ABSTRACT AN ECONOMIC COMPARISON OF MAJOR FARMING SYSTEMS ON SOUTHERN MICHIGAN CASH-GRAIN FARMS By Kenneth Neal Wegenhoft The major purpose of this study was to provide in- formation to farmers, agricultural workers, and policy-makers about potential incomes associated with alternative farming systems on cash-grain farms in Southern Michigan. The spe- cific objectives of the study were to: (1) describe major farming systems on Southern Michigan cash-grain farms; (2) determine the optimum farm organization associated with each farming system and varying farm sizes; (3) compare the po- tential incomes associated with these farming systems over lvarying farm size levels; and (4) appraise the adjustment implications for cash-grain farmers. Nine farming systems were studied, each differentiated from the other by the manner in which land, labor, machinery, or capital were acquired. These farming systems were: com- plete ownership, ownership plus crop-share rent—in,~owner3hipI plus cash rent-in, ownership plus custom harvesting, crop- share rent-in, cash rent-in, complete custom hire, cash rent? out, and crop-share rent-out. Kenneth Neal Wegenhoft The ”synthetic firm" approach, with linear program- ming and partial budgeting, was used to estimate potential income and the optimal organization associated with the alternative farming systems. Four farm sizes were assumed - for each farming system: 160 acres, 320 acres, 480 acres, and 640 acres. A comparative analysis of the various farming systems was based on the returns over cash costs; returns to risk, management, and unallocated capital; operating capital; labor utilized; optimal enterprise_organization: and the farm size necessary to provide an income equal to that of an average Michigan durable goods manufacturing worker in 1967. Enterprises included in the analysis were corn, wheat, oats, soybeans, and alfalfa. The farming systems were analyzed with and without off-farm work assumed for some of the farming systems. When off-farm work was assumed, it was considered for only three systems: crop-share rent-out system, cash rent-out system, and complete custom hire system. As farm size increased, the farming system (no labor ' sold off-farm) which produced the largest returns over cash costs changed also. For the 160 acre farm size, the complete custom hire system is the largest income producer because of lower total machinery costs. In second place was the owner- ship plus Custom harvesting system. The custom hiring of harvesting Operations kept the machinery investment down and returns up compared to the other farming systems at this Kenneth Neal Wegenhoft level. As the farm size increased to 320 acres, the complete ownership system became the largest income producer with a range of $441 between this system and the second place system. The complete custom hire system ranked third: Apparently the economies of size of the machinery complement lowered the ownership costs below the custom charges, thereby pushing the complete ownership system into first place. For the 480 acre and 640 acre farm sizes, the complete ownership system was the largest income producer. The introduction of off-farm work resulted in a re- arrangement of the standings of the various systems, based on income earning potential. For all farm sizes, the com- plete custom hire plus off-farm work system was the largest income producing system. As farm size increased, the cash rent-out plus off-farm work system and the crop-share rent- out plus off-farm work system lost in ranking of importance and the complete ownership system increased. The optimal organization for the complete ownership, ownership plus custom harvesting, crop-share rentiin, com- . plete custom hire, and crop-share rent-out farming systems for all farm study sizes had the same proportions for each crop. The enterprise organization of the cash rent-out system was-not under the control of the operator.of this farm system, and therefore was not considered. The ownership plus crop-share rent-in and ownership plus cash rent-in systems Kenneth Neal Wegenhoft had identical enterprise organizations which differed from the other systems in that they had a larger percentage of corn and a smaller percentage of wheat and soybeans at the larger farm sizes. I There appeared to be little relationship between potential incomes associated with the alternative farming systems of various sizes and wages of industrial workers. However, as might be expected, those farming systems which had lower productivity required more acreage to provide the income level desired. Based on the returns over cash costs, it appears that the larger farm sizes with the operator employed full- time on the farm are relatively profitable which may result in larger and fewer farms in the future. At the smaller farm sizes, based on the larger associated incomes, the operator will tend to custom hire part or all of the re- quired machinery services, which may result in an increased demand for custom services. The smaller operators (less than 320 acres) will tend to enlarge their Operations or to take off-farm jobs in order that they might maintain or raise their incomes. Pure tenancy will tend to decrease because of low returns to these Operations relative to other farming systems and its low capital generating abil- ity. Corn and soybeans with a minimum acreage.of wheat allowable to maintain the allotment will become the dominant crops provided the government programs assumed for this Kenneth Neal Wegenhoft study do not change. Based on the relatively low returns over cash costs, it appears that the smaller rent—in and rent-out farming systems will have little chance for growth unless off—farm work is undertaken to raise the income of these systems. Finally, the more resources that can be acquired, the better opportunity it appears there is for a higher income. AN ECONOMIC COMPARISON OF MAJOR FARMING SYSTEMS ON SOUTHERN MICHIGAN CASH—GRAIN FARMS By Kenneth Neal Wegenhoft A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics 1909 C3(;Clb7i a),,3-vw3 ACKNOWLEDGMENTS Appreciation is extended to the Department of Agricultural Economics for the financial assistance given the author which enabled him to start and complete his graduate study on the master's level. The author extends sincere appreciation to Dr. Larry J. Connor, Graduate Committee Chairman, for his encouragement, helpful advice, and assistance through the author's course of study and preparation of the thesis. Thanks are also extended to Drs. Lester Manderscheid and David Armstrong, members of the graduate committee, for reading earlier drafts and offering helpful suggestions and comments for improvement. The author is indebted to Carole Mills for typing the preliminary draft of the thesis. Finally, special thanks are due to the author's parents, Mr. and Mrs. Oliver Wegenhoft, for their encour- agement and understanding throughout the author's graduate program. ii TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES . Chapter I. II. III. Page . v . viii INTRODUCTION . . . 1 Problem Setting . . . . 1 Statement of the Problem . . 6 Objectives of the Study . . . . . 8 Organization of the Remainder of the Thesis 9 Footnotes .- . . . . . . . . . . 10 CONCEPTUAL FRAMEWORK AND RESEARCH PROCEDURE . ll Farming Systems . . . . . . . . . . . 11 Area of Study . . . . . 18 Research Techniques . . . . 20 Sources of Data . . . . . . . . . 27 Footnotes . . . . . . . . . . . . 29 RESULTS OF THE ANALYSIS . . Complete Ownership Farming System . . . . 31 Ownership Plus Crop-Share Rent-In Farming System . Ownership Plus Cash Rent- In Farming System . 38 Combination Ownership and Custom Harvesting Farming System Cash Rent-In Farming System Crop- Share Rent- In Farming System Complete Custom Hiring Farming System Cash Rent- Out Farming System . 'Crop- Share Rent- Out.Farming System J‘fi .- Summary . . . . . . . . . Footnotes . . . . . . . iii . . . . 42 O O O O O I U" \l Chapter IV. COMPARISON OF ALTERNATIVES AND IMPLICATIONS OF THE STUDY Comparison of Alternatives .-. Returns Over Cash Costs . . Returns to Risk, Management, and Unallocated Capital Optimal Enterprise Organization Comparison of Labor Utilization Comparison of Operating Capital . Farm Sizes Necessary to Produce Incomes Equal to Average Manufacturing Wages Implications of the Study Limitations of the Study . . . Suggestions for Further Study V. SUMMARY SELECTED BIBLIOGRAPHY APPENDIX iv Page 65 65 65 73 79 83 86 92 95 96 99 105 107 Table 10. 11. LIST OF TABLES Linear Programming Model Activities . . . Resource Restraints and Accounting Equations Hourly Wages for Selected Industry Classifications in Michigan Optimal Organizations and Associated Potential Incomes for a Complete Ownership Farming System . . . . . . . . Optimal Organizations and Associated Potential Incomes for an Ownership Plus Crop-Share Rent4In Farming System . Optimal Organizations and Associated Potential Incomes for an Ownership Plus Cash Rent-In Farming System . . . . . . Optimal Organizations and Associated Potential Incomes for an Ownership Plus Custom Harvesting Farming System -. . . . Optimal Organizations and Associated Potential Incomes for a Cash Rent-In Farming System . . . . . . . . . . . . . Optimal Organizations and Associated Potential Incomes for a Crop-Share Rent-In Farming System . . . . . . . . . Optimal Organizations and Associated Potential Incomes for a Complete Custom Hiring Farming System . . . . . . . . . Potential Income from a Cash Rent-Out Farming System . . . . . . . . . . . . . Page 23 24 27 32 36 40 43 4'7 51 S4 58 Table - Page 12. Optimal Organizations and Associated Potential Incomes for a Crop-Share Rent-Out Farming System . . . . . . . . . . . 61 13. A Comparison of Potential Returns Over Cash Costs for Alternative Cash-Grain Farming Systems . . . . . . . . . . . . . . . . . . . 67 14. A Comparison of the Returns to Risk, Manage- ment, and Unallocated Capital for Alternative Farming Systems . . . . . . . . . . . . . . . 74 15. A Comparison of Optimal Enterprise Organizations Associated With Alternative Cash- Grain Farming Systems_ . . . . . . . . . 78 16. A Comparison of Labor Utilization for the Various Cash-Grain Farming Systems . . . . . 80 17. A Comparison of Total Operating Capital and Annual Operating Capital by Farming System and Farm Size . . . . . . . . . . . . . . . 84 18. A Comparison of Farm Sizes Necessary to Provide an Income Comparable to That of an Industrial Worker 0 O O O O O O O O O C O O O O O O O O 87 Appendix Tables l. Assumed Prices Paid and Received . . . . . . . 107 2. Crop Yields, Fertilizer and Herbicide Requirements, and Machinery Operations . for Selected Cash-Grain Crops . . . . . . . . 109 3. Variable Cash Costs per Acre for Selected Cash-Grain Crops for Alternative Cash-Grain Farms . . . . . . . . . . . . . . . . . . . . 111 4. Total Labor Requirements per Acre for Selected Cash-Grain Cr0ps . . . . . . . . . . . . . . 113 5. Estimated Labor Requirements per Acre per Time, Period for Selected Cash Crops Using 4 Row Equipment, Southern Michigan . . . . . . . . 114 vi Table Page 6. Machinery and Power Operating Costs per Acre by Enterprise and Operation Using a 4-Row Complement with Complete Ownership . . . . . 116 7. Machinery and Power Operating Costs per Acre by Enterprise and Operation Using a 4-Row Complement with Ownership Plus Custom Harvesting . . . . . . . . . . . . . . . . . 118 8. Custom Rates per Acre by Enterprise and Operation . . . . . . . . . . . . . . . . . . 120 9. Available Operator Labor by Time Period . . . . 121 10. Assumed Four-Row Machinery and Power , - Complement . . . . . . . . . . . . . . . . . 122 ll. Cropland Renting Questionnaire . . . . . . . . 123 12. Results of Cropland Renting Survey . . . . . . 124 13. An Example of a Linear Programming Tableau Used in This Study: Complete Ownership Farming System, 160 Acre Farm Size . . . . . 126 14. Schedule of Annual Ownership Costs by Farm Size with a 4-Row System of Complete Ownership . . . . . . . . . . . . . . . . . . 128 15. Schedule of Annual Ownership Costs by Farm Size with a 4-Row System Using a Combination of Ownership and Custom Harvesting . . . . . . . . . . . . ._. . . . 129 16. Operating Capital Requirements per Acre for Selected Farming Systems in Southern Michigan . . . . . . . . . . . . . . . . . . 130 vii LIST OF FIGURES Figure Page 1. Selected Cities in Southern Michigan and Neighboring States with a Population Over 40,000 . . . . . . . . . . . . . . . . . 5 viii CHAPTER I INTRODUCTION United States and Michigan agriculture are changing rapidly in structure and resource usage. Farms are becoming larger in size and fewer in number. -Types of farms which were predominate in the past are losing place to other, different types. More capital and less labor are being used in the productive processes.1 Likewise, management is increasing in importance as farming becomes more complex in its technical and economic problems.2 The allocation of resources for an individual farm in this period of change to maximize returns is an ever present and growing problem. As change takes place, each firm has to adjust to the new environment to attain the goals of the operator. Problem Setting _In Michigan, farms with an annual sales of less than $10,000 have declined in both absolute (from 47,372 3 to 37,377 farms in 19644) and relative terms farms in 1959 (42.4 percent and 39.9 percent in.1959 and 1964,,respeCr tively, of all farms). At the same time, those farms with an annual sales of more than $10,000 have increased. In 1959, the above $10,000 sales range accounted for 17,670 farms or 15.8 percent of all farms while in 1964 this same sales range accounted for 22,810 farms or 24.4 percent of all farms. In this same time period, the number of all farms declined by 16.3 percent. These statistics indicate that farms are becoming fewer in number and larger in size over time. The farms are also growing in size and declining in number at different rates. The $10,000 annual sales group' is declining at a rate of 4.6 percent per year while the above $10,000 annual sales farms are growing at a rate of 5.2 percent per year. There have also been changes in the proportions of the various types of farms. he three most numerous farm types in Michigan are dairy, cash-grain, and livestock with dairying being the most important. However, from 1950 to 1964, the number of dairy'farms declined by 55.8 percent while cash-grain farms increased by 3.0 percent. In this same time period, livestock farm numbers declined by 19.6 percent. The relative importance of farm type has also changed. In 1950, 45,8005 dairy farms accounted for 29.4 percent of all farms while in 1964 there were only 20,230 dairy farms which accounted for 21.6 percent of all farms. _This is a 5.7 perCent rate of decline.. The same downward. trend is evident in livestock farm numbers. There were 10,857 livestock farms (7.0 percent of all farms) in 1950. By 1964, the number had declined to 8,725 livestock farms (9.3 percent of all farms), at a 1.5 percent rate per year. .The exception to the general declining trend in declining farm numbers is the cashegrain farm. From 1950 to 1964 the number of cash-grain farms increased from 14,972 farms to 15,418 farms or by 3.0 percent. This is a .1 percent per year rate of growth. The importance of cash— grain farms increased from 9.6 percent to 16.5 percent of all farms in the same time period. If the present trend continues, cash-grain farming will soon be the predominant type of farming in Southern Michigan. The question arises as to why there are fewer and larger farms? Also, why have cash-grain and livestock farms risen in importance and dairying declined? A number of reasons may be advanced. Agriculture in general is faced with serious overproduction problems which lead to low prices for agricultural products. Also, many input prices have been rising steadily. With stable prices and rising costs, the per unit margin is falling. One way to maintain or raise a level of income is to expand the number of producing units. More units of production even at low margins can often mean more income. But to expand production facilities requires access to the necessary . capital, the ability to manage the expanded operation,-and other factors. Not all farm people have the resources (human and physical) or want to expand their farming Operation. Those farmers which cannot or do not want to expand are faced with lower total returns from agriculture. Many of these, if they are able, seek off-farm employment to supplement their farm incomes. Some may sell or rent-out the farm and move to town, others may live on the farm and work it in their spare time while being employed off the farm. Most of the agriculture in Michigan is located south of a line drawn east and west from Bay City to Muskegon. In this area, also, are many of the industrial centers of Michigan. By looking at a map and drawing a circle around each industrial center with a radius of 25 miles and a second circle with a radius of 40 miles, it can be seen that almost no area in Southern Michigan is more than 40 miles from at least one industrial center and many are within 25 miles (see Figure 1). This location enables many farmers, if they so desire and have the skills necessary, to work at off-farm jobs. Within the Southern Michigan area, there are qu1te a variety of cash—grain farming systems. According to McMillan and Gonzales, ”A system is a set of objects together with relationships between the objects and their attributes."6 In other words, a system is any method or _way in which an objective is attained_and the characterise_ tics of the method. Lee asserts that farmers are more and more becoming organizers of resource services and less 51:! .Wsafi i i Legend If A-South Bend B-Kalamazoo l“ C-Battle Creek I D-Jackson E-Ann Arbor F-Toledo G-Detroit H-Pontiac I—Port Huron .J-Flint K-Lansing L-Grand Rapids "'-— M-Muske gon I N-Midland O-Bay City P-Saginaw ‘ -. ..—-—.-...o. -_.”..-—..m———._-- -_.-._. . _" 63‘ a“ -Study Area 0 I I \ A 0 \L"\ C... .I V s l .‘L T Vi a” --~¢.-..-. -.-_ ._. . m: =‘o anchoring -..—1'-—' 2 1.4LPCN'A -'..«_~.-..~47 51—“.‘17-"0 lever.- '1 (I ('1 ’H fit Eli’s /: vi— The. .rT-‘Ar i I lf 752277.74— / 70560 um: 51 u: [SHOWN #001760 I MONICAMII 16:47:07 I . c.4155}? "". 5m 'C I ..D. W4 SN VIN .l STJJSIHViDCJM“! States with .A I mama}: tum . n . . Iiigure 1. Selected Cities in Southern Michigan and Neighbo Ropulation Over 40g000 .—-—.-.————.- -4 -”.——-—..—_- ._.— laborers.7 Combining these two concepts may partially explain the variety of farm organizations. A farming system is a method of producing agricultural products and its characteristics are determined by the manner in which the necessary resource services are acquired, the product dis- posed of, and how these two functions are controlled and administered. A cash-grain farming system is a method of producing the various cash-grain crops characterized by the manner in which the land, labor, capital; machinery and ' other resource services are acquired, the crops marketed, and these two areas administered and controlled. Land services may be obtained by renting (cash or crop-share), leasing, ownership, gift, etc. Likewise, capital might be borrowed or it might be the operator's own capital generated from savings. Machinery services can be gained through ownership, custom hiring, renting, or leas- ing. Labor can be the operator's or it can be hired in a variety of ways. Due to the many ways in which the methods 'of acquiring resource services may be combined, there are many farming systems possible. Statement of the Problem Through a study of selected cash-grain farming systems representative of cashrgrain farms-in Southern Michigan, the comparative profitability of these systems may be analyzed. The following questions are of interest to many farmers and agricultural workers: What size of Operation is necessary to provide an income comparable to that which the Operator might earn off farm? What is the relative profitability of these alternative systems of cash-grain farms where the farmer: works full time on the farm, or part or full time in Off-farm work; custom hires all or part of the operation; rents out the land (cash or crop-share basis); rents in land (cash or crop-share basis); and owns the land he wOrks.- By determining howlarge a farm has to be to return an income comparable to that of an industrial worker, some indication of the comparative welfare of farm operators using the various farming systems is Obtained. It also gives some indication of how much a small farm will have to expand to obtain a comparable income. If this expansion is not possible, other alternative actions might be sought. The second focus of the study is on the alternative farming systems by which a farmer can maximize his income. 'The two most important variables in determining income are labor and capital. Labor is important in that it can be used in two alternatives: (1) off-farm as a laborer, or (2) on the farm. Due to the accessibility of high—paying off-farm jobs and low returns in agriculture, it is very important to the individual to know how tO.divide his time. For a given amount of time spent in farming, it is necessary to know which farming system to use to maximize income. Capital can be used in various ways to acquire resource services. It can be used either to purchase land or to rent it. Also, capital can be used to acquire machin-. ery services. Is it more profitable to custom hire all Or part of the operations or to own the machinery to do it? Should capital to cover operating expenses be borrowed or provided by the operator? Objectives of the Study The major purpose of the study is to provide infor- mation to farmers, agricultural workers, and policy makers about potential incomes associated with alternative farming systems on cash-grain farms in Southern Michigan. Specif- ically, this study is aimed at estimating the income possi- bilities for the farm operator under different labor usages (on-farm versus Off-farm), farming systems, and farm sizes. The specific Objeetives of the study are: (1) Describe major farming systems on Southern Michigan cash-grain farms. (2) Determine the optimum farm organization associated with selected farming systems for varying farm sizes. (3) Compare the potential incomes associated with these farming systems over varying farm size levels.‘ (4) Appraise the adjustment implications for cash-grain farmers. Organization Of the Remainder of the Thesis The organization of the remainder of the thesis is given in the discussion below. Chapter IIr-Conceptual Framework and Research Procedures. The conceptual framework of the study and the selection of the research techniques used are discussed in this chapter. The sources of the data, how the study situation was selected, and the assump- tions of the study are also given. Chapter III-—Results of the Analysis. The Optimum organizatiOn of the resources and potential incomes for the various farm sizes and farming systems are presented. Chapter IV--Comparison Of the Alternatives and Implications of the Study. A comparison of the alternative cash-grain farming systems and the implicationsof the study are presented. Chapter V--Summary. A brief summary of the Objectives, results, and implications of the study are presented in this chapter. 10 Footnotes 1James D. Shaffer, ”The Scientific Industrialization of the U. 8. Food and Fiber Sector: Background for Market Policy” in Agricultural Organization in the Modern Indus- , trial Economy, NCR- 20- 68 (Columbus: Department of Agricul- tural Economics and Rural Sociology, 1968), pp. 6- 7. zGeorge F. Patrick and Ludwig M. Eisgruber, "The Impact of Managerial Ability and Capital Structure on Growth of the Farm Firm,” American Journal of Agricultural Econom- ics, L, NO. 3 (1968), pp. 499-503. 3U.S. Bureau of the Census, Statistical Abstract of the United States: 1964, 85th ed. (Washington, D. C. Government Printing Office, l964),p . 613 . 4U.S. Bureau of the Census, Statistical Abstract Of the United States: 1968, 89th ed. (Washington, D. C.: Government Printing Office, 1968), p. 598. 5U.S. Bureau of the Census, Statistical Abstract of the United States: 1954, 75th ed. (Washington, D. C.‘ Government Printing Office, 1954), p. 662. 6Claude McMillan and Richard F. Gonzales, S stems Analysis: A Computer Approach to Decision Models, Irwin Serie$ in Quantitative Analysis for Business (Homewood, 111.: Richard D. Irwin, Inc., 1965), p. 1. 7John E. Lee, Jr., "Resource Ownership and Use- Rights in Agriculture” in The Structure of Southern Farms in the Future, ed. by Charles R. Pugh, Agricultural Policy Series 30 (Raleigh: Agricultural Policy Institute, North Carolina State University, 1968),p p. 83. CHAPTER II CONCEPTUAL FRAMEWORK AND RESEARCH PROCEDURE This chapter contains the framework and procedures used to evaluate the relative profitability of alternative cash-grain farming systems in Southern Michigan. The first part of this chapter presents the farming systems and the geographic area under consideration. The latter part Of the chapter contains the research techniques, general assumptions, and the sources of data. Farming Systems "A system is a set of objects together with rela- tionships between the objects and their attributes," according to McMillan and Gonzales.1 Or, in other words, 'a system is any method or way in which an ObjeCtive is attained and the characteristics of the method. In addi- tion to this, Lee asserts that farmers are becoming more and more organizers or managers of resource services and less laborers.2 By combining these two ideas a partial explanation of the variety of farming systems-may be found. .A farming system is a method of producing agricultural jproducts and its characteristics are determined by the 11 12 .manner in which the resource services are acquired, the product disposed of, and how these two functions are con- trolled and administered. Inherent in the resource services are considerations of technical variations which arise. If. the technology by which a resource service is provided is changed, the farming system is changed. However, a farming system does not Operate in a vacuum. It is a part of a universe, which also may be thought of as a system. Obviously, the farming system is affected by, but has little or no control over many parts of the universe. Those parts of the universe which the farming system has no control over, may be said to be external to the farming system. This is the environment in which the farming system Operates. Tnat which the farming system has control of, is internal to the farming system. The farming system is composed of subsystems just as the farming system is a subsystem of the universe. These sub- systems are Often interrelated and interconnected. Parts of one system are at the same time parts of other systems; In general, a farming system may be depicted as being composed Of three related systems: (1) the adminis- trative-control system, (2) the input system, and (3) the output system. In turn, each Of these three systems are composed of two systems. They are: (a) the environmental or external system over which the farming system has no 13 control, and (b) the internal system which is controlled by the farming system. Furthermore, these two systems may be made up of numerous subsystems. The input system is composed Of the: (a) environ- mental system, and (b) internal Support system. The in- ~ternal support system is made up of the general support system and the specific support systems. The general sup- port system is associated with all enterprises whereas the specific support systems are concerned with a given enter- prise or activity.3 This study is concerned with the general support system and the effects on the income producing ability of the farming system. Specifically, the study is concerned with income variaoility due to different manners of acquir— ing the services of land, labor, machinery, and capital. For purposes of this study, a farming system is a method of producing the various cash-grain crops (corn, wheat, oats, soybeans, and alfalfa) characterized by the manner in which -the land, labor, capital, and machinery services are' I acquired. By changing the manner of acquiring resource services the system is changed. By analyzing the results of the changes in the manner of resource service acquisition, an appraisal of the various systems can be made..; The ways that the services of the various inputs are acquired are as follows: (1) land services are acquired. 14 through Operator ownership, cash rent-in, crop-share rent- in, or a combination ownership and rent-in. In addition, returns on land services are received by cash rent-out or crop-share rent-out. (2) Machinery services are acquired by operator ownership or by custom hiring or a combination ‘of both. (3) Labor services are provided by the operator, are hired when the operator is unable to provide the hours of labor required, or are received in conjunction with the custom hiring of machinery Services.' (4) Capital services are obtained through the use of equity capital (internal financing) or borrowing (external financing). (5) Manage- ment services are provided by the operator for all systems. The farming systems analyzed in this study are: (1) Complete Ownership Farming System--the services of land and machinery are acquired through Operator ownership. Labor is provided by the Operator as available and additional labor is hired on an hourly basis as needed. Operating capital services are acquired by borrowing. Fixed capital in terms of land, machinery, and buildings are gained through ownership. (2) Ownership and Crop-Share Rent-In Farming System-- land services up to 320 acres are acquired by operator ownership. .Additional acreage is acquired by crop-share rent-in. Machinery services are acquired by Operator ownership. Labor services are (3) (4) 15 furnished by the Operator until this source is no longer able to provide them, in which case, addi- tional labor services are hired on an hourly basis as needed. Operating capital services are acquired by borrowing. Fixed capital in the form of machin- ery, buildings, and some land is acquired through ownership. Additional fixed capital in terms of land is rented. Ownership and Cash Rent-In Farming System-fland. services up to 320 acres are provided by Operator ownership. Additional land services are acquired by cash rent-in. Machinery services are acquired through operator ownership. Operating capital services are acquired by borrowing. Fixed capital in terms of land, machinery, and buildings is ac- quired through ownership and renting. Labor services are provided by the operator until this source is exhausted, then additional labor is hired on an hourly basis. 9 A Ownership and Custom Hiring Farming System--1and services are obtained through operator ownership. Machinery services except for harvesting are ac- quired by operator ownership. Harvest services, machinery and labor, are obtained by custom hire. Labor services except for harvest are procured from the operator and if this source is insufficient, (5‘) (6) 16 additional labor services are acquired on an hourly basis. Operating capital services are acquired by borrowing. Fixed capital in terms of land, machinj ery and buildings are acquired by ownership or 1 custom hiring, as the case may be. Cash Rent-In Farming System-~all land services are acquired by cash rent-in. Machinery services are procured through operator ownership. Labor services are provided by the operator and if more hours of labor service are required than the operator can provide, this is hired on an hourly basis. Operat- ing capital services are acquired by borrowing. Fixed capital in terms of land,'machinery, and buildings are acquired by rent, or ownership as the case may be. Crop-Share Rent-In Farming System--land services are Obtained by crop-share rent-in. Machinery services are acquired through operator ownership. Operating capital services are acquired by borrOw- ing. Fixed capital in terms of machinery, land, and buildings is acquired by ownership or rent as the case may be. Labor services are provided by the operator and when this supply is expended, additional labor services are-acquired by hiring on an hourly basis. l7 (7) Complete Custom Hiring Farming System--all machinery and labor services are Obtained by custom hiring. Land services are provided by the owner-operator. Operating capital serviCes are acquired by borrow- ing. Fixed capital in terms of land and buildings is acquired through ownership. (8) Cash Rent-Out Farming System--the purpose of this farming system is to provide land services to other people for cash rent. The rented-out services are owned by the operator of the system. No machinery, labor, or operating capital services are required by the Operator for this system. Fixed capital in terms of land and buildings is acquired by ownership. This system differs from the other farming system in that the manager is only concerned with selecting someone to do the actual farming. Managerial re- quirements are less here. (9) CrOp-Share Rent-Out Farming System--the purpose of this system is to provide land services to other. people for a share of the harvest as rent. Labor, operating capital, and machinery services are not provided by the operator. As with the cash rent-out farming system, this system is different from the systems that actually produce cash-grain.crops in._ that the manager is only concerned with selecting someone to farm the land. Managerial requirements are not too great for this task. 18 Area of Study The study area is restricted to dryland culture cropland located primarily in Baton, Ingham, Clinton, and parts of Ionia, Barry, Shiawassee, and Livingston counties of South Central Michigan (see Figure l). The dominant soils are Gray-Brown Podzolic Soils (Limy Materials) of the Miami and Conover soil associations. The soils of the study area are derived for the most part from glacial till, level to rolling. The drainage of the soils vary from well to imperfect depending on the slope of the land. They are deep, relatively high in fertility, and durable under cultivation, except for the steeper slopes. With a proper system of management, the soils can be maintained in a good productive state. The soils are suitable for growing corn, wheat, oats, alfalfa, beans, and sugar beets. The muck soils which are closely associated in the region, may be used to produce onions, mint, and truck crops. The principal soil series.are Miami and Conover.4 Between the seasons, average monthly temperatures have a range of approximately 50°F. The lowest average monthly temperature is 21.7°F. in January. August has the highest monthly average with 71.0°F. The average annual temperature is approximately 48.0°F. Within the‘Study area, average annual temperatures may fluctuate i l or 2 degrees depending on the local conditions. There are approximately 19 173 frost free days per year starting in April and ending in early October. Soil temperatures (2 inches below the surface) at East Lansing, Michigan have a larger range than does the air temperature. The average low temperature is 23°F. in February and rises to an average high of 87°F. in July- August. The average annual soil temperature is about 53°F. Average annual precipitation is approximately 32 inches. The wettest months are May-June, September, and November.5 The sizes of the representative farms under study were partially determined from Agricultural Economics Report NO. 99, Business Analysis Summary for Cash-Grain 6 Farms, 1967. It was found that farm sizes ranged from 117.5 acres to 944.0 acres in 1967. For those farms with an investment over $160,000, the size range was from 252.0 acres to 944.0 acres with a mean of 486.5 acres and a standard deviation of 168.9 acres. In the under $160,000 investment class, farm size ranged frOm a low of 117.5 acres to a high of 486.0 acres. This investment class mean was 294.8 acres with a standard deviation of 104.0 acres. However, this farm size data cannot be said to be represen- tative of the farms of the state because it is based on information provided by members of the Telefarm computerized record keeping project. 20 Other factors which went into the determination of the study farm sizes were a 4-row equipment and power complement. Also, the labor source is primarily the owner- Operator with hired labor used when the operator is unable- to provide the amount of labor necessary to complete the farming Operations. Based on the above mentioned factors, the study farm sizes of 160 acres, 320 acres, 480 acres, and 640 acres were chosen. Research Techniques The ”synthetic firm" approach, with linear'programf ming and partial budgeting, was used as the research technique for this study. The synthetic firm approach was uSed to insure comparability between farming systems with respect to management, resources, and technology. In a comparative study it is important that the differences in the results are inherent in the study variables and are not due to outside factors. .2 Linear programming was chosen for its ease of calculating maximum potential income and the associated Optimal organization for a given farming system. Three requirements are prerequisite to the use of linear program- ming. The requirements and corresponding satisfactions for the study are: (1) have an objective-~to maximize potential incomes and ascertain the associated optimal organization’ 21 of each farming system, (2) alternative means of attaining the goal-~different combinations of the various crops, and (3) have resource restrictions--limits on the availability of land, labor, and capital services.' Partial budgeting. - was used in those cases involving a very limited number of alternative activities. Each farming system and each farm size was programmed separately. Those farming systems with few alternative activities were partially budgeted because linear program-' ming was not necessary. The resulting programmed output and budgeting results (potential income and optimal organ- ization) are presented in Chapter III. The programmed returns are the returns over variable cash costs. Overhead costs consisting of machinery oxerhead, real estate taxes, interest on land investment, and operator labor costs were handled outside of the linear program or partial budgets. The Operational linear programming model for each farming system and each farming size may be summarized in a context as follows for the objective of maximization of income: (1) r.x. = maximum 1 33 um: i .where xj represents activity levels and rj represents the net revenues of the activities, subiect to the constant resource constraints (bi), with 22 (2) "MD a.. x. < b., and j 1 13 j — 1 (3) Xj 3.0, for all j, where aij represents the technical input-output coefficients for each activity.7 The linear-programming tableau for each farming system and each farm size programmed for this study has 18 activities and 20 restrictions and accounting equations.. The activities and the resource constraints and accounting equations are listed in Table l and Table 2, respectively. The activities and the resource constraints and accounting equations are the same for all systems programmed. The aij and bi values change from input system to input system and for farm size changes with each system. The aij values that change as farm size changes within an input system are the labor requirements by months for the various production activities. The rj values change from system to system but 'not within an input system. The bi values which change- within an input system are the acreage restriction, and an operating capital restraint which is based in part on the farm size. The between input system coefficient changes are the aij values for labor utilization by months, the_capital borrowing coefficients for each activity, and the grain transfer coefficients in the case of crop-sharing systems. 23 Table 1 Linear Programming Model Activities Activity Activity Activity Number Name Description P1 CORN Corn production P2 WHEAT Wheat production P3 OATS Oat production P4 SOYBN Soybean production PS ALFAL Alfalfa production." P6 SLCRN Corn selling P7 SLWHT Wheat selling P8 SLSOY Soybean selling P9 HLRNM Labor hiring for Nov.-March P10 HLRAP Labor hiring for April P11 HLRMY Labor hiring for May P12 HLRJE Labor hiring for June P13 HLRJY Labor hiring for July P14 HLRAT Labor hiring for August . P15 HLRSR Labor hiring for September P16 HLROR Labor hiring for October P17 SLLR Labor selling P18 CPTBW . Capital borrowing 24 Table 2 Resource Restraints and Accounting Equations Row No. Row Code Name Row Description 1 PROFIT Profit equation 2 LANDC Maximum acreage to put into corn 3 LANDW Minimum acreage to put into wheat 4 LANDT Maximum acres to all crops 5 LRONM Maximum operator labor available in Nov.-March 6 LROAP Maximum Operator labor available in April - . ', 7 LROMY Maximum Operator labor available in May 8 LROJE Maximum operator labor available in June 9 LROJY Maximum Operator labor available in July 10 LROAT Maximum Operator labor available in August 11 LROSR Maximum operator labor available in September 12 LROOR Maximum operator labor available in October 13 LROTO Total labor utilized l4 LRHIR Total hired labor utilized 15 LRTOT Total operator labor utilized l6 SLTRC Corn transfer from production to sale activity 17 SLTRW Wheat transfer from production to sale activity 18 SLTRS Soybean transfer from production to sale activity 19 CPTLAN Total annual capital utilized 20 CPTLTC Maximum capital borrOwable at any time during the year 25 The rj values change between systems. The bi values fOr capital change between input systems. In short, there are 9 different systems of which 6. were solved by linear programming, 1 by partial budgeting, and 2 by a combination of linear programming and partial budgeting. For each farming system, land is restricted to four farm sizes: 160 acres, 320 acres, 480 acres, and 640 acres. These farm sizes are based on infOrmation from Agricultural Economics Report NO. 99, Business Analysis Summary for Cash-Grain Farms, 1967. The Operator is considered to be the major source of labor. The total operator labor available is 3,000 hours per year. The monthly operator labor available is given in Appendix 9. Additional labor is hired as needed at $1.50 per hour. There is no restriction on the amount of labor hired. Operating capital is restricted to 70 percent of the machinery investment plus 40 percent of the land in? vestment.8 An interest rate of 7 percent is paid on borrowed capital. All funds necessary to put in a crop are borrowed at the beginning of the production period and paid at harvest. Operating capital requirements for the various’ enterprises are divided into annual operating capital and total Operating capital. The model is constructed so as to 26 determine the minimum resource service requirements and Optimal organizations based on total operating capital, but to calculate interest only on annual operating capital utilized. Total operating capitalwas chosen as the limit; ing factor because when borrowing, the total amount borrowed at any one point of time determines what can be borrowed, not a historic annual figure which is calculated after repayment. The annual operating capital figure is the total operating capital borrowed, adjusted to an annual basis determined by the length of time that the money is borrowed. The interest charge is deducted from the income earned by the use of the borrowed funds. The income earning enterprises‘are the production and sale of corn, wheat, oats, soybeans, and alfalfa. Field beans were not considered an important enough crop for the area under consideration to be analyzed as part of the study. No livestock, fruit, or truck crops were considered. The input-output relationships for the assumed level of produc- tion are given in Appendix 2. 2 For purposes of comparing the farming systems where no Off-farm work is performed and those where it is, the unutilized labor of 2 farming systems, cash rent-out and crop-share rent-out, is sold at the average annual wage .rate for a durable goods industry worker $7,289 or $3.47 per hour) for Michigan. For the complete custom hire farm- ing system, 80 percent of the unused labor is sold at the 27 same rate. The remaining 20 percent is assumed to be used in management of the custom hiring operations. A comparison of hourly wage rates Of various industries in Michigan is presented in Table 3. Table 3 Hourly Wages for Selected Industry Classifications in Michigan Industry Classification . Wage Rate Manufacturing ‘ ' $3.47/hour Transportation Equipment $3.71/hour Machinery except electrical $3.58/hour Food and Kindred Products $3.08/hour Paper and Allied Products $3.04/hour Source: Michigan Manpower Quarterly Review, Vol. III, No. 4, p. 27. Sources of Data Much of the data used in this study was drawn from Agricultural Economics Report No. 87, Costs and Returns for Major Cash Crops in Southern Michigan. This publication presents an abundance of information on the costs and re- turns of many cash crops, based on a synthetic firm approach. Much useful information on technical coefficientsj-ferti- lizer requirements per yield level, machinery and labor requirements, machinery costs, etc.,--are given. 28 Labor requirements per acre for the selected crops were drawn from unpublished research by Armstrong.9 In his study a Cobb-Douglas function was fitted to Telfarm data to estimate labor requirements per acre for various enterprises. Machinery systems and requirements information were based on Benjamin's M.S. thesis, "An Economic Analysis of Acquiring Farm Machinery Services for Southern Michigan Cash-Grain Farms." Agricultural Economics Report No: 99, Business Analysis Summary for Cash-Grain Farms, 1967 provided infor- mation on farm size and enterprise organization. A mail survey was conducted to determine the pre- vailing cropland rental arrangements in Southern Michigan. The questionnaire was sent to the county agents of the counties whose soils were predominantly of the types in this study. A sample questionnaire and the results of the survey are included in Appendices 11 and 12. 29 Footnotes 1McMillan and Gonzales, Systems Analysis, p. l. 2Lee, "Resource Ownership and Use-Rights in Agri- culture” in The Structure of Southern Farms in the Future, p. 83. 3Warren Vincent, ”A Management Information System as a Basis for Organizing Farm Management Resources" (paper presented during a Computer Application Program, Department of Agricultural Economics, Michigan State University, 1969), pp. 4-12. 4B. B. Hill and Russell G. Mawby, Types of Farmigg in Michigan, Agricultural Experiment Station Special Bulletin 206 (East Lansing, Michigan: Agricultural Experiment Sta- tion, 1954), p. 77. 5U.S. Department of Commerce, Environmental Science Services Administration, Environment Data Service, Clima- tological Data: Michigan Annual Summary, 1968, LXXXIII, NO. 13 (Washington, D. C.: Government Printing Office, 1968), pp. 191—197. 6Leonard R. Kyle, Business Analysis Summary for Cash Grain Farms, 1967, Agricultural Economics Report No. 99 (East Lansing, Michigan: Department of Agricultural Economics, 1968), pp. 6411. 7Earl O. Heady and Wilfred Candler, Linear Program- ming Methods (Ames, Iowa: Iowa State University Press, 1958), pp. 1-52. 8Based on information provided by Dr. John Brake, Department of Agricultural Economics, Michigan State University, 1969. 9Based on unpublished data by Dr. David Armstrong, Department of Agricultural Economics, Michigan State University, 1968. CHAPTER III RESULTS OF THE ANALYSIS This chapter contains the optimal organization and associated potential income for the various farming systems described in Chapter I and arrived at thfough the reSearCh procedures explained in Chapter 11. Three potential incomes are presented in the anal- ysis. They are returns over variable cash costs, returns over cash costs, and returns to risk, management, and unallocated capital. These income estimates are residual returns, or in other words, income that remains after certain costs have been paid. These are: (1) Returns over variable cash costs. This figure represents gross income less the variable cash expenses for seed, fertilizer, 'herbicide, custom hauling, preharvest machinery usage, harvest machinery usage, and rent. (2) Returns over cash costs. This is returns over variable cash costs less machinery ownership costs and real estate taxes. Ownership costs include depreciation, interest, and insurance. (3) Returns to risk, management, and unallocated capital. This figure represents returns over cash costs less interest on land investment and Opportunity costs for Operator labor. 30 31 If this estimate is negative for a particular system, pro- ducers might want to look at alternative farming systems in which to employ their resources.1 Complete Ownership Farming System This farming system is one in which the owner- operator has full equity in land and machinery. He is the main labor supply with outside labor being hired when the labor requirements exceed the capacity Of the Operator to supply them. Operating capital is borrowed at the beginning of the production period and repaid at harvest at an annual rate of 7 percent. Opportunity costs are considered for the investment in land and operator labor. The organization necessary to provide the maximum income is presented in Table 4. The returns to risk, man- agement, and unallocated capital for this farming system range from -$91 for the 160 acre farm size to $11,592 for the 640 acre farm size. Returns over variable cash costs range from $8,398 for the 160 aCre farm size to $32,848 for the 640 acre farm size. Returns over cash costs range upward from $4,357 for the smallest farm size to $26,876 for the largest farm size. The enterprise organization is proportionally the same for the three crops grown. ‘Percentage wise, soybeans rank first with 45.0 percent; corn ranks second with 38.7 percent; and wheat ranks last with 16.2 percent. For the 32 oo.~amm. oo.eefim oo.HNme oo.aeoe .Hem eeeeee>o ammo Hence oo.o~afl. oo.oeea oo.oea oo.owe .Hom waxes epeumm Heee oo.Nmoe oo.eoam oo.Hemm oo.Hemm .Hon . naemeeezo seeeaeeez . "mumou fimonhmkzo £mau oo.mewmm oo.ewae~ oo.aHeeH oo.wamw .Hea Nmemou ammo . mfinmwhm> MO>O mahduoz oo.oaaoa oo.mama oo.emae oo.mme~ .Hem Heeaaeo meaneeeeo Heaee< oo.NomeH oo.eaeNH oo.omem oo.m-e .Hoa Heeaeeu weaneeeno Heeo:_ H .Hmuammu wcaumsocc o.mem~ o.eaaa e.amea o.mww Leo: eeaaaap: seems Hence o.eee o.am~ o.eaa --- nae: tones eons: Hence o.aewa o.mmea o.MNmH o.mww are: tones aoeeaeno fleece ”eeuaaaes tones o.ew~ o.maN o.eea o.Ne eee< meannsom o.moa o.ae o.Nm o.e~ eeu< “were o.we~ o.ewa o.eNH o.me eee< eeoe "cofipmufiammno OmwhmpOpc; oee owe omm sea nae: Eeec AmosoO muQHMMUQQm hmwmm mHmOU Smmu .H®>O mCHd—Hmm .vmonho>o 69mm Hmuoemm pan 33 .auzoam .cofipmezmaoe how OHanwn>m mau:pom .wmuowamaoe “on ma emonso>o e m .mexwu ouepmo Hams so .emonho>o shocficoms .memoo ecma .sonmfi soumwomo sow momsmgo see Owsfiocfi p0: moon .mcuspea eOsEmumosd N .eaea ma “monopcfl goes: so pcofim>flswe Hansen Ox» Op mummou Hmufimmu maflumpomo Hencc< .Hmox esp sow powfiscos ucsoem Hmuou esp Op mnemou prfimmo :Oflunaomo HmuOH H. oo.NmmHH oo.mmns oo.muwm oo.ew~mH oo.mewHH oo.m-w oo.eom~ oo.mwem oo.mmma oo.omeNH oo.oomm oo.oemo oo.omwom oo.mmoma oo.wmoma oo.Hm- oo.weee oo.mNmH oo.o~am oo.nmme .Hom .HOQ .Hom .HOQ .Hom eampwmmu woumOOHHmcs can .u:oEowm:mz .xmflm Op mcuzuom enezpm>o :mmeeoz Hmuoe gonna uounnomo «coaumo>:H aged :0 umogeucH "mumou emogho>o ammocoz mmumou ammo ho>o mcsspom 34 160 acre Operation, there are 62 acres, corn; 26 acres wheat; and 72 acres, soybeans. In the largest farm size, there are 248 acres, corn; 105 acres, wheat; and 287 acres, soybeans. I 'The labor utilized for the 160 acre farm consists entirely of operator labor, 885 hours per year. Beginning with the 320 acre study size, hired labor is utilized at an increasing rate, in addition to operator labor. There are 114 hours of hired labor utilized alOng with 1,323 hours of Operator labor at the 320 acre size. For the 640 acre farm size, a total of 2,343 hours was utilized of which 474 hours were hired and 1,869 hours were Operator and family time. The operating capital requirements range from $4,225 total operating capital or $2,435 annual operating capital for the 160 acre farm size to $16,902 total operating capital or $10,110 annual operating capital for the 640 acre farm size. Ownership Plus Crop-Share Rent-In Farming System In this farming system, the operator has full equity in machinery and the first 320 acres of land. The additional 160 acres and 320 acres are rented-in under a crop-share rent-in agreement in which the operate; receives two-thirds of the harvest and pays two-thirds of the seed, fertilizer, and herbicide costs, and all other Operating 35 costs. The landlord receives one-third of the harvest as rent and pays one-third of the seed, fertilizer, and her- bicide costs. The Operator is the major source of labor with extra labor being hired if the requirements exceed the. capability of this supply. Operating capital is borrowed at the beginning of the production period and repaid at the end of harvest at a 7 percent annual rate of interest. Opportunity costs are changed for the interest on the land investment, and operator labor. . Table 5 provides a summary of the optimal enterprise organization, returns, Operating capital, and labor utilized for the 4 farm sizes studied under this system. The optimal enterprise organization consists of corn, wheat, and soy- beans in the solutions for all farm sizes. The corn acreage ranges from 62 acres for the 160 acre farm size to 444 acres for the 640 acre farm size class. All of the rented land is in corn. Wheat acreage in the l60acre farm size is 26 acres, increasing to 52 acres in the 320 acre farm size and remaining at that level for the Other two farm siZes. Soybeans account for 72 acres in the smallest farm size and 144 in the remaining 3 size classifications. Returns over variable costs for the 160 acre farm size are $8,398 and range upward to $28,408 for the 640 - Racre category. The range for the returns to.risk, manage- ment, and unallocated capital is -$91 for the smallest farm size up to $14,352 for the largest. Returns over cash 36 oeLNHom. oo.eeee oo.HNme oo.aeoe .Heo weeeeeso twee Hence oo.oea oo.oea oo.oea oo.owe .Hom waxes onenam Heme oo.Nmoe oo.eoem oo.Hemm oo.aemm .Hoa enameeezo antennae: . “mHmOU fim03h®>© £mdU oo.woem~ oo.mam- oo.efieea oo.wamw .Hoa Nmemeu ammo . manmflhm> pe>o messuom oo.awea oo.NNNa oo.emae oo.mme~ .Hoa Heeaeeu weaeeeeao Hezee< oo.ma~ea oo.~emNH oo.omew oo.mmNe .Hom Haeaeeu meaneaeao Hence . Hamuflmmu wcflpmsomo o.mem~. o.eHaH o.amefi o.mww nae: .eenaaaes tones Hence o.eae o.amN o.eHH --- teem noses ease: Hence o.memH o.mmeH o.mNma o.mww nae: Hones nopeeeno Hence ”eenaaaes tones o.eeH e.eea o.eea o.Ne eae< meanestm o.~m o.Nm o.Nm o.e~ eee< seen: o.eee. o.emN 0.4NH o.Ne eee< eeoe . "cowpeuwcempo Omflpmpoucm oee owe ONm OOH nae: aepH Amosoo Epmp Hmpocow paw .anOpw .COpmeOmcou pow.OHanpm>m mapSpem .mpmoo unoppe>o pepwpoomm pepmm mpmoe ammo po>o mapspom .wopovpmcoo po: mp Omenso>o e m .moxmp Opmpmo Hemp so .vnonpo>o knocpnome ampmoo ecma .ponma.popepemo pom mompmno zen bespocp po: moon .maHSpop wermpmopm. N manna mp pmopOpcp zepez no peepm>pswo finance esp Op whomop Heppmmo mappmpomo Hmscc< .meA map pow eoppswep pcsoam HmpOp Onp Op mpowop anpmmo wcppmpomo Hmpoe H oo.~mmefi oo.eeom oo.eow~ oo.ov~o oo.ommm~ oo.eNHm oo.m~nw oo.mwem oo.ov~o oo.newna oo.mnwm oo.mNNw oo.mwaH oo.oemo oo.wmo~a oo.Hm- oo.weev oo.w~ma oo.o~Hm oo.umme .HOQ .HOQ .Hom .Hoc .HOQ vamppmmu pomeOHHmcs wee .pcoEOmnqnz .xmpm Op mapspom emoppo>o ammoeoz Hmpoe Henna papmpomo pcespmo>:H camp :0 pmopOpaH mpmoo emozpo>o gmmeeoz mmpmou Ammo po>o mcpnpom 38 costs range from $4,357 to $23,396 for the 160 acre and 640 acre farm sizes, respectively. The labor utilization for this farming system is the same as that for the complete ownership farming system. For the 160 acre farm size, 885 hours of labor are utilized. This is operator labor only. Starting with the 320 acre farm size, hired labor is used increasingly as farm size increases. Hired labor accounts for 114 hours of the 1,437 hours of labor utilized at the 320-acre farm size and 474 hours of the 2,343 hours utilized at the 640 acre farm size. Operating capital amounts to $4,225 total operating capital or $2,435 annual operating capital at the 160 acre farm size, and ranges up to $16,293 total Operating capital or $9,487 annual operating capital for the 640 acre farm size. Ownership Plus Cash Rent-In Farming System The owner-operator has full equity in the machinery complement and up to 320 acres of land. The additional land services are acquired through cash rent-in. The op- erator is the major source Of labor with additional labor being hired if the operator is not able to provide the labor services when needed. Capital sufficient to cover variable cash costs and interest is borrowed at an annual rate of 7 percent at the beginning of the production period 39 and repaid at the end of harvest. Opportunity cost is charged for operator labor utilized at $1.50 per hour and the land investment at 6-1/2 percent per year. The optimal organizations and their selected returns and utilizations for this system are shown in Table 6. The optimal enterprise organizations for this system are: 160 acre farm size--62 acres, corn; 26 acres, wheat; and 72 acres, soybeans. The same ratio of corn, wheat, and soybeans applies to the 320 acre farm size with 124 acres, 52 acres, and 144 acres, respectively. The Optimal crOp organization-changes as the rented land is introduced in the study situation. For the 480 acre farm size, there are 284 acres, corn; 52 acres, wheat; and 144 acres, soybeans. The 640 acre size farm has 444 acres, corn; 52 acres, wheat; and 144 acres, soybeans. The returns over variable cash costs range upward from $8,398 for the 160 acre farm size to $29,733 for the 640 acre size farm. The range on the returns to risk, management, and unallocated capital is smaller with ¥$9ll for the 160 acre farm size and $15,677 for the 640 acre farm. The returns over cash costs range upward from $4,357 for the smallest farm size to $24,721 for the largest farm size. As with the preceding descriptions of farming systems, the 160 acre farm utilizes only Operator labor at a rate of 885 hours per year. Hired labor is utilized on 40 oo.Npom oo.eeee oo.p~me oo.peoe .pon eeegpe>o ameu peace oo.oem oo.oom oo.oem oo.owe .Hom waxes epepmm Hana oo.Nmoe. oo.eoam oo.pemm oo.pemm .pen magmeeezo steepeeez "mumoo flame—HOKIO gmmu oo.mmAa~ oo.eepm~ oo.apeep oo.wamm .poa mnemou name Opnmppm> po>o mapspom oo.em~ep oo.~Nea oo.emee oo.mme~ .pem Hephaee meaneeeao Hezee< oo.eoee~ oo.ANmep oo.omew oo.mNNe .pom peppeeu weppeeeeo pesos pupnppmmu mappmpmdc o.mem~. o.epap o.emep o.mwm nae: ..eeapppe: tones peace o.eae o.amN o.epe --- nee: poems eeepz pepop o.aemp o.mmep o.mNmH o.mmw use: Hones noeeaeno peace "erupppp: notes o.eep o.eep o.eep o.Na naea meannsom o.Nm . o.Nm o.Nm o.eN eee< peers o.eee o.ew~ o.e~p o.~e eau< eeoe ":Oppmupcmmpo Omppapmpcm see owe ONM oep nae: sens mmopoO Spam HOpOcOm mam .mpmoo OOOch>O OOHHHOOQO pOme mpmou ammo pO>O maHSpOm .gpzopm .cOHmesmcoo pom OHnOHHO>O mapspOm .OOpOmecoo po: OH OOOch>O e m .mOxOp Opmme HOOp so .OOOnpO>O xpOcHaems .mpmoo OGOH .pObOH pOpOpOmo pom mOmpnao Ham OOOHOQH po: mOon .mcpspop OOEEOpmopmN .epea OH mepOpaH :OHAB :O pqOHm>HOOO Hmsccm Opp Op mpOHOp HOpHmOO mchOpOmo Hmsec< .pOO» Onp pom OOpHOOOp pesoem HOpOp Opp Op mpOHOp HOpHmOO mchOpOmo HOpOh H oo.umomH oo.eeom oo.eom~ oo.oemo oo.HNn¢~ oo.nmnm oo.mmnm oo.mwem oo.oeNo oo.0Hme oo.mnmm oo.m-w oo.mme oo.ov~o oo.meNH oo.Hm- oo.meee oo.wNmH oo.omHm oo.~mme .Hom .Hoa .HOQ .Hon .Hom eHOpHmOu OOpOOOHHmea use :pcOEOmmcmz HmH m Op mapSpOm OOOAHO>O ammocoz Hmpos ponOH pOpOpOmo peoeme>aH vamp no meHOsz mpmou OOOnpo>o Amnocoz mm¢mOU gmmU Hm>0 manna—pom 42 the 320 acre farm size in the amount of 114 hours per year with total utilization equal to 1,437 hours. The 640 acre farm utilizes 2,343 hours of labor annually, of which 474 hours are hired labor. . Operating capital used on the smallest farm size is $4,225 of total operating capital or $2,435 of annual Op- erating capital. Whereas, the largest size farm was $24,604 of total operating capital or $14,287 of annual Operating capital. Combination Ownership and Custom Harvesting Farming System This farming system is one in which the owner- operator has full equity in land and machinery but custom hires the harvesting operation. The custom hiring charges for harvesting include charges for the machine operator's time. The Operator provides the labor supply for operations other than harvesting. Any additional labor needed is hired as the Operator's labor is exhausted.« As in the previously mentioned farming systems, operating capital is borrowed at the first of the production period and repaid at the end of harvest at an annual rate Of 7 percent. Opportunity costs of 6-1/2 percent are charged on the land investment and $1.50 per hour for operator labor. The optimal organizations for the variOus study sizes for the combination ownership and custom harvesting farming system are presented in Table 7. 43 oo.mm~e. oo.~eem oo.wmpm oo.mmeN .poa eeeaae>o ammo Hepos oo.o~mp oo.oeep oo.oea oo.ome .Hoa waxes epepmm Heem oo.mpm~ oo.~m- oo.mHHN oo.wHHN .Hoa OHEmaeezo seeeHeOez . "mpmou OOOapO>o Ammo oo.mpmm~ oo.eeo- oo.maaep oo.emee .Hoa mnemou naeu OHQOHHO> HO>O megapem oo.NHHNH oo.HNoa 00.00am oo.ema~ .Hom HeeHeeO merepeeO Hasee< oo.eopp~ oo.eeemH oo.mamop oo.NOHm .Hom HepHeeO meapeeeeo pesos . H. .HOpHQOo wchOpOmo o.pmea o.omm~ o.~oop o.ape Leo: eeNHHHOO tones peace o.mee. o.amm o.epp --- nee: Henna eeaHm panes o.eepp o.pe0p o.mmw o.epe nee: tones pepeaeeo Hence ”OONHHHOO tones o.aw~ o.mHN o.eep o.~e epe< menensom o.mop o.ae o.Nm o.e~ eee< panes o.we~ o.emp o.emp o.Ne epe< epoo ":OHpONHcmmpo OmHHmpOpcm ovo owe own OOH pHca EOpH mmOpoHO2 EOpmso msHm mHgmpOnzo em pom mOEOOaH HOHpeOpom eOpOHOomm< ecu mcoHpnNchwpo Hmermo n OHQOH 44 Spam HmpecOo .OOOHHO>O EHOH HOHOQOM use .npzopm .OOHmeSOGOO pom OHnOHHO>O mcppom OGOH .HOQOH.HOpOHOmO pom mOmpmgo kce OOOHOcH po: mOOQ .mapspOp OOEEOHmOHm .mpmoo OOOspO>O OOHHHOOQO pOpHO mpmoo ammo pO>O mcppom \ .OOpOmecoo pod mH OOOrpo>O v m .mOXOp Opnme HOOH HO .OOO5HO>O ApOaHAOOE .mpmoo N. Lease mH mepOppH :OH:3 no pcOHO>H5OO Hansen Opp Op OHOHOH HOpHmOO maHpOHOmO Hm:::< .HOOx Opp pom OOHHDOOH p::oEO HOpOp Onp Op mpOmOp HOpHQOO mchOHOQO Hmpoe . H oo.mea0p oo.m-eH oo.me5H oo.oweNH oo.eaae~ oo.woen oo.BOQOH oo.NOOH oo.oomm oo.mnme oo.mwov oo.Nnmn oo.~mmH oo.oe~o oo.um0HH oo.mmm oo.meoe oo.m~m oo.omHm oo.w~we .HOQ .peo .poe .pon .HOQ eHOpHmOo wOpOOOHHOGD can .pcOEOmmcmz .mem Op mapspOx OmonpO>o Ammucoz HOpOs HOOOH HOpOHOOo paoeme>cH ucmq co mepOch "mpmou OmonpO>o nmnoeoz mmpmou ammo HO>o mapspOm 45 The returns over variable cash costs range from $7,486 associated with the 160 acre farm size to $29,215 associated with the 640 acre size farm for a $21,729 spread. The returns to risk, management, and unallocated capital- V for the 160 acre size is $785 and rises to $10,748 at the 640 acre farm size level resulting in a $9,663 spread. Returns over cash costs range upward from $4,828 for the smallest farm size to $24,977 for the largest farm size. The optimal Organization for-the 160 acre farm 51:5 is 62 acres corn, 26 acres wheat, and 72 acres soybeans. This same proportion holds through the various study sizes. At the 640 acre farm size the crop acreages are 248 acres corn, 105 acres wheat, and 287 acres soybeans. Only op- erator labor was utilized in the 160 acre farm size, 617 hours. Starting with the 320 acre farm size, hired labor is utilized. At this size level, 888 hours of operator labor is used plus 114 hours Of hired labor to give a total Of 1,002 hours. At the 640 acre size level, a total of 1,631 hours of labor is utilized of which 465 hours are‘ utilized. The Operating capital borrowed for the smallest farm size is $5,102 of total Operating capital or $2,937 annual Operating capital. In comparison, the largest fart -size uses $21,106 of total operating capital or 512,112 annual Operating capital. 46 Cash Rent-In Farming System The owner-operator has full equity in his machinery complement and through cash rent-in acquires land services. The operator is the major source of labor with any addi- tional labor being hired as the Operator's labor supply is exhausted. Capital sufficient to cover variable cash costs and interest is borrowed at an annual rate of 7 percent at the beginning Of the production period and repaid at har- vest. Opportunity cost is considered for operator labor at $1.50 per hour. Table 8 presents the Optimal organization and asso- ciated potential incomes for the cash rent-in farming system. The farm size with the largest returns to risk, management, and unallocated capital is 383 acres with a return of $7,075. The optimal organization associated with this income is 186 acres corn, 79 acres wheat, and 118 acres soybeans. To produce this income, 1,577 hours of labor, of which 144 are hired, are utilized. Total operating capital irequirements are $17,633 or $10,672 annual operating cap- ital. The returns over variable cash costs are $12,931. The farm size that produces the second largest returns to risk, management, and unallocated capital ($6,760) is 367 acres. The Optimal organization of 248 acres corn, 105 acres wheat, and 14 acres soybeans also' produces a return over variable cash costs of $12,875. One thousand four hundred eighty five hours of labor, of 47 oo.~moe oo.oonm oo.Homm oo.Homm .HOQ .OOO£HO>O ammo HOpOh --- --- --- --- .HOQ . mOme Opmpmm HOOm oo.~moe oo.oonm oo.Homm oo.Homm .HOQ mHnmpOnzo Apmcngmz .. "mpmou OOOnpO>o.smeu oo.manH oo.Hmm~H oo.w~ooH oo.moem .HOQ Nmpmou :mmu OHpOHHO> HO>o mpHOpOm oe.mmeap oo.Neeop oo.em~m oo.mwoe .Hom Heepeeo meapeeeeo peaee< oo.mmonH oo.mmonH oo.meeH oo.mOHn .HOQ HOpHmOu wchOpOmo Hmpoe . HNHOpHmOu maHpOHOOo o.mweH o.aemp o.amep o.mwm nee: eeNHpHOO Henna Hence o.OHH o.eeH o.eHH --- p50: HOEOH OOHHm Hmpos o.msmH o.mmeH o.mNmH o.mmm p30: HOQOH HOpOHOmo Hmpos A HOONHHHp:.ponOH o.ep o.mHH o.eep o.NH eae< meeeasem o.mOH o.mm o.Nm o.o~ OHu< pOOEZ o.me~ o.omH o.eNH o.~o Opo< epou "noHpONHcmmpo OmempOpcm oeo owe omm OOH pHas EOpH HmOHoO EHOH HOpOcOm 0cm .apzopm .OOHpQEOOOOO pow OHnOHHO>O mcpzpom .mpmoo 0OO£HO>O OOHHHOOQO HOme mpmoo ammo HO>O mapspOm .OOHOOHOOOO p0: mH 0OO£HO>O v m .mOxOp Opnme HOOH HO .0OOAHO>O xpochuOs .mpmoo OcOH .HOQOH HOpOHOmO HOH.mprO:O zcm OOSHOQH po: mOOm .mcppoH OOsEOHmopmm .eHee mH mepOch :OHHS :o szHO>HOOO HOSCGO Onp Op OHOHOH HOpHmOu manOpOmo Hassc< .HOOH ng pom OOHHOOOp pezon HOpOp Opp Op mpOmOH HOpHmOO mchOpOmO HOpOH H 00.0050 00.m00~ 00.m00~ oo.m~ww 00.mnon 00.0mHN 00.0mHN 00.m-0 00.N00m 00.m00H 00.m00H 00.5005 00.eHm 00.0NmH 00.0NmH 00.N¢0H .HOQ .HOQ .Hom .HOQ .HOQ eHOpHmOU OOpOOOHHOcn 0am .pcOEOmmemz .HmHm Op mapspom 0OO£HO>0 Ammocoz HOpOH HOQOH HOpOpOmo pcOEme>eH OOOH no mepOpeH mpmou OOOAHO>0 ammocoz mmpmou Ammo HO>0 OGHSpOm 49 which 110 hours are hired, are utilized by this size farm. Capital requirements are $17,633 total operating capital or $11,635 annual Operating capital. The smallest return to risk, management, and un— allocated capital is $514 which is associated with the 160 acre farm size composed of 62 acres corn, 26 acres wheat, and 72 acres soybeans. Only operator labor is utilized, 885 hours. Annual operating capital amounts to $4,085 or $7,105 total Operating capital. 2 The smallest returns over cash costs is $1,842 associated with the smaller farm si7e and ranges to $9,225 associated with the largest farm size. Crop-Share Rent-In Farming System With the crop-share rent-in farming system, the Operator has full equity in machinery and no equity in land. The Operator receives two-thirds of the harvest and pays two-thirds of the seed, fertilizer, and herbicide costs plus all other variable expenses. The landlord receives. one-third of the harvest as rent and pays one-third of the seed, fertilizer, and herbicide costs. The operator is the major sOurce of labor with extra labor being hired as nec- essary. Operating capital is borrowed at the beginning of the production period and is_repaid at the end‘of’harvest at a 7 percent annual rate of interest. Opportunity cost charges are made on Operator labor at the rate of $1.50 per hour. 50 Table 9 presents the optimal organization and asso- ciated potential incomes for the crop-share rent-in farming system. The returns to risk, management, and unallocated capital range from $365 for the Smallest farm size, 160 acres, up to $13,417 for the largest farm size, 640 acres. Also, the smallest return over variable cash costs $5,254) is associated with the smallest farm size and the largest return over variable cash costs ($20,273) is associated . with the largest farm size. The returns over cash costs range from $1,693 associated with the 160 acre farm size to $16,221 associated with the 640 acre farm size. The proportion of the various crops to farm size is constant fOr this farming system. The smallest farm size is organized into 38.75 percent corn, 62 acres; 16.25 per- cent wheat, 26 acres; and 45 percent soybeans, 72 acres. The largest farm size is organized into corn 248 acres, wheat 105 acres, and soybeans 286 acres which represents ‘38.75 percent, 16.25 percent, and 45 percent respectively. The 160 acre farm size utilizes 885 hours of op- erator labor. Starting with the 320 acre farm size, hired labor is required. Total labor used at this level is 1,437 hours, of which 114 hours are hired. The largest farm size uses the most laborz. operator 1abOr--1,869-hours, and hired 1abor--474 hours. 51 .fiwOSHO>O SmmU HwHOH eo.~mee oe.eeam ee.aemm oe.pemm .Hoa sun I... n-.. I: .HOD moxwh oumumm Hmom oo.Nmoe oo.eoam oo.Hemm oo.pemm .Hee aHameeezo seeeHeOez _. "mpmou UQO£HO>O fimmu oo.me~o~ oo.mmmmp oo.Ommo~ oo.emNm .poa Nmpmou twee OHLNHHN> Hm>0 mcfispmz oo.m~ea oo.eeem oo.epam oo.mpwp .Hon pespaee OereeenO Hezee< so.OMHmH oo.wmma oo.aeee oo.aepm .peO HeeHeeO nepeeaeeo pence . HHHOpHmOu mchOpOOO o.memN. o.epap o.amep o.mmw use: ,OONHHHOO tones Hence o.eae o.amN o.epp --- nae: tones OeaH: Haves o.aemp o.mmep o.mNmp o.mmw use: tones nepeeeeo pence . "OONHHHOO noses o.ew~ o.mpN o.eep o.NH eae< meannsow o.e0p o.ae o.Nm chem eeu< pate: o.me~ o.ewp o.eNp o.Ne eae< epoe "coHpONHcOMHo OmHHmHOpcm see ewe ONO OOH ape: gees HmOpo<0 mONHm EHOm Eopmxm wcHEHOm :H-p:Om OHOHm-QOHu O How mOEoocH HOHpcOpom wOpOHuOmm< OGO mcoHpOanOmpo HOEHpOo 0 035. 52 ‘ .OOHOOHmcoo po: mH 0OO£HO>O EHOH HOHOcOo .mpmoo 0OO£HO>O OOHHHOOOO HOpHO mpmoo :mOo HO>O mapspOme .OOOHHO>O EHOH HOHanm 0cO .zpzopm .OOHpmeschO pom OH0OHHO>O mapspOmm .mOxOp OpOme HOOH Ho .0OO0HO>O 5pOcHAOOE .mpmoo OOOH .HOQOH HOpOpOmo pom mprOno 5aO OODHOGH po: mOOQ .mcpspOp 0OeEOHmopmN teams mH.mepOp:H 0OH03 :O pcOHO>HOOO HOscaO Onp Op mHOHOp HOpHmOe mchOpOmo HOOOO< .HOO5 ng pom OOHHOOOH pd:oEO HOpOp Osp Op mHOHOH HOpHaOo mchOHOmo HOpOe H 00.5HemH 00.00Hm 00.em5e 00.m0m .HOQ OHOpHmOu 0OpOOOHHOqa ch .pcOEOchOz .mem Op mapspOm 00.000N 00.mmem 00.mme 00.0NmH .HOQ 0OO£HO>O :mOOcOz HOp05 00.000N 00.mwem 00.mme 00.0NmH .Hoa HonOH HOpOHOmo --- --- --- .-- .Hom p:oEme>:H OGOH no mepOan mu mOU flmmfihflpro AmmUGOZ 00.HNNOH 00.500HH 00.0050 00.m00H .HOQ mmpmoo :mOo HO>O OQHSpOz 53 Operating capital is used in the smallest amounts, $3,149 total Operating capital or $1,815 annual operating capital, by the smallest farm size, 160 acres. The largest farm size, 640 acres, uses the most tOtal operating capital, $13,130 or annual Operating capital $7,623. Complete Custom Hiring Farming System The Operator utilizing a complete custom hiring has full equity in land but none in machinery. All Operations are custom hired. The hiring of the machinery services include labor services to operate the machinery. Operating capital is borrowed at an annual rate of 7 percent at the beginning of the production period and‘repaid at the end of harvest. Opportunity costs are charged for the land invest- ment at a rate of 6-1/2 percent. The optimal organizations and the associated poten- tial incomes for this system are presented in Table 10. The returns over risk, management, and unallocated capital range from $2,290 for the 160 acre farm size toll $9,475 for the 640 acre farm size for a spread of $7,185. The spread of the returns over variable cash costs is larger than that of the returns to risk, management, and unallo- cated capital. The smallest return ($5,890), is associated ,with the smallest farm size and the largest return ($23,875) with the largest farm size for a spread of $17,985. Returns over cash costs range from $5,410 associated with the 160 S4 wmonuo>o ammo Hmuoe oo.ommH oo.ov¢H oo.oom oo.owv .Hoa oo.o~mH oo.oqva oo.oom oo.omq .Hon moxmb oumumm Hmoz --- --- --- --- .Hoa aficmhmczo xhocfisonz ”mumou wmonho>o.:meu oo.mnmmm oo.moona oo.kuHH oo.omwm .Hon Nmpmou ammo manmwhm> ho>o magnuoz oo.Ho~mH 00.0mvaa oo.HNou oo.onm .Hoa Hmufimmu wcfipmnmmo Hmscc< oo.mvmo~ oo.HHmmH oo.mn~ma oo.nmoo .Hon Hmpfimmu wcfiumuomo Hmpoe . Hufimufimmu mcwpmuoao --- --- -1- --- kno: meHkuD honmq HmuOH --- --- --- --- poo: Home; papa: Hmuoe --- --- ---. --- use: uonmq houmpomo fiance ”wonwafiu:.uonmq 0.5mm o.mHN o.qqfi o.Na opu< memonsom o.moa o.om o.~m o.o~ ohu< yams: o.mv~ o.omH o.vNH o.mo ouo< :gou ”:ofiumwficmmho omfipmpopcu ovo owe on ooH was: EouH Amohoo spam Hmhocoo .mumoo wmogHo>o onmHoomm Hopmm mumou ammo uo>o mansuomv .vmogho>o sham HmHocom cam .LHZOHM .coHumEchoo How oHanHm>m m:H:uomm .moxmu opwpmo Hmoh Ho .wmogno>o xhoanumE «mumou @cmH .Hoan HOHmHomo How mowhmgo kcm owsHozH uo: moon .m:H:uoH onEMHMOHmN .meQ mH Hmonoch :ngs so pcon>Hsco Hmsccm may ou whammy HmHHmmo mcHumHomo Hmscc< .Hmox ogp How onHzcoH ucsosw Hmpou may ow mHoHoH HmuHmmu maHuwHomo HmHOH H oo.mno Ammocoz Hmpoe --- --- --- --- .Hoa Honmq Houmhomo oo.owv~H oo.oomm oo.o¢~o oo.o~Hm .Hom unosumo>aH vnmq no umououcH mumou wmmnho>o ammocoz oo.mmmHN oo.mNNOH oo.HNwOH oo.Ova .Hom mmumou ammo Ho>o mGHSumm 56 acre farm size to $21,955 associated with the 640 acre farm size. The optimal organization of the crop enterprise is the same prOportion for each farm size. The 160 aCre farm ' size has 62 acres corn, 26 acres wheat, and 72 acres soy- beans, or 38.75 percent, 16.25 percent, and 45 percent respectively. The 640 acre size farm is optimally organized with 248 acres corn, 105 acres wheat, and 287 acres soybeans or the same 38.75 percent corn, 16.35 percentwheat, and 45 percent soybeans as the 160 acre farm. Total operating capital ranges upward from $6,637 for the smallest farm size to $26,548 for the largest farm size for a spread of $19,911. Annual Operating capital has a spread of $11,451 from $3,810 for the smallest farm size to $15,261 for the largest farm size. Cash Rent-Out Farming System This farming system consists of the farm land being rented-out for $18 per acre annually.' The landlord pays' none of the expenses incurred by the producer in the produc- tion of his crops. The tenant is free to produce whatever crop he so desires. The landlord's only expenses are the real estate taxes, $3 per acre per annum, and opportunity costs on the land investment in which he has full eqUity. The opportunity cost is 6-1/2 percent, which comes to $19.50 per acre per year. After the deduction for real estate S7 taxes, the landlord is not meeting his opportunity costs by $4.50 per acre per year. For each acreage, the landlord is receiving $15 net cash per acre. For the 160 acre farm size, the gross rental income is $2,880 and returns to risk, management, and unallocated capital are -$720. For the 320 acre farm size, gross rental income equals $5,760. After deductions for real estate taxes and opportunity costs, a return to risk, management, and unal- located capital of -$1,440 results. The same trend holds for the 480 acre and 640 acre farm sizes. The 480 acre farm size has a grOss rental income of $8,640 which after real estate taxes and opportu- nity costs results in a returns to risk, management, and unallocated capital of -$2,l60. For the 640 acre farm size, gross rental income is $11,520, and after overhead costs results in a returns to risk, management, and unallocated capital of -$2,880. _ These returns over caSh costs range frOm $2,400 upwards to $9,600. Table 11 presents the expense and income information for the cash rent-out farming system. Crop-Share RenteOut Farming System,,. This system is one in which the landlord receives one-third of the harvest as rent and pays one-third of the 58 _ . .ovms mH amonuo>o sham Hmhocmm mo GOHumhomecoo oz .mumoo.©mogho>o onmHumgm Houwm mpmoo ammo Ho>o magnuomm .. .umo:po>o.EHmm Hmpocom can .cOHuQESmaoo .guzopm How oHamHHm>m mpmoo ammo Ho>o m203uom 0 . OEOUGH Hmucmh mmOHUH 00.0000- 00.00HN- 00.000H- 00.000- .Hom H00H000 emuauoHHmea 0:0 . .HmoEomwcmz .mem on mGHSHOm 00.0000H 00.0000 00.0000 00.00H0 .Hoo emogsoso 0000002 H0000 --- --- .-- --- .Hom Hone; Honmeo 00.0000H 00.0000 00.0000 00.00H0 .Hoa “cospmo>cu 0000 so “mmwmueH . mumoo wmogHm>o ammocoz 00.0000 00.0000 00.0000 00.0000 .Hoa 000000 0000 Ho>o 0003000 00.000H 00.000H 00.000 00.000 .Hom emonso>o.emmo H0000 00.0N0H 00.000H 00.000 00.000 .Hoa 00000 000000 H000 --- --- --- --- .HOQ mHzmuoczo knocHgowz ”mumou wmogpo>o ammo 00.000HH 00.0000 00.0000 00.0000 .Hoa HugoueH 00000 000 000 000 00H 00¢: sopH amouoo Ammo HwHOB oo.o~mH oo.o000 oo.oom oo.ome .Hon 06x09 0000mm Hmom --- . --- --- --- .Hom mHgmuoczo xhocHnomz "mumou wmoguo>o ammo oo.mnm~H oo.Hmvm 00.0000 00.00Hm .Hoq Nmumou nwmo oHan00> 00>o mcH=0om 00.0000 00.0000 00.0000 00.000 .000 0000000 000000000 00000< 00.0000 00.0000 00.0000 00.0000 .000 0000000 000000000 00000 . HuHmpHmmo waHpmummo --- --- --- --- 0:0: 00n00 Hmuoe --- --- -- --- 0:0: 00000 0000: 00000 --- --- --- --- 030: 00200 0ouwhomo Hmpoh , “wONHHHp: 00900 0.0mm o.mHN 0.00H o.Nn opo< mcmonzom o.moH. o.m0 o.~m 0.0m ouu< “mos: 0.000 0.000 c.0NH 0.00 00o< :0ou ”noHpmuHamwpo omHumhouem 000 000 000 000 0H0: EouH nmo0o0 E000 0000:00 .mumou 000:0o>o 000000020 000mm mumou :mmu 00>o magnumme .wWo:Ho>o 800% Hmaocom 0:0 .:0300m .coHuQESmcou 00m oH:maflm>m mchspmmm .moxmu 000000 0000 00 umm:nm>o 000:0:006 .mumou 0:00 “00:00 00000000 00m mmw00:u 0:0 0020020 00: 0009 .mc03000 wmaEmeOHQN .6009 m0 00000000 :00:3 :0 0.:ofim>0:cm 003::0 0:0 00 000mm» HmuHQmu ma00000ao Hmscc< .0000 0:0 00m 00003000 003050 00000 0:0 00 mHoMOH HmpHmmu wQHHmpomo 00005 0 oo.mNmH- oo.mom0- 00.000- 00.0m0- .00: vfiwpflmwu 000000000cs 0:0 .ucmEmmmcmz .xm0m ow mcpzpmm oo.ow0~0 oo.oomm oo.o0~o oo.o~0m .00: 000:0m>o :mmucoz 00000 --- --- --- --- .00: 00:0: 00000000 oo.om¢~a oo.oomo oo.oe~o oo.o~0m .Hom pamEumm>cH can: :0 “mohoucH mumoo wav:uo>o :mmucoz oo.mmooa oo.ammn oo.mmmm oo.voom .Hom mpmou :mmu HQ>0 mchzuom m 63 crop-share rent-in systems. The rented in acreage is all corn, resulting in 59.17 percent corn, 10.83 percent wheat, and 30.00 percent soybeans at the 480 acre farm size level and 69.37 percent corn, 8.13 percent wheat, and 22.50 per- cent soybeans at the 640 acre leyel. The other exception is the cash rent-in system. At the 480 acre and 640 acre farm sizes, the credit restraint limits farm size and therefore has effected the optimal organization. In general, as farm size increased, total labor ‘ utilized increased. More operator than hired labor was utilized. Those farming systems, excluding the cash rent- in system, where no machinery services are custom hired have the largest utilization of operator, hired, and total labor. The rent-out systems and the complete custom mre system use the least labor. The type of farming system exerts some influence on the amount of operating capital borrowed. Those systems with large cash expenditures have large borrowings. 64 Footnotes 1Larry J. Connor, Costs and Returns for Major Cash Crops in Southern Michigan, Agricultural Economics Report No. 87, Department of Agricultural Economics, Michigan State University, 1967, pp. 5-6. CHAPTER IV COMPARISON OF ALTERNATIVES AND IMPLICATIONS OF THE STUDY This chapter contains a comparison of the respective farming systems, based on the results of the-analysis pre-1 sented in Chapter III, and the implications drawn from the comparisons. Comparison of Alternatives Farm operators are faced with a continuing problem of selecting the manner in which to acquire resource serv- ices in order to maximize income. Depending on the manner in which resource services are acquired, incomes vary. This presentation is directed toward comparing the alterna- tive cash-grain farming systems in terms of returns over- cash costs (returns available for growth, consumption, and general farm overhead); returns to risk, management, and unallocated capital; Operating capital; labor utilization; and Optimal enterprise organization. Returns Over Cash Costs The potential returns over cash costs for the al- ternative cash-grain farming systems for all farm sizes are 65 66 presented in Table 13. The table contains two comparisons: (1) A comparison between those farming systems where all operator labor is for the use of the farming system, if it can be utilized. These farming systems are termed "pure“ . farming systems. (2) In addition, a comparison is made between those farming systems where some operator labor is sold off-farm and the “pure” farming systems. The farming systems where operator labor is sold off-farm to supplement the farm income are termed ”combined" farming systems, 143;) farm income is combined with off-farm income. There are three "combined" farming systems. The unused labor of these farming systems is sold at the average manufacturing rate and added to the farming system's returns over cash costs, in order to explore the income earning potential of cash-grain farming plus off—farm work. The unused labor of the cash rent-out and crop-share rent-out “farming systems is sold at the average manufacturing wage rate of $7,289 per year. In addition, 80 percent of the unused labor of the complete custom hire farming system is sold at the average manufacturing wage. The remaining 20 percent is utilized in management activities for the custom hiring operations. These three farming systems were used as the systems . from which operator labor was employed off-farm because they had the largest amount of time available. The critical labor requirements during certain time periods of the year 67 o o m m m . m m H oo.mmm.HN oo.NNN.OH oe.HNN.OH oo.OHe.m QHH: aoamsu opoHaaoe a a OH NH o . o N a oo.HNN.0H oo.Nqo.HH oo.a0N.o oo.mmo.H cH-u:om Quagm-aozo NH OH a HH a N . o N oo.me.N oo.mNN.a oo.Noo.N oo.va.H :H-ueom :mso m a N a . N . m N .N oo.NNa.a oo.mNm.mH oo.Nmo.HH oo.me.e ummsam: sepmsu + dHemzozzo N m . m m . m . N H m oo.HNN.aN oo.OHm.NH oo.wao.NH oo.amm.a aH-acmm ammo + aHemzoczc m m m m a a H m oo.owm.mN oo.Naw.NH oo.mao.NH oo.Nmm.v :H-psom opmam-mopo + mHgmpmczo N N m Nm H H H Hm oo.ONN.oN oo.mmo.mH oo.mmo.NH oo.Nmm.q ngmchzo mpoHanu HmHmHHoav OHS awe :Nm OOH AmopoHpmchouH< pom mpmou ammo ho>o mchsuom HmHuzouom mo camfiummEou < ma oasmb 68 .Ehmm-mmo woonmEo mH hoan Houmuomo ohms: mEoumzm wcHEHmm omogp ohm mEopmxm :woaHnEou: .mEopmxm mcHEhmm :opsm: paw :wocHnEoo: map How mpmoo ammo uo>o m:H5uoH mo mEHou :H umoBOH ou ymmgmH: Eonm wcchmmw . .cho.Epmm-:o voNHHHH: mH nonoH Houmuomo.opo:3 omoau ohm mEoumzm mGHEHmm :ohsm: .mEoumxm mcHEHmm :ousm: pom mpmoo ammo no>o chopoa mo mEHop cH amoSOH on ummang Eoum quxnmmH N N N . N OO.OOO.NH OO.OON.OH OO.OHO.NH OO.mmO.O HNOz ENOO-OOO + NOO-NOOO ONOOO-OONO O O O N OO.OOO.OH OO.OOO.OH OO.OOO.NH OO.OOO.O Hhoz ENOO-OOO + NOO-OOOO OOOO H H H H OO.OON.NN OO.OOO.NN OO.NOO.OH OO.HON.HH Hhoz ENOO-OOO +ONH: EOOOOO OOOHOEOO OH HH HH O N O O O , OO.OOO.OH OO.HOO.N OO.ONN.O OO.OOO.N Ono-p:om ONOOO-OONO HH NH NH OH O O O N O0.000.0 OO.OON.N OO.OOO.O OO.OOO.N pso-uaom ammo 69 for the other systems was cause for them to not be consid- ered in a combination of farm and off-farm incomes. It was assumed that any amount of labor could be employed off-farm, but only the two previously mentioned levels were considered in the analysis. The combinations undertaken by this study are directed toward exploring some of the possible consequences and is not intended to be exhaustive in its scope. There are problems concerning the "combined” systems becadse of the unemployment factor of industrial workers in terms of hours worked, the cost of travel to and from work, the fringe benefits of industrial employment, and other differ- ences. Important as these considerations are, the results of the combination still may give useful insights into the income earning ability of these systems without including them in the analysis. Comparison of "Pure" Cash-Grain Farming Systems. As farm size increases, with the exception of the cash rent- in farming system, returns over cash costs increase.- The capital limitation of the cash rent-in system restricted the income earning ability of the system at the 480 acre and 640 acre farm size. For the 160 acre farm size, the returns over cash costs for the rent-in farming systems ($1,842“for cash rent-in and $1,693 for crop-share rent-in) are lowest be— cause of under-utilization of the available machinery 70 services and rent expense for land services. The rent-out farming systems have low incomes ($2,400 and $2,664 for the_ cash rent-out and crop-share rent-out farming systems, reSpectively) because of the low cash rental rate for the cash rent-out farming system. The cash rent after cash expenses is less than returns over cash costs for the other farming systems. Likewise, the crop-share rent-out system's returns are low due to the small revenue received as rent compared to the other systems. The returns for the complete custom hire system are highest ($5,410) because the system utilizes only the machinery services that it needs, i;2;’ the system has no idle machinery and subsequent un-utilized machinery services, and no cash expenses for acquiring land services. The Spread between the lowest income earner, the crop-share rent-in farming system, and the highest income producer, the complete custom hire system, is $3,717. For the 160 acre and 320 acre farm sizes, the com- plete ownership, the ownership plus cash rent-in, and the ownership plus crop-share rent-in systems have the same returns over cash costs, and returns to risk, management, and unallocated capital figures. This is due to the owner- ship plus cash rent-in and the ownership plus crop-share rent-in systems being the same as the complete ownership system until the 320 acre farm size. After the 320 acre farm size, the additional 160 acre and 320 acre of land services are acquired via the rent-in schemes which changes the earning abilities of the farming systems. 71 As the farm size increases to 320 acres, the com- plete ownership system becomes the largest returns over cash costs producer ($12,098) and retains this ranking for the 480 acre and 640 acre farm sizes (incomes of $19,638 and $26,876, respectively) also. This is because of the more efficient utilization of the machinery services and the earnings of land services accruing to the system. The cash rent-out and crop-share rent-out systems rank lowest relative to the other systems for the-320 acre (returns of $4,800 and $5,329) and 480 acre (returns of $7,200 and $7,991 respectively) farm sizes because the rent earned is lower than returns over cash costs for the other systems. Even though the other systems have more expenses, the income earned more than offset the additional expense. For the 640 acre farm size, the rent-out systems moved up in ranking because of the cash rent-in system meeting its credit restraint, which curtailed its earning potential, and caused it to drop to the lowest income earning position. The complete land service rent-in systems usually rank higher than the rent-out systems for the 320 acre, 480 acre, and 640 acre farm sizes due to the larger income earning ability of these systems. The complete custom hire system ranks above the rent-in systems because this system does not.have caéh rental expenses for land services. Even though the custom hiring expenses are larger than machinery ownership costs, 72 the difference is not great enough to offset the lower costs resulting from no rental expenses for land services. Comparison of "Combined” Cash-Grain Farming Systems. Off-farm work is not uncommon among Michigan farmers.. By . combining off-farm work income with the farm income of those farming systems which require no labor of the operator for operation of the farm, a comparison between "pure" and "combined" farming systems may be made. The "combined” systems are: complete custom hire_plus off-farm work system, cash rent-out plus off—farm work system, and crop- share rent-out plus off-farm work system. Considering both "pure" and "combined" systems, the complete custom hire plus off-farm work is the largest income producer for all farm sizes. The crop-share rent- out plus off-farm work system and the cash rent-out plus off-farm work system, rank second and third, respectively, for the 160 acre farm size. The 160 acre farm size for the ”pure" systems is insufficient to produce an income equal to off-farm wages. Therefore, if off;farm income is added to that income which is produced by the farming sector of the farming system, the resulting combination is larger than any of the "pure" farming systems. Although, only 80 percent of the off-farm income of the crop-share rent-out system and the cash rent-out system is added to the complete custom hire system, the difference between the returns produced by farming are great enough to overcome the 20 73 percent differential in wage income to make the complete custom hire plus off-farm work the largest income producer. For the 320 acre farm size, the Mcombined" systems are ranked as follows: first-~complete custom hire plus. ' off-farm work; second--crop-share rent-out plus off-farm work; and sixth--cash rent-out plus off-farm work. The cash rent-out plus off-farm work system is separated from the higher ranked complete ownership system by only $9.00. As explained for the 160 acre farm size, the first and second ranked "combined" systems are superior in earning ability to the "pure" systems due to the off-farm earned income being more than enough to overcome the earning abil- ity of the various "pure" farming systems. For the 480 acre and 640 acre farm sizes the com- plete custom hire plus off-farm work is again the largest income producing system. Returns to Risk, Management, and Unallocated Capital Table 14 presents the returns to risk, management, and unallocated capital associated with alternative farming systems for all farm sizes. The rent-out systems for all farm sizes have neg- ative returns to risk and management values due to inability _of the system to produce enough income to cover the oppor- tunity costs on land investment. The complete ownership system of the 160 acre farm size also is negative due to a 74 N t. O . O O HOV . HNO HOV HHO O0.0N0.0. OO.OOO.O OO.HOO.O OO.OON.N . OOH: soumsu OOOHOEOO O O . O N HOV HNO HNO HOV OO.NHO.OH OO.OOH.O . OO.OON.O OO.OOO OH-OOOO OOOOO-OOOO O O . ,O O . HNO HOV HHO HOV _ OO.OON.O OO.ONO.N OO.NOO.O OO.OHO OH-O:0O OOOO . O N N O HOV HOO HOV HNO . O0.00N.OH OO.OOO.N OO.OOO.O OO.OON NOO>OO: EOOOOO + OHOONOOOO N . N O O HHO HHO HOO HOO oo.nNo.mH oo.nmN.m oo.mnw.m oo.Hm. :Hsucom ammo + mfigmaeczo O O O O O . HNO HOO HOV HOV OO.NOO.OH OO.ONH.O OO.ONO.O OO.HO- OH-OOOO ONOOO-OONO + OHOOOOOOO O O O O HOV HOO HOO HMOO . OO.NOO.HH OO.OON.N OO.ONO.O OO.HO- OHOONOOzO OOOHOEOO HOOOHHOOO ovo .bmw owm ooH mEepmkm mcwehmm AmopoHumcaopH< How HmuHmmo emumooHHmas cam .ucesommcmz .mem ou maHSHem one mo acmHHmmEou < «H efinwe 75 .Ehmmwmwo weonmEo OH Hoan Hoemhomo voNHHHp:.:s ohegz wsoumxm maHEHmw mmonu mam maeumzm :wechEou: .mEeumxm mnHEumm :ehzm: cam :pocHnEoo: use How mumoo ammo He>o magnum“ mo mason :H pmeon 0H Hmoan: Scam mcHxame .cho Eamm-:o meHHHu: OH Noan pepmpemo whoa: emonp ohm maeumxm mcHEpmm :oasm: .maoumzm mcHeNmm :ehsm: wow mumoe Ammo Ho>o megapou mo mENou QH ummBOH on “mogmH: Eoum wcchmmH m m . N N OO.ONO.O OO.OOO.O OO.OOO.O OO.ONO.N ONO: ENOO-OOO + “OO-OOOm ONOOO-OONO OH OH m m OO.OOO.O OO.OOO.O OO.ONO.O OO.OOO.O ONO: ENOO-OOO + “OO-OOOO OOOO H H H H OO.OON.NH OO.OHO.OH OO.NOO.OH OO.HOO.O Mao: ENOO-OOO + ONHm sOOOOO OOOHOEOO HH HH HH HH HOV HOO HOO HOO O0.0NO.H- O0.000.H- OO.HHO- OO.OOO- “OO-OOOO ONOOO-OONO NH NH NH NH HOO HOV HOV HOO . O0.000.N- OO.OOH.N- OO.OOO.H- OO.ONN- “OO-OOOO OOOO 76 lack of returns able to cover opportunity costs on operator and family labor and land investment. This lack of returns is due to high machinery costs for the assumed machinery complement for the farm size. I All other systems for all other farm sizes have positive returns to risk and management. The highest returns to risk and management for the "pure" systems changed from the complete custom hire system for the 160 acre farm size to the cash rent‘in system for~ the 320 acre farm size, thence to the ownership plus cash rent—in system for the 480 acre and 640 acre farm sizes. The lowest positive returns to risk, management, and unal— located capital accrue to the crop-share rent-in system for the 160 acre farm size, the ownership plus custom harvest system for the 320 acre farm size, the complete custom hire system for the 480 acre farm size, and the cash rent-in .system for the 480 acre farm size. If the farming systems are unable to cover their opportunity costs, the owner-operator might want to examine alternative enterprises where the returns to risk, manage- ment, and unallocated capital is not negative. However, the criteria for selecting a system should not be the mag- nitude of the returns to risk, management, and unallocated o Hahucoe_oHuuHH we; EHOHccmH an» emsaeon czonm :oHumNHcmmuo emHumNepce on was Eeumzm u:o-u:eu ammo oaHH OO.OO NON OO.OO OHN l OO.OO OOH OO.OO NN OOOOOOOO ON.OH OOH ON.OH ON.. ON.OH NO ON.OH ON “OOO: . ONHOO OON ON.OO OOH ON.OO OOH ON.OO NO OOOO OOO-OOOO OOOOO-OOOO . memenxom OOOOZ CHOU HSO.IH:®m JWQU OO.OO NON OO.OO OHN OO.OO OOH OO.OO NN OOOOONOO H . ON.OH OOH ON.OH ON ON.OH NO ON OH ON OOOOz . ON.OO OON ON.OO OOH. ON.OO ONH ONMOO NO ONoe ONH: EOOOOO OOOHOEOO OO.OO OON OO.OO OHN OO.OO OOH OO.OO NN OOOOONOO . , ON.OH OOH ON.OH ON . ON.OH NO ON.OH ON . OOOOz ON.OO OON ON.OO OOH ON.OO ONH ON.OO NO OOOO OH-OOOO OOOOO-OOOO HO.O OH HO.OO OHH OO.OO OOH OO.OO NN OOOOOHOO NO.NN OOH OO.ON ON ON.OH NO ON.OH ON OOOOz , ON.OO OON OO.OO OOH ON OO ONH ON.OO NO» ONOO :H-OOOO OOOO OO.OO NON OO.OO OHN OO.OO OOH OO.OO NN OOOOONOO ON.OH OOH ON.OH ON ON.OH NO ON.OH ON OOOOO OOOsOO: ON.OO OON ON.OO OOH ON.OO ONH ON.OO NO OOOO eOpOOO + OHOOOOOOO OO.NN OOH OO.OO OOH. OO.OO OOH .OO.OO NN OOOOONOO OH.O NO OO.OH NO ON.OH NO ON.OH ON OOOOz OOOO OOOO NO.OO OOO ONH.OO OON ON.OO ONH ON.OO NO ONOO + OHOOOOOOO OO NN OOH OO.OO OOH OO.OO OOH O0.00 NN OOOOONOO OH.O NO OO.OH NO ON.OH NO ON.OH ON OOOOO OH-OOOO OOOOO N0.00 OOO NH.OO OON ON.OO ONH ON.OO NO ONOO -OONO + OHOOOOOOO OO.OO NON OO.OO OHN OO.OO OOH OO.OO NN OOOOONOO ON.OH OOH ON.OH ON ON.OH NO ON.OH ON OOOOZ ON.OO OON ON.OO OOH ON.OO ONH ON.OO NO OOOO OHOOOOOzO OOOHOEOO pcoehom mopo< useoped moao< ucoepom mowo< pceohom mouo< ibOm OOO ONO omH mEoumxw mcHEumm ameaoHumcuopH< :sz eeuOHooOm< OcoHumNHnwmwo omHunueucm HmsHpno mo mH eHnmh :omHumnEou 4 79 The Cash Rent-In systems differ from the proportions to the various enterprises for the 480 acre and 640 acre farm sizes due to the capital restraint limiting the total cropped acres.’ The optimal enterprise organization for the 480 acre farm size is corn, 186 acres, wheat, 79 acres, and soybeans, 118 acres. For the 640 acre farm size, the enter- prise organization is 248 acres of corn, 105 acres of wheat, and 14 acres of soybeans. The minimal soybean acreage is due to the program forcing a minimum level of wheat acreage, and a maximum level of corn acreage. Comparison of Labor Utilization A comparison of operator and hired labor utilized by farming systems and farm size is presented in Table 16. The cash rent-out and crop-share rent-out systems used no operator or hired labor. This is due to the op- erator of the system not participating in the actual crop- ping activities, except in the case of.the crop-share rent- lout where participation is limited to partially financing the crop. The complete custom hire system receives its labor as a part of the custom services which it hires and therefore the operator does not provide labor to the system directly. The ownership plus custom harvesting system'uses the next smallest amount of labor for all farm sizes. Again, this is due to labor services for harvesting being acquired through the custom hiring of the harvestinz operati 80 O.HOO.H O.OOO.H O.NOO.H. O.NHO use: O.mov 0.0mN 0.0HH --- Mao: . 0.00H.H O.HNO.H 0.000. O.NHO use; umo>umm Ecumzu + mHnmpeczo O.OOO.N O.OHO.H O.NOO.H. O.OOO OOOO 0.0NO 0.00N 0.0HH --- Ono: 0.00N.H O.mmo.H O.mNm.H. O.mmw Mao: :H-u:om Ammo + mHnmwoczo 0.000.N O.OHO.H O.NOO.H O.OOO NOOO 0.0NO 0.00N 0.0HH . --- NOOO 0.000.H 0.000.H O.mNm.H 0.000 p30: :H-u:em ehwnm-mouu + chmaeczc O.OOO.N O.OHO.H O.NOO.H OO.OOO NOOO 0.0NO 0.0mN 0.0HH N r-- #30: 0.000.H O.OOO.H O.ONO.H HO.OOO Ono; OHOONOOZO OOOHOEOO HOOOOOO OOO OOO ONm OOH uHcs mEoumzm maHEOOO Hmepo on“ how coHpmNHHHuD uonmq mo :omemmsou < OH OHnmh 81 .aoan Hunchm .noan OehHmN .uoan woumhemoH O.OOO.N O.ONO 0.000.H O.OOO.H O.OHH O.ONO.H 0.0HO.H O.OON O.OOO.H O.NNO.H .O.OOH o.mm¢.H O.NOO.H O.OHH O.ONO.H O.NOO.H 0.0HH O.ONO.H use: Mao: 9:0: use: anon. 930: N30; Mao: 930: 9:0: poo; H50; H30: anon anon uso-p:em oun:m-mo~o uso-u:om ammo «pH: Ecum:u_ouonEou aHuucem ohmzm-mowu OH-OOOO OOOO 82 The operator and hired labor utilized by the remain- ing systems for the 160 acre and 320 acre farm sizes is the. same. The reason for this is that the method of acquiring machinery services and corresponding labor service require- ments does not change although the method of acquiring land services does change. At the 320 acre and 640 acre farm size level, the operating capital constraint stops the ex- pansion of farm size for the cash rent-in system and there- fore limits the labor utilization.. I i The labor utilization for the complete ownership, ownership plus cash rent-in, ownership plus crop-share rent- in, and the crop-share rent-in systems for the 480 acre and 640 acre farm sizes is the same, and the largest amount of labor utilized for all farming systems. In all cases, as farm size increased, operator labor services and hired labor service utilization increased. Operator labor utilization was greater for all farm sizes and systems than hired labor utilization due to labor serv- ices being hired only when the demands exceeded the supply of operator labor services in that time period. The op- erator labor service supply was sufficient to meet all labor service demands for the 160 acre farm size. Starting with the 320 acre farm size, the operator labor service supply was not adequate for the demands on some-time periods and labor services were hired. 83 Comparison of Operating Capital A comparison of total operating capital and annual operating capital for all farm sizes and farming-systems is presented in Table 17. Annual operating capital is the total amount of capital borrowed adjusted to a yearly figure based on the length of time for which the money was bor- rowed. All operating capital is borrowed at the beginning of the production period and repaid at harvest. _Operating. capital consists of all variable cash expenses. The largest amount of total operating capital and the corresponding annual operating capital for the 160 acre and 320 acre farm sizes is borrowed by the cash rent-in system. This is due to the larger operating requirements of cash rent; machinery operating expenses; seed, fertilizer, and herbicide costs, and other variable cash expenses. The second largest operating capital using system for the 160 acre and 320 acre farm size, and the largest user for the 480 acre and 640 acre farm size is the complete custom hire system. The large capital requirements for this system are due to the cash expenditures to pay for the custom opera- tions in addition to the seed, fertilizer, and herbicide costs. The third largest operating capital using system for the 160 acre and 320 acre farm size is the ownership plus custom harvesting system. The largest operating capital using system for the 480 acre farm size is the complete custom hire system 84 O0.000.0 OO.ONN.O OO.HOH.N OO.ONO.H “OO.OOOO ONOOO-OOOO --- --- --- --- p:O.u¢om :OOu OO.OOO.ON OO.HHO.OH OO.ONN.OH OO NOO.O ONHO OOOOOO OOOHOEOO OO.OOH.OH. OO.OOO.O OO.OOO.O OONOOH.O :H-OOOO ONOOO-OOOO OO.OOO.NHH OO.OOO.NH OO HOO.OH OO.OOH.N OH-OOOO OOOO OO.OOH.HN OO.NOO.OH OO.ONO.OH OO.NOO.O Omo>NOO EOOOOO + OHOOOOOOO OO.OOO.ON OO.NNO.OH OO.OOO.O OO.ONN.O OH-OOOO OOOO + OHOOOOOOO OO.OON.OH OO.NNO.NH OO.OOO.O OO.ONN.O . OH-O:OO OOOOO-OONO + OHOOOOOOO OO.NO0.0HO OO.NNO.NHO OO.OOO.O O OO.ONN.OO OHgmgmezo OOOHOEOO HOOHOHmz Ecumsu + mHgmheczo :H-ucem Ammo + QHnmuoczo :H-u:om epmgm-mopu + mHnmueczo mHgmhoazo eueHQEou H<9HmO OOOO HOOOO OO.ONO.H OO.OOO OO.OOO OO.NNOHH OOOHHOO OOxOO OOOOOO HOOO OO.NON.N OO.HOO.O OO.HOO.O OO.OOO O O.OOHHOO OHOOOOOBO OOOOOOOOZ . ”mpmou Omenhm>o :Ozu OO.NNO.NN OO.ONN ON OO.NON.ON OO.OON.ON OOOHHOO OOOOO OOOO . eHanhm> uo>o Ochzuoz O0.000.0 OO.OOO.N OO.OOO.O OO.NOO.O OHOHHOO HOOHOOO OOHOOOOOO.HOOOO< OO.ONO.OH OO.OOO.OH OO.OOO.OH OO.HNH.NH OOOHHOO HOOHOOO OOHOOOOOO HOOOO _ "HouHmmu mchOOOOC 0.000.H O.OHN.H O OON.H O.OOO.H OOOOO OOOOH_HOOOO O.OON O.HON O.OON O.HON OOOOO hOOOH OOOH: O.HOO.H O.OOO.H O.OOO.H O.OHO.H OOOOO OOOOH OOOOOOOO . HGGNHHHHD OOQOH O OOO O.NHO O.ONO 0.000 OOOOO ONHO EOOO Emumxm Eoumxm Eoumxm :H wchmo>hmz cH-pcom -ucom opmgw Eopmxm Eoumsu msHm ammo OSHA -Qopu msHm mHzmgeczo pHcs mHgmhoczo QHEOHeczo mHgmpeczo eueHmEou EeuH hexnoz HOHMpmswcH cm mo away on eHnmpmmEou oEoecH mm owH>0Hm op Ohmmmoeoz meNHm Sham mo :oOHhmmEoo < H OH eHan 88 .meHugmswaH mcthuummscmE esp OH hexgoz.HmHapm:O:H am we was“ OH esoe:H mo Ho>eH weanmmm mgeN .Hoan.uoumhemo co omumgo OuHssuhommo cm One .pqmsumo>:H OGOH :o umohmch on» mo GOHumheOHmcoo hopmm mpmoo ammo uo>o magnuea ou mcHOEep pang Hmsvaeh esp OH eEoonH was. H OO.OOO.OOH OO.OOH.HNH OO.OOH.HNHOO.OOO.NOH OOOHHOO HOOHOOO OOOO0>OH OO.OOO.N OO.OON.N OO.ONN.N OO.OOO.N OOOHHOO HOOHOOO OOOOOOHHOOO OOO «nosemmamz .mem on magnuem OO.NNH.HH O0.000.0 OO.ONO.O OO.HNO.HH OOOHHOO OO0OO0>O ammu-:oz HOOOH OO.NNO.H OO.ONN.N O0.00N.N O0.0NO.N OHOHHOO HOOOO OOOOOOOO OO.OOO.O OO.OON.O OO.OON.O OO.HOO.O OOOHHOO paospmo>eH OamH :o umohmucH ”mumou Omogho>o Ammu-:oz OO.ONO.OH OO.OOO.OH OO.OON.OH OO.NON.OH OOOHHOO OOOOO OOOO Ho>o OOOOOOO 89 --- --- O0.000.H OO.HOm.m --- mhmHHon .. Omogue>o Ammo HOOOH --- --- O0.000.H. --- --. OOOHHon moxme mumpmm Hmom -.- .-- --. OO.HOm.m --- mhmHHoa mHgmhoazo shocHsumz "mpmou Omesno>o ammo --- --- OO.HOO.OH OO.OHH.OH -.- OOOHHOO OOOOO OOOO oHanam> po>o mcpzuem --- -.. OO.mmO.HH OO.OmO.O --- mHmHHon .HmpHmmu mcHumHemo Hmscc< --- -.- OO.NOO.ON OO.ONO.O --- ONOHHOO HOOHOOO OOHOOOOOO.HOOOO "HmuHmmu mcHumhmmo --- --- --- O.OON.H --- mgzom uoan.ku09 --- --- --- 0.0NN .-- muse: gonna OOOH: --- --- --- O.NNO.H -i- mpsom uonmq uoumuoac ”OoNHHHu: honmq --- --- O.NOO 0.0HO --p mepe< oNHm shad Eeumzm mEepmxm mEoumxm OOH: Eepmxm maepmxm uso-pcem uso-ucem Ecumsu :H-u:om cH-u:om qu: EeuH oun:m-moau :mmu eponEoo egmsm-mouu ammo .OoscHucoo .OH eHnOO 90 cm mo umcp ou ucon>Hsvo eEoocH cw eunuchm ou oHnmcs ohm mamumzm omone .OOSpm mHnu mo coHpmenmmm ecu Hows: Hexuoz HmHhumswcH m --- OO.OOO.OOH --- O0.0wH.n --- OO.OON.O --- OO.OON.O --- O0.0N0.0H OO.OOH.OOH OO.NOMNO OO.OHN.N OO.OHN.N OO.OOO.O mgmHHoa mHmHHoa OHOHHOQ mpwHHon mumHHon mumHHoa HmuHmmu woume>cH prHmmo topmooHHmcz wan ucosemmcmz .mem ow Ochsuem Omosuo>o ammu-:oz Hmuoe gonna uoumhemo ucospmo>cH wama co umeheucH ”mumou Omegae>o Ammu-:oz mHmOU gmmU H®>O mGHSHOm 91 large portion of the job market and could be assumed to be representative of the wage rate that a farm operator could expect to receive if he were to work off-farm. This com- parison is useful in that it may provide some guideline for the farm operator to guage his level of income relative to the off-farm worker and help him to make a decision as to the desirability, in terms of income, of staying in agri- culture or moving off-farm, depending on his particular situation. ' - , ' . Using the returns to risk, management, and unallo- cated capital as the income criteria with which to equate the industrial worker, the smallest farm size necessary to produce an income equivalent to an average manufacturing '1 wage in Michigan is 410 acres as ociated wita the crop-shale U7 rent-in system. This is followed by 412 acres as the second smallest farm size producing the manufacturing wage equiv- alent. The farming system associated with this farm size is the ownership plus cash rent-in system. The farming system associated with the largeSt farm size, 502 acres, is the complete custom hire system. The ownership plus custom harvesting system has the second largest acreage, 490 acres, necessary to produce an income equivalent to that of an industrial worker. The system which used the largest amount of_operat- ing capital to produce an equivalent inCome is the complete custom hire system, followed by the ownership plus custom 92 harvesting system. The crop-share rent-in system used the least operating capital. The complete ownership system used the most labor, both operator and hired, in producing the income equivalent: The complete custom hire system used the least labor. The farming systems with the least invested capital are the ownership plus cash rent-in system and the ownership plus crop-share rent-in system. The second smallest amount of invested capital necessary to provide an income equiv- alent to that of an industrial worker's wages is associated with the crop-share rent-in system. The largest amount of invested capital is associated with the complete ownership system. The cash rent-in system, the cash rent-out system, and the crOp-share rent-out system were not analyzed because these systems did not produce a level of returns to risk, management, and unallocated capital sufficient to equal the level of income of an industrial worker. Implications of the Study Based on the assumption that farm operators wish to maximize income that is available for growth, consumption, and general farm overhead, a number of implications arise from the results of the study, Some of these implications are: (1) It appears that the larger farm sizes with the Operator employed full-time on the farm are relatively 93 profitable which may result in larger and fewer farms in the future. (2) At the smaller farm sizes, based on the larger associated incomes, the operator will tend to custom hire part or all of the required machinery services, which may result in an increased demand for custom services. (3) The smaller operators (less than 320 acres) will tend to enlarge their operations or to take off-farm jobs in order that they might maintain or raise their incomes. (4) Pure tenancy will tend to decrease because of low returns to . these operations relative to other farming systems and its low capital generating ability. (5) Corn and soybeans with a minimum acreage of wheat allowable to maintain the allot- ment will become the dominant crops prOvided the government programs assumed for this study do not change. (6) Based on the relatively low returns over cash costs, it appears that the smaller rent~in and rent-out farming systems will have little chance for growth unless off-farm work is undertaken to raise the income of these systems. (7) Finally, the more resource services the operator can ac- quire, the better opportunity, it appears there is for a higher‘income. The implication that there will be larger and fewer cash-grain farms is based on increased income as farm size ~increases, and the increased pressure to enlarge the farm 94 K to provide more employment to the operator or to rent-out or custom hire Operations and work off-farm on the small farms to compensate for low returns. The implication that the smaller farm size Operators will custom hire part or all of their machinery services is based on the higher income earning potential of these farm- ing systems as compared to the other farming systems. For the 320 acre and less farm sizes, the larger returns accrue to the ”combined” farming systems.' This is strikingly shown by the 160 acre farm size. The larger returns of the ”combined" systems is cause to expect move- ment to off-farm work plus some arrangement concerning the farm operation itself. The ”tenant” or rent-in farming systems are consis- tently low or lowest in terms of income potential. If possible, the operator may desire to change to another farming system, increase the size of his operation, or leave farming altogether in order to raise his income. The optimal organizations for the alternative farm- ing systems in Southern Michigan are composed Of corn and soybeans, with a minimum of wheat, provided the government programs assumed for this study do not change. This is cause to believe a shift to corn, soybeans, and wheat might OCCUI‘. 95 Limitations of the Study In general, the study was limited by the single value expectations assumed for the study. -More information. could be gathered if prices paid and received, yields, soil group, and machinery complement size were varied. By vary- ing prices paid and received, an indication of the sensi- tivity of the various farming systems to price changes could be determined. The technical input-output coefficients were fixed at a given level. By varying theSe coefficients and analyzing the resulting changes, valuable information about the responsiveness of the systems could be gained. The study was restricted to the loams-clay loam soil man— agement group which is representative of only a part of Southern Michigan, resulting in limited geographic coverage. Four-row equipment and power units were assumed to be rep- resentative of the farms in Southern Michigan. By varying the equipment complement and power units, comparative information on machinery size and its effects on farm income. could be gained. An average factory wage was assumed to be the income earning ability of farm Operators. This may or may not be the case and therefore limits the creditability of the comparison of the farming systems with off-farm work and those withOut off-farm work.-'AlSO, the wage rate paid to hire labor for the farming systems were not varied, thereby limiting the study. 96 Also, a harvest sale was assumed. Not all cash- grain farmers sell at harvest. Consideration of storage, on or off- farm, would extend the applicability of the study. A single managerial level was assumed. Where the managerial level varied, implications could be drawn about the importance of management in relation with the farming system. Another limitation and area for further study is that this study only tried to specify the major farming systems under a single proprietorship. More research needs to be done in the area of what farming systems are actually in use and why, plus potential farming systems and their potential income earning abilities. The study was limited in that the number of farms of the various systems that could be supported in Southern Michigan was not analyzed, as were not the problems of entry, exit, and growth. Suggestions for Further Study Many important areas for further study were men- tioned under the Limitations of the Study section. In addition to these, interesting tangents to the main stream of the study would arise as it was made. Some of these are as follows: What jobs are available to those persons which have farm skills? Further, to insure off-farm jobs, what skills should farmers possess? What should be the objec- tives of rural schools? To prepare the students to stay in rural areas 01' to move to urban areas? 97 Another interesting topic would be to determine exactly what farming systems farmers are using? Also, how should these systems be adjusted in order to increase their profitability and attain the goals of the operators. .It is. difficult to make recommendations about what to do unless the present situation is known. More study should be done on the custom hiring of services. Who provides these services? Farmers with excess machinery capacity? Companies offeringcuStom services to, expand the sales of other products? Or, full-time custom service providers? What are the possibilities for the future of this field? Of interest, also, is the effects on income of the various alternative actions under government programs. Should individual farmers take part in government programs? If so, to what extent, and under what circumstances? I Another need for further study lies within the management process itself. What is management is.a ques- tion that yet has to be satisfactorily answered though much research has been accomplished in this area. Further study needs to be done in the conceptualization of farm systems and their interrelation and interaction. Better management techniques are needed in order to help the farm operators cope with the flood of.new equipment and technology that is occurring. On what basis does a farm Operator decide to change machinery systems which cost 98 thousands of dollars? How does an operator decide to quit farming and work off-farm? How does a farmer gather infor-. mation to make these decisions? As change takes place in agriculture, each of the above points may provide interesting research topics. CHAPTER V SUMMARY The major purpose of this study was to provide information to farmers, agricultural workers, and policy- makers about potential incomes associated with alternative farming systems on cash-grain farms in Southern Michigan. The specific objectives of the study were to: (1) describe major farming systems on Southern Michigan cash—grain farms; (2) determine the optimum farm organization associated with each farming system and varying farm sizes; (3) compare the potential incomes associated with these farming systems over varying farm size levels; and (4) appraise the adjust- ment implications for cash-grain farmers. Nine farming systems were studied, each differenf ‘tiated from the other by the manner in which land, labor, machinery, or capital were acquired. These farming systems were: complete ownership, ownership plus crop-share rent-in, ownership plus cash rent-in, ownership plus custom hire, crop-share rent-in, cash rent-in, complete custom harvest, cash rent-out, and crop-share rentéout. The "synthetic firm" approach, with linear program- ming and partial budgeting, was used to estimate potential 99 100 income and the Optimal organization associated with the alternative farming systems. Four farm sizes were assumed for each farming system: 160 acres, 320 acres, 480 acres, and 640 acres. A comparative analysis of the various farm- ing systems was based on the returns over cash costs; re- turns to risk, management, and unallocated capital; Operat- ing capital; labor utilized; optimal enterprise organization; and the farm size necessary to provide an income equal to that of an average Michigan durable goods manufacturing ' worker in 1967. Enterprises included in the analysis were corn, wheat, oats, soybeans, and alfalfa. The farming systems were analyzed with and without off-farm work assumed for some of the farming systems. When off-farm work was assumed, it was considered for only three systems: crop-share rent-out farming system, cash rent-out farming system, and complete custom hire farming system. The average annual wage rate for a durable goods industry worker ($7,289) was assumed to be the income ob: ltained from off-farm work for the cash rent-out and the crop-share rent-out farming systems. Eighty percent of the average annual wage rate for a durable goods industry worker was assumed to be the off-farm income earned by the complete custom hire farming system. The remaining 20 percent was assumed to be used in the management of the' custom hiring Operations. 101 As farm size increased, the farming system (no labor sold off-farm) which produced the largest returns over cash costs changed also. For the 160 acre farm size, the complete custom hire system is the largest income pro- ducer because of lower total machinery costs. In second place was the ownership plus custom harvesting system. The custom hiring of harvesting operations kept the machinery investment down and returns up compared to the other farming systems at this level. As the farm size increased to 320 acres, the complete ownership farming system became the largest income producer with a range of $441 between this system and the next system; ownership plus custom harvesting. The complete custom hire system ranked third. Apparently the economies of size of the machinery complement lowered the ownership costs below the custom charges, thereby push- ing the complete ownership system into first place. For the 480 acre and 640 acre farm sizes, the complete ownership system was the largest income producer with wider.margins over the second largest income producer as acreage increased. The introduction of off-farm work resulted in a re-arrangement of the standings of the various systems, based on income earning potential. For all farm sizes, the complete custom hire plus off-farm work system was the largest income producing system,'although frOm‘the 320 acre farm size, the range between first and second positions shrunk. As farm size increased, the cash rent-out plus 102 off-farm work system and the crop-share rent-out plus off- farm work system lost in ranking of importance and the complete ownership system increased. The optimal organization for the complete ownership, ownership plus custom harvesting, crop-share rent-in, com- plete custom hire, and crop-share rent—out systems for all farm study sizes had the same proportions for each crop. The prOportions for these farming systems are: corn, 38.75 percent; wheat, 16.25 percent; and sOybeans, 45.00 percent. The enterprise organization of the cash rent-out system was not under the control of the Operator of this farm system, and therefore was not considered. The owner- ship plus crop-share rent-in and ownership plus cash rent- in systems had identical enterprise organizations which differed from the other systems in that they had a larger percentage of corn and a smaller percentage of wheat and soybeans. The cash rent-in enterprise organization for the 480 acre and 640 acre farm sizes differed from the above mentioned organizations becauSe of the credit restraint ‘ limiting the farm operation. As would be expected, those farming systems with the largest expenditures hired more services relative to the other farming systems and also used the most operating capital. As the use of total capital services increased, so did income. 103 There appeared to be little relationship between potential incomes associated with the alternative farming systems of various sizes and wages of industrial workers. However, as might be expected, those farming systems which had lower productivity required more acreage to provide the income level desired. Based on the returns over cash costs, it appears that the larger farm sizes with the operator employed full- time on the farm are relatively profitable which may result in larger and fewer farms in the future. At the smaller farm sizes, based on the larger associated incomes, the operator will tend to custom hire part or all of the required machinery services, which may'result in an in- creased demand for custom services. The smaller Operators (less than 320 acres) will tend to enlarge their operations or to take off-farm jobs in order that they might maintain or raise their incomes. Rure tenancy will tend to decrease because of low returns to these operations relative to other farming systems and its low capital generating abil- ity. Corn and soybeans with a minimum acreage of wheat allowable to maintain the allotment will become the dominant crops provided the government programs assumed for this study do not change. Based on the relatively -low returns over cash costs, it appears that 104 the smaller rent-in and rent-out farming systems will have little chance for growth unless off-farm work is undertaken to raise the income of these systems. Finally, the more 1esources services the operator can acquire, the better opportunity it appears there is for a higher income. In general, the study was limited by the single value expectations assumed for the study. More information could be gathered if prices paid and received, yields, soil group, and machinery cOmplement size were varied. .Also,‘a single managerial level was assumed. Where the managerial level varied, implications could be drawn abOut the impor- tance of management in relation with the farming system. Another limitation and area for further study is that this study only tried to specify the major farming systems under a single proprietorship. More research needs to be done in the area of what farming systems are actually in use and why, plus potential farming systems and their potential income earning abilities. The study was limited in that ‘the number of farms of the various systems that could be} supported in Southern Michigan was not analyzed, as were not problems of entry, exit, and growth. SELECTED BIBLIOGRAPHY , SELECTED BIBLIOGRAPHY Armstrong, David. Work sheets and unpublished research on labor utilization. East Lansing: Department of Agricultural Economics, Michigan State University, 1968. Brake, John. Unpublished research on interest rates. East Lansing: Department of Agricultural Economics, Michigan State University, 1969. Connor, Larry J. Costs and Returns for Major Cash Crops in Southern Michigan. Agricultural Economics Report No. 87. East Lansing: Department of Agricultural Economics, Michigan State University, 1967. Heady, Earl 0. Economics of Agricultural Production and Resource Use. Englewood Cliffs, N. J.: Prentice- Hall, 1952. , and Candler, Wilfred. Linear Programming Methods. Ames: Iowa State University Press, 1958. Hill, E. B., and Mawby, Russell G. Types of Farming in Michi an. Agricultural Experiment Station Special Bulletin 206. East Lansing: Michigan Agricultural Experiment Station, 1954. Kyle, Leonard R. Business Analysis.Summary for Cash Grain Farms, 1967. Agricultural Economics Report No. 99. East Lansing: Department of Agricultural Economics, Michigan State University, 1968. Lee, John E., Jr. "Resource Ownership and Use-Rights in Agriculture." The Structure of Southern Farms in the Future. Edited—by Charles R. Pugh. Agricul- tural Policy Series 30. Raleigh: Agricultural Policy Institute, North Carolina State University, 1968. McMillan, Claude, and Gonzales, Richard F. Systems Anal- ysis: A Computer Approach to Decision Models. Irwin Series in quantitative Analysis for Business. Homewood, 11L: Richard D. Irwin, 1965. 105 106 Patrick, George F., and Eisgruber, Ludwig M. "The Impact of Managerial Ability and Capital Structure on Growth of the Farm Firm." American Journal of Agricultural Economics, L (August, 1968), pp. 491- 506. ' Shaffer, James D. "The Scientific Industrialization of the U.S. Food and Fiber Sector: Background for Market Policy." Agricultural Organization in the Modern Industrial Economy. NCR-20-68. Columbus: Depart- ment ongricultural Economics and Rural Sociology, 1968. United States Bureau of the Census. Statistical Abstract of the United States: 1954, 75th ed. Statistical Abstract of the United States: 1964, 85th ed. ' Statistical Abstract of the United States: 1968, 89th ed} United States Department of Commerce, Environmental Science Services Administration, Environmental Data Service. Climatological Data: Michigan Annual Summary, 1968, Vol. LXXXIII, No. 13. Vincent, Warren. "A Management Information System as 3 Basis for Organizing Farm Management Resources." Paper presented during a Computer Application Pro- gram. East Lansing: Department of Agricultural Economics, Michigan State University, 1969. APPENDIX 107 APPENDIX TABLE 1 Assumed Prices Paid and Received1 Item . Unit Price PRICES PAID: Seed: Corn for grain bu. 13.50 Wheat bu. 3.25 Oats bu. 1.75 Soybeans bu. 4.50 Alfalfa lb. .62 Fuel and Lubricants: Gasoline gal. .174 Diesel gal. .154 Motor Oil gal. .90 Lubricant lb. .22 Fertilizer: Amonium Nitrate (33 1/3-0-0) Bulk ton 70.00 Bag ton 75.50 Anhydrone Ammonia With equipment ton 120.00 Without equipment ton 110.00 PhOSphate (0-46-0) Bulk ton 80.00 Bag ton 84.50 Potash (0-0-60) Bulk ton 51.00 Bag ton 55.50 Chemicals: Atrazine lb. 2.90 Z1 4-D (amine) lb. .82 Amiben lb. 5.00 Haulin : _' orn and Soybeans bu. .06 Wheat and Oats bu. .05 Alfalfa (hauling and storing) bale .10 Land:2 acre . 300.00 Cash Rent acre" '18.00 ‘ Labor: hr. 1.50 108 APPENDIX TABLE 1 (Continued) Item Unit Price PRICES RECEIVEDz3 Corn , bu. . 1.10 Wheat - . bu. ' 1.50 Oats bu. .67 Soybeans . bu. 2.60 Alfalfa ton 22.50 Land (Cash Rent) acre 18.00 1These price assumptions are not to be interpreted as pre- dictions or prospective prices. Assumed machinery prices are shown in Appendix Table 10. 2Real estate taxes are assumed to be one percent of the land price per acre. 3Approximate 1967-68 season average prices. Source: Larry J. Connor, Cost and Returns for Major Crops in Southern Michigan, Agricultural Economics Re- port No. 87, Department of Agricultural Economics, Michigan State University. ra‘l Crop Yields, Fertilizer and Herbicide Requirements, and 109 APPENDIX TABLE 2 Machinery Operations for Selected Cash-Grain Crops J l O_l 1 X::;£:§ . Seed Fertilizer i Crop Yield Requirements Requirements ‘ (acre) (acre) N—PZOS-KZO l 4 Corn 85 bu. .21 bu. 80-0-0 3 10-50-25 f Wheat 45 bu. ' 1.75 bu. '45-75-25 1 Oats 65 bu. 2.25 bu. 45-50—15 I Soybeans 28 bu. .83 bu. 30-50-15 1 Alfalfa 3.2 ton 2 lb; '0-50-15 1Corn was planted in 38-inch rows; soybeans in 28-inch rows. 2Quantities shown refer to actual pounds of nitrogen, phos- phate, and potash, respectively. Source: Larry J. 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