A STIIIIY III
ALTERNATIVES TI} BAIIIYING AND WITHIN DAIRYINIS
IN TIIE THUMB AREA BE MICHIGAN

THESES FOR THE DEGREE OF ALB.

MICHIGAN STATE UNIVERSITY

CHARLES ALEXANDER ROBERTSON

1962

 

LIBRARYI

Michigan State I
University (J

 

 

A B S T R A C T

A STUDY OF
ALTERNATIVES TO DAIRYING AND WITHIN DAIRYING
IN THE THUMB AREA OF MICHIGAN

by Charles Alexander Robertson

This thesis is concerned with the problems of choice
of enterprise and resource utilization on farms in the Thumb
area of.Michigen. The aim was to formulate profit-maximizing
patterns of production for certain classes of farms in the
area.

Two types of farms were considered, a dairying type
and a cash cropping type. A ”representative" farm structure
was developed for each type, based on the characteristics of
such farms as revealed by survey. The representative farm
data was then subjected to a profit maximization process
using linear programming. The programming model embodied
the assumption, through the medium of the input-output
coefficients, that farm operations were carried out at a
high level of technical efficiency.

The individual courses of action open to each
representative farmer included such alternatives as labour
hire or salvage, purchase or sale of land, use of credit
facilities or investment of farm capital in non-farming

activities. Possible livestock enterprises included

dairying and hog, beef and egg production. Various

alternative methods of livestock production were incorporated

Charles Alexander Robertson.

within each broad group of activities. Among the crops
which could be grown were corn, wheat, barley, oats, beans
and alfalfa. Various outlets for disposal of these crops
‘were included in the model.

Hulk was price mapped over the range $30 per 1000 lb.
to 350 per 1000 lb. All other prices were held constant.

The results suggest that dairy farmers whose farms
fall within the range 80 - 1&9 tillable acres should move
out of milk production, unless the price of milk rises
beyond the level of $1.0 - $1.5 per 1000 lb., all other prices
remaining constant. They should concentrate on growing
wheat and hay as cash crOps and corn for feeding on the farm
to hogs. This Optimum pattern of production also applies
to cash cropping farms over the whole milk price range
under consideration.

. Above tho - $L5 per 1000 lb. milk dairy farmers

should make full use of their existing dairying facilities
in conjunction with wheat growing and the production of

corn for feeding to dairy cows and hogs.
An increase in the present tillable acreage through

land purchase and a net movement of labour off the farm were

common factors to all optimum plans.

A STUDY OF
.ADTERNATIVES TO DAIRYING AND WITHIN DAIRYING

IN THE THUMB AREA OF MICHIGAN

By
Charles Alexander Robertson

A THESIS

Submitted to
THE COLLEGE OF AGRICULTURE
Michigan State University of Applied Science
in partial fulfilment of the requirements
for the degree of

MASTER OF SCIENCE

Department of Agricultural Economics

1962

Wee—L (3.9%

ACKNOWLEDGEMENTS

I am.deeply indebted to the Kellogg Foundation
for awarding me theFellowship which enabled me to visit
the U.S.A. and study for one year at Michigan State
University. This thesis was written as part of the study
program.which I undertook while there.

I would also like to express my gratitude to the
following:-

The Department of Agriculture and Fisheries for
Scotland for sponsoring my visit, and the west of Scotland
Agricultural College for granting me leave of absence for
one year.

Dr. Dean E. mcKee, my major professor, for giving
me invaluable guidance and encouragement throughout my stay.

Professor C.R. Hoglund for his helpful advice and
in particular for’assuming, latterly, the chairmanship of

my examining committee.
The other members of my committee, Drs. A. Koo,

H.E. Larzalere and G.C..McBride for their advice and

interest.
I received assistance from many other members of

staff of Michigan State University whose names are too

numerous to mention. To them, and to the persons and

institutions named above, I offer my sincere thanks.

(ii)

TABLE OF CONTENTS

I2282_!20
Chapter I Introduction:
General Background 1
The Approach 2
The Problem under Consideration A
Related Studies 5

Chapter II The Approach to be Used in this Study:

Scope 7
Approach at the Micro-Level 8
General Form of Micro-model 9
Assumptions 9
Chapter III The Data:
The Sample 11
Collection of the Data 12
Classification of the Data 12
The Representative Eanm 1A
Description and Comparison of the
Representative Farms 18
The Representative Farm Concept 21
Chapter IV The Mbdel:
Introduction to the Representative
Farm Model 2h
Medal for the Farm Representative
of the Dairy Group: 25
Cropping Set 25
Dairy Set ' 30
Livestock Feed Restriction Set 31
Beef Set 33
Reg and Poultry Set 33
Livestock and Feed Facilities Set 3h
machinery and Enuipment Set 3L
Labour Set 37
Land, Credit and Capital Set L0

Some Technical Aspects Discussed 43

(iii)

Chapter V

Chapter VI

The Optimum.Solutions:

The Cropping Farm
Organisation of Production
Resource Organization

The Dairy Farm I

I. At 330. 335. and 3&0
per 1000 lb. Milk

Organisation of Production
Resource Organisation

II. At $1.5 per 1000 lb. Milk

Organization of Production
Resource Organization

III. At $50 per 1000 lb. Milk

Appraisal of the Model and Summary
of Results

Appendix Tables

Bibliography

(iv)

Page No.

#7

#8
51

60
60

6O
62

65
67

68
70
89

Eggber
III-1
III-2
III-3
IV-1
IV-2
Iv-3
IV - A
IV - 5
Iv - 6
IV - 7
IV-8
V -1
V -2
v -3
V - h
v -5
V -6

LIST or name

 

Headigg Page No.

Farm Type-Group Analysis 1h
Qualitative Characteristics of the

Representative Farms 16
Quantitive Characteristics of the

Farms in each Type-Group l7
Tabular Summaries of Activities
Cropping Set 25(a)
Dairy Set 31(3)
Hog Feed Restriction Set 32 .
Beef Set - 33(3)
Hog and Poultry Set 33(b)
Machinery and Equipment Set 37(a)
Labour Set k0(a)
Land, Credit and Capital Set h2(a)
The Reprggentative Cro in Farm
The 1958 and Optimum Cropping Patterns L8
Labour Utilization 53(a)
machinery and Equipment Utilisation 5A ~

The Representgtive Dairy Fan;

The 1958 and the Optimum Cro ping Patterns
at $30, $35, andfih 31.0 per oI000 1b. Milk

labour Utilization at $30, 335, and 31.0
per 1000 lb. Milk

Labour Utilization at 3&5 per 1000 lb.
Milk

 

(v)

60
62(a)
66(a)

1.

3.

L.

5.

9.
10.
11.
12.

13.

14.

15.

l6.
17.

APPENDIX TABLES

Representative Crapping Farm - Basis
Activities in Optimum Solutions

Representative Dairy Farm - Basis
Activities in Optimum Solutions

Activity Identities and C
3; values for Crapping
0

per 1000 lb. Milk

values.

arm at

Resource Restriction Identities and

Initial Values

Representative Crapping Farm.
Value Products at the various Milk

Price Levels

Livestock Feed Requirements - Milk Production
Livestock Feed Requirements - Beef Production
Livestock Feed Requirements - Hog and Egg

Production

Marginal

Labour Requirements - Crop Production

Labour Requirements - Livestock Production

Market Prices

Assets and Resources Available on the
Representative Farms

Actual Fertilizer Application and Crap Yields
obtained in 1958 on the Representative Farms

Estimated Amounts of Farmyard Manure Produced

Annually by Various Types of Livestock

Estimates of Annual Machine Capacity and
Expected Use (Machine Acres)

Estimated Farm Real Estate Values, by Counties
Comparison of wage Rates in Agriculture and

Industry

(vi)

Page No.

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71

72
74
75

76
77

78
79
80
81

83
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85

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87

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I N T R O D U C T I 01!

General Back growing

The broad lines along which this study was
developed were laid down by the conditions underlying the
approach to, and the methodology involved in, a wider
inquiry currently being conducted into the dairying industry
in the Great Lakes region, to which study this paper is a
contribution. The parent investigation has as its main
objective the determination of: "changes that can be made
in the organization of dairy farms and in the allocation
of resources to dairying in the Great Lakes region that will
provide greater factor earnings and be consistent with a
balance in.the aggregate relationship between the supply of
and the demand for dairy products."1

The main study is being conducted on a regional
basis because of economic and technological variations among
regions within the area. For each region farm types will
be isolated, representing the main physical and organizational
features of the principal farm groups found therein. These
situations will then be analysed on a normative basis, i.e.

. the aim will be to develop on paper the organization as it
ought to be, given the objective of profit maximization.

1. Dean E. McKee and James T. Bonnen, Suggests; Prgcedureg
for the Analgsis of Production Adjustment; in t rea
es Daigy dustgx, Paper for discussion onlyE,
c gan State Un varsity.Agricultural Ebonomics'
Department, January 1959, p. 1.

-1-

 

 

 

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The analysis is static and thus ignores the time
element which elapses during the transition from one type
of setdup to another, the investigation being concerned
only with the forms of the current and the revised
organizations. Net only is the time element'unaccounted
for here, but also any associated loss of income deriving
from interruption of the production process as a result of
reallocation of resources. In practice such revisions,
particularly where they relate to livestock enterprises,
cannot always be accomplished in such a way as to achieve
instantaneous substitution of one enterprise for another
on.a fully operational basis, and therefore the flow of
current income to the farm family is temporarily reduced.

The Approach

The problem will be set up at the micro level in
the linear programming form and will include certain
features which are alien to the simple type of programming
model. The principal among these is that resource fixity,
in the sense that the physical quantities of farm factors
are held constant, is relaxed to allow for the purchase and
sale of units of resources, such transactions being a direct
effect of the profit maximization process. Not.all
resources, however, are completely variable. There is an
upper and a lower limit, for example, on the area of land
which can be purchased or sold respectively;‘ the amount of
farm family labour which can be sold off the farm is less

 

-3-

than that available for fans work; credit availability,
and thus the supply of capital, is governed by the value of
the fan real estate and chattels as well as by the rate of
interest. Other resources, such as hired labour, can be
varied freely and in general the quantity of these resources
and of other resources is conditioned by the value of a unit
of the resource in the production process in relation to its
market cost and to its salvage value, i.e. resource use will
be fixed at that level where there is no gain to be realized
from applying more of that resource in the production
process, or less of it. This is the level where the MVP of
the resource is less than the cost of acquiring another unit
of it, but greater than the revenue obtainable by selling a
unit. So long as this dual condition holds the resource
will be fixed for the farm business.2
In theory, the only elements which limit the

continued expansion of the farm firm are the managerial
ability of the farmer, rising factor costs, and falling
product prices. To these must be added the tendency, due
to the presence of risk and uncertainty, to discount future
HVPs. This factor is related to the increasingly
unfavourable equity position of the farmer as the size of
his business expands, when such expansion involves the use
2. G.L. Johnson and L.G. Hardin, Economics of Fe

Evaluation, North Central RegioEI fiincatIon U3. #8,

us versity Agricultural Experiment Station,
Lafayette, Indiana, April 1955.

 

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of credit facilities. within the confines of this study,
however, factor prices will be variable only in the sense
that units of resources of the same nature, but different
quality, will be charged accordingly, e.g. the interest
charge on credit obtained through land mortgage is lower
than that payable where chattels are offered as security.
The prices of all products, except milk, will be taken as
fixed.

Managerial efficiency is assumed to be unaffected
by changes in the size of the farm business.

Th3 Problem under Consideration

The paper now being developed will be concerned
specifically with the resource allocation problem within
the farm firm in the Thumb areaa of Michigan. Among the
main agricultural features of the area in question are the
preponderance of dairying enterprises and the importance of
cash cropping. Sanilac and Huron are two of.Michigan's
leading dairying counties in terms of cow'numbers,3 while
certain sections of the area (e.g. Denmark Township,
Tuscola County) are noted for their high natural level of
soil.fertility and related capacity for producing large

tonnages of cash crops per acre.

_.~

a. The area under consideration comprises the following
gave izunties: Huron, Lapeer, Sanilac, St. Clair,
sco .

3. JMichigan Department of Agriculture Michigan
Agflcultural Statistics, July 1958:

Related Studies

Two studies having a bearing on the present
problul will be described in brief.

Hildebrand" programmed the production pattern of
a typical central Michigan dairy farm and the method by
which he deals with the resource supply problm is basically
the same as that which will be followed in this paper. By
inserting acquisition and salvage activities for all
relevant resources he develops a model within which
resources are fixed at levels endogenously determined.
Within this setting and under the assumed technological
conditions the solution indicates that crepping is more
profitable than dairying. The technical coefficients used,
however, probably tend to encourage a result of this nature
since they infer that management of the cropping enterprises
is on a higher plane than in dairying.

An Iowa State College studys deals with the
competition among various dairy enterprises and between
dairying and other farm enterprises using continuous capital
and variable price programming. Among the several
conclusions reached are that the milk price at which

1». Hildebrand, Peter E. , Farm Or ization and Resource
Pixityx Modification of the Linear Frog-gaging Model,
unpu l .s ed thesis for t e degree 0 .D., Michigan
State University, 1959.

5. Ladd Geor e W. and Easley Eddie V., An A lication of
Linear Pro8 to the Stud of Su l Res one in

i in , Department of Economics and Sociology,

A icultural and Home Economics Experiment Station,
15:9. State College, Research Bulletin 1467, May 1959-

 

 

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dairying is forced out of the optimum plan is related
inversely to the size of the operator's capital supply,
and that where hog housing is unlimited there is an
inverse relationship between.milk output and hog prices.

Spring labour is the most limiting factor in dairy

production.

THE APPROACH TO BE USED IN THIS Mm

I?

It is proposed to consider the problem in its
broader aspects rather than to probe deeply into a narrower
field. For example, out of the infinite number of possible
crop sequences only four are represented here. Similarly,
with the exception of the dairy activities, the level of
feeding in the livestock enterprises is restricted to one
for each, although several feed input-output relationships
might have been considered. The chief danger of too broad
a study lies in the relative superficiality inherent therein,
compared to the more thorough if less comprehensive nature
of the narrower approach in which fewer enterprises might be
examined, but each would be subjected to more detailed
scrutiny. The logical sequence, however, would seem to be,
first, the establishment of favourable lines for more
specific investigations, followed by detailed consideration
of alternatives along these lines. Thus, the question
posed is: ”In the area under scrutiny, what alternatives
‘compare favourably on a profit basis with dairying, and how
can dairy farmers adjust their organizations to secure
higher financial gains?"

‘Although the approach is broad this does not
entirely preclude considerations of alternative systems

within particular enterprises, e.g. rearing beef feeders or

- 7 -

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purchasing them. Within each enterprise group or set,
various systems of management compete with one another.
Since the fate of the dairy enterprise is the main issue
this enterprise is considered in more specific terms than
the others.

Approach at the Micro-Level.

In the interests of realism the study will aim,
not at deriving the optimum organization for an ”average"
farm in the Thumb area, but at developing the end result
of an adjustment path for two selected farm types in the
area, on the basis of their resource supplies and the
associated technological and physical factors which
currently attend the operation of the farm business.

From this it should be possible to indicate how groups of
farmers with differing equity ratios, farm sizes, types of
resources, etc., can best adjust to benefit their own
commercial interests by attaining organizational patterns
which, though different from those of their neighbours, are
suited to their own specific circumstances. As far*as
dairy farms are concerned, any adjustment which is required
will be definable in terms of a change of emphasis between
milk production and production of other livestock products,
°r°P products, or between systems of dairying.

- 9 -

General Form.of Micro-model.

In order to lend itself to linear programming a
problem must satisfy three criteria. It must have:

(1) An objective.

(2) A series of alternative ways of achieving

the objective.

(3) A set of resources or other quantifiable

- restraints.

Since the problem under review fulfills all three
conditions it is adapted to solution by linear programming,
and also subject to the disadvantages which are associated
with this technique.

Assumptions

It seems appr0priate at this stage to mention
three of the assumptions which apply to the working of the
model, the first two are simplifying measures, the third
is technological in nature.

(1) The approach followed is that of conditional
normativism i.e. given a certain and, in this case profit
maximization, the model will illustrate the organizational
features which are concomitants of its attainment. There
is no attempt made to specify what the end ppgglg be.

(2) Absence of risk and uncertainty. It is

assumed that what is will be; that current prices, costsb

 

b Basically "current" prices and costs are averages of
those ru ing over the five years, 1954-58.

-10-

and technical coefficients maintain their present
relationships, with the exception of the product (milk),
which is being price mapped. Viewed in the strict sense
the model will merely solve the question of how farms ought
to be organized in time period to, which in itself is not of
great practical value unless the assumption of the constancy
of the interrelationship among the critical factors does in
fact apply, or unless a measure is required of the extent of
current maladjustment in relation to the present demand
situation.

(3) A high degree of managerial ability at the
technological level. The requisite qualities of the good
manager are easy to specify, but difficult to express in
quantitative terms. In the sense in which it is used here,
however, managerial aptitude refers to the ability to farm
efficiently. This implies achieving a given rate of
output with a minimum of input, or, conversely, using given
quantities of inputs in such a way as to maximize output.
Since the study is normative in nature this third assumption
would appear to be a realistic one i.e. farmers ought to be
technologically efficient. As improved practices become
adopted and advisory facilities more widely used, the gap

between the positive and the normative position can be

expected to narrow;

THE DATA.

The Sample

Total population of area sample
segments in the Thumb area . 5,205

Number of sample segments taken
in sample a 56

Total number of schedules obtained
in survey - 81

Number of Ebonomic Class I-V farms
in the Thumb Area (195h census) : 13,013

The sampling technique used was based on the
Master Sample of Agriculture. Farms falling outside the
Class I to Class V range - this covers farms with a gross
income of $1200 or more - were excluded from the sample, as
‘were specialty farms, i.e. fruit, vegetable, truck crop,
and poultry farms. A minimum sample size of 80 farms was
aimed at. The sample size of 81 farms represents 1.08%
of the relevant population.

. The numbers of sample segments drawn from each
county were in the same prOportion as the numbers of Class
I-V farms in the county to the total of such farms for the
whole area. , The total number of sample segments needed in
the area to provide the minimum size of sample was estimated
on the 1954 census count of eligible farmers. In order to
allow for the decline in farm numbers which has occurred
since the 195k census and to provide replacements for

refusals, a secondary sample one third as large as the

-11..

-12...

original sample was also drawn. In the Thumb area, half
of the replacement or secondary sample segments were used
to maintain the minimum sample size.

In each segment drawn all farmers were interviewed

provided that their farms fell within Economic Classes I-V.

Collection of the Data

A field survey was undertaken in the months of
May and June, 1959, when the sample farms were visited and
data recorded through question and answer interviews with
the co-operating farmers. Practically all of the
quantitative data collected refers to 1958.

Classification of the Data

This was carried out in three stages from the
first of which three classes of farms were isolated on a

tillage acreage basis:

 

 

9133; Description Tillable Are; (Acres)
A Small 0 to 79
B Medium 80 to 1&9
0 large 150 to 320

Each class was then further sub—classified into
categories determined by the availability of dairy and hog
facilities in the form of buildings and equipment. Fame
having dairy facilities only were designated as 23.4.21 farms;
H_og farms were defined on a similar basis. Dairy-Hog farms
were those having facilities of both types, while Qt__k_l_e_r_

- 13 -

farms included operations with no capacity for either type
of livestock. The Dairy and Dairy-Hog groups were then
further reduced to grade A and grade B milk producers.

Since the circumstances attending the rigorous
interpretation of the above method would have led, in
certain cases, to somewhat unrealistic groupings, certain
refinements were applied. No dairy farm with capacity for
less than ten cows was included in the Dairy or Dairy-HOg
groups. Similarly, if hog facilities were such that fewer
than three sows could be carried, the particular farm was
excluded from.the HOg and Dairy—Hog sub-classes.

Possession of hog or dairy capacity has been interpreted as
controlling gpecific dairy or hog facilities. Farms having
loose-housing of a general-use type suitable for dairying,
but with no other dairy facilities, were not included in the
Dairy and Dairy-Hog sub-classes. The presence on a farm,
however, of a dairy stanchion barn was taken to be indicative
of the possession of other dairy facilities even though the
present operations did not include a dairy enterprise.

Such producers were classified under the relevant grade B
heading. Similar arguments apply to the hog enterprises;
for example the possibility of substituting,hogs for poultry
1n.the use of chicken coops was not accepted as being
evidence of hog facilities and classification was in
accordance with general rules of this sort.

51h...

Analysis of the sample into type groups resulted
in the development of strata of the type and numerical
constitution shown in Table III-I.

Table III-I Farm Type-Group Analysis.

 

(A) (B) (C)
Class: Small Medium Large

 

 

 

Sub-class
(1) Daipz Grade A '7 @D 13
Grade B 5 6 L
(2) ‘flpg o 1 2
(3) Dairy-hp; Grade A o o 1.
Grade B 2 I. l
(A) Other 7 @ 5

 

In this paper programming models will be developed
for the medium-size Dairy grade A, and the medium-size
other" groups (circled in Table III-I) and further
discussion relates to these two only; The approximate
location of each farm within these groups is indicated on
the map overleaf.

The Representative Farm

The next step involved the synthesis of a
”representative" farm from the characteristics of the farms

in the respective sub-groups. If an attribute was held in

c For the sake of terminological clarity Other fame are

referred to henceforth as Cropping farms.

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-15-

common by more than 50% of the farms concerned, then that
attribute was deemed to be "representative", e.g. growing
or not growing dry beans, full-time farming as Opposed to
part-time farming. Such characteristics are outlined in
Table III-2.

Table III-3 shows the make-up of each group more
specifically, and allows comparison of various quantitative
features between the two. A full list of the assets
attributed to each of the representative farms is to be
found in the Appendix, Table 12.

 

(See page 16' for Table III-2).

-16..

Table III-2 Qualitative Characteristics of the Representative Farms)

 

 

 

 

deiumrsize medium-size
Class: Dairy, Grade A Cropping.

Tenure: Owned X X
Operating: Full-time X X.
Cropping:

lst year corn for grain X X

Corn for silage X 0

Oats X 0

Wheat X X

Dry Beans O X

Hay, baled X X

Rotational pasture X 0
livestock:

Dairy cattle X 0

Other livestock 0 0

Dairy facilities X 0

Family labourd X 0

(X = representative, 0 a non—representative.)

 

dThis excludes the operator and his wife.

_ 17 _

 

 

 

 

 

Table III-3 Quantitative Characteristics of Farms in Each Typeegroup
thium—size Pbdium-Size
Dairy; Grade A. Cropping.
Tenure: % owning land 100 100
% renting in land 25 20
Operation: % full-time farms 75 60
% of farms Acreage % of farms Acreage
growing crop gper farm growing crop gper farm
Cropping
Corn 100 19 60 13
Oats 87 17 L0 6
Wheat 87 17 80 20
Dry beans 37 27 90 39
Sod 100 35 80 32
eTotal tillable acres 104 97
Other 29 13
livestock
Dairy cows, no. 17 0
Young dairy stock, no. 15 O
Stanchion housing
capacity (cows) 23 0
Tower silo capacity (ton) llh 0
labour Family members 1 0

--~_—--_——--—---——---——-—-—-.
- -‘.—----._-.—-r—-----—-c——-——-—------—--——————————-—-——-—
--——---———--———--——— -____-—--_'-
_-----———-—‘-—---———---——-—

Capital Position ($1000)f

El) Gross Farm Investment A2.0 35.2
2) Net Farm Investment 37.6 32.
(3) (2) as a % of (1) 89.5 9 .h

(L) Net total of operator's
capital available for

6.5
farming 37°9 3
(5) (h) as a % Of (1) ?:§-———-—--===:=========J=-:)J=-;Z=========

e Includes woodland, permanent pasture, land used for buildings, etc.

See page 20 for definition of terms.

 

-18-

Qggrigtion agd OomQrison of the Representative Farms

1. Tenure

On both types of farms the land is owned by the
operator, and no additional acres are rented. In the

senaple only two farms from each group rented extra acres.

2. Nature of Operation

In the Dairy group the representative farmer is
engaged full-time on his farming operation. Only one
fourth of those Operators whose farms were sampled have
part-time off-farm Jobs. Off farm employment is more
common, however, in the Cropping group in which #095 of the
operations are part-time. This relative difference between
the two groups is to be expected since crop production is a
much less tying occupation than caring for livestock,
particularly during the winter months.

3 . Crop Production

There is a more uniform crap production pattern
within the Dairy than the Cropping group. All Dairy farms
grow corn and a sod crop, while nearly all produce oats and
wheat. Of the Crapping farm, a large majority specialize
in dry bean production while sod crops (mainly hay, which
is sold off) and wheat are also widely grown. Corn is
produced on-60% of these fame.

According to the yields and levels of fertilizer
application reported, it would appear that either the

 

9-19-

Cropping farms are located on better soil than the Dairy
farms, or the level of technical skill exercised on the
latter is lower. This tentative conclusion is derived
from.figures which suggest that the rate of fertilizer
application on Cropping farms is relatively low in
relation to the yields obtained when compared to similar
estimates with respect to Dairy farms.

(See Appendix Table 12)

'

Mammals

The representative dairy farm carries no livestock
other than those associated with milk production. Forty
percent of the farms in the group, however, have a poultry
flock, the average size being lhO birds. There is no
livestock on the representative cropping fann, and here
only a small minority of farms in the group carry any
poultry.

5 e labour

Neither of the representative farms employs hired
labour, regular or seasonal. Only on the Dairy farm is
there family labour available other than the operator and
his wife. Family members working on the farm part-tine
only are regarded as being available and counted as whole
units in Table III-2.

6. Machinepz and Egpipment

Farmers in each group either own, or share in the

 

-20-

ownership of, the usual array of machinery to be found on
farms following the type of cropping pattern illustrated
here. Of the main items of equipment needed, all but a
corn-pidker are available on the Dairy farm, and similarly
on the representative cropping farm with the additional
exception of a field chapperu Each farm carries two
tractors. On Dairy farms the practice of hiring;machinery
services, both from.contractors and to other farmers, is
more common than in the CrOpping group. A list of some
specific items of available equipment appears in.Appendix
Table 12.

7. Hanging and other Livestock Facilitigp

The representative dairy farm has a stanchion barn
to hold 23 cows, and a tower silo of 114 tons capacity. It
has neither a bulk tank nor a pipeline milker. There are no

livestock facilities on the representative crepping farm.

8. Capital Position

The analysis in Table III-3 shows the gross and
net position of the farm as a business and also the amount
of operator's capital invested elsewhere which.ppplg be
‘withdrawn from.its current use and made available for
Purposes of expanding the farm.business. The terms used
are defined as follows:

(a) Cross farm investment a total value of all
~ farm assets.

(b) Net farm.investment a (a) less farm debts.

-21-

(c) Net total of operator's capital available‘

P for fanning . (b) plpp non-farm capital
which could be transferred to farming,
lppp_non-farm debts which have to be paid
out of farm income prior to the expansion
of the business. This net figure is
really the effective supply of operator's
capital,including transferable etharm
investments.

The equity position of the farmer, shown as a
percentage in Table III-3 is expressed in two ways.

9. Sources of Income

Sixty-three percent of farms in the Dairy group
receive 75% or more of their gross farm revenue from the
sale of milk and related products, such as the sale of dairy
heifers and calves. The remaining farms in the group earn
75%iof their gross farm revenue from a combination of milk
sales and cash crop sales, with the former being the more
important.

All the farms in the CrOpping group derive at '

least 75% of their gross farm revenue from the crop sales.

The Rppresentative Fggp Concppt

The method which has been followed in developing
the description of the representative farm has the advantage
over simple averaging of being more realistic in that it

-22-

avoids the need for including attributes which are held by
only one, or a small number, of farms. Thus, if two or
three farms were growing barley the average farm would have
a small barley acreage, whereas the representative farm
would have none: On the other hand, by considering
attributes in isolation , as has been done here, some loss
of descriptive accuracy occurs in cases, for example, where
fewer than 50% of farms have either a beef or a poultry
enterprise, but where more than 50%have one or the other
of these two supplementary enterprises. However, few such
difficulties are encountered in the present study, due
perhaps to the nature of the data.

The condensing of a type group of farms in an area
into one ”representative" farm leads to the development of
problems of aggregation. While it is practicable for the
individual farmer to continue to expand the acreage which
he farms so long as he is willing and able to pay the
market price demanded for land, the representative farmer,
being a composite of all farmers in his group, cannot
expand beyond the limits laid down by the relationship
between the number of units going out of business, the
amount of land being sold off by other farmers, land taken
up for industrial uses, etc. Similar problems apply to
the acquisition of resources such as seasonal labour, and
to estimating prices which the farmer receives, and the

costs of the resources which he purchases. It has not

 

-23..

been possible, within the framework of the technique now
being used, to consider these problems in this study.
Prices and costs remain at fixed levels regardless of
output or scale, and with the exception of land (see page
40) it has been assumed that resources are available in

sufficient quantities to satisfy requirements.

 

 

THE MODEL

Introduction to the Representative Farm Mbdel

The remainder of the paper will be devoted to a
consideration of the programming model and to discussion
and interpretation of the results obtained. The basis for
each model'will be the resources now available to the
particular representative farm, and the production
alternatives considered to be feasible on technological
grounds. Since the economic rationale behind any program
should be evolved endogenously by the model itself, in
theory any number of alternatives could be considered.

The ones chosen, however, have been selected with an eye to
such factors as maintenance of soil fertility, accessibility
of markets, and soil and climate considerations.

Under the assumed conditions, the only factor
which limits the eXpansion of a farm business is the farmer's
ability to secure credit and to meet the interest payments on
the sum borrowed. The model developed allows increasing
applications in physical terms of all resources, except for
some categories of labour and land. Obviously, there is a
biological limit to the amount of family labour available,
and an argument will be forwarded later for restricting the
amount of land which can be purchased.

The 117 constituent activities and 6h resource

restrictions upon which the model is based are listed in

721.-

 

- 25 -

Appendix:Tables 3 and h respectively.

.Model for the Farm
Representative ogithe Dairy Gropp

This model, since it includes essentially the
same features as that for the Crepping group will be
discussed in detail, and comment on the form of the second
model will be restricted to features not held in common by
both models and arising from the rearrangement of
activities, or the use of different coefficients within the
same column vectors. For purposes of exposition the
various activities and the related resource restrictions
will be dealt with in terms of the "sets" into which they
naturally tend to fall.

Crepping Set

This set is composed of the various crop sequences
and crop buying, selling and transfer activities which
constitute the series of processes or activities P1 . . .P52,
and the resource restrictions (bi) which must be considered
in carrying out these activities. Table IV-l illustrates
the general form of the set.

(1) QgppSequences

' Since the general model is considered in terms of
alternative systems of enterprises rather than of the
individual enterprises themselves, the possible cropping
Patterns have been expressed in four series of related

 

- 25(a) -

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mo coamno>coo esp CH .hmm .mchHSmmh moapommnmnp snag :wcflmooxxoon= m pambohm ow hopho CH Amv

 

HSES

 

+ + I +

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I I + noNflprnoa

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+ I p.833

I I memo

+ + I Chou

+ snag
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nouflaflpnem Adv mono mono cofinnobcou mono mnammoho

 

amalgam S... pom mfimmono

.H I >H manna

 

 

productive activities. This method suffers from the
disadvantage that it is less flexible than where a number
of different crepe could be combined together in the
solution, in one of a large number of possible permutations.
This latter system, however, fails to take account of
complementary effects between different cropping enterprises,
and also must make use of a device to allow for the
inclusion of rotational practices as a means of maintaining
soil fertility. Some flexibility has been introduced into
the method used in this paper, in that substitution is
possible between similar kinds of crops, e.g. small grain
crops, within a particular rotation. Thus, if barley
growing proves to be more profitable than oat production
under a certain set of circumstances, this condition.will
be made manifest by the introduction of P12 into the
solution. Since the acreage of wheat grown is limited by
government production control programmes, the model includes
a wheat restriction equation limiting the acreage of wheat
to 17 acres in the case of the Dairy farm, and 20 acres for
the Cropping farm. These were the acreages grown in the
respective groups in 1958. Allowance has also been made
for proportionate expansion or contraction of this
restriction according to whether extra land is bought or
sold. Where a substitution activity comes into action
involving acreage transfer from, say, oats to wheat, the

relevant coefficient in the wheat restriction equation is

-27..

positive and acts as a direct restraint on the acreage of
wheat which can be grown. The equivalent coefficients in
the crop sequence activities, however, are such that the
restriction limits the acreage of any particular sequence
to a certain maximum amount. In the case of the Dairy
farm, for example, in a six course sequence the acreage
limit would be: 6 x 17 acres, if wheat constituted one of
the six courses.

Substitution among the sod crops is handled in
similar fashion.

The differing resource requirements of the
substitutable crops are reflected in the value of the
technical coefficients appearing within the respective
column vectors.

In constructing this part of the model the initial
step was to ascertain the representative type of soil for
the group. It was not possible to define in detail the
soil types on each individual farm since information of this
sort was not obtainable at the micro level in all cases, but

6

from the several sources consulted an indication of the

—_‘

6. Elton B. Hill and Russell I. Mawby, T as of Farmin in
Michi an, Special Bulletin 20, Michigan State CEIIege
IgricuItural Experiment Station, September 1954.
Michigan Agricultural Experiment Station, St. Clair

.qunty and Tuscola County 8011 ma 3, 1926 an
respectively.

Department of Soil Science, _Sanilac County Aerial
Photomphs, Michigan State University.

_ 28 -

general soil type was obtained. Predominantly, the soils
belonged in the Sims, Parkhill, Brooketon series of loans,
but other soil types including Montcalm, Onaway and

Angelica were also represented. The four crop sequences
indicated were considered to be suited to the representative
soil type, and they cover a range of possible cropping
alternatives from no. (1) which has two courses of
recognised cash crops and no sod, to no. (A) which is
constituted 100% of feed-type crops and has 40% in sod.

Some portion of the forages, of course, may be sold off

the farm. The crop sequences are:

(1) (2) (3) (4)

Corn AA AA AA

Oats Corn Corn AA

Beans Oats Oats Corn

Wheat AA Corn
Beans Oats
Wheat

('2) gar-timer Rates and Crop Yields

There are two levels of fertilizer application
and crOp yields associated with each crOpping sequence.
The first of these is based on the input of fertilizer
actually used on farms in 1958, and the crop yields secured
in the same year. To obtain the fertilizer rates used in
the study an average was taken, over all farms growing the
crop, of the amounts applied. This was then expressed in
terms of N, P, and K and an aggregate was arrived at for

each cropping sequence. In the Dairy group an allowance

- 29 -

was made for soil nutrients obtained through farmyard
manure being returned to the soil, it being assumed that
about 200 tons was available annually for this purpose.

A second activity was then established for each
cropping sequence by specifying another rate of fertilizer
usage and related crop yield level. Here the fertilizer
coefficients reflect the rate of application which is
recommended7 for the particular soil type (assuming that
the latter is high in P’and K), and the yields are those
expected to be associated with this rate. This doubling
up on fertilizer activities causes a complication to arise
with respect to the substitution activities referred to
earlier. Because, since there is uncertainty as to which
of the two sets of rotations will be represented in the
solution, there is similar'doubt as to the change in
fertilizer usage and crop output to express in the
coefficients. The values used correspond to those

applicable under the recommended conditions.

(3) Transfer Activities

These include the expression of forage output in
terms of roughage equivalents, (. 1000 lb. AA hay) and
grain output in the form of grain equivalents, (. 1000 lb.
corn), and add a further note of flexibility to the model.

__

7- Department of Soil Science and Hbrticulture, Fertilizer
r______

R commendationsfor Michi Cro , Extension Bulletin
ESlS§, Co-operative Extens¥on Service Michigan State

University, June 1959.

 

- 3o -

Since the grains have varying feed values depending upon
the type of livestock being considered the grain equivalent
coefficients reflect their separate values for four broad
groups of livestock, i.e. dairy, beef, hogs, and poultry.
The livestock activities under consideration will draw on
these general roughage and grain resource restrictions
rather than directly on the individual feeds.

In order to guard against the introduction of
inadvisable practices into the solution, such as feeding
to hogs unlimited quantities of oats, certain restrictions
are introduced later to take care of nutritional limitations
which an unmodified system would ignore. Thus, for any
animal type the ration chosen will be one which reconciles
the two aims of profit maximization and nutritional

expediency.
Baity Set

The milk production activities represent
alternative lines of production, distinguished on the basis
of type of housing facilities (i.e. stanchion or loose
housing) and management practices (i.e. summer pasturing
or dry lot). Replacement heifers are home-bred.

A milk selling‘actiVity is introduced to facilitate

the introduction of variation in the price received for milk.

8

It has been estimated that cattle and calves

8. L.M; Turk, and A.G. weidemann, "Farm Manur ”, Michigan

State College Co-Operative Extension Service, Section
of Soil Science, Extension Bulletin 300, June l9h9, p.7.

 

-31..

excrete 13.5 tons of fresh manure annually per 1000 lb.
live weight. It follows, then, that the use of purchased
artificial fertilizers will be lower on livestock farms
than on purely cropping farms where comparable crop yields
are being obtained. Consequently, all livestock producing
activities in this model have been credited, through the
appropriate coefficient, with an estimated value of the
manure which they produce.8 This estimate is based on the
quantity of fresh manure excreted with deductions made to
allow for losses in handling, and for the leaching and
run-off losses which are assumed to be incurred before the
plant can make use of the nutrients supplied. The latter
have been reduced to the form of lb. of N, P and K.

The relevant dairying activities and restrictions
are outlined in Table IV-2.
Ligggtock Feed Restriction Set

A ceiling has been set on the amount of oats
which can be fed to beef stock and to hogs, and, since the
inclusion of a small amount of oats in the poultry ration
is deemed to be valuable,9 a fixed quantity of this grain
(10%) constitutes part of the poultry feed.

, The beef and hog feed restrictions ensure that,

respectively, not more than one third and one fifth of the

grain ration will be taken up by oats. These proportions

 

g. Appendix:Table lb.

9. Frank B. Morrison, Feeds and Feeding, Twenty-First
Edition, 19h9, (Morrison Publishing Co., New'York),

P. #95.

- 31(61)-

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mI>H manna op oponpoow exp ca ooanHQXo ma cospofiapmoa mane nmv

 

 

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Hesaaso
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I I I I I I aoNHHHpnom
+ + + + + + Adonmq
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s manmsom panama measooanmasn meoanocssm

 

coasosuoaa sass
Numssdn 2H new.huflma N I >H oflnme

- 32 -

‘were arrived at on the basis of estimates supplied by
Mbrrisonlo.
Table IV-B illustrates the nature of the hog

feed restriction.

Table IV-B Hog Feed Restriction Set

 

Oats to Barley to Wheat to Corn to
hog grain hog grain hog grain hog grain

 

Hog grain equiv. -10 ~10 -1O -10
Hog grain equiv.
restriction +10 - 2.5 - 2.5 - 2.5

 

Grain for feeding to livestock can be drawn upon
only indirectly through the various grain equivalent
restrictions, e.g. Dairy Grain Equivalent, Beef Grain
Equivalent, etc. Conversion to grain equivalents is
provided for through the various crop conversion activities,
Operating on a feed value basis (see Table IV-l, and
activities 16-28, Appendix Table 3).

By virtue of the "Hog grain equivalent restriction"
illustrated above, a quantity of oats can be converted to
hog grain only if four times that quantity of barley, or

wheat, or corn, or a composite of these is also being used

for hog feeding, i.e. oats can.take up not more than one

fifth of a hog ration.
The other livestock feed restrictions perform

similar functions.

 

loe Ibide, Chapters xx, m0

 

- 33 -
Beef Set

Alternative beef activities include rearing
homebred feeders to #00 lb. and 850 lb. and selling at
either weight; feeding homebred or purchased steers to
finishing from these starting weights, with, in the case
of the lighter feeders, two different time periods for
finishing. Beef housing is considered to be restrictive
in this model and a beef housing equation has been
incorporated.

Table IV-h illustrates the general form of the

beef set.

Egg and Poultry Set

Provision has been made for considering hog
rearing and hog fattening separately. One or two litters
per sow per annum may be produced and the progeny either
fattened, or sold at weaning. Alternatively, feeder pigs
may be purchased and finished in either of two time periods.
The periods coincide with those which would be utilized by
the homebred spring and fall-born litters, were these to be
finished on the farm. A11 Operations are assumed to take
place on dry lot.

Two egg producing activities are considered, one

assumes that replacements will be purchased, and the other

that they will be home reared. Replacement is on an

annual basis.

The general form of the set is outlined in Table

IV-S.

- 33(3) -

 

 

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- 33(b) -

 

 

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Hagan gleaming om. in: «on

3H3 -

- 34 -

Livostodk and Feed Facilities Set

This set provides for the acquisition of livestock
housing and associated equipment, and of forage storage
facilities in the form of tower silo space. Dairy heifer
housing has not been considered as a restriction and no
acquisition activity for this facility has been included.
There are activities, however, for the purchase of dairy
stanchion or loose housing accommodation, hog farrowing and

fattening quarters, and poultry housing. Since there are

few farms which could not keep at least a few head of poultry {
without having to buy a poultry house or building materials

the representative farm is credited with accommodation for

150 birds. It is also assumed that up to 20 fattening

cattle could be finished without the need arising to acquire

more accommodation than is at present available.
Messiaen anLEQuigment Set

This consists of two main groups of activities,
selling and buying with reference to the use and supply of
machinery services.

The resource restriction is expressed in terms of
machine acres per annum. A rigorous approach to the problem
of machinery capacity would entail collection of data on the
lengths of plowing, planting and harvesting periods to which
farmers in a particular area were limited, through the
Physical conditions of the soil, climate and elevation
associated with their operation. It would also involve the

- 35 -

study of the week to week climatic conditions in the area
over certain critical periods. Account would then have
to be taken of rates of work, operating width and speeds
of the relevant range of implements and machinery; and
finally, an estimate would have to be developed of the
labour hours which are available for work on the land

itself. While it might be possible to obtain data on

Maw?!” JV- -5 u a
U0 . ‘I. .e I

theoretical machinery performance and on labour hours
available it was felt that the data on meteorology was not
sufficiently detailed to justify precise methodology of
this type. What was considered to be a more realistic
approach was followed in that various estimates, gathered
from reports on actual usage of machines, and of annual
capacities in terms of acres were used to synthesize
performance figures roughly approximating Michigan

11

conditions. These estimates form the basis of the b

i
values.

The farm machinery inventories have been split
into two sets, one of which consists of "specific"’machines
such as cornpickers, grain drills, etc., and the other of
more general use items such as ploughs and barrows. The
services from the former group are expressed as resource
restrictions, but no acquisition activities have been
provided for machines already on the farm, since it is

assumed that their present capacities are sufficient to

 

11. Appendix Table 15.

-36-

deal with any acreage of particular crops falling within
one of the crop sequences specified, up to a total farm
size of at least 180 acres. The figures shown in Appendix
Table 15 support this assumption. There are, however,
acquisition activities for cornpickers in the case of the
representative dairy farm, and for cornpickers and field
chappers in the case of the Crapping farm.

All machinery falling within the "specific" class
can be salvaged, but it has been assumed that more general
equipment now owned will be retained so long as the farming
operation is continued. As will be shown later, the
conditions of this study do not permit the sale of land
beyond 80 acres per farm, so unless the remaining land
stands idle this assumption would seem to be a realistic one.

Some thought was given to the possibility of
including activities relating to the hire of machinery from
contractors, but it was decided to exclude these. From a
study of the resources listed in Appendix Table 12, it is
evident that the representative farmer has available all
the equipment which he needs, which suggests reliance on
contract work is light. From.a pure economic viewpoint
it may well pay the farmer, under certain circumstances,
to hire rather than buy, whatever machinery he needs.

This fails to take into account, however, certain aspects
of contract work which weigh against this practice, one of

them being the timeliness with which.work should be carried

 

 

-37-

out. It is often the case that when one farmer in an area
requires the services of a contractor, other farmers also
make similar demands in the same time period. This can
lead to delays in carrying out Operations and consequently
to less efficient farming and the build up of frustration
on the part of the farmer.

Where there is any doubt about the quality of
contract work similar trends develop. The farmer would
rather do a gpod job of work using his own equipment than
risk hiring a contractor to do a poor job.

There is another reason also which relates to the
concept of the representative farm. This is that a possible
theoretical solution might involve sale of all farm
equipment and purchase of contractors' services for all
operations. For obvious reasons this would be an
unrealistic state of affairs for groups of farmers to
enter into, although it would be practicable for the
individual .

For these reasons therefore it was decided to
omit contract work from.the model.

_ Table Ivae indicates the general form of the set.
Labour Set.

The labour section of the questionnaire was
formulated in terms of the hours which the Operator and
family were willing to work on the farm. Since the

responses, particularly in the case of part-time Operators,

- 37(3) “

.mIaH eases on shampoos one an secaeaaxe as cosponnsmen mama

Amy

 

III/III,

Amv coapowapmem Hmpwmmo

Hmpflmmu
+

 

 

asexuanm

ammazsn CH pow pcosawooa use

 

©I>H @HflwB

-33-

appeared to refer to hours actually worked rather than hours
of labour available, the following technique was employed.

An average was taken of the hours per week, by periods,
h

which full-time farmers spent working,at their farm business.
This figure was then applied to part-time operators and-to

those family members engaging, to some degree, in work off

the farm, if their labour potential appeared to be equal to

that of the operator. Labour on offer from other family

members such as wives, parents and children was then studied

and divided into two groups. That falling within the first

group was added to the previously computed labour hours

giving the total farm labour supply available for either

farm or ex-farm employment. This group contains a measure

of that part of the work potential of such family sources
as children attending high school, students of college age,
the farmer's wife herself, etc., judged to be available for

etharm employment.~ The second group takes account of

 

h This figure refers to the Operator’s manual and to his
managerial time flow which together are arbitrarily
estimated to be equal to that of a full-time manual
worker. To safeguard against an operator's selling his
managerial time element off the farm a top limit of 90%
per farm has been placed on the Operator’s saleable
labour. The 10% is included within the category of
labour which accounts for the difference between the
labour supply and restriction equations. Implicit in
this situation is the assumption that the farmer, though
willing to hire all necessary labour, is unwilling to rid

his

himself completely of his farm-home interests.
assumption may not be valid, but it is felt that in many

cases ties other than economic ones may be a strong
motivating force behind such an attitude.

- 39 _

labour from these same sources which probably can be
applied only to direct operations in connection with the
farm itself. It was felt, for instance, that while a
farmer's'wife with a young family might be willing and able
to look after a few head of poultry or to tend to chores
around the barnyard, she would be reluctant to take on
off-farm duties, unless extreme circumstances prevailed.
The same sort of reasoning was applied to labour supplied
by young people attending college or high school. Being

 

held responsible for odd chores in the morning or evening,

 

prior to and after attending class respectively, is somewhat
different from taking on regular part-time employment for
the same number of hours daily. In the case of youngsters
attending college, however, the time which they spent on
agricultural labour during the summer vacation was added to
the figure measuring total farm labour available for off-
farm work. The labour salvage restrictions, therefore,
have the value of the labour restrictions over the
comparable periods, reduced by the number of labour hours
available for farm work only.

No quality differential was made among the classes
of labour discussed above, nor between these and hired
labour. The latter can be hired yearly or over certain
thee periods, regular labour between April and October and
Noyember to March, and seasonal labour over separate two-

monthly periods between April and October, with the

- no -

exception of August which has a specific restriction.
Since the representative farm has no hired labour this
cannot be salvaged, but family labour may be sold off up
to a maximum allowed by the series of labour restrictions
already discussed.

In arriving at the labour supply restriction a
total of 15% of the actual man-hours spent on farm work
was deducted to cover maintenance work not directly
associated with any particular activity. Deductions were
weighted on a monthly basis.12

The general form of the set is illustrated in

Land, Credit and Capital Set

L§§g_is a unique resource in that there is a
specific limit on the amount which is available to
agriculture, and particularly to agriculture considered
regionally. Not only is there not a virtually unlimited
supply of land available for cultivation, but the nonmal
flow of resource ownership traffic in farming is reversed,
the farmer'having to go to the land rather than vice versa.
These attributes attaching to agricultural land form the
basic rationale behind the treatment of the factor'in this

study. For present purposes it is hypothesized that the

‘—

12“ Frick, LE. and Burkett, W.K., Farm Mane went Reference
Manual, Cooperative Extension SeFVice, University of
New Hampshire, September 1953. p. 50.

 

— AO(a) -

 

 

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hmmcsifin 5 men .383

- hl -

representative farmer cannot buy all the land which he
desires, even though he is willing to pay a price above
that currently ruling in the real estate market. The
reasons for this assumption are covered in part by the
discussion above, but also depend upon the singular and
personal relationship which links man to the land, and in
particular to the land in the community in which he enjoys
membership. Influences other than economic ones, e.g.
social, sentimental, bind farmers to soils which, from a
pure economic angle, would be better utilized in some
modified fashion.

There is, however, a fluid element to land
resource use in agriculture including the continual transfer
of ownership rights as some farmers go out of business and
others enter the field or expand the land area over which
they already Operate. Hence, a compromise procedure has
been followed in this paper whereby provision has been made
for the representative farmer to increase or reduce the

size of his farm by the purchase or sale of land respectively,

uP to a limit of 80 acres in either direction. Thus, he

can neither expand his operation ad infinitum, nor can he

sell out completely.
It is realised that farm land is often bought and

sold in the form of complete business units, but to allow

the representative farmer to go out of business is to be at

Odds with the general approach used up to this point. One

dif:

ha

and

the

rec

0M

00!

- #2 -

difficulty which does arise, however, is that, since land
transference is assumed to take place by parcels rather
than by complete farms, it cannot be further assumed that
buildings for livestock or crop storage are also transferred,
and therefore land purchase does not automatically add to
the capacity of buildings in current use on the farm
receiving the addition.

Two land acquisition activities are considered,

one on a mortgage basis, the other by land contract. The

 

conditions attaching to the former specify a downpayment
0f 55%,13 and annual interest at 5%. For land contract
purchases the equivalent rates are 10% and 6% respectively.
In both cases the loan is repayable over a 20 year period.

Credit is considered to be available from two

sources, one based on mortgage security, the other on

chattels. Land mortgage credit is available at 5.5%

interest up to a limit of h5% of the value of the land.

The interest on chattel credit is higher (6.5%) and the

limit to which credit can be obtained, 50%, is also slightly

above that for mortgage credit. The latter is repayable

over a 20 year period and chattel credit over three years.

Capital currently being used in farming can be

"sold” and one activity provides for this.

The general form of this set is outlined in

Table IV-B.

 

e cost of credit acquisition

1 . in th
3 Conditions govern 8 Hildebrand. Op. Cit., pp, 9-10.

'are those specified by

- Li! (a) -

 

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- g3 -

Sgge Technical Aspectgggiscussed.

l. The Capital Coefficient;

Capital can be treated in several ways.lh The
method used here is to regard the capital coefficient for
an activity as expressing the combined need of that activity
for investment capital and operating cash expenses. It
represents the initial charge incurred by the activity for
investment in durable assets and also the annual cash outlay
required to meet the direct costs involved in carrying out
that activity.

Certain activities add to the supply of capital,
but for most the relevant coefficient has a positive sign.
The former class includes salvage activities such as the
sale of equipment or the sale of land which add to the
capital supply at the beginning of a period of production.
Other activities such as milk selling realize a return
within a relatively short time after the start of the
production period and the profit from such operations
becomes available to meet future cash expenses. Such
activities have been treated in compromise fashion here by
allocating one half of the net revenue/unit earned to the

capital supply, e.g. milk selling, labour salvage. The

“Clority of the activities, however, draw upon the capital

 

here see:
1 . alternative method to that used
A ggnég. McKee, Earl O. Heady, and G.H. Scholl, Optimum

nt and
of Resources Between Pasture Improveme
Alhgg'atiogrtunities on Southern Iowa Farmsi Reszgzih
fifilletin L35, Agricultural Experiment Stat on,
State College, January, 1956.

 

-l+l+-

supply without adding to it during the current production
period. In general the rule which has been followed is
that if an activity adds to the capital initially available
for operation, the capital stock is credited with this
amount. If the activity generates a flow type of income
throughout the season, one half of the amount is credited
through the capital equation. Activities which draw on
capital without adding to the supply until the end of the
production period are consumers of capital only. Expenses
such as depreciation and land tax which do not have to be
met until the end of the year appear in the net revenue
equation, but not in the capital equation because they are
paid for out of net earnings and do not detract from the
capital supply over the production period.

The capital coefficients in the land purchase and
sale activities were derived from the farmers' own estimates
of the current real estate value of their land and buildings.1
This figure was adjusted to 195h-58 values and then a 25%
deduction was made to meet the assumption that land would be
purchased or sold without buildings. For each group the
purchase price estimate is an average of the modified sale
value of the land for all other farms in the sample. The
selling price of land is the average modified market value

for the land in the group upon which the representative
farm is based.

 

1 See Appendix Table 16.

- pg -

2. The C: that RevenueJCoefficients

Each unit of an activity is priced, positive or
negative as the case may be, according to the market value
of that unit, with a deduction for direct cash expenses.
The resulting net figure constitutes the activity's Cj
value. Where there is no revenue the CJ value is equal to
the sum of direct cash expenses. Overhead costs such as
taxes, insurance and depreciation are also entered in the
net revenue equation.

To allow for costs of haulage, commissions, etc.,
incurred in marketing products, a differential of
approximately 10% has been placed on the prices at which a
farmer can buy and sell a product, e.g. the selling price
of oats is S 2.00 per cwt. and its purchase price £ 2.20
per cwt.

Labour services are also differentially priced.
The basic value used was the average wage paid to workers
in manufacturing in Saginaw City and Flint during the
195h-58 period.J The equivalent agricultural rate was
estimated at 75% of the urban level. Johnsonls has
estimated that: "if per capita farm incomes are 68% of
per capita non farm incomes, labour of equivalent earning

ability would be receiving the same real returns in the two

 

J. See Appendix Table 17.
15.8ee next page.

(A

I.

-45-

sectors of the economy". He developed this figure on the
basis of such factors as relative age composition of the two
populations, purchasing power of incomes, etc. His study
is based on the situation as of 1950. Other arguments
could be cited to support raising or lowering the rate
chosen by taking account of such factors as the spiritual
and physical advantages associated with country life; or
alternatively the social and cultural opportunities afforded
to urban dwellers and denied, at least in part, to ruralites.
These factors, however, while they may be relevant, are
difficult to quantify and their effects have been omitted
from the calculation.

Seasonal labour is charged at a higher rate than
regular labour, the difference being S 0.10 per hour. It
is felt that the inconvenience suffered by seasonal workers
in job transference, and the lack of security involved in
seasonal work ought to be compensated for. The respective
rates assume that there is no quality variance between
seasonal and regular labour.

Finally, labour sold off the farm is credited with
a wage rate of S 1.65 per hour. This provides smme

allowance for the cost incurred by farm family members in
travelling to and from their place of employment.

 

15. (See page #5) D. Gale Johnson, "Labor Mbbility and
Aggicultural-Adjustment", Agricultural Adjustment
Problems in a Growing Economy, North Central Farm
Management Research Committee, The Iowa State College
Press, Ames, Iowa, 1958, p. 16h.

 

THE OPTIMUM SOLUTIONS

,Much of the discussion.which follows could be
based with equal relevance on either representative farm
model. Consequently, where there is common ground,
duplication is avoided by illustrating the argument in
terms of one farm type only.

Since the results data has been received in
greater detail for the Cropping Farm than for the Dairy

Farm, discussion is more heavily weighted towards the former.

THE CROPPING FARM

§EEEE£Z

The optimum plan indicates that, under the
specified conditions, and irrespective of the level of
milk price within the range programmed, the representative

farmer should:-

(a) “Increase the scale of his business by buying
35 acres more land.

(b) Follow a simple 3-crop rotation, allotting the
land to corn, hay and wheat in the ratio
2: 2: l.

(c) Invest in hog housing, using hogs as corn

. convertors.
(d) Hire seasonal labour during the summer and

engage in off-farm work over the same period.

- 47 -

 

-43-

(e) Buy a corn picker.
(f) make full use of the available mortgage
credit facilities.

The activities constituting the basis are
identical for each of the five levels of milk prices, in
terms both of the actual activities and the level at which

each operates. Appendix‘Table 1 shows the relevant detail.
Organization of Production

A. Cropping: Apart from a negligible two acres all
the land is cropped according to Sequence (h), except that
wheat is substituted for oats. Fertilizers are applied at
the recommended levels.

Table Val gives a comparison between the 1958
crOpping pattern on the representative farm and that
indicated in the optimum solution.

Table Val. The 1958 and Optimum Cropping Pattegpp.

 

 

CrOp 1958 Pattern Optimum Pattern

Corn 10 acres 525 acres

Oats 1 acre -

Wheat 20 acres 27 acres

Beans 37 acres 5 acre

Hay 29 acres 52 acres
Total 97 acres 132 acres

The main difference, apart from the increase in
farm size, is that there is virtually no place for dry'beans
in the optimum plan. Otherwise the remaining major crops,

-49...

corn, wheat and hay, should continue to be grown. Corn

becomes more important relative to hay, the acreage of
which expands more, proportionally, than the area under
wheat.

Since the crOpping activities are defined in
terms of crop sequences rather than as single crops it is
difficult to explain why Sequence (h) ahould be preferred
to Sequence (1). The latter has a higher pr0portion of
conventional cash crops than the other. It may be that
corn and wheat are the two most profitable crops and that
Sequence (h) provides for a greater acreage of these two
together than any other sequence. Apparently it is more
profitable to utilize labour and corn in hog production
than to cash in on these resources directly by marketing
the corn as grain and hiring more labour off the farm.

On average, over all the farm acres, the cost of
chemical fertilizer is 3 h.25 per acre. Chemical

fertilizers are considerably supplemented by the manurial

output from the hog unit.

2239 - 52 acres are grown. All the corn produced on the
farm.is fed to hogs. Its value in this use (the MVP) is
i 27.1 per 1000 lb., compared to a value of S 21.6 (corn

salvage D3) which could be earned per 1000 lb. sold.

lheat - The crop takes up 27 acres. All of it is marketed
as grain and earns 8 32.3 per 1000 lb. Expansion of
production is limited by the wheat acreage restriction.

.‘b— '.' ... .‘r... .

- 5o -

This was set at 20 acres prior to the acquisition of more
land, which allowed the restriction level to be raised.

If wheat quotas could enter into trade it would be worth
the farmer's while to pay up to S 11. to allow him to grow

an extra acre of wheat.

D51 Beans - The Optimum plan provided for Q acre of dry
beans. The crOp is cashed and is valued at its market

price of S 73.6 per 1000 lb.

HEX - The whole hay crop, from 52 acres, is sold off the

farm, the value of the crOp being its market price of

S 21.7 per ton.

B. _Livestock Activities: Hog production is the sole
livestock activity. Feeders are raised from 22.3 sows on
the 2-litter system and finished on the farm. They are
marketed in February and in August. The annual output is
359 fat hogs. In order to house the hogs both farrowing
and fattening accommodation is required.

The MVP attaching to spring feeders is 3 11.3 per
hog, while that of fall feeders is S 9.6. In each case
the figure represents the potential value attaching to the
fattening of feeders rather than leaving them in disposal.
The disparity in values is related to the value in use of
hog fattening labour which is greater in spring than in the
fall, i.e. labour freed in the spring has greater earning

capacity in its next most profitable use than it has during
the‘winter.

-51-

Resource Orgggization

Lgbggg - The Optimum plan provides for both the hire of
seasonal labour, and for'family labour to engage in
off-farm'work. This may seem an anomaly, but it derives
from the definition of the labour hire and salvage
activities. Family labour can be salvaged only in "batches"
of hours spread uniformly (by months) over two periods,
April to October, and November to March. Seasonal labour,
on the other hand, can be acquired over shorter periods,
i.e. in April and may, or June and July, or August, or
September and October, or in all of these periods. In
order, therefore, to allow the employment of family labour
off the farm during the summer, seasonal labour must be
employed to free family workers in the busy months of that
period, which are April to July. From April to October,
off farm employment competes successfully with farming
outlets for 1,117 hours of farm labour, although this means
that 662 hours of seasonal labour must be acquired.

The taking up of non-farm employment opportunities
suggests that the scale of farming, as gpverned by capital
availability, is too small to allow profitable employment
of all family labour on the holding.

Summer labour in the period April to August is
Valued at S 2.hO per hour. This is the sum of the wage to
seasonal labour and interest on this at 30% (see capital

section), i.e. 3 1.85 + (1.85 x Egg) a 3 2ch0

pen

an

£0:
30'
N01

t
ml

pl.
No

m

31

he

_ 52 -

September’and October labour is worth $0.63
per hour.

Labour used in the period January to March has
an MVP of $3.16 per hour. This is a measure of the return
which would be earned from work off the farm, which accounts
for 84 hours. There is a surplus of farm labour during
November and December, and a scarcity from January to March.
None of the surplus, however, can be salvaged because of
the "batch" type arrangement for the hire of family labour.
This permits November-December and January-march labour to
he hired off in the ratio of two hours of the former to
three of the latter. Thus labour salvage in November-
December is precluded, unless one and one half times that
amount of labour is available for sale during January to
March. This explains why 8L hours from the latter period
are hired off and only 56 hours of November and December
labour.

Conversely each hour of January-March labour
Placed in disposal takes with it two-thirds of an hour of
November-December labour, and it is this complementary
effect which accounts for January—marsh labour having an
MVP of 83.16. Labour salvage in this period has a C3 of
31.65 and each hour put into disposal results in a loss of

net revenue as follows:

- 53 -

$1.65 + (1.65 1 §) . $2.75

Plus Interest at 30% on half of this

i.e. $2.75 + (2:22 X 'I%%)

a $3016

Since less than half of the saleable labour hours
are committed to off-farm work the labour salvage
restrictions are slack, and so have zero value.

An analysis of labour use, by periods, as indicated
in the Optimum plan, is given in Table V-2 overleaf.

- 53(a) -

3511

 

 

 

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3.9328 H393
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Ta!

Gr
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551,-

Machinery and gguipment - Table V-3 indicates that the

attainment of profit maximization involves considerable

sales of machinery.

 

Table V-3. Machinery and Ehuipment Utilization.
Initigy

Available £92m; $2.191 11.3.9.9 MERLE)
Tractors 1235 hrs. - L17 hr. 818 hr. 0.63 per hr.
Corn Planter 100 14.11. - 1&7 M.A. 53 FLA. 0.77 per M.A.
Grain Drill 125.M.A. - 98 MgA. 27 M.A. 1.06 per M5A.
Cultivator 200 M.A. - 1h? M.A. 53 M.A. 0.23 per FLA.
Combine 170 M.A. - 11.2 MA. 28 M.A. 2.31. per M.A.
Mower 200 M.A. - 11.8 M.A. 52 M.A. 0.1.5 per FLA.
Baler 150 M.A. - 98 MA. 52 EM. 3.02 per M.A.
Field Chopper - M.A. - - - 8.00 per M.A.
Corn Picker - M.A. 52 M.A. - .52 MIL 5.86 per M.A.

Side Delivery Bake 100 14.11. - L8 MA. 52 M.A. 1.10 per M.A.

M.A. - Machine Acre

In practice, excluding machinery hire, machinery

can be bought and sold only in complete units, e.g. one

tractor. It is not practicable, therefore, to sell 417

tractor hours, nor to buy 52 corn picker machine acres.

The optimum solution does not indicate that any
item of equipment be sold outright, so the representative

farmer should retain his present range of equipment, and

to it add one corn picker.

- 55 -

Since the theoretical notion of buying or selling
equipment in the form of machine acres is not acceptable in
practice, the level of net revenue, as stated in the
optimum plan is unrealistic. Comparing the net revenue
earned from machinery salvage (i.e. no. of units sold x MVP)
with the extra cost of buying a complete corn picker (i.e. ’
90 machine acres, rather than 52) it appears that net
revenue is over-estimated by $968. on this account.

Assuming that.the representative farmer would
rather own the necessary range of machinery than be reliant
on contractors, underutilization is the result. Crop
acreages could be considerably expanded without putting
undue strain on the machinery and power capacity of the
farm. The answer to this problem of over-capitalization
might take the shape of formation of farmer syndicates,
each of which would own the required items of equipment.

An increase in the practice of sharing particular items
with neighbours would also help to cut the overhead costs,
per farm, of ownership..

In common with contract arrangements, however,
both of the above suggestions have their disadvantages.

Without some recognised agreement concerning maintenance
and responsibility for repairs, or where Egg; co-operation
is lacking, such systems can be short-lived.

ngd,- Both purchase and sale of land enter into the
optimum solution. The explanation for'this is that land

-56-

is sold in order to raise capital, with which a greater
area of land can be acquired on the contract system.

Each acre of land sold realises $2h0, while contract
purchase requires only $19. per acre of capital plus annual
repayment instalments, insurance, etc., of $15.61. It is
doubtful whether, in practice, such an arrangement would
ever operate - it is permitted here within the context of
the model, and reflects the representative farmer's
scarcity of capital, and his need for more land.

The net acquisition is 35 acres, the land
purchase and sale restriction preventing further
transactions of this sort. The level of this restraint
is 80 acres, which is the sum of 57% acres purchased and
22% acres sold. The Optimum size of the representative
farm is thus 132 acres.

The MVP indicates that if the purchase and/Or
sale restriction was raised to 81 acres, net revenue would
be increased by $26.30. Land is valued at SL5.40 which
means that it would pay to rent additional land at this
price.

Espital and Credit - Credit is obtained both directly,
through land mortgage, and indirectly through activities
such as the hire of family labour and sale of machinery.
The farm is mortgaged up to the limit of 810,633.

Mdlk production is penalized in a sense at a
price of 835. per 1000 lb. and upwards, since the negative
coefficient in the capital equation of the milk selling

- 57 -

activity remains at a value of 815. for all milk price
levels. This results in under-pricing of milk at all
levels except $30. per 1000 lb.

The MVP of capital stands at $3. per 810. invested.
This represents interest of 30% at the margin. Since
chattel credit costs $37.60 per $100. borrowed, it does not
pay to acquire further capital by this route. If the
ceiling imposed on mortgage credit could be raised, a 810.
increase at the margin would show a return of $2.20.

Capital salvage (i.e. off-farm.investment) does
not enter into the optimum plan since capital so utilized
has an interest earning potential of only 3%%. The DJ
coefficient for this activity indicates that for each 8100.
of capital taken out of the farm business and invested at
35%, net revenue would suffer by 826.6. This figure
represents the difference between the return which could be

earned in either use.

Net Revenue.

 

As programmed $18,796
Less Overstated on machinery trading 968
Adjusted Net Revenue £37,828

 

 

To translate "Net Revenue"’into terms of

"Net Farm Income"’the following adjustments must be made:

-53-

(1) Deduct $2703. representing off-farm labour earnings.
(2) Deduct a charge covering overhead costs not allowed
6 for in the program, i.e. cost of materials required
for maintenance work on buildings, drains, etc., and

items such as insurance on buildings.

Assume that 81,000. meets these charges.

 

Adjusted Net Revenue $17,828
Less $2,703

1,000 3,703
(Derived) Net Farm Income 81h,125

 

 

This works out at 8107. per tillable acre,
compared with an average net farm income of 832. per acre,
earned by cropping and dairy farmers in the Thumb Area in
1958. The gap of £75. per acre between actual income
levels and the potential level points to failure on the
part of the farmer to attain the levels of technical and
organizational efficiency represented in the model. This
result is to be expected, however, for the following reasons.

Firstly, the level of technological efficiency is
assumed to be high for all activities. This means that the
representative operator is capable of employing and will
employ the "best" practices currently known for any of the
alternatives that are taken into consideration. This
.condition would not be realized in practice since only
rarely is a farmer capable of applying a uniformly high

 

-59-

degree of skill to all his possible alternative activities.

Secondly, the level of managerial business skill
is assumed to be high, i.e. if a more attractive line of
production is open to the operator he will follow it rather
than adhere to his current plan. The model automatically
chooses that organization which maximizes profit levels,
and thus the latter will reach a magnitude greater than
that to which the farmer can aspire with his limited human
knowledge of economic conditions and restricted capacity
for taking advantage of such knowledge as he does possess.
Additionally, it is doubtful whether the representative
farmer aims at attaining profit maximisation. It is more
probable that he has several composite notions of desired
standards of living, the resource supplies and organisation
required to attain these under diffeng economic
circumstances, and the amount of mental effort involved in
Operating such an organisation. It is within this
framework that he adjusts his farm plan.

The linear programing solution, then, is what a
"robot" farmer would achieve if he were faced with the
prescribed conditions. It is the 100% efficiency level
organisation of an ”economic" farmer, and represents what
should be aimed at to obtain as large an income as possible,
rather than what is likely to be achieved.

aw—

THE DAIRY FARM

§EEEEEZ

The Optimum plans for the three milk price levels,

330, $35, and SAG per 1000 lb. are identical, and are

similar to that for the Crapping Farm. A markedly

different plan, including dairying, is introduced at the

$h5 price level, and a further marginal revision occurs at

the #50 level. Full details are given in Appendix.Table 2.

I.

At :20, 535 ancLfiltOJQer 1000 lb. Milk.

Organisation of Production.

Cro in : Sequence (h), with fertilizer applied at the
recommended level, is the basis for the crOpping plan.
The acreage transfer activities, however, have Operated
to substitute wheat and barley for oats. Table V-h
gives a comparison of the 1958 acreage and cropping
pattern on the representative farm with that indicated
in the optimum solution. '

Table‘V-g. The 1958 and Optimum Cropping Patterns at £20,

in: and $540 per 1000 lb. Milk.

 

 

Crop 1958 Pattern Optimum Pattern
Corn 24 acres 55 acres
Oats 20 acres -

Wheat 17 acres 22 acres
Barley - 5 acres
Sod (Hay and Pasture) 43 acres (Hay) 55 acres
Total 10h acres 137 acres

+60-

-61..

The principal difference between the two patterns
is that the optimum plan excludes oat production, while the
area under corn becomes relatively more important. A
amall acreage of barley is introduced. Part of the
general rise in crop acreage (excluding oats) results from
the increase in farm size.

The average fertilizer cost per acre of the farm
works out at $8.37. In addition, feed residues from the
hog unit contribute significantly to crop manurial
requirements.

Qggg.- The crop takes up 55 acres. It is harvested as
grain and all of it is used for hog feeding.

,flhggg - 22 acres are grown. The increase of 5 acres
compared to 1958 represents the maximum expansion in wheat
acreage as defined by the wheat restriction equation.
All the wheat is marketed as grain.

Egglgy - 5 acres are grown. The grain is retained for
feeding to hogs. In the absence of a wheat restriction
it is likely that the barley cr0p would be dropped in
favour of wheat.

l§9g_- 55 acres are down to alfalfa hay, all of which is
sold off the farm.

B. Livestock Activitieg: Hogs are the only form of
livestock appearing in the optimum plan. The hog unit
consists of 25 sows rearing 2 litters per annum each, with

all of the progeny being finished on the farm. The annual

a 62 -

output of fat hogs is 394. Capital is invested in both
farrowing and fattening housing and equipment sufficient

to accommodate a unit of the size indicated.
Resource Organizgtion

Labour - Labour is both hired and salvaged. From November
to March off-farm employment accounts for 595 hours of
family labour. In the summer period, April to October,
the equivalent figure is 1703 hours. In order to allow
off-farm work on this scale 869 hours of seasonal labour
are required during the summer. Table V-S illustrates

labour utilization by periods.
As in the case of the Dairy Farm the labour

salvage restrictions are slack.

Machinery and Eguipment - One item of equipment, the field
chOpper, is sold outright. Portions of the capacity of

all the others are also "salvaged”, but the addition to

net revenue arising therefrom is false, for reasons already

discussed in relation to the Crepping Farm. To allow for

over-estimation from this source, and for under-statement

of costs in regard to the purchase of 55 machine acres of

cornpicker, net revenue should be reduced by approximately

$9u6.k

the
k. JMVPs of limiting resources are not available for
Dairy Farm, therefore this figure cannot be accurately

For
e timated since interest on capital is unknown.
‘wint of a better figure a rate of 30% was used. This

is the marginal return on capital in the case of the
Cropping Farm.

 

-62 (a) -

 

 

 

mfim mFF mm_ mm. opn m—m mmm I can .ommv.>oz
mam I I m? in: mam >3 I 03 .nooIdmm
am I ma mm. mm Rm SN I in $322
new I 03 mm, mum m8 $4 no: 0% 4:785
as I ma RN mom an. R3 3: mi. Enigma
son I map one I ran 5mm I and .ssz.cew
H.309 Madam mammoppmm mayhem CS Show mo ommmiumm opium H923 poanom
no: mom £30m also: now Hanna
oHmeHm>¢
3mg 3.:

 

an 2:82 ha Ba use 8% .8m pa conneaaflppéfifl

mi, Spas

-63-

Land - Land purchase and land sale both enter into the
optimum solution, the former at 56.7 acres and the latter

at 23.3 acres, i.e. a net acquisition of just over 33 acres.

Capital and Credit - The farm is mortgaged up to the limit,
but chattel credit is not drawn upon at all. The original
dairy cattle stock, consisting of 17 cows, 8 heifers, and

6 calves, are sold off, bringing in funds which can be used

for long-term investment.

Net Revenue

As programmed - $23,525
Less Overstated on machinery

trading - 9A6

Adjusted Net Revenue $22,579

 

To express "Net Revenue" in terms of "Net Farm

Income" the following adjustments must be made:-

(1) Deduct $A,929, representing off-farm income of p
' $3,792 and interest on this of 30% (see footnote

regarding interest rate, page 62).

(2) Deduct a charge covering overhead costs not

allowed for in the program, (as for the Cropping
Farm) say $1,000.

Adjusted Net Revenue $22,579
Less $4 929
' 11000 5.92;

 

(Derived) Net Farm Incomg $16,650

_‘-

- 6h -

This averages out at $122 per tillable acre,
compared to the actual 1958 figure for farms in the area
of $32.

The same comments on the level of Net Revenue
are pertinent here as those made in relation to the

Cropping Farm (pages 50-52).

II. At 51.5 per 1000 lb. Milk.
Organization of Productign.
A. Cropping: Basically, the crOpping pattern
follows Sequence (4), fertilizer usage being
at the recommended level. The crepping program

is as follows:

 

Corn , 56 acres
Corn silage 6 acres
Wheat , .26 acres
Barley . 5 acres
Hay 27 acres
Pasture 3h acres
Total 15h acres

 

The optimum farm size is 15h acres, and compared

to the $A0 level, most crop acreages have risen
proportionally.
s, of which 6 acres is‘

9252 - The crop takes up 62 acre
1 The

harvested as silage for feeding to the dairy cows.

grain from 56 acres is fed on the farm through the dairy

and hog units.

 

-65-

flhggt - The acreage under wheat is expanded as far as the
acreage restriction will allow. The whole crop is
marketed as grain.

£95121 - Just over 5 acres are grown, as opposed to just
under 5 acres at the $40 per 1000 lb. milk level.

gay - As previously, the crop is grown for sale, but on a
reduced scale, 27 acres compared to 55.

Pasture - 3h acres of the farm are down to pasture,

fulfilling the grazing needs of the cows during the summer.

B. Livestock Activities: Both a dairy unit and a hog
unit are maintained on the farm. The former consists of
23 dairy cows, plus replacement followers, housed in a
stanchion barn. Eighteen of the 23 are fed at the higher
rate (level III) and the remaining 5 are on level II.
To bring cow numbers up to 23, which is the cow capacity of
the dairy barn, 6 animals have to be purchased.

The herd is fed during the winter on corn silage,

corn grain, and purchased barley. Annual output is

2k3,66l lb. milk.
The hog unit comprises 19 sows. The progeny are

held on the farm for fattening. The hogs are maintained on

farm-grown corn, and 302 are finished each year.

Resource Organization

£32225 - Owing to the heavy man hour requirements of the
for off-farm work

even although

dairy cows no family labour can be spared

during the period November to March inclusive,

the h<
only I
1703 1
requi:
This,

dairy

accomj
)‘a chi
sligh
the 1
field

the c

— 66 -

the hog unit has been reduced. From April to October,
only 820 hours are spent on work off the farm compared to
1703 hours in the previous plan, but seasonal labour
requirements are reduced to 675 hours from 869 hours.
This, again, is a reflection of the labour demands of the
dairy unit.
Labour utilization is shown in detail in the
accompanying Table V-6.
Machinery and Equipment - Machinery "salvage" is on a
slightly larger scale than in the previous case because of
the introduction of pasture into the crop sequence. The
field chopper is, in this instance, required for handling
the corn silage, and no item of equipment is sold outright.
On account of machinery "sale" net revenue is
too high by $1,6h9.
ngd|- The net acquisition is 40 acres, 7 acres more than at

the $30 milk price level. Since milk production contributes

to working capital, so easing the capital shortage, there are

more funds available for land purchase.
Capital and Credit - Full use is made of mortgage credit

facilities. Chattel credit is not drawn upon.

Net Revenue.

 

As programmed - $23,927
Less Overstated on machinery

trading - 1,652

Adjusted Net Revenue $22,278

 

”

 

and)? .L d p

 

 

ad Common eHanihncn a;

 

-66 (a) -

 

Omn um 4mm

 

 

mm, so P: o? I I 03. .ommI.>oz

mmm I 0mm I in: NNN mmo 4mm. I mmm .poonémfi
smm mo map on no a, smm sfin I and gunman
mmm I Awow. ow; om F3 mmm 4mm x: 03 437086
82 I :m 8 m? 0.3 moor 4mm 43 mi Elissa
4mm I can NNF 0mm I nmm I I had .nsaI.cmw
Hmpoe xomam mcflhnfima mammoppmm wcanmom Adv anew no oowm>amm omnam Ho>uq moanom

mom mom .nenoz anon non amanaaH
mammaam>m
mamaaeaa mm:

 

 

mama .fl 89 new 3m pm coflgflfluhonfl

 

 

a; 033

-57-

To express "Net Revenue" in terms of "Net Farm

Income", the following adjustments must be made:-

(1) Deduct $1,759 representing off-farm income
. of $1,353 and interest on this at 30%
(see footnote on page 62).‘
(2) Deduct a charge covering overhead costs not
' allowed for in the model. Say, $1,000 as
previously.
(Adjusted) Net Revenue $22,278

Less $1,759
""“ 1,000 2,759

(Derived) Net Farm Income $19,519

On 15h acres this represents $127 per tillable

acre.
III. At4$50 pe;_looo lb. milk.

The optimum plan is almost identical to the
previous one. The only significant difference is that all
the dairy cows are fed at the higher level of concentrate
feeding. This involves reducing the corn silage acreage
by é acre and increasing corn (for grain) by a corresponding
amount; buying about 7,000 lb. extra barley for feeding to
the cows; and a slightly higher output of milk. Net

Revenue rises to $25,167 compared to $23,927 at the $h5
price level for milk.

APPRAISAL OF THE MODEL AND SUMMARY OF RESULTS.

The problem under consideration is an involved one
and necessitated the construction of a fairly complex set of
activities and resource> restrictions. Hindsight, in.the
light of the Optimum solutions, indicates that some
simplification could have taken place without detracting
from the value Of the results obtained. For instance,
certain restrictions, such as those relating to family
labour salvage, and a number of activities including egg
production and machinery salvage could have been omitted
altogether. On a primo facie basis it is difficult to
argue, economically, for a reduction in cultivable area per
farm, so the land salvage activity might have been omitted.

Nevertheless, it would have been dangerous to have
made modifications such as these without there being sound
precedent for so doing. Any future study, involving
conditions similar to those discussed, could probably be
stated in somewhat simpler terms since the general direction
of organizational change has been indicated. Unnecessary
resource restrictions could be excluded and the range of
activities limited to these lines which have been shown to
be relevant.

Within the terms of the present study, however,
the model has been satisfactory. The original aim was to

construct a broad overall picture Ofoptimum resource

+68-

-69-

allocation under prescribed conditions, and such a picture
has emerged. Under the assumed prices and coefficients
for the other enterprises it is concluded that unless milk
realizes between $40 and $45 per 1000 lb., operators Of
medium sized dairy farms in the Thumb Area will find milk
production less profitable than production of wheat, corn,
and hogs. Cropping farmers in this area, whose units fall
within the medium size group, should stay out of dairying
since milk production would be relatively unprofitable,
even at a price of $50 per 1000 lb. Again, the pattern of
production should be wheat, corn and hogs.

The differing solutions for the farm types at the
higher milk price levels can be explained by reference to
the capital position. Capital is the limiting factor in
each case. At higher milk price levels the Dairy Farm is
better placed for a switch to milk production than the
Cropping Farm which has no existing dairying facilities.
Provision of these would involve considerable capital
expenditure and consequently milk would have to attract a
higher price than has been allowed for in this study in
order to equate the return on capital invested in dairying

to that being earned from wheat, hog, and hay production at

the assumed price levels.

.(M-(nc ml ,mwr . fI‘. .

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, ‘L :i\ 113-‘:) ’ 105,1..71’7. ’ ‘\1 $7.172 \u I ) (3;, SF 2 ’

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0110.17. 13-; all/1‘7 (374373.. dfiCL‘I :7, I .1; _I. ‘_\.- f I I 7 09C) (4.1 71'1“.) /

-_ )L , l .
96 Lee one} 1:1Iuv hire, upril and [Iv 13 hours 23.9
p? Leu"oma1 7”““S? hire, June and Juiy 10 hours 35.9?
98 dessenn! 11beur hire, august D} Ignrs 3.2%

’CY? ItnijLgr l IINIUIO '-llf)’:e ””'WIIIJIIOI‘ fix) IIH. II 1 5 ‘.Cntrn: ”9.2“?

105 Demo me b% via
10? 'Ower serv1ce3
1&3 ’i‘er services
11: .Ide delivery

111 Darn picker 80
1‘13 Ealvi {mlr

C

7 1 . ,7 : . . I, a ° .

1 1 1‘4. QTGkII b 9.01-115“
e

117 land 891

i

1 1 Iviiv labour salvage, uDIQ
10? ”rICu r serviCI
10? wOTU 91.? her uerv

"(Iv c(,)‘I'lf,.‘(‘:\C"c, 1 '1" “'7‘ '3
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7C Te :0 1Lo'77
I3 salvage 10 7.1. 35.35
Silvege 74 m.h. II.31
3 311713328 1 O 7 us A o (:7 e 1
16 G710 ’ ('Kf" ’ ”’ S 8‘1 V") 1.7% f) .7 .e o I: o 75:)
rvieee ucquieit on 3 3,1, IQ.D9

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44’ 4" o (
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1' '03,: I‘— L “L'te 71*] 15 71011.8.7n8 ’ 13.61;] LI‘ 7 L 4:..1'5-)L].51_) fee (j 1:? (3 I ‘1). {fjél
1L '9 . ~‘\ ~ ‘ I
19“] “O“SEWO D.rfi C”) 159.00
7

Devember sin
Labour salvave
labour eIlvage
Labour salvage

Labour salvage
Labour salvage
Labour salvager
finattel or redib
Oupital resfiri

«I’m—vi-..” " v‘

1701.139

u ‘1 . A434 a. ,7 l "1 .- ‘ ‘ I, r ’ 5‘
resi:1l.310n, Deli fluel ind UCLJOGF your 3&2./6

restri tioa, ‘NovemOer Ind December 1 hour 79,5
resstrictjon $1, ZDHL.OO
ctlen $10, 817.90

 

‘StOCC unitru ed OXIrea the stock Deldlnm capacitv of the housing

.m»u.umna syn-:mo—W'Wumlm reek-m ...»

 

ties oper ratlng.at zero level

 

 

 

 

 

 

lselelé.

Deeresentstive DaiDy farm — users

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‘I

8 flotation (A), race I.eiue1 fcclili er use.
I

Crop ecreoee

10 Crop D
3 Drop acreage tr

1A Crop acreage tr
22 Feed value
an Deed value

29 Deed value
95 ~“"neaIt sale
38 'HQr sale
L9 OarleyfiI

10113.58

,ransfer, corn to corn si
scresoe crir

. 2n). I-1V.u'>_tm :avl. “ ..a. Mr- awn—>4. «a, n.«-‘~ awn-”nan" .kllul...‘ "a” .uo

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insfer outs to wheat

ensfer, buy to posture

conversion, barlev to Ouirf
conversion,
25 be d value conversion,
27 reed value cOIversiol, corn to bow
conversion,

rain equivalent
barley no: er in equivalemc

corn to dei rv Drain eluivulent
Urllfl equiIv:I ten?
o

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corn Sill e t rouvoclc equivalent

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53 NlLTOSGD (N) Durcbuss

93 3.3.3.}: 13‘: ()Clllc tj (331,

‘N '1 L 01 ( TI? \1 ‘r‘
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4

59 'Lilli prrId Diclj,Ion, st

65 Dairy heifer proouction

67 Dairy heifer sale

68 Dairy cow DUTLh’ e

69 Dairy cow sale

'70 1351:? ry e'r colt sale

71 Lilk sale

8” Dog proc miwctfi IoD, sov'ino w litters

83 Dog Proouction: fut Dogs, 225 1b., Igust

8A Dog productiOD, fut h 5s, 2?; 5 lbs., EeIDéD ry

91 Dog iarrowjng Do siDg and equinment: cluislulgn
92 Dog IutteDiDg housing unue Iuiorcr' .cqusit on

90 Nelsonu 3 labour
97 Densone
‘8 (1.30n‘I llfllfllF
100 bami.ly labour s

:L 31101.1?

101 Estulgr lslymIr Efilan”e

Dire,Iq>il and
hire June and Ju
IIIIT , .n151u3t

3

49>
4

l

C.

tr) 1 uacct1
to october

I FWIPUM‘077

April

102 Tractor services salvage
103 Corn planter services Salvage

10h Grain drill

107 Power services
108 Baler

111 Corn

r“ a]
services 531
1(1):) £133.81Cl C110 ’tl‘pP 1" 391 V: C83
110 cide delivery rake

services sulvege
105 Cultivator services
106 Combine services

salvage
<1 vs5e
1"e

'DIX‘e

3 JV
V
salvuee

K“:
serVices solvufie

picker serVices acqu1s3tion

113 land rurciose bv contrecI

11A Credit acqui
117 land sale

 

Hog grain res r:

Dilo capacity

.341 LJ 0": y

ljuxi Hmuv; age

Dtanchion housing

Hog fattening housinc
Poultry Dorsing

Algust labour

128137- +0 I\1Wfl'11ci‘\'lf
C), .‘4 I! J‘ 4.J_:) .KL. J

November and December labour

Labour salve 5e
Labour salvage
labour salvage
Labour salvage
Labour salvage
Che tel credit

restriction, January to Larch
restriction, June and tuly
restriction, August
restriction, September and
restriction, November and
restriction

October
December

Capital restriction

m~¢._~,wu -M um

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Deifer

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Dour

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(1) Dxcludes

(2) K.A. =

(3) The livestock units used

activities operat ing at zero level.
lbchine ncre.

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306.37
107.69
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550053
293.77
Del.5

602.00

“7060, 00

530.21

"TL—

 

 

 

 

 

Table 3.

a" ~~mflmmumao m.w-u~:“ .‘rva‘ m) tn) #0 at?” n- 9' he an oqu «n um arm- —«L“.:vx as n’- '4' .wu'r 21x ...-'2; (u

,ACt1Vlty Identities and 5

Activity

Number

20

J

N (\3 1“.) N {‘37}
~‘J7-P‘KJQ NA

L~

Hescriotion

A

w. . . ~L‘H’"."19' - I rv. "P. :9! av..:.v vn ”run-«-

:1N.sv~vv—v~c ra-wm‘rr-m ":1.-Iv

~~9 V."“.y_’~~j.f“ .-; . - -.

flotation. 11, moth actual iertili «3r usage
notation 1 , wimt recommen oded Lentiliuer usage.
notation 3 *1

MD Lactual iertilizer
with
1N1 11:1
mdth

vqifbll

B

- «~_~.

notation
dotation
Rotation
notation

recomrended erH
actual

/\/’\r\/“-./\/"‘\/".

C~Cotezx

\,—‘ \../ \«JV \1 \/\..
a

9‘.“

notation (A), with recoyiended ferma
Crop ”crcage transfer corn to cor'ii s11
Crop acreage tiansier, wheat to ea: .lehr
Drop acr iae trinsier, wheat to oats.

1

oats
oats

Crop transLer,

transfer,

1'00 b?" In] ez-ro
Drop a.. to ”heat.

C

c

Drop ac.
c

a

1 3 transfer, hay to pasture.
Crop a reijc transfer, hajf to grass silgic
‘eei v lue convers on, outs to dairy'gra:
be ed Jelima convermfi n1, outs t>>e1 ru':

- J— - -» .
’ C‘ K
(i) L3. L} k) L) \d)

r J" ‘ \
1417‘ 1. e G. L; i) (.1

ieed
reed

conversion,
conversion,

1, ..
UOx
_/

reed valu conversion, wheat to hog gre:Ln :
feed alue conversion, wheat t: poultry grain Co
reed value conversion, barley to dairy “rain CJUL

luaiflejr t4)
oarley to he; 5
corn

corn to eeei
corn to to:
corn to

conversion,
conversion,
CURVE” 1 SiOh ,
cornea: sion,
conve 1";31011 ,
conve sion,

reed value
Feed
reed
Feed value
Feed value
Feed value

.ifllll .1")

grain

. . ’ ,~- 1",“"fl
08.3- in; bi

‘ \ “(’1 (“"
oeei g

:rajn

U3 dalrjrgjraln
grain

usage.
recommended Lertilizer usage.
actual Lerti1izer use e

izer unig
Lertiliseri usk'ige.
‘ffher iuiige.
{2:630

equiv

egujva

reed Value conversion, corn silage to ”01”“xfefi
Feed value conversion, hay to rou;haf u.vlle:
Feed value conve sion, grass silage to r” n3ge
Feed value conversion: pasture to rough g «f.‘

Corn S3lvage.
Oats salvage.
loat salve be
Barley salv:ge.
Dry beans salvage.

-.
l 1'17"- C}

L'. .13; gal 7fci€eg
.5

00117 1:1crir s: ‘t :ax — 13>r Ltiirfi’ ecu tic
Corn acoui ition — for veer cattle.
Corn aciuisition ~ Ier logs

Corn acouisitio -~ Lor poultry
0at3H107ui' thion — Lor d;1ry caitle
0ats aciu isition ~ to. beef cattle.
Oats ace isxtion — for twgs.

mheat cwuisiiio‘ — for dairy castle.
Uheat acquisition ~ for hcgs.

‘hiaegrt :1Q N11 sigtix3r1 - 1171‘ rumil,txjf
Barley acxuis ition — icr dairy CaCtlc.
bailey dCIUlS ition — ior hoes.

Barley aciuisition — for
acquisition.
Nitrogen (1) ceuiC7txon.
Phosphate (1) a03uis ition.
Potasn \k) a07u' itfi -0n.
oiloa is 'ion.

1". ....
110.;
L

acaus

1.1 le
hilk

ration (
ration (
ration (
housing, dry l
1101 s in c , dry
irousing, 7~

4 a
1.. - '. ,-
£10118 lflb ,

production,
production,
Milk production,
Lilk production,
hilk production,
lek production,
Lilk pl"”CLJO“,
Lilk production loose housin
Milk production, loo e housi
Dairy heifer production.
Dairy heifer salvage.

Dairy COW'va isition.
Dairy cow'salvage.

Dairy heifer calf salvage.
hilk salvage.

beef feeder calf production lb. #00
Beef feeder calf salvage, lb. #00
nearing beef feeders, lb. 400 t0 650
deer feeder lb. 850 salvage.

stanchions,
obdnCIlOLo,
stanchi is,
loose
loose
loose
loose
pa

11;),

1011’,

pastured,
til‘le,
pastured,

ration <3)
(1)
(2)
(3)

Ivitixin

ration
ration

ecniiv1ilerHL.
.in eiu'Valert

1111:}

U.
7

mar." -‘/m- “5.5 1‘: u-rurua.

- _

I 1‘ tn‘;

values

x "A lama” 2%

I rm.»-
.- ‘J .3.

wv— m 1: x“.-

w->-o_‘~.:~..u.,

“leilt.
8.lGJIt.
.in €1U1V315nt.
alent,
Cduivalent.
lent.
67111 Va] m:
,I'V‘Yl e 1.14:. V0.1"? .
C711"! Veile "vm
it.

’elent.

oroooin:

tar J?) 0‘“ 1(00 lb ~13:13.}:

~nrm :m-iow—wa—v-fl, M..‘I" ”W"?! -—.~~ ”aw—m, xnvvayx—eo-wvn qr w-a-‘ tnvm<~.-q» (WIQa—r‘mq—ucthV-un

\ __,
- I,
1“

Unit

C,(%) D,(

 

A Ac. ~5w.8 ~
6 *9. "£35.63 1 1.4.9
5 Ac. —s3.e; 1.3
3 AC 0 "3-17 .1 5Q I I
3 .‘H‘LC . ”3'11. 1 g
5 AC. ~§Q.5 105.0
I) AC 0 ”'5? a 5 "'
AC. - 0.:3 1L”.

0
g) 7
i J».
J
6‘

0

..J h) ...; ...; .....x _.X ..x .. \
\-. ..l. L. -
V. ,.—«' .'..
O
O
0
U1
O
'\\7

it, 1,1oo 7.5
lb. 10,005 2.,1

:1- I) o 1 3 ,(;)':::’1;) 1 1 C.) .0
;lii. 1 CM]() : :
l

b. 10, 000
1,00C)
lb. 1,000
1,100
11,000
555
1) (DUO
1C),000
1,0[0 0 9 5
10 ten 0
1 ten 0 1Q,9
1’7'ton 0 61 ?

C O O O O O 0 -¢ “Cr:
...-A
Q\
\3

(3(3
I I

C)
—-.L
.
.‘x

. 1

CDC)
I I

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, AC C: ~
11; H730 11.6 5.5
lb 1301; 30.0 9.9
lb 1000 32.3 '
is. 1009 73.6 6.0

in. :oc 73.6 -

1 1‘ OH :51 . r/ "‘

lb. 1000 23.8 15.6
lb. 10C0 L3.8 3.9
lb. 1000 33.8 3.?
in. 1000 a3.o 13.n
lb. 1000 22.0 1L.é
1%. 1000 22.0 1.5
is. 7ooo 2-.o 7.8
lb. 10C0 35.5 30. 3
lb. 1000 35.5. 19.1
lb. 1-00 35.5 23.7
lb. 1000 20.5 11.3
lb. 7ooo ec.5 e.c
lb. 1CWKD 20.5 2.0
lb. 1C59 ~33.3 28.2
lb. 1000 ~17.0 —

.h. 105 -11 0
1b. 1oo _ 5,5 -
10 tons — 7 0
ca; Dacity
1b. 9,275
lb. 10,010
lb. 9,275
lb. 10 ,010
lb. 10 ,QLO
9,275
10,010
10,8t0
heifer
heifer

10.8

9

O\RJPJRJ
O

0

d
l i
V

0

Ar\

K, x"

C
d

x _
+
.
L2.»

I
r“)

l
{\DIOZ‘UNZ‘QFQIUNNN)

~\I“.:\Y

C>C>C7C>C>C7C>C>C>E>C>C>C>C>C>C>c>cw3
I

- , .. x
Q\ :J\ C." (J\ (4-.

wk.)
.0
\O

._‘.
7
.\

. —
COW’ 9. —
con 3. 100.0 ~100.0
call' 2h. 23,1

\

1000
calf
calf

vwv1CDf
O O O

\L

0\
kn Or
0

Leeder
feeder

, , , ,,. , 1 , ,
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T
Table 3 (Contd.)
Activity
Number Description Unit Cj($) 03(3) *
76 Finished steers, short-fed, lb. 950, salvage. 1 steer 201.0 66.3
77 Finished steers, long-fed, lb. 950, salvage 1 steer 215.0 32.7
78 Finished steers, purchased, lb. 1125, salvage. 1 steer 77.0 18.h
79 Finished steers, home bred, lb. 1125, salvage 1 steer 258.0 —
80 Beef feeders, lb. ADO, acquisition. 1 feeder —105.0 —
81 hog production, sow and 1 litter. 1 litter 97.0 121.1
82 hog production, sow and 2 litters. 2 litters 165.0 —
83 hog production, fat hogs, lb. 225, August. 8 hogs 260.0 -
8h hog production, fat hogs, lb. 225, February. 8 hogs 260.0 - l
85 spring feeder hogs, lb. 50, acquisition. 1 hog 411.0 6.9 C};
86 Fall feeder hogs, lb. 50, acquisition. 1 hog -1a.0 3.6 u
87 egg production, replacements purchased. 160 dos. 31.1 5.0
88 Egg production, replacements home-reared. 160 doz. 39.5 -
89 Dairy stanchion housing and equipment acquisition. 1 cow (2) ~15.0 106.1
90 hairy loose housing and equipment acquisitions. 1 cow (2) -16.0 49.7 -17.2
91 hog farrowing housing and equipment acquisition. 1 sow (2) ~16.0 —
92 hog fattening housing and equipment acquisition. 1 feeder (2) — .63 -
93 Poultry housing and equipment acquisition. 1 bird(2) - .23 1.6
9h negular labour, November to March, acquisition. 15 hours —26.25 5.7
95 negular labour, april to October, acquisition. 1b hours -2a.5 5.3
96 seasonal labour, april and hay, acquisition. 10 hours —18.5 -
97 seasonal labour, June and July, acquisition. 10 hours —18.5 -
a seasonal labour, August acquisition. 10 hours ~18.5 -
99 Seasonal labour, september and October acquisition. 10 hours -1b.5 17.8
100 Eamily labour, November to march salvage. 15 hours 24.75 -
101 Family labour, April to October salvage. 14 hours 23.10 -
102 Tractor services, salvage. 10 hours 3.8 -
103 Corn planter:services salvage. 1O h.n. (1) 2.3 -
10a drain drill services, salvage. 10 FLA. 3.4 -
105 Cultivator services, salvage. 10 fits. 1.2 -
106 Combine services, salvage. 10 L.A. 15.0 —
107 Mower services, salvage. 10 Eli. 1.5 -
108 Baler services, salvage. 10 M.A. 16.0 —
109 Field chopper services, salvage (acquisition for the 10 h.A. €83 30.0 — —11,4
Cropping farm.)
110 side delivery rake services, salVage. 10 h.n. 4,1 -
111 Corn picker services, acquisition. 5 M.A. — 8.5 -
112 Land acquisition, by mortgage. 1 Ac. - 8.67 18.4 - 8.42
113 Land acquisition, by contract. 1 Ac. —16.16 — -15.61
11h Credit acquisition, land mortgage. 310. - 0.78 _
115 Credit acquisition, chattel mortgage. $10. - 3.76 0.7
116 Capital salvage. $10. 0.35 2.7
117 Land salvage. 1 AC. 1.65 -

 

(1) "FLA.“ - Machine Acre.

(2) The livestock units used here express the stock holding

%

from.those of the Dairy Farm.shown in the main column.

capacity of the housing.

The figures in this column are Cj values for the Cropping Farm where these differ

Activity titles are uniform for both groups except for No. 109 which is Cropping

farm acquisition, rather than a salvage activity.

machine acres.

ta Unit is 5 M.A. for the Cropping Farm.

In this case the unit is 5

 

 

Table 4.

 

Resource Restriction Identities and Initial Values

 

 

 

 

 

 

 

 

 

Value
Restriction Dairy Cropping
Number Description Unit Barn} Farm
1 Corn—grain lb. 1000 0 0
2 Corn-silage. 10 tons 0 0
3 Oats. lb. 1000 0 0
4 Nheat lb. 1000 0 0
5 Barley lb. 1000 0 0
6 Dry beans lb. 1000 0 0
7 AA hay 1 ton 0 0
8 AA silage 10 tons 0 0
9 AA pasture. 1 Ac. 0 0
10 Wheat allotment restriction. 1 Ac. 17.0 20.0
11 Dairy grain equivalent. lb. 1000 0 0
12 Beef grain equivalent. lb. 1000 0 0
13 hog grain equivalent. lb. 1000 0 0
14 Poultry grain equivalent. lb. 1000 0 O
15 Beef grain restriction. lb. 1000 0 0
16 Hog grain restriction. lb. 1000 0 0
17 noughage equivalent. lb. 1000 0 0
18 bilo capacity. 10 tons. 11.4 0
19 Dairy cows. 1 cow 17.0 0
20 Dairy heifers. 1 heifer 8.0 0
21 Dairy calves. 1 calf 6.0 O
22 Milk. lb. 1000 0 0
23 Beef feeders, lb. 400 1 feeder 0 0
24 Beef feeders, lb. 850 1 feeder 0 0
25 Reader hogs, spring. 1 iog 0 0
26 Feeder hogs, Fall. 1 hog (1) 0 0
27 Stanchion housing. 1 COW' 23.0 0
28 Loose-housing. 1 COW’ E}% 0 0
29 Narrowing housing. 1 sow (1) 0 0
30 hog fattening housing, May to August. 1 feeder <1) 0 0
3; Poultry housing. 1 bird 150.0 150.0
3 N. lb. 10 0 0
33 P. lb. 10 0 0
34 K. lb. 10 0 0
35 Labour, January to harsh. 1 hour 954.0 628.0
36 labour, April and hay. 1 hour 743.0 686.0
37 Labour, June and July 1 hour 886.0 707.0
38 Labour, august. 1 hour 474.0 368.0
39 Labour, beptember and October. 1 hour 859.0 694.0
40 Labour, November and December. 1 hour 750.0 479.0
41 labour restriction, January to harch. 1 hour 864.0 564.0
42 labour restriction April and hay. 1 hour 650.0 634.0
43 Labour restriction June and July 1 hour 793.0 655.0
4 Labour restriction, August. 1 hour 411.0 341.0
45 Labour restriction, oeptember and October. 1 hour 719,0 642.0
46 Labour restriction, November and December. 1 hour 602.0 435.0
47 Tractor services. 1 hour (2\ 1235.0 1235.0
48 Corn planter services. 1 h.n. / 100.0 100.0
49 Graincirill services. 1 M.A. 125.0 125.0
50 Cultivator services. 1 N.n. 200.0 200.0
51 Combine services. 1 FLA. 170.0 170.0
52 Mower services. 1 M.A. 200.0 200.0
53 Baler services. 1 FLA. 150.0 150.0
54 Field chopper services. 1 NLA. 100.0 0
55 Cornpicker services. 1 M.A. 0 0
56 Hog fattening housing, November to February 1 feeder (1) o o
57 bide delivery rake services. 1 L.A. 100.0 100.0
58 Land. 1 Ac. 104.0 97.0
59 Land acquisition and salvage restriction. 1 Ac. 80.0 80.0
60 Chattel credit restriction. $1. 7,060.0 2,884.0
2‘12 Igortgfie credit restriction. :10 9,332) 10,633.?)
api . . ’ . '.
63 beef housing. 1 animal“) 20 326
64 Capital Restriction. $10. 259.5 313.6

 

(1) The livestock units used express the stock

(2) "M.A.” a machine Acres.

holding capacity of the housing.

...?{L-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 5 Representative Cropping b‘arm-l‘fiarginal Value Products (:5) at the Various Milk Price Levels
M. v. P. (1%)

Restriction I—i’ilk
Number Description Unit Prices(§£) 3O 35 4O 45 50

1 Corn—grain lb. 1000 27.0 — x
2 Corn-silage. 10 tons 16.6 16.6 28.1 63.6 103.0

3 Oats lb. 1000 29.9 — x
4 1’1heat lb. 1000 32.2 ——X
5 Barley lb. 1000 24.6 24.6 26.5 26.5 26.5

6 Dry beans lb. 1000 73.5 x
7 AA hay. 1 ton 21.6 X.
8 .01 silage. 10 tons 70.3 70.3 70.3 70.3 75.0

9 AA pasture 1 Ac. 5.5 5.5 9.3 21.2 34.3

10 Wheat allotment restriction. 1 Ac. 10.9 —— —— --—X
11 Dairy grain equivalent. lb. 1000 15.3 17.4 ”6.5 26.5 26.5

12 Beef grain equivalent. lb. 1000 27.0 — x
13 Hog grain equivalent. lb. 1000 27.0 ~ ..x
14 Poultry grain equivalent. lb. 1000 17.5 —— ——x
15 Beef grain restriction. lb. 1000 - -—--— _ x
16 Hog grain restriction. lb. 1000 - ——— _ x
17 'i‘toughage equivalent. lb. 1000 1.3 1.3 2.3 5.3 8. 5

18 bilo capacity. 10 tons. - - — ... 4,6

19 Dairy cows. 1 cow. 63.7 x
20 Dairy heifers. 1 heifer. 175.0 175.0 175.0 21.2.3 257.9

21 Dairy calves. 1 calf. 55.7 53.0 31.5 27.6 27.6

22 Milk. a lb. 1000 34.5 39.5 1111.5 49.5 54.5

23 Beef Feeders, lb. 400. 1 feeder 136.6 _ .3;
24 Beef seeders, lb. 850. 1 feeder 168.7 168.7 176.0 198.5 223.4

25 r‘eeder Hogs, spring. 1 hog. 11.3 --—~-—--—— — — ——x
26 Feeder Hogs, Fall. 1 hog (1) 9.5 _X
27 stanchion Housing. 1 cow (1) 28.5 72.1 78.2 78,2 78,2

28 Loose—housing. 1 cow (1) 51.8 95.4 101.5 101.5 101.5

29 harrowing housing. 1 sow (1. 112.0 _ __ ———x
30 Hog fattening housing, May to August. 1 feeder< 1§ - .................... —————x
31 Poultry housing. 1 bird - _ _ __X
32 N. lb. 10 2.2 --——__ __ —-x
33 P. lb. 10 1.4 X
36% K. lb. 10 007 —— — —X
35 labour, January to March. 1 hour 3.1 ___ X
36 labour, April and May. 1 hour 2.4 X
37 Labour, June and July. 1 hour 2.4 — _ X
38 labour, August 1 hour 2.4 — _ _ _.. X
39 labour, beptember and October. 1 hour 0.6 __ __X
40 Labour, November and December. 1 hour - _ _X
41 Labour restriction January to March. 1 hour — X
42 Labour restriction April and lay. 1 hour - —x
43 Labour restriction June and July. 1 hour - X
44 Labour restriction August 1 hour - — X X
45 Labour restriction september and October. 1 hour .. x
46 labour restriction November and December. 1 hour - —x
47 Tractor services. 1 hour (2) 0.6 ——x
48 Corn planter services. 1 ILA. 0.7 —x
49 Grain drill services. 1 ILA. 1.0 __ x
50 Cultivator services. 1 111.4. 0.2 — —x
51 Combine services. 1 ILA. 2.3 — —x
52 Mower services. 1 151.4. 0.4 — x
53 Baler services. 1 FLA. 3.0 —— x
54 Field chopper services. 1 191.4. 8.0 —x
55 Cornpicker services. 1 FLA. 5.8

56 Hog fattening housing, November to February 1 feeder (1) 4.3 - x
57 bide delivery rake services. 1 11.13.. 1.1 —— i:
58 Land. 1 AC. 45.4 L ___x
59 land acquisition and salvage restriction 1 Ac. 26.3 ——x
60 Chattel credit restriction. S10. .. __ x
61 Mortgage credit restriction. $10. 2.2 —X
62 Capital. 9110. 3.0 —— _ X
63 Beef Housing. 1 animal - _ _

64 Capital Restriction. $10. .. _ _ :3:

 

 

(1) The livestock units used express the stock holding capacity of the housing.

(2) "FLA. " 8

NOTE. :

I-iachine Acres .

covered by the arrow as that shown in $30. column.

(Shown thus ----—---—-x)

The horizontal lines indicate that the value shown is the same in each column

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0.0 0.0 0.0 0.0 0.0a 0.5 .83: a 08 300
in 04 I I I 04 .o: 3.303 .83. 00.0
«.0 .3 «.0 «.0 m.m 0.0 03 08a ...: 000004 .33.. 0.0.0
HA I I «A in 0.0 03 £90.... to: 000000 .33.. 000
0.m I 0.0 0.0 a...” 0.... a: 00003 .8008 080
«.0 0.m 0.0 04 mg 0.0 A: 03 .33 .8080 «can
.3." 0.0 0.0 0.0 «AA 0.5 08330 05300 38.0 .300 ban
0.3 0.0 «.0 mg. 0.3 4.5 03 E0 55300 083 .300 bin
0:: «AH «.0 0.0 0.? SN 05830 820500 :80 .088
637.32 $00.03 .004 290050 00,7304 sashfih. .80

 

0.30m I naduogoum xoopngdu

.. 81 ..

able 11. thket Prices.

The following list sets out the prices used in constructing

the objective function. They relate to the period 195L958.

Sale Prices.
5
fig: 225 lb. barrow or gilt [+3
50 lb. feeder hog 13
300 lb. fat gilt 50
#00 lb. fat sow 66
LOO lb. feeder calf 95
850 lb. feeder steer 165
950 lb. fat steer 233
1125 lb. fat steer 271
Cull beef cow' 155
1000 lb. milk 30, 35, 40, AS, 50
Milk COW’ 170
In calf heifer 180
Dairy bred calf 23
l

Cull dairy cow

Dozen eggs 0°37
Cull hen 0'50
1 ton hay 21’70
1000 lb. corn 21°60
1000 lb. oats 20'00
1000 lb. wheat 32-30
1000 lb. barley 13°60

73.60

1000 lb. dry beans

(Second.Hand)

2~plOW'tractor 573
2—row corn planter 180
Grain drill 30°
2-row cultivator 75
CmMm(m®r8fiJ “7
Newer 200
Baler 700
Field chopper 500
Side delivery rake 225
1 Acre land (Dairy Farm) 2L0
1 Acre land (Cropping Farm) 21h

1.65

1 hour, family'labour

- .§p~x-..4nv . P .3."

A _. l..-
‘ I

 

-82-

Table 11 S contd. 1

Purchase Prices

 

a

22?. = III-pig gilt 60

50 1b. feeder hog 1h

Breeding boar 75

LOO lb. feeder calf 105

In-calf beef cow 200

Beer bull 275

Milk cow 185

Replacement pquet 1.80

Chick 0.33

1 ton hay 23,30

1000 lb. corn 23.51)

1000 lb. oats 22.00

1000 lb. wheat 35.50

1000 lb. barley 20.50

100 lb. nitrogen 17

100 lb. phosphate 11

100 1b. potash 6

1 hour regular labour 1.75

1 hour seasonal labour 1.85

(New) Corn picker 121.5

Field chopper 1897

1 Acre land (Dairy Farm) 198

1 Acre land (Cropping Farm) 190
Source: Agricultural Marketing Service, A icultural Prices,

January 1951» - December 1958, United States Department of

Agri culture .

Earl I. Fuller, Alternatives for Increasylg' the w’

Power of Labour on Dair‘ Farms,

thesis presented in

partial fulfilment of Master's degree, Michigan State

University, 1957.

Various machinery dealers in the Lansing area.
Discussions with members of staff of Michigan State

University, Agricultural Economics Department.

-33..

Table 12. Assets and Resources Available on the Representative Farms.

 

Dairy Cropping
Silo Capacity (Ton) LUI 0
Dairy cows 17.0 0
Dairy Heifers 8.0 0
Dairy Heifer Calves 6.0 0
Stanchion Housing Capacity (Cows) 23 .0 0
Poultry Housing Capacity (Birds) 150.0 150.0
Labour, January to March (Hours) 954.0 628.0
labour, April and May (Hours) 71+3 .0 686.0
Labour, June and July (Hours) 886.0 707.0
Labour, August (Hours) 1+7II.O 368.0
Labour, September and October (Hours) 859.0 69L.0
Labour, November and Decanber (HourS) 750.0 k79.0
Tractors 2.0 2-0
Corn Planters 1.0 1.0
Grain Drills 1.0 1.0
Cultivators 100 1'0
Combines 1-0 1'0
Mowers 1'0 1'0
Balers 1'0 1'0
Field Choppers 1.0 0
Side Delivery Rakes 1'0 1'0
Land (Tillable Acres) 10h.0 97-0
2595.0 3136.0

Capital (5)

 

-34..

 

 

 

 

Tabl 13. Actual Eertilizer Application and Crop Yields
Obtained in 1958 on the Representative Farms.
Peas! 9.22.13.21.23
Yield/Ac. E. (b) Yield/Ac. pp,

N P K N P K
Corn (Grain) 70 bu. 28 16 19 65 bu. 10 36 32
(a) Oats 72 bu. 15 33 32 88 bu. 11 38 26
Wheat 46 bu 22 LB AD 59 bu. 24 36 32
(a) Dry Beans 21 bu. 20 35 26 22 bu. 11 22 19
Hay 2 ton 1t 1t 17 2 ton 0 O 0

 

(a)

(b)

Oats and dry beans are not representative crops on
the Cropping and Dairy farms respectively, but have been

included here for purposes of comparison.

Fertilizer has been adjusted on a per acre basis to take
account of farmyard.manure applied. The rate assumed
is (per acre) Lb. 8 N

Lb. 5 P

Lb. 8 K

 

-35-

Table 15. Estimated Amounts of Farmyard Manure
Produced anby Various Types of Livestock a) .

 

 

 

 

Lbs. N P K

Dairy COW' 32 20 32
Dairy Heifer“) 32 20 32
Beef Cow and Calf 32 20 32
Beef Stocker 16 10 16
Beef Feeder 21. 15 21.
Sow and 1 Litter to Weaning 3 2 3
Sow and 2 Litters to Weaning 6 l. 6
Fattening Hog 2 1 2
10 Layers 5 7 2.6

(a) Estimates are based on the figures shown in Tables
6 and 7 of Lilinois Farm and Home Development Reference
mics,

Book, Extension Service in Agriculture and Home Econo

College of Agriculture, University of Illinois.
osses in handling

figures have been modified to allow for l

and in run—off.

(b) Covers the period from birth to freshening.

These

vs ' ' '

 

x ‘Jl';~l.-"RJ." -' -

 

-'£fl5 -

Table 15. Estimates of Annual machine Capacity and Expected Use

Lilachine Acres) .

 

(l) Neximum
Capacity Expected Use
Corn planter, 2—rOW' 100 90
Grain drill, lB-hole 125 90
Cultivator, 2-row 200 90
Combine, 8 ft. 170 135
Newer, 7 ft. 200 42
Baler 150 42
Field Chopper 100 72
Side Delivery Rake 100 90

 

(1) Capacity figures based on estimates from various sources:

(a)

(b)
(C)

(d)

(e)

U.S.D.A., The Farm Cost Situation, Agricultural Research
Service, May 21, 1959, p. 38.

Loc. Cit., Frick and Burkett, p. 36.

Iowa State College Data, Doane's Agricultural Digest,
September 1951, p. 365.

F3 Nfiller, Q.W. Lindsey, and A.C. George, "Cost of
Operating machinery on Nebraska Farms", University

of Nebraska, College of Agriculture, Agricultural
Emperiment Station Bulletin Number 391, December 1948.

Personal consultation with members of the Agricultural
Engineering Department, Michigan State University.

 

film‘-

 

-37..

Table 16. Estimated Farm Real Estate VatlueSLby Counties(a)

3 Per Acre
Huron 303
Lapeer 2'72
Sanilac 159
St. Clair — 1,13
Tuscola 232

 

(a) These are the farmers' own estimates of the value of
land and buildings at 1959 price levels.

-88...

 

 

Table 12. Com; son of Wage Rates in Agriculture and Industgz.
Manufact ' Indust W“)
Flint Saginaw Michigan

 

(3) Per Hour

1951+ 2.23 2.05 1.00
1955 2.37 2.17 1.02
1956 2.1.1 2.20 1.06
1957 2.52 2.32 1.07
1958 2.68 2.1.3 1.06 (est.)

 

Sources: Burgoyment and Earnings, United States Department of
_ Labour, Annual Supplement Issue, Vol. 5, No. 11,
Table SC—S, May, 1959. '

Farm Labour, United States Department of Agriculture,
Agricultural Marketing Service, Crop Reporting Board,
January 10 , 1958.

(a) Rates quoted are wages paid without board or room.

1.

3.

4.

5.

7.

8.

10.

W

Dean E’. McKee and James T. Bonnen, Suggested
Procedures for the Analygis of Hoductpgn
Adlustments in the Great Lakes Dairy IndustLy,
(Paper for discussion onlyf, Michigan State
Uni versity Economics Department, January, 1959.

 

 

 

 

G.L. Johnson and L. G. Hardin, Economics oLForage
Evaluation, North Central Regional Publication
No. 48, Purdue University Agricultural Experiment
Station, Lafayette, Indiana, April, 1955.

Michigan Department of Agriculture, Michigan
Agricultural Statistics. July, 1958.

Hildebrand, Peter E., Farm Organization and
Resoyrce Fixity: Modification of the Linear
Progrgming Model, unpublished thesis for the
degree of Ph.D., Michigan State University, 1959.

 

George W. Ladd and Eddie V. Easley, An A lication
91: Linear Mgramipg to the Study °.Z 35221;;

Responses in Dairying, Department of Economics
and Sociology, Agricultural and Home Economics
Experiment Station, Iowa State College, Research
Bulletin 487, May, 1959.

Farming in Michigan, Special Bulleti
Michigan State College Agricultural Experiment
Station, September, 1954.

Elton B. Hill and Russell Y. Mawby, gases of
n 0,

Michigan Agricultural Experiment Station,

St. Clair Countyand Tuscola County Soil Maps,
1926 and 1929 respectively.

Department of Soil Science, Sanijlac County Aerial
Photomghs, Michigan State University.

Department of Soil Science and Horticulture,
Fertilizer Recommendations ,fior Michigan Crogs,
Extension Bulletin E—159, Co-operative Extension
Service, Michigan State University, 1959.

L.M. Turk and A. G. Weidemann, Farm Manure,
Michigan State College Co—Operative Extension

Service, Section of Soil Science, Extension
Bulletin 300, June, 1949.

-39..

 

5% ‘5‘! SC ‘3 ‘-

1.1.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

-90-

Frank B. Morrison, Feeds and Feeding, Twenty First
Edition, 1949, (Morrison Publicity 00., New York).

13E. Prick and MK. Burkett, Farm Management
Reference Manual, (Jo-operative Extension SErvice,
University of New Hampshire, September, 1953.

Dean E. McKee, Earl O. Heady, and G.M. Scholl,
Optinazm Allocation of Resources Between Pasture
Igzpro vement and Other Opportunities on Southern
Iowa Hanna, Research Bulletin 435, Agricultural
Experiment Station, Iowa State College,
January, 1956.

D. Cale Johnson, labor Mobility and gig tural
Adjustment Problems in a GrominLEconome, North
Central Farm Management Research Commzttee,

the Iowa State College Press, Ames, Iowa, 1958.

 

 

Extension Service in Agriculture and Home Economics,
Illinois Farm arid, Home Development Reterence Book,
College of Agriculture, University of inc 3.

Uni ted States Department of Agriculture, The Farm

Cost Situation, Agricultural Research Service,
May Slat, 1959.

 

Iowa State College contribution to Doane's
Apricgltural Digest. September, 1951.

F. Miller, QJI’. Lindsay, and A.C. George, Cost or
(gperatingMachimm on Nebraska Farms.
Agricultural Experiment Station Bulletin No. 391,
University of Nebraska.

Uni ted States Department of Labour, Englayzggnt
and Earnings, Annual Supplement Issue, Vol. 5,
No. 11, Table 80—5, May, 1959.

Uni ted States Department of Agriculture,
Farm Labor. Agricultural Marketing Service,
Crop Reporting Board, January 10th, 1958.

Victor E. Smith, A Linear Programing Analysis
2‘: Beef Feedigg, Michigan State College

gric ra xpe ment Station rterl
Bulletin, Vol. 3?, No. 4. Qua y

22.

33.

24.

25.

26'.

27.

-91..

Carroll V. Hess, Farm Mgetinfinggference Manual,
Cornell University Agricultural Experiment Station.

James M. Nielson, Application of the Budget Method
in Farm Planning, unpublished thesis presented in
partial fulfilment of the requirements for the
degree of Doctor of Philosophy in the Department
of Economics, Hirvard University.

J.A. Hoefer, H.F. Moxley, and R.E. Rust,
Producing Pork in Michigan, Michigan State
University Co—Operative Extension Service,
Extension Bulletin 335.

C.R. Hoglund, A Budggting Guide in Estimated
Feed Inputs and Milk Production when 1200 pound
Holstein Coywp are Fed Variable Quantities pf
Grain and Three Qualities of Ron ha e, Ag. Econ.
No. 670, Michigan State University, January 16,
1957.

Agricultural Marketing Service, Agricultural Prices,
January, 1954 - December, 1958, United States
Department of Agriculture.

Earl I. Fuller, Alternatives for Increasing the
Earning Power of Labour on Dairy Farms, thesis
presented in partial fulfilment of Master's degree,
Michigan State University, 195?.