THE MAXIMEZATION OF FARM PROHTS THROUGH
THE USE OF' ”NEAR PROGRAMMING

Thesis fat fhe Degree 6‘ M. S.
MICHIGAN STATE UNNERSiTY
David S‘ Brandiev
196.3

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Brandiey, David S
The maximization of farm profits
through the use of linear .....
Thesis
1963

 

 

 

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THE WEIZATION OF FARM PROFITS
THROUGH THE USE OF LINEAR PROGRAMMING

By
David S. Brandley

A THESIS
Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of
MASTER OF SCIENCE

Department of Agricultural Economics

1963

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CHAPTER I

INTRODUCTION

General Description of the Problem

 

This project entails the study of enterprise organization with
respect to a given farm in order to determine the optimum.(most profit-
able) enterprise combination. Linear progranming is used as a tool in
the determination of this maximum profit combination.

A specific farm has been chosen and production and price data
have been assembled to coincide as much as possible with the actual farm
situation. This farm is located near the town of Raymond in Southern
Alberta. It is presently owned and operated by a family partnership—-
consisting of a father and his three sons. This particular farm is the
one on which the author was raised, and on which he worked as a partner
for several years. It was felt that the selection of a farm situation
familiar to the author would enable him to make more realistic assump-
tions about it and.a more realistic evaluation of the programming solu-
tion. This choice has also been of considerable value in the selection
of data. Familiarity with past crop and livestock'budgets, soil types
and conditions, the prevailing market structure, labor availability, and
other institutional and production factors has been of invaluable help
in setting up the study. (The present farm program consists of 130 acres
of sugar beets, 100 acres of green peas, 150 acres of alfalfa hay, with
the remainder of the acreage in wheat and barley. Approximately 500

head of beef feeder calves are fed each winter.)
1

2

Crop and livestock enterprise selection has been.govtm1ed.by soil
type, climate, labor availability, marxeting facilities, acreage restric-
tions, irrigation water availability, housing, credit facilities, invest-
ment (present and future), risk, and managenent potentials. These en-
terprises (or activities as they will be referred to in the remainder
of the study) are analyzed in relation to each other in terms of the
resources they require and in relation to their respective per unit
prices.

Linear programming, as used in this study, allocates the avail-
able resources between the various activities denanding them-—in such
a way as to maximize farm profits. The linear programming solution
then, is the Optimum combination of the activities using these limited
(scarce) resources.1

This study has as its objective, to demonstrate the application
of the linear programming technique to the problem of resource alloca-
tion among the various activities on a given farm to determine the
most profitable combination of said activities. The hypothesis may
be stated in this manner: that lirmar'programming is a useful tech-

nique for organizing a farm business.

The Need

 

Numerous alternatives face the farmer of today. These altern-
atives take the form of using various portions of crop activities
and livestock activities, as well as innumerable combinations of these

activities. In addition to the wide range of alternatives, there

 

lResources that are not limited may also be employed. Further,
the limiting condition may be a result of organization or timing of
resource use in the production of the activities.

3
exists complex interrelationships between crops and livestock in terms
of the resources employed. This complexity of choices is not, of course,
limited to the individual farm problem, but the magnitude is probably
as great here as in any business.2

Certain resources may only be available in restricted amounts.

a resource may be limited under certain conditions (or at certain times)
and not under others. There may also be complementary relationships
among resources. The farm manager must decide how to allocate these
limited resources among the activities on the farm. He will want to
choose the combination of activities that will use these resources

most efficiently and thereby procure for him the.maximum returns.
heturns here may be strictly monetary or may be measured in terms of
other objectives the manager has, such as satisfactions. (Profit max?
imization is assumed to be the objective in this study.)

The decision-making task of the farm manager would indeed become
overbearing were he to endeavor to consider, throngh normal budgeting
techniques, all alternatives open to him. As a re~ult, many alterna-
tives must be either overlooked or ignored. J. R. hicks states that
"Th6 economist, confronted with this problem of simplication, naturally
proceeds by the method which he has found useful in other cases, he
simply leaves out those aspects which he cannot conveniently handle,

and reduces the problem.to manageable terms by a process of exclusion."3

 

2"Anyone who has thought at all about the matter will agree that

the choices which confront an enterpreneur are exceedingly complex;
though it is net difficult to write down a general description of them,
the resulting maximization problem is so difficult as to be quite un-
manageable. It is unmanageable to the economist; and it is also un-
manageable, in these tezns, by the entrepreneur himself.” \d. n. hicks,

H’ "”0" 7? 72.5%.)?” s.“- T‘m'rk. L—“lfarfi- and 'Zom‘petitinnfl' .fi‘he f‘azller‘ican
Economic review, Al-., 5;. a t5?5;j, pp, ooQ-oltJ.

I.

I
. vr

"W- U .c- r!-
L‘ {hrs ‘Vl'a ” d

3 This

Even though the farmer may be operating in the ”black", it is very
possible that he may be foregoing further profits by failing to con—
sider certain other alternatives open to him. Often he could, through
the re—allocation of resources between activities, have a more profit-
able program, using the same amount of effort and investment. Linear
programming appears to be a particularly useful technique in this
phase of farm planning.h

Linear programming provides a way of:

l. Organizing and interpreting a large volume of data and
facts. (A major difficulty in decision-making lies in the area of se-
lecting, gathering, processing and interpreting facts and information.)

2. Using approximations in mathematical processing of data
and facts.

3. Evaluating the benefits or profits that should come from
apportioning or allocating the available resources to different oppor-
tunities or combinations of opportunities.

Within certain limits, linear programming provides a better
way of determining how to assign or use limited resources among differ-
ent opportunities, according to designated ways and assumed relation-
ships.5

Using linear programming can yield several advantages to manage-
ment. It can serve to increase managerial effectiveness by:

1. Giving insight and perSpective into problem solutions.

 

4Earl R. Swanson, "Application of Programming Analysis to Corn
Belt Farms," Journal of Farm Economics, Vol. AXAVIII, No. 2 (Menosha,
Wisconsin: American Farm Economic Association, 1956) pt. LC8-Ll9.

5F. 0. Ferguson and L. F. Sargent, Linear Programming; Funda-
mentals and Applications, (New York: McGraw-Hill Book 00., inc.,
1958;

5

' 2. Iielding better and more successful decisions.

3. Yielding solutions in specific quantitative terms.

A. Providing better tools for adjusting plans to meet changing
conditions.

5. Increasing dollar returns to management through more effec-
tive use of existing facilities and more accurate planning.

Linear programming does not change the basic character of the
decision-making that an executive or manager has to do. Rather, it
permits a clearer definition of the problems that he faces, facilitates
the determination and selection of as good a solution as is possible
for him to consider, and adds explicitness and certainty to the tenms

. . . . . . .. 51
in which he makes his deCisions. The manager still makes tne decisions.“

t is hoped this study may be able to point out how linear pro-
gramming does satisfy a need by assisting the farm.manager in the de-
termination of what "can be done” to use most efficiently, and most
profitably, the resources available to him. In terms of the particular
farm.being analyzed in this study, it is hOped that the fans manager
will be provided with a feasible optimal program for the operation of
his farm. It is also hoped that the analysis will give hhu a greater

insight into the relationships existing between resources, enterprises,

 

 

and profits.
- 1 "- . . .- _ 0 . » 9. ~ . . .
Genera, .swdf.wtf:n :? L nrsr rrrernir:n~ its Le-ltionenips
_ ‘ _ wwm—w -ng .—
tN tt‘o 1r" 3“ r of“ tin ' t-n 811i r’IY'W 'Jju.‘ ’51‘ ’1
u .5 ~‘U A. i A. lu 1- .. . .L .A no-LA L Ali—1‘1 5-5

 

Linear programming is a technique or tool for providing manage-
ment with information on which to base decisions and planning. It is

a practical technique that, on the basis of results to date, is capable

 

vflqo

 

6r01d,

 

6

of providing management with better information about certain problems
tnan many techniques currently in use. It systemizes, for certain
conditions, the process of selecting the most desirable course of
action from a number of available courses of action, thereby giving
management information for making more effective decisions about the
resources under its control. It provides a way of using data and facts
to arrive at some decisions that were formerly arrived at on the basis
of intuitive judgment. It represents a unique approach to management
problems and a unique way of looking at them.7

Mathematically, linear programming consists of a technique of
maximizing (or minimizing) a linear function subject to linear restric-
tions and constraints. From an economic point of view, linear program—
ming means the allocation of certain resources (some of which must be
limited) between arhmimn‘of alternative productive processes (among
which exists various interrelationships—-such as complementarity and
competitiveness) in the most efficient way, thereby satisfying some
predetermined objective. In economic problems, it is required that
scarce resources be allocated in such a way that some objective such
as profit, utility, etc., is maximized. The basic idea portrayed in
either definition of linear programming is that it is concerned with
the Optimum Operation of a system of interdependent activities.8

Marginal analysis or theory of the firm provides a framework
for analysis and study of problems of resource allocation and enterprise

combination. Linear programming is simply a.mathematical procedure

7mm.

8.‘Jalter'fi-J. Garvin, Introduction to Linear Programming (New Ybrk:

McGraw-Hill Book Co., Inc.:—l§§CJ

?
develOped for the purpose of applying the theory of the firm under
certain restrictive, mathematical assumptions.

In firm theory, no activity is engaged unless its marginal product
is positive. Similarly, in linear programming analysis, no activity
is selected unless it yields a positive marginal return. Firm theory
indicates that the resource be employed where its marginal value is
the greatest. Linear programming considers the opportunity cost of
each resource, in terms of the products it goes into, and only selects
activities which will return the most for each resource employed. The
level of output selected by the program for a given activity is that
where the necessary resource is used up. Then the renaining resources
still available go into the production of the activity yielding the next
highest marginal returns for the resources. This is, of course, compat-
ible with firm theory as well. The relationships involved in the theory
of the firm, are basically the same as those involved in linear program-
ming. The difference lies in the method of selection and the ability
of each to handle real world problems.

In application to farm management, linear prOgramming may be
conveniently defined as a highly formalized type of fans planning and
budgeting. Progranming is basically a mathematical formulization of
the familiar budget method. Programming tends to maximize the useful-
ness of data derived from.conventional budgets.9

The general procedure in budgeting analysis is to define a prospec-
tive farm plan considering a few alternatives, and then to construct
budgets for each alternative. Through analysis of these budgets, the

most profitable alternative is selected. In linear programming

 

9

Swanson, loc, cit.

O3

procedure, the limitations of the farm and its resources are first
considered, and the over-all objective is detennined. Then budgets
are constructed for all enterprises that might be engaged in on this
particular farm.lo These are then set into the linear programming model
under the restrictions mentioned and, subject to the maximizing objec-
tive, the optimal combination of enterprises is determined.

Linear programming makes use of both the theory of the finn
and budgeting techniques. The logic behind linear programming can be
explained in terms of the theory of the firm. The input-output data
necessary in the linear programming model are the same type of data
as farm budgeting requires. Linear programming serves to complement
these two methods rather than compete with them. It expands the poten-
tial area of analysis to much larger and more complex problems in the
real world. The problem involved in this case study could only be
solved through the use of linear programming as it is too complex for

these other techniques.

The Plan of Attack

With this introduction to the purposes of this paper, supplemen-
ted with the need for this type of analysis and a general description
of linear programming and its relationships to economic theory and
farm budgeting techniques, let us move into the body of the paper prep-
' er. Before proceeding, however, let us hesitate long enough to outline
briefly the steps to be taken in the chapters to follow.

In Chapter II, a description and history of linear programming

will be presented along with the 'preoedunes to be followed in setting

 

lOEach enterprise or each method of production is treated as
a different activity.

9
up the progr'm. Chapter III will present the assumptions of the stuiy.
These assumptions will be related to the whole farm, major segments
of it, and individual activities and reso ‘ces. Chapter IV will deal
with the specific budgets required for each activity. These budgets
supply the data called for by the linear programming model. Chapter V
will discuss the programming procedures. The sixth chapter will deal
with the final solution of the program. Here the final program will
be presented and interpreted in terms of the actual farm situation.
Chapter VII is designed to evaluate the programmed solution in terms
of a realistic farm program. Results detennined in Chapter VI will
be analyzed in terms of their feasibility if actually employed on the
farm. Finally, Chapter VIII will summarize the progrmu in terms of the
objectives and hypothesis of the study. This summary will include an

evaluation of linear programming as applied to this type of analysis.

Chef-”TIER II
THE LIléi'Ah PhUGM-JAING RUDEL

The Similex Method

The simplex method refers to the particular arrangement of the
problem information and data, together with the special computational
steps used in solving the problem under that arrangement. The simplex
method is used for obtaining an optimum solution to a set of related
linear equations. From all possible solutions, the unique solution
(or solutions) which makes a certain objective function (in this study,
profit), a maximum or minimum (in this study, a maximum) is selected.1

The equations in the model may be formulated firat, as inequal-
ities, showing some indefiniteness, which is a distinct advantage in
many instances. For example, one any express an emeticm as greater
than zero but less thrn a specified anount. as will be pointed out

later, these ineqmiities are converted to equalities by the ad'iition

U

f disposal variables. The disposal variables make it, gossible for some
of the available resources to go unused. The dispose variable waild
equal that portion between the amount available (Uppur‘ limit of inequal-
ity) and the actual summit used. If the final program was :‘equireiad to

use all of the available readings, it might not .4:an

Us

p :2 fit: .“

 

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‘
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A‘At“I ‘I ’s i ‘L‘AI; "n A-L ~. ‘ v _ ' . e !.>. _.‘~~.. ,._ .‘0 Il'-. ~- .5,
l-‘A I ‘-“ - 4‘ -- -- ‘---w- .‘ -_
7r * ' ‘ ~
1‘ . .1) ‘ . --0 Q

ll

Linear programming problems are concerned with the efficient use
or allocation of resources to meet desired objectives. These probleus
are characterized by the large number of solutions that satisfy the basic
conditions of each problem. The selection of a particular solution as
the best solution to a problem depends upon some aim or over-all objec-
tive that is implied in the statement of the problem. A solution that
satisfies both the conditions of the problem and the given objective
is termed an optimum solution.3

The complete mathematical statement of a linear pregramming
problem includes: (1) a set of constraining linear equations which
represents the conditions of the problem (the restrictions on the re-
sources and their relationships to each of the activities). (2) An
equation which expresses the objective of the problem“ The latter
equation, called the objective function, is necessary in order to ob-
tain a unique solution to the problem, The optimum condition is expres-
sed as a result of combining this objective function with the multi-
solution system of linear constraints (none of which can express an
optimum in and of itself).h (3) The statement must contain restrictions
which will limit the production of activities to either zero or positive
quantities.

Mathematically, the methods nay be expressed as follows:

 

31f a diagram were constructed connecting the maximum production
points for each activity, the segments of each activity's curves fallins
under the intersection points would define the farm's production possi—
bilities. It could produce any'cttmination falling on this new curve.
Linear prOgramning takes this production possibilities curve and applies
the product price ratios to it which results in specifying the Optimum
product combination, which satisfies the maximum profit objective.

(Ibid.)
1..

oaul I. Sass, Linear Programmingherhods and applications,
(New York: McCraw-hill nook Co., Inc., 1958)

4-0

3.

Q35 tem 0: linear equations (expressed by inequalities):
all x1+a12 x2+..+aln xngbl
a21 f‘ifizz f2” "azn. 41‘}?
. . .
am Kramz x2+- dam anbln
wi‘lere: x1 x2 -—- xn are the unkgown portions of the reSpec—
tive rescurces :emsloyed and aij, are constants (given

ihpUt-Cutput data and:

n>m, i
X320, J

l, 2,-~,m
l, 2,-—-,n

An objective function:
Cl Al + C2 112 +---4 Tn In 2 iambwws

where: C1, C2, ‘-, Cn are constants (given input-output
data);

The inequalities in (l) are changed to equalities by the
addition of disposal variables:
all iii-0812 x21. .‘aln xh-rsl ; b

321 xl+a22 x»+. +a;n xn+33 b2
0 C o o ‘
" 0 o . °

811.1 waamz X ‘1"? *8 1m Xn+8m3bm3

The problem is to- select that solution for wh ich the OJ equation
(2) is a maxirum;

A.

The problem stated summation form:

:1

2:13:13 x < bi (i=1 —-- m, xi _>__o,j:l-un, n>m)

“j/gl EEC maximum;

where the notations have the following meanings:

x is a variable the value of which is to be determined by the

calculations. Each x.unknown represents the level of produc-
tion of one activity in the program.

is the constant which is given (given input-output data) and
is multiplied by the detennined values of x.to determine the
amount of the resource it represents is used.

is a constant which is given and represents the amount of

1:2
the resources available at the onset of the programming.

c is a coefficient which is given and represents the net value
for one unit of the activity. It is multiplied by the deter-
mined x factor also, to deterudne the total net value derived
from the production of the activity. In this study it is a
dollar value.

Development of Linear Procramming

A search for the best solution to problems has existed since
man first began to reason for himself. In recent years, man has foundu-
in the form of linear prcgramming—-a method of determining best or op-
timal answers to certain of his problem.

Although George E. Dantzig is credited with the develOpment of
linear programming, it is actually a descendant of the input-output
method of analysis developed by Wassily N. Leontiff in the 1920's.5
Following this, a number of problems were develOped having to do with
the optimization of a linear function subject to linear constraints.

In l9hl, Hitchcock posed a transportation problem (which was indepen-
dently posed by Koopmans in 19L7), and in l9hS, Stigler posed a diet
problem.6

George b. Uantzig, Marshall Jood, and their associates, working
in the field of military 105istics with the U. 3. air Force, first
crystallized and applied linear programming methods. Their aim was to
determine an optimal program of activities-and this accounts for the
origin of the term, linear progr'fiming. Dantzig is credited with the

'7
development of tne Simplex.metnco.‘

 

5r

.erguson and Sargent, lcc, cit.

6Garvin, loo, cit.

J

f‘ ' '
7aass, cc, cit.

it

Since that time, Charnes and Gosper have pioneered the applica-
tion of linear programming to industrial problems of planning and produc-
tion; Koopmans, Samuelson, and other economists have made application
of linear programming to input-output economic systems; and Kahn, Tucker,
and other mathematicians have investigated important connections between
linear programming and the theory of games. Considerable research has
also been done in the areas of farm management and production economics
by Heady, Swanson, and others.8

In January, 1952, the first successful solution of a linear pro-
gramming problem on a high-speed electronic computer was carried out.
Today, programming procedures have been coded for almost all electronic
computers in the United States, England, and throughout the world.9

Since its inception in 1947, and particularly in the latter por-
tion of this past decade, hundreds of papers (both theoretical and ap-
plied) have been published in the general field of linear programming.10
Many new books have been written. Even in lieu of this-or perhaps

as a result of it-—the range of applications is still spreading and the

usefulness of the technique appears still to be on the increase.

Requirements of the Linear Programming Model
A brief description of linear programming has been presented and
the hypothesis of the study has been introduced. This next phase will
tend to give direction to the analysis which will follow in Chapters III,

IV, and V. Linear programming requires that certain procedures be

 

8Garvin, loc. cit.

9

Case, loo, cit.

lO

wr-
L.

followed. The mathematical framework, as was noted, is quite precise
and data must conform to its structure.

The first requirement is the establishment of an objective.
This must be in definable algebraic terms. It could take the form of
minimizing time or costs, or, as in this study, the maximization of
profits. The objective must be stated in the form of a function (see
equation 2, page 12), with values of C being multiplied by their corres-
ponding values of x, the unknown to be determined in the computations,
and must be solved for a maximum.11

Second, there must be a set of known, definable restrictions
on the amount to which the object can obtain. These restrictions
(equations 1, page 12), must be exyressed in algebraic terms, as well.
They also contain the unknown 1 factors for each corresponding “a"
value. These restrictions may be stated as inequalities or equalities
(the former being converted to equalities by the addition of disposable
variables). Each equation represents the restrictions pertaining to
a specific resource, or group of resources. The "a" values represent
the amount required by each activity and the "b" value represents the
amount available.12

Third, the various activities considered in the problem must be
identified. Each activity is represented by a column in the matrix
and, referrirg to equations 1, 2, 3, page 12, are represented by x1,
x2, -—, X“. The x values are the levels at which the activities

will enter the final program. The x1 then, refers to the level at

which the specific activity it represents, will enter the final program.

 

llr‘erguson and Sargent, loc cit
12~

-_\~-¥,
—L A43.

 

This involves the concept of linearityb-that is, a change in one va'isbie
brings a proportional change in output and profits. Jiih all the a
and c constants being multiplied by the same unhnown factor, for a given
activity, the relationship is one of linearity. This is a requirement
iJILplied in ] inear prograhnni r g.13

Fourth, for effective use of linear programhing, the various
activities in the program must be interdependent. (if they were inde-
pendent, the problem could be solVed directly with budgeting meth»ds.j

I available re-

Cy

That is, the activities must share lindted amounts
sources. They may, however, compete for these resourCes. It also

may mean that one activity uses the product produced by another in its
own productive processes (for examp e, an alfalfa activity may preouce

- . . . . - 1
hay used in tne livestock actiVity;.‘“

p

Procedures in dettinggfp‘a Linear Programming Program

The purpose of this section is to outline the procedure to be
followed in setting up the program involved in this stuuy. The tmrgram
refers to the data satisfying a set of assumptions and fitted into
the framework of the linear pregramming model. The programming refers
to the computational processes themselves.

There are several steps that have been followed in this analysis:

1. The first step is to become familiar with the linear program-
ming model and its requirements.

2. One must have a clear objective in mind. The objective of

this study is to determine the most profitatle combination of enterprises

 

1

kg)

fl- ' ,~:
.‘

1
.‘JA 0

' “ . .
A.“ . 1" 1 ,~
‘ ‘.s 5» Q

l?
on a specific farm. This objective, as has been pointed out, must be
stated in explicit algebraic terms.

3. Once the objective is deteradhed, the basic assauptions of
the Studfi need to be listed. These include assumptions about the fans
as a whole, as well as those relatinu to Specific resources or group
or resources, or to activities or groups of activiti‘s. These assunp-
tions need to be as realistic as possible.

A. thn this general framework has been established, the next
step is the gathering of the necessary data. As in regular budgeting
analysis, the solutions are only as reliable as the data from which they
are computed. The data include input-output information and prices for
each activity and the resources involved in its production. The exact
amount of available resources must also be determined-—in cases where
these may be restricting. These data must also oe expressed in specific
numerical ten 3.

. anon data have been collected and pnacessed, the; lust than

\fi

be arranged in an orderly manner according to the requirenents of the
linear prggranming model. This means that they must be put in the fern
of related linear equations {or inequations-expressinb inequalities)
aequatiuas l, and 2, page lEJ. taco equation will refer DJ the restrL?-
tion concerning one resource or a group of resources and will shtw
amounts of resource supplied or required by the unit level of each

activity as well as the amount available. Each column {when the e;ua~

\./

tions have been set up matrix fashian will represent the unit level

resource requirements for a specific activity. The corresponding

*'§"
1“
\ I

‘ I I .
:uécbiectLVe lurm_

o
._,)
:3
‘ 3
g f
,0
:3
(-9-
F.)
:3
(+

on will shrw the profit per unit for

‘ ' .v-. ' :t‘y ‘ C -- ~~ .“ 7 '~ *: ' 7" \1‘v '\ :1
that activity. “Jon 0. tLPuB constants {in a sixth ctiunn) will be

f: r‘ L ol-A .~ ‘- 1",‘>>“y“‘ p ".'l,\‘ “A
{pleating ELH total d.-A\1L¢¢UJ Ci. Fused.»

P.

:u‘ kkltiitf‘ L..A.' 0'1 by the 51:3"? x &',:1’: Ln’lfl ’

,,. .' . .‘ '1. .‘1 .. " ‘ , ‘. .— ",24.. ' ;. O: -‘..'--:‘.,
re‘lki- red dial 113‘? tvtd- NFC: It: I‘JI‘ LIN? dCtlv;l.~u' 1n tut: LLILI-~.'. Suds-«Lian.

/ -r\ a I \ . .
o. anen tne equations are estaolisrx d, the matrix should be

examined to see if it complies With the linear proara'mi lg requirefints

on is obtainable. Since all activities

Jo

and to see if a fe ' Ml solut_

f

in this beginning prog, ram are at tile zers level, it is not likely that
the program cannot be improved.

7. The next step is the computational process. The progran is
at an Optimum when no more improvenent in profits can be made by alter-
ing the progran

8. Khan the optimum program is reached, the remaining tasks are

to interpret and evaluate the final solution in tenns of the actual farm

situation.
The above steps will be followed in this are; * is. Since the
linear programming method has been discussed, tne next step will be to

state the assumptions of the study. This is the tasx of Chapter ZTT.

fl...”
.1.)

Tfie aSSdJ.“tlDGS 01 ’n: stuuv serve to irale the ro-ram and to
r d

linlt or nefine its SCLyc. $ul$ is eeessary in orier to has- tun size

mod21 aui the compitin5 processes. In some instances, it will
that the aiiitio n 01 more activities, and/or, equagions, wouli threw
more light on the pic tuze-and perhaps, present a more rcalisoic pr;

The ta3n of the au thor is to stuflv relevant phases sf the Situ-
ation and determine which phases are of greatest inyort. It is possible
that other’s norms may uiiier somewhat from tncse set by the author.

Cer ainly this indicates that one of the mos , 1H1 o tent censiieratie ns

"5

57:

in applying linear programming to real-world pwale“3 lies in the
“thinkin5 thIOUééh stages”. Here the oasic assumptions or the stud; are
foruulated. neznsre ciosel ' these assumptions parallel the real—World
situation, the more accurate and useful will be the re lltS or the
st The as s‘izLiht ins that follow :re the results of the “thinkin'!
throu5h stage” and are designed to formulate and aetine tne pro rat,
"ithin the lin ts of tne model, as xealistim l3 as possible. Tne3
will serve as a basis fe" he foruulation of input-output bud5ets and

the fitting of data to the model

. . a :. .5 Mia: . '1 ;,,- \-' .11. '. «1
Tue zirst assumytlons u; oissei will eeal basicallyl With rela-

the program and how they are handled.

The third set of assumptions Spell out the credit situation and
indicate why no redit restriction has been placed in the prograa.
The last set of assumptions refer to the activities themselves.
to activities along with some

include general assumptions relating

"v
\J

assumptions relating to specific groups of activities.

 

 

 

 

‘| M . ' n - ' ?,

nSsuuvtions Relating to the set f

“.4...“ *1— W _
r‘ ‘7‘, ‘ a. . -. Y r ~0~ . r I '—
omnfixalnuh tiglg‘.muztfxm

 

 

This set of assumptions deals directly with those relationships
that restrict the movement of resources within the programming frame—
work. These restraints are built into the set of linear equations
(equations 2, page 12}. Some of these regulate the total amount of a
resource available, while others Specify the relationship of a resource

used or supplied in certain activities to its use in other activities.

Land

The farm in the case study is composed of two parts. One will
be riferred to as the Home Farm, the other as the Butte Farm.

The home Farm is composed of 200 acres, 140 of which are till-
able, and 25 of which are useable as irrigated pasture. The remainder
is composed of the farmstead, a lake, feedlots, irrigation ditches,
farm lanes, drainage ditches, a trench silo, and a feed storage area.
The 140 tillable acres on the Home Farm are available for crop produc-
tion under irrigation. The heavy clay soil on this farm would be quite
unmanageable for cropping purposes without irrigation. Irrigation is
also essential to insure adequate yields. There is a gentle slope to
the land and adequate drainage which allows for surface irrigation.

Water is available in sufficient amounts for all crop needs. in this

area fall plowing is considered an essential practice on this type of
soil. It Opens the soil up to receive winter moisture and makes it
much easier to work during spring seeding Operations. The 25 acres of
pasture land is not suitable for cropland but is adaptable to ir~igated
pasture which requires a minimum of tillage.

The Butte Farm is composed of 1000 acres. Of this, 620 acres
are suitable for crop production while 270 acres are suitable only
for irrigated pasture. The renaining llO acres consist of the fann-
stead, two alkali draws (utilized for drainage purposes) running the
full width of the farm, and a large lane. The crepland is a sandy loam
and is suited for some dryland creps and.nost irrigated creps. The
slope of most of tne land is too steep for surface irrigation and,
therefore, requires Sprinkler irrigation. This is also true of the
pasture land. Because of the high salt concentration, the pasture
land must be irrigated regularly to reduce concentration of salts
from around root areas as well as to supply the moisture needs of
the pasture grasses. Deep cultivation takes the place of plowing
on this sandy loam soil.

All tillable land will either be used for crop production or
rented out. It is possible it could go unused but unlikely since a
rental-out activity has been included in the program. The pasture
land, however, will either be used to produce irrigated pasture or go
unused. No allowance has been.nsde for it to be rented out. There
is a relative high cost necessary to produce the pasture, and it is
assumed that the returns received from renting it out would hardly

justify the cost.1 No allowance has been made for either the sale

lOne animal unit rents out for $7.9995 for the season while it
costs 98.7725 on the Home pasture and ol7.ooo9 on the butts pasture to
produce two and 1.3729 animal units, respectively. (dee Table 20,
r‘ fr Y \
.rlfi;.’t’3r 11.!

$ ‘. ’\. ’. .' ‘I ‘I '\- '— {H} r. ’ ' - .I ~- 0 .7 J “-\-' ., ' _ .- r. ‘ .. ‘ . . __ '1 . , . ‘1 - _ _

bAUsLe‘L «AC1 edit. Anti area in h;.iCI. Lu- lu.‘.'.. .Lo lucut'fli lb nei‘ L‘cy'g‘org-j;
4 - — «3., r. 3 - M .t .3 . 3 4 . - ‘

an.i pernanenciJ settizi. It h did not we an edgy t th t3 ac31ri : more

1

land in tne immediate locale-et ieast at an, s.cc;;ic timp. Ibis does
not mean that the land never CLfih,€S hands. Uver the years cannges in
ownership occur. Those often are witnin tie sane iatalies, however.
The point is, one cou ld nct de;end on JJ"“HF ad
des irei. In addition, 12cc acres is a fairlv infge farm in tnis area,
and provides an adequate base Ser even the most co. lex of epgratio:s.
For thgse reasons, no allmv once has be en mad3 in tns pro ram fur tne
rental or gnrckase of additional lends.

In summary, tnen, the Home Farm is restricted to iii acres of
tillable cropland, and 25 acres of pastuzeble land, all or which must
be irrigated. Tne butte farm contains 620 acres of tiliuole cropland
that can either be irrigated by spriztler systexs or used to produce
dryland crops. The Butte farmtaiso his 270 acres available for irri-
gated asture. Tne tillaole land on both fanus can De rented out, but

no additional land can be acquired either by rental or purcnase.

Labor

The labor_year nas been divided into ten periods. Periods one
and ten are composed of the months of January and February, and November
and December, respectively. Periods two tnrcugh nine are composed oi

one month each beginning witn March and ending with October. This has

(u

been done in order to facilitate the NiSh pericis for labor durin

sy‘ring and summer mon t‘rs. . Since the re guirements for crop activities

m

are almost nil during the winter months, it was considered justifiaol

to combine those four months intc two labor periods. A more exacti.g

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.{"~‘ 1'77

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'.'+ ,‘.. _.,.Ct ..',‘, .I‘.1—.., ., :3“... _~9 J .- -.~ 9-. ' .
Llav KLq‘y rift—Ls.) eb"aqt “‘—Ull 14'; l1—LUHAL) \.,i or -J/ a 35‘;an U qm'a".-. A..
A
-. -k‘. .- - .. - +‘i - . ._ ' l ' ° ‘ ‘ '
1 v,\ , V . J .4 s~ \ r, -vA 3 ~. 1 .' '3' .‘~ 2‘ r‘. .‘ ‘- -‘
Ilteisms uncxe tau labor IVJLlprch- begins in tnc CDQTJQ ti uLU twricd
o

A

a: greater yreci-

.“.’ ' 3- . fl " 1 4 “‘ - .— ’.\ -fi "1 _' 1‘. ‘
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4'..‘.i L...:.. .' - . .-. a A. I...', ,r' 4‘ :~. 3-, .' .X—WH $2....
u...(-'-L-l..dr S cunt” , ill“) Cg:4:.: HA~L a- 3.9 u. out. “LutI‘iA Ck 2.34:151‘QL4." . burns-“331‘,
tr ') 1"" fl ' t;r\ n“ - \1 . ~‘,r\.‘,‘..““t“)r‘ V' "~ 3 r ' 'y'n“ V‘Y‘ -‘ ~ ~ . ')‘ - I v.“ o‘- ‘ ‘ 14 .1" \ I
n'v s». .a» 1 Lyn H- 1.4...Q , LunIu-‘ukz 4, a. .‘ ’ U6 IUD; (if a 1.1%,:12I‘luce 1.1 01101 t‘tfir Lido]
" ",, ~. . D ., .' ., " .
FETICCLD Jere'iexisibie.
('1‘, 1 n: s r. - -: ,, v v~ . .« v L-scu r . r.“ x ' 1 ‘- ~ '. V
ine iaocr rc3ui1enent is m asured in nan-nour units. it may
‘ —-‘- F --r ‘ - ‘ . - . :." . —
be a5 rebates in tn-o winner:

:LC' HEE-hflll‘iz per day Iggy I11? I1,

work days per wee” or on man-hours yer WtOK per man,

ON

wtrk days tor month or 250 man—hours per month per man,

l‘~ )
\n

300 work days p3? year or 3000 man-hours per year per man.

No cash outlay has been provided for labor in the crop and live—
stock budgets. All labor, except for one year round fa ily laborel,
must be hired t rcugh the ILLO? hiring activities. This allcws for

whole units of labor to be hired rather than partial units as defined

by specific activity requirerents. Far example, tne final pecgram
may have called for nine months' Work for year round labor. Such a
requirement is contradictory. Under the present assumption, if year
round labor is required it must be hired in all ten periods or not
at all.

One question concerning year round labor may still rennin in
some minds. The final program will indicate tne validity of the as-

sumpticn selected. it has been assumed that year round labor must

be hired in blocks of one man-hour each nrnth (tWlet man-hour: for the
ten periods). The question, tren, arises as to whether Ulis should have
called for one man for each of the periods (3000 man—hours for the year).
As the assumption now stands, it may be possible to hire a part of a

year round man or, in other words, to hire a year round man on a part
time basis. This could mean, for example, that he WDUlQ work three

hours per day for each work day in the year. This may be quite pOS‘l-
ble. many men are employed in full-time jobs who seek part-time em-
ployment on a regular year round basis. individuals from lOCAl stores,
factories, etc., who complete work at A p.m. could still put in several
hours on the farm.

Under conditions now existing on tnis farm, both year round and
seasonal labor are employed. Year round labor is generally preferred
even though season labor is less exrensive in terms of hourly wages.
(Year round labor is priced at eighty cents per hour while seasonal
labor is priced at only sixty cents per hour.)2 There are several
reasons for this preference:

1. Seasonal labor is often scarce at the time it is needed.

As a result the farmer cannot always depend on filling his reguirenents.

2. Seasonal labor is usually less efficient on the jot.

-nis is particularly true when farm routine must he learned and Opera-
tion of equipment must be mastered.
,. As a result of the above, easonal labor generally requires

more supervision on the part of managenent or by exyerienced year round

 

"S’d on an aVera.e or.tne five years {1951-

. tei. Housing and living
are not :rovided in addition ‘o the x.abes. actually, hous-
ing is available on the f li'y the study, it is asswnad
that if i oor mines use of it, it ill gay the rents necessary t3 suin-
tdin it.

o s b\\ ‘-
'arm-ott t) sine

. 4sor FQihu iuusr, oohv:rsel;, 15 Cum 'La l;

fanu routinc an2 equipment and can follow through on d

I I
n ‘ 31.1%: L‘Vif'jlorz.

A

01"

Certain activities on the farm o ALLit

\J‘t
0

mo;

.. ‘I‘.’
:w l
-_ LA‘S‘J. rlu"; «AR/.1

I»

or year round h- 1;. may

jfivfifl

Q.“
U

4:»
U ,

wk

not be dual; ind

I ' I
V1-1 J. A; A

ii:-

1‘ " r f“ -
HA‘J‘L VA¢§

u with littlr:

.3
5 Ant .

t; manm' it

\

t0 DST-

A

:A;;.

these activities 9. This would tend to further t the use of s€asoual

*“ab‘

labur.

.1

Wad
\.

ion hgs bee:1r.w:.~3

' '7

(.0

*b
'J a

vie. SOIlin‘, tilt-3 a

in this study that for each so asonal man-roux hired, a tent of a mnn-

hour of year round man—hour is required. This assumes that t requires

one-tenth of a yea; louni L::n—ho ur to supervise and instru ct one mnn»

hour of seasonal help. fhis is illustrated in Table 1, Which follfiws.

The in unv

0

amount of seasonal laW ono yoriod is basic-

ally indepe: 1dzzut of tikzt hired in and other }e 'iod. kitwove", since

a .I u _ .1, ~ u cfi

it: guired J'AF rounu superisor; isoor a AlPPI ,y 1; our \rotner
‘ ‘ " ‘v‘l ‘ .0 v‘ ‘ ' a " ' 4 - ,‘. . 1 o 'r '4 . r."
tl.dlA L4; {141.0(1) Little is u 4...! cCtl sitillJ! ”lg-mt 164.99 Jt‘:l 17.3
x. r ~K ’ " ‘0. " u :1 ’ ‘ .5 1' ’\ , 1 . b ‘ . 1 “
of the m; mum amount thut con ou nl.u-. o.e o1 Juor sun id‘s: :sr

‘ ,— -,.“y n.,.i.- ‘1. n ,. . r ‘ -' w l .“.r\.,‘ .1 . ‘ a I ‘y : ;_ :
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31“,, 1.313121.sz a3 1I'I".f.LJ .

"‘ irn' mnr.‘ ‘1" Y - r‘i M r star) -. ~' ,r") in f‘a~w’i~.r "vwnr
Ahe Judi" [Jun-.1 labial , AIs'.zIA\/.LVA¢~ u dh-v E, “ind l1. _ um. -w.--..., ALAUY-’

.' . "'. -4 n,.~. . — -: '.. MM '“2 3- r.-~-v $ 33~

is 5 Y plied as a lixsu restircc in th stui‘. this agJAu-u ttu this
. V; -. ‘ " r- ‘r ‘ ,, -‘--' \ ‘ '3 -1 ’ r- v" "-1 + ‘ ‘ ~

Wt hJ...L.L 1‘8 4.. 1:1 Ail on tn“; ful‘.;, u/ILVAIAAA‘d‘dbAD', ha‘u .;g I"): u...t. “:1" lat JV" 9

"h .r‘ * u . o.h ‘ -"4“ p ’ -.—-~ , 4“ ‘1 f :‘r-I . _

inis assurariYn lo has—n; on t .LUI‘tU‘ 1‘ in; -~_n t. J. o w if -: cs1.

 

A
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3' V ". ‘ , .' J ' L I $ -“ A ~‘\\ ~ 7: I '- {'r A l : ‘
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o
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H ’ .. . a .I O . , . . f. . . s 1 1. d . n 1 I
T.’.~u~ Ao—éw-. .Lu V‘w'AtCAIA-Lr VA ULdD'JLAL-AJ. Latin/VA ya; ALL-r {w-UJLJ AJJUL, 1‘

_ fl _ __ _____ __..__q ._. _ __

 

Seasonal labor Hiring Activities

Labor Periods I II III IV V VI VII VlTl IX X

 

Year .1
Round .1
labor .1

 

 

 

Equations .1
.l
.l
. 1'
-‘ .
—l.L
.‘loi’
Equations —l.t
for -l.C
dams nal -l.C
ras;: -l.C
‘ -l.L
-Y (

Source: Adapted from Table L5.

Note: This table indicates that for each man-hour of Seasonal labor
uglied by fliese labor hiring activities, one—tenth of a man-hour of
z round labor is reguire;.

“I
1* stud? mafia it possiole for all land to be rented out if not used.
This rent woulj oY sufficient to sup; 0: t. th- sirI 11 dlaoorth‘ needs.“
'5
l...’

Three additicnal year round units of fan ly help are ava able and it

is assumed that these will consti ute the first year round labor hired.
These three units would beu Jul asset s in teims of the supervisional
and instructional functim of year round labor in relation to seasonal

“r (~ . 4 ws‘. t “W”... .‘.,. . 1" ' .-. ,
laoor pxevicusly mentionec,. he fwdliv laoOL supgiieo in tn” tqogram

is assumed to be managerial in nature but can be used in place of

year round labor or even seasonal labor. This would only result if

its total capacity were nut used up in tze managerialt as—s. It is
assumed that .6 man-hours of family laLor is reguired for marchment

aid sutervisicn for each twelve max: hours of year round laLJr hired.
(The year round laoor, in turn, may we usc:d in supeivis J seasonal
130:1.) This would limit the total numb r of Jth round Lu“ that coulc
be hired to tWenty and the maximum anouxt oi seasonal laoor in any one
later and year round laoor ore used solely

month to 200, providin51mil'

Vt .. ., .2. .» ' .. .‘ .- o“ . —'..~ ~
in staungcr.sl.curl Sufi .xinnxry iLuicticrua.

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is occupied by the family labor supplies in the progra". The other

'I I I’ fifi
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.1
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mere, teat on_; livestacn activit Uo alll ucmghj the use of thc build-

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There are some feedlot
t .e" are badly in need of repair. It is estinated that the r:rair cost
along with the cast of converting than for specific livestcck activities
would apprezima te the cs of new lot . as a result, these existing
facilities have been ignored in-the prcgram.

Tne logical locaticn for feedlots is on the Home Farm. H3r e,
they are closer to feed sources, to the railroad, and to the conmunity-

where all or part of the labor required ney'be residing. There is also

_!

an adequate water supply available. Since the pasture land on the Home
Farm is rather rough and is broken up by a canal and lake, the feed
lots would have to be built on the tillable farm land. us a result,

livestock activities requiring feedlots will be cc:;n etirr for the
use of the tillable land with crop activities. This also places a
limit cf lLC acres of land available fer feedlo.e and consequently,
limits the size of the respective livestock activities.

The cost of censtructing the feedlots has been ceneidered a

."\ D

‘5
fixed cost and will have t: come out 01 Iarm .rciite.I lhe feedlot
’

fl

area will include feed stcrafe laciliti

L,

s. (Depreciatien. interest

A

These costs are termed "fixed cgsts" for eunVenience in this
study only. The variable costs are those considered in the acti‘ity
budgets, The "fixed costs” include all costs not accounted for in the

activity budgets. See Chapter III, "Assumptions Relating to Fixed Costs.

1:

3o
on investment, and maintenance f0; feedlots have been accounted for
in the respective livestocx bud5ets.) although tne cost per head is
not nearly as much as when considering permanent ouiluints, yet, the
feedlots are basically a permanent facility once erected. They could
be torn down and the land reverted to crcp production but this is not
too likely.

One problem that arises with the allocation of both buildi g and
feedlot space has to do with the periods the various activities require
them. In the case of labor, the year has been ivided up into ten
periods. If an activity demands labor, it does so by periods. This
requires a separate equation for each period. In the building and
feedlot case, there is no break-down by periods. This is not as ser-
ious as it may seem and there is justification for proceeding in this
manner. First, let us examine the activities that re uire building
Space. Thvse include poultry, sheep, and dairy. or these activities,
dairy, hens, and turmeys require buildings the year-round. These
furnish no problem as each competes on a year-round basis. sheep re-
quire it only during lambinb season. dome alternative arrandenerm
night be made for sheep in terms or temporary buildings if this activ-
ity should conflict. Ihis would require a chante in the assumptions.
Broilers create a problem, if produced for less than a full year. This
is possible if all the broiler activities do not enter the progrmi.

In the :asos of octn the broilers {less than full year) and sheep, this

L.

means that th,y compete with the fonne‘ activities for use of he
buildings, only will not occupy them for the season. This is somewhat

justified; for if broilers (for a nartial year), for example, do enter

‘the program, it means that they are more profita le than the other

activities even thouch there is idle building capacity the remaining
part of the year. The other activities must have the Space either the
whole year or not at all.

In the case of the feedlots, the problem is not so difficult.
All beef activities compete for the use of feedlots but do so in the
same relative time periods. Some feeding periods extend longer than
others but they all begin at the same time and compete in tle initial
stages of their feeding periods. Hogs do not require feedlot space
at the same time period but they do not compete for the same tyre of
feedlot space. The hog activities, as do the lamb activities, require
special feedlots which are not suitable for beef activities.mml vice-

versa o

Rotation
An analysis of recommeined crop rotations points out that a good
rotation not only helps maintain soil fertility but also helps to con-

..- -.+ -"‘ “\mi .‘
;.ICVC;19 Sull erosion. i

trol disease, improVe soil tiltn, and helps
soil Conservation service recommenc is at least thirty ge ercent oi" the
mland be seeded to legur.es-—on a rotation basis, for these purpoSn: .

' 1
L

Good conservation practices also help maintain proper soil furtl

.Jo

iy

and tilth along with controlling erosion. It has bc-sn assuncd that the
farmer will use Wisdom and good farm management sense in laying out the
crop plan designated by the optimum solution of the study, and follow

through with a systematic rotation.8 Nith these assumotions in mind,

 

The optimum solution Will list the actiVities.anu their res.ec-
tive level.s. The crop activities must then oe lnid out on the available

land in such a way as to farm a goo; 1o+3tion b:1sr ;ach succeeding
year, the same crous will be ‘aised , in the sine gdwo'z'itioqu but will be

(I

swrzzptiar ns .

rotated on the land accordint; to th

let us proceed with the assungtions showing the relationships between
various crcp activities.

Table 2 shows the balance between soil depleting crops and soil
building crOps. This balance considers other factors in addition to
the nutrient factor. The soil needs a certain amount of fiber to main-
tain its aggregates and structure as well as to provide a source of
9',‘ ; u 5 ‘ r? T‘ - :4 ' ....~ ‘. ~ ~ 7 ‘ a». - !.'_2 I -: '. ‘-‘ .-
i-cu lo: hunbr, soil micro-ortarisms. uBCthS previue Luis floor.

(1

Inter-tilled cr p3 allow the soil to be cultivated and freed irom weed
infestation. These are necessary functions in maintaining the proper
soil environment.

It is wise, tnen, to incluoe in the rotation intertilled crops
as well as the sod building legumes.

Table 3 shows tne nexintm portion of tne farm that should be
allocated to tne various crops. It will be noted teat not over two-
tLiras of tne farm shoulu be in email grains un‘le not less than one-
tnird should be in legumes. With knowledge of these relationshiys,
tie assumptions regarding fertility, erosion, disease,and soil condi-
tion have been urawn up. In oroer to maintain tnese relationships,

set of restrict one were introduced in a "rotation” equation. (A

r»

{1‘

V I y I l O I . ‘ \ I I
portion of tnis equation is portrayed in lakle L.; These restrictions

are based on the relationships of the various crops to legumes in the

able u gives an example of this.

r“
L

rotation.
Lacs unit of a legume activity supplies one unit of legume.

Zach unit of a snail grain activity reduires one—half unit of legume to

compensate for its soil detleting affects. Lacu unit or green beans

or green peas requires one—fourth unit or leglme, while each unit of

q

‘‘‘‘ WI H‘~": r'w r ,n-n». ~.: ”'1:~ vr-Jr‘u.‘ ". ‘v V ' ~ew.
S" t: (it C'J: [} rC'lhfirUD Olle Lei‘lmdl' Q‘sit . iAALD ‘I"‘rd¢.o L.‘: .1 take ‘4 11‘.) b0 L1.

 

Soil Depleting Crops

-.

Soil Building Crops

 

2 units Field Corn, or small grains

1 unit sugar beets, potatoes or

Sweet Corn

1 unit Legume or Legume-Grass Mixture

1 unit legume or Legume-urass mixture

1. units field Beans, Green Beans, 1 unit Legume or Legumes—Grass Mixture

Field Peas, or Green Peas.

 

 

Source: "The Soil Productivity Balance of Crepland", A chart by J. A.
Slipher, Ohio State University.
TABL: 3p-»rercentages of Farm acreage Allowed For Various Crepe, dithin

the fertility Balance. Total rarm Acreage = 100%

 

-1‘-_ .q ‘

 

 

Range for “heat, Barley, Oats, Rye, Flax, Field Com ‘56 2/3

80% )

 

Bangs for Dry teas, and Beans, Green Peas and Beans

 

Exange for lotatoes, Sugar BeetsJoyeet Corn) 5C‘%

b—s—i

Clover, Legume Grass hixtures

....._...—.-.——¢-...

 

‘fl‘hz‘a >-___—.’—--

 

_—____—-——._.._.-_.

r. {‘lr‘ 4"
. 1 \_ A‘!‘

and

 

 

 

 

 

Derived from "The doil Productivity Balance of Cropland",
confirmed with other readings by the author.

Source:

TABLE 4. -Portion of the beginning Program Illustrating tie Equation usei

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to Liaintain Fertility Balance.
. Activities: ______ J*-

Portion of * ——---~" —— --- ~—

+' ‘ . ' ' ' w '\ ' . ._' ;_
E0”3P+On Alf.-drome nlf.-DPOMB Barley breen ory Clover ch.
equation Hay Silage Beans Beans silage Corn
)2? __r ____'.. 4.. .-. . _ _-

-100 -10U 05 .15:5 0‘.) -10L/ loU
source: Table L5.

de Ml 'zb crOp ofn enter the program unless there are enough legumes
in the program to offset it. This equation dces not restrict the
amount of legumes that can be {reduced on the farm at a given time.
This assumes that, if perchance the whole farm were to go into legumes,
the management would reseed it at regular intervals (recommended every
three to four years} and would use recommended practices in disease
control, fertility, and soil management in order to maintain yields.

Bach crop has been fertilized at the recommended rate. This,
along with the rotation effect, insures the maintenance 0: soil ferti -
ity. all cro gs, even leg ume s, deplete the soil of some nutrients.
For tnis reason it is recommended that commercial fertilizer or manure
be added to the‘soil. The costs of fertilization have been figured
in the crop activity cudgets-in Chapter IV.

The assumption has been made that only commercial f ztilizer
w"l be used on this land. This, as noted in the budget section, will
be ap;lied during the se eding operation in most cases. If manure were
available and used, it is further assumed that the cost of spreading
it woulda Hp rc ximate the cost of commercial fertilizer. If manure is
available on the farm and not used, it "ill be assumed that the cost
of loading and removing it will just be offset by the sale price. These
assuuptions have been made to similif3 the problem and are based on a
survey of the costs involved.9 This ignores the other values derived
from manure in addition to the nutrient value. A good rotation con-

tainin g le.;um«s would te nd to mane up for this loss however 10 The

__ A A
v v.

( ~ -. l ‘1 ' ' ‘ f‘ ‘
)fT04HCtlQnLLOm303lthfl and costs 01 nanuii. farm n.rur on

C:atral lnaiana tanns,‘ station bulletin 91) \LJlayeeTe, lniiana: rurdie
University agriculture a- experiment station, July l‘,£3).

 

l :ers in alberta, n neport Prepared by Tne irovincial
advisory rsrtiliser tomnittee, Circular #5 kMevisei), hay 195a.

author is not in a rosition here to aria: Lo: or a aihst the virtues
of organic farming-as such.

No summerfallow activities have been included in the study.
On irrigated farms rotations seldom include summerfallow. 0n dryland
farms, summerfallow ser es to control Weeds anl to build up moisture
supply. In recent years many drylani Iaruers have given ur their
summerfallow activities. In place of than they have introduced sweet
clover or other legume activities. The rotations require one-third

1

of the irni to be placed in sweet clover.

3

Tai: is seeded in the spring.

.J

5.

In early fall, one cutting is taken off for hay or silage ani the resi-
due, after leafing out again, is plowed under. In some instances the
whole crop is plowed under depending on yield and market conditions,
as well as time available for harvest Operations. Grain is planted
the following two years on the sweet clover land. Since it is plowed
down early, there is still time to build up the moisture supply, and
to take further weed control measures if necessary. The clover usually
gets a head start on the weeds in the sprin' znd in this manner, tends
to control them. It also supplies nutrients and fiber to the Soil.
In this area where hi5h winds are freiuent, its soil building quulitles
are very important. In this analysis, it has been assuned that sweet
clover will make up at least one-third of the dryland crap rotation,
that it will be cut for silage, and that the residue will then be
plowed under in preparation for the next year's Crain CIGE}

an alternative rotation method might have oeen exployeu. an
Th

activity could have been established for each rotation. is would

mean that certain or ;s in fixed proportions would alwags enter the

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4 \ - ‘ ~ ' I O Q
" ' ’ t" 'I “ " ’V' r2 r i- H -«‘. ~ "' 2"+ ' 4 I a? (" 1- .3 , “.. ‘
a .‘4 L1 av ..'AU K‘hAd \JL Ulnr Lou“: L t -.—*.A I t A ‘v'\£\‘ 1. LA‘. 1.- v - '~ A I ‘14.. ‘7‘ at L J A
‘ r ’1 ~ ‘. . - . ' v 1 ‘I ' l - l ' -r 1 - W ‘ m u‘r V' Y“ 4‘ ‘. ' v
- J V Au} _ kit-r- \ . ‘lk—I -; Av - v.5. -1; . Vufi .‘v‘ ’1 - u 4.. / ‘ . \A I - - A _A .. 1 .
A e \v s L

Au agelyals of feeling ra ti: n3 ingica_ ed thut Ion u\~e fed Either as
silage or tag was saticfactar; and that tge extze 931K of the silage
dii net deter the rate :f 5r: f . The main crite”ie affecting growth
is 1;; :xgti; cf cctmzxrtr't~3 (alefj.-lr tfjisf t;-:'Lg:h;;e.

Tu 3-; L3“? Praia-31d :n th; fuzm is 3'1 . It fiJct tc use Y
tJe l VIQtuCL actlviti s or g; tgccez. it“ nuke en 1e 'urchace , how-

r 5. '. 4-.‘ ~ ..‘ , - o.‘ fl -‘| .‘i . ‘ V, | '1 I q .
1", r ‘ ‘ .- r. '. ... .',_4 . 1... . —. , .-;,. ~-r .. .. - . a, .
be .A ’ .A.;l L..f‘3 ..U .‘ll L'-.. hv‘fiLI—AuL-h-KA 1A~A‘.— u-L.lC.‘l .vl";}‘1J_L_Lt,-L; I'k}“"3_.:‘u\.(: e»1t¢li‘»rdlC31JJbS.

‘:- -- .r‘ H mm ~‘- ”9;- ‘1 1 +

V , 4 . ‘ ._ . .1, ,7: u . v ' — r ‘ > ‘ ‘ 0‘ t”- A . . I, .

0““ ~"’ L'” Cl‘"“'l‘ “J'- , "'-"‘-“' L H (11-. L Lowlu t‘l C(PJ...‘ k4LK’.‘ m :JvCI‘qL' (h: ~1.1d truIlS-
U I ' O

1 w .. - -J-,Pf'— m1 - -M “....2 4. m'. 1. . \. .‘. «.2 ‘A_ w. . - a 4‘ '&

EC" tutlon (-4; J ~(.ul L1 '3’ In; CCJE LE: . -..t; “c1; T. .- C 2114C“; :. é. ;lx DUE; liq; JCtl J1. by

e
1 I. ~ . .: m ,3 :1 "-x-.' “1+! .. ...._-+.. -+~ ..*~ A. ~.
—LS CIKCIE—I 'd ~A‘»‘ U‘~\ U—l . -_.L. 2‘ LA .L.‘ ". LC ',‘_4 Vii? I u: 3 Iti't; UI'_L kal U:) i) -~_‘_\. . A 141,148,561 ’

in" purchasers u3‘421; camera thgt it he delivered to their fer . This
initfl QCliVery tine and cost lute the budge , derend-
but uycn tL~ time an: distance invclved in delivery. 3; . "MlllLL that
the rou~here be used if Uterxcllv cu he farm or go unused, it tends to

encc ura .:e the intreduction of ZLVestcck actlvities ifltu the final pro-

‘ ml , r‘ r . ’ . - v t '- ‘ - ‘ " --‘ . T" '7‘ " ‘ r‘ r‘ 1 " t‘
gl‘nllf‘. .Ll.t.‘.p€ dCthltl ‘35) Lucii“.-. Ui-C‘ 01 FULL “‘35.," 8.1L...Val€:fli$ do W641 do

us‘ “ ”ear rwunfi labor in winter mcnths vhen crcp activities do net

dimand it. In melcir: this assuwctinn it is realized tiet the program

‘.
.—

\J4.s

is being given “me directicn. This is partlculurly true in lieu of

the rotation r:striction taut reguiz 63 that a proportion of crops p10-

0

1 . . \
duced 0e legumes (routzn 5e producxng crops).

l.

The roughage eguivalent used is equal to one ton of good alfalfa

I
1

The ct mar rou5}1:1gecr0ps axe eh.wre sed in ter 5 of their relative

?' r\1 w.“ .' " .fi - ,.-A- - “" 5 ‘I‘ — r‘ v¢w— r 1 ‘l ‘ y". '
no uLlO&LMm3hdo bflenl&xb“§u tJe mau<1 ion a? Imfljn{yrjro—

ching crops into pasture. Th;s wauld 1e,ui:e sczqzate actlvitic :»r

each rourhare cro: converted. Tue rxsture season extends frcm oune l
w w I)”

.4

. , I o u
. v ‘ , --'," _‘ ‘. V ' I O/\ u 1 , .~I . V_\_‘ ‘ 1. =' _ ‘ . .- $— ‘ 7., . f, H .' .' . _ _ W .. .1. \. )
11.1‘9‘“ .. dtsi- «,CLCG‘I ,n, \.L...:..‘: ugbyu, . All- out; 1,44) we; t:—..‘...l\s...‘._g‘.1.b livtcitfl CzC
' 0 O 0 - w - -‘\ w ‘T .n r ' N
a. '3‘. . ‘ I'.“- . ' , . . « . . + «r 9 l pvJ.’ ». + —|,.‘ -~+o~.. .‘ P ~'.v
aCtlJltlpa Z't. 1L;-l k. Isisbth“: ..u I olJJ .LUl- ”cab-c I). ...,4. 01.3 Cd»u.‘.;.h 0.. {Lag

Cw ui‘: ""3 w" 51" ~. +31} 37‘ n9” thing; V-‘r‘uuu-I': v' ,L-v‘ *7.._. ’1':t. ‘rvl ",- of tI‘.‘) v-r 7(3
L w‘»-L.dg "(_I Er Uu‘LKl.. L}; L, ‘O_,~. 'IV J“ : At-‘.A-L ‘aAl u Ll-£‘J\... 1‘. “A iv‘nt.‘ a“ v I'Uu.“

\ ’ ‘ . 1 r l 1 v- I - -. . .— '_v ". ' ~‘ ., : 'l- c,. u-" ‘\ 1 r- ‘+ v“ - “u . —‘
cal: 02 avaiiaole cart cl a -cason, uu-cn would not help out tne liVe-

stccr act;Vlzies. It Could be rentea cut, out tLu sane Situa ion may

.‘¢ 4-; . “n. , ‘ '. a _, ,,.2 ..1 ,. .:
' “loft 8935;} 1:37..‘:I"S 4r. HulCfl cane -J(u..cz..ul \IcJLLLu be “J. {Ur

still agpl
Laylanfl after the first year, it would be feasible to pasture it the
A

full seascn. tonsiiering the costs involved, this would be relatively

l “ . "1‘ : 'l'r\ 'Q ,‘ u 1‘ . r ,. ‘ . r 'w 4‘ \ ‘1 ,- ~- 7-, -‘.
e pasture. inls nmhll also Ieiuire tnat fEUCdb be glGCed arouno

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LNJ
(T)
(0
F I.
4

each plot to retain the livestsck. fi.hese are not ‘res ntly in exist—

kl

. Q ‘ “'Q .~,. :- . P - .V_: +.V ,, .. 4,; 5., ,1-“ c», -. ‘v‘. 4.‘
encu,‘ LL” GILL; iences in e -.lSo'::;Ce ale Outiioe, L's-Foe; LSIACCI) £31.14 silt:-
- . . v.1
sarronnding regular pasture lanes. ror anntsl crtps such as sweet clev—

-‘ ' 1\ . u~ ~ . ‘ . I ‘ «V 1‘ a.» w . a! \. r
er, erowth would not Le hlph enough anor MGll GUUdLH estaoljsned, at

the teginnine of the pasture season tc allow for grazing. as a result,

it, too, would only be availrble for part of the season. For tnese

reasons, allowance has not been made for roughage producing activities

9‘
U)
rt
‘3
’I‘
Q

to be converted to p

for convenience purpOSes, two sroups of costs have been included
in this category. The iirst group is those normallj thcucnt of as
fixed cos s. Tnese are costs incurred regardless of the production
level, Even with zero output these ccsts mus 3e paid. The second
grOUp includes a portion of costs generally included with variable
costs. These costs differ, however, from most variable costs in that
they are incurred only once, and not annually as are most production

costs. As each new activity '5 introduced these quasi-fixed costs are

incurred-but do not recur in successive years of production.

\

All the fixed costs are deducted from the profit obtained by the
. 1

Optimum soluticn. The variable costs are all deducted in the budgeting

(4'

processes in de en ining per unit returns for each activity. The net

profit of the farm operation th-n, is determined by sutt‘acting these
fixed costs from the profit determined bg'the optimum progrwr. {The
net profit should be sufficient to proceed with the next year's Oper“—
ticn——until returns from its operation are forthcoming.)

The first group f fixed costs includes property taxes and in-
surance on buildings and eyuipment, wages doing to the family labor
supplied in the beginning program. Jages to the family labor include
the amount necessary to maintain his home on the fern” These costs
must be paid annually, regardless of the level of production.

The second group of fixed costs, or quasi-fixed costs, includes

the initial cost of irrigatien equipment, tractors, trucks, and other

machinary, costs of converting buildinbs to fit needs of specific live-

(0

stock activitie , and costs of erecting feedlcts. dince there is an
extensive inventory on hand 01 irrigation and equipment and machinery,
only that additional amount (if any) will need to be acquired. Depreci-
ation has been charged in the activity budgets for equipment and for
buildings and feedlots. This ncans that once this necessary investment
is made, as long as the activities requiring it are in the pregram, .
no further investment will be necessary. These quasi-fixed costs could
be deducted all at once or over a period of years, depending upon their
amount in relation to annual profits. The government and other agencies

have credit programs that cover such costs. Jee "Assumptions deleting

to Farm Credit” on the following page.

them to do their best for tne farm—~these would have to be an annual
payment, degendent on the laborer and the net profits available. These
costs do not actually fit into either the fixed or quasi—fixed cost
groups, but would also be deducted from profits.

an outgrowth of this assumption is one concerning the budgeting

,"
la

V'V‘

ficients. These will only include variable costs.

coei

assumy ion helatinr to Farm Credit

Availatility of credit ylays a very important role in the devel—
Opment and Operation of a farm. In this stony there has been no credit
restriction developed. There are several reasons for this. first,
this is an intermediate run situation (one to five years). Within such
a period certain adgustments can be made. Certainly, if this were next
year's program that was being develOped, specific credit restrictions
would have to be established. however, in this intermediate situation,
it is assumed that the farmer will have time to gradually work into
‘his Optimum program. Thus, what would be restrictions this year may
be relaxed by the time the management moves into this Optimal program.
As the operation grows in size and becomes more efficient, its borrow-
ing power will also tend to increase.

Second, the government has develOped a fans loan to cover many
of the quasi-fixed costs. This is the Furs lmyrovement Loan. It
allows each land-owner (including {artners} to borrow up to $5,000.00
each for improvement purposes and for equipment purchases. Cn this farm,
if all four of the owners participated, s33,ooo would be available to
cover costs of improveucnts and of acguiring now or used macninery.

This type loan runs fro; three to five years.

m . V." I A 1 "' ‘ ‘ ' ‘ c J :- "v ’~ ~ A “‘ Vs‘r
.ni.d, tne lederal gcvrrnuont has, in aieiticn to the .ann

Improvenent Loon, a long term loun, that can be used for large-scale
capital improvements, consolidation of debts, and extension and intensi-
fication of farm operations. This loan re;uircs a first mortgage on
the land. Up to off,fif0 is available without government supervision,
{¢}C,OCO with government sugervision}. These loans are paid uack at
low interest rates over a ten to twenty year period.

Fourth, the banks ,roviie cagitul Ior livestock purchase and
Operating czpenses with or without a mortgage degending upon the amount
requested. If cattle are purchased, they usually just take a lien on
the cattle. If a nominal sum is borrowed for oyerating, thug may just
.make a reguest to hold the land titles. If the amount is extensive
(approaching the disposal value of the land), they will insist on a
mortgage on the land. The credit rating the farmer has with the bank
is a big factor in determining the amount they will loan and the con-
ditions under which they will loan it. This case "tudy farm manager
has an excellent credit history and a favoraole rating.

Fifth, insurance companies are often willing to loan menu; to
fanmers for improvements and for debt consolidation. They usually
require a first mortgage on the land, however. they will lend on
intermediate, short, or long tenn contracts.

Sixth, equipment companies quite regularly now will finance the
purchase price of a new machine if a down payment (one-fourth to one-
thi IT!) is mace .

seventh, feed companies now have policies to carry tne feed bill
for the farner until the livestock is sold (often without interest;.

In addition, some producers of poultry feeds will also carry the yrice

the poultry until they are sold. nrrangéa't‘ents, in the poultry in-

dustry are also often made for equipment to be purchased on credit

in this manner. The sugar beet company supplies seed and fertilizer,
nd often equipment on credit-deducting the costs from tie first check
due the farmer from sale of sugar beets. They also extend this credit
courtesy to the rurchase of hy-produ cts use for livestock feed In-
di vidual merckants, in farning communities also extend credit during
the feeding or crOp production periods.

Eighth, in addition to these credit sources, it is possible in
some instances to receive financial support from an individual or indi-
viduals on a perSUnal loan or investment arrangement.

n3 may be noted, credit facilities are abundant. Of course,
this should not suggest that all are availaule at once. Four factors
that are important, however, as one reviews these facilities are:

\

(l) the management in this case study has a $000 credit rating. (2)
The land is completely paid for. ~23 Li.4e Wilse,tne eiui;nent on hand
is 003:1324ly fr'. §;; .: ht. (i) fixéfarm is in o;erati0n now and has
fl is to oegin ope ra-ion L;r tne on«:ominb year (at least, in terms of
its present program}. Through systematic, bradual adjustments over
the irterse ate period, it is assumed the..niuy2ruxn.will be able to
adjust t.e present program until it coincides with the optimal one-
without being restricted by credit limitations. A careful analysis

of the finalp rorram vzill determine the validity of this assumption.

.Ass Lurfiit ons Relating_to cfiv“""“"ets
71 re were son e assumptio ons made prior to the fcrr; ulation of the
livestock >-' crop activity budgets that should be pointed out at thi

\Ao‘u

time. These, along with those just presented, served to guide the

selection and formulation of the input-output budgets. All data used
in the study must reflect as closely as possible the assumptions of
the study. The ass Lptions serve as the framework into which the data
are fitted; this framework, in turn, must meet the Specifications of

inear programminv model.

U

’_l

the

V

It must be assumed from too beginning that the farmer is absolut—
ely indifferent as to which activities cuter the final optimum solution.
The degree of indifference may, in actuality, he more than that assumed.
However, by making this assumption, more activities can be included in
the beginning prOgram giving him a greater selection of alternatives

fpgm which to choose. dome of these activities that may have been.exe

eluded were he to voice his preferences may be more profitable than

If this is the case and thev do enter the final
I d

J
..A .

those preferre.
program, he will produce tnemlaecause of the profit incentive rather

than because he prefers working with these types 0

.‘5

activities. This
is often the case. subjective evaluations are involved here to some

extent. The preceeding analysis presupposes that the farmer is capable

rs

producing ither activity equally well. If this were not the case,

0

he would be justified in not selecting certain activities. The selec-
tion of activities to be used in this study are those with which the
management is capatle of working-and yet, some are included that it
would normally prefer not producing. in the latter case, it is assumed

f any of these activities enter the optimal pregram, he will produce

PI

them because his positive preference for profit outweighs his negative

4

tivit' or activities.

0

preference for wwrhing with said a

oats and returns are held constant.

0

In all antivitles per unit

In this study, chanpes in costs and prices will not be Considered.

All input-outlut data are an average of the five—year period from 1951-
lQSC. In some instances, data were not available for the whole period

be made. The assumption followed that

(J‘

and agproximations have had t:
during the next five-year period the data would remain valid. In as-
suming prices of factors and products constant, it has been assumed
that the production from this farm would not substantially affect mar—
ket prices and, also, that the average market trices for the ne 9 five
years would remain the same as for the preceding five years. in
studies of pri: e trends in 1956,v wnen tais stud; was Lerun, it dds felt
that this was a satisfactory assumgtion. In some instances, such as
wheat, government aid 0 her u‘HlC-pQ control and ev set prices.

a necessary assamgtion is that all products produced can be mar-
keted. It has been assumed that all production of liv ' stocx anu crops
..oild oe mar Ket3d imaediat te y upon C\mcietion o: narVest, or feeding
peri iod, with the exception of r'ubnage products. These mm at be used
internally on the farm. In the case or crop activities, the products
are delivered by the farmer to the market terminals at the time of
harvest. In the case of livestock activities, animals are sold on
the farm with the purchaser making the delivery. The ssllingc costs,

\

ii anr, are cons is ezed }a art oi the ptrm mtiction tud3e . Grain products
used by the livestock will be purchased from off-the-farm sources and
delivered as needed by the livestock.

The product ion pc"iod in tne pro:ra:: is lo? one year of

an in-
termediate run (five year) period. This allows time to wcrk into the
optimal progra:n. It also names it possitle to syread Certain duasi—

_.. ‘ , a ,, ,. 3-: "-- , a ' 3 , NW' -."_.
1120371 costs out over a longer tern”. Ine Ll, ul ts snoala Show a leis

' i i. , .. :- . 'n _,.. ~_ .vvv'o H I ~- .
tively stable farm program rather than Just the float yea. o ,robxad.

Y "

In this type of situation, aigustments have to be xade and steps tanen
to move from the present fern pro3ram to the optiuai. These steps are
not s; eh ed out in the pro3rammin3 solution althou3h direction is def-
initely 'ivez.
There is alwa55 tne element of risk and uncertainty involved
in the decisions of mana3enent. Trend-lines may be constructed for
prices, weatM: r Lorecasted, and 'ie spredicted, out the outcome is
still suite undecisive. No measurenent of uncertainty has been design-
ed for use in this problem. Some ste }DS have been taken, however, to
reduce risk and uncertainty. Datau sing five-year avera3es have been
used in an effort to reduce uncertainty. In this region, crops cannot
be insured except for hail damage and the pos osibilities of this are
sli3‘ t in this area. Insurance has been considered in the livestock
budgets. Insurance on buildin3 and equipment has been considered a
part of the fiJLGd c:st . Through careful appraisal each year by manage-
ment of market situations, alon3 with the prevailing farm condition,
and in lieu of the o’ci‘un pro “a! desi3ned for its farm, adjustments
should be made in the pr03ram to curtail risk and minimize uncertainty.
linear programming model re e1uires that there be no ne3ative
production. This infers, then, that all aetivities will either cone
nto the final pr03ram at zero level or some posiu ve produc.tion level.
The periods prescribed for performin3 various jobs such as Seed-
in3, cultivatiz'g, and harvesting only stipulate that the Work 1. ust be
done dlrin3 the r sre ective periods. This does not mean that tic Job
must be spread out CVer the whole 3erici—-or that only a portion of it
can epe;rfw med each day during the period. It does mean that the

particular task will not extend beyond the prescribed pcri3d. In the

3.0

V..-

re,“ anorld 8113201 lCEA t‘OIl, there Will undoubtedly U6 801118 give and take

No restriction has been set for amounts or 33m es of equipment
used on the farm. There is a substantial inventory of equipment on
the farm at present. This is mostly related to crop use, however.
It is assume ha. additional esuipn‘.cnt required by incoming act iv vities,
in the optimum program, will be purchased out of the prQ ;rammed profits.
This expenditure is included in the fixed costs to be deducted from
the profits occuring to the final pr03ram. This cos Mul be financed
over a period of one to five years if puofits won't allow the total
expenditure in one year. The gilptuznt may also be acquired durin3
the years in which the farmer is adjustin3 to the opthnwn pro3ram. If
the pro3ram.had been restricted to the use of equipment on inventory,
certain pr fits may have been foregone. Since the equipment exyendi-
ture is a quasi-fixed cost, it was considered Justifiaule to not re-
strict it. The activity bud3ets include costs of depreciation and
interesv on the investment on all e1uinme nt uses. In the selection

0 be used in tud3ets, uniformity of size and t312e has

*‘3
(D
L
C
F“
'9
:3
(I:
’3
{+-
C+
0

been maintained. This means that one machine may serve several activ-
ities as lon3 as they are not compe etin n3 for it in a given time period.
Th e selection of size has been b: sed on the farm size as well as the
robable use. This continuity'of nechine size, allowing uses in vari-
ous activities, should help to get more use from the machine per dollar
inves ed as well as to lower total equipmen 1t inrestnent.
No custom work is to be hire d ty the farm. similarly, it is

assumed that the farmer will not d any custom work. On a farm of

. . o v o x V _' ... f ‘ n _ ‘ ,.,. . .° .1 ‘. -...‘ '1
this Size, it was ceCiied that in most instances, e1uit.w no would be

I
. - _' r - 4 a 1 3 ._ -3-
use; ngquateLJ {L.;3nx

L C.

custom vmo k v;i h
it wc uld not be justified. althougix, in actual rractice , ii" manpower

" " ' . "‘7'“ ‘ '0 ‘ - r‘- "' r": 1‘ v 'u' ‘1 3’ '-'¢ >fi . r ‘- .1 r ‘ \, an 1
dfld elelempiCt afele ltlLt" uuu CUStQJ -..v_.-I 1‘. ud.) a‘m133~3:3, that: ..OU;d

be no rca.or for the farmer not to an ace in it unless he fclt the

(J (.1
wear and tear on the machine was nc1 worth the returns invclvcd. The

Ewneral fazm operation is now larg3 6.3 n to jut tLLy euccndit" 35 for

a ‘. w . “ ‘ I " ‘ '\ ‘. .
eq;;}ment 0; 3t3 oun tn3rcug data;

Y
‘1

away wizn th3 need for hiring cust

self in a bind and cculd 'ustify the hiring of 3ome oc tensional cue tom
*r‘: - .: ., . ', .,,.‘ ' 3 ..p , .. , . .
'"K. L33 330.3an. th3.; he-3, ncheler, 13 that Cuotufl wtrh ”011d not

\1 l- . ‘. I‘. w‘ » ‘1? 'fl‘ ‘ 7‘ r."|’ \-' VI 4 ~ " " ' “ _ I" ~‘
p'la‘}, d A‘LLI 'C‘r‘ I‘M/.1: in tile ldl‘t‘ OEJTJLdt/lvl" “Ala LlelUIU.‘-,, L0 IXUU ‘13.-..»1.‘ 4'3“
° $ ‘ 3 "n ... . 1.».
in VI“: ldlu. EFI‘JQI 6A....

'7‘ .

' "u“ v‘ -. - I -: 1 9 . t : A :' l “
3n: r233333 lrpm br33nz3c3lv3t333 3s a;

(«1
h.’
f-
1*
O
(7
(I)

C
LL
CT
{1‘

. .ID\ ‘-. fl . 1.:1 \ -.~—~ --' . ‘ " - ‘ ' 1 "(J I ‘. “V'\ \‘V‘L . A; .v.

lnto tne $33-. 5L1 5r33n crtt3 “131 L3 n31VestcA “Ltd a Ctnulnm hlth
v~ v s - ‘ v V‘r - ...- #‘nr 1 r ’ AA . s\

a straw-5193131 attaCnc.. 3n tne .ome :33“, 333 n33v3 3311 co3_

»,-~ A: ‘ r- .— rJAn“ A‘ ol‘ ‘, "- a ...o 11 r P .\ — t “A #
b3n323t from tn: 3333313n o- tn33 .3_;iuw. an tne Lutte r rm, tne

by hijz‘uinis, irrir?ti3n water, and rain. from tic standy’int of
lixz: stock activities a straw balinq acti'i v mirnt be dfisir331n. -nls

would regulre an additionnl acti"ity and C;U3tion in the frugram. H3w-
ever, th costs of straw turchqse, per animal uni , is not big. 3t
.51"

' " ‘$ .-.. 4—. t‘.— . (6- 4‘ :. #:VV‘) 4- 4h no"; ,3
ref" 13‘; Lue gift-... 30 in.) U11‘1“. at, 3:23 '34.“!3 1L; .3 [1,938'“.

th_ - . fl ' V. J ,3 . 3 ~ <- - -_ r‘ .4— --: 3,- ..‘5' + 1n"! ‘1': '2f‘ 4 - [3' '*:"-' ‘3 '1 t: 7'13
‘IA'J bc‘lenk’, Urk1“Q'J‘CI‘t 41L Lt‘ll'l L120 1‘L1A_I.’ L'L LJLILArl .LLI all LI...‘ VI;va \j dbtd L4H“,—
‘ ~_‘

I l ‘I ' 3 ‘_ - .‘ _ .. \ .1 .3 ‘ : "..
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CHMWHKIV
ACTIVITY BUDGETS

This chapter will deal with the activity budgets used in the
study. The first section will consist of statements relating to the
importance of these budgets in the programming procedure and, hence,
the necessity of care in their selection and construction. Items to
be considered in selecting activities and data will be next presented.
Finally, the general requirements of the budgets will be set forth.

The second section will deal specifically with the crop activities.
Material relating to all the activities will first be presented. This
will be followed by the individual activity budgets.

The third section of Chapter IV will present budget material for
livestock activities. As in the crop section, materials relating to
all the activities will be presented first. Then each group of live-
stock activities (for example, beef) will be dealt with as a unit.
Material relating to the whole group will be presented first, followed

by the individual activity budgets. A similar procedure will be follow-

ed for each group.

Importance, Selection, and Generalmggggiggments of Eudretq
The input-output budgets have been said to be the heart of the
linear pregramming method. Certainly, they are important. Budgets
need to be carefully selected, well thought out, and accurately'construc-
ted. If budgets are poorly constructed and contain errors, then the

L9

50
optimum pregram designated will have very little meaning and applica—
tion. On the other hand, if budgets are well prepared and accurate,
then the optimum program will be meaningful to the problem.at hand.
Linear programming is simply a mathematic technique that solves the
problem fitted to it. It will do the best it can with what it is given
but solutions can only be as good as the data employed. Selection of
data, therefore, and.oonstruction.of budgets, is vital to the satisfac-
tory application of linear programming.

One serious handicap has been the sparsity of budgeting data
available in useable forms. If linear programming is continued to be
used in fans management, then considerable work needs to be done in sys-
tematic selection of budgeting data. In more than one instance, the
author has had to synthesize data from various sources to construct nec-
essary budgets. In many cases, the information was available but not
in a useable form. Before it could be used, it had to be adapted. In
the case of irrigation and water needs, as will be noted later, the
necessary budget data had to be synthesized and adjusted before it was
in a useable form.

The selection of budgets is basically a judgment decision of the
researcher. Important factors in the selection of budgets are the num-
ber of possible enterprises and the relationships existing among them.
Enterprises or activities that are interrelated should be selected.

If livestock require roughage, and land is an available resource, it
is logical to include-along with the livestock activities-roughage
producing activities. Alternative production processes should also be
considered. Livestock activities should be selected having different

feed rations or other input requirements. These present alternative

Sl
patterns for resource allocation and increase the possibilities of reach-
ing a more profitable optimum program.

Two types of information are necessary for decision-making. The
first is to know the amounts and costs of required inputs for each pro-
duction unit. These inputs include such things as land, man power,
capital, equipment, etc. The second is to know the profit for each
unit of product.1 These types of information make up the activity
budgets. The budgets include the amounts of inputs required, their
costs, and the gross and net returns for each productive unit of the
activity.

The net profit per unit (c3) for the budget in this study repre—
sents the selling price minus all costs not accounted for in other ac-
tivities within the program. These are variable costs. Costs accounted
for elsewhere include those involving the use of labor, the use of
tillable land or pasture land, the use of roughage equivalents, and the
use of buildings. When these latter factors are employed either another
activity is brought into the program.supplying the item or they are
taken from the existing inventoried supply.

Each activity‘s budget is based on the ”Unit Level of Activity".
This is determined before input-output data are assembled. It is an
arbitrary'unit detenmined by the researcher. Usually it is the same
as, or similar’to, the nonmal divisions used in marginal analysis of
budgeting. Table 5 shows the unit levels assumed in the activity bud-
gets in this study.

The inputs in a given budget are used in fixed proportions.

This means the inputs required for ten units are Just ten times the

 

1Ferguson and Sargent, lo:I cit.

r: I)
'1‘ L.

TABLE 5.-Unit level for each activity

 

 

 

. l. _‘ ‘_ __ ___ -
Activity' Unit Level
1. Crops: All crops 1 acre
2. Livestock:
a. Bee!
breeding herd l cow
feeder calves l calf
feeder yearlings l yearling
feeder two-yearholds l two-year-old
b. Dairy
type A l cow
cream 1 cow
c. Sheep
breeding flock l ewe
feeder lambs l lamb

3.

input requirements for one unit.

d.

Other:
3.

C.

Poultry
broilers
hens
turkeys

Feeder hogs
Labor

Year round 1: gr hiring
Seasonal labor hiring

Roughage purchasing

Tillable land rental-out

m

 

l,oQG broilers
lOO hens
JO") turkeys

l hog
12 man-hours

(1 man hour/month)
1 man hour

(2 man hours in
periods 1 & 10)

1 ton

1 acre

The production plan and its required

inputs are those required for the output range at which the particular

activity may enter the final program.

It has been specified, for example,

that at least one-third of the tillable land must be in legumes. The

legume activities' budgets, as a result, have been constructed to allow

53
for a range in production from one-third of the acreage to the total
acreage. Similar accounting has been done for each crop activity. In
selection of equipment, the size selected was such that it could be
employed on the whole farm if need be. Within the range allowable on
the farm, it is not likely that there would develOp noticeable economies
to scale. Some economies may be encountered in livestock activities,
however. A feeder truck may, for example, be able to deliver feed to
one thousand head and may only be delivering to five hundred head. The
cost per head certainly would diminish. However, repairs, depreciation,
etc., may offset this economy to some extent. Constant costs, returns,
and input proportions in each activity are requirements of linear pro-
gramming.

Interest on investment, depreciation, andhmaintenance costs are
included in the budgets. The original cost of acquiring equipment,
feedlots, or altering buildings is to be taken.from the programmed
profits. Labor costs are not part of the crOp and livestock budgets,
but come through labor supplying activities. This is true also of rough-
age and pasture in the case of livestock. Roughage and pasture activ~
ities have no selling price. They are produced only if their value to

another activity offsets their costs of production.

Crop budgets
The crop activities selected for this study are those most comp
monly raised in the particular locale. The varieties selected are
those recommended by the Department of Agriculture for the area. The
length of the growing season has been set according to the local clim-
atic and soil conditions. Cultivation practices, seeding rates and

dates, irrigation practices, and fertilization practices used are those

54

recommended by the Department of Agriculture. Labor and equipment
requirements have been estimated from studies approximating the conditions
on the case farm.

The crop activities in the study include only those fertilized
at recommended rates. Budgets were originally established for nous
fertilized crops as well. When these were compared to the budgets for
fertilized crops, the differences in methods and costs of production
were so slight it was decided to drop the unfertilized group. The main
differences consisted of the yield-which affected transportation costs
and returns per acre-and the cost of the fertilizer. The other inputs
used were approximately the same. Table 6 illustrates these differences
and similarities. The general rule for activity selection states, if
output is greater in one activity than another-and inputs remain the
same-the activity with the greater output should be selected. For

example,

Activity A
Output
Activity B

 

 

Input

in the illustrated case activity A would be selected. For the foregoing
reasons only fertilized crops have been selected in this study.

Fertilizer will be applied in.most instances during the seeding
operation. A fertilizer attachment on the drill facilitates this opera-
tion. Fertilizer applied during the growing season will be applied
during the cultivation Operation—-using a fertilizer attachment. In
the case of some roughage and pasture crops, it will be applied after

the first year of growth with a fertilizer spreader or grain drill-

.muadmoa
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.SOHHOM page mHN moanea “meadow

 

 

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duap.mv up.nd abov.va om.a a~.u owwq.w omoo.m .msn o.mw om.a .m poem:
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mops.) Ammo.ma wamm.x m+3.H §N.w ooao.o unoo.n .msn w>.ma mqo.a .m was
maes.0H emnm.eu moms.o mmq.a mmoo.o aema.n .msg mo.me em. .m.z memo
mwum.md omww.mm mean.oa qu.a m.m mmmo.o quQ.m .msn .m.am 5m. .m memo
henna.qq Nwm0.mm um.n mam.a , mmom.p Nooo.m .mzp mm.aa u.u .m.z .xmam
mopu.mu em.wm mnmo.e nmm.a mm.H msmm.o qwnm.w .msn ea an.m .m Xmam
mpmm.ma om.wm mmwm.w om.a Nmo®.o oqeo.m .msn om mo. .m.z moanmm
mmnq.qwe em.mme Hepm.oae ow.dw mm.we Heap.oe ammo.m .msn mm mm. a .m hmapmm
menses: manspem mpmou momoo menoo memoo eao< when Hwhmsm .phmm coz hufi>flpow
pea mmOhu Hmuoe Upon howfiaflppvm hwzom you you you no
one memo: odeflw oofiam .pamm
mmwxona cs2

 

‘ .II‘ ',In. ..Il

 

eyed pod menses: vcm memou
limoflufi>flpo< dons sandman penfiaapnomlsoz op mafipfl>flpo< demo ncmaxpa UmnaAHpamm go COnfiamdsogla.w manme

as
with a fertilizer attachment.

Fertilizer and seed costs are considered cash eXpenses. These
cash expenses are deducted from the sale price of the activities.
Hachinery depreciation and maintenance costs, along with interest on
investment, are also cash expenses. Labor charges are not deducted,
however. Year round and seasonal labor are provided thnough labor
hiring activities. Labor is only hired if the activity, or activities,
requiring it can purchase it and still remain more profitable than those
not yet in the program solution.

Trucking costs are incurred in transporting the harvested crOps
to market. This entails an average of five miles (round trip) from
the Home Farm.and ten miles from the Butte. By marketing salable crops
immediately, the need to provide temporary storage for an indeterminate
length of time is avoided. The only exception to this procedure is the
case of potatoes. Storage is provided for them on the fan:. (The stor-
age costs and shrinkage are deducted as cash expenses in the budgets.)

Surface irrigation is used on the Home Farm.while sprinkler irri-
gation is used on the Butte Farm. Surface irrigation costs are basically
annual costs. They include maintenance of main ditches, flumes, and
diversion boxes and the construction of lateral ditches within the fields.2
The labor required varies with the crop being irrigated and the amount
of water applied. Flood irrigation does not involve as much labor as
does the furrow method.3

Sprinkler irrigation costs are based on the amount of water

.applied. Labor charges are also proportional to the acre-inches of

¥ __ -‘

2Appendix, Table lZ—A

3Apprndix, Table l3-A

57
of water applied.b Sprinkler irrigation is more exrensive than surface
irrigation in most instances. It is used on the Butte Farm because the
lepe of the land is too steep for surface methods. Also, irrigation
cannot, thJough gravity flow methods, be directed to all parts of the
farm.

Table ll-A in the Appendix shows the moisture requirements for
each crop along with the average rainfall for periods during the growing
season. Irrigation supplements the rainfall in periods when the latter
fails to meet crop requirements. The irrigation applications are based
on.these needs. In addition, reconnended practices regarding amounts
(at one tine) and frequency of irrigations for individual crops are
considered.

Water used for irrigation is charged for on the basis of acre-
inches used. These shares of water are contracted for in advance and
continue from year to year unless changes are specified. Regardless
of whether water is used or not, once the contract is in force (for a
given year), the contractee must pay the charges. (Contracts may be
altered or cancelled prior to the beginning of the crop year.) In this
study, we will assume the farmer will contract for the amount called
for by the optimal program. Since water costs are based on amount used,
they are considered a cash expense.

The silage produced on the farm will not be sold. It will be

placed in horizontal self-feeding silos when harvested.5 This includes

hAppendix, Table lA-A

5A comparison of various types of silo structures was made prior
‘30 selecting self-feeding horizontal silos. (See Table S-A Appendix).
531103 will be built in the feeding areas allowing livestock to be
3°1f”f0do

58

alfalfa-brows silage, pea vine silage, and sugar beet top silage. Alfalfa-
brome hay will also remain on the farm-unsold. This is harvested as chOp-
ped hay. It would be difficult to transport if sold. It will be stored
in bunks in the feeding areas. These activities will enter the final
program if livestock activities require them or if their value in rotation
exceeds their negative prices.

The pasture activities' production is measured in "Animal Units
of Pasture."6 One "Animal Unit of Pasture" is defined in this study as
the equivalent of the pasture requirements of one cow for the 122 day
pasture season. Pasture is only produced on the farm if its value to
the livestock activity, or activities, is sufficient to offset its nega-
tive price. This negative price includes the costs of seeding the p83-
ture as well as irrigating it during the growing season. (The nurse
crop with which it is seeded is grazed off. It is assumed that the graz-
ing value just offsets the seeding costs-except for cost of pasture seed.)

The crop budgets that follow are presented in tabular form. These
are quite self-explanatory when examined in the light of the preceding
comments, the assumptions of the study, the sources listed, and the refer-
ence tables in the appendix. Tables 7 - 9 contain the dryland crop bud-
' gets, while Tables 10 - 26 contain the irrigated crOp budgets. Each ta-
ble in this latter group contains an activity budget for the Home Farm

and its counterpart, for the Butte Farm.

Livestock_§udggt§
The types of livestock that have been selected are those commonly

poroduced in the study area. Availability of stock marketing facilities,

‘ A __
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6Appendix, Table 3-A.

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performance records,_ housing, feed and labor requirements, and influ-
ences of climate were all carefullyczonsidered in making the selection.
reeds selected are those recommended for the particular area by the
Department of Agriculture.

In selecting the possible livestock activities for the farm, stress
has been placed on the variety of different types of livestock and on the
effects of differences in feeding levels and rations. The main differences
in feeding rations are concerned.with varying the prOportions of concen-
trates to roughage, also the type and units of various concentrates used.
Where a choice of rations is offered, each choice is treated as a sepa-
rate activity-—having different input and output factors.

It has been assumed in rations that silage is a substitute for
hay on a roughage equivalent basis. The roughage equation in the pregram
is supplied by both hay and silage activities in the form of roughage
equivalents. Livestock activities demand roughage in the form of roughage
equivalents rather than hay or silage. Roughage required by the livestock
must either come from crop activities or be purchased in the form of al-
falfa hay.

Feed storage facilities for livestock are considered to be suffic-
ient only for the immediate needs-except in the cases of hay and silage
harvested on the farm. These feeds are stored in feed bunks and self-
feeding horizontal silos, respectively, in the feeding areas. Other feeds
are delivered to the farm as needed. The fixed costs for feedlot construc-
tion include the costs of constructing temporary feed storage facilities.
Local feed mills and producers will deliver feed on request during the
feeding period. This eliminates the need for storage facilities for

large amounts of feed.

82

Miscellaneous costs in the livestock activities include costs of
such things as veterinary needs and artificial insemination, feed grind-
ing, bedding, insurance on livestock, tractor fuel, repairs, electricity,
equipment, and miscellaneous supplies. These have been lumped together
in the budgets. Tractors used will be shared with the crop activities.
The actual useage will be slight and will be mainly during the periods
in which crop activities are not involved.

The first group of livestock activity budgets to be presented will
be the beef group. This will be followed by‘dairyshogs, poultry, and
sheep in that order. The individual budgets are presented in tabular
form. The information in the tables is supplemented by reference tables

in the appendix.as well as the original listed sources.

Beef Budgets

Four different types of beef activities have been selected for
this study. They are: a beef breeding herd, two-year-old feeders,
yearling feeders, and feeder calves. The breeding herd is budgeted for
a single ration under a single type of program while the feeder stock
are budgeted under four different rations each. This makes a total of
twelve feeder activities and one beef breeding activity.

No purebred beef breeding activity has been included in the pro-
gram. The basic reason for this was that it would require a longer
period than allowed for in an intermediate run to get a herd established.
The capital requirements would be considerably greater per unit than
for the regular beef breeding herd which produces feeder calves. If
included, a capital restricting equation would be necessary to restrict

the size which it could attain during a five-year period. In a long

83
run program, it would perhaps be desirable to include such an activity

in the prOgram.

Beef Breeding Herd

The beef breeding herd is composed of one thousand pound hereford
cows. Ten per cent of these cows are culled each year and replaced with
fresh heifers. Each cow is bred artificiallyh—near the first of August
so she will deliver near May first. The heifers are bred when fifteen
months old. The calves not used as replacements are sold in the fall
as feeders. They are dehorned at three weeks with a caustic pencil and
the bulls castrated during their second month. The calves are sucklings
until sold but also receive some oats (creep fed).

The ration for the cow consists of good pasture during the late
Spring, summer, and early fall, and alfalfa hay or its equivalent during
the winter. No housing is provided except wind breaks and Open sheds.
These are necessary during inclement weather. Table 27, following, gives

the details of the beef breeding activity.

Beef Feeder Activities

Three types of beef feeders are considered in this study under
four different rations. All feeders are purchased during the month of
Cmtober. At that time the calves weigh.t00 pounds, the yearling, 700
pounds, and the two-year-old, 950 pounds. The approximate selling weights
are 800 pounds, 1,000 pounds, and 1,200 pounds reapectively. The latter
weights will depend mainly upon the feed rations employed.

The basic difference in the feed rations is the ratio of concen-
trates to roughage. This is accented in some of the rations by vari-

ations in types of roughage used and by the addition of oilcake, meal,

 

 

 

 

 

 

 

 

 

 

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so
and salt. These ration differences affect the rate of gain and the final
market weight and grade of the animals.

All feeders are housed in feedlots with windbreaks and Open sheds
for protection against the weather. Feed is delivered to storage areas
adjacent to the feedlots. The hay or silage being placed in feed bunks,
while the grain is carried daily from the storage bins to the feed mangers
by means of a feeder truck.

Tables 28-33, fellowing, give the details of the beef feeder budgets.

The rations and other supplemental details are found in the appendix.

ngry_Buggets

For the two types of dairy activities being considered, Holstein cows,
weighing 1,500 pounds each, are used. These are bred each December (arti-
ficially) and freshen each September. Thirty per cent are culled and repla-
ced each year. Heifers except for replacements are sold when one year old.
Deacons are sold a few weeks after birth. Replacement heifers are bred at
fifteen months. The annual production period for each cow begins the last
of September and ends in July of the following year.

There are four different rations considered for the dairy herds.
These differ only in preportions of alfalfa, barley, and oats. Each ra-
tion makes use of the same amount of pasture and each is supplemented with
oilcake meal.

The housing for the dairy herds is pen type. Enclosed lounging areas
and calf pens are provided for in the budgets. The dairy activities, if
they enter the pregram, will utilize existing building facilities subject
to the conversion needed. Milking facilities budgeted include a pipeline

milker with a bulk storage tardx'.

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The Type A—-fresh milk,production-dairy activities require more
labor than do the cream.milk production activities. In the case study
locale, there is a good market for both types. The requirements, in terms
of facilities and handling methods, are not as strict for the cream produc—
tion activities. While the same type of herd.management will be employed
by both, the labor reduction comes through the handling of milk and milk-
ing facilities.

Tables 34 and 35 present the dairy activity budgets. Table 34.cons
tains data common to both types, while Table 35 contains the summary data

for each of the activities.

Hog,Budg§ts

There are six.hog activities included in the study. These include
hogs purchased from the first litter crop and those from the second litter
crop. Each litter is given a choice of three rations. Originally a pig
breeding activity was designed. This was later dropped in the process of
trinming down the program. After analyzing its budget, it was decided that
weaner pigs could be purchased more reasonably than they could be raised.
This excludes the possibility that this activity might have utilized labor
that might otherwise have been idle during the periods in question. How-
ever, since several other activities call for labor during these periods,
it is not likely that this would be the case.

The basic difference in the three rations is the addition of bran
to one and alfalfa to another. This results in altering the rate of gain
and the length of the feeding period slightly. The researchers who devel-
oped the rations preferred number three. The selection will depend on
demand for each of the resources, both there and elsewhere, and their

respective marginal valuations for each alternative.

9‘14

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The rations are listed in the appendix while the sumn-ry tables

giving the programming data, follow on Tables 36, 37, and 38.

p?! I1 "vhv

#4

Hens

The egg production activity consists of two phases. The first phase
each year is the rearing of a new-batch of chicks from age six.weeks (age
when purchased) until they are in production. The second phase begins
when the pullets begin production (in the fall of the year) and continues
until the next fall when a new flock of pullets is ready for production.
At this time, all of the former flock are sold. Plymouth Rocks are the breed
used in these budgets. They are large birds and.mature rapidly. This makes

them ideal for this type of schedule.

Broilers

The bnoiler industry in the locale of Use case study is new. Prices
here range considerably higher than in nearby'American markets. The prices
will undoubtedly become more competitive as new firms enter the business
and will probably decrease. An estimate of this decrease has been allowed
for in the prices used in the budgets.

The broilers used in the study are a Rhode Island Red Cross. They
are mixed sexes. Usually male birds are more efficient in terns of meat
production, but the difference is not so pronounced during the broiler's
life span. The longer they are fed, the more apparent the difference be—
comes. The gains and feed consumption figures used in these budgets are

averages of the male and female birds.

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102
has the same feed rations, costs, and returns. The main distinction has
to do with the production periods. Each produce in a different quarter
of the year. This will allow for part or all of’them to enter the program.
In nmny'areas broilers are produced on a year-round replacement schedule.
Their budgets follow on Tables b0 & Ll. The ration used is located in the

appendix.

Turkeys
Turkeys are purchased when two weeks old and fed for twenty-six
weeks. When marketed they weight twenty-four pounds live weight. Ten
per cent are lost during this production period. The breed chosen for
this project is Bronze, moles. Housing for the birds will be utilized
from existing farm buildings. Table AZ gives the details of the turkey

activity budget.
Sheep Budgets

Sheep Breeding Activity

Rambouillet sheep are recommended for breeding flocks in the area
of the case study. Budget data are based on a flock of 1,000 ewes and
40 rams. The Rambouillet reaches its maximum wool production in three
years. Culling takes place the fifth year.

The ewes are bred the first week of November and the lambing begins
the first week of April. The average ewe's weight at breeding time is
13h.6 pounds. Ninetybfour percent of the bred ewes lamb, and, based on
this number, the lambing percentage averages 13A.5 percent. The average
lamb's birth weight is 9.6 pounds. The lambs are then nursed by the ewes

until October. They are weaned just before marketing. (Weaning should

103

 

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TABLE L2.-—Turkey Activity Budget (loo birds)

 

 

 

 

 

 

 

 

Item Particulars ! Costs ' heturns Lian Hours
Purchase Price éBé.CO/1LO birds e 36.to
Purchase Date March 2 (wt. A?)
Nbrtality‘lOi 4
Sale Price $.3Lfé (dressed)
Sale Weight 1 24% live, 18#
3 dressed @ae@.co
Sale Date *1 Sap-tether 1
Misc. Costs f 59.63 i
Turkey Ration ; First 8 weeks, i
! starting mash; E
{ last 20 weeks I
5 growing mash i
f with grain
g (“3% oats,
Afli barley? 135.2
Labora Period 2 ‘ 1A
3 1L
A 1 1A
5 I 14
6 , 3 l
_ i J 4; e ; 31:
Building Space A 3 sgiift._per Lird - A ‘4
Tctals ; LCQQLZQJQE‘ f _
__ i L__ 4242221 1

 

81033 of labor is required to be year round. me rest can either
be seasonal or year round.

Source: Tables l-A, 2-A, L—A, 16-A, lB-A, nppendix.
Bauman gtm§;., lcc. cit;
Frank b. hbrrison, loo, cit,
Farm Management Handybook, 1356
fipnual Poultrgifgoducts Market

 

 

F

9. J. Larzden,'Turkey Raising", Eermers' Bulletin glAQQ
(dashington, D. C.: U. 3. Dept. of 55y.) ng 1954), p. 78.

‘ .1
I "'

take place at least four weeks prior to the breeding season.) Lambs av-r-
age 70 pounds when marketed. Most lambs are sold as feeders with the ex?
ception of those held back for replacement purposes.

Housing is provided for the ewes amd the new lambs during the lamb-
ing period. Ten claiming pens per 100 ewes (3% feet square) are required.
The lambs and ewes are left in these one day and then moved in with the
other new lambs and their mothers. The total area required for the ewe
and her portion of the lambs and rams is 12 square feet. This includes
shelter throughout the year as well as the specific housing at lambing
time.

Shearing of the ewes and rams takes place in the latter part of
May and during June. Ewes average 11.5 pounds of wool each (A.9 p unds
cleaned weight) while the rams average 16.1 pounds each (6.86 pounds clean-
ed weight). Table A3 summarizes the budget data for the sheep breeding

activity.

Feeder Lambs

Winter feeding of lambs in the locale of this case study farm is
a very common practice. Breeding flocks in the region provide an ample
supply of feeder lambs. Lambs are purchased in mid-October and fed until
mid-January. At marketing time the lambs average one hundred pounds and
are from eight to nine months old. They are marketed as prime and choice
lambs.

The lambs are fed in Open lots with no shelter other than a wind
break. They require ten square feet of lot space per lamb. Death losses
up until the time the lambs are weaned (prior to purchase) average eight

per cent. However, after that time, a careful manager can carry lambs

109

TABLE 43.-5heep Breeding Activity Budget (per ewe)

 

 

 

 

 

 

 

 

‘ Man
Item. Particulars Costs , Returns ' Hours
Replacements .25 ewe/year —f'
.l ram/ewe/year '
Lambs Raised i 1.27 :
lambs Sold ' .92 (on Oct. 16) 3
Sale Price * éll.3319/lOO# 3 3
Weight g 70# each ~c 7.2894
Lamb Ration ; Creep fed Apr. A i f a
g to est. 16 f ’
= AA.IC# oats/lamb ‘ I
, h.9# protein meal I$l.3068
‘ 122 days pasture r
EMe Ration ' Oct. 1 - may 30
i 500# alfalfa
. 12# salt [
723? grain8 E
122 days pasture 1.8659b '
Ram Ration Q 500# alfalfa i
l2# salt i
. 783 graina Q : i
122 days pasture ' f E
(.4 ram/ewe) i '
122 days pasture
Animal Units of Pasture .2595 j
Roughage Equivalents .25c ‘ 3 3
Cull Ewes Sold Oct.16 lasass7.oo/1oo# = 5 2.3625 I
Cull Rams Sold Oct.lb zsoscsc.co/1oo# ' 1.50 3
Misc. Costs = 3.50 E
Building Space 12 sq. ft.
Feedlgt Space 1008 acre i
Labor Period 1 t .2
3 (Lambing) ‘ i .7
L i r .2
5 (Shearing) I .h
c i .1
7 i 'g
8 ' .2
9 e .2
10 (Breeding) ~ : .3
'Nool Ewes A.?# (cleaned)¢5.35/# (2.2C )9
‘Wocl hams 6.9fifi {cleancdlu;.a§;§:f ; (Lgéfiagle
Totals : i§C.5T~I lill.1519_ i
Net Returns ' i i 94.4793 i

 

aGrain consists of 50% barley, 20% oats, 20% bran, and 10% protein
meal. Ewes are fed %# per days just prior to lambing and 1% per day from
April A to May 3C. Rams are fed l# per day'during breeding season.

bIncludes feed costs for the ewe and its portion of a ram.

110
Table h3.-Continued.

°An error in the budget was noted here a ter computations were
completed. Alfalfa has been deducted as a cash expense as well as in the
form of roughage equivalents. This amounts to o5.625 that should be added
to net revenue.

lefi of labor each period is required to be year round labor. The
rest can either be seasonal or year round.

9A second error was observed after computations were completed. The
returns from woold sales were not included in the budget. These would in—
crease the net revenue by 33.4398.

Sources: Tables l-A, Z-A, 3-A, h-A, 15-A, l6-A, l7-A, lB-A, Appendix.
Bauman 9+ al., loc. c't.
Fr fink u. Morrison, loc. cit.
Livestock hcvtet Review l95l—1955, loc. cit.
Lethbri:ge Pro grass Report, p. 39, loc. cit.

S. B. Slen, F. Whiting, K. Rasmussen, Ran;;e Sheep Production
in Nestor n Canada, Publication #886 (Ottawa, bntaric: preii-
mental rarms Service, Canadian Dept. of Agr., March 1953), p. A8.

 

5. W. Williams, breedinggfor Market Lamb Production, Publication
#865 (Ottawa Ontario: LXperimental Farms service, Canadian
Dept. of Agr., December 1951, reprinted 1955), 8.
through the winter with little or no losses. (No accurate data were avail-
able on such losses during the feeding period, and, as a result, no allow-

ance has been.made in these data for them.) Table at summarizes the bud-

get data for feeder lambs.

TABLE LL.--Feeder Lamb Activity Budget (per lamb)

 

 

 

 

 

 

 

Itan Particulars Costs Returns Man Hours
Purchase Price e11.319/lOC#
Purchase Weight 70# a 7.9233
Purchase Date October 16
Sale Price eZC.02/10C#
Sale Weight 100? éZC.02
Sale Date January 15
Lamb Ration .0938 bu.-barley
(let go days) .c:;;
2.5 bu.—barley
(.GZS/day) a 2.325
.085 ton alfalfa :
2# salt ? .0283
Misc. Costs 2.95
Feedlot Space .000; acres
Labora Period 1 1.1
9 1.1
10 b.4
Totals 513.2800 $20.02
Net Returns 36.7h

 

 

 

 

 

alcg of labor is required to be year round. The rest can either
be seasonal or year round.

Source: Tables 1-A, 2-A, lS-A, 19-A, 18-5, Appendix
Slen, Nhiting, Rasmussen, 13?. off.
Farm Eanagement Handboon,_1756. ;;a. nil

Frank E. Morrison, 10c. cit.

Livestock market heview, 1951-1955,,loc. cit.

CHAPTER V

flfi
.3

1:114:31“ likuiinimx. 11:13 Liibbiuku
Hitting the Late. to Model

The Crganization of the Matrix
Up to this point an overview of linear programing methods has
been presented along with the reduired assumptions arri production budgets.
Now these data and assumptions will be fitted to the linear prOgramdhg
model itself. before doing this, a sketch of the organization of the
matrix will be presented.
The following charts shows the organization of the problem in the

matrix form necessary for computational processes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

__ Basis _ Colum Des ignatoz
Equgition Fmgl'am “-...-..."... ACt l‘v'mltj Name - *3) A. .. F-
Number Products Xo Unit Objective Factors {Cj s_)
i i ...n -1 -1 l,_ W moc-iPr0f.,.i.§.r€2£.wlitL. ...__
Identity Trunk
Aj-Cj \Profit Margin)
afu’e’nfiJ Onto fl . {Lit i CC’Qt&_S_~ ‘ __ __‘__..__ _ H _ ’_. _-.

 

 

 

 

Source; rerguson, Sargent, page 81,10C.__Qlit.

- -<

The basis consists of the equation numbers, the name of the restric-

1

ting resources, the ancunt of each ava 11a ul n the beginning program

(0
P.

(30), and the measuring unit of each. These resources will be replaced
by incoming pro-gran products as the computations proced. These program

Pnsducts represent the sums of LA: unknowns in a given eguation mult ir i1 ed

1.12

113
by their respective constants. At the completion of any iterationl during
the pregramming process, the amount of resources available can be determined
from this basis. The basis shows the products or activities that enter
the program and the level at which they enter. When an activity, represen-
ted by a column, enters the program, it replaces the equation of its most
restricting resource (the one used up first in the production of this ac-
tivity}. This prOgram.product multiplied by its corresponding valuation
or C value equals the program profits for this activity. The sum.of all
such program profits for activities entering the prOgram is the total prof-
it for the prOgram.

The identity portion of the matrix consists of columns corresponding
to each of the resource equations in the basis. They are placed in the
same order as the resource equations. The activities in the identity ma-
trix are the non-use coefficients and their unknowns which are added to
the inequations to make them equations (see Chapter II). As a result, each
has a zero C value and a zero value for each equation except the one to
which it corresponds. Its value there is one. The identity matrix.must
have an activity for each equation listed in the basis-no more or no less.
The programming processes make this requirement. Since in use beginning
program all C values in the identity matrix are zero, and since these
identity activities correspond to the equations in the basis, the pregram
profits are also zero.

The column designators are simply the names given to each activity
in the identity and the trunk. The Objective factors (Cj's) represent the

profit margin possible for each activity. Total profit is to be maximized

m ___.1 v 'v

1 . . . . .
One iteration represents a step in the computational processes
from one feasible solution to another. The processes continue by itera-
tions until the optimal feasible solution is reached.

114

as a result of the computational processes.

The trunk consists of columns representing the activities to be
considered in the programming. The coefficients in each column represent
the requirements of the activity represented for the resources in each
of the equations. The coefficients for a given activity are each multi-
plied by a single “x" factor. This factor is determined in the program-
ming computations and will determine the level at which the activity enters
the pregram. If the activity enters the program at greater than the zero
level, it will replace its most limiting resource in the basis-as preve
iouslyxmentioned.

The Zj-Cj row at the bottom.of the chart represents the profit
margin for each activity after opportunity costs are considered. The
Zj represents the opportunity cost for a given activity. If the resources
[used to produce this activity can be more profitably used elsewhere in the
pregram, the 23 value will be greater than the Cj. In the beginning pro-
gram, the opportunity'cost is zero. The Zj-Cj values equal -Cj's. The ac-
tivity with the greatest negative Zj-Cj value will be selected to enter the
program first. It will add more profit to the program than any other since
. its profit margin is greater. The Zj-Cj values serve as indicators at the
end of each iteration to point out which activity should enter the pregram
next (which would add the most to prOgram profits). When all the Zj-Cj
values are positive, this indicates that no activity can be introduced to

increase profits and, hence, that the program.has reached an optimum.2

Necessary Checks to be Made

When placing data into the model, several checks should be made.

 

23wanson, lgot cit.

1 Units of measure employed must be comparable. They need not
be identical, but they should peniit a legicul relationship between pro—

gram data and answers.

5

2. Tech activity used must be identified and represented by a
column in the matrix.

3. .ne unknowns ("x” values) must exlress linearity and must be
identical for a given activity. This means that any unknown appearing
in one equation must appear in all equations, close its coefficient in
an equation is zero.

L. All inequations must be converted to equations by the addition
of slack variables.
5. The objection function must contain a 03 value multiplied by
the activity's unknown factor for each activity in the program.

6. The Cj values for the‘activities in the identity matrix (repre-
senting the slack variables) should all be zero.

7. The basis must contain the names and amounts of the restricting
resources. Each must be in the same row as the constants of the activities

requiring or supplying it. This must be so since each row represents an

equation respecting the use of a restricting resource.

The ngixuiingr Program

Table 45 presents the problem in matrix form and is the beginning
‘program. Xl-ABl in the basis represent the equations affecting the restric-
ting resources. The assumptions and limitations binding these equations

axwaciiscussed in Chapter III. Chapter IV presented the budgeting data that

cormwusponds to these assumptions. The activities are represented by the

columns and are named. The identity matrix includes the columns numbered
from Xl-lBl, correSponding to the equations in the basis. These identity
columns actually represent artificial activities. The identity activities
have zero value when the restricting resources are all used. If all are
not used, they represent idle capacity, or non-use of the resources.

The Zj-Cj are not shown in Table 45 but may be easily observed.
Since the 24;] values in this beginning program are all zero, the EZj—Cj

values are simgly the negative Cj values.

Computational Processes

 

The first matrix (Table 45) represents the first solution. This
is a zero profit solution since nothing is being produced. This is true
because none of the restricting resources in eiuation 1-31 has been used
up and replaced by an activity, and Cj values of these resources are zero.
(These resources are supplied in the beginning pragram.) The fact that
all of the Z—C values are negative indicates that improvement is possible.
With the beginning program, and after each iteration, the problem.must
be tested to determine whether or not improvement can be made. This is
done, as observed, by determining the number of'negative Zj-Cj values.
When there are no longer any negative Zj-Cj values, the pregram is at a
maximum and cannot be improved.

The activity with the largest negative Zj-Cj value is the one se-
lected to enter the prOgram. This is the most profitable choice since
its marginal revenue is the greatest. Its profit per unit is greater than
any ot er activity's after Opportunity costs are considered. It will there—
fore, add more to total profits than any other activity. If the Lj Value

(Opportunity cost) was greater than the C3 value, it would not pay to

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produce more. In Table 1.5; the activity with the greatest Lj-Uj value is
being nation I, Type A. Its Zj-Cj value is -o’,~)‘:i);.‘.18‘9f3. Tglld will be the
first activity to enter the program.

‘lhe simplex method proceeds by the aforenentioned iterations. With

each iteration the Opportunity cost should remain the same or increase.
Each iteration is a feasible, workable solution, but is not necessarily

the Optimum one. The Optimal is reached only when successive iterations

do not increase the total profits. This occurs when Z-C values are all

positive.3 This final solution represents the best possible program under
the assumptions Of the study. The sum of the program profits in the final
solution multiplied by their respective Cj values represents the total
profits.

It may be well tO observe at this point that all activities that
enter the prOgram in the iterations preceding the final one do not neces-

sarily remain in the program. As the computations proceed, the Opportunity

costs change and an activity that previously entered the program may be
replaced by another. The resources may be more profitably employed by a-

nother activity or combination of activities. New activities may produce

resources used by other activities now in the prOgram. This phenomenon

was observed numerous times while computing this problem. As will be noted

later, Dairy, which entered during the first iteration, drOpped out and was

not a part Of the final solution.

Qomput ing Methods Ernplcbjed

Hand Calculator

The calculating Of this particular problem was begun on a hand

3Garwin, loc. cit,

1.29
calculator: lhe method followed was that described by Earl Heady in
the Journal of Farm Economies, VOlume XXXVI, December 1954, number 5.
This proved to be too time consuming for this size of a problem, howeve .
The computing and checking of a single iteration took several weeks.
This was abandoned in a year's time-~3 months“ full time and 9 months'

part-time work.

650 I. B. H.

In 1960, the author learned of the I. E. M. 650, Magnetic Drum
Processing Machine, at Brigham YOung Universit'. A program developed by
D. D. Grosvenor and H. O. Hartley, both of Iowa State University, (Program
Number 10.1.001 I. S. U. 1960) was adapted by the technicians at B. Y. U.
to this problem. Because this program employed the fixed decimal system,
it was not able to solve this problem. Rounding errors crept in and the
storage drum filled up before the optimum solution had been Obtained.
This program had a range of 99 rows and 9,999 columns pnoviding the data
used ranged from 10 to .1. The data in this study had a greater range.
It is possible that I. B. M. 650 could have handled the problem.with a
floating decimal prOgram, but none was available at the B. Y. U. computer

center.

701. I. B. M.

Through the cooperation of the Michigan State University's Department
of Agricultural Economics, the problem was finally computed by the Tennessee
valley Authority on an I. B. H. 70h computer. The program used was SHARE,
linear prOgramming routine number 161, deveIOped by William Orchard-Hays
(Rand Gorp.), Hal Judd (I. B. u), and Leola Cutler (Rand Corp.). This

program used a modified simplex method and would handle 255 equations with

130
no limitation on the number of variables used. It used a floating decimal
system. It required that no restricting resource (I) exceed 8,t00. Through
the use of this prOgram, the calculations were completed and an Optimum

solution to the problem was Obtained.

felting @2111.le em

 

 

 

 

 

 

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source: iuccessiul turning, tad, 1:302.

 

PREdiNTATIUN AND IdfjmrthiTIuN
OF THE PhOGhahlmu SULUTIoN

In this chapter the optimal program will be presented along wifli
its adaption to the case study farm. The first part of this chapter will
present the final solution including the incoming activities, their re—
spective levels Of production, the net profits, and the quantities of
resources not used. The last portion of the chapter will adapt the pro-
gram to the actual farm conditions. This section will deal with the
crop program, livestock prOgram, feedlot construction, building renova-
tion, labor utilization, equipment requirements, financial requirements,
and the consideration of taxes and insurance and other fixed costs. The

actual net returns to the farm will then be derived.

Presentatio of the Cijimal Program

This linear prOgrahming problem reached an Optimal solution after
112 iterations. Eighteen activities were included in the final solution.
These included two hog activities, broilers, green peas, dryland sweet
clover, alfalfa-brome hay, tillable land rental, nine labor hiring activ-
ities, and purchase of roughage. lbs total net profits deter"' ed in
the prOgramming amounted to $1,654,065.h6l4. his figure will be adjusted
when fixed costs-—not included in the program--are deducted. Table 46
presents the optimal program. It includes the requirement of each incom-
ing activity for the original restricting resources, shows the level at

131

ljd

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which the activity entered the program, the profits (Cj) arising from

each of these activities, and lists the resources not used in the program.
It also shows the rounding error for each equation (these errors are a
result of the computational processes). Activities not entering the final
pregram are omitted from this table. -

As will be noted, the two incoming feeder hOg activities account
for the major portion of the farm income. Most of the other incoming
activities seem to center around these hog activities. The hogs are fed
in two cycles-from first and second litters. The first litter hogs go
on feed during the third time period (April let) and are sold during
the seventh time period (August 10th). During this cycle, hogs compete,
to a certain extent, with the crop activities for land, labor, equipment,
and management. However, since all the cnaps supply roughage to the hog
activities, they are, to this extent at least, complementary. The green
pea activity supplies roughage as a byhproduct in the production of peas,
which are a cash crop. The harvesting of sweet clover silage and fall-
plowing, on the Home Farm, come after group 1 hogs are sold and before
group 2 h0g3 are purchased, and, as a result, do not compete with the
hOg activities.

The group 2 hog activity competes only with the broiler activity.
No other activities, except the resource supplying ones, enter the program
during this cycle. Group 2 hogs go on feed in the ninth time period and
are sold in the first time period the following year. Table 47 shows the
distribution of labor for the final prOgram, indicating the periods where
activities compete for labor. This table also shows the periods in which

labor is idle.

The optimal program utilized most of the beginning resc‘urces. The

6

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is?
available tillable land was either used for crop production, rental, or
feedlot construction. The Butte land was all rented except for 19.5908
acres which went into crop production. One pasture production activity
entered the final solution but at the zero level. This indicated that
no pasture would be produced on the pasture land. All the available
management labor was utilized as was all the building capacity. The green
pea contract was not completely used up (21.637l acres still available)
and the SUgar beet contract was left idle. These contracts were simply
upper limits set by the marketing agencies and, therefore, do not indicate

idle resources, only idle capacity to produce what the market would allow.

The thimal Program Applied to the Case Study Fans
This second section will deal more specifically with the incoming
activities, applying them directly to the case study farm situation. The
land and crop activities will first be examined. These will be followed

by tLe livestock activities which, in turn, will be followed by a discus-

.‘f

sion of the total farm situation in terms of labor, eguipment, taxes, insur-
ance and other fixed costs. The program prescribed by the optimal solution
will only be presented. Possible alternatives, criticisms, and evaluations

will follow in Chapter VII.

Crop activities

The incoming crop activities are outtle dryland sweet clover (.67o3
acres), Home irrigated green peas, alfalfa-brome hay (18.7l45 acres).
Tao;e 46, in this chapter, shows tne rotation balance for these three crops
(see rounding error column). It will be noted that they satisfy the rota-
tion re uirements (only an -.QOCl rounding error). Tables 2 and 3 in Chap-

-.. According to these assuhmtions,

Lu»! 0

F"

"T ..‘v ‘t'.‘ . -“§:/\' ~H‘V-vyrvt
- -" ~ ' I‘_* led. 3.33.10...

PI“. -1.‘ A L“l."‘ .Jv!" (LA-J

.138
no more than eighty per cent of the cropland should be in green peas
at any one time. The remaining 20 per cent should be in soil-building
legume crops such as alfalfa or sweet clover. The problem that arises
here with two of the crops on a different farm (Butte), with different
budgets, will be discussed in Chapter VII.

Tables 48, 49, and 50 present the actual costs and returns accru-
ing from the production of these activities by periods. They also show
the equipment and labor requirements.

The land rental activity rents out 6CO.LC93 acres of Butte land.

It was assumed when the rental fee was determined that this land would
primarily be used for irrigated cash crops. If this is the case, the
rental fee would be paid during the ninth time period (October) after the
crops are harvested. At that time, $12,000.8186 would be paid to the farm
owner. The rented land, under the terms of the assumptions, can be utiliz-
ed during the entire year by the tenant, however.

Equipment for the production of the above-mentioned crop activities
is now available on the farm. This will be utilized until fully depreci-
ated at which time it will be replaced. allowance for depreciation and
Inaintenance has been.made in the budgets. This equipment has been suffic-
.ient to Operate the total 760 acres (140 Home & 620 butte) along with

supndying the needs of a 500 head beef winter feeding operation.

Livestock activities
The incoming livestock activities were hogs, ration III, group I
(60,928.3884 or 60,928 hogs); hogs, ration III, group II (62,3,1..8322. or
(32,355 hogs); and broilers, group I (9,679.9999 or 9,68Q broilers).

Tables 51 and 52 present their costs, and returns, as well as their labor

at. .
[Pity

if

\L‘)

TABLE L8.-—8utte Dryland Clover Silage
Incoming Level .8763

 

 

 

Labor Costs Production
Period 1 Tons
Y. E.;_Total Item s/Itom Total s/Period
3 Q .5258 Labor .3155
; Cultivatora .7368
3 Seed 8.7630
‘ Disc8 .7136
Harrowa .1081 lC.6380
l.‘
h .A382 9 .8763 Labor .6135
1 Harrowa .1081
Drilla .7758 1.i97t
8 .7887 4.6320 Labor 2.8230
Lowera .7672 1.1567
1 hakea .6029
Forage
Harvester,
'I'Jagons, &
Tractor 7.h77h 11.6705

 

 

 

 

 

 

 

Source:

Tables l-A and 8-a, Appendix.

Table 7, Chapter IV.

Table AS, Chapter V.

Table A6, Chapter VI.

aCosts include operation, maintenance, and depreciation of the
eguipment and their acconmanying power units.

TAbLE A9.-—Home Irrigated Green Peas

Incoming Level 78.3629

 

 

 

 

 

Labor Costs Prod Gross
Peri , '
”a Y. R. Total Item. fiiitem Tot.6/Per. Tons Return
3 133.2169 Labor 79.9301
51308 63.9049
Harrowa 38.6800
Floata 94.1609 276.6759
6 23.5119 27.8336 Labor 81.6030
022111a 69.3747
Irrigate 430.9960 581.7737
5 185.1326 Labor 111.0796 111.0796
6 168.0884 Labor 100.8530
Mowa 69.3968 150.2498
7 62.3160 Labor 25.3896
Mowa 19.2099 78.3629 $7,836.2900
Pick-up tons of
& Load 437.5784 peas
Haul to
Vin-crya 380.2168 470.1776 81,550.8870
Jater tons of
Costs 7.5385 [869.9332 vines
8 161.8718 Labor 61.1231
Fall '
nowa 198.1661 259.2872

 

 

 

 

 

 

 

 

aCosts include operation, maintenance, and depreciation of the equip-
ment and their accompanying power units.

bIrrigation costs, except for labor, are paid at the beginning of
the season.

Source: Tables 1—8 and 9-A, Appendix.
Table 21, Chapter IV.
Table 65, Chapter V.

Table 66, Chapter VI.

 

141

TABLE 50.-Butte Irrigated Alfalfa-brome Hay

Incoming Level 18.7145

 

 

 

 

13====
Labor Costs Production
“’1“ ‘ m . F‘Total‘ qItem Whem' ‘ 7651" Me'riod T0”
3 9.3573 Labor 5.6144
Fertilizer 137.3469
Drilla
Fertilizer 16.5679 129.2292
4 21.8523 Labor 13.1171;
Seed 35.0897
Irrigatea 51.135 99.3426
5 11.2287 87.5839 Labor 51.7861 37.1.29
waa 15.29.35 2
Fukea 12.8756
Foragea
Harvester 118.2887
Irrigatea 51.6520 253.9969
6 11.2287 109.6669 Labor 68.0459 37.429
Mowa 16.3845
Rakea 12.8756
Foragea
Harvester 118.2887
Irrigatea 103.3040 318.8987
7 38.0934 1Labor 22.8560
Irrigatea 89.0997
Water
Costs 1.6375 7 113-5932

 

 

 

 

 

 

 

 

Source:

“V‘—

aCosts include operation, maintenance, and.depreciation of the
equipment and their accompanying power units.

Iv.

Table 45, Chapter V.

Table 46, Chapter

VI.

Tables 1-3 and lO—A, Appendix.
Table 10, Chapter

TabLE 51.-—Hog Activities, Ration III, Groups I & II.

M... . . .— A

*3
i.

Incoming Levels
69,933,3888 & 62,354.8324 Hespectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

Period Particulars Group I Group II
-... —— w... _ - 4}-———-—-——- .— —--——.— + —~—
1 Labor Costs 9 22,360.4428
Feed Costs 918,586.4490
Sale Price b 2,431,526.6894
Eisc. Costs 654,725.7102
-—————~—a»— _.___ 1. - __ .1_
3 Labor Costs # 4,914.4838
Purchase Price 347,9b1.0978
4 Labor Costs 16,939.4362
5 Labor Costs 16,752.8697
6 labor Costs 16,934.4“62
7 Labor Costs 5,462.8373
Feed Costs 897,572.6466 .
Sale Price 2,519,693.5023a l
Misc. Costs 639,743-0782 5
r
9 Labor Costs 3 . 3 1,210.0579
Purchase Price g I 356,045.3930
ConstructionC & i ‘ 67,934.u125
Emuipment Costs 7
10 . Labor Costs 34,061.8579
..."..._11.__ 1,--- ...-..._.
an

uross income.

bThese costs include operation, maintenance, and depreciation of
all equipment used in the activity.

cConsidered with the fixed costs in this stu’v.

hetimated at 5¢/

sq. ft., this includes the construction of fences (of hog wire and wood
paneling), Open sheds (plywood), self-feeders and waterers (wood, metal,
and cement), and pavement of areas adgacent to feeders.

Source:

Tables l7-A and 18-h,

Table 38, Chapter IV.
Table 46, Chapter 31.

Appendix.

(v1.0870 per beg.)

-43

 

 

 

 

 

 

TAbLL 52.-aruilers, Grsup I. Incoming LEVu; 9.L799.
Period Particulars Costs Gross Returns
1 Purchase Price $1,742.3820
Labor - Year Round 201.3419
Labor - Seasonal 1,359.0580
2 Sale Price 07.262.4660
Feed Costs 3,445.6572
Miscellaneous Costs 246.2567
Labor - Year Round 100.6710
Labor - Seasonal 679.5290
Conversion of Build-
ings and Purchase
and Installation of
Equipment 2, 903 . 1.000“

 

 

 

 

“A fixed cost. This is not deducted in determining net profits
as buildings on the farms have already been converted and equipment
installed. This conversion factor was estimated from actual costs of
installing equipment and converting buildings. (It represents approxi-
mately'3¢/ square foot of floor space.)

Source: Table 40, Chapter IV.
Table 45, Chapter V.

Table 46, Chapter VI.

-. 1?

"‘i‘ h.“

Amy’..-

 

 

and equipment requirements. .
The hog activities will both be able to utilize the swne feedlot
facilities since these activities enter the program.during different time
periods. For this reason, feedlot construction costs will be given only
for Group II since Group II enters the program at a higher level than does
Group I. By following this procedure, costs of supplying new feedlot fa-
cilities and equipment will be cut almost in half. These costs are consid- a“
ered as fixed costs in this study. .
Roughage required for the hOg activities enters the program through
the roughage equation. The clover silage, green peas, alfalfa-brome hay .
activities, along with the roughage purchasing activity, supply this rough- .{
age. Table 53 shows, by periods, the roughage required by the hog activ-
ities and that supplied by the aforementioned supply activities. The
roughage obtained through the roughage purchasing activity becomes a cash
expense and must be paid for when delivered. (Roughage costs are not de-
ducted in the programmed budgets for the livestock activities.) Table 53
also gives the cost per period for obtaining said roughage.
At the time this study was instigated, there were no broilers being
produced on the case study farm. Since that time, however, the two barns
on the home Farm.have been renovated, additional floors have been construc-
ted, and equipment has been installed. This new set-up is capable of hand-
ling up to twentybthousand broilers at one time. The production of the
9,679.9999 broilers during the first quarter of the year will not tax these
existing facilities. Costs of building conversions and equipment purchases
are included in Table 52 but will not be subtracted from the income as part
of the fixed costs. The maintenance, depreciation, and operation costs

determined in the budgets will apply to these existing facilities, and

145

Usii the Same Facilities

 

(60,000 hogs)

 

... '
'0
9‘.
‘
J
I
1 .-

’-
I" Mf'. A. _ M A (K "— f "«
. I

 

"Have you seen the feed bumz?"

 

inc

TABLE 53.-fi0u5hage Purchase. Incoming Level 3,671.9682 Tbns

Amount hequired

 

 

 

 

Dates Amounts Supplied fumints Amounts Costs
by Periods by Other Required Purchased
Activities (Tons) (Tons) (Tons)
Period 1 721.0888 721.0488 812,978.8781. .
2 :
3 17.8.1381+ 176.1381. 3.1704912 '=
z. 528.1;152 528.1452 9,Sll.l+736 ‘ 5
5 528.1452 528.1452 9,511.4736 J
6 172.3981. 52.8.4152 356.0188 6, 408.3021.
7 7L.8580 176.1381. 101.2801. 1,823.0872
8 1.1557
9 180.2622 179.1055 3,223,8990
10 , l,O8l."532 1,081.7532 19,471.5576

 

 

 

 

 

 

Source: Tables 1.6, 1.8, 1.9, 50, 51, 52, and 53, Chapter VI.

only that portion of these facilities necessary to handle the incoming

level of broilers will be depreciated and maintained.

Labor Hiring Activities
Labor for the optimal program consists of twenty year-round men
and from ninety down to twelve seasonal workers monthly. During, March

\ s I 1- ' I n‘ - ‘
and beptember, no seasonal men are hire-:1. It .13 6333.1de tsee wapter III}

11.7
that the labor will find their own housing in the town of Raymond which
is adjacent to the Home Farm. Since most of the activity will center on
this farm, this is an ideal situation.
If this new farm pregram proves to be stable, homes for the year-
round labor could be constructed on the Home Farm. Rentals paid by labor
could then be applied as home payments. The present homes could be uti-

lized immediately either for year-round labor or for bunk houses for seas-

' ”f!

onal workers. Construction of the new homes could be done during March

and September by the idle year-round labor.

_ ____.___.....-.-.

Seasonal labor may be difficult to find in the large quantities
defined by the optimal solution. The months demanding over fifty men are E;
January, February, May, June, July, November, and December. Dtu'ing most
of the winter months, the demand for labor in other businesses is consid-
erably less, and sufficient labor would probably be available. The summer
months may present a sterner situation, however. Some possible solutions

to this problem will be discussed in Chapter VII.

Net Returns

The net returns for the optimal farm program are derived by subtrac-
ting from the net income listed in the Optimal solution, the fixed costs.
These fixed costs have been classified into two groups-annual fixed costs
and fixed costs occuring only at the onset of the new pregram ("quasi-fixed”
costs). The annual fixed costs include land taxes, building and property
insurance, and wages for family labor. finese annual fixed costs are presen-
ted in Table 5A. The costs occuring only at the onset of the new farm pro-
gram include the construction of feed lots and purchase and installation

of equipment for the neg activities. The present building and equipment

 

N 7
sh-

TABLE 5&.-—Annual Fixed Costs

 

 

 

 

 

Cos
Particulars . t3
home butte
Land Taxes 0360.00 e 950.00
building Insurance 705.00 3h.00
Family Labor Wages h,000.00
Total $6,049.00

 

 

 

Source: Louis Brandley, present Operator of
the case study farm.
facilities are sufficient for the other incoming activities. Table 5l
presents these costs for the hog activities. The net returns for the

final pregrams are:
01.654.965.861A
- 6,0t§9 QWOO
-57).??‘40 12-1-2;
01,581,012.0489
Beginning the Optimal Program
Up to this point, the incoming activities have been presented, the
labor situation set forth, and the net returns determined. In this con-
cluding section of Chapter VI, the method of beginning the new farm pregnmn
will be discussed.
No capital equation was placed in the linear programming model for
several reasons (see Chapter III). It was assumed that sufficient capital

would be available to the management for its needs. A final program of

 

 

 

149
such large preportions was not anticipated when these assumptions were
made. However, they may still be valid. Two approaches are possible.
First, since this study was designed as an intermediate range pregram
(one that could be worked up to graduallyb—not necessarily next year's
program), the investment in the hOg activities could be made by degrees.
This being the case, linear programming could be utilized to determine

the length of the in-between steps. These steps would allow a gradual

‘ fl!
5
r

‘1. 3 '

build-up of capital as well as feedlots and equipment. The Butte land
could.inmediately enter the new program. The Home Farm could be all crop- E
pad with green peas or alfalfa-brcme hay except for the portion going into 1
feedlots. Each year, as new feedlots are constructed, the crop land would sf
be cut down, until, finally, the conditions described in the new program
could be obtained. Contract livestock feeding could also be utilized.
The second approach would be to endeavor to enter the new progrmn
immediately on both sections of the farm. This approach would require
more credit. In considering either approach, it may be well to point out
that the land and equipment are now completely free from debt. This pre-
sents an excellent situation credit-wise. In addition to this, the present
management has an excellent credit rating in the local communities.
Table 55 presents by periods the capital supplied and demanded along
with the resulting balance. A close study of tnis will point out just when
capital is supplied and.required during the year. Periods one and seven
are the only two supplying an excess of capital. The other eight demand
additional capital. This means that this excess must be spread over the
other eight periods. In the beginning months, capital would have to be

borrowed.

If the new program were introduced in the ninth time period

TAbLE 55.-Capital Requirements (by Periods)

 

 

 

 

 

 

 

 

 

 

 

 

Period Activity Debit redit Ba 1 ance-

l Hogs G.II ol,6C8,651.510n $2,n3l,526.689a

Broilers G.I 3,302.7819 0819,572. 3971
2 Broilers h,h72.1139 7,262.4660

Idle Labor 2,993.2806 -202.9285
3 Clover Silage 10.6880

Green Peas 276.6759

Alf.-Brome Hay 129.2292

Hogs G.I 355,986.0728 -356,h02.6159
A Clover Silage l.h97h

Green Fees 581 7737

Alf.-Brome Hay 99. BAL 6

Hogs G.I 26,.-5. 9;58 -27,128.5235
5 Green Peas 111.079h

alf.-brome Hay 253.9969

Hogs 0.1 26,266.3433 ~26,629.4196
6 Green Peas m5

Alf.-brome hay 318. 8987

Hogs G.I “3 ,3u2. 7386 -2},8ll.887l
7 Green Peas 869.9332 7,8;6.290©a

alf.-orome Hay 113.5952 . ’

Hogs G.I 1,5ah,006.6113 2,519,095.5023 981,939.65n6
8 Clover Silage 11,6705

Green Peas 259.2872

Idle Labor 3,196.2151

Land Rental 12,000.8186 -3,A67.l728
9 Hogs G.II 428,386.h624 —L16,383.6h38

10 Hogs G.II . 53,533.6155
Family'flagesb 6,049.0000 58.582.6155

 

Taxes, Ins.

 

 

 

Source:

aValue of vines
it was included in the bung: t.

not included here, even though,

thnnnh.h1empr,
(Vines are used as roug,hage by the hogs. )

b"‘ I 1 l a 1 .
ramily wages could be paid monthly ii more convenient.

Tables n6, L7, 48, L9, 50, SI, 52, 53, Chattr. r

9..

 

151

(October), by February when Group II hegs would be sold, the expenses ‘
could all be met. In addition, a balance would be left to Operate on

until the next hogs were sold (period seven). In October a land payment

would also be made to help defray the expenses. This would mean that

short term loans would have to be obtained for the construction of feed-

lots as well as the purchase and installation of equipment. Arrangements

for purchase of the hogs on credit would have to be made. Operating expen-

ses including labor and feed would have to be met. It is possible that

many feed suppliers would grant credit for the production period. arrange-

» - -

ments with the bank or other loan agencies would have to be made for labor

-.-...--<—

and other costs. after this initial four month period, the farm income

-“)-

would be sufficient to meet future programmed expenses. The fact that this
initial period is only four months in length would increase the possibility
of securing the necessary short term credit.

This latter approach would mean that the full program would begin
in October with the purchase of Group II hogs. Construction work and in-
stallation of equipment would have to be complete prior to the purchase
date. By the end of the first year's production, the full program would
be established and fixed and "quasi-fixed" costs met.

The first approach would take several years, depending on the
capital and facility build-up each year. This approach would be more
cautious and less risky for the owner-managers but would also cut down on
possible profit during the step years. The choice of approaches, then,
would depend on the credit availability along with the desire of the owner-
operators to yield to the risk and uncertainty of the complete program.

In either case, it is assumed that the factor and produce market structures

would remain within the bounds established in the study.

 

CHAPTER VII

AN shimmer; or THE; Paoorm'rm SOLUTION -
:2! mas OF A HEALISTIC has: Pabst.” "a

\

The.preceding two chapters have presented the optimal farm program was
and have applied this program to the case study farm. an evaluation of 5
this final program, in terms of a realistic farm pregram, will be made in i
this chapter. Problehs relating to the crop, livestocK, and labor activ- ,
ities will be presented along with some possible solutions for these prob-
lems. Possibilities of expanding tne farm program to include other inte-
grated productive processes will also be discussed. The Concluding sec-
tion of the chapter will suggest a possible course of action to be follow-
ed by the managenent before testing the optimal prOgrau on the case study
farm. This section will draw from material discussed in the earlier sec-

tions and organize it into systematic procedural steps.

The Crop Activities

 

'Dle Green Pea Activity
The first crop activity problem that presents itself concerns Uie
green pea activity on the Home Farm. This activity entered the final solu-
tion at the 78.3629 acre level. after computations were cozplete, an er-
ror was discovered in this activity's budget. The budgeted returns should
have been leC.OO per acre instead of $130.60. The error consisted of sup-
plying the pea vines, after pea harvest, as a roughage through the roughage

eiuation while at the same tine, giving them a cash value and maraeting them

152

 

153

along with the podded peas. This gave the vines a double value, and, of
course, over-valued the green pea activity by thirty dollars per unit level.

Two alternative ways might be employed to correct this error. The
first would be to supply the vines as roughage thnaugh the roughage equa-
tion with no cash return. This alternative would lower the returns of the
activity thirty dollars as previously mentioned. If this were done, the
next step would be to examine the L-C values of the other activities in
the study in an effort to determine whether or not this green pea activity
would enter the program. An examination of the L-C values indicates that
green peas would not remain in the program with this lower return. The
difficulty that now presents itself is determining the activity or activi-
ties that might replace it. This problem can be solved accurately only
through re—programming. If reprogramming is to be done, this would be
the best alternative.

The second alternative would be to leave the green pea activity
in the program at its present value. In this case, the vines would be sold
and the s pply through the roughage equation would be seVered. In order
to compensate for this decrease in supply through the roughage equation,
more roughage would have to be purchased through the roughage purchasing
activity. The green pea activity suprlies 2.2 roughage equivalents per
unit level. These equivalents are valued at thirty dollars or ol3.636t
each. The roughage purchasing activity supplies one euuivalent for el8.ou
which is ea.3636 more than what the green pea activity supplies the eouiv-
alent for. This Change would increase the cost of roughage required in

, , ,_ A r . n,,, a . .4 .»H . l
the program by e7pa.a777 \oa.)o;c a 4.2 x {b.goLQJ.

 

1Increase in cost per eiuivalent multiplied by the number of eluiv-

alents p‘oduced per unit level multipliec oy the incoming level.

'I Q. r
LI)“

”he total cost to the program would be e3,lC3.l7C8 (w18.C0 x.2.2 .
x 78.3629). This anpunt would not be too significant in relation to the
total income and expenditures of the whole prograh and should not affect

the program seriously. This method would not Change the basic structure

 

of the final program; whereas, the former alternative would involve changes
in the relationships between resources. If no reprogramming is done, unis

latter alternative would probably be the best method of coping with this

u. u.

..
error since no changes in the activities, the resource structure, or the i 7

V 1
ratati:n wruld be nu:essary, and the aiQtstient cost «gull not be cites~ g

E i
sive. Since this latter method does not involve changes in the basic 3 .

‘ 1
data, and since no reprogramming is done, the final solution (even though E;

3;.

adjusted) may still be in error.

The Rotation Problem

In Chapter VI it was noted that, although the rotation equation
balanced, two of the three crops were being produced on a different farnn
The problem involved is that each crop has a different oudset for each
farm. Therefore, when the rotation requires that green peas be replaced
by alfalfa-brome hay or sweet clover, a traisfer of base crops from one
fanu to the other takes place. This transfer requires a change in the
crop budgets.

The following solution is offered as a remedy for this rotation
ailment. First, since most of the butte fans is rented out, the remainder
of it snould also be rented. This would eliminate the need of transporting
men and equipment to this fanu to Operate 19.5908 acres (18.7145 of alfalfa—
brome hay and .8763 of sweet clover silage). It would also eliminate the

transferring of this hay and silage to the feeding operation on the Home

155

Farm. Second, replace the alfalfa-brome hay and sweet clover silage from
the butte Farm with 19.5908 acres of alfalfa-brone hay on the Home Faun.
This would be possible since the hog activities require only 31.1774 acres
of their prOgrammed acreage (see Chapter VI). All Operations would tnen
be concentrated on the Home Farm, and all of the tillable butts land would
be leased. The rotation could then be satisfactorily carried out on the
Home Farm with the green pea and alfalfa-brome hay activities.

There is considerable justification for this suggested solution
to the rotation problen. Table 56 compares these roughage activities in
terms of cost, production, and requirements for the factors of production.
The 2-0 values are also shown. These values indicate the activities' rela-
tive proximity to entering the final solution. (The nearer the 8-0 value
is to zero, the nearer the activity is to entering the program.) From a
study of these comparisons in Table 58, several observations can be made.

1. More than enough roughage would be produced under the revised
program. (This surplus would help offset the increase referred to in
part one of this chapter section.)

2. The rotation balance would be satisfied with four parts of green
peas to one part of alfalfa-brome hay-all on the same fans (see rotation
assumptions in Chapter III).

3. Total farm income would be increased by decreasing the costs
of producing roughage equivalents. (This increase is possible; adgustments
are being made for data errors, discovered after programming took place.)

Cost of producing Butte dryland Clover silage b 20.05a0

Cost of producing Butte alfalfa-brome hay" _]50.62Q2

Total cost to final program 8770.0832
Additional income from Butte land rental

(19.5908 acres) $391.5160

Cost of producing Home alfalfa—brome hay ”584,5l22

Tbtal cost to revise program a192.6969

155

Cost savings.2 $577.9863

(This additional savings would also help compensate

for the additional cost referred to in part one of
this chapter section.)

A. A slight adjustment in labor requirements would be necessary
in switching to the revised program. The Butte alfalfa-brome hay activity
requires 1.3829 man hours per acre more seasonal labor than the Home alfalfa-
brome hay activity requires. Butte dryland sweet clover silage requires
.2 man hours per acre more year round labor and 5.8608 man hours per acre
less seasonal labor than Home alfalfa-brome hay requires.

A study of the acreage allocation on the Home Farm indicates that
there are still 10.8734 acres of tillable land not being used. The follow-

ing is a breakdown of the acreage usage:

Total tillable acres 140.0000
Acres used by:

Green pea activity 78.3629

Alfalfa-brome hay activity 19.5908

Feeder hog activities3 _QL;;£L§

Total acres used 149.1311

acres not employed 10.8734

 

 

éfhese adJustments result in more profit than specified by final
program. There are several possible reasons for tnis. The prograuxcon—
tained data and assumption errors. If these errors had been corrected
prior to programming, the final programmed profits would have been direct-
1v affected-probably increased. With the 5iven assumptions and data,
home alfalfa—brome hay, that was used as a substitute,wes not in the final
program because its required resources were employed elsewhere more prof-
itably. Apparently Home green peas more profitably utilised the resources
available on the Home Farm than did Home alfalfa-brome hay. Similarly
Butte alfalfa-brome hay and Butte clover silage apparently utilized re-
sources available on the Butte farm more profitably than other activities.
Since these adjustments were made mainly by considering effects cn rota-
tion along with cost differences, they do not tell the whole story. Be-
programming might point out that a different series of adjustments would
have been more profitable.

3Since both feeder hog activities can use the same feedlot facil-
ities (in different time periods), the 30.n6h2 acres allocated to Group I
hogs can be used for other purposes. (Full acreage and facility require-
ments had to be considered for each of the hog budgets since either Group
I or Group II activities could have entered the program without the other)

 

|
t ‘

 

 

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neoannsuasuaz do comapsaaoos..em mange

158
Some of the ways that these unemployed acres might be used are:

1. Additional feedlots for hogs allowing for adjustments in number
of hogs fed. The number fed may fluctuate with Variations in factor and
product markets.

2. A processing plant for the processing of marketable hogs.

3. Additional feed storage facilities.

A. A feed mill for preparing broiler and hog rations.

5. A hog pasture to be used for various reasons; such as, for in-
coming hogs, or for sick h0g3 while they are recuperating.

6. A fertilizer plant which would utilize manure and waste from
hOg and broiler activities. :'I

7. The expansion of crop program according to market conditions.

8. Facilities for brood sows for the production of feeder stock.

9. The construction of a railway spur to us used in transporting
feed as well as hogs.

10. Gardens for employees.
11. Pasture for employees’ milk cows.
12. The building of homes and bunk houses for employees.

The diagram on the following page portrays the Home Faun snowing
the farmstead, the crop rotation layout, the hog feedlots, the broiler plant,

and the adjacent highway, roads, and railways lines.

The Pasture Activities
No pasture activities entered the final program. There may be
several reasons for this occurance. First, the pasture producing activ—
ities were limited to irrigated pasture. Irrigated pasture is expensive

to produce and competes with other activities for many of the factors of

159

 

Town
L IHOL l N

 

 

 

 

 

 

 

 

 

 

>
— | T /
e
_ ' a ture g
' 23 acres 21 acres
' Tillatle alfalfa-Brome
g Land Hay
__o.
g 31.177h ac.
E Q) 8.8212680. Hog fl
(3 23 acres Idle feedlots IS
I 3
. is 3 '-
m 1_
l >‘ ast r
+3 23 acres ,;
5% Fake Existing i,
‘ feedlots h;

 

 

 

 

production. Dryland pasture was trimmed from.the program because of its
low yield (one cow per two to three acres). However, because it is ineXpenr
sive to produce and would have competed Very little with other activities
for resources, dryland pasture might have entered the program more readily
than the irrigated pasture.

Second, pasture was made available only in units compromising the
complete pasture season and, therefore, had.to be employed by the livestock
activities for the whole season whether utilized for the complete season
or not. This is not a serious problem, however, because all of the program?
xned livestock activities that require pasture require it for the whole season.

Perhaps with the inclusion of the dryland pasture production active
ities and rental activities for Home irrigated and Home and Butte dryland

‘pasture, the now idle pasture land would be usefully employed in the program.A

“Butte irrigated pasture is too expensive to produce to compete with
(other pasture rental activities in the case study locale. For this reason,
(K) rental activity should be provided for this irrigated pasture. (See
Chaiter III, Assumptions, and Chapter IV, Table 20.)

 

160
This idle land, even though it is not considered tillable, presents a prob-
lem to the farm.management. It should be maintained to some degree and,
as the program now stands, no funds have been allowed for maintenance pur-
poses. A though net profits are sufficient to cover this maintenance, it
would be more practical, as well as more profitavle, to make use of this
land in one way or another. It is felt that these afore-mentioned sugges-

tions would solve this problem satisfactorily.
The Livestock Program

he Hog Activities

»3

The incoming levels of use hog activities were far higher tnan had
been anticipated. although this high level hog program presents several
problems, it also Opens the door to many new ideas ard.possibilities. The
problems will first be presented and then some of the possibilities of the
program will be explored.

The Problens

-An examination of the hog budgets used indicates there
could quite possibly exist some economics to scale with this high incoming
level of production. When the budgets were established, it was not expected
that the incoming level-if hogs did enter the programs-would exceed two or
three thousand hogs. The budgets were established on the basis of that exe
pectation. The solution to the problem would be to revise the budgets in
relation to the actual incoming level before putting flie program into action.
The rations would not change. The main changes would probably come in areas
of feed handling, equipment, labor distribution, and the physical setup of
the feedlots. The main changes in the lots would be in arrangeuent rather
than the size of each lot. Automation would probably increase the effic-

iency of laoor. A diseconOIy may also eiist since the price of acquiring

wag—1

 

lol
feeder pigs (o5.7l) may be too low when considering the purchase of
60,000 of them. Under the heading, "The Livestock Program" some of the
possibilities that this size Operation presents will be discussed. These
will, in many instances, bring about economics to scale. After all possi-
bilities have been explored, budgets should.be revised accordingly. A com-
parison Should indicate some savings per unit level, due to economies to

scale of the revised budgets over the programmed budgets.

Problems for Managgment

 

 

\L.
7
EV ‘00 3

"Fred, can I see you alone?

A major problem that presents itself is that of, first, acquiring
and, then, marketing sixty thousand hogs twice each year. A solution to
the first phase of this problem may be the establishment of a pig breeding
activity which would supply the necessary weaner pigs. A budget for this
activity was originally included in the model but was later deleted when
the model was trimmed. .On examining the hog statistics for the locale of
the case study farm, it was found that many more hogs are produced than
are required by this program. Table 57 gives the number of h0g5 on farms
in Alberta ( where the case study farm is located) and in all of Canada.

As will be noted from the table, the optimal program would require

about seven and one-half per cent of the total hogs on alberta farms.

of;

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Table 2-A.--Unit Prices of Crops and Feeds

 

 

 

 

 

 

 

Crops and Feeds Price Unit
__‘_‘ 0
T» - ,_
Alfalfa-brome Hay E 18.00 Ton
Alfalfa—Brome Silage i 6.00 Ton
Barley ' .93 Bus.
Green Beans* 123.00 Ton
Dry beans* 7.50 Ton
Clover Silage 5.00 Ton
Fieid Corn Silage 1 7.45 Ton
Sweet Corn* ‘ 23.10 Ton
Flax 9 2.? bus.
Oats I .51 bus.
Green Peas* 100.00 Ton
Pea Vine Silage 5.00 Ton
Dry Peas 3.00 Ton
Potatoes 1.50 Ton
Rye 1.045 DUB.
Sugar Beets 14.50 Ton
Sugar beet Top Silage 5.44 Ton
Wheat 1.30 5113.
Protein Keel 5.00 100 #
Salt 3 1.90 100 a"
Dried beet Pulp 40.00 Ton
...... ...... u..-a-....._.~-_

 

 

Dominion Bureau of Statistics, Dept. of Agr., Ottawa,

Canada

Sources: Agr. Prices, (adjusted for local study area.)

lcc. cit.

Siggl er.'1 en t t
i°tjcsfiart
l955, pp. c9

F-4 ('j

Eiandybcc}: of Agri culture

: _\ f ‘
r 4.6.; d ‘4 FOLK: ,

l Stat—
C'n. AFUV.

;_ ..Animal Units of rasture

mm— -..——

 

 

 

 

Animal Animal unit
Equivalent
Cow 1.00
Heifer over 1 year .50
Calves under 1 year . .25
Bulls 1.00
Ewes .lh
Rams .14
Lambs (before weaning) .05

 

Source: Farm Management Handbook, p.2, Department Agricultural economics,
Michigan State University, 1960.

NOTE: 1 Animal Unit of Pasture equals the amount of Pasture, 1 con

will require each day for a period of 122 days \The pasture
season in this study).

1 -- ,-Available Building Floor Space on Farm

 

...—.wu—a-o

(100 square feet)

 

F-.’....:;'..- 1‘34

—m
' QM

 

 

 

Building Dimensions Floor Space
(feet)
Cow Barn LO A 100 h0.00
Chicken Coop 20 A 30 6.00
Granary 8 X 10 .80
Granary 10 A 20 2.00
Horse Barn“ 35 A 80 28.00
Machine Shed 20 X 100 20.00
Tbtal 96.00

 

 

 

Source: Farm.Records

(A

.~ .-Cr0p Storage Costs

‘_..

 

 

 

 

 

 

 

 

 

Construction Cost Annual Charge“ Interestc Total
Annual
Cost
Corn o LOO/bus. a .OS/bue. 3.025/bua. s .075/bus.
Small Grain .37/bus. .0185/bue. .0093/bue. .0278/bus.
Hay 12.00/ton .60/ton .3/ton .9/ton
Silage
a) Upright 20.00/ton LOO/ton '.5/ton LSD/ton
b) Trench 1.00/ ton .OS/ton .025 ton .075/ton
c) Horizontal 6.00/ton .55th .15 ton .Aso/ton
Self Feeding
Bruiser; it a; . cl’ .

 

Otwinning 20 yr. life.
CM: 2%% on full cost per year.

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7- .Fertilizer Prices Used 1h Budgets

 

 

 

 

Type Price rer Ton
ll-AB-O $llh.50
33.5—0-0 88.50
16—20-0 87.50
Source:

 

fertilizers in A;§ggta. Circular #5» ‘

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n55: h>-o.Surface Irrigation Costs (Per Acre)

.- -.- -..-... —_.._-oh—. _—

 

 

 

 

Particulars Costs
Conveyance Control Facilities 82.50
Conveyance Facilities § 2.50
Reconstruction of annual ditches r ; .50
Total Annual Costs 85.50

 

 

Source: mcCulloch, Allan N; Schrunk, John F; Sprinkler Irrigation, lst
Edition, 1955, prepared by Sprinkler lrrigation Association,
1028 Connecticut Ave., N.W., Washington 6, D. C.

NOTE: Furrowing costs are included with cultivation costs.

1;..Surface Irrigation labor Requirements for Various Craps
\Per Acre - inch)

 

”.....—.‘_..._..-. --....‘un—sm _.
...—...-.— '

 

Particulars Man Hours
of Labor

 

m. “- -_w——o.-mlray.-- "14 0‘~ ‘ - - A .-. ., 4,7- ‘-_ .- :n- -..JAA— J -7 ..- ......-

Labor required

Corn \widely spaced furrows) .7OC?
Small grains, peas & dry beans (flood) .525f
Alfalfa and pasture (flood) .ho9”
Sugar Beets, Potatoes & Green Beans 1

(Narrowly spaced furrows) .931'

 

aColorado Bulletin #ABZ-A, p. 9

bDerived from requirenents for corn.

Y: j) ;,Sprinkler Irrigation, Costs & labor Requirements
(per acre-inch)

 

 

 

 

 

 

Item Cost Man Hours
Seasonal
Equipment Costs
Power 3 .4?
Repairs .02
Depreciation .60
Interest .2A
machimry Costs __.Q_§_
Total Costs ' 31.38
labor
Setup System 8 .04
Takedoun System .03
lbve laterals .47
move mainline
& Pm» _ez
Total Labor 3 .59

 

Source; Page 1A9, Sprinkler Irrigation prepared by Sprinkler irrigation
Association, 1028 Connecticut Ave., Washington, D.C., First Ed. 1955,
pp.466. Jompiled and edited by Allan W. McCulloch & John F. Schrunk.

* ..imilxxal Units

 

 

Animal length of time fed
1 Dairy Cow 1 year
5 Hogs To Karket height
1
7 Sheep (EweS) 1 year
11. Lambs To L'arket height

 

 

Note: Animal Unit may be defined as the amount of feed (T. 0. Ike)
required to feed the animal a Specified time.

Source. Animal Science, h. E. Ensninger, The Interstate :rinters
and rublishers, Danville, Illinois, 1952, pp. 1096.

 

Patterson, H. L., Dairy Farm Businessnin Alberta, 1132 to 191.6,

Publication #812, necember 191.8, [apartment of Agriculture,
Ottawa, Canada.

 

*r _ , ioiuilding Space Required by livestock filer Unit level)

 

 

Animal . Building Space (100 square feet)
Broilers ' 10.00

Dairy .99

Ewes .12

Hens 3.00

Turkey 3.00 -

 

 

Source: llanning Props, Prepared for use in egr. icon. 511, Purdue
University, lafayette, Indiana

 

farm nanaggment Handy—book, 1V*;, TW‘. “".

...... -..—a— Avw--

- 0"

"A'LL - ~A. Acreage of Feedlot Space Required by livestock (Fer Unit Level)

 

 

 

 

 

Animal 3 Square Feet Acres
Beef Cow 500 .0115
Feeder Calf 200 .OCA6
Dairy Cow 500 .0115
Feeders Hog 2O .OOCS
Feeder Lamb 18 .CCLL
Ewe 35 .0008
Two Year le, Beef 500 .0115
Yearling, Beef A00 .0092

 

 

 

Source: Planning Props, loc cit.

.
b ‘ O
....-. .. ..- ...._ ..

Farm management Handy—book, 1w ,

1 acre equals A3,560 square feet.

 

 

 

 

 

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Item Pounds . 3 Pounds Bushels Cost/ Cost per
of reed ' Protein Protein Bushel Item
4| s
Barley 1.3 ; 10.8 0.61.1. .8958 3 .93 3 .8833
Wheat 17 I 13.3 2.261 .2833 1.30 .3683
Date 25 13.9 3.h75 .7813 .57 .4453
Protein 15 JLKLCI 15.000 35.00/1604 .7500
Total 1000 25.38 $2.LA69
:9; 1.37 # gain 1 day, 62.0438 days on reed.
reed consumed/100% gain - 432.29's
Feed.consumed/85# gain 8 367.37fi's
Total cost/85# gain = 08.9893
;<.t. Rog Ration Number Ib
(126# to 200# hogs)
Item Pounds % fi's Bumels Cost/ Cost per
of reed Protein Protein Bushel ltem
Harley 08 i 10.8 4.968 .9583 s .93 s .8912
Wheat 18 ' 13.3 i 2.394 .3000 1.30 .3900
Oats . 28 . 13.9 ‘ 3.892 .8750 .57 .0988
k‘rotein 1 8 'lco.o 8.000 5.00/1009 .0000
!—~~-——————~—-——<> -
Total ‘ 100 19.254 2.1800
t. 1.37# gain 1 dAY, 54.7hh5 days on Feed.
Feed consumed/ 100# gain 432.2fi'8
Feed consumed/ 75# gain 324.15fi's
Total Cost/ 759 gain = 87.0665
Total Cost/ 160# gain (Ia & Ib) 3 016.0558
Source: Agricultural Prices, .:=_._,;:.

"Annual Farm Prices of Selected Agricultural Products, Alberta.
1935-55", .... 3...-.. _19

nose 5 s Renata. .19 A 2:192.

, Jog nation number :a
\4L# to 1259 Hogs,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

z: _ — ‘
Item Pounds o 75 99's Bushels Cost/ Cost per
Feed Protein Protein Bushel Item
Wheat 17 13.3 2.261 .2833 1.30 .3683
Data 25 13 e 3eh75 e 7813 O 57 OM53
Pl‘otsin 15 100.0 15.000 5.00/1009 .7500
Bran 10 14.5 1.450 .3000
Total 110 26. 83 $2 . 7469
' : 1.4359i gain per day, 59.4406 days on feed.
Feed scammed/1009‘ gain 3 434.1
Feed consumed/856‘ gain 3 368.985
Total cost/ 85# gain ' $9.2144
,u.;,Hog flation Number 2b
(1268‘ to 2008‘ Hogs)
Item Pounds Z # bushels Cost/ Cost per
of Feed Protein Protein Budmsl Item
.. - ...—..., -.- nair-«un—ew-n—o-v. '
Barley 1.6 10.8 4.968 .9583 8 .93 3 .8912
Wheat 18 13.3 2.394 .3000 1.30 .3900
Oats 28 13. 9 3 .898 . 8750 . 57 .4988
Protein 8 100.0 8.000 5.W/100ff .4000
Bran 10 110.5 1.450 .3000
Total 110 20.704 32.4800

 

 

 

 

 

 

 

' ”or : 10,43# gain/GAY, 520101676 4‘5" on F.0d.
Pied consumed/1008‘ gain - 434.1

Feed constant/7% gain - 325.575
Total cost/758‘ gain . 87.31.02
Total coat/160:? ”(20. 8 2b) - 816.5546

Agicultural Prices, 100. cit.

"Annual Farm Prices of Selected Agricultural Products, Alberta,
1935-55", M.

Prom” Rspgrt, 1252-1252, 102. git.

Source:

;-~;-.Hog Ration Number Ba
K40? to 125# Hogs)

 

 

 

 

 

Item __ 4 Pounds S 3 Pounds Bushels Coét/ Cost per
of reed Protein Protein Bushel item
Barley 43 10.8 4.644 .8958 3 .93 $ .8833
Wheat 1? 13.3 2.261 .2833 1.30 .3683
Oats 25 13.9 3.475 .7813 .57 .4453
Protein 15 100.0 15.000 5.00/1008 .7500
......_._.._.._._,-4 ___________
Totals 110 26.560 32.4469

 

 

 

 

 

 

 

 

.,.u-; 1.44# gain/day, 59.0278 days on feed.
reed consumed/1009 gain = 436.25
Feed consumed/BSfi gain 3 370.77
Total costs/BSfi gain - 68.2481

- .Tm+.Hog Ration Number 3b
(126% 32-200? Hogs)

_~ —-A

 

 

 

 

 

 

 

 

 

Item Pounds % Pounds Bushels Cost/ Cost per
of Feed Protein Protein Bushel item

....._.._—- . “-...- "“"‘"“T - .: ...- ...—...... ... «L 1... 1....-."
Barley 46 10.8 4.968 .9583 3 .93 as .8912
Wheat 18 13.3 2.394 .3000 1.30 .3900
Gate 28 13.9 3.892 .8750 .57 .4988
Protein 8 100.0 8.000 5.00/1008 .4000
Alfalfa 10 11.8 1.180 .0149t

Totals 110 20.994 L 82.1800

 

 

 

 

 

 

: 1.44” gain / day, 52.0833 days on feed.
reed consumed/ lOO# gain 3 436.20#
Feed consumed/75# gain.- 327.15
Total coats/75fi gain = 06.4835

Total cost/160# gain - 614.7316 (33 & 3b)
Total amount of alfalfa required = .0318 tons

Source: Agricultural Priceai_loc. cit.

"Annual Farm.Prices of Selected Agricultural Products, Alberta,
1935-55", 100. cit.

Progress Hegprt1U194791952, loc. cit.

-, Broiler Ration

 

 

 

 

 

 

 

 

 

 

 

 

0 - 8 weeks 8 — 18 weeks
Item. Pounds Cost Per 100st Per cent Per
Used Unit Item. Item
Barley 19.5 t .93/bus. s .94 s .66
Ground Uate 10 .0 . 57/ bus. .18 .36
Alfalfa
(lea: meal} 5.0 5.00/100# .25 .25
or Vit. A
Soybean
(oil Ital; 20.0 5.00/1oor 1.00 1.00
Fish Meal 4.0 3.00/100r .12
Meat Scraps 4.0 3.00/100# .12 .30
Bone Meal 1.0 2.00/100# .02 .02
Oyster Shell 1.0 l.00/100# .01 .02
Salt .5 1.00/100# .025 .01
Riboflavin 5.0 5.00/lOQfi .25 .30
Tat“. 100.W‘ 32. 915 82 e 92
1“ _um_iii_i,1.,M_H_flm.mil,_m Lfla_w_m.____

 

56008 (0 - 8 week ration) 0 $2.9l5/1008 = 8192.72
6600’ (8 - 18 week ration) O $2.92/100# ' $163.24
Total Cost 2 0355.96

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