developing small scale pump and other irrigation, pasture and range improvement, land.c1earing, terracing and other forms of erosion control and construction of needed farm‘buildings.1 These are but a few of the methods responsible for increasing produc- uflprmwfmmmiMaof%inUMtoR3m1%m mmis twice the magnitude of the corresponding increase during the 1936 to l9h5 period. The rapid adoption of new practices in recent years has by no means exhausted the possibilities of still further technological development. DeGraff paints a bright picture of the dynamic possibil- ities of new technologies in even the most developed regions. There is no such thing as a fully developed country or area nor can there be while science and technology remain dynamic. 0n the one'hand, there are few if any wholly underdeveloped areas. The capacity of any area to produce is always a func- tion of the science, technology, and corresponding capital applied.to the resources to which it has access. Even the re- sources are not a constant, but rather they expand and stretch as a basis for production in relation to the science and tech- nology applied to them. Consequently, even the presently most developed regions have in store potentially greater develop- ment from the further application of existing scientific knowledge and from new scientific discoveries yet to be made.2 More livestock, buildings, machinery and land are often needed to .permit effective use of the new methods. As a result, the trend is towards larger sized farms in nearly every section of the country. The Census supports this observation hy showing a 300 percent increase in 1John D. Black, "Agricultural Credit Policy in the United States,” flgurnal of Farm Economics, 19h5, p. 601. 2Herrell DeGraff, “Some Problems Involved in Transferring Technology’to Underdeveloped.Areas," Journal of Farm Economics, 1951, p. 697. value of the labor-saving, cost-reducing machinery and equipment invenp tories of farms from 19h5 to l95h. In addition it shows a corresponding 60 percent increase in total value of United States farms for the same period. moreover, the new complex techniques and machines require, in addition to larger farm size, a high degree of skill and a lot of attention for effective use. Consequently, many farmers tend to specialize in fewer enterprises. Uneven Rates of New Investment Farms in the more prosperous areas have readily adopted new technologies and seem to have a high rate of new investment. For three reasons, on the other hand, the farms in low income areas like Mecosta County have not invested capital or adopted new technologies at a corresponding rate. One reason is that low incomes make substantial capital accumula- tion very difficult and do not provide the net worth basis for borrowing more capital. A second reason is that investors vary the quantity of funds and also interest rates directly with the amount of risk involved in any investment opportunity. Consequently, the high risk associated with farms in the low income areas has reduced the quantity of new investment capital available to these farmers. Thirdly, opportunities for profitable investment are easier to visualize on the prosperous area farms than on farms in the low income areas where substantial changes in methods are often needed to achieve satisfactory incomes. In fact, added capital frequently appears to have a low productivity on low income farms because of the following characteristics. Typically, these farms are small in size and located on "poor” or unproductive land. Their Operators usually have acquired only a minimum of education; they lack knowledge " adjustment oppor- tunities; and they typically do not manage th r present resources effectively. Hence, farmers and investors \ke have not invested capital in the farms in the low income areas at the same rate as in the prosperous areas. In 19h5, Black pointed out factors which contributed to a slow rate of additional investment on low income farms; now, even a dozen years later, these factors still exist on many low income farms such as those in.Mecosta County. The ones who really need it {financing} are those who already have mortgages on small farms and are having difficulty carry- ing even the mortgages which they have because their farms yield.such small returns; or they are not mortgaged but their earning power is so low on their present farms that lending agencies do not consider them safe risks. Fanmers in either of these situations are in a vicious circle. They are not able to borrow because they have so little resources; and only with great difficulty can they increase their resources . without borrowing in order to get command of more resources. Significance of Investmgnt Opportunities on Farms in Log_Ingome Areas Hendrix.noted the prominence of the low income farm problem. Chronic low incomes still persist as the typical situation in large parts of American agriculture. This is so now after several years of rapid growth in the general economy and after more than two decades of large-scale federal programs directed to farm price and income problems. Increasing public awareness of, and interest in, the persistence of these low incomes has new culminated in the official recognition of them.at the national.polioy 1eve1.as an important public action problemah Many of the present public programs aimed at low income ares farms completely overlook or do not fully exploit potential investment 3J0hn D. Black, "Agricultural Credit Policy in the U. 5.," gournal of Farm Economics, 19h5, Do 596. kW. Elbert Hendrix, "What To Do About Low Incomes In Agriculture," Journal of Farm Economics, 1956, P. 1385. on! "“ D. V v-u A acts , pron inves tech: AM | 3?va a I Opportunities. Black urges the nation to decide what adjustments are needed in its agricultural sector. He argues that full exploitation of investment opportunities will help to solve the low farm income problem.5 If farmers in low income areas are to increase their productivity enough to be financially independent of government hand! outs, tO'use the country's agricultural resources effectively and to ‘provide an.ample supply of agricultural products, ‘they will need investment funds for the major adjustments necessitated by changing technologies and.market situations. The needed adjustments present opportunities to invest varying quantities of capital in many different enterprise combinations. Also, a wide diversity of new management practices will need to accompany the new investments. A thorough understanding by the public of investment opportunities will provide a base for wise planning of public programs affecting farms in low income areas. On the other hand, if the low income farmer knew his investment opportunities, he could invest his limited supply of capital more effectively to increase his productivity. Furthermore, if the investment opportunities were more clearly defined for his farm, he could present a strong argument fer borrowing the large amounts of capital he needs to adopt new technologies necessary for'more ’ successful farming. The guiding hypothesis followed in this study was that Mecosta County farmers do have opportunities fer investing capital in additional resources which will permit more effective use of their_labor and - 5.1. D. Black, "Ebctremities of Current Agricultural Policy Propo- sals" ( a r ven before Economics Seminar Michi an State Universit Feb ,pi955? ’ g y), Q.- " .v. .t v’ ".v ,1...»- I“ v'.‘ . (‘0‘ management resources. Such investments, when coupled with improved management, will make for more successful farming in Mecosta County. moreover, a clearer understanding of investment opportunities, will make investment in.Mecosta County farms more attractive to investors. The Study;Area Most of Mecosta County's farmers Operate dairy and general type farms. According to the l95h Census, 63 percent of Mecosta County's 1,575 farms received moreidun1$l,200 gross farm income. About three- fourths of these, however, received less than $5,000 from the sale of farm products. Livestock and livestock products contributed two dollars of every three that Mecosta County farmers received for farm income. Dairy products alone accounted for nearly half of the total farm receipts. Crop sales returned one dollar of every three that Mecosta County farmers received from sale of farm products. The Census goes on to report that off-farm employment of farm Operators in Economic Class I to V increased from 1950 to 195 . In addition, the 19514 Census reports an average milk production of 5,500 pounds per cow; crop yields averaged 27 bushels for wheat, 30 bushels for oats and 1.5 tons for hay. A typical.Mecosta County farm has had a combination of livestock and crap enterprises on its 80 acres of land. Its barn was constructed to house 6 to 12 dairy cows and a team or two of horses. The dairy herd produced farmpseparated cream.for sale and skim milk to feed either veal calves or hogs. Furthermore, three or four dairy steers were raised for beef. The cropping system was designed to provide feed for the live- stock, although a few acres of wheat and potatoes were grown as cash crOPBO Soils of Mecosta County are predominately Rubicon-Montcalm- Grayling sands (117%) and McBride sandy loam (23%).6 The central and western part of the county has areas where wind erosion is a problem at times. However, the south and eastern parts, comprising the larger part of the county's agriculture, contains some of the heavier types of the above associations. Even so, these soils tend to be droughty, keeping long run average yields low. The Soil Conservation Service recomends that .the farmers adopt organic matter building practices on much of the county's soil. ’ 6Statemerrt by Ivan Schneider, Soil Science Department, Michigan State University, based on Soil Surv of Mecosta Count Michi an Number 18, Bureau of Chemistry and Sch, 0.5253... 1927. CHAPTER II METHODS AND PROCEDURE The farm management worker could adopt one of several research methods to study investment opportunities on fame in low income areas. The research worker's decision to adopt a particular method will be influenced by the purpose of the study, the availability of data and his personal preference. The case study and comparative budgeting method was selected to study the opportunities for various levels of additional investment on Mecosta County farms. In the case method, the researcher endeavors to understand why each farm is as it is, Operates as it does, and obtains the results that it does, and what influence each particular element has on all of these factors .1 Comparative budgeting of alternative plans of action on the case farms will then help the researcher to understand their investment opportunities. By budgeting alternatives and comparing the results among a number of case fame typical of an area, some of the common problems of investing additional capital will be exposed and promising possibilities can be identified. On the other hand, if only one case farm is studied, the wide diversity of farm situations in am one area will limit the application of results from this method. 1John D. Black, et. 8.1., Farm Management (New York: Macmillan 00., 19117), p. 5150 In his article in the 1950 Journal of Farm Economics, Wheeler explains some of the advantages of the case study and comparati*e budgeting method employed in his Operating unit approach. The farm.management worker cannot hope to provide a ready made solution for even the most important problems on each individual farm. But extensive analysis in terms of representative operating units will demonstrate appropriate ways of attacking' particular problems; moreover, the solution can be adjusted slightly to fit many situations similar to the ones actually analyzed. There is no need to stop at this point. Extending the number of case studies to include an appropriate sample of a particular group of operating units illustrates a technique for moving from.micro-economics toward macro-economics, or from partial equilibrium analysis toward general equilibrium analysis.2 For the results of this method to be most meaningful to an area, the farms must be chosen to represent typical farm situations within the area. However, bias can be introduced because not all the typical farm situations will lend to detailed study; the small number of farms used in the case method may not represent all types of farms found in a large or heterogeneous farming area. If the case farms are well chosen, the results of the case studies may offer specific solutions to many farm problems in the area. However, the number of cases is usually so small that in relation to the entire universe, even the results of a well chosen sample will only provide hypotheses and indicate possible adjustments for a farming area. After planning promising management alternatives on a particular farm, a convenient method of comparing these alternatives is to subtract thesummation of all items used in production times their respective prices 2Richard 0. Wheeler, "Operating Unit Approach to Farm Management," ‘ggurnal of Farm Economics, 1950, p. 215. 10 from the summation of all expected products (or increases in inventories) times their respective prices for a given period.3 This budgeting procedure will give the estimated net income resulting from.promising alternative plans of action. Then, the plans can be evaluated by comparing their net incomes. Wheeler pointed out the three types of information needed as a basis for budgeting. 1. The present situation, including physical and financial resources available, the cropping programs, the livestock program, rates of fertilization, rates of feeding, and other management practices; 2. The range of technical possibilities for varying the management of present enterprises on the farm, or for adding new enterprises; 3. The expected price relationships for the period of time covered by the analysis.” If this information is available on a farm for several years, a normal year can be synthesized. The research worker needs to adjust or "normalize" the abnormal situations to establish a clear picture of the typical physical and value relationships between.the farm inputs and outputs, expenses and receipts. However, on some farms, incomplete data or erratic situations will hinder the establishment of a normal pattern. Comparative budgeting is a useful guide in adjusting management techniques and physical and financial resources for an optimum farm organization. Plans for future financial transactions affecting the 3Lawrence A. Bradford and Glenn L. Johnson, Farm Management Amsis (New York:Wiley & Sons, Inc., 1953), p. 329. hRichardG. Wheeler and John D. Black, Planni For Successful Dairyigg_in New England (Cambridgezflarvard University Press, 1933), p.299. ll farm business can be easily evaluated by making appropriate budgets to show the financial impact of the proposals. When budgeting alternatives, the farm management worker will draw on knowledge of the various technical fields as well as of the field of economics. In addition, his budget will have to reflect the management capacity of the farm operator. Budgeting is limited to situations where a small number of promising alternatives are to be analyzed. The researcher will find I budgeting a large number of alternatives time consuming. However, a preliminary evaluation will usually narrow the number down to a few of the more promising alternatives which warrant further analysis by bildgeting 0 Selection of Case Study Farms Eight.Mecosta County farms were selected for analyzing various levels of additional investment. All were operated by men.who expressed an interest in making long range adjustments for more successful farming. Table 1 gives a brief description of these five, oneaman farms and three, two-man farms. 'With the exception of two men who were the senior partners on two father-son combinations, all eleven of the operators were under 50 years of age. Two of the farm operators worked off the farm for a hundred days or more in 19Sh as did about he percent of all Economic Class I to IV farm operators in Mecosta County. Table 1 shows that four of the eight case farms would be classified in Economic Class IV. The Census reports that 57 percent of all of Mecosta County's Economic Class I to IV farms would fall in a similar category. ‘ a Usher 12 TABLE 1 A DESCRIPTION OF THE EIGHT CASE FARMS IN moan COUNTY Hen r . Type of Milk Product Farm far};e Farm 81“ faming Cows Market sales (number) (tmable (numSerI I ((10ij acres) B 0119 68 Dairy 12 We M700 D I 130 Dairy 12 Marmf. h,1oo E v 98 Dairy 11 new. 3,h00 F v 160 Dairy 17 Fluid 6,000 G 3’ 138 General 10 Cream 34,900 A Two 16? Dairy 25 Manuf. 8,500 C " 126 General 15 Cream 8 , 300 H " 160 General 12 Cream 13,700 The eight farms used in this thesis were among twelve that were selected for an earlier study of farming adjustments .5 The earlier selection was based on a preliminary survey taken in 1955 of 133 farm in Mecosta County. In this preliminary survey, information was obtained by personal interviews with nearly all of the farm operators in Economic Classes I to IV in a quarter of Hecosta's land sections. The questionnaire was designed to obtain general information about the farm business, such as the number of acres, number and ldnds of live- stock, recent changes on the farm and attitude and age of the fam operator. Table 2 shows how the eight case farms used in this thesis fit into the group of 133 farms. About half of the 133 farms appeared to have enough gross income to correspond to the Census definition of Economic Class IV farms. The other half corresponded to Economic Classes I-III fame. About to of the 133 farm OperatOrs were under 1.0 years of age 3 another hh were 1.0 to 50 years of age; the remaining 1;? operators were 50 years of age or older. SE. F. Lord and a. 0. wheeler, "Opportunities For Higher Incomes 0n Hecoets County Farms," Mich. Agri. Expt. Sta. Quart. Bul., Vol. 39, No. 1, pp. 125‘1380 13 TABIBZ A CLASSIFICATIQ‘I (I THE 133 PREIJEINARI SURVEY FARMS AND THE EIGHT CASE FARMS ' ‘ 7* u agape:- rm size irype of Typical tors 1913514 Total 1 083° . fan toning size of Under j Over farms ! farms herd 81'8 ears iSOIOOtOd WWe' cows) r '7 number) {fainter} acres) 3 :- ' one 30tolh0bs1ryi6t012'28 2h 2 52 i 3 " 30 to 1h0 General? 6 to 12 7 5 § 12 ‘5 1 - 150 to 1.00 Dairy #12 to 17 12 2 i 1h : l w 150mm Generelfotoll 7 3 a 10 ; - 30 to 1.00 Other 5 None I: 2 9 6 1 he 80 to 1&0 Dairy . 6 to 17 6 1 f 7 ‘ " 150 to 2140 Dem :18 or I: 6 ' 10 l ' a more - so to 21.0 Generalle or 8 -j 3 n 2- ; more . " 250.150 500 Dairy :18 or 2 : 2 h f more i were 250toSOO|General 18 or 2 ! l 3 than two . more , Here 150 to 2&0 Other None h ‘ h than two ' . I w l i ll . T T '1 Totals 81: , 19 i 133 8 The operators of the eight case farms emressed interest in improving their fan business and appeared to be in a position to make long range plans for more successful fandng. These case farm were selected Iran p1 rm, nearly half of the 133 farms, that were in a similar situation. A frequency distribution of these 61 general and dairy farms shows that they have about the same proportional distribution among the categories listed in Table 2 as the 133 fans. Also, nearly half of the 61 farms sold fem-separated cream. Thirty-four percent of the 61 farms grow a small acreage of cash crops, with wheat and dry beans being the most popular. 1h The operators on the other half of the 133 farms lacked interest or were not in a position to develop more successful farm businesses because of age or for other reasons. Consequently, no case study farms were selected from this half of the total sample population. However, knowledge of the number and kind of these farm situations will help in discussing how the results found on the case farms apply to the area as a "11019 0 Information Needed for Budgetigg The information necessary for budgeting was obtained by a personal interview with each cooperating farmer. These data formed the basis for synthesizing a "benchmark" or "normalized" plan for each farm. This "benchmark" plan represented.what might reasonably happen if a case study farm.were operated for the next five to ten years about the same as it has been operated in the past few years. Agricultural researchers and extension workers helped in estimating the technical and economic possibilities on Mecosta County farms. In addition, various types of literature provided helpful information. Price data were based on expected price relationships in Mecosta County over the next five to tenyears.6 A particular set of resources coupled with a particular type of management resulted in the "normal" yields, practices and financial statements of the "benchmark" plan for a case farm. The "benchmark" plan then served as a point of departure for estimating on paper what might happen if additional investments were assumed to alter the present combination of physical resources. Management practices, yields and 6 See Appendix A for a list of the prices used. financial results were assumed to vary in response to additional investment. By examining the effects of the changes in net farm income, opportunities for additional investment were evaluated for each case study farm. Forms Used A crop and livestock form? was useful in planning changes for comparative budgeting of crop and livestock inputs, production and sales on a case study farm. When additional investment opportunities were explored, the changes from the "benchmark" plan were noted on one of the forms. Qualitative changes in production methods were proposed and then quantitative estimations were made about inputs and outputs. Acres in each crop were noted along with the yields, total production, crop receipts and fertilization application. For convenience, crops fed on the farm were converted to a corn equivalent or a hay equivalent basis. The livestock part of the form was designed to record livestock numbers, feed inputs, production and sales. The remaining part of the form was used for recording those purchases directly relating to crop or livestock production, namely fertilizer, stock, seeds, plants and.feed. A second useful form for comparative budgeting on the case farms contained the financial summary8 for the "benchmark" and any adjustment plans. The t0p half was used to record annual farm receipts (crops sales, livestock sales, and other) which add up to gross farm income. The bottom half was used to record annual farm operating expenses as well as 7See Appendix B for crop and livestock form. 8 See Appendix C for financial summary form. 16 charges for interest and for replacement. A total of this expense column subtracted from the gross income yields net farm income for a year 0 Alternative Levels of Investment In this study, budgets were prepared to show the opportunities for additional investment at three levels-~3S,000, $7,500 and $12,500 on the one-man farms, and $10,000, $15,000 and $25,000 on the two-man farms. At each level, alternative dispositions of funds in various combinations of stock, improvements, machinery and equipment were explored. In addition, promising management alternatives were investigated within each combination of additional physical resources. The levels of investment set for this study were not high enough to provide capital for stock, machinery, buildings, improvements and also land purchases. Therefore, few opportunities involving land purchases were analyzed. In those cases where additional 1and.was proposed, leasing was usually assumed. If a farmer can hold land by leasing, the limited amount investment funds can be used to acquire other resources. CHAPTER III RESULTS OF ANALYSIS Net Farm Income Can Be Increased by Additional Investment Farms in Mecosta County, a low income area, do offer remunerative opportunities for additional investment. As shown by Census data, many of Mecosta County's farmers now have £29.93 incomes barely equal to the .223 incomes of many industrial workers. After deducting farm expenses from these gross incomes, many Mecosta County farmers have not incomes so low that their farms are typically not considered to offer attractive investment Opportunities. However, if additional investments were made on these farms, the net income of their operators could be substantially increased. Farm A The analysis of Farm A points out the Opportunities for additional investment on a 25-cow dairy farm in Mecosta County. Additional invest- ment in this father and son partnershipiaill increase the Operators' net income after normal interest and replacement charges on the added investment have been deducted. Since the younger partner returned from military service ten.years ago, the Operators have added 130 acres, bringing the total acreage to 300. Of this, about 167 acres are tillable. Forty acres of the tillable land are Isabella loam. The remaining 127 acres are sandy loams and loamy sands of the McBride and Nontcalm series. A few of the fields have rather steep side hills. 18 The present cropping system for Farm A was designed to provide feed for the livestock. A rotation of corn, oats, hay, hay and bay has been followed on most of tillable acreage. However, the fields with the heavier textured soils sometimes have had a shorter rotation with fewer years of sod. 0n the other hand, the side hills with erosion problems have had longer rotations with no row crops. Twenty-five acres of corn produce 100 tons of silage and 600 bushels of grain annually. Thirty acres of cats, used as a nurse crop, add. h25 bushels of corn equivalent to the feed supply. Sixty-five acres of alfalfa-brome yield.l.8 tons of hay equivalent per acre and ho acres of rotational pasture yield about one ton of hay equivalent per acre. In addition 70 acres of permanent pasture provide about 1h tons of hay equivalent annually. Total plant nutrients from commercial fertilizer and manure applied on the 16? till- able acres have averaged 20 pounds of nitrogen, 25 pounds of phosphorus and 33 pounds of potassium.per acre. Milk from the 25 Guernsey cows comprises the largest single item of gross farm income. Production per cow has averaged 7,500 pounds of h.h percent butter-fat milk. The herd has been fed an average 2,h00 pounds of grain and 5 tons of hay equivalent. Farmpseparated cream was sold until recently, when a change was made to manufacturing milk. Most of the calves have been raised either for dairy replacements or for beef; seven steers and five heifers have been raised for sale annually. The machinery inventory includes two tractors, a pickup truck, the usual tillage equipment, milking machine and a hay loader. Silage harvesting, corn picking and grain combining are custom hired. The operators of this farm have kept a large percentage of the tillable acreage in sod for extended periods of time. Therefore, 19 roughage consuming livestock fit well with the present cropping system. However, possible expansion of the dairy enterprise is hindered because each of the three no by 60 foot barns is located a distance from the others. The present milking herd nearly fills the barn at the home place. A second barn, located about a mile away, houses the dry cows, the beef animals and some of the young stock. The third barn houses the rest of the young stock. None of three barns offers much opportunity for housing a larger milking herd without substantial remodeling. Improving the roughage program appears to have promise for Farm A. Probably more total digestible nutrients could be grown per acre if improved roughage management practices were adopted. Annual applications of potassium and phosphorus on the alfalfa-brome sod would help to increase yields and improve the quality of roughage. Careful planning of rotational and strip grazing would help to provide ample quantities of roughage throughout the pasture season. Sudan grass or cats could be grown to supplement midsummer pasture. The Operators could focus attention on better methods of roughage preservation. The present method of haying using a hay loader does not result in as high quality roughage as a grass silage program does. Grass silage can be cut and stored in one day but hay needs to be dried for several days before it is stored. Therefore, there is a greater probability that hay will be rained on and some of its digestible nutrients lost through leaching. Increased.milk production also appears to have promising possibil- ities for Farm A. Milk production per cow might be increased economically by feeding more grain and higher quality roughage. Remodeling the buildings and increasing the size of the milking herd might also prove economical. In addition, the productive capacity of the herd could be 20 improved if artificial breeding replaced the beef bull which is presently used and if replacement heifers were carefully selected for milk producing characteristics. On the other hand, some of the more productive soils on Farm A might support an intensified cash-crop type of farming which would provide another source of income. For example, a few acres of potatoes or pickling cucumbers might add more income and still allow keeping the dairy enterprise intact if some improved dairy management practices were adopted. . Farm A was a two-man dairy farm as were 28 of the 133’farms in the preliminary survey. Farm.A with 167 tillable acres was placed in a category with ten other two-man dairy farms ranging in size from 150 to 2h0 acres .(Table 2). These ten dairy farms had herds averaging 25 cows. Four of the dairy farms, including Farm A, sold manufacturing milk. The following seven plans explain the investment possibilities explored on Farm A. A summary of these seven plans is presented in Table 3. The important variations among the plans are the amount of investment, size of herd, production per cow, rates of feeding and quality and quantity of roughage. Plan 1 In Plan 1, the operators will expand the dairy herd to 35 cows. The beef herd will be sold and the proceeds reinvested. A net invest- ment of $2,300 is proposed. The basement of the barn where the beef herd is now housed will be remodeled and a loose housing systemlvill be adopted. The operators will construct a.mdlk:parlor and a milkroom in one corner of this barn. 21 oas.a~ o-.as omw.a omo.a oma.a aflo.m mom.e moa.m Annmaaoev esoocH v.2 ma $0.33 3..”on Om Amonomv umoeapom ma ma 5 5 Anatomy paws: osa 04H 04H om can mas msa oca Amoaoav nacho some NH AhmnEficv mflmewcm Moom N N Aaoneanv hHamoh panama mmom «N ow ma m ma «H m m Anonsqnv unease: pumamomaaom ooo.m ooo.HH ooo.aa ooo.m coo.m ooo.w coo.m oom.~ Ameezoav 300-com ass: 00 om mm mm an om mm mm Anmnsssv .200 ads: nah ommpopm sympom ooh ooh ooh ooh psmh.po>mm o9». no.» a?» no.» not» 0.3m nmxcsm ooh mom ooh no.» noun Econ 43.: no» ed» as» och ooh moaned MHHS ooh wok wok mom mwh ooh chop new message meaeaasm ooo.m~ ooo.m~ coo.mH ooo.oa ooo.oa oom.s oom.~ Amaaaaoev aumspmm>eH eoeea aoz oo~.H oo~.H oo~.a ooN.H oo~.a ooN.H ooN.H Amwaafloev use; «can no oasm "mama oo~.om oo~.o~ oo~.oa ooN.HH oo~.aa cem.m oom.m Anamaaoev . pcospmoch Hopes cow Amaaaaoev Lasso cem.a com.» oo:.m cow.m ooo.H ooo.m Antwaaoev soopmm>aq ooa.m 00m.m ooH.m oom.w oom.a oom.~ Annmaaoev possesses ooo.m oo~.oa 00>.m ooo.~ oom.m ooo.m cem.a Amwaafloev umeaeaasm fi upeofinméa snag «1‘ swam 41 a scam a seam m swam : swam m swam m seam H swam xsmsnocmm use: as»H 4 SmzH ho Hm sea meaemopm Omm.H Omm.H Omm.H Osm.m Omm.H OHO.H OHm ooe amaaanpoe OJN OJN Osm OON Oem cam OJN ONH cans OOH OOH OMH OON OON oos OOm OON owHe ceases: OOO.H OOO.H OON.H OOO.H OOm OOm Omm ONN Omen One sanam OJO.m OmH.s OOm.m OON OmO Omm OOO OOa coca OOO.H OOO.H OOm OON OON OOH OON OON noan 3935 OHO.mN OOa.mN OOm.Nm OOO.OH Omw.mH OaH.~H omO.OH OHm.© Haves OHa.m neonapoa OOO.~ monoaa mes OOm OHN OOH smog: Om: Om: apOHsom as. some osm.m OO~.N OmH.~ mam Oma.H OOm.H OOa O4~.~ mo>Hso ecu OHpsmO OaO.m~ OOm.m~ OmH.ON OOs.O OmO.aH OaO.OH OOO.m OHO.m sHaz mag—Boom AmamHHOOeememHHoevAmwaHHoOphnuaHHoevHmaaHHOOvhmnaHHOOvAmneHHOOO thmeHOOV 4; a cmHm O emHa m :wHa : caHa m smHa N emHm H :mHm :aHm xumeeueom . eupH 4 seem .mmazzem HaHOzHe«=>x-1-.hni to their conmmnities; therefore,they will be willing to help fin“users acquire the additional dairy facilities. In addition many Of the productive resources essential for dairying are already available on Mecosta County farms. 35 Equal Investments in a Dairy Enterprise and in a Poultry Laying Flock Some of the problems affecting additional investment in a new enterprise as well some of the problems facing small farmers producing manufacturing milk in Mecosta County are investigated for Farm B. The following analysis of investment Opportunities on Farm B compares equal investments in a dairy enterprise and in a poultry laying flock enter- pri as at bOth the low and high levels. A summary of the investment Opportunities described here is presented in Table 6. Farm B In 1955, Farm B had a gross income between $2,500 and $5,000 as did half of the farms in the preliminary survey. Furthermore, Farm Bwas placed in the largest group in Table 2. This group was composed of 52 one—man dairy farms with 30 to 11.10 acres of tillable land. The operator of Farm B sold manufacturing milk as did [:0 percent of the farm operators. Farm B has two ho acre tracts of land of which 63 acres are tillable. Five additional tillable acres are rented from a sister. Crops grown on these 68 acres provide all Of the feed, except protein supplement, 1' or a lZ-cow Holstein herd, replacement yamg stock and a bull. The dairy herd averages 9,000 pounds of milk per cow. The usual practice has been to feed 1,800 pounds of grain and 5.2 tons of hay per cow. The Operator provides most of the labor for the farm operation. Howe‘rer, he does participate in a labor exchange agreement with the neigh- box-g during the feed harvesting season; he contracts labor to pick seven acres of pickling cucumbers; and his wife takes care of 120 layers. The 68 tillable acres are level and predominately McBride sandy loam- NO typical rotation appears to have been followed. However, the O , Perator has grown wheat, cucumbers, oats, hay and hay in one sequence and corn, wheat, hay and hay in another sequence. Usually the operator has applied 200 pounds of 3-12-12 to the wheat, oats and pickling cucumbers to produce 25 bushels, 35 bushels and 200 bushels per acre, respectively. The corn has produced 35 bushels per acre with applications of only stable manure. The alfalfa-brome sod does not receive any fertilizer. The operator applies lime when soil test results warrant. The machinery inventory includes two tractors, a half-ton pickup truck, a combine, a two-unit milking machine, the usual tillage equipment and a few small 2tools. The Operator feels the continual cost-price squeeze and is looking for ways to improve his income prospects over the next few years. One of the more pressing problems at the present time is that total crop production is limited by the small number of tillable acres. The Operator has tried to increase the present feed supply by renting crep- 1and from neighbors on a yearly basis. However, uncertainty of yearly cash renting hinders long range planning. Higher rates of fertilization and improved management practices will help to increase yields. Even so, only a limited increase in total crOp production can be realized on the small acreage of Farm B. The buildings are another limiting factor. Nineteen stanchions and two box stalls fill the basement of the barn. The tie-1s) is crowded and has caused many teat injuries. The 10 by 21; foot silo will not 8tOre enough silage for the present 12—cow herd. The milkroom fEmilities will not meet requirements for selling fluid milk so a new "‘ilkroom will probably need to accompany any major changes in the (1311? enterprise. 37 The Operator might solve these problems in several ways. He could apply more intensive management practices to the present resources; he could continue renting, when possible, with homes of obtaining a long term lease; or he might enlarge the buildings by adding a bunker silo, a pen type stable or a young stock shed. Most of these ideas will probably be more attractive if a shift is made to fluid milk. Another possibility would involve shifting to an enterprise such as poultry and buying the extra feed that is needed. Some Of these investment and management possibilities are explained below. A brief may of the four plans is presented in Table 6. Plan 1 Most of the changes resulting from the $5,000 investment in Plan 1 will occur in the dairy enterprise. A milkhouse meeting requirements for selling fluid milk will be constructed. As the possibilities of sell- ing fluid milk seem to depend rather heavily on the operator's willingness to adopt bulk handling facilities, this plan will include a 300-gallon tank. The present small upright silo will be replaced with an unlined bunker silo. Four cows will be added and an artificial breeding program will be adopted; any further increase in cow numbers above the 16 proposed in this plan will require more stanchions or a larger barn. Some changes in, the rotations are prOposed. Twenty acres will be in a cucumbers, wheat, hay, hay and hay rotation, 20 acres will be in a corn, cu(Bumbers, oats, hay and hay rotation and 27 acres will be in a corn, hay and hay rotation. A late fall or early spring seeding of oats (1/2 bushel per acre) will establish the alfalfa-brome sod. Fert- lizer applications of 150 pounds of 5-20-20 on corn, 300 pounds 0“ Oats, 300 pounds on wheat and 200 pounds on pickling cucumbers will help to boost yields to ’45, b0, 35 and 200 bushels, per acre, 38 .popSHOCfi mam useevomaaon was pmeaepcw pom mumpmnom I'b {111‘ 1111‘ m gees mos sameness meHaHzpemoeao ezmmamsezH as we exam 0 mqmwm sesame sea: paveaquo e Soon xafi: pcoeewSUe e OHfim pmxcsm meson zpvflsom camp com emson.hhpdzom undo: xawz nememno wcwpawdm 00m.ma oom.NH ooo.m coo.m Aeneafieev geeseheeea eeeee eez oom.m Aeeeaaeev ebb; asses we eaemueeeg ooo.mH oom.NH ooo.m coo.m Aeneflaeev webbeheeeH fleece cem.m coo.m oom.H com Amnesfieev seephbeaa ooo.m oo~.a oo~.H eoe.m Ameeflfleev beeeeaeem oom.b oom.m oom.m oom.a Aeeeafieev hmeaeaaem cfi mpcmspmm>cw pepe< seam ; ease m seam N seem a beam xeeseeeem been ebe 39 respectively. An application of 200 pounds Of 0-20-20 on the alfalfa- brome sod after the first cutting will increase quality and quantity of roughage. Five and a quarter tons of hay equivalent together with 30 bushels Of corn equivalent fed per cow will result in a herd average of 9,500 pounds of milk per cow. An investment of $5,000 as indicated in Plan 1 will add $1,800 net income over the benchmark plan after deducting interest and replacement charges. Plan 2 During the preliminary visits, the Operator and his wife expressed an interest in adding a poultry enterprise as opposed to investing additional funds in the dairy enterprise. One Of the possibilities for adding a poultry laying flock to Farm.B is explored in Plan 2. The 12-cow enterprise will be continued as in the benchmark plan. The proposed $5,000 investment will provide equipment, buildings and stock for the new poultry enterprise. A single story insulated poultry building will be constructed to house a 900 bird laying flock. The house will also have facilities for brooding 1,100 late-winter- hatched replacement chicks. Annual replacement and careful feeding are estimated to help to attain an average of 18 dozen eggs per bird annually. Two rotations will be followed-35 acres in a cucumbers, corn, oats, hay and hay rotation and 32 acres in a corn, oats, hay and hay rotation. As a result, all of the feed for the dairy herd will be raised and a large part of the poultry feed will be purchased. The fertilization rates are somewhat lower in this plan due to a liberal use of hen manure, although yields remain about the same as in Plan 1. to The ration for the laying flock will consist Of an average of 30 pounds of supplement and 60 pounds of corn.and oats per bird. Twenty pounds of corn and oats plus ten pounds of supplement will be fed to each replacement chick. Innoculations and antibiotics will be used as necessary. The operator's wife will do much of the work fbr the larger poultry enterprise. Even so the changes in Plan 2 will only increase net income by 3800 after paying interest and replacement charges. Plan 3 The proposals in the previous plans stayed within the limits of the present acreage and explored possibilities for intensifying produc- tion. In recent years, the operator has rented 30 acres on a yearly basis. This has helped the feed situation in the short run. However, the uncertainity of the year-to-year lease does not encourage him to adopt good soil management practices or to expand his operation as much as he desires. He has tried to buy land in the neighborhood but he feels that land prices are high in relation to the added feed that the ‘ land will produce. Expansion to a 25 to 30-cow dairy herd.will be easier to visualize if more land is available. In Plan 3, the assumption is made that the operator can obtain a long-term lease, on 30 acres of land with the same productivity as his own 63. This long term lease, will encourage the operator to improve his soil management practices which will lead to higher crop yields. He will raise enough roughage on the 98 acres to feed 27 cows and 6 replacements. However, the cucumbers, corn,oats, hay and hay rotation and the corn, oats, hay and hay rotation, will only furnish about 60 percent of the grain requirement. The remaining 30 percent will be purchased, along with three tons of supplement. bl Careful selection and purchase of 15 cows of proven ability and the wise use Of artificial breeding will increase the productive capacity of the herd. Then a high quality roughage program including grass silage,and the good management that the operator has demonstrated will form a basis for a 1,500 pound increase in milk production per cow over the benchmark plan. About $9,500 will be invested in new buildings and machinery. A new self-feeding bunker silo will replace the small upright silo; the present barn will be used primarly for hay and straw storage; part of the present stable will be converted to a milkroom and milk parlor; some of the remaining space will be used as a feeding area for the dairy herd; and a pole frame addition to the barn will provide additional Space for a loose housing system. These accomodations will comfortably house 27 milking cows. The calves and yearlings will be housed separately in a part of the Old barn. A small forage harvester and a bulk tank are the items Of machinery to be purchased for Plan 3. The adoption Of the proposals presented in the plan will increase net income $h,260 after interest and replacement charges are deducted. Plan h A flock of 2,700 layers and an investment of $15,000 is proposed in Plan h. Of this investment, $2,500 will come from the sale of the dairy herd. A more intensified cropping system is suggested for Plan h. The pickling cucumbers, oats and wheat will be replaced by a second year of corn to form a corn, corn, hay and hay rotation. The home grown corn will supply about half of the total feed requirement for the poultry flock; the other half will be purchased. The operator will feed about 20 pounds more of corn and oats per hen than in Plan 2. Egg production ha is estimated to average 21 dozen eggs per bird, three dozen more than in Plan 2. In Plan h, the Operator will spend fulltime tending the flock. Furthermore, with some automatic equipment, the present family labor and about four months of hired help are expected to meet the labor needs. The investment program in Plan h includes remodeling the present barn to house the pullets on the ground floor. Part Of the second floor will provide additional pen space for any overflow of pullets. The proposed two-story laying house will have community nesting and automatic waters. The laying house plans do not include~an automatic feeder but probably one will be installed in the future. The house will have a grain storage and an equipped egg room. A corn picker will also be purchased partly because of the larger corn acreage and partly to take advantage of any Opportunities to rent additional corn ground or to purchase standing corn. A feed mill and mixer will be purchased. The hay will be baled and sold. Adeption of the preposals for Plan b will increase net income $3,h10 after interest and replacement charges are deducted. A laying flock is one way to intensify a Mecosta County farm with a limited acreage. However, as illustrated by Farm B, a sum invested in a laying flock does not appear to provide as remunerative a combina- tion of resources as an equal sum invested in the dairy enterprise. The soil and its relation to feed production for livestock appears significant here. Mecosta's soils will produce fair yields of corn,whcat and oats. However, a rotation that will maintain the soil productivity will require about half or more of the rotation to be in sod crops. The dairy cow requires large quantities of easily produced roughages and only small amounts of supplemental grain. In contrast, a laying flock requires all grain and no roughage. h3 Equal Investments in a Dairy Enterprise and in a Potato Enterprise The farmers of Mecosta County have grown a few acres of cash crops to diversify their cropping systems and their sources of income. Wheat, pickling cucumbers, potatoes and dry beans are some of the typical cash crops. Wheat is probably grown as much for the straw as for the grain. The other crops are usually produced for sale. The Opportunities for added investment in a specialized potato and a specialized dairy enterprise are compared for Farm C. Farm 0 Farm C was one of a group of’ll, two-man farms that were classified in Table 2. The group included general type farms which had 80 'to 2&0 acres of tillable land. All of the farms had a few acres of wheat; most of the farms including Farm 0, also had other cash crops such as dry beans and potatoes. The 11 farms had dairy herds ranging from 3 to 26 cows; seven of the farms sold cream as did Farm C. Farm 0 has 106 tillable acres that are located in one tract at the home farm. The soils in this tract are classified as Isabella loam or loamy sand. Two additional tracts, located about a mile away from the home farm, contain 20 acres of lighter textured cropland. Occassionally, 35 acres or so have been share-rented from neighbors. A father and his 30-year old son Operate this general type farm which had 15 Holstein cows, 50 hogs, 10 veal calves, 12 acres of cran- berry beans and 7 acres of potatoes. The feeding rates have averaged b0 bushels of corn equivalent and 5.5 tons of hay equivalent per cow. These rates have resulted in an average of 10,000 pounds of milk per cow, a record well above the county average of 5,500 pounds. The practice on Farm C has been to sell the cream and.to feed the skim milk to hogs and hi: and veal calves. In addition, the hogs have received about 12 bushels of corn equivalent each before reaching the market weight of 220 pounds. A rotation that has been followed on no acres is potatoes, corn, oats, hay, hay and hay; a second rotation that has been.followed on 80 acres is wheat, corn, beans, oats, hay, hay and hay. Ten acres have been in permanent pasture. Moderate fertilizer applications have helped.to produce hS, 50, SS, and 250 bushels of wheat, corn, oats and potatoes per acre, respectively. Hay yields have been 1.5 tons per acre. In recent years, harvest labor problems have caused the operators to reduce the potato acreage and to substitute dry beans as the main cash crop. The buildings and machinery have been kept in good repair. A 30 by to foot machinery barn, built within the last few years, houses two Farmall H tractors, a baler, a combine, a two-row potato planter, a six- row potato duster and some small tools. Seventeen stanchions arranged in two rows facing in are located across the west half of the ho by 60 foot barn. Part of the east half is used as a farrowing shed for the spring and fall litters and part as a stable for four to eight head of young stock. Farm C has several problems which may affect investment possibilities. Inadequate water drainage often delays cropping operations in several fields. Droughts in midsummer, a shortage of harvest labor and a limited number of marketing channels affect potato expansion possibili- ties. Low hay yield and a corresponding shortage of roughake have meant that occasionally the operators have increased the rate of concentrate feeding in an effort to maintain milk production. The present milking herd and replacements fill the 17 stanchions. The small milkroom which M is attached to the west side Of the stable, does not meet fluid milk standards. Consequently, dairy expansion possibilities are limited, without remodeling the dairy buildings. ' Farm C has several promising possibilities as indicated in Table'? By draining the wet spots and by adopting improved soil management practices, a specialized potato enterprise could be developed. During summers with good growing conditions, the Operators have reported hSO bushels Of potatoes per acre. However, because of the frequency of midsummer droughts, the long-term average yields will fall below this figure. Some of the severe drought conditions could be lessened by irrigating the potatoes during the dry periods. Either a pond dug in one of the several wet spots or a deep well will furnish sufficient water. On the other hand, more liberal use of lime and fertilizer would increase roughage yields. Then by reducing the acreage of cash crops, roughage production would be further increased, paving the way for a larger dairy herd. Furthermore, the Operators could eXplore either remodeling the present barn and adding more stanchions,or constructing a pen barn addition and a milking parlor; adoption of fluid milk would involve changing the present milkroom and adding a milk cooler. Plan 1 A $10,000 investment in a specialized potato enterprise is suggested in Plan 1. By using 100 acres at the home farm and renting an additional 50 acres from neighbors, 76 acres of potatoes will be raised on Farm C. The Operators will spend full time on potato prOduction and will also use all of the land in a potato rotation. The cows, dairy equipment and the other livestock will be sold and the proceeds reinvested in the potato enterprise. no .pcosoomfldon one pmoaopcfi pom mowamzo moonmccHo .pwe happen mo «eczema OHH.HH oamam oaflao oaaaq ozowm Annmaaoov second 902 omm.ma omm.em omo.m oam.sa mmm.o Amamaaoev geomemaxo Hapoa ooo.am own.sm osa.aa omo.am mam.w Amumaaoev madamoot fleece mm mm Awesomv mucnpo op poacem NH Amouomv modem ow . on w Awesomv mooampom mH HH Amouomv Pwm£3 oepcmp oa~+ ONH deacon 0m + NQH Qua popcon Om + NR1“ cmH Amouomv mmOho HH< _ pm 0: Apoosdcv zHumoh oomfiwu omom Hm m : Aaoosocv enemas: pcosoowaoom 08.2 80.2 scam Amends 38 he as: 00 on ma Anonsaev mzoo xaaz Oawm coxcsm pone xoopm quow soaked xawz Oaam noxcsm omson xaflz camp Hooosom sumo com cmmpopm opmpom omso: mafia omwhopm opevom newness wcfioaflsm ooo.mm ooo.m~ oo~.oa Anamaaoev epeospmmpea noose pmz oom.m oom.m Annmaaoev ”zoo mo same names ooo.mm acm.wm oo~.oa cem.ma Amnaaaoev semapmmpea fleece oom.a ooa.m ooo.H oom.a “mamaaoev posse ooowm Downm Anheaaoov xOOpmo>Hq cem.e oo:.~a oom.m ooN.a “mamaaoev wpeasaasem 8.3 80; Sim 8a.; A2233 manage cw pcospmopca oooo< dead 4 seam m swam N seam H swam xhesnecom was: ,EopH 0.2m4m mom mmmOAmXMXmMHBHZDBmommO Bzmzemm>zH mma ho HEdEZDm h mqmda h? Specialized potato equipment including a two-row planter, a roto- beater, a two-row digger, a six-row sprayer and additional field crates will need to be purchased. Other changes will involve remodeling the present dairy barn into a potato storage and draining several of the wet spots. Thirty-eight acres of early potatoes and 38 acres of late potatoes will spread the harvesting over a two month period. As irrigation is not proposed, a 300 bushel yield per acre is expected. A three year rotation (late potatoes, oats and clover, and early potatoes followed by . a rye cover crop) will permit growing two potato crops and two green manure crops in three years. The cats and hay will be sold. Thus, a cash crop occurs in each year of the rotation. Seven hundred.pounds of 5-20-20 per acre will be applied to both the early and late potatoes. The rye cover crop will receive 150 pounds Of ammonium nitrate; this fertilizer will supply nitrogen to the cover crop and also provide some nitrogen to supplement the regular spring fertilizer application on the late potatoes. Potato prices are very uncertain from season to season. Although $1.00 per bushel was used in this analysis, fluctuation Of over 100 percent can be Observed in the potato price cycles. Therefore, some potato specialists generalize that a potato farmer makes a good profit one year out Of five. In the other four years, the farmer makes little profit or loses money. This statement may not be entirely true. However, a prospective grower will need sufficient operating capital to sustain a few unprofitable years until he is rewarded with favorable prices and/or yields. If the Operators adopt Plan 1, they will have to overcome harvest labor problems and also they will have to develop a market for their LB potatoes. In the last 12 years the potato acreage in Mecosta County has been reduced drastically from.h,h90 acres in l9h5 to less than 500 acres in 1957. Therefore, neither potato buyers nor potato harvest laborers visit the county in any appreciable number. A large quantity of potatoes as suggested for Plan 1 will help to overcome these problems. A long potato harvesting season and a large quantity of potatoes will insure several weeks of work which should help to attract harvest laborers. In addition, the large quantity of potatoes produced will help to solve the marketing problem because the operators can offer large lots of uniform quality potatoes for sale, thereby attracting buyers and enabling the operators to bargain effectively. This $10,000 net investment in a specialized potato enterprise will increase net income by $2,000 over the benchmark plan after deducting interest and replacement charges. Plan 2 Expanding the dairy herd to 30 cows is suggested in Plan 2. The Operators will invest_$10,000 and make several changes before they complete the transition to Plan 2. A shift will be made to a fluid milk market. The dairy barn will be remodeled to accommodate the larger herd. A new pole frame building located near the present barn will house the young stock. Enlarging the present milkroom and adding a bulk tank will meet requirements for selling fluid milk. The swine enterprise will be reduced to 27 hogs and two sows. - A wheat, corn, hay and hay rotation and corn, oats, hay, hay and hay rotation will be followed in Plan 2. Two hundred pounds of 0.20-20 applied.per acre after the first cutting will increase alfalfa-brome yields to 2.5 tons per acre. Fertilizer expense for the other crops will be to twice the amount in the benchmark plan. Tile drains will be laid to several of the troublesome wet spots. A forage harvester and horizontal silo will form an integral part of the improved roughage progran. Alfalfa-brome will be harvested at the optimum maturity and the oats will be either pastured or emailed depending on roughage requirements at harvest time. Artificial breeding, a 30 percent rate of culling, better care and improved management will increase milk production 1,000 pounds per cow. Moreover, as excellent quality roughage will be preserved in this plan, the herd.will consume about 0.5 tons more per cow. The $10,000 investment as outlined for Plan 2 will increase the net income by 8h,100 over the benchmark plan after deducting interest and replacement charges. Plan 3 A specialized potato enterprise similar to the one proposed in Plan 1 is explored in Plan 3. However, Plan 3 calls for $25,000 net investment. The dairy herd will be sold. The home farm and 50 acres of rented land will be used in a three year potato rotation similar to the one described in Plan 1. Rather than turn to a larger acreage for increased production, more intensified potato production practices are proposed for Plan 3. For example, irrigation together with an application Of a ton of 5-20-20 per acre will help to increase potato yields 175 bushels over Plan 1. The growing of both early and late potatoes will spread the harvesting season over six to eight weeks. All of the early crop and part of the late crop will be sold directly from the field or will be stored for only a short period of time before being sold. About half of the late crop will be stored for several months if necessary. 50 Plan 3 requires a much larger investment in machinery and equipment than Plan 1. Most of the investment over Plan 1 will be needed for the irrigation system. The pump, motor, pipe, sprinklers, deep well and well screen are estimated to cost $12,600. If the Operators adopted Plan 3, they could eXpect net income pros- pects to improve by $7,560 over the benchmark plan after deducting replacement and interest charges. Plan h For Plan L, the operators will invest $25,600 in a 60-cow dairy enterprise. The 166 acres, including ho acres of rented land, will be in a corn, oats, hay, hay and hay rotation. In this plan, all Of the crops will be used for roughage; the oats will be pastured or ensiled; the corn and a large part of the grass will also be ensiled; and ear corn will be purchased. The roughage program, including two horizontal silos, a new forage harvester and.optimum.fertilization, will help to supply an adequate quantity of high quality roughage. The roughage production practices will correspond to those outlined in Plan 2. Early cut grass silage and roughage harvested daily will be fed to the herd at the barn as a- substitute for pasture. The dairy herd.will consume an average of six tons of high quality roughage and 35 bushels of corn, and will produce 10,500 pounds of milk per cow. The adoption of an artificial breeding program, the culling of 21 cows annually and the demonstrated dairy husbandary of the Operators will help to realize the adjustment presented for the dairy enterprise. 51 The construction of a loafing shed is suggested to provide facili- ties for a loose housing system. A milkroom will be equipped with a bulk tank and a milk parlor will be constructed in part of the old barn. The operators will shift to a fluid milk market. Two men will be needed to milk the 60-cow herd. This higher labor requirement may become burdensome because the olcer operator will probably want to do less farming in the future. However, his five grandsons are beginning to help with the chores now and are expected to be more helpful in the future. On the other hand, this plan offers enough net income so outside help can be hired if necessary. A $25,000 investment, as outlined Plan )4, is estimated to add 39,080 net income to the benchmark plan after paying interest and replacement charges. Three Promising Areas in Dairy for Additional Investment As shown in the foregoing analysis, Mecosta County farms have Opportunities for remunerative investment in livestock, buildings and equipment and machinery for the dairy enterprise. These areas are not necessarily listed in the order of importance. However, the optimum Combination of productive factors for any particular Mecosta County dairy farm will require a wise apportioning of investment funds among the three areas. The magnitude of investment in any one area will vary with the management capacity of the farm operator, the production Practices followed and the resources presently owned. Table 8 shows the average investment in these three areas for the most promising dairy plans that wereproposed for the eight case farms. Wilcox and Cochran's 1951 statement explaining that additional investments are necessary to increase productivity is applicable to Mecosta County farms seven years later. They said that the national average of 5,200 pounds of milk per cow does not compare with the 8,000 to 10,000 pound average many dairymen get. All these methods [better feeding;]housing, and care of cows and better selection and breeding of increasing milk production per cow, except the better care, involve using additional capital applied in combination with the existing dairy herd and operator's labor. A similar analysis holds for rates of crop production; on most farms heavier application of fertilizer, more use of insecticides, and better seed bed preparation would increase both yields and profits. Only the best farmers use the right forms of capital in sufficient quantities with their land, breeding stock, and labor. The adoption of the most efficient combination of factors in farm.production would increase output per farm and per farmer 25 to 50 percent above current levels in most American communities. TABLE 8 AVERAGE ADDED INVESTMENT PER FARM IN LIVESTOCK, MACHINERY AND BUILDINGS UNDER VARIOUS DAIRY INVESTMENT PLANS PROPOSED FUR EIGHT MECOSTA COUNTY FARMS L Level of Investment Item. _J Low Medium 'High (doIIars) ‘(dollars) (dollarsII Oneqflan Farms Livestock 1,200 2,860 h,800 machinery 1,700 2,100 3,h20 Buildings 1,920 2,010 b.3ho TwoéMan Farms Livestock 3,h60 5,160 7,600 Machinery 2 , 800 5,130 9 ,000 Buildings 3,530 5,160 8,h60 Adjustments towards larger sized dairy herds were relatively attractive for most of the case farms. Table 8 shows the average in- vestment in livestock at the three levels for the case farms. Not only ZWillard w. Cochran and Walter w. Wilcox, "Economics of American Agziculture" (New York:Prentice-Hall, Inc., 19515, p. 52. more cows but also cows of a high inherent productive capacity were proposed in the investment plans. This meant "good" or "very good" cows and improved practices such as Cochran and Wilcox describe. Machinery was a second important area of investment on.Mecosta County farms (Table 8). In the analyses of the case farms, machinery and equipment were estimated to provide the increased labor productivity needed to keep more and better quality cows. Such items as forage harvesters, bulk tanks, forage wagons, and tractors were prOposed in many of the investment plans. The third area of remunerative investment was in dairy buildings. (Table 8). As explained previously typical Mecosta County barns have a few stanchions, few milkroom facilities, and small silos. These factors tend to limit present milk production and milk production practices to standards of many years ago. Therefore, many Opportunities exist for remodeling and constructing dairy buildings. Low cost buildings constructed to minimize labor requirements for chores were included in most of the dairy plans. Because of the larger demands for high quality roughages, silage storages were proposed in many of the investment plans. Remunerative opportunities exist for shifting to the production of fluid milk. Usually the price for fluid milk is about a dollar higher than the price of manufacturing milk. The additional dollar per 100 pounds received for fluid milk will amortize the additional investment in a milkroom, a cooler and other fluid milk facilities in a relatively short period of time. Improved management practices were propcsed to accompany the additional investments. An attempt was made to balance additional Sh investment with those practices that seemed feasible for the particular farm. Investment in the dairy enterpriseby itself will not be remunerative unless the investment is also accompanied by the type of management which will effectively use the new physical resources. limited Opportunities for Additional Investment Most of the case farms had several rather promising Opportunities for additional investment. However, the analysis of the investment opportunities on Farm D indicates that not all of Mecosta County farms are as fortunate. Ears-.2 Farm D was drawn from a group which contained about a third of the 133 farms in the preliminary survey. This group was composed of one- man dairy farms with 30 to 1130 acres of tillable land. Although two men live on Farm D, neither of them is considered to be a full-time operator. The father is at an age where he does little farming and the 30-year-old son has worked fun time off-the-farm during the winters. 0f the 2&0 acres owned, 130 acres are tillable. The soil types range from loamy sands to sand. Farm D probably has a larger amount of light sandy soil types making up its total cropland than the other case farms. Annual applications of 111 pounds of nitrogen, 21 pounds of phosphorus and 26 pounds of potassium have helped to produce 15 bushels of wheat, 30 bushels of oats, 10 bushels of kidney beans and 25 bushels of corn per acre, respectively. Pickling cucumbers and sugar beets have been grown in recent years but both produced disappointing results because of a combination of droughts and light soils. 55 The 12-cow dairy herd is about the typical size for many of Mecosta County farms. The operators have produced manufacturing milk as did about a third of the 133 farms. Four replacement heifers, four beef steers, two bulls, three work horses, ten hogs and one sow are included in the livestock inventory. On a per-cow basis, the dairy herd averaged 3,500 pounds of 14.0 percent butterfat milk and consumed 20 bushels of corn equivalent and four tons of hay equivalent. The livestock and crops yields, as presented above, were lower than usually found on the other case farms. Probably a substantial improvement in practices will be necessary before investments will increase the net income. The barn he by 30 foot has a watering trough in the center, five stanchions on the west side, three stanchions on the north side and three stanchions on the east side. Such an arrangement makes chores burdensome. However, remodeling may be as costly as constructing a new pole barn addition and adopting a loose housing system. Crop yields on the light soils have been low. The operators of Farm D could overcome droughty conditions by irrigation, although it has not been used in the neighborhood. If the operators have to rely on their demonstrated crepping practices and yields as a basis for credit, they may encounter considerable difficulty in borrowing additional funds for a new irrigation venture. 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