THE POTENTEAL ROLE 0F AGRESULTURAL LAM) fiRAEE‘éAGE IN? WMEPISS GRQW’YR Thesis for me Basra-e of m D. MECHEGAN $TATE UNEVERSEI: MELVEN L. {TOWER 1967' t LlBRA R Y THESIS 1 Michigan State 1 M " ‘ Univ-gnu? 153 ’ -. .3 v. .wm'h 3." ' This is to certify that the thesis entitled The Potential Role of Agricultural Land Drainage in Economic Growth presented by Melvin L. Cotner has been accepted towards fulfillment of the requirements for Ph.D. Agricultural Economics degree in __ fl .fl ///‘2 vs. I 0-169 ! ‘- In. ”00". '1.‘ he! a c ‘ C-‘n‘! -- u o o- a -- Zes concert: u! .n—Q- ' 1 ‘lfl"< a...:.. ,e.a-.b‘ _ t . . .. ‘ a... A. . -~ “ -ta . a. . t . “.5 k.. - A 1 ~’.- =_‘ r‘a A - 5 .‘;.. N“. .l'; ‘ u. 3'- ,. . ' A H‘ "' AC ...5 4‘. a (‘5.n‘ § . I";4 .A .- t... .v .A “ ‘ts.‘?as .1 I‘;. -‘ . ‘\ It. ‘- ‘ . 5.’-~“.=-' a"- l ‘ 4t .- ‘4' I ‘g r . .‘ ’::‘A~. I -'.' it -~ . h A. C: .. . ‘- .‘ _2. ' 5. " 9-27..“ .‘h. . I}. ‘ C ~ . I. "‘ A‘ ‘L " e .l‘ 3"" . ‘ ‘ ‘V ‘ ,tsc“ ;‘ h“ ..'a-:‘. . .. If t “5* V O r :'.' 3‘ nt.' ’35 :9": .Ilf'l‘ “- . ABSTRACT THE POTENTIAL ROLE OF AGRICULTURAL LAND DRAINAGE IN ECONOMIC GROWTH by Melvin L. Cotner I One of the main objectives of this study was to formulate general principles concerning the role of natural resources in economic growth. The thesis of this study is that the use and development of natural re- sources is and can be an important factor in economic development. A review of literature found varying views about natural resources and their relationship to economic activity. Many scientists and laymen hold that the Malthusian doctrine still is applicable. Others argue that abnormal scarcity rents have not accrued to natural resources and therefore the Malthusian law is invalid. Scientists point to changes in the quality of resource inputs, thereby improving the productive capacity of our natural resources. Put another way, manmade substitutes developed through modern technology have lessened the pressure on the conventional natural resources. An analytical model is developed which encompasses the agricultural resources of a 42-county region in lower Michigan. The model is de- signed to investigate the importance of natural resource deveIOpment under specified alternative demand conditions and changes in the level of technology. The model developed is a minimum-cost formulation of a linear program. It is designed to simulate a partial economic equilib- rium of the agricultural economy of the study area. By developing comparative static solutions with and without the test variables, the “i am " mid effects on M littf'lifibdo Ito buic .z‘mtion on soils, t :artglont. The coat! times of condi tions lithout technclogi trifictntly as popula 2:: decrease as tech: 3|. The adoption of ttfitt that accrue to inticitiet. Mars 0 3'0 subarea: of t}:- h‘: m South Central 0“ “t u. Niou 'nd 11:: ~ Melvin L. Cotner potential effects on natural resource rents and consumer benefits are determined. The basic linear programming model contains detailed information on soils, their quantity, productivity and location within the regions. The coefficients in the model are intended to be realistic estimates of conditions in 1980 for the region. Without technological change, natural resource rents increase significantly as population increases. Alternatively, natural resource rents decrease as technology gains outstrip the food and fibre product needs. The adoption of field drainage provides significant efficiency benefits that accrue to producers or consumers depending upon demand elasticities. Owners of drainable land receive increased rents. Two subareas of the 42-county region are studied in detail: the Thumb and South Central areas. According to the linear program, some 650 thousand crop acres have economic potential for additional field drainage. A survey of randomly selected farmers in the two areas indicated that farm operators felt additional drainage would pay on about the same number of acres. But only one-fifth of the farmers had plans for investing in drainage. Farm owners listed internal capital rationing as the principal reason for not undertaking the practice. Inadequate outlets for field drainage also were a significant factor in retarding drainage adoption. The analysis provides insights as to the relationship of resource development in the form of drainage to economic growth. Implications for general policies and specific programs are developed. TH! P0257 in pa. THE POTENTIAL ROLE OF AGRICULTURAL LAND DRAINAGE IN ECONOMIC GROWTH By Melvin L:h\Cotner A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics 1967 the research 1'1 p: drainage stud)" 21mins and Nature. lurch SerViCOe 55:“ 3.11 [variant 5:4 may of faraers i: mmdertaken stilt restated to 5?): a: ataodei was develc 2.8. Crickaan and '- Etult of HRS who p: all as fit-tancial a: A special than}: it w-aations and 43' I tonittee, ha utittance of A. All '4” is gratefully a The assistance 3:. :0 Economics Di V 1;? tciated. His he 1:.aptar IV and in a9, another NR! 3! .111 varsity of II :3 timing Staff.‘ li‘i’itanting resul ACKNOWLEDGEMENTS The research reported here represents,in part, the agricultural land drainage study undertaken by both the Farm Production Economics Division and Natural Resource Economics Division of the Economic Re- search Service, USDA. The work was in cooperation with the Agricul- tural Experiment Station at Michigan State University. The drainage survey of farmers in the Thumb and South Central areas of Michigan was undertaken while the author was a member of FPE. Later, the author transfered to NRE at which time the agricultural production and drain- age model was developed. The author expresses his appreciation to C. U. Crickman and W. B. Sundquist of FPS and W. A. Green and H. A. Steele of NRE who provided administrative and technical support as well as financial arrangements for the work. A special thanks to Dr. David Boyne who served as thesis adviser. His suggestions and constructive criticisms, as well as those of the thesis committee, have improved the manuscript significantly. The assistance of A. Allen Schmid as chairman of the guidance committee, also is gratefully achnowledged. The assistance of John Hostetler, a co-worker in the Natural Re- source Economics Division, ERS, located at Michigan State is deeply appreciated. His help in the development of the basic data reported in Chapter IV and in checking computer runs was invaluable. R. D. Dunlap, another NRE employee, assisted in the computer runs made at the University of Illinois. Vernon McKee of the Program, Evaluation and Planning Staff, USDA, provided valuable assistance in interpreting and presenting results. Pat Durst, NRE secretary at East Lansing, typed earlier drafts of the manuscript. Secretarial staff in the Department of Agricultural Economics and NRE assisted in typing and editing. To these--a debt of gratitude. ' Finally, the encouragement received from an understanding family has been deeply appreciated as work on my graduate program was extra- mural, which served as a principal substitute for family life. My wife, Clara, typed the final manuscript, a task performed with more excellence than the manuscript deserves. Errors of omission and commission, of course, are the author's. Melvin L. Cotner ii h; I '0 .i :n THODCLOCY lg ISTRCDL'CTICN . . . ‘0 firms. e e 3. Objective 132 0? NATURAL A. Resource Keith: Ricard Deplet Faith Public Polici BoConterpO: Resea Expiri C‘ Th. Theo: on Th! s: Heaou: Relax Intro DYnar POllc P011C A.c.n.r.1 TABLE OF CONTENTS Chapter I INTRODUCTION...‘OCOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO. Ae PUrPOSCeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Be ObJOCthCSeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee II ROLE OF NATURAL RESOURCES IN ECONOMIC GROWTH............ Ae Resource Scarcity Doctrines....................... Malthusian scarcity dOCtrlHEeeeeeeeeeeeeeeeeeee Ricardian scarcity doctrine.................... DOPIQthH scarcity doctrine..........o......... Filth in UClCnCO dOCtraneeeeeeeeeeeeeeeeeeeeee Public opinion about scarcity doctrines........ Policies assuming scarcity..................... Be contemporary Th00retlcal Work..................... Research by Resources for the Future........... Empirical studies of T. W. Schultz............. C. The Theoretical Dependence of Economic Growth on Natural Resources........................ The static theory of resource scarcity......... Resource scarcity as related to prepensities to consume and product demand elasticity. Relaxation of the technology assumption........ Introduction of resource improvement........... DynimlCI 0: resource U.Ceeeeeeeeeeeeeeeeeeeeeee De Policy IMPllcathHBeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Policy for research and extension education investments.............................. Policy for public investments in natural resource improvements.................... III METHODOLOGY AND ANALYTICAL PROCEDURESeeeeeeeeeeeeeeeeeee A. General Methodological Approach................... Be Formal ARIIYthll Procedure....................... Minimum COS: primal problem.................... Minimum C08: dalleeeeeeeeeeeeeeeeeeeeeeeeeeeeee GCRBr‘l CalumpthHSeeeeeeeeeeeeeeeeeeeeeeeeeeee Ce Farm Survey....................................... Survey ‘ChOdUIOeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee S‘mplfl plan.................................... Sample size.................................... IV PHYSICAL AND ECONOMIC DESCRIPTION OF STUDY AREAS........ A» Agricultural Characteristics of Study Areas....... Be L‘nd ChCTCCCCYIIthB and Av.lllbllltYeeeeeeeoeeeee Cropland available for future grain and r0' crop production...................... iii Page NM!— 29 30 31 32 35 36 37 39 39 41 41 45 47 a7 48 49 50 32 53 62 as C. Crop and Prc Iechnc Fertil Drain: 00 CO]: or E Drain: lo Alternate Prc EXpec: Livest PTOjec . A. Nature of Total iv Table of Contents (continued) Chapter C. Crop and Pasture Use, Alternatives and PrOdUCtlon POtOntllleeeeeeeeeeeeeeeeeeeeeeee Technology attainment assumptions.............. Fertilizer USO llBUfllpthflBeeeeeeeeeeeeeeeeeeeee Drainage POthtlfileeeeeeeeeeeeeeeeeeeeeeeeeeeee De C08: 0‘ Production................................ Drainage COSCBeeeeeeeeeeeeeeoeeeeeeeeeeeeeeeeee E. Alternate Regional Food and Fibre Production PtOJECthflSeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Expected per capita uses of agricultural com0d1t198eeeeeeeeeeeeeeeeeeeeeeeeeeeeee Livestock feeding efficiency and ration assumptions.............................. Projected regional product requirements........ V ECONOMIC POTENTIALS FOR LAND DRAINAGE.........o......... A. Nature of the Linear Programming Model............ Be Interpreting thB .ROSUICSeeeeeeeeeeeeeeeeeeeeeeeeee Total production COStBeeeeeeeeeeeeeeeeeeeeeeeee Refiteeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Marginal costs of production................... Cropping patterns.............................. Ce Base Program RBSUltSeeeeeeeeeeeeeeeeeeeeeeeeeeeeee De Regional malyslseeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Effect of product requirement changes.......... Effect of technology adoption changes.......... Effect of changes in drainage investment costs by resource owners................. E. Thumb and South Central Michigan Subarea WIYOIBeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee VI CURRENT AND EXPECTED DRAINAGE ADOPTION BY FARMERS....... A. Existing and Potential Field Drainage Improvements................................ B. Existing Nonfield Drains and Improvement Needs.... C. Reasons for not Making Field Drain and Outlet Improvements................................ Flfild drainage................................. Outlet improvement............................. D. Farming Changes Planned With Drainage Adoption.... VII SUMMARY AND CONCLUSIONSeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Ae SUMIrYeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Be COHCIUIIORI and Implications...................... ROBOUI'CO scarcity rents........................ Role of drainage deveIOpment in economic “O‘Cheeeoeeeoeeoeoeeeeeeeeeeeeeeeeeeeeee Policy 1mplications............................ Usefulness of analytical procedures in study... Page 67 71 76 76 84 86 89 91 93 95 101 101 105 106 107 108 109 110 115 115 122 126 135 141 142 147 149 149 152 154 159 159 ' 160 160 164 167 171 3:32? . ail.» :3...'.'.'A?T:Yeeeeeeeee £77.3le Aeeeeeeeeeee 31331 -~ SURVEY 5 m: II -- $2.533: 511:3 l.......... e 33114223153125 C? On.‘ n P Lil-.x weeeeeeeeeee ERIE?! ACPLASE REQ Vii-:3 Dseaeeeeeeee l'AJSl CELLAND USE Table of Contents (continued) Chapter BIBLIOGRAPHYOOOOOOO0.0.0000000000000000.0.0.0.0...00000.0...00. APPENDIX Aeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee PART I " SURVEY SCHEDULEeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee PART II -- SELECTED PORTIONS OF INSTRUCTIONS TO ENUMERATORS. APPENDIX BCOOOOOOOOOOOOOOOOCOOOOOOOIOOOOOIOOCOOOO0.0.0.0....OO. CHARACTERISTICS OF SOIL MANAGEMENT GROUPS................... APPENDIX COOOCOOOOOOCOOOOOOOOOOOO000.00.00.00...OOOOOOOOOOOOOOO MINIMUM ACREAGE REQUIREMENTO0.0000......OOOOOOOOOOOOCOO0.0.0 APPENDIX DOOOOOOOOOOOOOOOOOO...0.0.0.0....OOOOOOOOOOOOOOOOOO..0 MAJOR CROPLAND USE, AZ’COUNTY REGIONeeeeeeeeeeeeeeeeeeeeeeee Page 175 178 178 186 193 193 197 197 198 198 1:10 1A ‘Ns Extractive Pr' 51.5 Wholesale Indexes of I: Indexes of Uh Perl Products of Far! Real Ctaracteri sti in 51", Thur IF?! 0! Farm! Study An“. implant! L'se, leus Years . Cropland U... CNN! Years. alltl'lbution ““1 Off-Fara MSIWMC ( Ind South Ce: “‘1" Land 1' Study Area, Crepl‘nd Dl. Odllcuon . Table 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. LIST OF TABLES Extractive Product Prices (1954 Weights) Relative to BLS whOICSCIC Prlc. Index.............................. Indexes of Employment per Unit of Output............... Indexes of Wholesale Prices for all Commodities and Farm Products, Realized Net Income per Acre and Value of Farm Real Estate per Acre, United States............ Characteristics of Farmland and Farms Over Ten Acres in Size, Thumb and South Central Michigan Study Areas.. Type of Farming, Thumb and South Central Michigan StUdy Areas, 1963eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Cropland Use, Thumb Area Michigan, 1949-54-59-64 COBB“. YQCrSeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Cropland Use, South Central Michigan, 1949-54-59-64 Census Yfifiraeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Distribution of Farm Operators by Gross Farm Earnings and Off‘Fln Work...................................... Demographic Characteristics of Farmers in the Thumb md South Central Michigan Study Areas, 1963eeeeeeeeeee Major Land Use in the Thumb and South Central Michigan Study Ar...1958000.00.00000000000000000000000000000eee Cropland Distribution by Soil Management Group in the Thumb and South Central Michigan Study Areas, 1963..... Proportion of Cropland Recommended for Row Crop Production, Thumb and South Central Michigan, 1980..... Average Productivity Levels for Crop Alternatives on Soil Management Groups in the Thumb and South Central MIChlg‘n StUdy ”0",1963eeeeeeeeeeeeeeeeeeeeeeeeeeeee Average Productivity Levels for Crap Alternatives on Soil Management Groups in the Thumb and South Central Michigan Study Area, Assuming Technology Attainment 1, 19800....0.0000CCOOOOCOCOOOOOOO...OOOOOCOCOOOOOOOOOO0.. Average Productivity Levels for CrOp Alternatives on Soil Management Groups in the Thumb and South Central Michigan Study Area, Assuming Technology Attainment 2, N980.0000000COOCO'COOOOOOOOOCOOOOOOOOOOOOOOOOOOOOOOOOO. vi Page 15 17 22 56 57 58 60 61 63 64 66 68 69 72 74 "l. ‘a ‘ . 31:10 ‘ d, 25, Fertiliser Ap Manage-ant Gr Attainment Le Cropland Tile Group, 07‘1“. Central Mich: Potential Y1. Alternative. And South an TechnoIOgy A: E:qifliilient and I!!! Dl’ll here “”18. Prod; on Soil Hana; “I'mIIIV/a I Drllnag. I md Poorly Dr Centm Hichi I‘NQ “Minions I .qull'imgnt' Index Numb": I ““51“: tm Alt.m.t. Cr mehlgm Fir Table 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. vii List of Tables (continued) Fertiliser Applications for Alternative Crops on Soil Management Group 3, Under Alternative Technology Attainment Levels, Thumb Area, 1959 and 1980 Projected. Cropland Tile Drainage Potential by Soil Management Group, Drainage Condition and Slape, Thumb and South CCnCT'CI Michigan, 1958eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Potential Yield Increases from Drainage for Crop Alternatives on Soil Management Groups in the Thumb and South Central Michigan Study Areas, Assuming TCChn0108y Attainment leeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Equipment and Labor Costs for Budgets, Michigan Pam Drainagfi SCUdYeeeeeeeeeeeeeeeeeeeeoeeeeeeeeeeeeeee Average Production Cost Levels for Crop Alternatives on Soil Management Group 3 in the Thumb Area under Alternative ICChnOIOSy AssumPCIOHSe e e e ee ee e ee ee e Oeee e e e Drainage Investment Costs Per Acre for Imperfect and Poorly Drained Soils in the Thumb and South centr.1 ”lChlgm SCUdy ArCBSeeeeeeeeeeeeeeeeeeeeeeeeeee Assumptions for Alternative Effective Demand Requirements for Analysis of Drainage Potential in the Michigan Farm Drainage Study Areas................. Index Numbers of Projected Per Capita Uses of Major F.m Products, UDICCd StatGBeeeeeeeeeeeeeeeeeeeeeeeeeee Feeding Efficiency Assumptions for Determination of Alternate CrOp and Pasture Production Requirements, MlChlgm Ffim DTCIHCSC SCUdYeeeeeeeeeeeeeeeeeeeeeeeeeee Projected Livestock Feed Ration Composition for Determining Alternate CrOp and Pasture Production Requirements, Michigan Farm Drainage Study............. Production of Major Farm Products, U. S. and 42- County Region of Michigan, 1959-61 Average............. Indexes of Alternate Product Requirements for the Analysis of Drainage Adoption in Lower Michigan, Michigan P.“ Drainage sdeOOOOOOOOOOOOOOOOOoeeOOOOeee Tabular Illustrations of Minimum Cost Linear Programming Model with Drainage, Row Crop and Minimum Crop AchIg. EXthIOROeeeeeeeeeeeeeeeeeeoeeeeeeeeeeeee Page 77 79 82 85 87 90 92 94 96 97 98 100 102 .12] i 29. 33. L.’ g). Labor and Ca; C Product Re and Hithout A Michigan Para Major Croplar Lil Iectnolog 42-County Re: Prejections” M”Sinai Cos: hililitslents, Land Drainage Drain." Stu Labor and Ca; Ems" in p, Htld gt Addl {1011.1 1 :l‘. Dflinag. Stilt -1920 I Table 29. 30. 31. 32. 33. 34. 35. 36. 37. viii List of Tables (continued) Labor and Capital Costs and Resource Rents Assuming C Product Requirements, TA Technology Adoption, With and Without Additional Land Drainage, 42-County Region, Michigan Farm Drainage Study, 1980 Projections......... Major Crapland Use, Assuming C Product Requirements, TA Technology Adoption and Additional Land Drainage, 42-County Region, Michigan Farm Drainage Study, 1980 Projections............................................ Marginal Costs of Production, Assuming C Product Requirements, TA Technology Adoption an Additional Land Drainage, 4 -County Region, Michigan Farm Drainage Study, 1980 PtOJQCthflSeeeeeeeeeeeeeeeeeeeeeee Labor and Capital Costs, Resource Rents Assuming Changes in Product Requirements, Technology Adoption Held at TA Levels With and Without the Adoption of AdditionallDrainage, 42-County Region Michigan Farm Drainage Study, 1980 PtOJQCthIlSeeeeeeeeeeeeeeeeeeeeeee Marginal Costs of Production Assuming Changes in Product Requirements With and Without the Adeption of Additional Land Drainage, 42-County Region Michigan Pam Drainage Study, 1980 PijGCthflBeeeeeeeeeeeeeeeeee Major Crapland Use Assuming Changes in Product Requirements, Technology Adoption at TA Levels With and Without the Adoption of Additional Drainage, 42-County Region Michigan Farm Drainage smdy, 1980 PrOjGCthIISeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Labor and Capital Costs and Resource Rents, Assuming Changes in Technology Adaption, Product Requirements held at C With and Without the Adoption of Additional Drainage, 42-County Region Michigan F‘m DTCIMSC Study, 1980 PIOJOCthRBeeeeeeeeeeeeeeeeee Marginal Costs of Production, Assuming Changes in Technology Adoption, Product Requirements Held at C , With and Without the Adoption of Additional Land Drainage, 42-County Region Michigan Farm Drainage Study, 1980 Projections................................ Major Cropland Use Assuming Changes in Technology Adoption, Product Requirements Held at C With and Without Additional Land Drainage, Michigan Farm “.11138. Study, 1980 PrOJOCthRCeeeeeeeeeeeeeeeeeeeeeee Page 111 112 114 117 119 120 123 125 126 VJ . 31. 45. Labor and C Changes in Requirement at the TA, Drainage 5: Marginal :3: Drainage C: Additional Farm Drains I“-lior Crop: IDVQst-Eent C LQVQI A: Ll'COunty 1 ‘13:...“ Proje: Table 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. ix List of Tables (continued) Labor and Capital Costs and Resource Rents Assuming Changes in Drainage Investment Costs with Product Requirements at the C Level and Technology Adoption at the TA Level, AZ-County Region, Michigan Farm Drainage gtUdy’ 1.980 PrOJGCtionSeeeeeeeeeeeeeeeeeeeeeee Marginal Costs of Production, Assuming Changes in Drainage Costs, With and Without the AdOption of Additional Land Drainage, hZ-County Region, Michigan Farm Drainage SCUdy, 1980 Projections.................. Major Cropland Use Assuming Change in Drainage Investment Costs with Product Requirements at the C Level and Technology Adoption at the TA Level, 4 -County Region, Michigan Farm Drainage Study, 1980 Projections....................................... Efficiency Gains, Producer's Rents for Drainage and Land Drained under Alternative Public Cost-Share Plans, AZ-County Region, Michigan Farm Drainage Study, 1980 Projections....................................... Detailed Cropland Use Assuming C Product Requirements, TA Technology Adoption, With and Without Drainage Adoption at 100 and 67 Percent Cost Levels, Thumb and South Central Michigan Study Areas, 1980 Projections... Labor and Capital Costs and Resource Rents Assuming C Product Requirements, TA Technology Adoption, W1th and Without Drainage A Option at 100 and 67 Percent Cost Levels, Thumb and South Central Michigan StUdy AYOCSQ 1.980 PfOJGCtiOflSeeeeeeeeeeeeeeeeeeeeeeeeee Amount and Kind of Field Drainage Installed on Cropland on Thumb and South Central Michigan Farms, 1963.00000COCOOOCOOOOOOOOOOOIOOOOOOOOOOOOOOOOOOOOOOOOO. Farmer's Estimate of Additional Drainage Potential on Crepland in the Thumb and South Central Areas of “1611188“. 1963eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Farmer's Estimate of Additional Drainage Potential on Land with Existing Drainage Systems, Thumb and 30111311 Central “101118811, 19630eeeeeoeoeeeeeeeeeeeeeeeeee1 Summary of the Economic Potential for Tile Drainage as Estimated by Farmers, Thumb and South Central “101118811, 1963eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Page 128 130 131 131 137 139 143 144 145 145 V til 4‘. RI OJ. ‘2 a,‘ (r Plans for Ya..- fhusb and So. Ase-ant of Ce. Sonfield Dra' 19§3eeeeeeee PrOportion 0 Outlet Impro hichigan, 1,. PmPortion o Odtlet Acces lid South Ce Reasons f o r I2:?1’0‘wr- exits mtlets as F Expected L's« PTOpOrt‘ On ' “1435 And S than and iii-Jab arc: S .‘Iins .t t‘ Table 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. List of Tables (continued) Plans for Making Field Drainage Improvement, Thumb Ind SOUth Central Michigan, 1963eeeeeeeeeeeeeeeee Amount of County and Private Open and Closed Nonfield Drains, Thumb and South Central Michigan, 1963.00.00.00000000000000...OOOOOOOOOOOOOOOOIOOOOOOO... Preportion of Drainage Potential Dependent Upon Outlet Improvements, Thumb and South Central M1Chlgln, 1963eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Proportion of Drainage Potential Dependent Upon Outlet Access Across Neighboring Property, Thumb and SOUth Central Michigan, 1963eeeeeeeeeeeeeeeeeeeeeee Reasons for not Making Potential Field Drainage Improvements on Cropland now Served with Adequate Outlets as Related to the Expected Use of Credit....... EXpected Use of Credit for Making Field Drainage Improvements as Related to Age of Operator, Thumb and South Central MLChlgan, 1963eeeeeeeeeeeeeeeeeeeeeee Proportion of Farms with Farmland Drainage Potential, Thumb and SOULh Central Michigan, 19630000000000.000000 Average Time Lapse Between the Establishment of Outlet and the Installation of Field Drainage, Thumb and SOUth Central Michigan, 1963eeeeeeeeeeeeeeeee Reason for Not Improving or Cleaning Existing Drains It the Present Time............................. Changes Planned in Livestock System with Additional Field Drainage Installed, Thumb and South Central MLChigan. 1963eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Changes Planned in Crapping System with Additional Field Drainage Installed, Thumb and South Central M1Ch188n’ 1963ee0eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Current and Projected Use of Artificially Drained Lands, Thumb and SOUth Central Michigan, 1963eeeeeeeeee Significant Characteristics of Large Soil Management Groupings, 42-County Region, Lower Michigan............ Page 146 148 148 150 150 151 153 153 154 156 156 157 . 193 ">0 .th ‘1 e.. ‘9 “0 iii imam A: to Reflect 9 Farm Drainage Major Croplan: hichigan, 19:.- Table 61. 62. xi List of Tables (continued) Minimum Acreage Requirement Used in Analytical Model to Reflect Historical Production Shifts, Michigan Farm Drainage StUdyeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Major Crepland Use, 42-County Region of Lower “101118.11, 1949-64eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee Page 197 198 \.' “- i'teoreticai P: Cosbinations c Assuming Varic Esprovesent... $de Areas 1: Figure 1. 2. LIST OF FIGURES Page Theoretical Production Relationships from Various Combinations of Resource and Nonresource Inputs Assuming Various Levels of Technology and Resource Improvementseeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee 27 smdy Areas 1“ 50111318111 Lower Michigan................. 51‘ xii cmflx «'3 PART I -- SL'T PART II -- S: E? CZ-LL‘ACTERISI EINIML'M A: :3 P"MGR CRCPLA' Appendix LIST OF APPENDICES PART I " SURVEY SCHEDULEeeeeeeeeeeeeeeeeeeeeeeeeeeeee PART II -- SELECTED PORTIONS OF INSTRUCTIONS TO ENUMERATORS0.0..OOOIOOOOOOOOCOOOOOOOOOOO... CHARACTERISTICS OF SOIL MANAGEMENT GROUPS............. MINIMUM ACREAGE REQUIREMENT.OOOOOOOOOOOOOCOOO0.0.0.... MAJOR CROPLAND USE, 42‘COUNTY REGIONeeeeeeeeeeeeeeeeee xiii Page 178 186 193 197 198 A CCS The world is Things are ‘5 Coal is burre Iornts cut a Hells are dry mat is blow: Oil is gait-1, Drains receii land is sin‘a‘. m. is far t; Fire will ra. Soon Ve'll y.“ P9091! breed People hay. . floral: The en- “en: a TEE T ’L‘l'g Poten' You emit i m. Cream 1 I mezo 1 {Very “cliff: 100d 1| fO'J.’ in. need I £0 '9 ha» You“ Ind a $011 1. .13 F Can 8"” Tl1.11 til; “Oz-u: hm, But C l‘flpg'hm of t .. Ea- A PROLOGUE A CONSERVATIONIST'S LAMENT The world is finite, resources are scarce, Things are bad and will be worse, Coal is burned and gas exploded, Forests cut and soils eroded. Wells are dry and air's polluted, Dust is blowing, trees uprooted. Oil is going, ores depleted, Drains receive what is excreted. Land is sinking, seas are rising, Man is far too enterprising. Fire will rage with Man to fan it, Soon we'll have a plundered planet. People breed like fertile rabbits, People have disgusting habits. Moral: The evolutionary plan Went astray by evolving Man. THE TECHNOLOGIST'S REPLY Man's potential is quite terrific, You can't go back to the Neolithic. The cream is there for us to skim it, Knowledge is power, and the sky's the limit. Every mouth has hands to feed it, Food is found where peeple need it. All we need is found in granite, Once we have the men to plan it. Yeast and algae give us meat, Soil is almost obsolete. Men can grow the pastures greener, Til all the earth is Pasadena. Moral: Man's a nuisance, Man's a crackpot, But only Man can hit the jackpot. (Written by Kenneth Boulding; inspired by the symposium on ”Man's Role in Changing the Face of the Earth") xiv r-a: 335 the United Stet xliq. The current lulu e step in th mi the several n 1:134 the role net hunting and ex; E! the world provi c 1mm use and du‘ a: lie one would ‘15:? and» "11 ch .‘ “Nari of the rel: CHAPTER I THE POTENTIAL ROLE OF AGRICULTURAL LAND DRAINAGE IN ECONOMIC GROWTH INTRODUCTION The United States does not have a comprehensive natural resources policy. The current emphasis on comprehensive water resource manage- ment is a step in this direction.l/ But this policy pertains to only one of the several natural resources. Many divergent views exist con- cerning the role natural resources can play in economic growth. Even so, existing and expected pepulation pressures within the United States and the world provide the impetus for a better defined policy on natural resource use and development. While one would be optimistic to envision a monolithic resource policy under which all resource problems would be solved, a conceptual framework of the relationship of resource availability to economic growth should be developed. A resource policy is difficult in that goods and services from resources move in national and international markets. Resource use is conditioned by interregional and international resource supply and demand relationships. A comprehensive resource policy is complicated from the institu- tional standpoint also. In our federal system, the local, state and national governments as well as individuals play interdependent roles in resource use and deveIOpment. A resource deveIOpment program at 1] Senate Document 97. Policies, Standards,and Procedures in the [ormulation,_§valuation and Review of Plans for Use and Development of Water and Related Land Resources, 87th Congress, 2d Session, May 1962. 1 : .6 “'1" 1 «incl mast cone in mic an nintimshipe make zizciples mid thee him: and use L m in this resea: "ml resources, We m is mini is a" po‘. My ““9 lapel alumni“ in “mm“ land . a“ “fling lssu t: of thi. .0“. l‘. 11 b. hint“ On 2 one level must consider the programs and actions of others. The dynamic and complex physical, economic and institutional, relationships make the work of the economist difficult. but economic principles and theories are held to be relevant in the allocation, development and use of resources for the benefit of society. Ac P“! E'. In this research an examination of general principles concerning natural resources, their development and their potential influence on economic growth is made. Such princi plea should be useful to those involved in the policy formulation process. Only one aspect of the natural resource-economic growth problem will be studied in depth; that of examining the potential influence of agricultural land drainage in a specific region on economic growth under varying assumptions. Even with the narrow focus of the analytical part of this work, not all of the relevant variables are studied. As will be pointed out, additional information is needed by policymakers if a comprehensive natural resource policy is to be formulated. Infor- mation on the economic potential of drainage, even though partial, should assist in the developent of specific programs concerning land and water resources. Analytical techniques and procedures will be developed which may be useful in the future analysis of agricultural resource development problems. The procedures are applied in a pi lot study of lower Michigan and will be evaluated concerning their applicability and effectiveness. 3. Objective! The general objectives of this study are to: (I) review literature relevant to the resource scarcity and economic growth problems, (2) «new ‘3" {Elicetion‘ for myth. (3) dovel Mendel mm] in selected “'"I iithi mall!“ (I Quince and 131' 3?de areas - Vith reIPOC’ ileum, the W increased food a: 1nd drainage. (' cost-maria: arr~ substitution rel. — - lgiculturel lar. 3 (2) articulate the theoretical relationships and public policy implications for alleviating the resource scarcity impacts on economic growth, (3) develop and test an analytical model for examining the potential contribution of agricultural land drainage to economic growth in selected areas of lower Michigan, (4) examine the critical variables in the analysis of land drainage potentials, and (5) analyse farmers' experience and plans for making field drainage improvements in the study areas. With respect to the analytical model for selected areas of lower Michigan, the specific objectives are to: (1) determine the effect of increased food and fibre demands on the likely adoption of agricultural land drainage, (2) examine the aggregate effects of alternate public coat-sharing arrangements for field drainage, and (3) evaluate the substitution relationship between nondrainage technology gains and agricultural land drainage. (l) articulate thel indications for a mi, (3) develo potential contribu inulected areas lathe analysis of (finance and p1, my arm. Iith respect Enigma. the lpec themed food ”“1 Inc drain". (2’ might!“ “r” Ebatitution rela’.‘ 3 (2) articulate the theoretical relationships and public policy implications for alleviating the resource scarcity impacts on economic growth, (3) develop and test an analytical model for examining the potential contribution of agricultural land drainage to economic growth in selected areas of lower Michigan, (4) examine the critical variables in the analysis of land drainage potentials, and (5) analyse farmers' experience and plans for making field drainage improvements in the study areas. With respect to the analytical model for selected areas of lower Michigan, the specific objectives are to: (1) determine the affect of increased food and fibre demands on the likely adoption of agricultural land drainage, (2) examine the aggregate effects of alternate public cost-sharing arrangements for field drainage, and (3) evaluate the substitution relationship between nondrainage technology gains and agricultural land drainage. 301:: 0? he purpose of :l anxious resource 5 attspta to validate iaclaaaical theory lmcepta about r- lfiliutions of the " .l'tlic investment 5': 11:9 dW'lOment v Miles the thecre t ulyti cal Iodel to Lia se-srce Searci t 3°15 Pessimist: a: scientists that lie “coll fig her. it ‘5‘“ natural resou- cot-1th. '18. ug. CHAPTER II ROLE OF NATURAL RESOURCES IN ECONOMIC GROWTH The purpose of this chapter is first to review literature relevant to various resource scarcity doctrines, policies based on them and attempts to validate them. Then an attempt will be made to recapitulate the classical theory on resource scarcity and broaden it to represent new concepts about resource availabilities. Finally the public policy implications of the broader theory will be developed. Principles for public investment strategies for resource development and general tech- nology development will be discussed. The material in this chapter provides the theoretical underpinning for the development of the analytical model to follow. .A. Resource Scarcity_Doctrines Both pessimistic and optimistic views can be found among laymen and scientists that nonreproducible natural resources are scarce and are becoming more so. The pessimistic view obviously leads to questions about natural resource limitations on economic growth and questions about the wise use of these resources over time. Malthusian ggarcity,doctrine-oburing the early part of the 19th Century, Malthus postulated that population increases in geometric progression while means of subsistence increase arithmetically. Thus, in a matter of time,population eventually would begin to press on the means of subsistence. Modern theorists have classified this as the scarcity doctrine. According to this view,natural resources, being 4 Immciucibie, N [.192 the evaileb? time ”03’0“!“ 12:; urginel pr «74:4 against the Al output per impaired. Likc kritwt, the di: ' 3‘43?“ reaches litardisn ,. H mum sure: "1" on their I "u’d “ ‘ O I‘lugs 1 Milan. but th I .19: K . to dzainigmna he 5 nonreproducible, have a finite supply. According to this doctrine, as all of the available natural resources are brought into use the law of variable proportions comes into effect. The economy runs into dimin- ishing marginal productivity of labor and capital as these factors eXpand against the fixed amount of natural resources. As output per capita declines, the economic welfare of individuals is impaired. Likewise, if economic growth is measured by the increase in output, the diminishing returns slow the growth rate and ultimately, as output reaches a maximum, economic growth will cease.l/ gicardian scarcity doctrine--ln its rigorous presentation, the Halthusian scarcity view assumes homogeneous resources and absolute limits on their availability. The scarcity model attributed to David Ricardo relaxes these assumptions by postulating that resources are available but they have varying economic quality. As demand increases occur, resources of declining economic quality are employed. If in fact, a society does call in the more productive resources first, then the diminishing productivity associated with increased resource employ- ment would have a dampening effect on economic welfare and economic growth just as in the Malthusian scarcity model. Depletion scarcitygdoctrines--Nonreproducible resources can be depleted or destroyed over time. Stock resources and to a certain extent flow resources diminish with use. Soil nutrients, tree growth, A] For a discussion of these points see Morse, Chandler and Harold J. Barnett. "A Theoretical Analysis of Natural Resources Scarcity and Economic Growth Under Strict Parametric Constraints," Natural Resource; and Economic Growth, compendium of papers presented at conferences of Committee on Economic Growth of the Social Science Research Council, Joseph J. Spengler, editor, April 1960, p. 23. umls, ores, 0 smile or flow 1am to a single assume evailabi anal balance at Euriim swcit} W lore acute Faith in sets M— l’ticuiu- leteris men to b.“ ev. :m b. “Mded . I.“ ’1 “Bites. 3.. a“ CCRC e n-Vgs .‘nd man e 3 k If?“ . new, "‘z- At t tw. "‘°'~‘-‘Ient is u Se "a h . minerals, ores, etc., are depletable. Associated with maintaining the renewable or flow resources is the problem of ecological balance. Damage to a single resource or element may deplete the aggregate of the resources available for man's use. The depletion and impairment of the natural balance of the earth's resources allow the Halthusian and Ricardian scarcity doctrines to be more severe. Diminishing returns become more acute and economic welfare and growth more limited. Faith in science doctrine--Whi1e at any given time the supply of a particular material or group of resources may be limited, there is reason to believe that over the long run the total supply of resources can be expanded. The technology and knowledge springing from science in effect can expand the supply of the resources either in developing more resources in the same form as the original or by developing substitutes. The new concept of resources is a dynamic view. As science im- proves and man's knowledge grows, increasing prOportions of our total environment can be used to provide food, shelter, clothing, tools, energy, etc. At the present time only a small proportion of our total environment is used for these purposes. Likewise,if we accept the view that there is an infinite amount of matter in total space then the horizons are unlimited. Furthermore, if matter is never destroyed by virtue of its being used, and only its current arrangement into useful resources is destroyed, then man needs only to resort to the process of science to develop some new (and perhaps improved) replacement or substitute resourcesal/ 1] For an excellent discussion of the technological advances on the horison see Fisher, Joseph L., and Hans H. Landsberg, Natural Resourcg; Projections and Their Contribution to Technological Planning, Resources for the Future, Washington, D. C., Reprint No. 32, January 1962, pp. 127-137. he ieplicationl 55m. more would :tuwrcu want and nativity, forces i mum to: the team :fmoum scarcity a amend and dir his ”confidence m to proceed vi ti- ”W °Ptiaistic \ “ti-“i resources 0' s”Wu! desirabl W102! this “03 116mm! control c .. t1 Minion. r.'°U1’c I! “y b. fOre.e P3211: O 1111 0" \k at?! I with, “unto: 7 The implications of this view for economic growth and welfare are profound. There would be no resource limitation on growth. As pressures on resources mount and labor and capital experience diminishing marginal productivity, forces would be set off in the economy to develop sub- stitutes for the resource. Economic welfare need not diminish because of resource scarcity as long as the forces of science and technology can be controlled and directed to this end. This ”confidence in science and technology" could lead resource users to proceed with reckless abandon. however, most individuals who hold the optimistic view also see the necessity of the wise use of existing resources over time. The wasteful use of resources would not . be socially desirable. Rather than drift with population trends and technology this group holds the view that society should strive for increasing control over the key factors in the population-resource problem. This process involves a systematic appraisal of trends in Population, resources, and economic activities so that emerging prob- lems may be foreseen and plans made for meeting theml/ Public opinion about scarcity doctrines-~Many highly regarded Officials, educators as well as laymen, voice concern about the resource scarcity problem. For instance, Admiral Rickover stated on a TV program, If we continue to use minerals and fuels at the rate we do, there is no question that within a generation or two there will be a shortage. It is my firm conviction that that nation which controls energy resources will become the dominate nation in the worldagl ‘1] For a discussion of these views of "cautious optimism” see Fisher,.Joseph L., Our Resource Situation and Outlook -- Public Policy and Individual Res onsibilit , Reprint No. 22, Resources for the Future, “.mRngton' De Ce, 2]. pp. ‘2] ”See It Now," TV program manuscript, November 18, 1956, CBS. umetlciet, R01 the world's use of larx‘. «tr-sly a: ham energj basic PFOblq of living ii the eubeieti areas will 1 Already the of the vori‘ oi the good I: econosics pro Under these in not a th- ‘0I16e Us I “fit. Java scarce and to realise - 1‘ tfill com 5" Ms ou NPPOrt an . of living, °f I finite “I” ther litter . W'stion Io: m. .0 far Ch. op. lime “numb 8 A geneticist, Robert C. Cook writes: The world's growing population will force the use of marginal lands, which in general are extremely expensive to exploit. More and more human energy will have to be devoted to the basic problem of producing food and the standard of living instead of going up, will remain at the subsistence level..., while the wealthier areas will find their standards of living declining. Already the pressures of population in most parts of the world haveviympelled an unwise exploitation of the good lands An economics professor writes: Under these circumstances the Halthusian doctrine is not a theory but a reality in many parts of the world. we have only to think of China, Indonesia, Egypt, Java or even parts of Europe where food is scarce and the standards of living unbelievably low, to realise the seriousness of the problem.... Even in this country there is a growing concern as to how long our existing resources can continue to support an expanding population and rising standard of living. Furthermore, if we accept the concept of a finite supply of resources we are forced to admit there is no answer to the population problem. No matter how much.we save or replenish it is only a question of time until the supply is exhausted. For the more pessimistic, it is a matter of years, for the optimist a little longer.Z These statements concerning the scarcity doctrines go on‘gg infinitum. Large numbers of our lay conservationists, as well as many or our more highly trained individuals, believe in the pessimistic Icarci ty doctri nes . ‘ 1] Cook, Robert C., Human Fertility,_The Modern Dilemma, London 1951, ’e 296a 3] Reese, Jim E., "The Impact of Resource Decisions on.America's Economic Development, Resource Use Policies: Their Formation and IllMct (a series of background talks) Conservation and Resource-Use regional Project, Joint Council of Economic Education, New York, ! 59. biid'! assum‘. ““1“ ”sour: airy doctrines. eternity of rest azuiniog economic la maple of ' so: marvetion illumination 0 bionic ”smug =3": that the r no of m" 5” 3“ Motion ”m“ '1 napalm hm. Sine. Pro: 133‘“. ., Md 12: 1am“?! Hi c] 9 Wuhan of those responsible for developing our national resource use programs tacitly assume the validity of the scarcity doctrines. Conservation policies aimed at maintaining the preduetivity of resources over time are devised with the purpose of maintaining economic welfare and fostering economic growth. An example of the use of the implicit ecarci ty assumption is the recent conservation needs inventory for Hichigan and the U. I.“ in the determination of Nichigan soil and water conservation needs, one of the basic assumptions guiding technicians in developing the needs inven- tory was that the resources would not be able to supply the farm product needs of consumers in 1975. The assumptions were that aggregate demand for farm production in 1975 would increase about (.0 percent over 1953 because of population increase and small increases in per capi ta expend- itures. Since production currently is in excess of utilisation, an increase of around 30 percent will meet projected requirements. For this inventory Michigan farm production is assumed to increase 25 percent between 1953 and 1975.3! The fact that there is a gap between require- ments and the potential supply indicates that, implicitly, the scarcity doctrine must hold. With this as a basic assuption, technicians in the Various counties when developing the needs inventory would tend to stress the use of more conservation inputs for the maintenance and development of agricultural land. The productivity change of 25 percent has as one basis, at least, ll See ”An Inventory of iii chigan Soil and water Conservation Needs," Michigan Agricultural Experiment Station, November 1962, and Basic Statistics of the National Invggtogz of Soil and Water Conservation heedg, Statistical Bulletin 318, USDA. 1’ Ibid., see Michigan Experiment Station publication, p. 7. uni! 5! USDA natu‘. 2'?" of 31014 9103' xiii mi m “econoi injections were in mam' yield an ritual. Io none :5 mm: practi c and on the seam Retires would - “3- me latter “5.331% of impr: 10 a study by USDA natural scientists and agricultural economists..1./ Two types of yield projections for 1975 were made. An ”economic maximum” yield and an ”economically attainable" yield were determined. Doth projections were in terms of “fight“ gnown pragtigeg. The ”economic maximum" yield was estimated based on each farmer being completely rational. No noneconomic factor would retard the full economic adoption of current practices. The ”economically attainable" projection was based on the assumption that certain limitations on management and incentives would influence and tend to retard the practice adoption rate. The latter projection was based primarily on past rates of adoption of improved practices. The 1975 agricultural production was projected to be 50 percent higher than the 1957 level if the ”economic maximum" assuption is used and 25 percent higher than the 1957 level if the "economically attainable" level is postulated. The latter figure was used for developing the state conservation guide. The "economically attainable" measure gives no weight to the development of new techniques of production during this period that would shift the production function upward. In this context the linear extrapolation of existing techniques seems unduly conservative. Regard- less of its accuracy the projection as used by the conservation needs workers had an implicit assumption of resource scarcity. B. Contemarag Theoretical Hort Professor 1'. if. Schults at the University of Chicago has been instrumental in bringing about an awareness of the role of resources in economic growth and welfare. In looking at the performance of ¥ y Barton, G. T. and R. l. Daly. Prospects of Agriculture in a My, paper presented at conference on Problems and Policies of American Agriculture, October 27-31, 1958, mimeograph, p. 13. at,“ mtri e ,3". receive antics devel moral resource 2:. . (These . :me next sect "10?“ in thi We meta . Schultz's t] '3 °f the resou: We” not co: :5? m. I“ t... 11 Western countries as they have developed, he finds that natural re- sources receive a smaller proportion of the total national product as the nation develops. Further, as increased demands are placed on natural resources their unit prices have not increased relative to other prices. (These empirical generalisations will be discussed more fully in the next section.) his hypothesis supports the optimistic view developed in this section about resource scarcity, vis., advances in economic growth and welfare nggd not be limi ted by natural resources. Schults's thesis is that economists have not taken into account all of the resources used in production. There have been some new resources not considered and there have been some effective substitutes for the land resource in this set of new resources .1, The characteristic of modern economic growth is that wholly new resources are developed and these resources play an ever increasing role in production and growth. Schults states, "It is by adding to the stock of resources and, then, by employing them that we increase the national Product."-2-/ Thus, increases in resources result in economic growth. Schults distinguishes two sets of resources - conventional and non- conventional . Conventional resources include labor, land and reproduc- lbla physical capital as conventionally treated and measured. Schults labels the nonconventi onal set of resources as those that pertain pri- Iari ly to the improvement in the quail ty of the conventional resources. Of primary importance is the concept of human capital. The quality of _—._ _l_/ Schults calls this the ”underspecification of resources." he developed this idea in his lectures given at the University of Illinois, June 17-20, 1958. See Schults, T. U., "Land in Economic Growth," Agricultural Economics Research Paper No. 3816, Univ. of Chicago, August 26, 1958 (mimeograph),pp. 27-32. 2., Ibide’ Pa 270 hither force a semis the I optimises that W quilt! Eiinothesie 1| continual i limi that the 3‘“ o. resouri 0th” ”the: mu: 12 the labor force and the stock of useful knowledge have increased. In other words the nonconventional resource is increased knowledge. Schults hypethesises that these nonconventional resources are manifest in the improved quality of the old conventional resourcesJJ he argues that his hypothesis is supported by the fact that the else of the stock of unconventional inputs has increased relative to that of the conventional set and that the rate of return obtained from the productive services of these new resources has been relatively high. Other workers are in major agreement with Schults, Earl heady writes: ...education will be important as it prepares human resources to be efficient managers in agriculture, but more so in providing education and training adapted to the skilled and professional fields of greatest demand derived from economic growth. Pro- vision of more human resources to these fields will be a greater immediate contribution to national growth than upping the rate of output progress in agriculture. Improved education will be needed in agriculture so that diminishing returns won't be encountered in traditional inputs, with ratio of input to output in national food requirements increasing.- Thus Heady, too, is optimistic that the acquisition and application of knowledge will allow man to free himself from the grips of limited resources. Harold J. Barnett,in a discussion of the static scarcity theories, indicates that by relaxing some of the rigid assumptions behind these Iodels, the effects of natural resource scarcity might be indefinitely k ll lb‘de. Po 37s 31 Ready, Earl C., icultural Po ic Und r ncmi velo ent, Iowa State University Press, 1962, p. (.90. will 3. grgues mamas by inc" ngmmt function or mace of disinis.‘ mm scarcity can rim opposing force: distill be operat‘ mute: had not bee. tion function coul “ml! of the net mart: more can r residues of in; W 101109“: (1) t1“ ' m. I11": ..‘311 at" Nu. m. , “our“. to 13 delayed.l/ he argues that if the static gggigl_production function is characterised by increasing returns to scale (presumably this is the management function on how to combine labor and capital inputs), the appearance of diminishing marginal returns to labor and capital due to resource scarcity can be indefinitely delayed depending upon the strength of the opposing forces. he further observes that the scarcity force would still be operational, and effects would still be experienced. If resources had not been scarce, then the improvement in the social pro- duction function could have generated even a much greater influence on the growth of the national product. Barnett thus develops the case where rosource owners can receive increased scarcity returns while marginal productivi ties of labor and capital can remain constant or even increase. Research by Resources for the Future--Recent work published by Resources for the Future represents attempts to measure the alleged changes in natural resource scarcity. In this work two measures are developed: (1) time series of product prices for minerals, timber and agriculture, and (2) time series of employment per unit of output. The first measure reported by Harold J. Barnett,3/ is a price rel- ative index. It is a ratio of the price index of the products produced by the resources to the wholesale price index for all products. The specific hypotheses that Barnett allegedly is testing concern the rising resource factor costs in the scarce resources sector. Presumably, the factor cost of a scarce resource in a competitive market would increase k y Barnett, liarold J., Measurement of Chage in Natural Resource Economic Scarcity and Its Economic Effects, Reprint No. 26, Resources for the Future,‘Washington, D. C., March 1961, pp. 87-88. 2., Idee. 1). 93s writes of the p in. has. 1870 I unit prices of 1 min to the 31.1 while this am howls. the eh “ulna. the ”511 “militanc '3' ‘0 not devi. to: relative she 3“the forum win 1%“ m 1. ,1. of ‘ an. mm! o: M: Ben 1!. the prices of the products from the scarce resources relative to all goods. Between 1870 and 1956 there was approximately a 10 percent increase in unit prices of extractive goods (agricultural, minerals, timber) relative to the DES wholesale price index (Table 1). Barnett concludes that while this small rise would give some credence to the scarcity hypothesis, the short-term cyclical movements are so frequent and of such magnitude that the small long-term change raises doubt about its social simificance. Individually, the agricultural and mineral compo- nents do not deviate mch from the aggregate. Only the forestry products price relative shows a steady climb over this period. Barnett concludes that the forestry component is the only resource that appears to be re- ceiving increased scarcity returns. Re hastens to qualify his conclu- sions in view of the vagaries of the index number price weight problem and the paucity of data in the earlier periods. howover, Barnett presumably is making a dynamic measure of resource scarcity. lie measures the price of product each year against the whole- sale price level in each year. The problem concerns what is happening to the quality of the other nonresource factors of production such as labor, capital and manag-ent in the agricultural component as compared to the total wholesale goods industry over time. For his measure to isolate the scarcity effect for agricultural land over time, the nonland capital, labor, management-output functions have to be identical over time in both the individual component and the wholesale aggregate. To the extent that these diverge, the change in the price relative index would then reflect changes in nonnatural resource inputs as well as Nssible resource scarci ties. The improvement of the capital, labor, 'a'ui. ktrsctive Pj' helesale Pt Yen silt: 1170-19 1880-89 1890-99 1900-09 1 10.19 1920.29 1930.39 196049 15 Thble 1. Extractive Product Prices (1954 Weights) Relative to BLS Wholesale Price Index Years All Extractive Agriculture Minerals Timber (1947-49 - 100) 1870-79 70 65 93 28 1880-89 68 72 63 34 1890-99 68 71 65 38 1900-09 72 74 72 41 1910-19 82 84 83 42 1920-29 85 82 103 54 1930-39 77 71 96 57 1940-49 96 98 94 81 1950-54 95 91 102 106 1955 89 80 108 109 1956 87 77 110 109 ‘_ Source: N. Potter and F. T. Christy, Jr., U. g. Natural Resource Statigtics, 1870-1956. II“pout?“ "ti mill 1"” 60-90“ numb" and th m scarcity- *1 rue: prim 1“" r m productivit u the mt”! ““1 he second In!“ miiic hypothesis t unity on the urgil Nativefihen labo: IE thisty dhonstr. it lined in all majo 16 managemmt-output ratios in agriculture has been phenomenal. Whether other BLS price components have experienced identical changes over time is questionable and therefore would tend to impugn Barnett's measure of resource scarcity. Alternatively, one could conclude that agricultural product prices have remained relatively constant over time because of increased productivi ties of capital and labor and would have been lower had the quantity and quality of resources been greater. The second measure concerns labor productivity over time. The specific hypothesis tested here concerns the adverse effect of resource scarcity on the marginal productivity of labor. If labor becomes less productive, than labor costs per unit of output should increase. Potter and Christy demonstrate that labor costs per unit of output have in fact declined in all major resource components except forestry (Table 2).}! Therefore the conclusion is that the resource scarcity doctrine is not supported except possibly in the case of timber. Timber cutting and pricing is so integrally related to U. 8. Forest Service policies and programs on public lands that the timber price rise may be an example of artificial scarcity resulting through the institutional forces involved. Questions can be raised whether the assumptions behind the Potter and Christy analysis are valid and therefore allow the conclusion drawn. The difficulty with their measure (just as in Barnett's) is that to isolate the resource scarcity effect, they must assume, in the case of agriculture for instance, that the labor cost per unit of nonland capital is constant over time. If the marginal productivity of labor increases significantly with respect to nonland inputs, then there is a problem in ll Potter, Neal and Francis T. Christy, Jr., Eploygent 93d Outfit in the Natural Resourgg Industri 3;, 1870-1955, Resources for the Future, Nashington, Reprint No. 26, March 1961, p. 128 hole 1 lure 1870-7' 1883-8 mo 1920.1 mo. 1920. 1930. i940. 1950 1955 Son! 17 Table 2. Indexes of Employment per Unit of Output Years Agriculture Timber Mining Extfiitive Manufacturing GNP (1947-49 - 100) 1870-79 341 48 598 370 356 320 1880-89 291 58 440 320 236 230 1890 298 85 n.a. 310 233 226 1900-09 238 63 298 250 208 182 1910-19 214 73 233 220 176 167 1920- 29 189 112 194 186 146 147 1930-39 170 111 157 173 132 . 138 1940-49 114 114 105 113 98 105 1950-54 81 100 84 81 87 89 1955 74 n.a. 70 73 80 82 Source: N. Potter and F. T. Christy, Jr., W itagiggicg. 1s7o-125e. mm m “it“ snow Malawi ‘ arises. Caution Mouldified. aided em :1 (let: to shoe t urinal lealth. Iinr total veal! “tilted to 17 pa “dine. This cc "‘19 Prior to 1 Schults of! mm“. 9! 11 W to ‘1": MM.“ 18 measuring the relative strength of these two forces. Neither of the measures developed by Barnett and Chri sty serve to refute the scarcity doctrines. Conclusions can be drawn only about how the scarcity effect has been modified. mirical gtudies of T. W. Salts-donuts has su-arised histori- cal data to show that land represents a declining fraction of our national wealth. In 1896 the total land component represented 38 percent of our total wealth. In 1920 it was 28 percent and in 1955 it had declined to 17 percent.l/ Likewise, agricultural land shows a marked decline. This component represented about one-fifth of our national wealth prior to 1910 and was equal. to one-twentieth in 1955.3, Schults offers two explanations for the apparent declining economic importance of land. On the supply side, progress in technology has tended to enlarge the production potentialities in agriculture as much as in other industries. On the demand side, the demand for agricultural products has not risen in proportion to the demand for the products of other industries. Low income elasticities for agricultural products and a decline in the rate of population increase in the industrialized Western countries account for the relatively smaller increase in demand for agricultural products. Thus,two complementary forces are in action in developing countries which explain the declining fraction of wealth and income accounted for by agriculture and other natural resources. This information is evidence that for the U. 8., natural resources are not ce-anding an increasing share of the total product and have not inhibited economic growth in a significant degree at least. ll Schults, T. W., Research paper 3816, op. cit., p. 5. 21 [b1 . m til: point, will: is: less de‘ me to question: Methity continu tin: utimsi Sec: woes siaply a mu over the pri this expand the‘ :iitmtional t mmandthd The decline 1 ““1 "sources Whnot 19 On this point, Abramovits cautions about the generalisations possible for less developed countries based on this evidence.l/ lie raises two questions. First, will rates of technological gains in productivity continue and will they have the same effect on other devel- oping nationsf Second, to what extent is the declining importance of resources simply a shift in the comparative advantage of the industrial sector over the primary product sector? Will all developing nations be able to expand their industrial component accordingly? A country involved in international trade and in protective tariff and subsidy programs may achieve a wealth distribution not possible in other countries. The decline in the share of total national product attributable to natural resources does not in and by itself show that limited natural resources do not have a drag on the economy. The discussion of the measures reported by Resources for the Future is relevant here also. Would economic growth have been greater if there had been more plentiful natural resources? To the extent that this is true, the scarcity effect still is operational. The implication is that the highly developed countries to date have found means of counter-balancing the scarcity effect. Abramovi ts states: ...(The proposition) is not about natural resources at all, but rather one about the yield of technological progress and capital accumulation. To get the specific contribution of physical endowment to the generation of growth,...wo need to pose the question somewhat differently. We ought to ask what the importance of differences in resource endowments is in accounting foizr differences in rates of growth among countri es...’ ll Abramovits, Moses, Conant on T. W. Schults's paper, ”Connec- tion. letwun Natural Resources and Economic Growth," Natural Re our“. ‘M ‘M° G . Mo. pp. 9-14. ——--'-— z.’ mgog Po 1‘ "gather ”I“: 9" '0 2rd Umcnvably r maths resource c mus, levels of ad savings, investmen Schults also loo Ducts and of farm first two periods- funny 1) Rites race 15 Meant 1910-56. 2) i’Yltes of 1 Mon: re‘. 1910-56. 3) “thongh ‘ “flices o '11 “Puts 4) Dig Pflce: r‘lltlv. 1 farting, S) "1" real ”t“. (e Prod .e v.1“. T'lai 20 In other words, are some resource barriers harder to overcome than others? Conceivably resource endowment and the extent and speed by which the resource can be exploited would have some effect on per capita incomes, levels of education, attainment of skills and other factors such as savings, investment and incentives. Schults also looks at changes in relative prices of agricultural products and of farm inputs including the services of farm land. No compares two periods--1910-14 and 1956. The following summarises his findings .l/ 1) Prices received by farmers for farm commodities declined about 15 percent relative to the index of consumer prices between 1910-56. 2) Prices of farm products at wholesale also declined about 15 percent relative to all commodities at wholesale between 1910-56. 3) Although satisfactory measures are lacking, the price of the services of farm land has been falling relative to that of all inputs used in farming between 1910-56. 4) The prices of all nonland inputs in agriculture have risen relative to farm product prices between 1910-56, except fertiliser. 5) Farm real estate prices and income attributed to farm real estate (excluding farm structures) have declined relative to farm product prices between 1910-56. a. Value of farm real estate per acre declined 33 percent relative to farm product prices. b. Income attributable to farm real estate, divided by an index of the quantity of farm land declined 29 percent relative to farm product prices. Schults states that this evidence strongly supports the view that the supply price of the services of land has been falling, not only relative to farm product prices but relative to consumer prices. On an economic basis, an influx of imported farm products could cause land ll 22. Cit., 'r. w. Schults, Research Paper No. 3816. K100 a decline . Milt neithe mm the dwd m 1: via of th n1 utete prices Mm declined. mine are lnop m0 lets cite m can be 3m of m. m . ""N to be ““PM and 1 mu, n” “shot 1 21 prices to decline. Also. the physical supply of farm land could have in- creased, but neither of these are the case. Population pressures have shifted the demand for agriculture products considerably. Why is it then, that in view of the relatively small shift in the supply function, farm real estate prices fail to rise at a greater rate? In fact, they appear to have declined. He concludes that the Halthusian - Ricardian scarcity doctrines are inoperative and have not limited economic growth. The data cited by Schults as measures of the resource scarcity phenomenon can be subjected to the same questions about assumptions as those of the 2!! studies. The nonland capital and labor-output ratios are assumed to be constant in the two periods. To the extent that non- land capital and labor have induced increasing agricultural output re- turns, the higher MVP's would have the effect of lowering farm product prices disproportionately in the second period, making the index smaller even if there were constant returns to the land input. In other words, the change in ratio of land rent to agricultural product prices in t0 and t1 would not be an accurate measure of the scarcity effect of a finite supply of land if the agricultural product prices in the second period were influenced by increasing returns in the labor and nonland input. Purther, the conclusion by Schults that real estate values and in- come attributable to farm real estate are declining relative to farm product prices can be 'questioned. In an att-pt to reconstruct and up- date the indexes, the index of farm real estate values per acre was found to rise 190 points betwun 1915 and 1960 (Table 3). The wholesale Price index for farm products rose 123 points for the same period. Clearly, farm real estate prices have increased significantly in the last 111.3. Indexes of Products, E 1011 Eltltc 1 I UhoIes All Comma ‘ 100 237 151 125 115 122 147 21% 24‘ 24 m 31 “on C 7 Wit 0: “101' inCoIe q 51101.‘. "ilhtg 22 Table 3. Indexes of Wholesale Prices for all Commodities and Farm Products, Realized Net Income per Acre and Value of Farm Real Estate per Acre, United States Index Index value Farm Year Wholesale Price Index Realized Net Real Estate All Commodities Farm Products Income per Acre per Acre (1915 - 100) 1915 100 100 100 100 1920 237 211 177 168 1925 151 153 161 125 1930 125 123 106 111 1935 115 110 103 74 1940 122 95 97 80 1945 147 179 263 121 1950 216 244 271 169 1955 241 224 233 218 1960 246 223 I 234 290 Source: Historical Statistics of the United States, Colonial Times to 1957 with Continuations to 1962, Department of Commerce Indexes of wholesale prices derivod from Series E-26, 27. Realized net income index constructed from Series K-I27 and K-2. Index of farm real estate value per acre constructed from Series K-7. Wholesale price index for 1915-50 period based on 1926 price weights; thereafter 1947-49 servod as the base period. ”a stile for rice I“ for arts In 1960 u n: be ignored. rim for all t not land is c :1 in source, 1 ’1‘" Prices. Many Proble flee of stock r may. "1.“- imam, n 'l’ilhility in :1 112m . higher ‘ “wt :5. he". hdumr Nte M" u" Peri 23 decade while farm product prices have declined somewhat. The wholesale price index for all commodities was slightly higher than for farm pro- ducts in 1960 as compared to 1915. The rise in real estate values can- not be ignored. Real estate values were higher relative to wholesale prices for all commodities for the first time in 1960. The agricultural use of land is only one of many uses that gives land value. Regardless of the source, forces are in action to bid land prices up relative to other prices. Many problems plague the analysis of changes in land prices. The price of stock resources, theoreticallygis the present value of the pro- spective stream of incomes. The discount rate used influences price. A high discount rate represents a pessimistic view about the level and/or variability in the stream of revenues from the land. A low discount rate allows a higher capitalised value, indicating a more optimistic view about the income earning capacity of the resource. To the extent that the discount rate is affected differently by exogenous factors in suc- cessive time periods then actual prices may not be entirely relevant in measuring the true scarcity component in land price. In recent decades opportunities for invastment in nonland capital ventures and the rela- tively high returns would tend to driva up discount rates and would lower the capitalised value of income streams from land. Even so, land prices have risen relative to other prices in the last decade. In su-ary, the empirical evidence from the 0. 3. experience supports the optimistic view about resource scarcity.‘ Porces have been released in many of the wastern industrialised economies which provide substitutes for natural resources as they become scarce. The theoretical analysis and empirical validation of these forces are the critical pro- blems at the moment. However, the empirical data presented are not 5,131 11‘ thl s effect '1‘“ 1. the Theore In this s attic form so 5‘ pephics a find reswrce 3' Fri-l?! pu ‘Ilthneian - 1 m” and sec: till he d1 sea“ 1" term Ocono u". to lake ‘ hr "“1081 mm. Of .COI 24 convincing that natural resource scarcity has had no effect or will have no effect whatsoever on economic growth. C. The Theoretical Dependence of Economic Growth on Ngtural Resources In this section the scarcity doctrines will be summarised in geo- Imtric formiso the dependent relationships can be seen more clearly. The graphics are for explication only and are not meant to imply that broad resource problems have been refined for mathematical analyses. The primary purpose is to develop more explicitly the nexus between the 'Halthusian - Ricardian scarcity doctrine," and "faith in science doc- trine" and economic growth. Finally, the "faith in science" doctrine will be discussed in terms of conscious public policies to foster the long term economic growth function. Information requirements for policy makers to make rational and knowledgeable decisions will also be discussed. For purposes of clarification of the theoretical exposition, the concepts of economic growth and natural resources are defined. Economic growth--Rconomic growth is the added economic activity generated through the utilisation of resources to provide goods and services. For economic growth to occur, capital must be invested to provide new income earning and,consequent1y, consumer demand activity. Not only must there be additional resources available for capital invest- ment but there must be a demand for the goods and services from the resources-omaking the capital investment attractive. Gross National Product is the direct measure of economic activity; consequentlygthe rate of change in GNP is a measure of economic growth. Economic growth, Just as with economic efficiency, does not necessarily imply improvements in individual economic welfare and income distribution. While these are “a, probl 5e “bud“. Natural arsenic use really re1 ru vhich c: I: least wit? 2 several we Emacs use 3‘ "er time. “Mme may it! ovu- u... "' “source. 1 ”more, use a: M 112111 in the CC I: :5, '1’! rings "Wm M 4 25 worthy problems, the individual welfare aspects will not be studied in the subsequent analysis. Natural resources--Resources are instruments of production that have economic usefulness. Natural resources are such nonreproducible and naturally replenished items as agricultural land, water, minerals and ores which can be depleted but cannot be reproduced in their exact form, at least with current technology. Natural resources can be manipulated in several ways, anyone of which can be a conscious policy objective. Resource use can be regulated so as to conserve, extend or sustain its use over time. Resources may be depleted and used at exhaustive rates. Resources may be developed so as to improve their quality and availabil- ity over time. Parts of the environment may be combined into entirely new resources for which there is new demand. The concept of natural resource use and development is dynamic. The gtatic theory of resource scarcity--Classical theory holds that limited resources will have the ultimate effect of restricting output in the economy. The presentation in this section has its roots in the writings of Adam Smith, Thomas Malthus, David Ricardo, John Stuart Mill and Alfred Marshall}, An aggregate production surface can be conceived where natural re- sources and nonnatural resources can be combined in varying proportions (Figure 1, chart 1). To be less abstract, one could conceive of an aggre- gate agricultural production process where units of land would be the I] For an excellent summary discussion of the theories of these early economists see Harold J. Barnett and Chandler Morse, "Scarcity and Growth, The Economics of Natural Resource Ayailability," The John Hopkins Press, 1965, Chapter 3. The writer is indebted to these authors for ideas in diagramatic presentation. we. inpute It mine! I: e Jolt :nmonite of he in product 1 lifted and fibre may prenmebi: citation in so: 1‘: illustration hand in PM“! “mom. the I Iii Of an and 1 ““1“ list ho] '3 "union. " ‘ mend! Mm More at md‘t' Ci Van 26 resource inputs and the nonresource inputs would be labor and capital combined as a joint input. In a similar manner, the production surface is a composite of agricultural products in this illustrative example. loch iso product curve from CI to 06 represents larger amounts or levels of food and fibre production. An expanding population in a growing economy presumably would employ resource and nonresource inputs in some combination in some expansion path from C1 towards C The output in 6' this illustration is measured in monetary terms while the inputs are measured in physical terms. To maintain rigor in the presentation of the concept, the inputs Illt be of homogeneous quality throughout the range of use and the ceterig paribus conditions pertaining to all other variables must hold. A fixed state of the technical arts is an import- ant assumption. As an expanding society demands more food and fibre, consumers and resource owners should be interested in production patterns that are efficient. Given the production possibilities illustrated in Figure 1, the least costly production pattern and expansion path, 2!, can be de- rived if prices of inputs are known. A given sum of production capital can be invested to buy all resources, ggor all nonresource inputs g_1_ (see chart 1). An iso outlay curve, £_l_, can be derived representing varying proportions of the inputs that can be employed with the given sun of production capital. The c2 iso product curve is tangent to the 1.1 iso outlay curve at point 1 representing the highest product possible for the production capital considered. Alternatively, the production input mix at point 1 is the least costly way of producing the C2 amount of food and fibre. The expansion path can be traced as increasing amounts of production capital are considered. 27 ucomooounmu sounoeoz one amouoczuoh uo e~o>ed encuuo> mc—Inew< eunuc— eousceoucoz one oouaooem uo croquet—aloe enoaus> Iowa onmnecouueuox :o_uo:ooum "souuouoonh .~ shaman Amazon. ouunooemco: a“ ucwmcmeuue Auceuacou a~o>e~ aneuoccueu Aucole>ouolu sumac-om numav hue—oczuou condoned” snumv one auu>uuonvoun eumaoeom nanny sumac“ oounonouno: human. sounooounoc ounce. sounoeoucon .u . ~ 0 .~ m o .u NH} o —u . o 1. \\\11W, e e \\\\\V \g_ r u u Nu I no .1] .h eh ensued ouunowou o Amv “NV “mg Vim uniili mum path 1 12:”!!!le as: ’m‘diogy attai action functior steed C‘ (so! The ispoeit :stinct 1isitin 3‘ upemion p. ihline if produ Warren. Clea miuctivity. 0 '13th °f ”sour "31190 in the p M11. In this Euplneion p": 1mm “lit 0 Hith ”mu“ (Sim b'COI. p M u “Nip“ ‘ in do. “nu 2. With unlimited quantities of resource and nonresource inputs the expansion path in obtaining incrossed product is 29. Resources would not restrict agricultural output. Output, of course,is limited, as the technology attainment assumed has a definite effect in shaping thopro- duction functions and their ultimate declining slopes. Output could exceed C“ (see chart 1). The imposition of a limit on available resources such as 23 has a distinct limiting effect on output as more nonresource inputs are applied. The expansion path is 29. Output rises to a point below Ca,thon would decline if producers tried to combine more nonresource inputs with the resources. Clearly the nonresource inputs would be faced with declining productivity. Output in the producers sector would be limited as a result of resource availability. A case does exist where technology implied in the production functions could become limiting before resources would. In this instance maximum physical product would be reached on the 23 expansion path and would experience a decline before reaching the physical limit of resources. With resources employed at their limit, two potential economic effects become prominent. As the effective demand for output increases and as attempts to combine more nonresource inputs with limited resources are made, scarcity rents accrue to resource owners. A reciprocal of this effect is reduced payments per unit of nonresource inputs. Resource rents per unit of output would increase and nonresource costs per EELS of output also could increase as larger amounts of nonresource inputs are applied. As a result, the price per unit of output would increase, making the total bill for goods and services from the producers sector hi KhCr o One should not 112:; the path 9_e_. me which is in a tan would opera Ilutic demmd fun '31? more nonrsgc Wuctivi :y for , Emotivi u .. . '3“. increa“ :ease in dose: . care of the We; In“ the same "i e :29 One should note that there would be no economic incentive to push along the path 3:. Since this is in the declining total physical product stage which is in an irrational stage of production, knowledgeable pro- ducers would operate at.point 9, But atomistic producers face perfectly elastic demand functions thereby receiving erroneous economic signals to apply more nonresource inputs. If production was kept at g, the marginal productivity for nonresource inputs would not experience declining productivities. The increase in rent to owners of limited resources implies an in- crease in asset values. Resource owners have control over a larger share of the wealth in the economy. Nonresource owners' earning capacity remains the same or is lower so they are not as well off relatively and perhaps on an absolute basis. In summary, the static theory of production with all of the attend- ant assumptions of ceteris paribus conditions does support the view that limited resources would have a negative or dampening effect on economic expansion and growth. Resource owners would gain asset values while the earning power of other factor inputs would decline relative to that of I‘OSOUI'COO e figsource scarcity as related to_proponsities to consume and product demand olasticity--Tho ultimate effect of resource limitations on economic growth cannot be traced until the income recipients have uti lised their in- come. Sinco nonresource owners have less disposable income and resource owners have more, there is potential for different propensities to consume which would have an of f act on the economic activity generated through the in- come multipliers. One cannot say categorically that there would be less mic utivity vi ‘ em to resource 0 ii resource iim Cutie d-and, the dune demand sugge :my relieving t. in effect on Ocono 1‘1: it lili ted 1g If the new“ a 1”Mum: dm m, then an 3‘“ '“ mum. 31‘1“th “fiend “1de. in. Weld "“te den 2 Persut. the :5. hand. °t re Th. “w ‘ m“ “lowed 30 economic activity with shifts of purchasing power from nonresource owners to resource owners. If resource limitation involves a product for which there is an elastic demand, the decrease in economic growth may be short lived. An elastic demand suggests that alternate products could be used readily, thereby relieving the pressure on the product with limited resources. The effect on economic growth may be negligible also if the resource that is limited is small relative to the total of all resources used. If the resource that is limited produces a product for which there are inelastic demand requirements and the product is a major one in the economy, then the effect on economic activity can be significant. In fact, an unstable situation would exist for major products having an inelastic demand and scarce resource inputs. Increased scarcity rents would provide incoma which when spent would create jobs which in turn would create demand for the product of the limited resources. If allowed to persist, the end effect would result in a concentration of wealth in the hands of resource owners. The view that wealth would be concentrated in the hands of resource owners allowed the early Classicists to label economics as the "dismal science," to identify ”subsistence theories," develop the ”iron law of wages" and predict wide scale famines. These are logical conclusions given the static, changeless conditions believed to exist by these writers. Relaxation of the technology assumption-~11 the state of technical arts is allowed to change, then resources can be less limiting in the production process (Figure l - chart 2). Under conditions of an increase in general technology attainment, the expansion path, 2;, calls for different combinations of resource and nonresource inputs mm“ the initi aphyeicel “In!” e,higher levels oi mics! liait is re man: of product a'. 2,:30 C3 level of 4 ham 1, the ass: 1: fostered a. mpg lawn. 'I'ell ham “1 in “ca“ «cede. Elam-m ‘Vlilal Nurse in canju; 12113ch on the aim. as cone“ “can“ atWand. lie . 31 than under the initial technology assumption (compare chart I and 2). The physical quantity of the resource remains the same in chart 2. Even so, higher levels of product requirements can be produced before the physical limit is reached. Technology has the effect of increasing the amount of product attainable with a given level of resources. In chart 2, the C3 level of production is obtainable from the £l_outlay function. In chart I, the same outlay produces the C2 level only. Economic growth is fostered as inputs are released to be employed in other productive measures. Hell known examples of technology advances in agricultural production in recent decades are hybrid corn and other improvements in seed varieties. Widespread availability and use of inorganic fertiliser is another. These measures in conjunction with mass mechanisation have had a significant influence on the culture of crop and livestock production. General tech- nology, as conceived in chart 2, comes about through education and other so-called expenditures in human capital. Productive capacity is influ- enced indirectly through the improved know-how of the human inputs in the projection process. Contrary to the views of the early theorists, the state of the arts does change. General technology has substituted for natural resources. In fact, technology has increased sufficiently so that abnormally high natural resource rent and product price rises have not come about. Introduction of resource improvement--Improvements in the natural resources can have an effect similar to that of a general technology increase (Figure l - chart 3). Any measure that has the effect of improving the productivity of the natural resource also has the capac- ity of reducing the resource scarcity effect. The expansion path is grim resource imp mined before the .ilutretlon, resour‘ miderebly less ir Resource impro' idlstlngulshing 1' m the resource . film“ PTOductive “3°“ “\th the ram. “’88 sun WI to Cl.‘f, d 112‘: . genera liner 3! ! .QSOIII'c. 'C.T'1 32 ‘ggywith resource improvements. Again, higher levels of product are attained before the absolute limit on resources is reached. In the illustration, resource improvement allows output to be produced with considerably less inputs. Resource improvement or development is another form of technology. The distinguishing feature of resource deveIOpment is its physical link with the resource. Public eXpenditures can be applied directly to in- fluence productive capacities of the resources. Agricultural land drain- age is an example. Tile drainage is strictly a technological improvement but it is considered resource development because of its unique spatial location with the resource. The agricultural land resource has been im- proved. Large sums in both the private and public sectors have been spent to clear, drain and irrigate land. These improvements when coupled with general technological improvements have lessened the negative effect of resource scarcity on economic growth. gynggics of resource use-~Schults states that economic growth results from a dynamic disequilibrium.l/ As demands shift, opportunities to uti- lise existing resources or develop substitute resources with a high payoff come into existence. As the resources are developed and the particular de- mand satisfied, rates of returncniinvestment decline, thereby slowing the productive investments and deterring economic growth. To make a continuous positive function, new or expanding demands and new sets of resources or improved existing resources must be available for productive use. The maintenance of an ample and relevant set of resources in which 'l/ 92. cit., T. H. Schults, Research Paper No. 3816, p. 27 :zvuclmts can M II new“ Wu“ AW“! requi :ml is unattaina m: growth woul :ntm decline. ‘2 a eleeticity of d. lulu of the proc “ “uquilibriu. {Wu m “N“. 33 investments can be made are of primary concern to a society interested in economic growth. .A product requirement of CA under the assumptions in figure I - chart I is unattainable. As attempts are made to achieve this product, economic growth would tend to be dampened as labor and capital produc- tivities decline. The degree that economic growth is slowed depends upon the elasticity of demand for the product from the limiting resource and the sise of the product market relative to the whole economy. But this is a disequilibrium that will call for the corrective measures, providing of course an adequate institutional framework exists in the public and private sectors of the economy. The higher profits (rents) to the re- source provide the incentive for technological inputs to capture some of the abnormal rents. With an increment of general technology as assumed in chart 2, resource earnings would be diverted to nonresource inputs. The new inputs, which are really manifestations of new resources are applied until the new demand requiremont is satisfied. The new inputs also could become scarce, command abnormal rents and entice substitute inputs. Resource managers must be ingeneous and be innovators if measures to correct the dynamic disequilibrium forces are to be most effective. In fact,one could generalize the healthy economy as one in which there could be many resource barriers but knowledgeable entrepre- neurs are adopting technology to circumvent the resource problems. Shifts in the productive capacity of resources such as shown in charts 2 and 3 must come about if economic growth and a full employment economy “'0 to b. flittincd- Presumably, some desired mix of public expenditures for research, extension education and resource improvement will facili- tate the dynamic adjustments process. One “a conceiv um lisitations 0 mien suggests the as sure inelastia Freer. the theory lifting resource b' ~31. stovth is great mmtrete public mrtes most likely ilflte; thus up.“ “3°! “sure 1. In the mbucl ““111 technoi m“ °f Mcial 1 36 One can conceive of a grand strategy to minimise the effects of re- source limitations on economic growth. The theory summarised in this section suggests that as the original supply function of a resource be- comes more inelastic, the scarcity returns potential becomes great. Further, the theory indicates that as the demand for the product of a limiting resource becomes more inelastic, the potential effect in limit- ing growth is greater. The strategy through time perhaps would be to concentrate public investments in the area of those conventional re- sources most likely to inflict diminishing marginal returns on other inputs; thus expanding productive capacity as conceptualised in charts 2 and 3 of Figure I. In the public sector, decisions about investments of public funds in general technology development and specific resource development can be subjected to the marginal calculus of economics. In general, the stream of social benefits from public investments in increasing the Nation's productive capacity should be equal to or greater than the stream of social benefits in the private purchasing power forgone in the investmentmll If the marginal increase in productive capacity and re- sulting stream of social benefits is smaller than the increment of public investment and its opportunity costs if left in the private sector, the expenditure would have a negative impact on economic growth. The above criteria relate only to the magnitude of economic activity and not to the effect on the distribution of personal utility streams. As indicated, wealth distribution is an extremely important problem but is not analysed in this work. I] The productivity criterion for public expenditures is advanced by James Buchanan in his book, Public Princi les of Public Debt, Irwin, Ines 9 1958 e mbly, the am, educati activity capacity one in Ieking res relic decisions ca. maid seaningfu] ". Mic! Implicat The Principal mm?!" is tha mm barriers :1 "My ere ainiai “ti. “It: on“ .rru lots to eeei st in n“ m Justin . 33 Presumably, there is a functional relationship between investments in research, education and extension activities and shifts in the pro- ductivity capacity of the Nation's resources. Likewise, public expend- itures in making resources more productive are positively related. Public decisions can be improved if these functional relationships are known and meaningful information on costs and benefits developed. D. Policy Implications The principal policy implication to be drawn from the discussion in this chapter is that positive actions should be undertaken to insure that resource barriers do not become critical and that losses in economic activity are minimised. To achieve sustained economic growth, adequate institutional arrangements must be provided. Presumably, public invest- ments to assist in the development and adoption of technology in relevant areas are justifiable uses of public funds. But there are questions about the role that public agencies should play in directing the flow of resource creation. Some fiscal theorists argue that government should play a passive role in resource allocation and development schemes. In other words, the public programs should not alter the workings of the market in the private sector in calling forth resources and employment. In this view, the government would undertake only those measures necessary to soften temporary cyclical adjustments in the economy. Other fiscal theorists argue that there is a persistent and chronic gap between full employment and existing employment levels. With the Employment Act of 1946, this group feels that policy and respon- sibility of the Federal Government becomes one of coordinating and utilising its functions and resources to achieve maximum employment, Mm all P‘m‘v" I hose I'M “8‘“ .11 public action! L'Iccstions. There sold not preclud isms of alternat‘. :f constructive me. Polio for re I511: policy for aMme creation‘ 3!! full Opioym 3' "Inc of the teem. As ind! Kit 1; not prod i Tub”: 8 3110i 36 production and purchasing power.l/ Those who argue for a passive role of government must concede that all public actions (even inaction) have a definite influence on resource allocations. Therefore, the acceptance of either political philosophy should not preclude research and analyses of the potential gains and losses of alternative public actions in the resource area and an analysis of constructive means of alleviating resource problems. Policy for research and extension education investmentso-The public policy for research and extension education should be one whereby resource creation from such expenditures is adequate to maintain a near full employment economy. The criterion involves comparisons of the value of the public investment with the value of the employment created. As indicated previously, if the research and education invest- ment is not productive of new streams of economic activity then the measure does not contribute to economic growth. Research and education investments should be compared with alternative investments to increase the productive capacity, such as direct public expenditures in resource improvements. The ability to predict the increase in productive capacity associa- ted with public research and extension educational expenditures is diffi- cult. But if knowledgeable policy decisions are to be made about the use of public funds for research and extension education expenditures to develop and encourage the adoption of technology, estimates of these functional relationships are necessary. Research and extension education I] For a presentation of the Heller-Burns arguments on these points, see the Morgan Guaranty fiurvey, Morgan Guaranty Trust Company of New York, ““8t 1961’ ppe 1-16e matures M? 3' masts to minisi uric growth. The conditure questi q r. indicates OppO‘ Policy for 2 32.511: policy fc mm”! 0! our .3103'lent econm “d “tension ed mu m“ be cc lists Ind 1°C.1 Retina ““111 M13’“. Chlpt. Vitli M11: to; It M118. .8731 g 37 expenditures may well be a better use of available public funds in attempts to minimise the negative effects of limited resources on eco- nomic growth. The analysis in this study does not deal with the research expenditure question directly but the farmer survey reported in Chapter VI indicates opportunities for extension education investments. Policy forgpublic investments in natural resource improvements-- Public policy for resource improvement should be one whereby the pro- ductivity of our stock of resources is adequate to maintain a near full employment economy. In a manner similar to that suggested for research and extension education investments, public resource improvement invest- ments must be compared with the social benefit streams created. Federal, state and local governments now have specific responsibilities in facil- itating natural resource improvements. As will be pointed out in the analysis chapter of this study, certain social benefits are associated with public cost-sharing arrangements with private resource owners to encourage agricultural land drainage. While drainage is only one of several resource improvement measures, the basic relationship with other resources is expected to be the same. The theory presented in this chapter indicates that public resource improvement or development is clearly an alternative and complement to public research expenditures to promote general technology adoption in preventing negative impacts of scarce natural resources. In the final analysis, some combination of expenditure on research and extension education to indirectly influence productive capacity with direct invest- ment on already-known techniques of resource improvements would be ideal. To properly apply these criteria, considerable information is needed on the functional relationships of the alternative uses of the public monies. Mytlcal s was prOblus mills can be p imiopent and a sly Pm of the if edded economi his use, resou: Mes. m. u.c “1W dupter. 38 Analytical schemes are needed to inventory current and potential resource problems. An analytical procedure is needed whereby resource problems can be placed in perspective and the effects of public resource development and assistance measures can be identified. In this study, only part of the functional relationship is analysed; namely, the amount of added economic activity possible through resource improvement. In this case, resource improvement is land drainage for agricultural pur- poses. The exact nature of the analysis in this study follows in the ensuing chapter. The general a: the farm sure A. General Heth Direct pub? iscirect invest ere alternat. . 3°“ and fibre restitution cg resource :1»... “Rim ”ntr sireq Wblic the gmct‘m“ calyx“! ‘1‘: Public 3%“ . on < strai ght .rs ‘ CHAPTER III METHODOLOGY AND ANALYTICAL PROCEDURES The general methodological approach, formal analytical procedure and the farm survey used in the study are discussed in this chapter. A. General Methodological Approach Direct public investments in agricultural land improvement and indirect investments in agricultural research and extension activities are alternate means of increasing the Nation's capacity for producing food and fibre. The suggestion in the previous chapter was that some combination of direct and indirect public investments for purposes of resource creation would be optimum. Such investment patterns would make maximum contributions to economic growth. The decision concerning de- sired public investment patterns requires considerable information about the functional relationships. Only part of these relationships are analysed here. Public investments in land drainage historically have taken two forms. On one hand, river basin and watershed projects to deepen, straighten or extend streams and rivers so excess waters may have an outlet have been wholly or partially financed with public funds. Sec- ondly, public funds have been used to share in the actual land owner costs of installing field drainage systems. These measures have the effect of increasing agricultural productivity. The central focus of this analysis concerns the potential for and likely adoption of private agricultural field drain improvements. The effects of research and extension expenditures were not analysed in 39 sail in 0 me I”. ruensnsbi he he till for is Insther v tusl proc Quest 01 an. pert smasher Rhee lieu g, the“ ' “M'r s “flit: “so 9 1': is Ctr-:10 33...! 60 detail in this report, but various levels of general technology adoption were seemed in the analysis te detesmims the potential substi tutioaal relationships with land drainage. The basic approach in this study was te analyse the economic poten- tial for farmers to adopt agricultural land drainage within a region. In other words, to what extent can land drainage increase the agricul- tural productive capacity as the expected population increases press against our conventional resources! Linear programming was utilised in this part of the study. Secondary data were used almost exclusively to determine the economic potential fer drainage. A number ef variations in yield and fertiliser use assumptions, and public cost-sharing in field drain installations were made to determine the sensitivity of these variables in economic growth. A survey of farmers in the region under study was made to determine the validity of the linear progra-ing results and determine critical variables in the analysis. The survey also provides information on the necessity of public investments in out- let improvement to encourage field drainage investments by farmers. A definitive policy for public resource improvement investments cannot be developed from the partial analytical approach used herein. However conclusions are drawn concerning the agricultural productive capacity possible through public measures to encourage farm drainage. The relative importance of direct investments in drainage to increase agricultural productive capacity can be compared with other measures such as general technology adoption. however the actual public costs of measures to encourage farm drainage or measures to obtain increased general technology adoption are not estimated. The analytical procedure used is considered a pilot study which can be expanded and improved for miyses in lsrsfl sd‘. es irrigatio: stadi es . Since the s‘. uticultursl pro itvestueht, the 3‘ '9“le maker Twitter-n. But i- Micy, the p01 'ill in fact to Line‘r pri team W. Dr“ hp‘Cl ti .d to“ in en “temp: e ‘~L 41 analyses in larger regions. Other land resource development measures such as irrigation and flood protection should also be included in such studies. D. Formal Analytical Procedure Since the attempt in this study was to estimate the potential agricultural productive capacity that might be induced through public investment, the analytical model must take a special form. On one hand, the policy maker is interested in the normative public expenditure pattern. But in another respect, as an instrumental step in developing policy, the policymaker is interested in how private resource managers will in fact respond to alternate public expenditure patterns. Linear programming was used in this study to simulate resource managers expected drainage practice adoption patterns. The programming technique provides optimum or normative resource use patterns under specified constraints. Certain constraints are built into the procedure in an attempt to make the results indicative of likely resource use. The program model is set up in a minimum cost formulation for this study in what is commonly called the requirements approach. A minimum cost resource use pattern is derived in producing given levels of require- ments under certain land availability constraints, drainage possibilities and other restraints. Requirements are derived from separate studies. The formal statement of the minimum cost primal problem can be general- ised as follows: Minimum cost primal probl -- Min s - plxl e pzx2 + .... pnxn Subject to: xl,2,...n § 0 Vher l 1“...” .llxl O .lzxz * eeee . X ' C ‘21‘1 ’ ‘22‘2 I.eeee. X '6 I’lxl + anzxz d11*1 * d12*2 d21 1 22 2 x e d x + .... d +eeee. X -C eh #oeeed X sh d.1‘1 * d.2‘2 h11‘1 * h12x2 h21*1 * h22*2 Ih e .... d x 'V ‘0' eeee h X W § eees h x hvi"1 * “vz‘z IV e .... h x vn n where s - total production cost excluding payments to land p192....n ‘l,2,...n ‘11...-n dll...sn hll...vn c1,2,.... rl,2,.... ' - le2,...v The two basic sets of costs of production per acre excluding land costs for various xl n land uses acres of various land uses (activities) amount of product requirement used in a unit of activity amount of land resource used in a unit of activity ' - amount of minimum acreage requirement supplied by a unit of activity - product requirements for various commodities specified from outside the model amounts of land resources available (extends to include land resources available for which additional drain- age is possible) minimum acreages for individual crops~ constraints in the model are(]) product requirements (cl 2 .), the food and fibre to be produced from the ’ ’00. «shells to prod' uiiity was extent hinge on speci tin constraint tin of certain s tions in the lane fliebraic fer-ml A tial“ c: this: study v“ . “mm across. 1‘“ "‘er03 1 43 region,and~GD land resources (rl ) -- the amount of land resource ,2,...s evailable to produce the product requirement. The land resource avail- ability was extended by adding equations to allow for additional field drainage on specified land management groups. An additional crap rota- tion constraint was placed on the land resource to restrict the propor- tion of certain soil groups being devoted to row crops. These exten- sions in the land resource availability were not made in the preceding algebraic formulation but they are illustrated in Table 28 in Chapter V. A.ldnimum cropping pattern constraint for subareas of the region under study was imposed in the model. The constraint specified that a required acreage of each crop (“1,2,...v) be produced on each group of land resources representing a subarea. The minimum acreage constraint by subareas represents an attempt to partially reflect existing trends in production patterns. The constraint has the effect of placing a bound on production shifts among subareas in the study region. Since produc- tion pattern shifts and resource mobility are conditioned by many forces, this constraint is referred to as an institutional constraint. The minimum cost program model as outlined is set up for a 42-county area in lower Michigan. Selected groups of counties representing the Thumb and South Central areas of the bZ-county region are analysed to determine the intraregional effect of agricultural land drainage on land use patterns and other economic parameters. Data for the program model were developed from survey data, unpub- lished data from the Michigan Agricultural Experiment Station and from published sources. Basically, four sets of data are needed for the models (1) information is needed on the extent and location of the land resources within the bZ-county region to include information on additional must ”win“ . mist md,lihally is met be rail 1: mm W. he basic flti me without minutiae with “i “Ming var iiiitiml tron Iiiic out-shat m solutio fiction costs ex 1' Muted. (.6 drainage potential, row crop limitations and minimum acreage constraints; (2) cropping alternatives and productivity levels on each land resource are necessary; (3) production cost data for each crop alternative are needed: and, finally, (4) product requirements to be produced from the region also must be available. The nature and source of the data are discussed in Chapter IV. The basic model was set up to reflect projected 1980 conditions with and without the extension of the drainage land use activities. In conjunction with the drainage comparisons, several computer runs were made assuming various level of product requirements and yield levels. Additional programs were run to reflect various drainage cost levels and public cost-share plans. The solution to the primal problem provides estimates of total pro- duction costs excluding payments to land. Land use on each land resource is indicated. The land resource data utilised in the model are related to geographic locations, i.e. counties and groups of counties, therefore estimates of land use change and costs of production for subareas can be developed. Comparisons of total costs of production and resource use patterns provide a direct estimate of the effect of limited resources on the capacity for economic growth. The linear programming procedure provides a basis for imputing rent values to scarce resources and marginal costs of production for each of the required products. This information stems from the dual of the primal problem formalised previously. The dual can be generalised as follows: (a, “Ore 65 is tation ~- Max s'i- (clu1 e czu2 e .... c.u.) - (rlyl + r2y2 e .... r.y.) § ("1.1 § '2.2 * oeee ".') Subject to: ) yng,eee. . O )- .I,2,...v - 0 (.llul + I21u2 + esee .ulu.) - (dllyl + d21y2 + eeee d.ly.) + (h + h . * eeee h V 11‘1 21 2 1 u.) - (dlzyl * dzzyz § eoee d.2y.) e)5'p V 4. .v) - pl u § . u * eeeo . - (‘12 1 22 2 2 + (h C 0 h C + eeoe h V 12 1 22 2 2 2 (alnu1 e aznu2 e .... a-nun) - (dlnyl + d2n’2 + .... d.ny.) 4‘ § (hln.l § hzn. + eeee h'n.') - 9n 2 Where s' - total payments to nonresource inputs ul 2 - cost per unit of product requirement, ’ ..... c1 2 m 9 goes y1 2 8 - value imputed to limiting resource, 9 goes r1,2,eee. el 2 v - cost per unit of satisfying ’ ’°°° each minimum acreage restraint, '1,2,...v The objective in the dual of the minimum cost primal problem as specified is to maximise returns to labor and capital without exceeding the specified production cost levels for each land use activity. The minimum acreage constraints, if restrictive, have the effect of raising production costs. The u1 coefficients represent marginal costs of production. ,2,... The marginal costs of production when multiplied by their respective product requirem ments to land not or flit per spective acreage pted to the la: unlined, the i m-‘ps- Each 3: Guction costs q “5 ”Jinan: Wald COngt. 1 Wm 'lth gxc “4' Grain.” d mm“: in m” "t1! eri 3“! could b. Nuctmt, r| 1th Vlth “Q? In ‘ddi t! ment the co as product requirement levels represent total production costs including payments to land. The yl,2,. .. coefficient represents the scarcity pay- ment or rent per acre of land. The rents when multiplied by their re- spective acreages in the program solution represent the total rent imp puted to the land factor. In the application of the program formulation outlined, the land resources were first characterised into management groups. Each group contain soils of similar productivity yields and pro- duction costs were developed to reflect existing resource development and management requirements. In the program each land management group would compete in producing the product requirements. Land management groups with excess water as a management problem and with potential for new drainage development were allowed to compete in producing the product requirement in some of the program runs. In addition, land management groups with erosion problems were limited in the amount of row crops that could be planted. This restraint, along with the drainage and basic productivity restraints, provides identifiable rents that could be associ- ated with each characteristic. In addition to the resource rents, the clan"" coefficients rep- resent the cost per unit of satisfying the minim acreage constraints in the model. when the minimum acreage becomes an effective constraint in the model, production patterns are less efficient; hence the negative rents are reflected in higher production costs. In the several program runs, comparisons of marginal costs of pro- duction, changes in resource rents, drainage rents and negative rents due to minimum acreage requirements were made. The procedure provides a direct measure of change in production efficiency and change in asset value as a result of any variation in paired program runs. These proce- Iii In 1:91“ minim 9°“ mm u n: at umpti to! m: (1) (2) "“12 t1 3min. the 3° emu“ W Would 1 “Whig, m d bi el Sptcit um ‘ rand a7 dures are explained and discussed in greater detail in the analysis and conclusions portion of the report (Chapters V and VII, respectively). General assumptions--The program model developed implies a general set of assumptions that must be considered in evaluating results. They are: (1) Labor and capital inputs have unrestricted mobility and supplies are readily available at prices used. (2) Owners of land resource groups seek to maximize prof- its and have full knowledge of cropping patterns that will maximize profits or alternatively minimise costse (3) Land resource groups represent a relevant basis for identifying homogeneous decision units in the program and input-output coefficients are constant within the relevant range considered. (4) Total agricultural production in the region and sub- area is limited only by the land resource available, drainage potentials, crop rotation limits and certain institutional factors implied in the minimum acreage constraint. while the assumptions would appear to dampen the validity of the results, the program model is used primarily as a projective procedure to estimate economic relationships in a future period. A.further assump- tion would be that some of the imperfections concerning resource mobility, knowledge and decision units unrelated to field boundaries and farms would be eliminated. Specific assumptions and limitations concerning data used in the model are discussed in Chapter IV. C. Farm Survey A random sample of farmers in the Thumb and South Central areas of Michigan were surveyed to determine the extent of and potentials for aruinaga. 1 m drainaga tors that r: Adascriptiu may scha Virtua mirage i: in organ!" and Zonsm Wishes a In incolpi Song . tional dra 5011 and U kricultur 5"” Cons. "3 desigr In “dim 51: pl“: The . at “‘0 fa ”Sad in 1 tart. th. obtain“. with mp My. I“ 48 drainage. The survey schedule also was designed to obtain information on drainage practice adoption rates and to determine the critical fac- tors that restrict additional drainage that otherwise would be economical. A description of the areas and counties involved in the survey and the survey schedule are discussed in Chapter IV and Appendix A. Virtually no information is available concerning the extent of land drainage improvements. The decennial Drainage Census reports acreages in organised drainage districts only. The Agricultural Stabilisation and Conservation Program Service of the U. S. Department of Agriculture publishes annual reports on drainage measures cost-shared but these data are incomplete with respect to the total picture. Some estimates are available concerning acreages suitable for addi- tional drainage. These estimates were developed in the Inventory of Soil and Water Conservation Needs conducted by the U. S. Department of Agriculture in 1958. The estimates were based on the judgment of county Soil Conservation Service personnel. The survey of farms in this study was designed to provide additional information concerning potentials. In addition, the survey provides information from the farmer concerning his plans for adopting and utilising additional land drainage on his farm. The survey also provides information on the general characteristics of the farm and the farm operator. Details on the management practices used in installing and improving field drainage systems and other cri- teria that influence the adoption of the drainage practice were also obtained. Through cross sectional analysis, the important variables with respect to the drainage practice are studied. gurvgy gghggulgr-The survey was undertaken as a part of the cooper- ative research between the Department of Agricultural lconomios at mum State Lapartmt of a no not only laaa'mhlp of in Study ur many, so: am drainag The sche: Idaftnition a Ietralatad t. Imam in 5113 concern Lam '13 obtain“, M‘Phic ;. he. “mm mm)“ the rite of firm: mmr1160 . "9’ may L h. “u 39mph! Th. m m”? and f.‘ thair 8m if r " ? 5L1; ._ “g. . h 49 Michigan State University and the Economic Research Service of the U. S. Department of Agriculture. The survey was designed to provide informa- 'tion not only for the cooperative Michigan farm drainage study under the leadership of the author but to provide information for the Lake States Dairy Study under the leadership of George Irwin of the ERS staff. Con- sequently, some ofothe detail in the schedule is not necessarily germane to the drainage study. The schedule along with summary instructions about the schedule and a definition of terms is reproduced in Appendix A (parts of the schedule not related to the drainage study are not included). Five enumerators ‘were used in the survey. Each enumerator was given identical instruc- tions concerning the study, the sampling plan and interview techniques. Sample Elan--A completely random sample of farms and farm managers was obtained. The Master sample of Agriculture was used. In this sample, geographic segments are selected at random throughout the United States. Each segment is selected to include three or more respondents; conse- quently, the size of the segments varies generally in preportion to the else of farms in the area. In lower Michigan, the segments generally contain 160 to 320 acres. The sample is divided into three groups: (1) primary sample, (2) alternative Sample A, and (3) alternative Sample 5. The sise of the sample can be expanded by combining two or more of the samples or by randomly selecting within the alternative samples. The sample plan was to interview all eligible respondents from the paimary and alternate A sample segments. Farm managers were interviewed if their gross income from farming exceeded $1200 the previous year. If 30 percent or more of the farm income was from poultry, fruit or truck t‘rming, a schedule was not completed. The schedule was completed only aim With male were :‘I the ibCVG i All pote: mat were :araapcnden :11 «giant t m3. land Oi Eta us inc‘ :;:.:‘.pa1 at Anusin :31!“ p1” SIB-tie \— d, --~".'!ati on ih.z In ba‘ 14' \ .l‘;!>~“al 50 on farms with 10 acres or more of crepland. Sections 1 and II of the schedule were filled out for all tracts of 10 acres or more regardless of the above qualifications. All potential respondents living within the boundaries of the sample segment were contacted. At least two return calls were made in the event the respondent was not found at home.’ Farmers operating land in the sam- ple segment but living outside of the segment were not contacted. How- ever, land outside of the sample segments operated by eligible respond- ents was included on the schedules unless the land was outside of the two principal study areas. Assuming that an adequate sample is taken under the completely ran- domised plan, statements about the universe can be made. Sample sise-~A desired sample sise can be estimated if the following information is known: (1) estimates of the standard deviation of the pop- ulation,(2) an expression of the allowable error in the sample mean.and (3) an expression of the confidence limit the researcher is willing to accept that the sample is representative of the universe. The required sample sise at the 95 percent confidence level is deri vedx-l-I ~ng L2 Where: n - sample sise d’- standard deviation L - allowable error in sample means Information obtained in a survey of 43 farmers in northern Lapeer 1] George H. Snedecor, Statistical Methods, Iowa State Press, 5th Edition, 1956, p. 501. Iii mi soothe! n for am of :1 mm m the istniari dovi aria: Lain it: may arm ow iron aa ill-i nomad mile error a 1316! level. film; to 1 mom in; all a. Pmam Th! rami' 51 County and southern Gratiot County in I961 provided an estimate of vari- ance for one of the key variables in the present studies. The principal variable was the extent of land drainage on each of the farms surveyed. The standard deviation for the variable was estimated to be 26.6. A previous Lake States Dairy Study survey of the sample segments in the two study areas indicated that an average of 1.6 respondents could be expected from each of the 122 primary and alternate Sample A segments. The 177 expected respondents substituted into the formula indicated a possible error of four percent in the sample mean at the 95 percent con- fidence level. A four percent error was judged to provide sufficient precision; to include alternate Sample B would not appear to warrant the additional sampling costs. The results and conclusions of the survey will be presented in subsequent chapters. The results of the survey are discussed in Chapter VI. Io thi lion: pro; aim, fa LIL cropp‘. It! tional! in t! Wattle 1'. in“ at Ian: and. “Flat. at!!!” CHAPTER IV PHYSICAL AND ECONOMIC DESCRIPTION OF STUDY AREAS In this chapter, the nature and source of the basic data used in the linear programming analysis are presented. As indicated in the previous chapter, four basic sets of data are needed, viz, (1) land availability, (2) cropping alternatives and yields, (3) production costs, and (a) prod- uct requirements. Each is discussed separately in this chapter. In the cropping alternative section, two alternative sets of crap production and drainage yield estimates are developed to represent differ- ent levels of technology adoption. Corresponding fertiliser use, associ- ated management practices, production costs, and drainage costs are pre- sented. Cropping alternatives involving artificial drainage are deve10ped separately so they may be included and excluded in paired program runs to determine the potential effect of drainage. In the product requirement section, three sets of physical product requirements for the éZ-county region in lower Michigan are developed. The product requirements or effective demands reflect increased popula- tion, changed personal income, and per capita consumption rates, live- stock feeding efficiencies, and historical trends in regional production. Several paired programs are developed from these data to test the sensitivity of the major assumptions in the model. While the alternative product requirements and production possibilities were not developed for the express purpose of making predictions, the coefficients used do rep- resent possible relationships. Thereby the analysis can be useful in determining the elasticities of agricultural supply and drainage practice adoption. 52 3mm. harm L‘. “ Kw, 53 In addition to the presentation of the basic data for the linear program model, information about the agricultural characteristics of the two principal study areas will be presented. The study area character- istics will be presented first. A. Agricultural Characteristics of Study Areas The groups of counties representing the Thumb and South Central areas of Michigan approximate the geographic areas identified as Dairy and Cash Crop and Dairy and General Farming type of farming areasl/ (Figure 2). Dairying is the most common type of farming in both areas. However, general livestock farming is second in the South Central area whereas cash-crop farming occupies this position in the Thumb area. The soils in the Thumb area differ between the eastern and western portions. In the eastern counties, they are mostly loams and silt loans adapted to intensive cropping. These heavy, wet soils coupled with the high probability of late spring frosts limit the proportion of the land that profitably can be devoted to corn. Dry field beans, wheat, and sugar beets are the main cash crops. In the western counties of the Thumb, the land is more rolling and the soils range from sends to light loans. Dairy herds make good use of the forage, and milk is readily marketed in the nearby Detroit, Pontiac, Flint, and Saginaw markets. The terrain in the South Central area is rolling and the soils are predominantly sandy loams, silt loams and loams of medium to high fer- tility. Most of the crops are feed crops--hay, pasture, corn, and oats. Farms generally have livestock of one type or another to utilise these feeds, making them general livestock farms. Wheat and soybeans are .1, Elton 8. Hill and Russell G. Mawby, Types of Farming in Michigan, Michigan.Agricultural Experiment Station, SB 206, September 1954, pp. 33-34. Te E .. m ‘ -/arL r7 {K3 3 {\1'71‘4" l 73"“ ~\..\—.,.\ W] FINE...” '4‘ {gum . (T J.,! ' L' 5/ MICHIGAN THUHBAREA Figure 2. (Dairy-Cash Crop Farming) SOUTH CENTRAL AREA (Dairy-General Fanning) hz-County Area 1. Study areas in southern lower Michigan afcr cash cro According ruin slight Emily less 2150th Cent liaillioo a: 1e 1%] [are fine in Di laces or i; M, mow The aver: Elma larg. ‘5 °P¢ratad About on ”“5 Vere ca 55 major cash crops. According to the 1964 Census of Agriculture, the Thumb area counties contain slightly over two million acres in farms 10 acres or more in sise. Slightly less than three million acres are in farms 10 acres or larger in the South Central area (Table 4). Cropland in farms in 1964 was 1.5 and 2.0 million acres in the Thumb and South Central areas, respectively. The 1963 farm numbers for each area were developed through an expansion of the Farm Drainage Surveyml/ In 1963 some 13.2 and 16.3 thousand farms 10 acres or larger were estimated to be in the Thumb and South Central areas, respectively. The average sise of the farms in the South Central area was some 30 acres larger than the Thumb farm. In both areas, two-thirds of the land operated is owned by the farm operator. About one-sixth of the farms in both the Thumb and South Central areas were cash crop farms; no livestock were produced (Table 5). About half of the farms in the South Central area were large livestock farms. The Thumb area had fewer of the larger livestock farms but more of the farms comprising smaller enterprises. The binomial distribution of farm types was significantly different at the 99 percent level. Dry beans are the principal cash crop in the Thumb area (Table 6). However,corn production represents a larger acreage when corn for grain and silage are combined. Alfalfa and other hay, oats, and cropland pasture combine to represent a sizable proportion of the Thumb cropland devoted to uses to support livestock enterprises. An analysis of the cropping trends in the Thumb area from 1949 to if The land in farms surveyed was 19,032 acres in the Thumb area and 23,604 acres in the South Central area, representing .971 and .840 percent of the 1963 acreages,respectively. These factors were used to expand the sample farm characteristics to the universe. 56 Table 4. Characteristics of Farmland and Farms Over Ten Acres in Sise, Thumb and South Central Michigan Study Areas Item Thumb South Central Land in Farms 1964 Census acres 2,039,943 2,953,217 Cropland in Farms 1964 Census acres 1,542,300 2,026,800 Total Farm Number 1963 Survey Expansion* 13,176 16,303 Average Sise of Parm** 1963 180 213 Percent Proportion of Farmland Owned by Operator 68 66 Source: 1964 Census of Agriculture and 1963 Farm Drainage Survey. * Farm numbers estimated by expanding the random sample in the 1963 Farm Drainage Survey. ** Farm sise relates only to those farms in the survey grossing $1,200 or more per year. lib“ Se 1 l Cash large LlIgt Larg Larg Slal 57 Table 5. Type of Farming, Thumb and South Central Michigan Study Areas, 1963 Type* Thumb South Central Cash Crop 16.9 15.6 Large Dairy 24.1 24.7 Large Beef 4.5 6.5 Large Hog 4.6 20.8 Large Enterprises, Two or More 9.8 3.9 Small Enterprises Only 40.1 28.5 Total 100.0 100.0 Source: 1963 Farm Drainage Survey * For purposes here farms were classified: Large Hog - if 30 or more pigs were raised and sold; Large Dairy - if 20 or more dairy cows were inventoried: Large Beef - if 25 or more beef cows were inventoried, or 30 or more feeders were raised or sold; Small Enterprises - if one or more livestock enterprises existed with numbers under the limits above: Cash Crop - if no livestock were produced or sold. Frequency distributions were statistically different at the 99 percent confidence level. fell 6. Cr Crcoland U — n 21’ .3! u: its f ‘3 0“ «1 ' a 3’ teas l'VZEIf‘S teat Table 6. Crepland Use, Thumb Area Michigan, 1949-54-59-64 58 Census Years Crepland Use 1949 1954 1959 1964 (000 Acres) Corn for Grain 79.9 134.8 157.4 193.0 Oats 198.1 201.1 157.2 137.0 Barley 47.0 8.0 10.3 7.2 Dry Beans A/ 198.6 236.4 237.8 Soybeans 1.1 1.9 1.7 5.2 wheat 227.0 199.0 221.6 182.7 Sugar Beets 32.2 33.4 38.0 36.4 Potatoes 4.4 3.3 2.8 2.1 Vegetables 9.0 10.5 11.3 13.2 Alfalfa - Mixtures 120.1 183.9 206.9 219.7 Clover-Timothy 155.5 124.0 64.1 48.8 Grass Silage ll ll 1/ 19.0 Cropland Pasture 289.4 287.3 212.3 174.6 Corn Silage 47.9 64.9 55.6 73.3 Other Crops 297.6 41.5 34.0 23.2 Idle llOe3 153e7 174e8 l69el Tat‘l 1’619e5 1,645.9 1,584.4 1,542e3 Source: Census of Agriculture 1] Information not available. ..l Lii‘u indicat: motion d lfalfa prod Szlage produ :eased abor Com fr 534th Cent: ether hal tetior. ap; tilled in 1 tile th action is teased a, mi. l0 :1 Hist: '98. ii,“ ,s lining ":5 to: L.‘ 'e :4“. On at. «a g“ 59 1964 indicates that corn production is increasing while oats and barley production declines. Cash crop production appears to be fairly stable. Alfa1fa production appears to be replacing clover-timothy production. Silage production is replacing cropland pasture uses. Idle acreage in- creased about 50 thousand acres during the 1949 - 1964 period. Corn for grain and silage represent a half million acres in the South Central area (Table 7). Alfalfa and cropland pasture combine for another half million. Hheat is the principal cash crap. Feed grain pro- duction appears to be declining somewhat as corn acreages have been main- tained in the last decade. Both dry beans and soybeans are increasing while wheat has declined. Shifts in cropland pasture use for silage pro- duction is apparent in the South Central area also. Idle cropland in- creased nearly 50 percent from 1949 to 1964 to a total over 350 thousand acres. To summarise the cropping trends, the Thumb area appears to be under- going internal shifts in cropping patterns. But, preportions of the crop- land devoted to feed grains, roughages and cash crops remain the same. No shifts in type of farming seem evident. In the South Central area, there appears to be some shift in acreage from feed grains to cash crops, such as dry beans and soybeans. This may not mean a shift in type of farming away from livestock production. South Central area farmers pro- duce corn as a cash crap; consequentlx.soybeans and dry beans may be a substitute for this crop. Idle crop acreage rose significantly in both areas. One-third of the farmers in the Thumb area earned some money off the farm in 1962 while more than half the farmers had off-farm earnings in the South Central area (Table 8). Twenty percent of the farmers in 1151. 7a Table 7. Cropland Use, South Central Michigan, 1949-54-59-64 Census Years 60 Cropland Use 1949 1954 1959 1964 (000 Acres) Corn for Grain 359.1 417.9 468.3 420.4 Oats 316.1 285.3 191.0 146.8 Barley 5.6 12.4 28.5 6.4 Dry Beans .1, 32.2 49.4 72.8 Soybeans 6.6 18.8 32.4 59.4 Uheat 332.7 257.4 276.6 238.6 Sugar Beets 7.8 5.4 2.2 .4 Potatoes 5.7 3.8 4.5 3.9 Vegetables 12.9 10.8 11.9 13.5 Alfalfa - Mixtures 199.3 252.4 269.4 300.5 Clever - Timothy 168.8 164.8 84.4 44.6 Grass Silage ll Ll y 30.0 Cropland Pasture 383.2 365.5 286.2 211.3 Corn Silage 59.1 61.3 61.9 84.6 Other Crops 129.5 98.7 67.9 37.8 1‘1. 23400 196e3 263e8 355.8 Total 2,220.4 2,183.0 2,098.4 2,026.8 Source: Census of Agriculture 1! Information not available. Table 5. Di Oi iii-Fara \ior fill Tile \ Fart ’ a . .ile 61 ‘Table 8. Distribution of Farm Operators by Gross Farm Earnings and Off-Farm Hork Off-Farm work Gross Earnings Thumb South Central ---O----P.f¢.nt--.--u---- Full Time $1,200 and more 55 37 less than $1,200 11 7 Part Time* $1,200 and more 25 38 less than $1,200 9 18 100 100 Source: 1963 Farm Drainage Survey. Frequency distributions were statistically different at the 90 percent confidence level. * For purposes of this survey, farms were classified part-time if the farm operator grossed $200 or more per year off the farm. Frequency distribution of part- and full- time work by area was statistically different at the 99 percent confidence level. The distribution of those earning less than $1,200 between areas was statistically different at the 70 percent level. I... MMMan mama oi a roaring lea: ouwhn fmnmo ailaar that mu m at he diatribr manna ‘lPOreeor 1 Tie av. illila 9). MOlieb 54! I elem WP! ban 62 the Thumb area grossed less than $1,200 in 1962. In the South Central area one of every four farmers grossed less than $1,200. Many of those grossing less than $1,200 on the farm, had off-farm income to counter the low farm income. But, both areas had approximately one of every 10 farmers who was classified as a full-time farmer yet had a gross income lot less than $1,200. The frequency distribution of off-farm work by iaraaa was statistically different at the 99 percent probability level. ‘The distribution of farmers between areas earning less than $1,200 was not statistically different as the null hypothesis was rejected at the 70 percent confidence level. The average farmer in both study areas was nearly 50 years of age (Table 9). One of every five farmers was over 60 years of age. The 45 to 60 age bracket represented the largest group in both areas, represent- tng a skewness toward the older age groups. The distribution of age groups between areas was not statistically different. Male family work- ers per farm were essentially the same in each area. An average of about 1.5 men over 14 years of age worked on each farm. 8. Land Characteristics and Availability About two-thirds of the rural land in both the Thumb and South Central areas of Michigan is cropland; pasture represents 10 percent or less (Table 10). The major land use of the two areas is quite similar even though large areas of the Thumb are level, flat farms that appear to be mostly cropland. Forest, woodland and miscellaneous acreages rep- resent comparable portions of the rural lands in both areas. The soils in Michigan have been categorised into seven major soil management groups by specialists at Michigan State University and the Soil Conservation Service of the U. S. Department of Agriculture. The labia 9. ~— iao over image a in diet: I ”hoe: 63 Table 9. Demographic Characteristics of Farmers in the Thumb and South Central Michigan Study Areas, 1963 Characteristic Thumb South Central Men.over 14 years of age, per famm 1.4 1.5 Average age of farm operator, years 48.9 49.7 Age distribution, percent less than 30 8 5 30 - 44 31 30 45 - 59 39 47 60 and over 22 18 100 100 Source: 1963 Farm Drainage Survey Frequency distribution of age groups by area was statistically different at the 45 percent level. 41* r ..-fl-.. marl Lun- _ Table 10. Cro; Paa' For Oth ‘5 Soar“; l “’1 but 64 Table 10. Major Land se in the Thumb and South Central Michigan Study At.‘ ’ 19 58-1- L d U Thumb South Central an 8‘ 000 Acres Percent 000 Acres Percent Crop land 1,705.1 70 2,205.3 62 Pasture 149.4 6 364.8 10 Forest 324.1 13 486.1 14 Other land 264.9 11 518.4 14 Total 2,443.5 100 3,574.6 100 Source: Inventory of Soil and Water Conservation Needs, USDA, 1958 1] Land use pertains to all land areas except federal land, urban and built-up areas and water areas less than 40 acres in sise. aajor go nil tax loan, a data in ml: to in each 1.2. ar lid 5 a: Win: “51? lb: 30 Ion Chiral Willa N. the St. 65 major groupings are related to the parent materials of the soils and soil texture. The texture of the soils varies from silty clays, clay loams, silt loams, sandy loams, loamy sands, sands to mucks.l/ The soils data in the Inventory of Soil and Water Conservation Needs provide a basis for estimating the acreage of each of the soil management groups in each county in the study areas (Table 11). Soil management groups 1, 2, and 2c represent clay loam and silt loam soils while groups 3, 4, and 5 are sandy loams and loamy sands. Over two-thirds of the Thumb cropland is in the clay and silt loams group. In the South Central area, only about half of the cropland soil is in this group which represents the more productive soils. Sandy loams are more prevalent in the South Central area. Nearly five percent of the cropland in the South Central counties is muck land. Cropland available for future grain and row crop production--For purposes of this study an estimate of the soils that would be available for grain and row crop production in 1980 is needed. The current crop acreage is expected to be reduced for urban, industrial, highway and recreational development. Since these are higher economic uses, the land estimated for these purposes is reduced from the current inventory. The urban impact is related to the population projections for the Nation and the study areas by the Bureau of Census and Battelle Memorial Insti- tute, respectively.3/ All of the cropland can be planted to row crops but for part of each I] For a detailed description of the soil management groups refer to Appendix B. 31 ”Agricultural Activity in the Grand River Basin: A Projective Study," Natural Resource Economics Division, ERS, USDA, January 1966. tabla ll. Soil lunar Grou; 66 ‘Table 11. Cropland Distribution by Soil Management Group in the Thumb and South Central Michigan Study Areas, 1963 Soil Management Thumb Sguth Central Group Percent Percent l 3.4 .6 2 35.9 39.2 2c 27.8 9.6 3 15.8 33.2 4 12.5 10.3 5 3.0 2.5 M 1.6 4.6 Total 100.0 100.0 Source: Distribution of soils among management groups based upon detailed soils mapping information listed on the sample segments in the Inventory of Soil and Water Conservation N.“.e nil anal Cmarvat: mar mrl pain no imam: at grou lzaita ca razomend 31? liai lei mc 67 soil management group, the recommendation of Experiment Station and Soil Conservation Service technicians is to plant small grain crops only. In other words, a basic rotation involving a certain percentage of small grain crop is necessary to maintain soil productivity over time. The Conservation Needs Inventory indicates the acreage of each soil manage- ment group with slope or soil problems for which recommended row crop limits can be estimated (Table 12). By 1980, the assumption is that these recommendations will be followed rather uniformly; consequently, the row crop limits and total cropland availability after urban impact represent land resource restraints in the linear programming analysis. C. Crop and Pasture Use,gAlternatives and Production Potential A productivity index of the soils in lower Michigan and the study areas was developed by staff members of the Crops and Soils Departments of the Michigan Agricultural Experiment Station, technicians of the U. S. Department of Agriculture Soil Conservation Service. For each study area, Statistical Reporting Service time series data on crop yields were uti- lised in a least squares regression analysis to predict current yield levels free of abnormal drouths, precipitation, frosts and other factors influencing crop failure. The area's current "normal" yield served as a base yield on which the productivity index was applied (Table 13). .As a result, an internally consistent set of yields by soil management group was estimated for the current base period from which alternative techno- logical yield projections could be derived. The clay loam and silt loam soils clearly have higher productivity ratings over other soil management groups. Since two-thirds of the cropland in the Thumb area and only about half the cropland in the South Central area represent these more productive soils, the aggregate Soiree: 68 Table 12. Proportion of Cropland Recommended for Row Crap Production, Thumb and South Central Michigan, 1980 Soil Management Thumb South Central Group Percent Percent 1 73.9 62.5 2 86.2 70.3 2c 100.0 97.1 3 86.8 74.9 4 88.7 81.3 5 89.9 68.3 M 100.0 100.0 Source: Minimum crop rotation schemes based on estimates of staff members of the Crops and Soils Departments, Michigan State University and the Soil Conservation Service, U. S. Department of Agriculture. 69 Table 13. Average Productivity Levels for Crop Alternatives on 5011 Management Groups in the Thumb and South Central Michigan Study Areas, 1963; 3:;t :::::.- wheat Corn Oats Barley Soybeans 82:3, -- ------------------ Bu.- ------------- - ----- th. Thumb 1 31 68 53 41 24 11.9 2 32 65 53 43 24 14.3 2c 36 74 59 50 26 15.6 3 30 59 48 37 23 11.1 4 26 50 41 34 21 10.6 5 17 36 30 -- 21 -- M -- 70 -- -- 28 -- South Central 1 30 66 50 40 23 11.7 2 3O 63 54 41 23 13.6 2c 36 7a 59 .50 26 ' 15.6 3 29 55 45 35 21 10.9 4 23 46 37 36 20 9.0 5 15 32 29 -- -- .- M -- 70 ' -- -- 28 -- ‘1] Productivity levels reflect average management, average climatic conditions and present drainage conditions and existing improvements. Table 13 Continued-- ‘19.. ”I Sill hm; Grou SWtor Table 13. Continued 7O Soil Management Potatoes Corn Alfalfa Other Crapland Group Silage May Hay Pasture* --th.-- ------------ Tons ---------- -AUD/yr.- muse 1 176 10.9 2.7 1.9 100 2 -- 11.5 2.8 1.9 125 2c -- 14.0 3.2 2.1 145 3 192 10.6 2.7 1.7 113 4 174 9.3 2.1 1.4 92 5 -- 6.0 1.4 1.0 55 M 240 12.0 -- -- -- South Central 1 176 10.7 2.7 1.9 115 2 -- 11.1 2.7 1.8 125 2c -- 14.0 3.2 2.1 145 3 187 9.9 2.6 1.7 111 4 169 8.9 2.1 1.2 87 5 -- 6.4 1.3 0.9 54 M 240 12.0 -- -- -- s('eurce: Unpublished material developed for the report, "Agricultural A Projective Study," Natural Resource Economics Division, ERS, USDA, January 1966. John Hostetler, Agricultural Economist, Natural Resource Economics Division, USDA.primarily was responsible for the assembly of these data. Activity in the Grand River Basin: * Average yield on permanent pasture assumed to be 63 animal unit days per year. product y attupi lavala rm 1 rid the of ore; taoiool 11 Mill) N b Jmcrii I'M: for t, nology Int I mile {Mp Woo fliot noIla. dr11:1, had“ i €01: lat, ‘ 71 productivity potential of the Thumb area would be greater. Technology attainment assumptions--For the economic analysis, an attempt is made to ascertain the effect of the adoption of different levels of crop production technology on the cropland use patterns, the rents attributed to the land resource prices of commodities produced, and the adoption of the farm drainage practice. Accordingly, two sets of crop and pasture yields that reflect different levels of production technology and management were developed (Tables 14 and 15). The yield projections,of necessity, represent estimates of the possible adoption of known technology. The projected yields were devel- oped by members of the Natural Resource Economics Division, ERS, in con- junction with the Michigan Experiment Station staff. The Statistical Reporting Service data on trends were used as the base yield projections for technology attainment number one for 1980 (TAl). The second tech- nology attainment (TAZ) was based upon assumptions of improved manage- ment and the more wide-spread application of near Optimum uses of fer- tiliser. In the development of the estimates, each soil management group was analysed with respect to its capacity to absorb additional technology. In all cases, the estimates developed are designed to re- flect productivity levels under average management and climatic condi- tions. In both the TAl and TA2 yield projections, no additional land dl'ainage is assumed. Additional yield increases due to drainage will b. discussed later. The tabular material presented reflect yield projections for the :13 counties of the two study areas central to this study. Comparable amta were developed for an additional 27 counties surrounding the study ‘l'eas in lower Michigan and are not reported because of their voluminous 311a “a $611 Hana! mt Grou; 72 Table 14. Average Productivity Levels for Crop Alternatives on Soil Management Groups in the Thumb and South Central M 7higan Study Area, Assuming Technology Attainment 1, 1980— ::;: :::::.' Wheat Corn Oats Barley Soybeans 32:1' -------------------- Bu.---------------------- th. n.a.-at; 1 49 107 76 62 32 18.8 2 50 103 76 65 31 22.6 2c 56 116 84 76 34 24.6 3 46 91 68 56 30 17.6 4 40 78 58 51 28 16.7 5 22 56 43 -- 28 -- M -- 110 -- -- 37 -- South Central 1 51 105 72 59 28 18.0 2 52 96 74 59 29 19.7 2c 60 114 88 73 33 24.0 3 48 84 65 51 27 16.4 4 39 71 52 45 25 13.8 5 26 49 41 -- .. -. M -- 107 -- -- 35 .. \ ll Productivity levels reflect average management and average climatic conditions and 1963 drainage improvements. Table 14 Continued-- 73 Table 14. Continued Soil Manage- Potatoes Corn Alfalfa Other Cropland ment Group Silage Hay Hay Pasture* --th.-- ------------- Tons ----------- -AUD/yr.- men-.2 1 -- 17.1 3.8 2.9 138 2 281 17.9 3.9 2.9 173 2c -- 21.9 4.5 3.2 201 3 307 16.6 3.8 2.6 157 4 277 14.5 3.0 2.0 128 5 -- 9.4 2.0 1.5 76 M 383 18.7 -- -- -- South Central 1 -- 16.1 3.7 2.9 159 2 265 16.6 3.8 2.8 173 2c -- 21.0 4.5 3.2 201 3 279 14.9 3.7 2.6 154 4 253 13.5 2.9 1.9 121 5 -- 9.6 1.8 1.4 75 M 359 18.0 -- -- .- ‘ sOurce: Unpublished material developed for the report, "Agricultural Activity in the Grand River Basin: A Projective Study," Natural Resource Economics Division, ERS, USDA, January 1966. * Arerage yield on permanent pasture assumed to be 88 animal unit days per year. 74 Table 15. Average Productivity Levels for Crop Alternatives on Soil Management Groups in the Thumb and South Central Mifhigan Study Area, Assuming Technology Attainment 2, 1980.— 2:;: H;:::;' Wheat Corn Oats Barley Soybeans 82::s --- ----------------- Bu. ----- - --------- ------ th. ens-.2 1 59 126 90 76 37 23.5 2 61 121 90 81 36 28.2 2c 69 137 100 94 40 30.8 3 57 107 82 70 35 21.9 4 50 92 67 63 33 20.8 5 34 67 51 -- 32 -- M -- 130 -- -- -- -- South Central 1 62 119 86 72 33 22.5 2 63 114 92 74 34 26.2 2c 73 134 101 .90 38 30.0 3 59 99 78 63 31 20.6 4 49 84 62 56 29 17.3 5 32 58 50 -- -- -- M -- 125 41 -- 41 -. 1] Productivity levels reflect average management and climatic conditions and 1963 drainage improvements. Table 15 Continued-- 75 Table 15. Continued :2. “22: .22. “:2“ 22 22222 --th.-- -------------Tons----------- -AUD/yr.- use 1 -- 20.1 4.4 3.5 170 2 349 21.2 4.5 3.5 212 2c -- 25.7 5.2 3.9 246 3 381 19.5 4.4 3.2 192 4 344 17.1 3.5 2.5 156 5 -- 11.0 2.4 1.8 94 M 476 22.0 -- -- -- South Central 1 -- 18.9 4.3 3.5 196 2 329 19.5 4.5 3.4 212 2c -- 24.7 5.2 3.9 246 3 347 17.6 4.3 3.2 189 4 314 15.9 3.4 2.3 148 5 -- 11.3 2.2 1.7 92 M 446 21.2 -- -- -- ‘ so“roe: Unpublished material developed for the report, ”Agricultural Activity in the Grand River Basin: A Projective Study," Natural Resource Economics Division, ERS, USDA, January 1966. * Arerage yield on permanent pasture assumed to be 114 animal unit days per year. .3 “" 'mm :aturt 313101 rulta irate. in al Mill :arior liven: tlllt} 76 nature. As will be discussed later, all of the data for the 42-county region are used in the linear programming analysis of this study. Re- sults discussed will relate to both the region and to the two subareas. Fertiliser use assumptions-~The fertilizer use implicit in the yield projections TAl and TA2 represents approximately 30 and 60 percent increases in fertiliser nutrient use over 1959 estimates (Table 16). The alternative yield estimates represent increased levels of all manage- ment such as improved seed, use of insecticides, timeliness of operations, and so forth,as well as fertiliser uses. In general the fertiliser applications represent maintenance appli- cations. Fertiliser is assumed to be applied commensurate with the amount of the nutrient used, sufficient to maintain the basic soil fer- tility without mining the soil. Drainagegpotential--In the 1958 Inventory of Soil and Water Conser- vation Needs, committees of local county agricultural leaders were formed to guide the inventory, interpret results and determine the conservation problems. Soils were characterised according to their primary and sec- ondary conservation problems. One of the problems was excess water. The Thumb area has 1.1 million acres and the South Central area has .6 allllion acres where excess water is the dominant soils problemrl/ In addition to the estimate of acreages with an excess water prob- 1fill, an unpublished estimate was made of the acreages that need arti- flcial drainage in order that conservation measures and conservation tfirming could be undertaken (Table 17). These data were not published, ¥ y Inventory of Soil and Water Conservation Needs, Michigan ‘.p°rtg ’Pe (69.50e 77 Table 16. Fertiliser Applications for Alternative Crops on Soil Manage- ment Group 3, Under Alternative Technology Attainment Levels, Thumb Area, 1959 and 1980 Projected r3333: Nutrient Wheat Corn Oats Barley Soybeans ---------------Average Per Acre, Pounds ------ --------- Axsicultural Sub- N 18 27 l3 l4 8 egion 40, 1959 . P205 44 40 37 37 33 K20 42 35 36 36 31 _TOclmology N 55 91 41 34 0 Attainment l P 0 69 73 54 45 45 2 5 K20 37 36 27 22 30 Emchnolon N 68 160 49 42 0 mam-2.2.2 P 0 85 86 66 56 53 2 5 K20 46 64 33 28 35 Table 16 Continued-- 78 Table 16. Continued Porti l i ser Dry Potatoes Corn Alfalfa Other Cropland lEstimate Beans Silage May May Pasture - -------- ~---Average Per Acre, Pounds-- --------- --- Agriculture Sub- 8 74 ll _2_/ 26 2] region 40, 1959 34 131 _1_/ 2] 45 y 32 136 ll _2_/ 43 y l‘chnology as 15:. 133 o 13 t. Attainmgt 1 53 123 50 76 52 14 35 184 83 38 26 43 T. .chnologz 22 191 156 0 l6 4 9.5212225; 66 152 59 88 64 17 44 229 98 44 32 51 E Source: ll .21 gommercial Fertiliser Uged on Crops and Pasture in the United States, 1959 Estimates, Statistical Bulletin No. 348, ERS and M3, USDA’ July 19“, pe 79o Projected fertiliser use levels developed from estimates by members of the Michigan Agricultural Experiment Station. Yield estimates in Tables l2, l3 and 14 reflect the fertiliser esti- mates. In general, fertiliser estimates represent maintenance applications. Fertiliser is assumed to be applied commensurate with the amount of the nutrient used by plants, sufficient to maintain the basic soil productivity. Technology attainment levels 1 and 2 represent increases of 30 and 60 percent in fer- tiliser use over 1959, respectively. Fertiliser use included with corn for grain. Fertiliser use included with other hay. 79 Tabla 17. Cropland Tile Drainage Potential by Soil Management Group, Drainage Condition and Slope, Thumb and South Central Michigan, 1958 Soil Designation? Thumb South Central ----------Acres----------- 1bcA 27,600 --- lch --- 5,200 2hA 219,400 103,300 2bB --- 3,800 2cA 257,400 91,800 3bA 91,000 68,400 3bB --- 1,600 3cA 2,300 3,000 4bcA 77,700 26,800 5bcA 12,500 6,500 McA 13,600 49,900 Total 701,500 360,300 g Source: Unpublished estimates made by the county co-i ttee in the development of the Inventory of Soil and Water Conservation Needs. * Soil designation symbols are defined as follows: 1, 2...5, M - soil management group b - imperfect natural drainage c - poor natural drainage A - slopes less than 1 percent B - slope between 1 and 3 percent 80 but were obtained from the Inventory of Conservation Needs' work sheets in the county Soil Conservation Service offices in the study areas. Presumably, the acreage estimate, as developed by the co-ittee, repre- sent. cropland area where tile drainage would be physically feasible. In both areas, the foasiblo-to-drain acreage represents about two-thirds Of the total land area having excess water as the dominant problem. The foasible-to-drain acreage by soil management groups provides acroage limits for the linear programing model for determining the economic potential for drainage. As will be discussed later, the drain- “. activity is allowed to enter at various cost levels to determine the 'Cnmi tivity of various cost-sharing arrangements on possible drainage “O’ti on. The potential yield increase obtainable through artificial drain- “. was based primarily on the 1963 Farm Drainage Survey. Individual mp production and acreages were obtained from each respondent in the mrweyvl-l In addition, the actual drainage improvement, if any, was I'Ooordod. Thus, overall yield levels for the major crops were obtained 101‘ undrainod and artificially drained conditions. However, those yield differences were not identified by soil management group. In a separate ‘rminage study of the Ohio River Basin, Indiana and Ohio Experiment station and Soil Conservation Service personnel developed drainage Field estimates for soil groups similar to those used in Michigan. Ono °t the regions analysed in the Ohio study overlaps lower Michigan oven u“lush it does not lie in the Ohio river hydrologic boundary}! The ‘ _1_/ See Section III, Appendix A. Q] Land Resource Area 111 extends into lower Michigan. See the “Nhlishod intoragemcy report by the author, "Agricultural Activity in th. Ohio River Basin: A Projected Study," Natural Resource Economics Division. an. am, February 1966, p. 16. @firgfl {and mu Si index developed fron these data was coupled with the yield differences found in the term Drainage Survey for the study areas to determine the average yield response that might be expected. The results were checked and adjusted by members of the Michigan Station (Table 18). The drainage installation assueed for each soil management group reflects the reco-ended installation for each group by the Soil Conser- vation Service and the Exporinont Station. At present, nearly all of u" “flue. installed in the study areas is done under technical as- li stance of the Soil Conservation Service and cost-sharing arrangements 0: th' ‘8?! cultural Stabilisation and Conservation Program Service. Consequently, the assumption is that future installations also will be 3000““! to recs-endations. Potential yield increases were developed for both technology at- tainmont levels to be consistent with the yield projections developed earlier in this chapter. Practically no experimental information is "‘11.“. 'hich relates the share of improved yields that can be im- Flt“ te drainage. In other words, the percent increase in yields thfllgh Crtlfioial drainage that farmers experience currently was used ‘0 ‘Otormine the potential drainage increase from the ‘I'Al and ‘IA2 pro- Joctieag. The average yield levels for each conodi ty under the I'Al “‘4 1‘: tom‘s-etions were liltiplied by the respective percent increase. therefor.. u“ drainage potential was assumed to be perfectly related to the minted yields for ‘I‘Al and 1A1. The drainage input into the M°u0l process undoubtedly interacts with other technology inputs to N the higher yield. fertiliser inputs, seeding rates, har- vest!“ meats, etc., also would increase in oonjunotion with the drain- ... “to and may not be a oonstant proportion. while the constant I It“ imputation of productivity is arbitrary, alternative 82 Table 18. Potential Yield Increases from Drainage for Crop Alternatives en Soil Manage-ent Groups in the Thu-b and South Central chhigan Study Areas, Assuming Technology Attainment l- * :2: m;- Wheat Corn Oats barley Soybeans 332. -------------- ----- bu.---------------------- cwt. 3M1 1bcA 13 39 39 17 12 3.3 1“ 21 33 33 17 13 10.3 M 23 3o 33 32 13 11.3 3“ 20 33 23 13 9 7.3 3cA 23 33 31 29 13 11.1 “(A 23 33 33 -- 13 3.7 5bcA 17 37 23 -. -- .. lic -- 35 -- -- 16 -- W than 13 33 33 13 9 7.3 m 21 32 33 13 13 10.2 1“ 17 27 32 1o 3 3.3 1“ 33 39 33 31 13 11.1 3‘“ 32 33 23 13 9 7.3 3“ 27 33 31 23 13 13.3 353 17 33 23 11 3 3.3 “NA 23 33 33 -- - 13 3.3 "'4 13 31 27 .. .. .- __L .. 33 -- -. 13 -- 1’ Yield increases represent average flanges in production above the averages listed in Table 13. table I. Continued-- 83 Table 18. Continued 1:11:11;- W... .112. “as“ 2:: --th.-- -----------------Tons-------------- 111.2! 1bcA -- 7.8 1.5 1.3 2bA -- 5.5 2.1 1.5 2cA -- 10.1 2.3 1.5 JbA 88 8.1 1.7 1.3 3cA 14‘ S.’ 2.1 1.5 5bcA 93 7.8 1.7 1.0 SbcA -- 6.6 1.0 1.1 lo 224 3.8 -- -- Sggth gentral lbcl .. 6.7 1.0 1.1 ZbA -- 5.2 2.1 1.5 Zbl -- A.5 1.5 1.1 2cA -- S.7 2.3 1.5 3bA 82 7.8 1.7 1.3 3cA ’0 8.6 2.1 l.‘ 3b! 90 6.! 1.7 .9 bbeA 87 7.5 1.7 1.0 5bcA -- 3.5 '.8 1.1 In 211 5.6 -- .- L Source: Interaction developed from the I!” tars Drainage Survey and free.estimetes of the Soil Conservation Service and Agricultural hporinent Station personnel in Michigan, Ohio and Indiana. 8!. estimates are not available. The yield increases are in addition to the projected productivity levels presented in Tables 14 and 15. D. gegt of Production The production costs were developed on the basis of current input pri 3:. levels and relationships. Their purpose in the nodol is to in- dicate the relative costs of producing various crops in the soils in the study areas. Current relative input prices are assumed to exist in I’OO. All items of on-farm production costs were included with the “ception of charges for crop and hay storage and interest costs for I“ or land improvements. The per acre production costs for each crop ”“1 soil were aggregates of the three major ole-ents of costs: pro- MI'Vest costs, harvesting costs ‘1‘ the cost of naterials. The costs '01:. designed to represent average costs of production that farIers Mild incur in the projection year 1980 (Table 1!). Tillage operations, «nu pent si se, and performance rates represent better than surrent “.rege production netheds. Unpublished Iiichigan Perm Account data were ”‘0 principal sources of infornation for developing input budgets. Preharvesting costs consisted of charges for land preparation, ’1uting and galoral cultivation. Additional charges for side dressing “eh fertiliser and spraying with insecticides and herbicides for cor- t‘“! crops were made. Charges were node for clipping cropland pasture. ‘ uncellanoous charge was made for equipont naintenence. Hired and “-1 1y labor costs were figured at $1.58 per hour.” \ ’0 ll Labor rates based on 1961 rates used in the fare business re- fiytt. prepared by the iiichigan luperinut Station and adjusted to 1963 S the wage rate index found in Agricultural Statistics, 196‘, p. “5. Hi Cleo Leonard A. Kyle, Michigan Perm business Report for 1961, ‘h‘gnn Snperiment sun... a.s.3.. ”31.1. 33-23. lov-ber 1932. 85 Teble l9. Equi t and Labor Costs for Budgets, Michigan Porn Drainage Study. Ito A;::.$:.gu Cost Per Hour --iiours-- --Dollars-- Tractor, 3 plow 600 1.43 Plow, 3 - 14 in. 100 .88 D1 mh harrow, 10 ft. 100 .66 Drug harrow, 10 ft. 60 .13 Planter, 4 row (30 1.93 Rotary hoe, (3 row (.0 1.43 Cultivation, (3 row 100 1.05 Sprayer, 8 row (.0 .63 Corn picker, 2 row 100 3.85 Colbine, 7 ft. 100 5.50 Hour, 7 ft. 30 1.10 Hnybaler, P.T.O. 40 7.04 Hey rake, 7 ft. 60 . 1.21 Gram 3:111, 13 - 7 in. 30 2.20 Labor -- _ 1.53 \ sCbnircex Developed fron unpublished Michigan farm account data and naterial developed for the report, "Agricultural Activity in the Grand River Basin: A Projective Study," Natural Resource Scone-ice Division, ERS, USDA, January 1966. 1] Costs reflect 1963 nachinery and salvage price levels. Capital charges were 6 percent. Labor costs, based on rates used in fern business reports prepared by the Michigan Experinent Station. 86 Harvesting costs include the tine necessary to harvest the crop and, in addition, include the costs of equip-ent and labor needed to transport the crop to an on-farn storage facility. Off-farm transpor- ter! on costs were not included. The cost of materials varied anong crops sore than did the costs of planting and harvesting. Nitrogen, phosphorus and potassium fertié liner costs used were 12, 10 and 5 cents per pound of actual nutrients .Pplled, respectively. Other material costs included such itens as line, Iced, spray, twine for hay baling and bags for potatoes. Production costs were developed representing the two technology ‘ttninnent assumptions discussed previously (Table 20). Material and lInn-vesting costs were the principal variants in costs of production from OR. attainment level to another. Material costs per unit were assumed c”Instant over all levels of application. harvesting methods were as- "filed to be slightly more efficient as yields increased. Preharvesting °°ets were assumed to rush unchanged. Wane investment in drainage was developed from un- P‘lblished information available from the Agricultural Stabilisation and corleervation Program Service. Records of actual installation in the 1363-64 season provide a basis for deternining typical tiling cost for the “may gran. Average tiling costs were $2.84 and $3.85 per rod in- ":CI led in the Thumb and South Central areas, respectively. Current di tehing costs are 10 cents per cubic yard of earth eoved. A survey of "than by :3. 33:11.: in Lapeer .113 Gratiot County in 1931 133133333 tht the useful life of tile installation averaged 30 years and open in ten installation 20 years. The .ortisation rate in determining the h‘ic annual drain investnents was 6 percent. The effect of varying 87 Table 20. Average Production Cost Levels for Crop Alternatives on Soil Manag-ent Group 3 the Thumb Area under Alternative Tech- nology Assumptionsl Technology Asa-ption Wheat Corn Oats barley Soybeans Technology Attai ment 1 Prehnrvest Costs $ 5.88 $11.90 $ 9.25 $ 5.88 $12.77 H-terlal Costs 23.42 23.77 16.62 17.66 11.25 Harvest Costs 12.41 12.135 10.96 13.79 9.58 Total $131.71 $48.12 $36.83 $37.33 $33.60 ..TOclmolon Attai nmont 2 Preharvest Costs $ 5.88 $11.90 $ 9.25 $ 5.88 $12.77 Material Costs 26.12 29.32 19.90 19.58 15.82 Harvest Costs 13.79 13.23 12.70 15.06 9.58 Total $33.79 $33.33 $31.33 $40-52 $38-17 y Costs reflect 1963 nechinery and salvage price levels. Capital charges were 6 percent. Costa do not reflect land charges or land inprev-ent charges. . Table 20 Continued-- 88 Table 20. 922512225 Dry Potatoes Corn Alfalfa Other Cropland TWOIO" “III-Pt!” 3.“. 31 1‘8. “.y u., P‘.mr. Technology Attainment 1 Preharvost Costs $12.77 $ 76.28 $12.03 $ .44 $ .87 $ .44 Material Costs 13.33 239.21 23.23 13.23 13.37 13.71 Harvest Costs 13.32 39.73 32.33 30.00 23.00 2.73 133.1 ' 331.03 3323.23 $90.33 $33.37 $39.23 $13.90 Technology.Attainment 2 Preharvost Costs $12.77 $ 76.28 $ 12.03 $ .44 $ .87 $ .44 Material Costs 18.36 345.61 34.25 17.99 15.92 18.35 Harvest Costs 15.26 72.09 57.32 33.00 27.10 2.75 Total $46.39 $493.98 $103.60 $51.43 $43.89 $21.54 Source: Developed from unpublished Michigan fern account data and material developed for the report, "Agricultural Activity in the Grand River Basin: A Projective Study," Natural Resource Economics Division, ERS, USDA, January 1966. 89 drainage costs through alternate cost-sharing arrangements will be dis- cussed in the following chapter. The investment costs developed for this study represent the recom- mended tile and surface ditch spacing of the Soil Conservation Service and the Michigan Agricultural Experiment Station (Table 21). Grid tile systems are recommended on all soil management groups except on certain wet sandy soils (5bcA) where random spacing of tile laterals in depres- sions provide adequate drainage. The costs develOped for each soil management group include costs for large on-farm Open ditches for out- lets. The cost presumably represents the farmers "on-farm" costs in draining an acre of land. Public drain costs or the cost-sharing of major channel improvements performed by federal agencies are not included. E. Alternate Regional Food and Pibre Production Projections For purposes of this study, three levels of product requirements for agricultural products in the region were developed. The term pro- duct requirements as used here refers to the amount of agricultural products consumers would be expected to purchase or require from the region. As discussed earlier, the aggregate requirements for agricul- tural production are exogenous variables in the study. The three levels of requirements were designed to reflect potential population levels and changes in per capita uses of agricultural commodities in the U. S. in the future. Assumptions also were made concerning import-eXport levels as well as livestock feeding efficiency and livestock feed com- position. Tho production requirement developed can be considered as alternate projections for 1980 based on different growth rates, output ratios and per capita income. Alternatively, the requirement could be considered as projections into the future beyond 1980. At any rate, an 90 Table 21. Drainage Investment Costs Per Acre for Imperfect and Poorly Drained Soils in the Thumb and South Central Michigan Study Areas Soil Management Recommended Amortised Annual Cost Per Acre ** Group Drainage System* Thumb South Central 1bcA 4-rod grid 6.41 8.46 1ch 4-rod grid 5.93 7.98 2bA 5-rod grid 7.27 9.69 2bB 5-rod grid 7.17 9.59 2cA 5-rod grid 7.22 9.64 3bcA 6-rod grid 5.93 7.91 3bB 6-rod grid 5.88 7.86 4bcA 7-rod grid 4.64 6.18 5bcA random .71 .91 Mc 7-rod grid 4.95 6.49 * Tile spacing represents recommendations of Soil Conservation Service and Agricultural Experiment Station technicians. ** Costs based on current drain investment costs in the study areas as recorded by the Agricultural Stabilisation and Conservation Service. Tiling costs are $2.84 and $3.85 per rod installed in the Thumb and South Central areas respectively. The per acre costs also included necessary on-farm open ditch costs. Current ditching costs are 10 cents per cubic yards of earth moved. Tile costs were amortised over 30 years at 6 percent and open ditch costs over 20 years at 6 percent. 91 attempt is made to make the three estimates internally consistent and comparable. Whether the projections are alternative estimates for a given projection date or subsequent time period is immaterial as long as the estimates are within the range of possibilities. Alternative national economic growth projections have been devel- Oped by the Ad Hoc Water Resources Council Staffl/ (Table 22). These projections represent different assumptions about population growth, labor force participation and growth in Gross National Product. They were developed to represent expected11980, 2000 and 2020 economic con- ditions but for this analysis the projections were labeled C1’ C2 and C3, respectively to reflect less emphasis on the time dimension. The symbol C represents the product that is assumed to be produced in the region or alternatively required. The population and labor force assumed represented increases of and C3 res- 2 pectively. However, 2-, 4-, and 9-f01d increases in GNP are expected. about 40, 100 and 175 percent for the three levels Cl’ C These rates are consistent with the population increase, the purchasing power of the labor force and the continued growth of the economy. Gross product per capita also increases significantly which influences per capita food consumption rates. Expected per cgpita uses ofiagricultural commodities--An initial estimate of total U. S. agricultural product requirements of effective demands was determined by multiplying the expected per capita uses of the major farm products by the population assumed in Cl’ C and C 2 3' Per capita uses were developed by the Economic and Statistical Analysis ll Economic Task Group of the Ad Hoc Water Resources Council Staff, National_§conomic Growth Projection, Washington, D. C., July 1963. 92 .nceu much ..u .m .uoumcunuex .coauuo one museum uumocoom decoauoz .uueum uuouooo soounoeem uouom_eo: u< on» no cacao mesa camouoou .uc edema naucooe< use n oases noun mounsu< \4 a." .oo.o ecu men.» _n. ~_n.e onm.~ » 33.330 mod uoauome eaouu on“ on.n~ aeu 35.3 men «3.3 c~.n » 3:3: =3- 0.3 333333 use emn.e nae "nu." «ma ooe.— n.n~n » .~.n seasons neuouuoz eeouo emu «on no“ can ne_ cos o.oe .uaz uceauo_aae «an ac" «cu has ~33 eo_ a.n~ .Haz .ouoa son-a ops o.~on can o.enn can o.en~ a.oe_ .uax cosy-usage so-onoa no no-3noa «u no-3noa do no-3na_ hobo nope . uopo omeuo>< noun oueouocn oeeouocu oeeouucu a e a smudmgumumdiundwemwummc leoou< more» omocaoum mush sewage“: on» c. «saucouom success: we eueauec< uou euuehuuumoou use-on o>uuoouua opauecuou~< uou ecoauemsuu< .«N o—noa 93 Division, IRS, c00peratively with the Resource DevelOpmont Economics Division (Table 23). In general, meat products are expected to have higher per capita uses, while cereal, dairy and egg products will have lower per capita uses. The increase in soybeans per person is expected to be most dramatic. Other commodity uses are not expected to change significantly. Alternative per capita uses were not projected since disposable personal incomes were expected to reach a level where addi- tional incomes would not change the commodity mix in the U. S. diet significantly. Livestock feedingfgfficiency and ration assumptions--To maintain consistency with the TA1 and TA2 technology assumptions, changes in feeding efficiency were estimated to correspond with the alternative product requirements (Cl, C and C3). Feeding efficiencies influence 2 the amount of feed grains required for the livestock product estimated to be needed under the three situations. Little statistical data are available to analyse feeding efficiency trends. The kinds and types of livestock fed have varied which tends to veil improvements in feeding efficiency. In fact, some projection models, in which favorable livestock-feed price relationships are assumed, indi- cate decreased aggregate livestock feeding efficiencies in the next 10- 15 yearsal/ Nevertheless, livestock specialists estimate continued im- provement in breeding, improved rations, less food wastage, and increased parasite and disease control. Mochanisation is expected to allow larger, more efficient organisation and management of enterprise which in turn ll ‘e f. m1, and As Co EgbCrt. "‘ LOOK “.Cd for FOOd and Agri- culture," Agricultural Economig! Research, January 1966, Vol. XVIII, he I. ’e as 94 Table 23. Index Numbers of Projected Per Capita Uses of Major Farm Products, United States Item Projected (1959-61 - 100) Meet (carcass weight) Beef 132 Veal 85 Lamb and mutton 71 Pork (excluding lard) 89 Total 111 Dairy Products Total milk equivalent (fats solid basis) 87 Poultry Chicken (ready to cook) 120 Turkey (ready to cook) > 157 Total 127 Eggs 86 Soybeans 164 Flex 57 Wheat 87 Rice (milled basis) 106 Rye 78 Peanuts (farm stock basis) 103 Wool (apparel, scoured) 100 Sugar crops (raw equivalent) 100 fruits ‘ Citrus (fresh basis) 102 Noncitrus 107 Tree nuts (in shell) 94 Vegetables (all, including melon) 103 Potatoes (fresh and processed) 102 Sweet potatoes 72 Dry beans 92 Dry peas 100 Tobacco 100 Source: Economic Framework Section, River Basin and Watershed Branch, Resource Development Economics Division, ERS, USDA. Unpublished memoranda dated March 29, 1965. Data developed cooperatively with the Economic and Statistical Analysis Division, BRS. 95 will encourage the adoption of newer technologies. feeding efficiencies have been estimated based on information pre- pared by the Ohio lxperiment Station and the Michigan Agricultural Ex- perimuit Station U (Table 24). In general, the feed requirements per pound of product of all livestock groups are reduced by one-third under the C3 assumption. Another factor in determining feed grain and roughage requirements is the mixture in the livestock feed ration. Roughages are expected to constitute a smaller share of the ration (Table 25). feed grains also are expected to be a larger share of the concentrates fed. Increased pen feeding of beef and dairy cow confinement is expected to result in higher concentrate consumption. Sven so, the projections do not deviate significantly from present rations. Projected regional product reguirements--Statistical Reporting Service data were summarised to develop a 1959-61 base for the produc- tion of the major farm products produced in the U. S. and in lower Michigan (Table 26). following this step, the assumed population for Ct, C2 and C3 was multiplied by the per capita consumption rates to determine estimates of domestic food requir-ents. Livestock products were further translated into feed grain and roughage requirements. Not export requirements were added to the domestic requirements. Txports were entered at approximately double current rates for all three pro- jection situations. The assumption is that developing countries are j] C. Jz‘lillard, Projected Crop and Pasture fields, Associated fertiliser See and feeding lffieienoies. Ohio River Basin, 1980-2010, unpublished report prepared for the lateral Resource Sconemics Division, IRS. USDA, 1964; and Project '60, Summary of Phase 1! Papers, Michigan ”3.6”“ m3“: 'tlt3-. m 1965. 96 Table 24. feeding Efficiency Assumptions for Determination of Alternate Crop and Pasture Production Requirements, Michigan farm Drainage Study feed Units* for Pound of Product Commodity 1959-61 Projected Estimate C1 C2 C3 Beef and veal- 11.5 10.5 8.8 7.2 Lamb and mutton 13.0 12.0 10.0 8.2 Pork 4.6 4.0 3.7 3.3 Milk 1.0 .85 .75 .65 Broilers 3.0 2.5 2.3 2.1 Turkeys 3.7 3.2 2.9 2.5 Eggs 3.6 3.1 2.7 2.3 Source: C. J. Willard, Projected Crop and Pasture Yields, Associated fertiliser Use and feeding Efficiencies, Ohio River Basin, 1980-2010, unpublished report prepared for the Natural Resource Economics Division, ERS, USDA. * A feed unit is equivalent to one pound of corn. 97 Table 25. Projected Livestock feed Ration Composition for Determining Alternate Crop and feature Production Requirements, Michigan farm Drainage Study Ration 922“ tion feed Units feed Units Cc-odity from mantrates from Grain 1959-61 1959-61 Estimate Projected Estimate Projected --------------------percont--------------------- Beef and veal 21 25 l4 19 Lamb and mtton 10 10 6 6 Pork 96 97 81 82 Milk 32 41 23 33 111-3113:. 100 100 33 37 Turkeys 95 98 58 62 Eggs 98 99 64 65 Source: Economic fr-ework Section, River Basin and Watershed Branch, Resource Develop-1t Economics Division, ERS, USDA, unpublished 98 Table 26. Production of Major farm Products, U. S. and 42-County Region of Michigan, 1959-61 Average 11:.- Uni t u. s. “2"“th Region (1959-61 average) Beef and veal Mil. Lbs. Live Wt. 28,206 372.1 Lamb and mutton Mil. Lbs. Live Wt. 1,658 17.2 Pork Mil. Lbs. Live Wt. 20,564 213.7 Chicken Mil. Lbs. Live Wt. 7,571 37.8 Turkey Mil. Lbs. Live Wt. 1,540 18.1 Milk Million Lbs. 121,164 3,998.4 Eggs Million 64,993 1,299.8 Wheat Thousand Bushcls 1,185,533 27,267.7 Rye Thousand Bushcls 28,143 619.1 Soybeans Thousand Bushels 597,600 4,183.2 Sugar beets Thousand Tons 17,047 1,108.0 Dry beans Thousand th. 18,710 6,585.9 Potatoes Thousand th. 258,230 5,681.0 Vegetables Thousand th. 416,640 11,665.9 fruits, non-citrus Thousand Tons 8,098 380.6 Source: Economic framework Investigation Section, River Basin and Water- shed Branch, Resource Development Economics Division, ERS, USDA and interagency report Agricultural Activity in the Grand River Basing A Projective Study, January 1966, Natural Resource Economics Division, ERS, Table 11. 99 expected to provide larger shares of their own food and fibre needs. A final step was to analyse the historical share of U. S. produc- tion that the lower Michigan area produced of each major commodity. A linear regression prediction for 1980 was used for allocating U. S. prod- uct requirements for the three projection situations. One slight modi- fication in predicted shares was made in that corn production was in- creased to allow lower Michigan to be a slight surplus feed grain pro- ducing area for the three projection situations. Statistics were not available nationally or regionally to develop the estimated share of roughage production for pasture. Pasture production for lower Michigan was developed on the basis of existing and projected livestock production and expected pasture yields. Based on the foregoing relationships and assumptions, indices of product requirements for the lower Michigan area were developed (Table 27). food crop projections were generally below current levels for CI. All crop and livestock items were above current levels in the C3 situa- tion except for cats and barley which gave way to corn in the livestock rations. 100 Table 27. Indexes of Alternate Product Requirements for the Analysis of Drainage Adoption in Lower Michigan, Michigan farm Drainage Study Commodity C 1 2 3 (1959-61 - 100) Wheat 101 115 152 Corn 78 119 164 Oats 73 76 51 Barley 56 67 59 Soybeans 267 338 448 Dry beans 124 173 229 Potatoes 182 253 335 Corn silage 91 129 138 Alfalfa hay 75 120 140 Minor crops 96 118 136 Cropland pasture 132 140 131 Permanent pasture 129 145 119 Beef and veal 128 183 242 Lamb and mutton 92 130 172 Pork 122 170 225 Chicken 62 92 122 Turkey 154 213 282 Milk 118 163. 215 Eggs 96 133 176 Source: Unpublished data from the Economic framework Investigation Section, River Basin and Watershed Branch, RDED, ERS, USDA and working data for the interagency report Agricultural Activity in the Grand River Basin, A Projective Study, Natural Resource Economics Division, ERS, January 1966. CHAPTER V ECONOMIC POTENTIALS FOR LAND DRAINAGE The results of the linear programming analysis are presented in this chapter. As indicated in Chapter III on methodology, a minimum-cost formulation of the linear programming technique is used to estimate the economic potential for agricultural land drainage under various assump- tions. One of the questions to be asked in the analysis concerns the role investments in agricultural land drainage by private resource owners and public agencies can play in economic growth. In other words, what are the expected changes in producer benefits? More specific economic ques- tions can be raised. The linear programming model as used herein pro- vides estimates for many of these questions. Information on production costs, merginal costs of production, resource rents, drainage renta,sub- stitution of drained land for idle acres, etc., are provided. A. Nature of the Linear Programmigg Model The objective function for the linear programming model used herein is designed to minimise the costs of producing a given set of product requirements, given a specific set of restraints on the production pro- cess, within a producing region. The model‘wes presented in Chapter III in both its primal and dual forms. A.tabular illustration of the model is shown in Table 28. In the symbolic matrix, the p represents the per acre cost of the production activities and the a represents the per acre output or yield. The land requirement for each activity is one acre, to correspond‘with the per acre cost and yield coefficients. The product 101 102 Table 28. Tabular Illustrations of Minimum Cost Linear Programming M 1 ‘with Drainage, Row Crop and Minimum Crop Acreage Extensions—. Activi ties Restraints P P 0 P P P 0 P 1 1 . 1 peep-m pm 1 1 . 1 pp-pp'p' 1 1 . 1 gm. mom.— 0 O O 0 pm 9' 12' p' p' 9' p. 1 - Cost Product Requirement Wheat Corn Crop Pasture Land Acreage Available "\MMIA he [03-0 Drainage Acreage Available inlhohoh MONO-2 Row Crop Acreage Limit "($1113 .o MOI. Minimum Acreage Requirement a'Wheat "Corn 9'. ? Crop Pasture 1] Identity Matrix emitted. 103 requirements are expressed as equalities meaning that all requirements must be met. The land availability restraint is such that not all of the land resources need be used in the production of the requirements. The drainage potential extension provides additional activities in the model. The p' represents the per acre cost of producing an activity on drained land. The cost includes the amortised cost of the field drainage system as well as the regular production costs. The 3' reflects the yields on an acre of drained land. The acres drained must be less than or equal to the acres available in the restraint column. Drainage activities compete with nondrainage activities in producing the required production. Either activity draws from the total land availability. In this formulation wet soils could be used in one of three ways: (1) drained, (2) undrained, or (3) left idle. On certain soil or land management groups, limits on row crap use are recommended. Since these recommendations are expected to be followed in the time period assumed in the study, allowable acreages of row crops in any one production period were entered as a restraint. The row crop acreage on a given soil must be equal to or less than the recommended acreage. An additional restraint is shown which requires at least so many acres of product be produced on the land resources available within sub- areas of the region. As explained in Chapter III, the minimum acreage constraint was included to partially reflect past production patterns in each subarea. In the actual computation of the program, a unique set of restraints was entered for each of the five subareas of the 42-county region. In other words, the five subareas competed in producing the required product. But each area had different resource availability. 104 including drainage acreage and row crop acreage availabilities as well as minimum crop acreage requirements. The programming tableau as shown in Table 28 is directly related to the general model and matrix developed in Chapter III. The objective of the program is satisfied if the solution provides a land use arrangement that satisfies all of the requirements and restraints set forth,and total costs are minimised. In other words,the acreage of a specific land resource used in producing one of the requirements, multiplied by the per acre production cost for that use when summed for all land re- sources,roprosents total production cost, the sum to be minimised. By the same token, the acreages of various land uses when multiplied by their respective yields and summed for each product will exactly fulfill the product requi r-ents. The basic comparison made in the analyses is between program runs including and excluding the drainage activities. In runs excluding drainage, the drainage extension was left out. Alternative runs were also made where different levels of product requirements were entered. Different yield levels and production costs were entered to reflect varying amounts of technology adoption in another set of program runs. In a similar manner, production costs that included drainage were varied to reflect different public cost-sharing arrangements. Except for these variations, all other restraints in the model were constant in the various program runs. The cropland base for the program model is developed from the Inventory of Soil and Water Conservation Needs conducted by the U. 5. Department of Agriculture in 1958 (see Table 10 and 11). The crepland base for the model is reduced for expected urban and industrial buildiua 105 by 1980. Crop yields and fertiliser use represent projected average levels for l980.l/ Only eleven cropland uses were considered in the model (see Table 13). Acreages for sugar beets and for minor crops such as vegetables were subtracted from the cropland basevgl Four of the eleven crops are row crops. Many of the soils cannot be used continuously for row crops and maintain productivity; consequently, a restriction was made to limit the amount of row crops on these soils (see Table 12). Only cropping alternatives are considered in the program. Livestock requirements were not entered explicitly. However,feed grain, roughage and pasture needs for livestock production projected for the 42-ccunty region are included in the product requirements along with a 10 percent surplus of feed grain (corn) for interregional export. Cropland only is considered in the model. Native pasture is a near substitute for cropland pasture;therefore,a share of the grazing require- ments was allocated to the native pasture acreage. Native pasture land was assumed to continue in pasture use. The remaining pasture require- ment was included in the model to be provided via the cropland pasture activity. 3. Interpreting the Results The nature of the computerised linear program solution is such that estimates of important economic relationships are readily available. Some 20 linear program runs were made for the az-county region in this A] For a discussion of these points refer to the corresponding sections in the previous chapter. 2] Sugar beets are a significant crop in the Thumb area but have not been included because of their orientation to processing facilities. 106 study. Only four of the runs were made on the Michigan State computer using the CDM-é system because of the problem size. The balance of the runs were made at the University of Illinois on the IBM 7094 computer using the LP 90 system. lcth systems provide information for the primal and dual solutions to each problem (refer to chapter on Methodology). Total production oosts--One of the results of the linear program analysis is the total production costs necessary to produce the product requirements for the region. Total production costs in this study rep- resent all nonland on-farm costs; in other words, all labor and capital costs except a capital charge for the land investment were included. Any return over the labor and nonland capital expenditures is assumed to accrue to the fixed factor, the cropland resource. Unpaid factors such as family labor were charged at an imputed value. Changes in total production cost from one program solution to an- other indicate the size of the payment to the nonland factors. While the size of payment does not by itself indicate changes in individual welfare to labor and nonland capital owners, the payment does indicate the relative share these factors command in the production process. Changes in production costs have implication for those who supply and support the agricultural industry. Production cost totals for the hZ-county region are derived directly from the LP solutions without further calculation. However, the iden- tical total cost can be derived by summing the product of the acreage used and the per acre cost for the use indicated in the program. Pro- duction costs for subareas of the kZ-county region were derived in this IMO? e 107 gents-Another result of the linear program is the earnings attri- buted to the fixed factor, in this case the cropland resource. 1) figgggggg_£ggggi Resource rents, in the Ricardian sense, accrue to those soil management group acreages that are used completely and more could be used to minimise total costs of production. The linear program solution indicates the MVP resulting from the use of the last acre of a soil management group that is limiting. The sum of the pro- ducts of the MVPs and their respective acreages in the program indicate the total rent accruing to the fixed resource. Resources as used here include existing capital improvements such as roads and existing drain- age improvements. Since the soil management groups are identified by subareas within the AZ-county region, changes in rents can be identi- fied under alternative program runs for subareas as well as the region. Changes in the earnings of the natural resource are of prime con- cern in this analysis. Again, changes in the magnitude of the earnings of the natural resource factor do not necessarily indicate individual welfare changes. But, earnings of the resource input relative to non- land capital and labor earnings can be compared. 2) Drainage rents: Rent accrues not only to the existing quali- ties of land but man-made improvements or developments as well. In the formulation of the linear program model, additional portions of selected soil management groups can be cropped under the drainage alternative (see previous chapter on acreage availabilities and crop yield poten- tials). Drainage allows selected soil management groups to have more productivity relative to lands not having a wetness problem. Depending upon costs of the drainage investment, artificially drained land may 108 have an additional rent earning capacity. 3) Nggative ingtitugignal Ilntli A third rent concept is employed in this analysis. Negative rents accrue to acres of various crops forced into the linear program for each subarea to reflect to some degree the historical trends in production. If the minimum acreage restriction (see Appendix C for acreage restrictions) does in fact force a cropping pattern that is not consistent with efficient resource use,then the re- striction forces a cropping pattern with higher production costs and rents. A measure of the negative rent is derived from the program re- sults Just as the natural resource and drainage rents were. However, the sign on the MVP is reversed. Total production costs and rents are increased if one more unit of the restriction is added. The size of the negative rent is a measure of the effect that in- stitutional forces have on production costs, rents and ultimately on the sales value of agricultural products. The measure is an indicator of the benefits that would accrue if public programs could be developed to improve resource mobility, eliminate capital limitations, etc. The negative rent concept is not the central focus of this study, but it does have implications for further analyses. For instance, any program that has the effect of changing crapping patterns or forcing land retire- ment in one subarea over another can be analyzed for the impact on pro- duction costs, rents and marginal costs of production. Marginal costs of_production--As indicated previously, programming is consistent with equilibrium theory in economics, therefore, marginal costs of production are obtained in the solution. The term shadow price is used in programming as each requirement in the model implies or has 1.; ' r. 109 a per unit cost associated with it. The concept is equivalent to mar- ginal cost in economic theory. Since the model is set up in a cost minimisation form in this study, the shadow price is considered the marginal cost of producing the last unit of product required. Changes in production costs and marginal costs of production are important as they are estimates of payments made by producers as a re- sult of the measures considered in this study. Marginal costs of pro- duction in the region and subareas indicate the relative costs of ob- taining additional products. Crogping 2attcrns--Since soil management groups are identified by subareas within the bZ-county area and crop uses of each soil group can be identified, cropping patterns for each subarea can be derived. The cropping patterns identified here are ones based primarily on the loca- tion and quality of the natural resource and then on farm costs of pro- duction. Transportation cost and market locations were not considered explicitly. The effect of transportation cost differentials are con- sidered in part by the minimum cropping restrictions placed on each sub- area in the model. In other words.the historical trends reflect market differentials. Changes in cropping patterns may have significance in the type of farming of a subarea. There may be more or less cash crop farming. Comparative advantages in feed grain and roughage production also in- fluence livestock production. In the discussion of cropping patterns among subareas, crops will be grouped into cash, feed grain and roughage crops. No attempt is made to project individual crops. 110 C. Base Program Results The base program run is the model with Cl product requirements and TA technology attainment levels. The population increases and the 1 corresponding food and fibre needs assumed in C1 are considered to be the most likely to occur by 1980. The technology adoption in TA appears 1 to be most consistent with current technology adoption and use rates. In addition to the Cl product requirements (Table 27) and TA1 technology attainment or yield levels (Table 14), corresponding produc- tion costs for the T51 technology levels were used (Table 20). Land resource availability reflects the total cropland expected to be avail- able for use in 1980 (Table 11) and the acreage that can be devoted to row crops (Table 12). The minimum crap acreage constraint was based on current trends in production patterns in the five subareas in the 42- county region (Table 61). In the paired drainage run, activities were entered to reflect yields with drainage and associated management and drain investment costs (Tables 18 and 21). Acreages on which drainage was a potential also were entered (Table 17). The basic model with the drainage extension contained 138 equations and 445 activities. In the C -TA 1 1 full economic potential, crop production costs are estimated to be solution with drainage adoption allowed to enter at $147.72 million (Table 29). Resource rents and drainage rents total $6.78 million, making the gross sales value (less minor crops and native pasture) $156.5 million. The resource rents capitalized at 5 percent represents land values in the 42-county region of over $135 million. The negative rent of $2.11 million indicates the increased production costs because of institutional constraints on resource mobility in one form or another. without drainage the base program run indicates 111 Table 29. Labor and Capital Costs and Resource Rents Assuming C Product Requirements, TA Technology Adoption, With and Without Addi- tional Land Drai age, 42-County Region, Michigan Farm Drainage Study, 1980 Projections Item Without With Drainage Drainage ---Million Dollars---- Labor and Capital Costs $153.35 $147.72 Rents: Resource 6.18 4.59 Drainage -- 2.19 Institutional (.85) (2.11) Total Production Costs 159.53 154.50 production costs at $153.35 million and gross sales at $159.53. Resource rents are $6.18 million and the negative rents are less than $1 million. A comparison of the with and without solutions indicates that the adoption of the full economic potential for drainage in equilibrium would lower production costs $5 million. Producers' labor and capital costs would decrease $5.6 million but rents (both resource and drainage) to resource owners would increase $.6 million. Producers would be better off. Economic growth would be enchanced as fewer inputs are required to obtain an identical bill of goods; in other words, a shift in pro- ductive capacity similar to that illustrated in Chapter II (compare r'l' outlay in Chart 1 - Figure 1 with r1 outlay in Chart 3 - Figure 1). Natural resource owner's purchasing power is increased by the net gain in rent and the efficiency gains. The negative rents due to forced minimum cropping pattern increased 2% times, indicating that even larger producer gains would accrue if eliminated. 1} I». Eqdlm J v 112 Additional drainage is a physical potential on 1,641.1 thousand acres. Under the assumption of this solution, farm drainage investment would be profitable to farmers on 743 thousand acres. The cropland available for use according to the USDA Inventory of Soil and Water Conservation Needs for the 42-county region is 7,249.2 thousand acres (Table 30). Of this total, slightly more than half is used in crop production. An examination of the 1949-64 trend in cropland harvested and cropland in farms indicates that the 3.9 million acres in crop use by 1980 would be consistent with current trends (see Appendix D). An extrapolation of the crapland harvested acreage trends for the 42-county region indicates that crop use would be between 4.0 and 4.5 million acres. The difference between the historical trend and results of the linear Table 30. Major Cropland Use, Assuming C Product Requirements, TA Technology Adoption and Additional Land Drainage, 42-County Region, Michigan Farm Drainage Study, 1980 Projections Without With Item Drainage Drainage ----Thousand Acres---- Cropland Acres Available 7,249.2 7,249.2 U8“ 3,867e5 3’473e8 Idle 3,381.7 3,775.4 Additional Acre; Drainable -- . 1,641.1 Dra1ned " 743.0 113 program is related to the assumption about technology adoption in crop yields for TA and the assumed managerial capacity of resource owners. 1 Cropland on farms has decreased significantly in recent years. Not only has idle cropland on farms increased but land in farms has decreased and there have been internal shifts on farms to new crop uses. A comparison of the cropland use with and without drainage adoption indicates that drainage reduces the cropland used. The 743 thousand acres of drainage has the effect of idling 394 thousand acres of crop- land. In theory, the idled land has no productive value,therefore in- come and capital values of idled land are written off and are not con- sidered as social costs. In practice, however,idled land may be supra- marginal thereby having a value representing a social cost. Also the relocation and re-cploymant of the resource owners on idled land may entail a social cost which should be considered in any benefit cost comparisons in program formulation. The marginal costs of production in the Cl-TAl solution with drain- age clearly are below current prices (Table 31). If current prices were to hold in 1980, farmers in the study area would appear to have economic incentive to produce agricultural products if acreage restrictions were not imposed. The implication is that the technology and drainage adop- tion assumed would increase farmer earnings. If efficiency is reflected in lower product prices, then consumers would gain from the technological advance, as smaller portions of their purchasing power would be spent for food and fibre. If efficiency gains from drainage are reflected in producer earn- ings, then producers would be interested in investing in field drainage and drain outlet improvements. If efficiency gains are passed on to 114 Table 31. Marginal Costs of Production, Assuming C Product Require- ments, TAi Technology Adoption and Additional Land Drainage, 42-County Region, Michigan Farm Drainage Study, 1980 Pro- jections Mar inal 0 ts Crop Unit Without With Drainage Drainage ------Current Dollars----- 1963 Wheat Bu. .85 .83 Corn Bu. .48 .47 Oats Bu. .51 .47 Barley Bu. .45 .45 Soybeans Bu. 1.12 1.12 Dry Beans th. 2.04 1.89 Potatoes th. 1.31 1.15 Corn Silage Ton 4.96 4.60 Alfalfa Ton 11.49 11.14 Other Ray Ton 13.43 13.13 Crop Pasture A00 .11 .11 115 consuors, society would be interested in policies and programs to fi- nance the drainage measures. Likely, some of the efficiency gains will remain with the producer and part will go to consumers. Under these circumstances, cost-sharing of drain improvements in proportion to benefits received is implied. Cost-sharing arrang-ents will be dis- cussed in more detail in the last section of this chapter. The balance of this chapter will be a discussion of the several paired program runs designed to test the sensitivity of the major as- 2) and three levels of farm drainage investment costs (50!, 67%, 100%) to sumptions built into the model. The three assumptions to be analysed are product requirusnts (Cl, 02, C3), technology adoption (TAI, TA represent different levels of cost-sharing. The implications for the 42-county region are discussed first, then the implications for the Thumb and South Central subareas will be dis- cussed. Under each comparison of program runs, changes in production costs, resource rents, drainage rent, negative rents, marginal costs and cropland use will be analysed. 0- W of t cent «The linear progra-ing model is designed so that only one set of product requiruonts are considered in each progr- run. Rowevor, additional progr-s were run to deter- mine the sensitivity of product requir-smts on costs, rents, drainage adoption and per unit costs. Three pairs of program runs were made to determine the likely effect of increased product requironts. Programs using c1, C2, and c3 product requir-snts with and without additional drainage were run to show the influence of increased population pressure and consumption 116 requirnonts on a given resource base. In these comparisons, technology adoption was held constant at the TAl level (Tables 32, 33, 34). Production costs rise nearly $100 million when product requir-onts are raised from the CI to C3 levels. Without drainage, resource rents raised from $6.2 million for the C1 requirement to $16.9 million for the C, requir-ent (Table 32). As a percent of total production costs, rents also rose from 3.9 percent to 6.3 percent for the two situations. With drainage, the sum of the rents was slightly higher than the no-drainago situation for the C1 requir-ent but was slightly lower for the C2 and c3 requirements. One would expect resource rents to be higher under the no-drainage situation. The increased productivity through drainage has the effect of lowering the overall scarcity rents. However, on a percent of costs basis, the scarcity rents were 6.3 percent for the c, product requiraont for both the with and without drainage runs. On the other hand, the negative institutional rent becomes larger on an absolute and percentage basis. The sales value of the ce-odities increased nearly $100 million in) the 03 over the 61 product requirement situation. The efficiency gains counted to $5 million under the c situation as compared to about 1 $9 million under the 03 case. Marginal coats of production did not increase materially under the three product requir-ut situations. however, dry beans, potatoes, corn silage and alfalfa per unit costs were reduced about lOpercent when additional drainage was adopted (Table 33). Without drainage, cropland used raised from 3.8 million to 6.1 million acres from the I:l to C, situation (Table 34). Drainage reduced the cropland use about 400 thousand in the C:l case and about 900 thou- sand in the c, case. In the i:l case, one acre drained had the effect of 1izh‘da 117 --esscmucoo «a ems-a unsouom u no no. menu seeds o.oo— no.0uu A_.v “-._v «.n sn.~_ .13 8.3“ scanned » .mqm o.oo_ on.enm Ae.~c A"..«v e.— on." o.« on.e o.no uh.h¢~ accused 9 .mm: 0.00~ unsan— on Anm.v o.n m~.o ~.oo nn.nn— essence » .nmz eueco ccuuosocmm demos decemumuauacn omemmomn ecusceom cocoa euecu monumeo one honed omenueum enema“: meanuo omemueum on. men- 0 ummmmummuuqr ememueun so: «3 <9- 0 loan unease-nose oeom .uesua asses-so aus¢ caemaomx assess suaseu-«e aommmummn ummm«0uvu< um mouuaou< on» Hausa—3 one sud: mashed <9 no cue: ccmumooc ”modem smock amusemeumsvom monocum nu commune mmumuee< cocoa someones .eueou «common use honed .«n swash 118 unsouon _ no no. cum» moods 0.09“ on.onu no.—v Asm.cv n.~ cm.n o.¢ h¢.N~ u.no nu.nd« ummumem 0 on“: 0.00~ snooou any Anc.—v n.o oo.o~ h.no he.~nu asses-m » .mmm 98. 2.8" Am._e noe.uv a.“ No.n ~.n oo.o n.ao no.oo~ essence a . m s. euecu co—uoooomm neuca uncommon—moon omen—sum oounceom modem .ueoo mound-o can sense omenueun £Uu3 ouemueun mac: .3 _sm (H as mcuunco< amoucnmuoa amusemeumooom monocum a. commune monumeu< on: ocunncmo ucfiez .on sandy 121 idling about one-half acre of cropland. The substitution rate was even higher in the 0 case where the exchange is almost one-tc-one. In the 3 C3 case, poorer cropland had been called into production, therefore, one would expect an acre drained to substitute for a larger amount of crop- land at the extensive margin of production. The increased product re- quirements represented by 03 would call in 350 thousand additional acres of drainage, a 50 percent increase over the Cl situation. A summary of the results of the three pairs of program runs with changes in product requirements indicates that a doubling of the popula- tion in the U. S. could have the effect of increasing the payments to labor and nonland capital $100 million; approximately a 67 percent in- crease. Rents would increase nearly 250 percent. The relationships support the conclusion of the scarcity doctrines. (Compare Cl-TAI, and C.,-TAl program results in Table 32.) The adoption of drainage reduces the total outlay necessary to pro- duce the food and fibre requirement. Most of the reduction comes in the payments to labor and nonland capital. Resource and drainage rents to- gether nearly equal resource rents without further drainage adoption. (Cuparo Cs-TAl with and without drainage adoption in Table 32.) Clearly, drainage adoption can have the effect of lessening the impact of resource scarcity. Land used for crops under the C3 product requirement, without drain- age, weuld exceed that used in 1949. With drainage adoption, cropland use would be similar to amounts currently used. The implication is that the cropland base in the 42-county region could produce a reasonable share of the food and fibre requirement for a national population of 502 million with approximately 800 thousand acres returned to cropland, notwithstand- ing further technology gains or resource development. (TA1 was held con- .tnt o) 122 [gfogt of technology adoption changes--Two pairs of programs were formulated to test the sensitivity of the farm technology adoption as- sumption on production costs, rents, marginal cost changes, and drainage adoption. The technology adoption change from TA1 to TA2 infers an approximate 20 percent increase in average crop yields. Fertiliser use and other management inputs increased accordingly. The C1 product re- quirement was held constant in these comparisons. The 20 percent increase in yield potential (TAl to TAZ) has the effect of reducing total production costs $6 million. The product ro- quiromont (Cl) can be produced with a smaller total outlay for labor and nonland capital. (Compare Cl-TA and Cl-TA without drainage in Table 1 2 35.) The decreased costs implies increased productivity of these inputs. Under the without drainage assumption, resource rents were reduced both in absolute and relative terms (Table 35). The increased technology adoption in TA2 reduces the scarcity value of the natural resource. Under the with drainage assumption, some of the scarcity value returns to the natural resource in the form of drainage rent. Drainage rents are slightly over $2 million per year. (Compare Cl-TA2 with and without drainage.) The technology change without further drainage adoption reduces total costs for the C product requirement $9 million. If drainage is 1 included, total costs reduce $12.5 million. Drainage yield increases range from 50 to 100 percent (see Table 17) as compared to 20 percent yield increases assumed in the TA2 over the TAl situation. Yet larger efficiency gains accrue to consumers from the nondrainage technology change. The oosts of obtaining production through drainage are high relative to these from nondrainage technology. The costs of developing the nenfarm technology are not fully accounted for in the labor and non- 123 mucous.— u «o 3. com» seeds e.cc— ec.~em o.oom no.cn~ o.ocm on.enm o.oc~ an.on. assoc sonuoseoum mason Ae.~v Aoc.uv An.—c Ao~.~v Ae._v A_m.~v Ace Ano.v mecemusumu-cm e.“ he.~ -- -- e.~ on.“ -- -- .oncsqua n.« on.n n.~ on.n o.n on.e o.n o_.o oousoeem ance: n.ao on.—e_ h.~o .—.se~ o.no «n.5em m.oo nn.nn_ assoc mauaaeo on. some; assoc-m » .max ocean-m » .max assoc-a » .msm segue-m » .mmm omemmeum one: “on: one: «sum omen no.5 «uwmao smmww: mummwu “somww: scum «ummmmmmmuumuy ecomuoonoua coon .scsum sesameua .eescssun mesons—eu< no comuaoe< as» users“: one can: .moquooz amouommoou. 5 soup—emu mmumoee< .eucem oousceem one ounce men Eco one honed a much can «no «x no «men nuance nae o u- ndo: .ucsseu.sosm uoseosa .nn suns“. 124 land capital inputs in the model. The development of general farm tech- nology does have a cost to the consumer - taxpayer. Also, producers boar costs in acquiring management skills. In a complete analysis, re- search and extension program costs should be included in studies compar- ing benefits received by producers and consumers from public programs. All per unit costs are lowered in the TA2 case except for barley (Table 36). Barley production was forced to poorer quality land; con- sequently, marginal costs increased slightly. The technology assumed favored wheat, dry beans, soybeans, potatoes and corn silage production costs especially. With the adoption of technology (TA! to TA2),loss crapland is needed to produce the Cl product requirements (Table 37). Even without considering additional drainage, 700 thousand loss cropland acres are needed. An acre of drainage displaces nearly two acres of marginal cropland under both the TA and TA2 technology assumptions. Through the 1 adoption of technology at the TA2 level, less drainage is economic. Approximately 120 thousand fewer acres would be drained. The reduction in cropland use and drainage adoption is consistent with the reduction in rents attributable to the natural resources. Clearly, one can conclude that farm technology is a substitute for land just as drainage can be. The rent reduction of $6.18 to $3.54 million if capitalised at 5 percent represents an asset value loss of over $50 million. Rapid technology increases with stable demands for food and fibre can result in declines in the capital value of natural resources. In the previous section, the analysis of changing product requirements indicated that the increased food and fibre requirements assumed in C2 would raise rents $5.2 million over the Cl situation. The change in rents infer an upward pressure on land values. Thus, we see 125 Table 36. Marginal Costs of Production, Assuming Changes in Technology Adoption, Product Requirements hold at C , With and Without the Adoption of Additional Land Drainage, 42-County Region Michigan Parm Drainage Study, 1980 Projections Marginal Costs u... .333: $521 «$5.23; mite Drainage Drainage Drainage Drainage --------------------Dollars-------------------- Wheat .85 .83 .79 .75 Corn .48 .47 .47 .47 Oats .51 .47 .46 .44 Barley .45 .45 .54 .53 Soybeans 1.12 1.12 1.07 1.07 Dry Beans 2.04 1.89 1.79 1.65 Potatoes 1.31 1.15 1.21 1.09 Corn Silage 4.96 4.60 4.61 4.21 Alfalfa 11.49 11.14 11.49 11.36 Other Ray 13.43 13.13 12.31 12.30 Crop Pasture .11 .11 .10 .10 126 Table 37. Major Cropland Use Assuming Changes in Technology Adoption, Product Requirements Held at C With and Without Additional Land Drainage, Michigan Farm Drainage Study, 1980 Projections Assumptions Item Cl-TA C&-TA1 C -TA2 Cl-TAZ Without ith W thout With Drainage Drainage Drainage Drainage ---O----------.-Omousmd Aer..---------------- Cropland Acres Available 7,249.2 7,249.2 7,249.2 7,249.2 Used 3,867.5 3,473.8 3,165.3 2,824.0 Idle 3,381.7 3,775.4 4,083.9 4,425.2 ggditional Acres Drainablo -- 1,641.1 -- 1,641.1 Drained -- 743.0 -— 624.4 the countervailing forces in the resource scarcity problem. The C product requirements and TA technology adoption levels were 2 2 matched in one program run with drainage adoption to measure the counter- vailing forces (not illustrated). The sum of the natural resource and drainage rents were $9.8 million about $3 million more than in the basic Cl-TA1 solution with drainage. If the assumptions behind C2 and TA2 exist in the future, natural resource values probably would be pushed up- ward as the pcpulaticn increases. Effect of chan es in draina e investment costs b resource owners-- In the last two decades, field drainage systems have been subsidised under the guise of conservation. In some instances up to 50 percent of the investment costs have been paid by the Federal Government. While the Ill-s- uwflj 127 stated purpose of Federal cost-sharing on field tile may be "for estab- lishing conservation farming methods," the and result is a more produc- tive natural resource. At a time when the capacity of the agricultural plant seems to be more than adequate, questions are raised concerning the efficacy of public investments in drainage. Alternative linear pro- gram runs have been made to test the effect of alternative cost-share arrangements on the overall productivity of the agricultural resource and other economic variables. Pour program runs were set up to test the sensitivity of various drainage cost-share assunptions. The drainage cost levels considered were 50 percent, 67 percent and 100 percent of the annualisod drain costs (see Table 21). These alternatives represent one-half, one-third and no public cost-sharing respectively. In recent years the Federal cost-share rate in Michigan changed from a one-half to a one-third basis. Under current arrangements, resource owners pay about two-thirds of the cost. A comparison of these runs along with the no cost-share run (1002 cost born by resource owner) will demonstrate the implications of such a shift. Cl product requirements and TAl technology adoption are assumed throughout. Production costs would be reduced $10 million if drainage adoption under the 50 percent cost-share basis is assumed (Table 38). Production costs are reduced less when the Federal cost-share decreases. As would be expected, production costs rise as the drainage costs increase. In- terestingly, the resource rents and drainage rents have a reciprocal relationship. The lower the drainage investment cost of the resource owner, the higher the scarcity rent on drained land. The sum of the rent is essentially the same for each program. Consequently, natural resource rents substitute for drainage rents. When comparing the no 128 unecnon no. non» anode o.oc_ on.enn o.oc_ oe.~n~ o.oon -.onn o.oom an.onn .u-oo nanosecond neuoa ne.—v A...~V mo.nv Aee.~v Ao.nv ano.~v Ace Ano.v muconusunu-cn e.m o—.~ e.~ es.n m.~ n~.e -- -- essence: c.n on.e o.~ oo.n o.~ -.~ o.n c~.o noose-ea canon o.no «n.5en o.no o~.ne— e.no co.nen ~.oo na.nn~ auuoo manna-o one noose espouse o .mnm assumed a can: assoc-m » .mnx assoc-m » .nmm «2: o «S a won a confine: eueow omunueum eueo omunmemm eueo saunaeum “nonu—m - 0 <9- 0 <9- 0 <9- 0 scum enowuummam¢i _ ace—soonoum econ .sosum cadences sued can.:o.: .conesz season -ue .me>em cs on» u. conuaoc< anemones-a one mos-m u on» us eunoseuumoom uomooum nuns .euecu unemueoonu omenmeum n— eomneno unummeu< eunom ooumcaom one ounce «mu—moo one momma .mn mummy 129 cost-share with the 50 percent cost-share arrangement, drainage rents rise $2 million while natural resource rents decline by almost an identical amount. Potentially, some natural resources that do not have the capacity for additional drainage could lose asset value with drainage adoption in other areas, implying that supramarginal land can be displaced by public land drainage programs. The production costs under the 50 percent drainage cost arrangement are nearly $9 million loss than without the drainage alternative (see Table 38). The drainage run assuming 100 percent drainage costs shows $5 million efficiency gain. The change from a no cost-share to a 50 per- cent plan increases efficiency gains $4 million. The one-third cost- sharing arrangement potentially could reduce production costs $6.5 million from that sold under the no-drainago situations. The per unit costs are lowest for the 50 percent drain cost run and gradually increase in the program solutions where drain costs born by resource owners rise (Table 39). Nearly 1.2 million acres could be drained under the 50 percent drain cost run; an increase of about 450 thousand acres over the program where drain costs to resource owners are entered at 100 percent (Table 40). Cropland use drops 600 thousand acres in the 50 percent drain cost run which is about 200 thousand fewer acres than the amount used in the pro- gram with 100 percent drain costs. In general, two acres of drainage idle one acre of cropland. If the cost-sharing arrangement is uniform for all soils and acres without differentiation (essentially this is the present policy), the annualisod cost for drainage for the 50 percent arrangement would be $4.2 million (1.2 million acres G $3.50) (Table 41). Under the 50-50 arrangement the efficiency gain would be $8.8 million. however, $5 0 130 Table 39. Marginal Costs of Production, Assuming Changes in Drainage Costs, With and Without the Adoption of Additional Land Drainage, 42-County Region, Michigan Farm Drainage Study, 1980 Projections CI-TAI Cl-TAI Cl-TAl . Cl-TAI Commodity Without Drainage Drainage Drainage Drainage Costs Costs Costs (9 50% <3 67% (Q 100% --------------------Do1lars--------------------- Wheat .85 .81 .82 .83 Corn .48 .46 .47 .47 Oats .51 .46 .47 .47 Barley .45 .45 .45 .45 Soybeans 1.12 1.10 1.12 1.12 Dry Beans 2.04 1.84 1.86 1.89 Potatoes 1.31 1.15 1.15 1.15 Corn Silage 4.96 4.53 4.57 4.60 Alfalfa 11.49 10.22 10.62 11.14 Other Bay 13.43 12.72 12.94 13.13 Crop Pasture .11 .11 .11 .11 131 Table 40. Major Cropland Use Assuming Change in Drainage Investment Costs with Product Requirements at the C Level and Technology Adop- tion at the TA Level, 42-County Region, Michigan Perm Drainage Study, 1980 Projections Cl-TA clémI cl-ml 01"“1 Item Withcu Drainage Drainage Drainage Drainage Costs Costs Costs @ 50% @ 67% @ 100% ----------- ------ Thousand Acres------------------- Cropland Acres Available 7,249.2 7,249.2 7,249.2 7,249.2 Used 3,867.5 3,271.6 3,345.5 3,473.8 Idle 3,381.7 3,977.6 3,903.7 3,775.4 ggditional gcgos Drainablo -- 1,641.1 1,641.1 1,641.1 “.113“ '- 1,187o6 1,030ol 743.0 Table 41. Efficiency Gains, Producer's Rents for Drainage and Land Drained under Alternative Public Cost-Share Plans, 42-County Region, Michigen Perm Drainage Study, 1980 Projections Item Public Cost-Share gggangement 501 33% None --------Million Dollars--------- Public Costs Annualised 4.2 3.6 --. Efficiency Gains 8.8 6.6 5.0 Drainage Rents 4.2 3.7 2.2 Resource Rents 2.7 4.0 6.2 Acres Drained (000 acres) 1,187.0 1,030.0 743.0 132 million of the efficiency gain would have accrued without public cost- sharing. This being the case, the $4.2 million public investment nets only $3.8 million in efficiency benefits. Drainage rents increase to $4.2 million,noar1y half of which are created by the 50 percent cost-share. The increase in drainage rent to the resource owner essentially is a transfer payment brought about by the cost-share. The one-third cost-share plan has similar implications. The $3.6 million public investment is offset by a $6.6 million efficiency gain, however all but $1.6 million allegedly should accrue anyway. The increase in drainage rent from $2.2 to $3.7 million also is a transfer to the re- source owner. Proponents of the uniform cost-sharing plan argue that cost-sharing is an incentive plan to encourage farmers to undertake the drainage prac- tice and thereby adopt conservation farming techniques. According to the model, farmers should be willing to drain 743 thousand acres without any public incentive (see Tables 30 and 41). As was pointed out in the dis- cussion of the basic model, producers and/or consumers stand to gain $5 million with drainage adoption. Society should be concerned that the economic potential for drainage is adopted and should stand ready to pro- vide the necessary incentives to obtain the efficiency gains. However, there is question whether a uniform cost-sharing arrangement is the pro- por incentive for the maximisation of economic growth. From a strict economic point of view in a private enterprise economy, public investments should be made in those activities that would not be made otherwise, but yet provide consumer gains equal to or greater than the public investment. Also, alternative investments of public monies must be considered. Micro-economic principles of choosing alternatives with the highest marginal returns must be applied if maximum economic 133 growth is to be fostered. If we assumed that the efficiency gains were passed on to consumers, the maximum allowable public cost-share would be $2 million in order that the additional $3.8 million in consumer benefits could be achieved. (Compare differences in drainage rents and efficiency gains under 50 per- cent cost-share and no cost-share - see Table 41.) Through selective cost-sharing with owners of the 444 thousand additional acres to be drained (difference between acres drained with 50 percent cost-share and solution with no cost-sharing), the identical consumer's benefit (offi- cioncy gain) could be achieved at a saving of $2.2 million in public monies. The 444 thousand acres represents lands on which drainage would not be profitable unless there was a public cost-share equivalent at least to difference in drainage rents of the two situations. A similar comparison can be made between the one-third cost-share plan and no cost-sharing. In this comparison the maximum allowable cost- sharo would be $1.5 million and the efficiency gain would be $1.6 mil- lion. Clearly, society would receive greater efficiency gains per dollar spent under the 50 percent cost-share arrangement. The data for the two cost-sharing arrangements suggests that other sharing arrangements may be optimum in a program designed to foster economic growth. As will be pointed out in the conclusions chapter theg. r.1.egon.h1,, ..y b. .041- fied as larger regions are considered and opportunities for interregional shifts are permitted. In addition, social costs of relocating and re- training users of resources idled have not been considered nor have asset value losses on supra marginal land been considered. In fact, the sum of the resource and drainage rents is reduced $1.5 million under the 50 percent cost-share plan (Table 41). While owners of drainable lands would receive increased rent, owners of marginal and supremarginal land 134 idled would lose rent earning capacity. A complete analysis of cost- sharing arrangements should consider both gains and losses in returns to resource owners as well as efficiency gains. The linear programming models developed in this study did not include the off-farm outlet improvement costs. For this reason the logic for cost-sharing as outlined above applies only to on-farm field tile sys- tems. However, the sise of the drainage rents does indicate the resource owner's ability to pay for outlet improvements or share in their costs. The efficiency gains would be captured by the resource owner if he is faced with a perfectly elastic demand for food and fibre. In this case there would be no general consumer benefit. The public cost-share would represent a windfall gain to the resource owner. Under the 50 percent cost-share arrangement, the public expenditure would induce drain- age rents and efficiency gains totaling $13 million. Without cost-shar- ing the comparable figure would be $7.2 million (Table 41). In other words the $4.2 million public investment would provide a net advantage to resource owners of $5.8 million. (8.8 + 4.2)-(5.0 + 2.2) - 5.8. But when the one-third cost-share arrangement is compared on a similar basis, the $3.6 million cost-share provides only a $3.1 million net gain. (6.6 o 3.7)-(5.0 + 2.2) -.3.1. If the cost-share program was intended us an income transfer to resource owners, a direct payment scheme would be more effective. Moreover, other effects should be considered. Re- source rents decline as the cost-share increases, consequently the bene- fits above must be adjusted for these externalities to properly account for the program impact. In summary, the current cost-sharing procedures on field drainage systems that treat all qualities of drainable soils alike, can b. qugs- tioned. In fact, from an economic standpoint, cost-shares to resource 135 owners on lands where drainage would be economic anyway, represent a transfer payment which can be capitalized into an asset value. Since one acre of land goes out of use with two acres of drainage, owners of idled land lose asset values, which in and by itself has a wealth redistribu- tion effect. In fact the 50 percent cost-share plan reduces resource rents $1.9 million from rent levels under the no cost-share plan (Table 38). Since fewer acres are required to produce the given product (Cl) under the 50 percent cost-share arrangement than under smaller public cost-shares, the productivity of the agricultural resource definitely is enhanced by the government program. Drainage adoption under the alter- native cost-share arrangement also influence the aggregate use of crop- land. While the drainage of agricultural land may provide a means to conservation farming, the drainage program increases the productivity capacity of agriculture as well. E. Thumb and South Central Michigan Subarea Analysis The analysis of the 42-county region program runs indicated that resource rents tend to shift from the nondrained to the drained acreage. Conceivably, the resource productivities and product requirements could be such that a positive or negative economic impact on a specific sub- area within the region under a given program could occur. To analyse the differential impacts, detail for three of the program runs were developed for the Thumb and South Central study areas. The three models selected were (1) base run without drainage, (2) base run with drainage costs at 100 percent, and (3) base run with drainage costs at 67 percent. The South Central subarea contains more cropland that is found in 136 the Thumb but a higher proportion of the Thumb cropland is used under the assumptions of the basic model. In comparisons with the present, crop- land use increases in the Thumb area and is reduced significantly in the South Central area under the assumptions of the base program. If the minimum acreage constraints on individual crops had not been imposed, the concentrations in the Thumb area would have been greater. (Compare Table 62 with Tables 6 and 7.) With large acreages losing productive value, the impact on existing land resource ownership patterns could be significant. Ovor half of the Thumb cropland in use is for cash crops such as dry- beans, wheat and potatoes. Host of the South Central area cropland that is used is devoted to feed and roughage crops with only about one-fifth of the land in cash crops such as wheat and soybeans. With drainage, the land-use picture shifts. With private drain costs at 100 percent, less food crops and more feed and roughage crops would be profitable in the Thumb area. The reverse is true for the South Central area. The feed crop percentage remains the same but wheat and_soybeans substitute fer roughage production. ' > Nearly twice as much cropland in the Thumb has the physical poten- tial for additional drainage than does cropland in the South Central area (Table 42). But the additional cropland drained in the Thumb is only slightly more than that drained in the South Central area. While a larger proportion of the cropland is idled in the South Central area than in the Thumb, the rate of drainage adoption would be greater in the South Central area. When private drainage costs are reduced one-third, cropping patterns tend to revert to the proportions in the program run without drainage. The comparative advantage of producing cash crops in the Thumb area is 137 oo— oo~ #0 mm 0‘ Ow ON co m.ono.m ~.-n ~.ee~ ~.woe n.aeo.m n.o~m n.oon «.moh o.eoo.n n.~¢o.~ n.nem._ o.m—m ~.nen.n ~.won._ ".mno ~.emm ~.oe~.h ~.onn.n o._eo.~ ~.mno._ 00— God hw an «n ma do on nun-nn-u-unusunuceouemnauuunuununnnuu o.n¢~ c.oo~ n.co— w.~m~ —.~¢o.~ n.05n n.oon n.~05 e.n-.n e.o_o.— o.onn.m «.mmn m.nhe.m c.5mo.m ~.~en m.nmn.m ~.oe~.~ ~.onn.n n.amo.~ «.mno.m unuuuuuuunuueeuu< oceanonauuunnnnunnu 00" God ~muow on on ewmnwnoz an o macho ween su an macho poem em: one—ammo I. u- an n- condemn -s- U- " .' .dn.:«.efl° ..uo< maco.u.uu< “.mon.n m.mno.~ n.~on.m e.nm~ .mum n.a0m.n e.hhn.m n.ehs o.n~n.~ u..n ~.oe~.~ ~.onn.n m._wo.~ «.mno.m .mnum.->< eeuu< oceumcuu ue ueuuceu a: e we menaceu ”such muo musom a my a new mac nusom nanny III eeuemsm seweosm who m..u.oo .u.=.-ua zu.m‘me4 ueou uncouem no one cog ue ccmucoo< ewes—sun yucca—3 one mum: .comucoo< amcnocmueh d <9 .euceaeu_aoem uumooum du mamasaw< em: oceanouu condense .Nc can-H 138 maintained. Idle cropland would increase significantly in the Thumb area under the one-third drainage cost reduction assumption. South Cen- tral cropland use would actually increase over that in the base program without drainage. The comparative advantage in producing roughages would call in increased amounts of cropland. The drainage adoption and cost-sharing arrangements would appear to provide definite influences in intraregional land use even to the extent of influencing the type of farming. The Thumb area would tend to become more of a livestock producing area if the full drainage costs were borne by the resource owner as feed crop and roughage production increased. The South Central area could move towards cash-crop farming. Even the policy on cost-sharing arrangements would tend to influence farming pat- terns among subareas if the assumptions in the analysis hold. Rents increase with the adoption of drainage in the region as a whole but the Thumb area loses $1 million in rents in both drainage sit- uations (Table 43). The South Central area loses resource rents but drainage rents more than offset this loss. In total, additional drain- age tends to favor the South Central subarea. Rents increase which means that natural resources asset values would increase. But the asset values would be concentrated on fewer acres under the no cost-share arrangement. Production inputs and gross output values remain about the same. But the Thumb area would lose rents and asset values with drain- age adoption. Drainage would provide the Thumb area with a comparative advantage in less intensive uses; consequently, the rents are not as large. Even gross output is less, especially for the case of no cost- sharing on drainage. The negative rents due to the forced minimum cropping pattern are relatively minor in the study areas under the no drainage assumption. 139 m.Nnu n.hn n.5N O.wo n.€n~ 0.00 «.ON N.hn o.on~ h.no 0.0N 0.00 mumoo GouuostHm quDH an.~v an.—v Am.v Au.v A~.~v An.~v Ao.v Au.v Aw.v Ao.v A—.v A~.v memouumuuuemu h.n n.N a. Q. N.N h.~ Q. a. II in II In Inidumufi o.n m.~ o. N.— c.¢ ~.N o.— n.~ «.0 d.N N.~ o.N ooumomll eased N.n€~ N.nn o.nN ¢.oo h.sd~ ~.no O.NN 0.0“ «.nnu n.uo h.nN c.00 mumoo divunmu val hoamd ---U--'-.-I---'--------IIJ 3|---'.u.H.—8 “Odd” d:--"-l"U----'------'I'------'- ueuuneu menaceo «enumeo winch MOSUO Suaom Alana annoy hoauo Suaom 8.329 flinch H.500 Samoa 5.359 eeueamm eenemnm A eeuenmm mean uuou . «cause as“: gene . nan-um sum: omen—eunuaosums "(n-au mem u.oo unsouem so we. com u. comuaon< .wecaesa uaosums use no.3 .comuaoue <9 .euceleuuaoem uosoonm du mcamsee< annex eousoeeu use eueou meanneu one nomad .nc eumea 140 But with drainage, the negative rent increases and is highest in the South Central region where the minimum cropping pattern forced on the area is more restrictive on efficient crop production patterns. Again the partial equilibrium analysis is for a small 42-county region. In the more general equilibrium case for the economy as a whole, the devaluation of assets and the idling of marginal cropland as drain- age is adopted might occur in another region. On the other hand, drain- age or other resource development and technological improvements in other regions might make the asset value and idle acre change even more dramatic in the study areas. To summarise, the adoption of drainage by resource owners and the public cost-sharing program can have a definite influence on rent earn- ing capacities. Wealth redistribution within and among areas can be significant. Also, cropping patterns would tend to shift especially under conditions of no cost-sharing. As was pointed out in the methodology chapter, no constraints were placed on the adoption of drainage in the linear program. All other elements in the basic model were entered at levels expected to be con- sistent with reality. A minimum cropping pattern constraint was placed on each area to reckon with historical trends in production. While the minimum acreage constraint would affect drainage adoption indirectly, no direct or explicit constraint was placed on drainage adoption in the model. To determine the possible limitations to drainage adoption, a random sample of farmers in the study areas was interviewed to determine their plans with respect to drainage adoption and drained land use. The results of that survey will be discussed in the next chapter. CHAPTER VI CURRENT AND EXPECTED DRAINAGE ADOPTION BY FARMERS In the previous chapter, the linear programming analysis indicated that there would appear to be economic potential to drain over 400 thou- sand more crop acres in the Thumb area and nearly 250 thousand in the South Central region. The linear programming estimates were developed primarily from secondary data. No direct information from farmers was used. As has been pointed out, the linear programming analysis was an attempt to measure the economic potential for drainage, given that other variables are held at the levels as specified in the program. From the analysis, certain programs could be developed based upon the selective cost-sharing principles discussed in Chapter V. The consumer and pro- ducer gains, identified in the program results, were developed on the assumption that resource owners are perfect managers with respect to drainage adoption. Since perfect management is unlikely, then what management levels are likely? What factors tend to inhibit the adoption of the full economic potential? Can these factors be eliminated or min- imised by eXplicit policy? The initial section of this chapter will relate the potential for field drainage on farms in the Thumb and South Central area as viewed by farm operators.l/ The farmer's estimate of the need for off-farm 1] The questionnaire used in obtaining information from farm opera- tors for this chapter is contained in Part I of Appendix A. Part II of Appendix A is the instructions to the enumerators who contacted farmers to participate in the survey. Terms are defined and special interpreta- tion of questions are also discussed. A discussion of the sample plan, sample size and statistical base for the sample is given in Chapter III. 141 142 channel improvement for outlets also will be discussed. Then, farmers plans for using the new drained land will be summarized as will be the reasons for not making drainage improvements. A. fixistingfiand Potential Field Drainage Improvements The farm survey elicited information from 265 farmers in the Thumb and South Central areas. The determination of sample size and discussion of the questionnaire used are presented in Chapter III. The survey was taken in the spring of 1963. The land area on survey farms represents approximately one percent of the farm land in the study areascl/ Of the 1.5 million acres of cropland in the Thumb, some form of arti- ficial drainage exists on 1.2 million acres. Of the 2 million cropland acres in the South Central area, only about .6 of a million acres are artificially drained (Table 44). Random tile installations are most pre- valent in the South Central area. Over half of the Thumb area drainage reported is surface ditch drainage only. According to drainage special- ists, surface ditch drainage also needs to be supplemented with grid tile systems. For this reason, the acres reported represent varying degrees of drainage effectiveness. On cropland on which there is no artificial drainage, farmers indi- cate that less than a fourth is potentially feasible to drain in the Thumb with even a smaller percentage in the South Central area (Table 45). Farmers were asked specifically concerning the acreage on their land that they thought it would ”pay" to ”artificially" drain. In each area a mmall percentage of the wet crapland is considered impractical to drain. 1] For further information about the survey particularly as it pertains to the land market see, Cotner, H. L., H. E. Wirth and G. D. Irwin,"Participants in the Land Market," Michigan Agricultural Experiment Station, Research Report 12, Hay 1964. 143 Table 44. Amount and Kind of Field Drainage Installed on CrOpland on Thumb and South Central Michigan Farms, 1963 Artificial Thumb South Central Drainage Acres Percent Acres Percent Installation (000) (000) Random Tile 135.3 8.9 369.8 18.4 Grid Tile 3-rod spacing 56.2 3.7 38.2 1.9 4-rod spacing :183.9 12.1 64.3 3.2 6-rod spacing 18.2 1.2 12.1 .6 Other spacing 56.2 3.7 22.1 1.1 Tile and Surface Ditch 60.8 4.0 20.1 1.1 Surface Ditch Only 655.1 43.1 49.0 4.5 .flen. Aka i L5 354.3 23.3 1,434.4 69.3 Total §a~- 1-- 1,520.0 100.0 2,010.0 100.0 144 Table 45. Farmer's Estimate of Additional Drainage Potential on Crop- land in the Thumb and South Central Areas of Michigan, 1963 Land Thumb South Central Characteristics Acres Percent Acres Percent (000) (000) Potentially feasible to drain 82.5 23.3 225.7 16.2 Not feasible to drain 8.8 2.5 32.0 2.3 Naturally well drained 262.8 74.2 1,135.3 81.5 354.2 100.0 1,393.0 100.0 The potentially feasible acreage presumably is an acreage where the re- spondent feels drainage would be profitable. The balance is acreage he considers well drained (see Appendix A, page 4 - Survey Schedule). Farmers estimate that there is need for additional drainage on lands that already have some form of artificial drainage (Table 46). The tiling of land that presently has surface ditch drainage only represents 324.5 thousand acres in the Thumb and 49 thousand acres in the South Central area. Tiling between existing lines also would represent a sizable acreage. Often, farmers will lay out field grid systems but due to capital rationing will install laterals at wider than recommended intervals. When the farmer's estimate of potential on land with exist- ing tile is added to his estimate of potential on undrained land the gross potential is 440 thousand acres in the Thumb area and 314 thousand in the South Central area (Table 47). According to the Inventory of Soil and Water Conservation Needs estimates, drainage is physically possible on 700 thousand acres in the Thumb and 360 thousand in the South Central area (see Table 16). 145 Table 46. Farmer's Estimate of Additional Drainage Potential on Land with Existing Drainage Systems, Thumb and South Central Michigan, 1963 T f Im v nt Thumb South Central ype 0 pro eme Acres Percent Acres Percent Tile between existing lines 48.1 4.4 42.6 7.0 Tile land having surface ditch only 324.5 29.7 49.0 8.1 Relay existing tile 10.9 1.0 17.6 2.9 Surface ditch land already til“ 202 I e2 e7 e1 None needed 707.0 64.7 496.8 81.9 Total drained land 1,092.7 100.0 606.7 100.0 Table 47. Summary of the Economic Potential for Tile Drainage as Estimated by Farmers, Thumb and South Central Michigan, 1963 Type of Improvement Thumb South Central (000 acres) Tiling undrained crOplandt 82.5 225.7 Tile between existing lines* 24.0 21.3 Tile land having surface ditch 324.5 49.0 Relay existing tile 10.9 17.6 Total 441.9 313.6 * Represents 50 percent of acreage reported in Table 46. 146 The linear program with the assumption of a one-third cost-share arrange- ment indicates that slightly over 400 thousand acres would have economic potential for drainage in the Thumb area and nearly 250 thousand acres in the South Central area. Farmers believe that the economic potential is from 10 to 20 percent higher than that indicated by the model. As will be pointed out later in this chapter, farmers may not have a clear concept of economic p0tential; consequently, the acreage may be over- estimated. Even so, the two independent estimates of drainage potential are reasonably close. Only one of five resource owners with drainage potential on their land have definite plans for making the improvement (Table 48). Eight percent indicated plans to make drainage investments within two years and 12 percent stated that they would invest in drainage within 3 to 5 years. In comparing estimates of Thumb and South Central area farmers, no statistical differences could be detected. While the linear programming model indicates that there would be over 650 thousand acres of cropland on which drainage would be economic Table 48. Plans for Making Field Drainage Improvement, Thumb and South Central Michigan, 1963 Time Period Percent Within 2 years 3 3 to 5 years 12 Indefinite 80 Total 100 147 in the two areas, the farm survey indicates that only about one-fifth of the farmers on that acreage have definite plans about undertaking the practice. If public investments are made to provide outlets and the time lag in farmer adoption is great, the social benefits would be dis- counted considerably. Farm owners indicate a variety of reasons why the drainage practice is not adopted or given priority. These reasons will be discussed in the final section of this chapter. 8. Existing Nonfield Drains and Improvement Needs Nonfield drains for outlets for field systems can be provided either through the County Drainage District organization or private individual or group action. An inventory of nonfield drains indicates that there are approximately 2 million rods of Open and closed ditches in each of the two areas (Table 49). Over one-third of the drains are private drains in the Thumb area while only one-fourth of the drains in the South Central area are private drains. (Sum the open and closed per- centages in each of the two areas in Table 49.) County drains require group action for clean out and other improvements while private drains can be accomplished usually with the initiative of a few resource owners. Closed county drains are most prevalent in the South Central area as there are nearly a half million rods. Usually, less maintenance is re- quired on closed drains. Slightly more than half of the drainage potential in the Thumb and South Central areas is dependent upon outlet improvements (Table 50). Farmers would not be expected to install field tile with inadequate out- lets. In the Thumb, one-third of the drainage potential is dependent upon new outlets. Some of the outlets can be provided through private investments but many of the new outlets must come from actions of'a I lime; I Table 49. Thumb and South Central Michigan, 1963 Amount of County and Private Open and Closed Nonfield Drains, Area Nonfield Drains Thumb South Central Rods Percent Rods Percent (000) (000) County Open 1,256.2 62 936.0 49 Closed 30.5 1 498.2 26 Private Open 704.3 35 396.4 20 Closed 49.3 2 87.0 5 Total 2,040.3 100 . 1,917.6 100 Table 50. Proportion of Drainage Potential Dependent Upon Outlet Improvements, Thumb and South Central Michigan, 1963 Type of Outlet Improvement Thumb -§9§th Central Acres Percent Acres Percent (000) (000) Clean and repair existing 115.2 24.6 100.7 30.0 outlet Establish new outlet 157.3 33.6 82.2 24.5 None needed 195.7 41.8 152.7 45.5 Total drainage potential 468.2 100.0 335.6 100.0 149 Drainage District or a group of individuals.l/ The establishment of Drainage Districts and the petitioning for improvements is time consum- ing and often is met with opposition by those who benefit little. In many instances the drainage outlet must cross a neighbor's pro- perty. Easements for a drainage ditch on the neighbor's property are necessary. Often these are not granted. Drainage Districts can be established to get access to outlets across neighbor's property but these are hindrances in field drainage adoption. In the Thumb area nearly three-fourths of the drainage potential dependent upon new out- lets also is dependent upon access through a neighbor's prOperty (Table 51). In the South Central area, nearly 60 percent of the drainable land without outlets will require easements on adjacent preperties. C. Reasons for not Makinggfield Drain and Outlet Improvements Field drainagge-Self imposed capital rationing appears to be the principal reason for not investing in farm drainage even though farm owners indicate that the practice is profitable and outlets are avail- able (Table 52). One-sixth of the farmers indicate that other improve- ments have priority over drain investments. A similar group judged that the drainage problem was not serious enough to merit investment at this time. Undoubtedly, the productivity gained and the return on the invest- ment on.some crapland would be low, causing investors to be cautious and indifferent. In other words, there is more risk to the point where there is indecision. But this can involve up to 10 to 15 percent of the area that the program model, and farmer too, identify as economic 1] For a discussion of procedures for establishing a Drainage District see Cotner, M. L. and A. Allen Schmid, ”Drain Law for Michigan Land Owners," Farm Science Series, Michigan State University, Extension Bulletin E382, September 1963. ‘ 150 Table 51. Proportion of Drainage Potential Dependent Upon Outlet Access Across Neighboring Property, Thumb and South Central Michigan, 1963 Thumb South Central Location Of Outlet Acres Percent Acres Percent (000) (000) Outlet must cross neighboring property 116.1 73.8 48.4 58.9 Outlet need not cross neighboring property 41.2 26.2 33.8 41.1 Total requiring new outlet 157.3 100.0 82.2 100.0 Table 52. Reasons for not Making Potential Field Drainage Improvements on Cropland now Served with Adequate Outlets as Related to the Expected Use of Credit; Reason for Not Fi Plan 3: $52 Cradit :0 t Making Investment Now nance a nage nves men Yes No Funds not available _ 57.1 58.1 Making other improvement first 14.3 19.3 Problem not serious enough ‘ 8.6 17.2 Nearing retirement and other factors 20.0 5.4 100.0 100.0 1] Frequency distributions were statistically different at the 95 percent confidence level. 151 potential. The point here is that farmers belief about the economics of the practice is not necessarily followed by a decision to adapt the practice. Resource owners' expected use of credit for drainage investment is related to age (Table 53). As would be expected, a larger proportion of the younger farmers would incur indebtedness for drainage. Less than 5 percent of the farmers over 60 would borrow and only one out of eight of the farmers in the 45 to 59 age bracket would borrow. The two groups. "45 to 59" and "over 60", control over half the farm land area in the two areas. If credit will not be used, then capital for the improvement accrues only through personal savings; a procedure which creates a con- siderable time lag in drainage adoption. Also as farmers approach re- tirement in these age groups, they are less apt to invest in drainage. There was no statistical difference in the expected use of credit for drainage between the Thumb and South Central areas. Table 53. Expected Use of Credit for Making Field Drainage Improvements as Related to Age of Operator, Thumb and South Central Michigan, 1963.1. e of O erator Less Than 30 30-44 45-59 60 and Over Expect to Use Credit Yes 57.1 35.7 13.6 3.3 No 42.9 64.3 86.4 96.7 100.0 100.0 100.0 100.0 l] Prequency distributions were statistically different at the 99 percent confidence level. 152 The drainage potential is concentrated on 40 percent of the farms (Table 54). Most of the farmers having economic drainage potential have less than 25 percent of their holdings in this category. However, one- tenth of all farmers have from 25 to 49 percent of their acreage in the potentially drainable category. If a large proportion of the farm has drainage potential, the size of the capital investment to drain all of the land at one time would appear formidable to the decision maker. In the survey, a historical record was made of the field drainage adoption on farms after outlets were made available. Two-thirds of the farmers with all of their drainage completed required nine or more years to complete the job (Table 55). In contrast, of those who were only half completed in 1963, nearly 50 percent reached this level in less than two years. However, 15 percent of those half completed took nine or more years to accomplish that amount. The time leg for field drain- age adoption after the outlet is developed is significant. Outlet imp;ovement--The resource owners who responded that existing drain outlets needed improvement or cleaning were asked their reason for not making the improvement at this time. Over half indicated that they could not get financial support from their neighbors to make the improve- ment (Table 56). One-fourth indicated internal capital rationing as a reason for not improving the outlets. Many of the existing outlets were originally improved as early as the turn of the century. Many of the older farmers attest that little or no maintenance has been accomplished since the original improvement. In most cases, outlet improvements can- not be made on an individual basis. Usually the entire drainage ditch or channel improvement must be made for any of the farm outlets to be effective. Often, there is a disassociaticn of costs and benefits. 153 Table 54. Preportion of Farms with Farmland Drainage Potential, Thumb and South Central Michigan, 1963 Portion of Farm With Proportion of Farms Potential Drainage ...... Percent------- ------Percent------ None 58.6 1-24 25.4 25-49 11.1 50-74 2.9 75-100 2.0 100.0 Table 55. Average Time Lapse Between the Establishment of Outlet and the Installation of Field Drainage, Thumb and South Central Michigan, 19611/ Farmers Reporting; Time Lapse All Field One-Half Field Drainage Complete Drainage Complete ---Years--- ------ -----Percent ---------- Less than 2 A 16.3 48.8 2 - 4 4.7 16.3 5 - 8 10.5 19.8 9 and more 68.5 15.1 Total 100.0 100.0 1] Frequency distribution statistically different at the 99 percent confidence level. ~ 154 Table 56. Reason for Not Improving or Cleaning Existing Drains at the Present Time Proportion of Farmers Reasons Reporting --Percent-- Finances, lack of cash, other priorities 27.6 Not interested in intensifying problem not serious 17.2 Neighbor won't share costs 55.2 100.0 One farm may be adequately served by a nonfarm drainage ditch but the whole ditch must be dredged to adequately serve a neighbor. If the drain is a County Drain, the improvement expense does not need to be, but often is, spread among property owners in the same proportion that the original expense was spread. Improvements in the County Drain are initiated by petition of the resource owners. An identical problem exists with private group drains. Neighbors cannot reach agreement on the relative benefits, hence cost-sharing arrangement. D. Farming Changes Planned With Drainage Adoption In the previous chapter the linear programming model which incorpor- ated drainage at the 100 percent level indicated that the Thumb area *would experience a shift in cropland devoted to roughage production. JPresumably there would be increases in livestock production to utilize the areas comparative advantage in producing roughage. The South Central area would shift to increased cash-crop farming as more wheat and soybeans 155 would be produced. However, under the one-third cost-share arrangement the cropping patterns remained much as they are now (see Table 43). Since the one-third cost-share arrangement presently faces resource own- ers, one would expect the resource owners to maintain existing basic farm plans in the two areas. When asked whether they would change their livestock system upon completing their drainage, more than 90 percent of the farmers had no plans for changing or establishing a livestock system (Table 57). There were nostatistical differences in the response from the two areas. While the response tends to confirm the linear program results, one can ques- tion whether resource owners respond with carefully calculated manage- ment plans. Since drainage investments for most farmers obviously are not in the immediate future, livestock management plans at best would be tentative. Nevertheless, the response does indicate that significant immediate shifts in livestock production would not be expected. Nine out of ten farmers indicated that they would follow the same cropping pattern after they made their drainage investment. Again, there was no statistical difference in response between areas (Table 58). One out of 20 farmers planned to increase the acreage devoted to cash-crops. In view of the sample size and the expected accuracy of the results (e or - 4 percent) the increase estimated for cash-crops would appear to have little significance. The current cropland use on artificially drained land in the Thumb area is distributed nearly equally among food, feed and roughage crops (Table 59). Corn grain production on drained land in the South Central area makes the feed grain distribution larger in that area. The pro- Jected use of drained land in both the Thumb and South Central areas indicates increased uses of cash or food grain crops. Thus the plans 156 Table 57. Changes Planned in Livestock System with Additional Field Drainage Installed, Thumb and South Central Michigan, 1963 Change Planned PrOportion of Operators Reporting --Percent-- Same livestock system 93.4 Increase dairy 2.5 Increase beef 2.0 Increase hogs .4 Decrease dairy 1.3 Decrease beef .4 100.0 Table 58. Changes Planned in Cropping System with Additional Field Drainage Installed, Thumb and South Central Michigan, 1963 Change Planned Proport;::°::iggerators --Percent-- Same cropping pattern 92.1 Increase cash-crop 5.8 Increase feed and roughage crops 1.7 Other .4 100.0 157 Table 59. Current and Projected Use of Artificially Drained Lands, Thumb and South Central Michigan, 1963 Cropland Use Thumb South Central --------- Percent-------------- Current* Food crops 30 35 Feed grain crops 36 44 Roughages 34 21 Total 100 100 Projected** Food crops 49 68 Feed grain crops 21 26 Roughages 30 6 Total 100 100 *Farm Drainage survey. **Assuming C , product requirements, TA , technology adaption and field draiAage at 67 percent (one-thifd cost-share arrangement). ,- 158 of farmers to maintain existing farm plans with sue overall increase in cash-crop farming appears to be consistent with the results of the linear program model . CRAPTER VII SENIMIS'AID CONCLUSIONS M32522 One of the main objectives of this study was to formulate general principles concerning the role of natural resources in economic growth. The thesis of this study is that the use and development of natural re- sources is and can be an important factor in economic development. A review of literature found varying views about natural resources and their relationship to economic activity. Many scientists and lay- men hold that the Malthusian doctrine still is applicable. Others argue that abnormal scarcity rents have not accrued to natural resources and therefore the Malthusian law is invalid. Scientists point to changes in the quality of resource inputs, thereby improving the productive capacity of our natural resources. Put another way, man-made substitutes developed through modern technology have lessened the pressure on the conventional natural resources. An analytical model is developed which encompasses the agricultural resources of a 42-county region in lower Michigan. The model is designed to investigate the importance of natural resource development under spe- cified alternative demand conditions and changes in the level of tech- nology. The model developed is a minimum-cost formulation of a linear program. It is designed to simulate a partial economic equilibrium of the agricultural economy of the study area. By developing comparative static solutions with and without the test variables, the potential effects on natural resource rents and consumer benefits are determined. The basic linear programming model contains detailed information on 159 160 soils, their quantity, productivity and location within the regions. The coefficients in the model are intended to be realistic estimates of con- ditions in 1980 for the region. Without technological change, natural resource rents increase sig- nificantly as population increases. Alternatively, natural resource rents decrease as technology gains outstrip the food and fibre product needs. The adoption of field drainage provides significant efficiency benefits that accrue to producers or consumers depending upon demand . elasticities. Owners of drainable land receive increased rents. Two subareas of the 42-county region are studied in detail: the Thumb and South Central areas. According to the linear program, some 650 thousand crop acres have economic potential for additional field drainage. (A survey of randomly selected farmers in the two areas in- dicated that farm operators felt additional drainage would pay on about the same number of acres. But only one-fifth of the farmers had plans for investing in drainage. Farm owners listed internal capital ration- ing as the principal reason for not undertaking the practice. Inadequate outlets for field drainage also were a significant factor in retarding drainage adoption. The analysis provides insights as to the relationship of resource development in the form of drainage to economic growth. Implications for general policies and specific programs are developed. 8. mclusions and Inlicatiog lgsourge scargigz ren§!--The alternative product requirements used in the linear progra-ing analysis in this study were based upon in- creases in U. 8. population. The c, product requirement was based on a U. S. pepulatiea of 254 million. The c, product requir-ent was based 161 on a 502 million population; approximately double the Cl assumptions. The assumed populations are representative of the intermediate and long term projections developed by the Bureau of Census. Per capi ta con- sumption patterns used were estimates projected for 1980. With all other variables held constant, the shift in product re- quir-ents for the C1 to C3 assumption caused resource rents in the 42- county region to increase from $6.2 to $12.5 million; a 100 percent in- crease. Clearly, without corresponding increases in technology and natural resource development, larger shares of consumers purchasing power will go to resource owners in the form of resource rent. But perhaps more important is the finding that resource use in the region could be expanded to provide increased food requirements. The tecimology attainment assumptions were based upon estimates of likely adoption of technology in future time periods. The TA1 level represents the expected productivity level in 1980. The TA2 level re- flects possible adoption in 1980 under an intensive research and exten- sion progr. or adoption at some later date. With all other variables ~ held constant, the increase in teclmology from TA1 to TA2 reduced re- source rents from $6.2 to $3.5 million with a Cl product requirement; a 43 percmt reduction. The CI - TA, and C2 - TA2 program runs indicated that the technology attainment in TA2 would not be sufficient to keep pace with the product requiremmits in C2. Resource rents would rise $3.6 million or 60 percent under these assumptions. If the assumptions in the two programs do have a sublance to ex- pected reality and if the income distribution effects are not satisfac- tory, then specific policies and programs for the development of tech- nology and resource development are needed or may be needed. Presumably 162 increases in agricultural research and extension activities would in- crease technology adoption. Resource rents in total rise $1.5 million for the 42-county region when the full economic potential for drainage is adopted under the one- third cost-share arrangement and Cl product requirements and TAl tech- nology attainment. Through drainage the quality of the resource improves, consequently increased scarcity rents accrue. Rents on drained land appear to substitute for rents on nondrained land when drainage is entered as an option. Such substitution could have an impact on asset values both within and among regions. Some resource owners conceivably could lose natural resource value and yet the basic market forces remain un- changed. The equilibrium analysis used in the study is for a small region, thus the rent substitution was forced to occur within the region. Even in a larger region the principle holds. The idling of land is a direct measure of the devaluation phenomenon. The size of the resource rents generated under the assumption of the alternative programs indicates that the average agricultural value of the natural resource is relatively small. On a per acre basis the rents average from $2 to $4 per acre which when capitalized at 5 percent represent only one-tenth of the census estimate of the value of land and buildings as reported in the 1964 Census. Even at a lower capitalisation rate the capitalised agricultural land value is but a small fraction of reported value. The rent estimates are in terms of 1963 constant dollars. (1963 input price levels were used.) The rents discussed here pertain only to the qualitative differences in productivity of the fixed factor - the cropland resource. In other words, the MVP measures the Ricardian rent that accrues to land because of its varying quality. In the small regional model developed in this study, transportation costs were not 163 considered explicitly. Subareas with significant transportation advan- tage would earn rent also. Undoubtedly, other factors not considered contribute to agricultural value. But even so the average agricultural value of cropland appears to be below reported values. Farm lands may be purchased in view of their marginal value to a farm unit rather than the average productivity presented above. Undoubtedly, land values are influenced by factors other than agricultural. Another difficulty in capitalizing the calculated MVP into values concerns the relevant agricultural product price level to use. Prices received for agricultural products currently are higher than the margi- nal costs of production indicated. The MVP derived from the linear pro- gramming analyses are based on the assumption that the marginal costs of production are market clearing product prices. Government programs to pay product prices at higher levels obviously would increase the residual rent to resources. But the MVP as shown herein should be a valid measure of the use value of the resource in the food and fibre production process. If product prices are pegged at higher levels, rents attributable to land would be higher. Under these circumstances, a problem occurs in estimating relevant measures of benefits for public drainage channel im- provement projects. Should benefits be calculated on the basis of their use value or should the institutionalized prices be used? This partic- ular’question was not the subject of this research but it is relevant to further studies. Subsequent linear programming runs could be made in maximizing formulations using various assumed price levels. Comparisons with the existing minim cost solutions would indicate the relative share of the rent that is attributable to use value and price support programs. 164 If the product components in the supported prices and marginal costs of production derived in this study have the same relative values, then certain results will be unchanged. Land use patterns to produce a given mix of product will not change if prices are increased by a constant. Likewise, acreages identified as having an economic potential for drain- age in the minimum cost formulation would remain the same with higher but constant relative prices. Role of drainage development in economic growth-~The results of the linear program analysis indicate that a sizable return in efficiency benefits could accrue if all of the economic drainage potential is adopted. Benefits can be in the form of lower prices for agricultural commodities, higher resource rents or some combination of the two. If consumers are confronted with lower prices they can purchase an identical bill of goods using less of their purchasing power; then, society pre- sumably is better off. If the saved purchasing power is diverted to other productive uses, then economic growth would be enhanced. If the purchasing power represented in increased rents is diverted to productive uses, economic growth is affected similarly. The basic linear programming model indicates that there would appear to be economic incentive for resource owners to install field drainage systems on some 743 thousand acres additional without any public cost- sharing. Assuming that efficiency gains are passed on to consumers in the form of lower product prices, the cost for primary agricultural products from the 42-county region would be reduced some $5 million. Under a one-third cost-sharing arrangement with resource owners,.the consumers gain would be $6.6 million or $1.6 million more than under the no cost-share arrangement. Under a uniform one-third cost-share 165 arrangement on all lands drained, the annualized public outlay would be $3.6 million (excluding administrative costs). Clearly, the public out- lay for drainage would not be rational from the public viewpoint if the $3.6 million investment provides a $1.6 million increment in benefits at large. Resource owners receive increased rents in this example. But these gains are the basis for cost-sharing by the resource owner and other local beneficiaries. The relationship suggests selective cost-sharing on those drainable lands that would not otherwise be drained. A similar example can be shown using the data derived for a 50 percent cost-sharing plan. The linear programming models used to depict alternative cost-share plans indicate that owners of nondrained land lose rent-earning capacity as the public cost-share is increased and more land has economic poten- tial for drainage. Improving the productive capacity of the resource through drainage lessens the aggregate scarcity value of the resource in the production process. Public resource development programs do have important income earning and redistribution impacts. If the cost-sharing policy is to be equitable, all of the gain and loss relationships must be considered. Many factors influence the adoption of the economic drainage poten- tial. Resource owners in general recognize that the drainage potential as identified by the linear program exists on their farms. But only one of every five resource owners has definite plans for draining additional land in the Thumb and South Central subareas. Slightly over half of the drainage potential in the two subareas surveyed is dependent upon outlet improvements. Much of the outlet improvement must come from group ac- tions either on a private basis or through the Drainage District. ,Fed- eral legislation exists to provide financial support for major channel 166 improvement and flood control measures. In the analysis of benefits to be associated with the public costs, the lags in drainage adoption must be considered. Time delays in the realization of consumer and resource owners benefits could influence the discounted benefit-public cost comparison significantly. Approximately half the drainable lands require improvement of group outlets. On this portion, three-fifths of the resource owners claimed that capital availability kept them from making the drainage improvement now. The balance either were making other improvements first, nearing retirement or thought the problem on their farm was not serious enough. Based upon the survey, one could conclude that at least one-fourth of the drainage potential would not be adopted because of farmer's age, attitudes and indifference to the drainage practice. Farmers will not use credit to overcome the capital limitation they indicate confronts them. Farmers over 45 control half the land but only one of 10 will borrow funds for drainage. Resource owners are loathe to :mortgage their resource for this purpose. If capital for drainage in- vestments must accumulate through personal savings, one can question if even the three-fifths who claim capital limitations will drain land dur- ing their tenure. The cross sectional analysis in this study on drainage adoption has direct implications for the benefit determination procedures used by federal agencies in estimating time lags in actual adoption. Adoption rates usually are somewhat arbitrary based upon the informed judgment of agency technicians on the likely practice adoption in the area. Em- pirical studies on past and expected adoption rates would assist agency personnel in these decisions. 167 Policy implicatigggr-The analysis herein supports the hypothesis that technology adoption and natural resource develOpment are substi- tutes in the production of the nation's food and fibre needs. But more importantly, the two can be complementary and matched in appropriate combinations to enhance economic growth and development. But what principles should govern the policies and programs to achieve the ends of maximum economic growth? The policy is difficult as the programs have wealth distribution or redistribution implications and each pro- gram involves an investment of public monies. In other words, benefits from publicly induced drainage adoption are not entirely "at large". Specific benefits do accrue to resource owners in the form of increased rents and asset values. The decision to redistribute wealth among resource owners is largely a political decision. But the economic consequences of different resource development programs, wealth distribution and ultimate effect on economic growth is within the purview of economics. The economic purist would argue that the economic relationships should guide the politician in the development of institutional arrangements for resource use. If maximizing economic growth is a goal, then guides for public investment programs in the technology-resource development area can be developed. The principal criterion for such a policy is the productivity test. The program to follow would be one that produces the largest net gain in economic growth. Marginal analysis procedures are held to be directly applicable in the analysis of alternative measures and in de- signing the scale of public involvement in the development of technology. Public investments in research and extension indirectly influence the productivity of natural resources. Public investments in incentive programs or other cost-sharing activities also improve the productive 168 capacity of natural resources. Research, extension or direct incentive programs, have (alone or in combination) a functional relationship with the desired end--economic growth. These "social production functions" allegedly can be treated in principle the same as production functions in individual farm management. Admittedly, the quantification and measurement of these relationships seem formidable. But the analysis in this study is one attempt to quantify parts of the input-output rela- tionships with respect to field drainage and general technology adoption. 3 The complete social production function would trace the input- '1 output relationships resulting from a public investment through both the production and consumption sectors of the economy. Changes in Cross if...” National Product stealing from alternate levels of public expenditures on and combinations of resource programs would be the direct measure of economic growth. Each of the alternative policies considered by society concerning resource development would imply a certain wealth distribution within the producing sector. For instance, technology improvements that are not tied to the land resource would tend to reduce natural resource rents and increase rents to the technology adopted. Another program could stress natural resource development wi th increased earnings accruing to users of these resources. Clearly, one combination of these inputs would maximise the contribution to economic growth. To deviate from the wealth distribution implied would be at the expense of economic growth. Such’ a scheme may so. grandiose, especially when problems of meas- urdlent, analytical techniques and computer capacities would appear to limit the application of the principles suggested. But researchers con- timse in their attupt to improve the analytical procedures. Currently, the Office of Business Economics, U. S. Department of Co-erce, is 169 developing a national interregional model of the U. S. economy. Presum- ably, input-output matrices will be developed for the 16 major water resource regions. The Economic Research Service of the USDA is develop- ing a national interregional model for agriculture. In the current emphasis on comprehensive water resource development, models are being developed to project mineral and energy production. Improvements in computer technology are being made. Recent developments in the LP 90 system on IBM equipment provides almost unlimited capacity for linear program studies. We are soon approaching the point where the effect of public investment programs on a national basis can be traced and compared with alternative uses of public investment funds. The uniform cost-sharing practice on field drainage would appear to involve the uneconomic use of public monies on some lands. The net gains in producers rents and consumer benefit in reduced product prices over what would accrue with no cost-sharing is smaller than the public in- vestment cost. The procedUre also has implications concerning transfer payments and wealth redistributions. An analysis of the linear program results indicates that selective cost-sharing on drainable soils that would not otherwise be drained would be a rational policy. Even then, the program should be compared with alternative means of obtaining the food and fibre needs before final decisions on cost-sharing arrangements are undertaken. The costs of administering a selective cost-sharing program probably could be high relative to current administrative costs but actual program costs should be reduced in view of the reduced cost- share payments. The general resource development policy outlined in this section has implications concerning the political philosophy held by many in the U. S. In the above outline, the role of government would be one of 170 full partner with the private resource owners. Presumably, the goals of the resource owner and the goals assumed for society are mutually com- patible; one of maximum individual economic welfare and maximuminational economic growth. Since some hold the political value that the government should have a passive role in individual's decisions about resource use, the active role of government in manipulating resource use to enhance economic growth may not have full support. One further policy implication concerns the negative attitude of resource owners towards the use of credit. Consideration should be given to expanding the research and extension programs to improve farmers' knowledge and use of financial management. Such a program would be of value not only in individual decisions to borrow money for drainage but would assist in all decisions involving capital investments. Since the drainage practice is one that normally will pay for itself in 5 to 10 years, intermediate term credit is needed. Public programs that could encourage intermediate loans might speed up drainage adoption materially. Current agency procedures in analyzing potential water resource development measures involves a budgeting analysis of primary benefits to resource owners only. Secondary benefits to consumers through reduced product prices are not considered. Often the size of the individual proj- ect being considered is so small, its impact on consumer's benefits is not considered significant. With price supports, the efficiency gains are not realized by consumers. In fact, the efficiency gains foregone 'make the opportunity costs of a price support program to society even larger. The complexion of water resource development programs is changing. Whole water resource regions are being studied. Alternative uses and 171 development of the water resource are being considered. The implication is that micro-individual project analyses do not consider all of the re- levant relationships. Problems cannot be considered in isolation. Clearly an analytical model is needed to examine the producer-consumer gains and losses and keep the relationships in perspective. The linear programming technique used in this study with further modification could be an important part of such an analytical model. Usefulness of analytical_procedures in study-~The minimum cost formulation of the linear programming technique appears to be useful in analyzing future resource use and for determining the likely effect of alternative policies. But, as with all techniques, the use of linear programming is not without conceptual and operational problems. The problems are not intrinsic to linear programming but mostly a problem of how the technique can be used in a study such as this. Conceptually, difficultues arise when we assume that we can make a comparative static analysis of two partial equilibrium situations at the aggregate level. In one application we are asking the model what will happen. How will resource owners use their resources and produce the products expected to be needed? In another application we try to impose an additional variable-drainage to determine what should happen with respect to this variable. A technique is needed to predict reality and at the same time allow the isolation of a single variable to permit normative prescriptions. The linear programming approach provides solutions showing the economic system in equilibrium given the constraints placed upon it. One of the conceptual difficulties concerns the time dimension and path to equilibrium of the economy. Conventional theory suggests that long- 172 run adjustments within an economy are towards equilibrium. In other words,the basic drive of decision makers in the capitalistic system at least is to prefer more rather than less economic goods. In this regard, the use of equilibrium theory should provide meaningful results concern- ing intermediate and long-term adjustments in an economy. Even so, the equilibrium solution for the 1980 projections indicated rather sharp concentrations in resource use among subareas; more than an analysis of historical trends would support. To make the model more realistic for 1980, additional constraints on the perfect management assumption implied in the linear programming system must be made. Herein lie the operational problems. Further constraints could be placed on resource use to reflect cap- ital rationing, labor availability and management constraints. Such constraints would have the effect of modifying the perfect management assumption in the basic linear program system. But to do so would in- crease the equations and vectors in the LP matrix beyond the useable capacity of computer systems available for this study. At least the analyses could not be made for the 42-county region. A one step recur- sive constraint was placed on cropping patterns in this study. A mini- mum cropping pattern was forced on each subarea to reflect historical trends which of course represent the realities of the decision process. This restriction required 11 equations in each subarea which kept the problem within limits of computer capacity. Conceptually, then, part of the projection for 1980 (approximately 50 percent) is based on trend and the balance is based on the efficiency aspects of equilibrium theory. The problem in the application here is the determination of the proper balance of these two forces. Interestingly, the formulation here allows determination of efficiency gains forgone through the imposition of minimum cropping patterns. A dilemma exists in the aggregation problems of the analvsis. On one hand, more detail is wanted in the model so more realism and increased accuracy in results can be obtained. But as the detail in the model is increased, the validity of the coefficients that represents small micro elements in the system are questionable. In other words, accuracy may not be gained by becoming more precise. The accuracy-precision rela- tionships suggest guides for the incorporation of precision in the model. The development of precision represents an expense to the decision maker. Marginal analysis again would be useful. The marginal cost in developing precision in the model should be weighed against the marginal benefit obtained through increased accuracy in results. Another conceptual problem concerns the dynamic path to equilibrium. The actions of decision makers in making adjustments may in fact influ- ence the ultimate equilibrium. In other words, a sequence of imperfect decisions on the part of resource owners might have a feedback effect on the quality of the resources and even the nature of the problem being analyzed. The stochastic variables in agriculture such as weather may be such that significant discounting for risk and uncertainty should be accounted for in the model. The yield coefficients in the model developed repre- sented expected averages as influenced by "normal" climatic conditions. While the effect of climate was considered in determining individual crop yields, no special constraint was placed on the overall farm manage- ment function for risk and uncertainty except for the minimum cropping pattern restriction imposed on each subarea. Additional work is needed in designing and improving a projection model to accomplish the purposes set forth in this study. Historical 17h climatological data developed recently by the Heather Bureau on a Crop Reporting District basis provides key variables in a study of the climate- crop yield relationships. Probability distributions of yields can be derived from which a range of outcomes in the projection year could be obtained. There is some promise that the climate-yield probability distributions could serve as a driving force for a computer-simulation analysis of the dynamic growth path in agriculture. One final note concerns the farm survey analysis. In the past agencies have depended upon informed judgement as to resource owners' response to a public development measure. Public investments have been made based on these estimates which do not have an objective measurement. No claim is made that the design of the questionaire used in this study provides most of the relevant answers. But the survey results do indi- cate relationships that must be considered in any project analysis. Much of the research in water resource development work has been on a case study basis. The problem with case studies concerns the relevance of results to other areas. Often the number of observations are such that statistically meaningful relationships cannot be made. More cross sectional analyses are needed to provide improved information of re- source users response to public resource development investments. ‘9. "4__-v_-. gun-Lu, ‘ I BIBLIOGRAPHY Abramovits, Moses. Con-ent on T. N. Schults's paper, ”Connections between Natural Resources and Economic Growth,” Natural Resources and Economic Growth, compendium of papers, Social Science Research Council, Joseph J. Spengler, editor, April 1960. Agriculture, 0. S. Department of, ERS, NEED. "Agricultural Activity in the Grand River Basin: A Projective Study,” January 1966. . "Agricultural Activity in the Ohio River Basin: A Projective Study ," February 1966 . Barnett, Harold J. "Measurement of Change in Natural Resource Economic Scarcity and Its Economic Effects," Reprint No. 26, Resources for the Future, Washington, D. C., March 1961. . and Chandley Morse, Scarcity and GrowthI The Economics of Natural Resource Availability, The John Hopkins Press, 1965. Barton, G. T. and R. E. Daly. Progpects of Agriculture in a Growigg Econom , paper presented at conference on Problems and Policies of American Agriculture, October 1958, mimeograph. Boyne, David ii. Chan es in th Real Wealth Position of Farm 0 rators, 1940-1960, Technical Bulletin 294, Michigan Agricultural Experi ment Stati on . Brown, L. H. Hill Tilin Pa You - Ste s in Maki Co tations, unpublished Extension Farm Management guide, Department of Agri cul tural Economics , Michigan S tate Uni versi ty . Buchanan, James M. Public Principles of bblic Debt, Irwin Inc., 1958. took, Robert C. Human Fertility, The Modern Dilemma, London 1951. "Optimum Timing of Long-Term Resource Improvements," other, M. L. Journal of Farm Economics, October 1963. . and A. Allan Schmid. grain Law for Michigan Land Owners, Farm Science Series, Michigan State University, Extension Bulletin E382, Sept-her 1963. ., M. E. Hirth and G. D. Irwin. Participants in the Land Market, Michigan Agricultural Experiment Station, Research Report 12, May 1964. "A Look Ahead for Food and Agriculture," y, R. l". and A. c. Egbert. Agri cultural Economics Research, January 1966, Vol. XVIII, NO. I. 175 176 Dorfman, Robert, Paul A. Samuelson and Robert M. Solow. Linear Progra-ing and Economic Analysis, Rand, 1958. Economic Task Group of the Ad Hoc Water Resources Council Staff. National Economic Growth Projection, Washington D. C., July 1963. Egbert, A. C., and Earl 0. Ready. Regional Adjustments in Grain Pro- duction: A Linear Pro ra-i Anal sis, Technical Bulletin 1241, June 1961, USDA. . Regional Analysis of Production AdjustmentfisL in the ngor Field Craps: Historical and Prosmctive, Technical Bulletin 1294, November 1964, USDA. Fisher, Joseph L. ”Our Resource Situation and Outlook -- Public Policy and Individual Responsibility," Reprint No. 22, Resources for the Future, Washington, D. C. . and Hans N. Landsberg. "Natural Resources Projections and Their Contribution to Technological Planning,” Resources for the Future, Washington, D. C., Reprint No. 32, January 1963. Heady, Earl 0. Agricultural Policy Under Economic Development, Iowa State University Press, 1962. Hill, Elton B. and Russel G. Mawby. T es of Farmin in Michi an, Michigan Agricultural Experiment Station, SB 206, September 1954. Noglund, C. R. Economics of Farm Drains e, Department of Agricultural Economics, Michigan State University, and Production Economics Research Branch, ARS, USDA, unpublished mimeo, February 1955. . M_a_n_ggerial Decisions in Organizigg and Oarsting a Farm, Michigan Experiment Station, MSU, Agricultural Economics Mimeo No. 625, September 1955. McKee, Vernon C. Optimum Land and Water Resource Develogent, A Linear Pro a-i A lication, unpublished PhD dissertation, Iowa State University, 1966. Michigan Agricultural Experiment Station. An Inventory of Michigan Soil and Water Conservation Needs, November 1962. Morgan Guaranty Trust Company of New York. Morgan Guaranty §urvey, “8‘": 196‘s Morse, Chandler and Harold J. Barnett. ”A Theoretical Analysis of Natural Resources Scarcity and Economic Growth Under Strict Parametric Constraints,” Natural Resources and Economic Growth, compendium of the papers, Social Science Research Council, Joseph J. Spengler, editor, April 1960. I‘ “:72 r. 2 llIvIll 177 Potter, Neal and Francis T. Christy, Jr. "Employment and Output in the Natural Resource Industries, 1870-1955," Resources for the Future, Washington, D. C., reprint No. 26, March 1961. Reese, Jim E. "The Impact of Resource Decisions on America's Economic Development," Resource Use Policies: Their Formation and Impact, (a series of background talks) Conservation and Resource-Use Educational Project, Joint Council of Economic Education, New York, May 1959. Schultz, T. W. The Economic Organization of Agriculture, McGraw-Hill, 1953. . Land in Economic Growth, Agricultural Economics Research Paper No. 3816, University of Chicago, August 26, 1958, mimeograph. Senate Document 97. Policies, Standards and Procedure; in the Formula- tion, Evaluation and Review of Plansgfor Use and Development of Water and Related Land Resoupcpg, 87th Congress, 2d Session, May 1962. Skold, Melvin D. and Earl O. Heady. Regional Location of Production of Major Field Crops at Alternative Demand and Price Levels, 1975, Technical Bulletin 1354, USDA in Cooperation with Iowa State University of Science and Technology, 1966. Snedecor, George W. Statistical Methods, Iowa State Press, 5th Edition, 1956. Whiteside, E. P., I. P. Schneider and Ray Cook, Soils of Michigan, Michigan Experiment Station, Special Bulletin 402, December 1959. APPENDIX A PART I SURVEY SCHEDULE Schedule No. Budget Bureau No. 140-6339 Date Approval Expires-maggr 31.41963 Enumerator Checked by _m Michigan Agricultural Experiment Station in cooperation with Farm Production Economics Division Economic Research Service, USDA F} FARMING ADJUSTMENTS IN LOWER MICHIGAN ‘ ...- IF GROSS INCOME FROM FARMING IN 1962 DID NOT EXCEED $1200 OR 80 PERCENT OR MORE HAS FROM EITHER POULTRY OR FRUIT AND TRUCK, COMPLETE ONLY SECTIONS I AND II. DO NOT TAKE ANY IN- FORMATION UNLESS tMRI-’2 HAS AT LEAST 10 ACRES cnopsggp, ‘_—__ Operator: Name Sc edu 6 Code L 1962 1953 Address I. The Farm - Size, Control and Tenure (1) Location of farm: County Sample segment (2) Has this farm operated in 1962 by: An owner [:1 A tenant D A partnership 0 A corporation C] A hired manager D '1‘ an an t and land lord jointly None of these D (3) How long have you Operated this farm? :4) Carmen ts years Farmed? years IF MORE THAN ONE PERSON, other than hired and family workers, participated in the management of this farm in 1962. (8) How many additional participated? (b) What is the relationship among the persons who jointly participated? 178 (5) Acres in farm: Total 179 Rented Rented in out Owned (6) IF LAND WAS RENTED IN, what was the leasing arrangement in 1962: (1) When have field drainage improvements been made: (2) Do you have a drainage sump pump installation? Yes [:1 (3) (a) Percentage share to tenant of each amp (b) Permyuage share to tenant of each class of livestock (c) Cash rent paid per acre (d) PerCentage share of operating expense (tenant- crops and livestock) (e) Relation of tenant to landlord? II. Farm Drainage (a) tile: (b) surface ditches: _‘ year acres served years acres served " No]: (b) Installa- (c) Annual main- (3) Year installed tion cost $ tenance costs 5 ((1) Annual operat- (e) Acres of land ing costs '5 served by pump: Til-3d: Other; (f) Do you plan to install a sump pump Yes [:3 N E] in the next No years? Amount of large drain ditch improvement on or along side your property: Year last Year cleaned or Rods estab . repaired Working condi t_i_r~: 3 ( a) County or Inter- County Open drains good [3 poor r] Closed drains good C] poor L} (12) Private non-field open drains good D poor [3 good [:1 poor D Closed drains 180 (u) Since 1958 what kind of improvement, new drains, maintenance, repairs have been made on your non-field drains (include information on county drains on or next to your farm). Year Kind of improvement or repair Type drain Financed PW Counpy Private Partnership 7 Tax Private DDDUD DECIDE] BEECH] [1080!] DODGE] (5) On your most recent clean out or repair of a non-field drain: (a) What was the total cost 5 (indicate ASC payments received, (b) Your share of the total cost 8 in addition 3 (c) Description of work done: (d) When had this drain been cleaned out or repaired before? Year (6) If a new open ditch drain was constructed in 1961 or 1962: (a) What was the total cost s (indicate ASC payments received, (b) Your share of total cost S in addition $ ) (c) Number of acres served acres (d) Description of work done Continents : 181 (7) Field Drainage improvements, existing and possible acreages Permanent pasture Cropland and other (Sect. I (5) ) (0 mm ACRES [:3 C: acres CZ] acres (b) Field drains installed (acres affected only) 10 Tiled a. Random * pods rods b. Grid ( ) __ ac. ( ) ____ ac. (1) 3 rod ,_ ac. ac. (2) u rod ._ ac. __ ac. (3) 5 rod ac. __ ac. 1 (4)__ 1'0d ________ ac. __ ac. ”.4 c. Tiled plus surface ditch ( ) ac. ( )ac. i """"""’ — L 2. Surface ditch only ac. ac. i 3. TOTAL mamas LAND :3 8°- [:3 ac' . -- (c) Potential drainage of undrained land : j l. Drainage not needed or will not if pay 1. Naturally well drained ac. ac. 2. Wet but will not pay ac. . ac. Plan to Plan to convert use in to existing 2. Drainage will pay and can use erogland use present outlet (with outlet drains in existing condition) - .* rods rods rods a. random tile ( ) ac. ( ) ac.[ ) ac. b. Grid tile ac. ac. ac. 0. Surface ditch only ac. ac. ac. d. Tile and surface ditch ac. ac. ac. 3. Drainage will pay, but only with new outlets (requiring new or cleaned outlet drain ) rods rods rods a. Ranjom tile“ ( ) ac. ( ) ac.( ) ac. b. Grid tile ac. ac. ac. c. Surface ditch only ac. ac. ac. d. Tile and surface ditch __ ac. ac. ac. 4. TOTAL NOT DRAINED F—"] A E: acres (d) Additional potential drainage on drained land (Cropland) (Pasture and other) 1. Tile between existing lines ac. ac 2. Tile land having surface ditches ac. ac. 3. Surface ditch land having tile ac. ac. *landowners frequently will report random tiling in terms of feet or rods. If his random tile acreage estimate is not readily available we will use the factor 500 feet or 30 rods serves 1 acre. Include county tile that cross land farmed. 182 ' relate to Sect. 7, (9) If you have insufficient outlet at your farm boundary: (part c (3) ) (a) How many some can be drained by deepening and cleaning the flies drain? _______acres (Include acres that could be served with sump pump.) (b) How many acres can be drained only by the establishment of a new drain to your property acres (c) Will this new drain have to cut across a neighbor's field requiring a new channel? 233D No [3 Comments : (10) ONLY ASK or OWNER OPERATORS If you can drain more of your fields now with existing outlets, (a) What are the reasons for not making the improvements at this time? (b) When do you plan to make these drain improvements? (c) Would you expect to use credit? Yes :1 No :3 . If so, what kind do you expect to use? (Specify lengcn term and type of security) (11) 45 you drain more land, what change could you make in your: (Indicate magnitude) (a) Crapping system (1:) Lives tock sys tem (12) If you have insufficient outlet because of a clogged open ditch drain (public or private), (a) Why hasn't this been corrected? (b) If this is a private ditch when do you expect to make this improvement? Cements : 183 III. Land use, crgp production and drainage conditions, 1962 (u) Drainage Indicate drainage conditions: wet (3) land not drained, naturally well Actual drained, u rod grid, 6 rod grid, (1) (2) yield per surface ditch. (Indicate if more Land “50 Acres acre than on o ' io is resent .‘_ Corn for grain lst year bu. 2nd year bu. Corn for silage ton Soybeans bu. Drybeans cwt. Sugarbeets ton Potatoes bu. Oats bu. Wheat bu. Barley bu. Grass silage ton Hay: Legume ton Grass ton Mixed ton Rotation pasture Peed Grain Program Conservation Reserve Idle Total Cropland owned rented’ ;l 184 .ooor.>oz mgan-o=nn ammo .prwupmco may mama houmpmao mewvaaocw . when when .uoo-.uaom has-kua< when «use m umoo dopey .moma was: scanned»: Amy essence unawac couazoauoacaw when uaou deuce on "cowusnuuuuwo aacomaom Any «one a“ new“: sauce Ame «cad you“: wanna ANV .xuoa auauumwo was vuooou .uuuAIuE hflwamw uucuo fish you .mucahcw ucauo ou uno vane: shoe Afico cuooou anaconda can muoumumao nom\w Amuwmmumw mango nouvaaao mud: nocuumm concawfiu «was runp acmumnuuoo oususw mo aomumuowaxu vogue: cums: cEOOCH mood nu aumwamuo xuos «can cw cowumasooo u can: uvflu U H N600 oomuw fleeces umunwwm jnmudl HBGHQHW Nauamw mo uoaau: sues fiuuunwuo can muouao>=u hawanh Aav (l) (3) (u) (5) (6) (7) (8) (9) (10) (11) (12) (13) (1H) (15) (16) (17) 183 VII. ugntarm Employment_p£ ngggggr, 192; Did you have s suntan job at any time in 1902? You No [j IF NO, skip the rest of this section. What kind of work did you do? Who was your employer? Name Location How many miles was your job from home? Were you employed year around [::] or seasona1[:::] IF SEASONAL, (a) How many weeks were you employed? (b) Which months did you work? To get some idea of time you had available for your farm work we would like to know: (a) What time of day you left for work? (b) What time of day you arrived home from work? (c) How many days did you work per week? Did you work overtime anytime in 1962? . Yes] I No[:::] IF YES, when and for how long? IF NOT SHOWN IN QUESTION 7, did you work night shift anytime in 1962? Yes [:3 N0 [:3 IF YES, when and for how long? What was your wage rate per hour? Regular $ Overtime $ What were the total take-home wages received in 1962? $ How many days of paid vacation did you have during the year? IF ANY, could you choose your vacation period? Yes [:3 No [:1 IF YEAR AROUND, were you laid off at any time in 1962? Yes C:::]No| I IF YES, (a) What was the reason? (b) How long and in which months? Why do you work off the farm rather than expanding your farming operations? APPENDIX A (CONTINUED) PART II SELECTED PORTIONS OF INSTRUCTIONS TO ENUMERATORS Major Parts of Schedule The schedule includes seven parts as follows: I. The Farm - Sise, Control and Tenure ll. Farm Drainage III. Land Use, Crop Production, Sales and Purchases IV. Livestock and Livestock Facilities V. Change in Farm Organization since 1958 VI. Family Inventory, Off-Farm Work, Labor Hired VII. Nonfarm Employment of Operator Comments and interpretation of individual sections and questions follow: I. The Farm - Size, Control and Tenure (1) Sample segment is the number indicated on the enumeration map. (2) Owner - may be a full owner or an owner with additional land rented. Partnership - may be owners or tenants. Corporation - applies only when a member or an officer of the company performs the management. Tenant and landlord - may include father-son and other family agreements, but the landlord must participate in the management more than merely specifying land use. (3) Acres in farm applies to the land operated as a single unit. It 186 187 may include both owned and rented land and should include land temporarily rented out. (4) In recording rant and expenses. show the rent paid to the landlord and the share of the expenses paid by the landlord. List crops. kinds of livestock and items of expense separately. II. [arm Drainage The purpose of this section is (l) to determine the extent of artificial drainage, (2) to determine the potential drainage on farms both with and without additional off-farm outlets, (3) to determine the rats that drainage practices have been adopted and (A) to determine the critical factors that restrict additional drainage that otherwise would be economical. Definition of Tog; Field drainage: Any artificial drainage on cropland fields, meadow or pasture. Tils drainage: Tile laid underground either on a systematic ggid basis or a.ggnggg,basis which drains underground water into open ditches. Tiles are normally 6 to 5 inches in diameter and usually are 2% to 3 foot doop. Tile lines are spaced 4 to 6 rods apart, if on a grid basis, and are connected to a system of mains. fiurfsco ditches: Any shallow ditch to move surface water off the fields. Surface ditches can be crossed by farm machinery and normally are cropped. Ditches normally are 10 to 12 foot wide and 12 to 18 inches deep. 0233 ditghog: Ara largo ditches that cannot be crossed by machin- ery and equipment readily. Those ditches normally are a to 10 feet deep and 10 to 15 foot wide. Open ditches can be private (l) (2) 188 ditches or part of a system of public drains (County or Intercounty drains). Public drains: Individual drainage areas are organised into Drain- age Districts. The County Drain Commissioner is an elected official who administers the business of the Drainage District. Landowners petition for the ggngtgggtion of no! drain! or glean out of exist- ing drains. Public drains are normally large open-ditch drains. Often,existing stresm beds are enlarged as public drains. Some- times new channels are constructed to go along side a farm adjacent to the road or cut across a farm. Open ditches become clogged with tree and brush growth and silt, thereby reducing the outlet for drainage. Qgglggx Refers to the ability to drain water from the surface ditches or the tile system of the farm‘without stoppage due to clogged ditches off the farm or water in ditches backing up because of clogged drains further away. In many cases, additional outlet can be obtained by cleaning out the off-farm drains or constructing new drains. gggp;pggpx Some landowners do not have an outlet at the boundary of their farm to serve their field tile which are 2% to 3 feet deep. In some cases these farmers install a cistern at the end of their mains,then pump the drainage‘whter into the public drain. In this section the rate of adoption is sought. Some farmers will not be able to relate the early drainage history. Go back as far as this operator can give, then list acreages with dates unhnown. Installation costs should include material costs, excavation costs (including the building of dams or dikes) and all hired labor-costs. (3) (4) (5) (6) (7) 189 Since there will be a few sump-pumps falling into our sample, esti- mate the annual maintenance costs and operating costs based on the last three year's records (1960-62). In determining the length of the open ditch and large closed non- field drains,include those drains that cross the farm and also those that are contiguous to the farm boundary. For instance a public drain or private drain that follows a road ditch between the farm and the road would be included. If the drain.was across the road in the opposite road ditch it would not be included. If a segment of the large drain actually separates two farms only one-half the length of this segment is reported. In this manner sample estimates can be expanded to area estimates. Occasionally landowners prefer to clean out small portions of the public drain on their own rather than follow the legal procedure specified in the drain law. Describe the work in terms of total yards excavated or in terms of added depth, width or length of excavation. Agricultural Stabilisa- tion and Conservation payments are available in some instances on private drains. Show ASC payment separate from actual direct cost to the farmer. Some as (5) above. All of the acres in the farm are considered in this section. Sub- section (b) + (c) must total to (a). Only those acres where the drain is actually effective should be entered in subsection (b). A lO-acre field with a random tile system which really drains 3 acres of the field will be credited in the schedule as 3 acres ran- dem tile drained. Much tile'wes installed 30-60 years age and is (8) (9) (10) (ll) 190 now ineffective. These acreages should not be listed. Subsection (c) elicits information on potential drainage. Not all drainage is practical. The question in section (c) and (d) relates to drainage investments that would pay as estimated by the farmer. In subsection (c) the permanent pasture and other land acreage that has drainage potential is divided into land that is (l) to be converted from pasture or other use such as woodlots to cropland and (2) to remain in its existing use. If there are other kinds of changes anticipated such as converting cropland to permanent pasture after drainage, indicate this in the margin. Subsection (d) refers to 5dditional drainage investments on land reported in subsection (b) above. This section is relevant only if the farm operator has existing tiledland with which to compare yield potentials. This section is a further breakdown of section (7) (c) 3. The acreage listed for (a) and (b) in this section should equal the acreage listed for (7) (c) 3. In part (a) there may be more than one reason for not installing drainage. List all reasons. In part (c) we are interested if the farmer expects te get short, intermediate, or long-term credit. List the length of term inizgggg. Also we wish to find out if he prefers to use his land, his livestock, machinery, or other assets as security. In this section indicate as precise as possible the kind of_change and the magnitude of change planned when more land is drained (i.e., increase 10 acres of white beans - decrease cats 5 acres, decrease (12) (1) (3) (5) 191 barley 5 acres or increase dairy herd from 30 to 45 cows). The outlet is one of the important restrictions on additional land drainage. Since the public drain and private large ditch drains involve group action, the reasons for the inaction in this area are important. If there are additional comments on this or any other part of this section on drainage,please list at the bottom of this mo- III. Land Use, Crop ProductionI Sales and Purchases, 1952 Account for all of the land operated in this farm as recorded on page 1. Write in additional crops or other uses as needed. "Corn for grain, 1st year” is corn that was grown on land that was used for some crop other than corn in 1961. ”2nd year" is corn that was grown on land that was in corn in 1961. If grass silage was cut on land which was used for rotation pasture or fromwwhich a hay crop was harvested, in 1962, circle the acreage of grass silage to in- dicate double cropping. Write in unit for crops added. The purpose of this column is to relate.the drainage improvement to the actual yield for each crop. Frequently there will be a combi- nationof drainage improvements existing on the land used for a specific crop in 1962. When this is the case, try to get the farmer to estimate the ac ield er acre in 1962 for each drainage condition. Hake marginal notes to explain any entries in this column. Note if there were different fertiliser rates and different cultural practices. I III- Ill'lll l. .l 192 VI. gogpgsition and Occupation of Operator's Family This section concerns the migration situation and expectations which have a bearing on trends in adjustments on farms. (1) List the members of the operator's family even though they may be grown and away from home. The age of each is important information. Obtain the highest grade completed only for the persons who have discontinued attendance at school. Major occupation for persons with more than one occupation may be determined on the basis of relative time spent. The expectation question may apply to the operator and his wife as well as the children if they have expec- tations to discontinue farming. (2) Record labor hired by days for each period of 1962. VII. Nonfarm Employment of Operator, 1962 The purposes of this section are (1) to ascertain when and how much time part-time farmers have available for work on the farm, (2) what is the nature of off-farm employment and income, and (3) why part- time farmers prefer to work off the farm rather than expand their farming operations. .eumeu eunu unanoue>eo nu oeueueee .huuene>un= eueun nem~no«x .eoneuom anon uo noeeeuoum 3333.5 .m 2896 ..8 one «on: ion 535:. 5.35.3 :8 33m .3255 .< 8:810 \4 .emeuo noun one ewenueno one noueoue .eno—m .eoueuu uc onene .emeonueuo men one some eonenuunu unuen one eeene .eunee eeene use oeueaooeee denoneeenneo .mnunneuu neeo aloe uuoe one Ins .huoxuun .uuuno meou heuo au—«e nu emenueno noon one ensue ueuenem .nee .meo .ennel uemne one .Ieou heuu .Ieon .oenueno hauoeu oeueuooeee any! no mnuueuenoo ueeuou nu oeno~e>eo euuoe anon-u on use: noeueebuu one home: ooomouen huueueneo eugenno one neon .aunun cu ~e>e4 o .eu .ueuxe one .oen—eunuel angeno one eunuunuue .eOuueuuue ea ennuonuue duce .ennel uuoe one ance uo emeaaohm nueno euenueno nu oenueuo hueueno nee .mue may: oeuen .eue—ueuel uneuen noon cu eueueoom aeoe neme.nn—nnouo an.» madness .mnleoe hedu muuue no meou neat unuunon o .n .eu ueuenem cu euneuanm one ueo_h~e>.ueue¢ menu nu oenoueoon cu nebeu auneez o .m .eo enouu hone! eleuncum anemonenex euenueua annouo une- one on: onea ncuueueue> eoduez one eueuueuex uneuem one «em—ex neuenez «mom \Mnemgnoux.ueeoq .ncumea monsoonue .emnumnouo unseemenex anon owned no eumueuueuoeuenu anecduunuum_ .oo eases mmaouu Hznzuuezex Anon ho mauamuuuaueuezo a x~nzumu< 193 194 one need- unnnn hnex .enono «euueoe one magnum .eaouu oueuu uc emneu eoum.e . nu numeeu unnenmon no» enmeuobeunn one amuse no hu—eueoun .huueeuou one nouueenoen uou sun-one: neon- manna .eeounee onee one nee-no .senuoseoua moeueebuu no eenhu nae one eeoueuon unueuoenee .enonu we emneu eodo e c» oeumeoe huuuauueu nenmuen eueeeoox .mnunnouo «eneneu uou eumeuune use eueeo henna one eneeo oueuu .nuoo ee none enonu enuehonuun you oeen huueneneo .eeeeeum unone one neuel .nee one an. .nuoxona .seo no ueeneu oooaouem .ennel one. one see .ane .uuesons .see no one then oeoeouen huemuea .eunel uuoe one nee .eue no“: hu«uee ..ua canons.» annseez omen .eenona «o cu cu no enuneo ue heme hu—«e o» neon a. enenu eeeeo ence nu .uqoeane oeunuxeu henna e nan-.eonee bleed eeoou one neno .euenuo nu oeoeen onenueuo .eeeue emoe nu 'uaoun enoruee e no—eoue heuem .eeoeun nu Hebe.“ one onee nude.nueuneonn hauoeneo undonon .ueueo_eueueool nay! emeou honee .ouue nuance». o» anon". eu—oeone one eueuunm .eue unueuo no elennoun “=5 bunnuuneu ”ennuen noun e>en ”emeo~ mean one emeou uuue .emeon nu oeaone>sn .e>nueeu sen eunueuoe .en—u one nemonunn .ueuuel ouneu -uo a. can: n~e>nuenea emu—unueem on» n. eeneuem one enleme .eeuen nun: swoon h—emeuuxe o» ununucu one enonu ache: one can onea nouueueue> eouuez eleuaoum uneleuenex one enenneue: uneuem nunns a» ne>en o .a ..e .emenueuo eweuune o—neu cu mode nun: and“: on debea o .3 .en .oenueuo huuoon maneunuen one noun: eeeue denoueeeuneo cu uebeu haueez on emenuena annouu unem one ueunea newenex ~uom oennuunoo .oo euoea 195 .eeuneoneen uennn one eeene nonueenoen cannon .neenou nueonu onooee .eunnnn nae-e .enono sunny aennneen .nnnn unonu nenenem emom .eeeunnneune debenu no onee one nonneenuen .hnneenou non oee: one one mega non euneu «sen: .eeeeenw uncne one eemoee .nee one age .hnoxunn .xeo no neonou ooonone: .oe—unu en duce on» ones! leunonn e en nonecne ones..nonuee.nnunen one nonuemnnnn on oneneen eeene ~e>ea .hnnnnunou and one hon uueneo unnouon none: to“ .onoe nawnonne .eononn co nenu once on none» nooo aannez .enonuo no eneunonn one eenone neeue no non-one one hu— nb—uonoonn sou .eeen unnunona ennnoen eeuneu neueo nun: nnnenoeeee nag: e938 .euenneno. .oeonnonn one eeene oenneno hunoon ence non .oenneno duel annene anew .nemnnunx oxen anode nonno ence nun: .eoneunn hand: age-en» une cu ~e>ea .onnen on ooou euenneno eoennne .eeene oeuenuoeee .unoo o .a ..n .unoo enonu nofie: one een onea nonueuewe> e>auez emeunonm one-ewenex one euennenex unenem emennena one nouns: ennonu unem neuenez unom n.annucoo .oo enaun 196 neuunou: one «son: nu .onon nealeunem .oou nnuennsn .oena .nonueum nceennennu nonsunsonnne «5h NO I n .23: e5 2.: vs. 2...: none-ox. Joe c333. 62.» .53-um ace-«noon. inflnannmz 535.: .5-23: no .28 :38 on. 83.5.3 33.32: 383» .onoe mne» e. «nee on» eneno .eIe—nonn noncone onyo one neonn .nnnnnu uneu .unememenem none" none: numb .enuem weanneaenao one ennn .ennnne one sen uneun no non». .emenneno oeen no eemeenue due-e nanna .eunel.uuoe .nee uneonmooeo nennnen uennnen noon .enenu mean» one .mne .eeenn noonnue enu Iona oeno—e>eo mnelenuxe cu eeoueuon .hneueo .unnl .eeeeenm unone .nonn eeenxonnn eunennee noon nude.~enone .eno—no no nounonoonm census» won one none: no eueen one agent neenneo on neoea ox enonu none: elenaonm uncleuenex emennena ennono unel one 8: on: 833.»; .3»... e5 .13.»... gauge 2.. no.3. .5933. :8 coacnulco.o_ .8 e28. APPENDIX C MINIMUM ACREAGI REQUIREMENT Table 61. Minimum Acreage Requirement Used in Analytical Model to Reflect Historical Production Shifts, Michigan Farm Drainage Study 42- cunt ion Commodity Thumb South Other Central --------Thousand Acres---------- Wheat 52.2 68.3 102.2 Corn 31.2 101.2 153.5 Oats 36.5 42.7 59.4 Barley 1.9 4.3 5.0 Soybeans 1.0 29.0 131.6 Dry Beans 71.5 15.1 79.9 Potatoes .4 1.1 5.5 Corn Silage 10.4 12.7 21.0 Alfalfa Hay 43.4 55.1 99.7 Other Hay 6.8 7.7 14.4 Crop Pasture 53.3 81.9 121.2 Source: Based on trends in cropland use found in 1949-64 Census of Agriculture reports. 197 APPENDIX D MAJOR CROPLAND USE, 42'COUNTY REGION Table 62. Major Cropland Use, 42-County Region of Lower Michigan, 1949-64 Cropl and Cropl and Cropl and Year Harvested Pastured Not Used T°t.1 (000 acres) 1949 6,024.6 1,424.9 910.5 8,360.1 1954 5,957.9 1,338.9 879.3 8,176.2 1959 5,666.4 982.9 1,026.8 7,676.2 1964 5,374.9 770.2 1,203.7 7,348.8 Source: Census of Agriculture 198 JIMHmnmuhmmtl@Jlflinfljiuflllliflji ‘ I h-I-n-I-I-I-I’I-I’I-