r- L at: $8: ,A ‘K 0 ABSTRACT ALTERNATIVES IN DAIRY FARM TECHNOLOGY WITH SPECIAL EMPHASIS ON LABOR BY Allen E. Shapley The nonfarm sector of Michigan is experiencing a very low unem- ployment rate and a very high wage rate relative to the national average. At the same time, many Michigan dairy farms are being operated with obsolete facilities, equipment, and practices which result in relatively low output per man. These conditions all tend to make labor one of the most serious problems for Michigan dairymen. The purpose of this study was to find a solution to the problem of acquiring and keeping qualified full time labor on Michigan dairy farms. It was assumed that qualified labor could be acquired and kept if the dairyman offered wages and hours competitive with non- farm industries. To determine whether or not this could be accom- plished, the following general hypothesis was tested: 'Tfichigan dairyman can offer wages and hours competitive with urban industries and still make returns to their own labor, manage- ment and risk bearing equal to or greater than opportunity cost, by using an optimum combination of technological innovations." The hypothesis was tested by developing a linear programming model for dairy farms. In the model, land, capital, housing facili- ties and herd size were all allowed to vary but restrictions were placed on the labor force. These restrictions were in terms of amount available, time of year available, and quality available relative to skills required for various tasks. Six technological combinations were programmed. These combi- nations included one of two possible silage production programs (a 100% corn silage program or a 50-50% corn silage-haylage program on a dry matter basis); one of two possible silage storage facilities (tower or bunker silos); and one of two possible manure disposal systems (conventional or liquid). It was assumed all farms had un- insulated covered free stall housing, herringbone parlors, raised all replacement stock and produced all forage requirements. Four labor situations were considered (one, two, three and five full time hired men) and two seasonal labor situations (available July-September or July-October). Parametric procedures were used on some of the programs to determine the impact of changes in the price of milk and the price of corn. The most significant finding in the study was that even the firm with the least profitable technological combination considered, when operated at an optimum level within the limits imposed, yielded a return to the operator relatively larger than the average reported by Michigan dairyman in the same size range. This implies that if a dairyman hires at least one full-time man, uses technology already demonstrated to be economically superior such as free-stall housing and herringbone parlors, has management ability of a degree whereby he can acquire a herd average of 13,000 pounds of milk per cow, and crop yields such as 18 tons of corn silage per acre on moderately productive land, and receives $5.00 per cwt. for his milk, he can pay wages competitive with urban industries and still have an income greater than his opportunity cost regardless of which combination of technological innovations considered here he uses. A dairyman's opoortunity cost was assumed to be approximately $8,000. Other findings of import were: 1. A 100 percent corn silage program.was considerably more economical than a 50-50 corn silage-haylage program but ggly if £ES££.£§ a relatively large labor supply available during September and October. If a ready supply of seasonal labor or custom service were not available, the corn silage-haylage program was a more econom- ical alternative. 2. Bunker silos were more economical than tower silos on all size firms considered, but the difference was only significant on the large farms (3 to 5 full-time men employed). 3. Liquid manure disposal systems were slightly more economi- cal than the conventional system. ALTERNATIVES IN DAIRY FARM TECHNOLOGY WITH SPECIAL EMPHASIS ON LABOR By \ Allen EJ‘ShapIey A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for a degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics 1968 okra/.2423 S’lb'é? ACKNOWLEDGEMENTS The author wishes to express his appreciation to the members of the Department of Agricultural Economics for their counsel and understanding relative to this study. A sincere expression of ap- preciation is extended to Professor 0. R. Hoglund for his guidance and supervision in the development of the study and the thesis and to Dr. L. J. Conner, Dr. J. A. Speicher and Dr. D. W. Sturt for their constructive criticisms and suggestions. A debt of gratitude is extended to Dr. K. T. Wright for his guidance and inspiration through my entire doctoral program. A note of appreciation goes to the secretaries who typed the first draft and especially to Jan Miller for her conscientious attention to detail and accuracy in typing the final draft. The author is especially grateful to his wife Jane for her understanding, encouragement and assistance throughout the course of his graduate study. TABLE OF CONTENTS INTRODUCTION The Problem The Objective The Hypothesis Previous Research Method of Procedure THE MODEL The Technique The Assumptions The Manager The Firm The Innovations Forage Production Systems Forage Storage Systems Manure Disposal Systems The Model Description The Objective Function The Constraints Return to Operator THE ESTIMATES Prices Milk Labor Constraints Total Labor Milking Labor Coefficients Labor Requirements for Milk Production Variable Cost of Milk Production Summary of Milk Production Activity Labor Requirements and Costs of Corn Grain Production Fixed Factors Milking Parlor and Milk House Basic Machinery & Equipment Complements Labor Conclusion \lUI-P-l-‘N 10 ll 14 l4 16 26 27 28 29 31 31 33 36 38 39 41 42 45 47 51 53 54 66 78 83 85 85 88 91 91 Chapter Page IV RESULTS OF THE ANALYSIS Labor Situation I -- One Full Time Hired Man 94 With Seasonal Labor Available July-October 94 With Seasonal Labor Available July-September 97 Labor Situation II -- Two Full Time Hired Men 104 With Seasonal Labor Available July-October 104 With Seasonal Labor Available July-September 110 Labor Situation III -- Three Full Time Hired Men 111 With Seasonal Labor Available July-October 111 With Seasonal Labor Available July-September 113 Labor Situation IV -- Five Full Time Hired Men 119 With Seasonal Labor Available July-October 119 With Seasonal Labor Available July-September 122 Results of Varying Prices 126 Varying the Price of Milk 127 Varying the Price of Corn Grain 129 V CONCLUSIONS AND IMPLICATIONS Conclusions 133 Limitations of the Study and Future Research Needs 137 Suggested Action 139 The Researcher 139 The Extension Worker 140 The Dairyman 140 Table 3-1 3-2 3-3 3-4 3-5 3-6 3-7 3-8 3-9 3-10 3-11 3-12a 3-12b 3-13 3-14 LIST OF TABLES Price Estimates of Milk and Major Dairy Farm Inputs, Michigan, 1967 Restrictions on Labor for Total Work: Four Labor Supply Situations Estimated Labor Requirements Per Cow for the Milking Operation Estimated Variation in Number of Cows Milked and Labor Requirements for Milking Operation by Labor Periods Estimated Labor Requirements Per Cow Plus Replacements to Feed Forage and Grain Estimated Labor Requirements Per Cow Plus Replacements for TWO Manure Disposal Systems Estimated Labor Requirements Per Acre for Two Forage Crops Estimated Costs and Receipts Per Cow Plus Replacements of Items Unaffected by Farm Organization or Size Estimated Costs of Storing and Feeding Forage Estimated Cost of Handling Manure Under Two Systems Estimated Costs of Producing Two Forage Crops Labor Requirements, Costs and Receipts Per Cow Plus Replacement for Producing Milk Under Various Combina- tions of Farm Technology on Farms with 150 Cows or Less Labor Requirements, Costs and Receipts Per Cow Plus Replacement for Producing Milk Under Various Combina- tions of Farm Technology on Farms with More than 150 Cows Estimated Labor Requirements and Costs of Corn for Grain Production Estimated Costs of Basic Milking Facilities for Herd Size Ranges Page 40 50 55 58 6O 62 64 67 71 73 77 79 81 84 87 Table 3-15 4-1a 4-1b 4-2a 4-2b 4-3a 4-3b 4-4a 4-4b 4-5 LIST OF TABLES (Continued) Estimated Costs of Basic Machinery Complements for Three Herd Size Ranges Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology; One Full Time Hired Man; Seasonal Labor Available, July - October Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology; One F111 Time Hired Man; Seasonal Labor Available, July - September Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology; Two Full Time Hired Men; Seasonal Labor Available, July - October Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology; Two Full Time Hired Men; Seasonal Labor Available July - September Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology; Three Full Time Hired Men; Seasonal Labor Available July - October Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology; Three Full Time Hired Men; Seasonal Labor Available July - September Results of Analysis of Synthesized Firms with Different Combinations of Technology; Five Full Time Hired Men; Seasonal Labor Available July - October Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology; Five Full Time Hired Men; Seasonal Labor Available July - September Returns to Operator with Various Technological 99-100 101-102 106-107 108-109 114-115 116-117 120-121 123-124 Combinations, Size of Herd, and Seasonal Labor Supply 125 Table A1 A2 A3 A4 C-1 C-2 C-3 C-5 LIST OF APPENDICES TABLES Page The "b values" Reflecting Four Labor Situations in The Linear Programming Model 143 Coefficients for MILK Production Activity (Activity #1) Reflecting Six Combinations of Technological Innovations on Synthetic Dairy Firms with 150 Cows or Less 144 Coefficients for MILK Production Activity (Activity #1) Reflecting Six Combinations of Technological Innovations on Synthetic Dairy Firms with More than 150 Cows 145 Basic Linear Programming Tableau for Synthetic Dairy Firms in Southern Michigan 146-148 Results of Analysis of Synthesized Dairy Firms with Different Combinations of Technology: Two Full Time Hired Men, Seasonal Labor Available July - October 150 Effect of Varying the Price of Milk3 on a Synthesized Dairy Firm with CS-B-L Combination,b One Full Time Man and Seasonal Labor July - October 152 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CH-T-L Combination,b One Full Time Hired Man and Seasonal Labor July - Septem- 153 ber Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CH-T-L Combination,b Two Full Time Hired Men and Seasonal Labor July - Septem- ber 154 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CH-T-L Combinationb Three Full Time Hired Men and Seasonal Labor July - September 155 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CH-T-L Combination,b Five Full Time Hired Men and Seasonal Labor July - September 156 Table C-6 C-8 C-9 LIST OF APPENDICES TABLES (Continued) Effects of Varying Price of Purchased Corna on a Synthesized Firm with CS-B-L Combination,b One Full Time Hired Man and Seasonal Labor July - October Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CS-B-C Combination,b Two Full Time Hired Men and Seasonal Labor July - October Effects of Varying the Price of Purcahsed Corna on a Synthesized Dairy Firm with CS-B-L Combination,b Three Full Time Hired Men and Seasonal Labor July - October Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CS-B-L Combination,b Five Full Time Hired Men and Seasonal Labor July - October 157 158 159 160 CHAPTER I INTRODUCTION Dairying is the largest farm business in Michigan. In 1964, sale of dairy products made up 27% of the agricultural income in the state. When including the sales of dairy cattle, the dairy farm busi- ness represented 33% of the 1964 farm product sales.1 It is expected that dairying will continue to contribute about 1/3 of the state's ag- ricultural income in the forseeable future.2 Although the proportion of total farm product sales contributed by dairy farms is not expected to change, the firms producing the pro- duct are changing. Between 1959 and 1964 the number of dairy farms in the state was reduced by 18% and total number of milk cows was reduced by 7%. However, sales per farm nearly doubled during this same per- iod.3 The increase in sales per farm is due to a number of factors in- cluding increase in production per cow and larger herds. With increasing size and production, the dairyman encounters many problems. These include such things as, how to get control of sufficient capital, how to determine whether to adopt different tech- 1K. T. Wright and D. A. Caul, Michigan Agriculture, Extension Bulletin 582, (Michigan State University, 1967), p.4. 2Project 89 - Rural Michigan Now and in 1980, Michigan State Uni- versity Agric. Expt. Sta. & Cooperative Extension Service, RR-45 (Jan- uary, 1966). 3K. T. Wright and D. A. Caul, op.cit., p.39. nology or add more units of the old and which techniques to use in an effort to acquire higher yields. The Problem One of the most difficult problems encountered by Michigan dairy- men today is acquiring and retaining qualified full-time workers. It is a problem that has been increasing in importance over the past dec- ade and there is good reason to believe that dairyman will be faced with even more severe problems in the future in competing with indus- try for reliable labor. The problem has many facets. Some are external to the dairy firm and cannot be modified by the farmer. Others are of an internal na- ture, and are under the control of the operator. External facets of the dairy labor problem include wages, hours and the unemployment rate of the nonfarm labor force. Michigan has one of the highest nonfarm average wage rates and one of the lowest unemployment rates in the nation.1 The average work week of the manu- facturing worker in Michigan was 42 hours in 1966 and he was paid overtime for the last two hours. Under these conditions, Michigan dairyman find it difficult to acquire and retain labor at wages they believe they can afford to pay and at hours they feel are necessary. 1Michigan Manpower Quarterly Review, III, No. l, lst quarter, 1967. ['u I’ I'll. .Illcl. ‘ Internal facets of the problem include such things as obsolete buildings and equipment changes in skill requirements and lack of know- ledge in the area of labor supervision. The level of technology used on many dairy farms allows such a small output per man that with the present input-output price ratios, the MVP of the full-time worker is below his opportunity cost. On other farms, where the level of tech- nology is higher, the output per worker could be greater, but the skills required to operate this technology may not be present in the type of workers which the operator has been hiring. Also, many farms lack the volume of output needed to justify investments in labor-sav- ing technology. In nonfarm industries, wages will continue to increase, and the work week may grow shorter. On the farm, skill requirements will con- tinue to increase, and the changes in technology that cause this in- crease will also persist. In addition, the demand for full-time wor- kers on farms is increasing. In 1959 there were 3300 dairy farms in Michigan employing one or more full-time‘men.1 These farms employed 4300 workers. By 1964 the number of these farms had dropped to 3100 but the number of workers had increased to 4700.2 The problem of ac- quiring and retaining qualified full-time workers in the face of these conditions and trends and still being able to operate a viable dairy business was the concern of this study. 10.8. Census 2: Agriculture I, Part 13, 1959. 21bid. Flew A dairyman has little or no control over the external facets of the labor problem. He can, however, make adjustments internally in an attempt to put himself into a position whereby, he can compete with nonfarm employers in the labor market. The overall objective of this study was to examine some possible adjustments which would make it possible for the operator to pay com- petitive wages. Specifically, the objective was to: a) determine the labor requirements and costs of some technological innovations b) determine the optimum herd size, land and capital requirements of different combinations of these innovations under various sized labor forces and c) compare the results to see which innovations, if any, would put the farm operator in a financial position whereby he could offer industrial wages and hours and still make an adequate income. The Hypothesis The problem and objective are brought into clearer focus through the statement of the hypothesis that was tested in this study: Michigan dairymen can offer wages and hours com- petitive with urban industries and still make re- turns to their own labor, management and risk bearing equal to or greater than opportunity cost, by using an optimum combination of technological innovations. Previous Research There has been considerable research carried out on the effi- ciency and costs associated with the more important technological in- novations being adopted by Michigan dairymen. The results of some of these studies plus interviews with specialists formed the basis of the estimates used in this study. The forage program is one area in dairying that has recently been changed considerably on some dairy farms. A Michigan study showed a 20% increase on large dairy farms and a 50% increase on small ones in acres of corn silage grown between 1960 and 1965. It also showed considerable increases in forage harvesting and storage in- vestment.1 Another study was an investigation of the effects of feed- ing various levels of corn silage and hay.2 An Illinois study was made of the effects of feeding only corn silage and grain,3 while still another study concerned itself with the effects of feeding corn silage as the only roughage to dairy calves.4 Investments and costs 1C. R. Hoglund, "Changes in Forage Production and Handling on Southern Michigan Dairy Farms," Agric. Econ. Report §2°.Z§’ (Michigan State University, April, 1967). 2L. D. Brown, J. W. Thomas, and R. S. Emery, "Effect of Feeding Various Levels of Corn Silage and Hay with High Levels of Grain," Journal of Dairy Science, Vol. 48, No. 6, (June, 1965). 3L. D. Muller, K. E. Harshbarger, and E. F. Olver, "Group Feed- ing Lactating Dairy Cows a Complete Feed Mixture of Corn Silage and Concentrates," Journal of Dairy Science, Vol. 50, No. 6, (June, 1967). 4W. R. Murley and R. D. Mochrie, "Corn Silage as the Only Rough- age for Dairy Calves," Journal 2: Dairy Science, Vol. 42, No. 5, (May, 1959). were investigated by Hoglund.1 Another area where there are currently many questions concerning which technology is most profitable is in the area of silage storage. Labor requirements to feed from tower silos were included in an inves- tigation by MacLachlan in Michigan.2 Costs of owning and operating tower and bunker silos were studied by Hoglund.3 Another innovation important in dairying is the liquid manure system. MacLachlan investigated the labor requirements of this as well as conventional systems in his study.4 Casler and LaDue at Cor- nell University surveyed farms with both systems and budgeted the costs.5 Oygard at Cornell reviewed a number of studies pertaining to liquid manure systems in Europe.6 Other studies have been made where the whole farm approach was used to study these innovations. LaDue carried out a survey on farms 1C. R. Hoglund, "Which Forage System Fits Your Farm," Agric. Econ. Report 39. 32, (Michigan State University, 1965). 2D. L. MacLachlan, "A Study of Dairy Chore Labor Under Different Systems of Free Stall Housing," unpublished Master's thesis, (Michigan State University, 1967), p. 47. 3C. R. Hoglund, "Economic Considerations in Selecting Silage Stor- age and Feeding Systems," Agric. Econ. Report Ng.l§4, (Michigan State University, September, 1967). 4D. L. MacLachlan, 92,915., p. 55. SC. L. Casler and E. L. LaDue, "Liquid Manure Systems in Free Stall Dairy Barns," Agric. Econ. Research Report N9. 218, (Cornell University, May, 1967). 66. Oygard, "A Review of Recent Studies of Liquid Manure Handling and the Use of Slatted Floors," Agric. Econ. Res. Report N9. 197, (Cornell University, April 1966). using these innovations in New York.1 Buxton, at Minnesota, did a linear programming study concerned with economies of size in dairying and took account of many of the new innovations currently available.2 Another linear programming study dealing with the effects of new inno- vations in dairy housing and feeding on costs was pursued by Holt at Pennsylvania State.3 Method g£_Procedure The hypothesis of this study was tested by carrying out four steps. The first step was to build a linear programming model that could be used to test the hypothesis. The second step was to deter- mine which currently available technological innovations could be as- sumed to have merits so economically superior to alternatives that there was no need for comparison; which ones could be assumed irrele- vant to the study for various reasons and which should be compared with alternatives. The third step was to determine what the labor requirements and costs were for the various innovations considered and the fourth was the analysis of the data. 1E. L. LaDue, "Free Stall Barn, Herringbone Parlor, High Silage Feeding, Dairy Chore Systems," Agric. Econ. Res. Reports Nos. 188, 189, 190, (Cornell University, January, 1966). 23. M. Buxton, "Economies of Size in Minnesota Dairy Farming," unpublished Ph.D. thesis, (University of Minnesota, 1967). 3J. S. Holt, "The Effect of Alternative Housing Systems and Pro- duction Techniques on Costs of Milk Production for Various Herd Sizes," unpublished Ph.D. thesis, (Pennsylvania State University, 1965). Determination of which innovations to consider as given, which to leave out and which to compare and the determination of the labor re- quirements and costs of these innovations were made by studying re- sults of various investigations made previously in Michigan and else- where, and by interviewing specialists in the relevant departments at Michigan State University. Synthesized firms were developed, organized around the technolo- gies under consideration and based on the estimates made relative to the labor requirements and costs of these technologies. These synthe- sized firms then were incorporated into the linear programming model and analyzed under the following conditions: 1. Four alternative labor situations I) Operator plus one full-time man II) Operator plus two full-time men III) Operator plus three full-time men IV) Operator plus five full-time men 2. When seasonal labor was available for hire during-- a) July through October b) July through September 3. When prices were varied including-- a) The price of milk b) The price of corn grain Under all alternatives, wages paid and hours worked by the full- time labor were similar to those in urban industries. The following chapters are presented relative to these steps. Chapter II is a description of the model; Chapter III is a discussion of the assumptions and how the estimates were arrived at; Chapter IV contains the results of the analysis, and Chapter V is the summary and conclusions. CHAPTER II THE MODEL An economic model of the firm was developed to test the hypothe- sis. The goal was profit maximization within an environment of per- fect competition. According to the theory of the firm, when perfect competition is assumed, profits are made only in the "short run" in the presence of fixed factors. The length of run can be divided into: a) the "very short run" during which the firm cannot change it's output b) the "short run" during which the firm can change it's output but not it's capacity c) the "long run" which is long enough to let plant size be- come variable, and d) the "very long run" during which even tastes and preferences are taken into account.1 None of the criteria above clearly delineate the problem analyzed here. The "short run" comes the closest to explaining what was anal- yzed. The firm size in terms of number of full-time hired workers was fixed in any specific problem. Also, the milking facilities and a basic machinery complement were assumed fixed. However, such things as number of cows, acres of land and capital needs were considered variable and, the magnitude of these items were determined relative to various technologies used and within the framework of a fixed labor 1H. H. Liebhafsky, The Nature 3; Price Theory, (Homewood, 1963) pp. 154-156. _ 11 - supply, milking facilities and machinery complement. Generally, when analyzing the short run, researchers are more apt to consider land and capital fixed with labor variable. The reason for this is that, the length of run concept is relative to time--the time required to make adjustments in the firm. In this study, the primary fixed factor--labor, was considered fixed not only because of lack of time to change it, but also due to the operator's desire to fix it at a specific level. Looking at it from this position, it was a "short run" analysis in the theory sense but the results of the an- alysis could be applicable over long periods of time. Such situations as assumed herein, relative to which factors are fixed and which are variable, are not uncommon on dairy farms. Many dairymen consider their labor force a fixed factor and attempt to ad- just cropping patterns and number of cows, adopt new innovations and discard old ones in an effort to maximize profits. The Technique Linear programming was the technique used to analyze the data. This technique was selected over regression analysis because regres- sion analysis is more commonly used as a projection technique where the solution is positive; while the problem studied here was one where the solutions would be more normative in nature. It was selected over simulation or recursive programming because these fulfill specific needs not required to analyze the problems considered here, such as, the effects of the time element. - 12 - Profit maxbmization was selected over cost minimization because it seemed more realistic to study the problem from this point of view since it is the item the dairyman is ultimately concerned with. Linear programming allows the researcher to use the computer to analyze many more alternatives and to deal with many more constraints than would be possible with conventional budgeting within an equiva- lent time period. The assumptions underlying linear programming do not restrict the model used here or make it any less realistic. One assumption is con- stant prices. It has already been noted that the "length of run" un- der consideration makes this assumption valid. Another assumption is that the firm's input-output, output-output and input-input relations are all linear. Over the range of consideration in the study there is no justification to assume otherwise for most relationships. Where evidence indicates that a relationship is non-linear such as, econo- mies of size, the relationship is assumed to be discontinuous having different linear relationships over different ranges. This is hand- led by using a specific linear program for a specific size range. Another assumption underlying this technique is that there are always constraints that influence the decisions. Since no firm in the real world operates without constraints of some kind, whether they are capital, land, labor, management, or institutional in nature, this - 13 - assumption in no way restricts the model.1 Linear programming provides conditional normative answers to problems, that is; the answer given is an action the firm ggght to take, given the assumption of profit‘maxi'mization.2 In the model used in this study, the program results are given in the form: "giv- en that the firm has these activities to choose from, these constraints to work.within and a goal of profit maximization, he gggh£.to organize in this way." Whether or not a specific farmer will organize as the program solution suggests, will depend on what his alternatives and constraints are and what his objectives are. The research question that was studied here was basically: "what is the potential profit that can be gained from firms of various sizes using advanced technology when labor is hired at industrial wages?" Such a question is best analyzed by the synthetic-firm technique. This technique involves develOpment of hypothetical firms by using es- timates based on data the researcher feels is most relevant. Prices used are those expected in the market during the period under consid- eration or relevant opportunity costs. In this study, the synthetic- firm technique was used as the basis for determining which economic, engineering and biological estimates would be used. Then these syn- 1For a detailed discussion of the assumptions underlying linear programming see G. Hadley, Linear Programming, (Reading, Mass.: Addi- son-Wesley Inc., 1963), p. 481. 2The normative analysis concept is discussed more fully in Earl O. Heady and Wilfred Candler, Linear Programming Methods, (Ames, Iowa: The Iowa State University Press, 1958), p. 8. - 14 - thetic firms were analyzed by using linear programming methods. The next section is a discussion of the assumptions underlying the linear programming model. Following this, a formal description of the model is given. The Assumptions In order to study certain aspects of a business, assumptions must be made about other aspects in order to hold them constant. When wor- king within a theoretical model, the realism of the assumptions are not too important, but if one wishes to use the model as a tool to find answers to real world problems then the assumptions must reflect real world phenomena. Realism then, was the criteria for determining the assumptions underlying this model. In the discussion that follows, an attempt was made to document the assumptions. This documentation was based on the comparison of many studies in an effort to make the assumptions as realistic as possible. The Manager The farm operator was assumed to have the ability to manage the particular size range and technology being studied. The size of a particular farm situation was based on the number of hired workers, that is; the nmmber of cows carried depended primarily on the size of labor force. Therefore, when a manager studies the results of this - 15 - research, he will have to first determine his own ability and pre- ferences relative to the number of men and size of business he will handle. As mentioned earlier, this seems to be a realistic approach since many farmers determine how many cows they will carry on the ba- sis of the number he, his family and his regular hired labor can handle. There are managers in Michigan currently operating businesses of the size studied herein. Some of these men are successful and could manage larger businesses if they so desired. It will be these and others like them who will most likely be operating dairy farms in the future. Therefore, it is not unrealistic to assume that managers of adequate ability are available to manage the farm situations dis- cussed. It was further assumed that the goal of the manager was profit maximization within the specific farm situation being studied. If the goal were income maximization instead of profit maximization, it would have been necessary to allow firm size to vary and to consider the in- come potential of using the resources in other ways such as using the land for urban development and taking off farm employment. But, by recognizing that different managers have different preferences as to firm size, the profit maximization goal is more realistic. Still another assumption was that the farm would be a specialized dairy farm. That is, all revenue would come from sale of dairy prod- ucts and dairy livestock. If this assumption were not made, there would be no limit to the number of activities that could be included - l6 - in the program. Even if the activities were limited to farm activi- ties, the program might well show that the optimum allocation of re- sources would be to raise only grain and not have a dairy herd. A study by Lard illustrated this.1 Buxton handled this question by specifying that at least 60 percent of the farm receipts must come from dairy.2 Many of his solutions minimized the dairy enterprise, with hogs, beef and/or grain making up the other 40 percent. These studies are valuable for the manager who either has no preference or whose desire to maximize profits is stronger than his preference for specific enterprises. There are many men, however, who would prefer to specialize in dairying if they can."make a living" at it. It is this kind of manager that is assumed here. There are other strong arguments in support of this assumption. One is, that there is a strong trend toward specialization in farm- ing. Another is, that the new technology often results in economies to specialization. The Firm Location - The hypothetical firms were assumed to be located in Southern Michigan. (See Fig. 2-1). As can be seen from the map, 1Curtis Lard, "Profitable Reorganizations of Representative Farms in Lower Michigan and Northeastern Indiana With Special Emphasis on Feed Grains and Livestock," unpublished Ph.D. thesis, Michigan State University, 1963. ZBoyd Buxton, "Economies of Size in.Minnesota Dairy Farming," unpublished Ph.D. thesis, University of Minnesota, 1967. - 16a - Counties with 5.2 million dollars or more in dairy prod. sales, 1964 " Counties with 1.0 \ dollars or more increase h in dairy prod. sales, 1959-64 A) Fig. 2-1 CONCENTRATION OF DAIRYING IN MICHIGAN Source: 1964 Census Reports - 17 - this is the area of greatest concentration and recent expansion in sales of dairy products in Michigan. Also, it is an area where cli- mate and soil are conducive to growing corn, an input of increasing importance to dairying. In addition, this area is closer to large industrial cities such as Detroit, Lansing and Flint, where the prob- lem of competition with high wage paying industries is more relevant. ngd - By far the most important assumption relative to land is that, there is no limit as to the amount available in any specific farm situation, as long as it's cost of ownership or "rent" can be paid. That is, it is treated as a variable input. It is true that many dairymen in Michigan consider land as their limiting resource. However, there are also many dairymen who produce grain for sale in addition to supplying their own needs. Others may not own all their land but are able to rent enough to meet feed requirements at a cost approximately equal to the cost of ownership. The fact that many dairymen are able to gain control over enough land to meet their needs justifies this assumption.1 Another assumption regarding land was that all land used was in Land Capability Class I or II. This assumption can be justified on two bases. One is that, Southern Michigan has large areas of soils 1According to figures submitted by dairymen in the TelFarm pro- ject (an electronic farm accounting project), those farms with over $160,000 in assets averaged 81 cows, had average sales of cash grains of $2,487 and corn of $774 and averaged over 5 acres of tillable land per cow. See R. E. Hepp & L. H. Brown, Daigy Farming Today--Southern Michigan, 1966, Agric. Econ. #72, (Michigan State University), 1967. _ 18 - that fit within these classifications. The other is that, the areas of the state where dairying is increasing in importance are in areas containing these soils. High yields are essential to efficient crop production and dairymen are recognizing this fact. Capital - Capital was also assumed to be available in amounts large enough to make any investment deemed profitable within the pro- gram. This is not to say that it is assumed that the operator has sufficient capital to make all invesUments; it just means he has cre- dit capacity of sufficient size to make the investments. As the model is set up, the business is charged for every dollar of capital inves- ted. Therefore, capital like land, is treated as a variable input. Capital is divided into two categories on the basis of interest rates charged. "Short term" rates were charged on capital used for all machinery and equipment, and "long term” rates were charged on land, buildings and livestock. Short term capital was available at 7 percent and long term at 6 percent.1 Capital is another input that some Michigan dairymen consider as their limiting resource. One study showed, however, that farms in the size ranges considered here (one full-time hired man or more) did have adequate capital to adjust from their present situation to a point of their highest income potential within their physical re- 1Estimates suggested by J. D. Brake, Department of Agricultural Economics, Michigan State University. - 19 _ sources.1 Some dairymen have the necessary credit capacity to make the adjustments assumed here but are reluctant to take the risk of extend- ing their credit to the necessary level. If research studies show that such adjustments are profitable and if early adopting farmers in- crease profits from such adjustments, other farmers will be more wil- ling to accept the necessary debt load. Lgbgg - Unlike land and capital, which are treated as variable inputs, labor is considered fixed at least for some periods during the year and for some jobs. In studies of this type labor is often considered a variable resource, but from listening to many Michigan dairymen it was learned that many of them make decisions as to size dependent on the size of their regular labor force. They perceive labor then as their limiting resource. There are numerous cases where, when the operator is sure he can acquire and retain an additional full- time man, such as a son who wants to join the business, he will find the land and capital to expand the business in order to utilize the additional labor. Also, there are a number of instances in which the farm operation has been cut back due to the loss of a hired man or a member of the family labor force. It was assumed in this study then, that the regular labor force was fixed for specific farm situations. 1D. Colyer and G. Paterson, Adjustments in Dairy Farming ig‘West- ern Wisconsin Under Alternative Capital Limitations, Bul. #578, Uni- versity of Wisconsin. - 20 - It was also assumed that qualified labor was available to the dairy farmer at industrial wages. ‘Many dairymen claim they are not able to acquire and retain qualified labor. This is not surprising when one observes that the wage paid on "typical" Michigan dairy farms is $1.30 per hour.1 Some even go as far as to say that, "re- gardless of how much I pay I can't get good help." However, few if any of these farmers have tried paying industrial wages and offering the worker a 40-hour week with time-and-a-half for overtime. The assumption that farmers will pay industrial wages is admit- tedly unrealistic in that it does not reflect what dairymen are doing. However, it is justified in that the major purpose of the study was to answer the question "Can an operator organize his farm in such a way that he can pay industrial wages and still meet his opportunity cost?" In addition to the regular hired labor force, it was assumed that seasonal labor was available during certain periods of the year. It was assumed that seasonal labor would not be used in milking cows. The amounts of regular, overtime and seasonal labor available during the year is discussed in detail in Chapter III under the section en- titled "Resource Restrictions." Physical Plant - There are a number of different types of dairy facilities being used by Michigan dairymen today. Cows are housed in stanchions, in open barns and in free stalls. They are milked in 1R. E. Hepp & L. H. Brown, Dairy Farming--Southern Michigan, 1966, Agric. Econ. #72, Department of Agricultural Economics, Michi- gan State University, 1967. - 21 - stanchions or in various types of milking parlors. With all these systems available to dairymen it would seem only reasonable to com- pare housing and milking facilities. Fortunately, sufficient research results are available so that decisions can be made as to which systems are most efficient prior to the study; thus, allowing realistic assumptions to be made on these items. It was assumed that the cows would be housed and fed in uninsu- lated barns equipped with free stalls. Henceforth, this type of hou- sing will be referred to as "cold-covered" housing. This is in con- trast to "warm-enclosed" which refers to insulated barns with mechan- ical ventilation and "open" housing which includes separate housing and milking parlor buildings and outside feeding of forage. Cold- covered housing was selected on the basis of a study made by a commit- tee consisting of agricultural engineers, dairy specialists and ag- ricultural economists during the winter of 1966-67. After considering the influence of temperature on milk production and feed intake, cost of building and maintenance, labor efficiency and flexibility, it was determined that cold-covered housing was the most economical type available to Southern Michigan dairymen at this time. For the milking operation, it was assumed that a double-4 herring- bone parlor would be used. This assumption can be justified not only on the basis of budgeting but also on the basis of empirical research. Studies have been carried out comparing types of parlors, and the her- - 22 - ringbone system has repeatedly demonstrated its superiority over the 1 other types. On the large farm situations, two double-4 herringbone parlors were used. The choice between two double-4 and one double-8 should be based on personal preference or the particular labor situation on a farm. Research has shown, however, that the additional labor ef- ficiency from two double-4's almost completely offsets the additional cost in building two double-4's over one double-8.2 It was assumed that one double-4 herringbone was adequate for herds of 150 cows or less. For herds of between 150 and 300 cows, two double-4's were used. For herds of more than 300 cows, the two double-4's were operated two shifts per day. This is common practice on farms of this size. Enterprises - As mentioned earlier, this study was only concerned with specialized dairy farms. Even within this narrow scope, however, the young stock, forage and grain enterprises must be considered. These are discussed individually as follows. Dairy - The size of the dairy enterprise was variable, dependent only on the size of the regular labor force and the technology as- 1C. R. Hoglund, J. S. Beyd &'W. W. Snyder, "Herringbone and Other Milking Systems, Operations and Investments," Quarterly Bulletin, Vol. 41, No. 3, Michigan Agric. Expt. Station, Michigan State University, February, 1959. 2C. R. Hoglund, J. A. Speicher and J. S. Boyd, "Milking Efficiency Investments and Annual Costs For Different Milking Parlors," Agricul- tural Economics Report Number 85, Michigan State University, October, 1967. - 23 - sumed. The cows were assumed to have average milk sales of 13,000 pounds at a culling rate of 25 percent. The 13,000 pound milk production level was the estimate sug- gested by both specialists in the dairy department familiar with the DHIA records and specialists in the agricultural economics department familiar with TelFarm accounts, as a level capable of attainment by management of the quality assumed in this study. In 1966, more than 50 percent of the Holstein herds enrolled in DHIA in Michigan, aver- aged l3,000 pounds or more per cow.1 Some of the higher producing herds are purebred and, thus; are probably subjected to a more sel- ective breeding and culling procedure. Dairy specialists at MSU be- lieve that a 13,000 pound milk production level can be maintained by use of standard artificial breeding programs and recommended feeding and culling practices. Another assumption was that all forage would be fed as corn si- lage and haylage. This assumption was based on research results from feeding studies in.Michiganz, and North Carolina3, which showed that equal milk production could be attained by feeding only corn silage or 1Paul A. Wilkes, Martin A. Wilson and A. J. Thelen, 1966 Michigan Dairy Herd Improvement Records: Annual Summary, Michigan State Univ- ersity, 1967. 2L. D. Brown, J. W. Thomas and R. S. Emery, "Effect of Feeding Various Levels of Corn Silage and Hay With High Levels of Grain To Lactating Dairy Cows," Journal 2; Dairy Science, No. 6, (June, 1965.) W. R. Murley and R. D. Mochrie, "Corn Silage as the Only Rough- age for Dairy Cows," Journal 2f Dairy Science, Vol. 42, (May, 1959). - 24 - any combination of corn silage, haylage and hay when the rations were properly supplemented. If the farm is located in an area where corn grows well (an as- sumption made under "location" and "soils"), the yields, influence of weather on harvesting and handling all tend to make silage or haylage the economic choice of dairymen. Another assumption concerning the dairy enterprise was that the grain supplied to the herd was high-moisture corn and was fed bulk with the silage. No grain would be fed in the milking parlor. High- moisture corn is readily available and when stored in tower silos and fed mechanically, saves considerable handling. Farmers who do not feed grain in the parlor find that the number of cows put through the parlor per hour can be increased.1 Furthermore, the evidence avail- able suggests that if the herd is divided into three or four groups on the basis of stage of lactation or level of productivity, and the groups fed accordingly, there is no significant drop in production or increase in feed consumption. Illinois researchers concluded that lactating cows can efficiently utilize a group-fed, complete ration mixture of corn silage and concentrates.2 1L. D. MacLachlan, "A Study of Dairy Chore Labor Under Different Systems of Free Stall Housing," unpublished Mgs. thesis, Michigan State University, 1967. 2L. D. Muller, K. E. Harshbarger, and E. F. Olver, "Group Feed- ing Lactating Dairy Cows a Complete Feed Mixture of Corn Silage and Concentrates," Journal 9; Dairy Science, (Abstracts) 50:965. - 25 - Young Stock - It was assumed that all replacement stock would be raised on the farm. The question of whether the commercial dairyman should raise or buy his replacements has been the source of much con- troversy and some research has been done on the subject.1 However, at this time there are not sufficient numbers of regular suppliers in Michigan to make a 100 percent replacement buying program feasible for many dairymen, regardless of the potential economies of such a pro- gram. Therefore, due to the inadequacy of a ready supply of heifers of a quality necessary to guarantee a 13,000 pound milk sales per cow, it was assumed that all replacements would be raised. It was assumed that calves would be housed in individual stalls with slatted floors until they were weaned. At that time, they would be housed in a free-stall barn with other young stock and dry stock. This arrangement is relatively efficient, especially in regard to man- ure disposal. Forage - It was assumed that all forage requirements would be produced on the farm. This assumption was made because, as was stated in the discussion on the dairy enterprise, the forage fed was 100 per- cent silage or haylage. It was believed that since an all-silage forage program.was planned, that it would be difficult to contract for delivery of adequate quantities of corn silage or haylage. Lack of experience in contracting for delivery at a price satisfactory to both 1John Jack, Economic Considerations in Raising Dairy Replace- ments, A. E. Research 123, Cornell University, 1963. - 26 - buyer and seller and problems in transporting bulky feeds long dis- tances are obstacles to a forage buying activity. The types of forage produced on the farm are discussed in detail under "The Innovations." Grain - Whether grain corn was produced or purchased to meet the requirements of the herd was determined within the linear program. Regardless of whether it was produced or purchased it was in the form of high-moisture corn, stored in tower silos and fed with the silage. (The merits of high-moisture corn and bulk feeding are discussed un- der the section, "Dairy Enterprise"). The Innovations There have been a number of technological innovations introduced in recent years that are of special interest to dairymen. Some of these innovations have already been adopted by many farmers and their experiences have illustrated their worth relative to the technology they replaced. When such an innovation demonstrates a clear economic superiority over a technology it replaces, it could be assumed to be part of our synthetic-firm. Free-stall housing and herringbone par- lors are examples of such innovations and are discussed in the sec- tion on "Assumptions." Other innovations have been available for such a short time that only a few dairymen have adopted them, but from the experience of these few adopters plus limited research re- sults, the innovations are economical improvements over the tech- - 27 - nology they replaced. Such an innovation is cold-covered housing, and due to the evidence of its advantages over other types of hous- ing, it was assumed to be the housing used for the synthetic-firm. Its advantages are documented in the section on "Assumptions." Still other innovations have either been adopted by so few or have so little research evidence on the comparative merits, or both, that they cannot be examined closely in a study such as this. Such innovations include slatted floors and conveyor belt Parlors. Their possible impact can be discussed but there is not sufficient data to make any concrete statements concerning their relative merits and use. There are still other innovations, however, which despite their superiority over a traditional form of technology, do not have clear advantages over an alternative innovation. An example of such a sit- uation is corn silage versus haylage. Either of these forages is ec- onomically superior to dry hay as pointed out in the assumptions made above, but whether corn silage or haylage is better depends upon such factors as relative yields, cost of protein supplement, available 1a- bor during peak seasons and storage facilities available. It is this latter type of innovation that will be considered in this study. The innovations considered include two forage production systems, two forage storage systems and two manure disposal methods. Forage Production Systems The two forage production systems considered are: a) a 100 per- cent corn silage program and; b) a program including 50 percent corn - 23 - silage and 50 percent haylage on a dry matter basis. Since the smal- lest farm situation employs one full-time worker, plus some seasonal help, it was assumed that enough corn silage would be grown to justify large plowing equipment and a self-propelled chopper. This same equip- ment was used in the corn silage-haylage program but some additional equipment was needed to produce the haylage. Although the machinery investment was greater when both types of silage were produced, the labor requirements were spread more evenly over the production period than for corn silage alone. Since labor was a limiting resource during some periods, producing two types of silage could be more economical. Forage Storage Systems Forage on Michigan farms is stored primarily in three types of structures including: a) sealed storage; b) concrete tower silos, and; c) bunker silos. Considerable research has been carried out com- paring sealed storage (primarily the upright glass-lined silo type) with concrete tower silos, and; repeatedly the concrete silo storage has proven to be most economical under feeding systems similar to those assumed for this study.1 In this study, comparisons were made of large diameter concrete tower silos and bunker silos of a size appropriate to the number of 1C. R. Hoglund, Economic Considerations in Selecting Silage Storage and Feeding Systems, Agricultural Economics Report Number 84, Michigan State University, September, 1967. _ 29 - cows fed. Bunker silos may be all or partially below ground level or completely above ground level. For this study, it was assumed that they would be largely above ground level and built Of tongue-and- groove, treated planks or poured concrete walls on three sides and a concrete floor. In general, investments for a bunker system are considerably less than for a concrete silo storage system but feeding from concrete si- los can be automated to a considerably higher degree. These opposing forces determined which system worked best in the particular farm sit- uations studied. Manure Disposal Systems Two methods are commonly used in Michigan to remove manure from cold-covered, free-stall housing: (1) the conventional method and, (2) the more recent innovation, the liquid manure system.1 The conventional system consists of using a tractor and blade to scrape the manure from the alleys and feeding area to a loading area in one end Of the barn, or to an outside concrete apron. A tractor loader is used to load the manure into a spreader. This Operation is usually performed once daily. The liquid system consists of using a tractor and blade to scrape the manure from the alleys and feeding areas into slots over a large 1A third method, slatted floors over liquid manure pits, has re- cently been introduced but has been adOpted by only one or two farms in Michigan at this time. _ 3o - underground storage tank. This tank may be constructed tO hold from one tO three month's supply of manure. When the underground storage is full, or anytime before it is full when conditions favor spreading, the contents are pumped from the storage tank into a tank spreader. Although there are a number of liquid manure systems in the state, there are only a few cold-covered housing arrangements and not all of these have liquid manure systems. Some dairymen who are using a li- quid manure system with Open housing have had difficulty in the winter with snow and frozen manure. Cold-covered housing eliminates the snow problem but there is still the problem Of manure freezing on the floor in severely cold weather. If this frozen manure is scraped into the pit, it stays frozen and floats on the liquid. For this reason, some dairymen would not recommend coupling a liquid manure system with cold- covered housing. Other dairymen, however, have solved this problem by delaying the scraping until the surface thaws out. A liquid manure system requires considerably more capital than a conventional system, but if properly designed and managed it can save labor and add flexibility to the work load. This study compared the costs and labor requirements Of the two systems, given the restric- tions and assumptions of the model. This section has been a very general description of the innova- tions incorporated in the model for comparison. MOre detailed infor- mation concerning costs involved and labor required for these inno- vations are given in Chapter III. - 31 - The Model Descriprion Only one linear programming model was needed to analyze all the situations Of concern in this study. By making changes in the values reflecting limits on the labor resource, the model could be used tO analyze problems relative to the number Of full-time men hired. By changing the labor requirements and costs in the milk production ac- tivity to reflect various combinations Of technology, it could be used to evaluate the relative merits Of the innovations considered. By changing a price Of a factor, the model could be used to determine the effects Of the price change on a specific solution. A formal description of the linear programming model used in all the problems analyzed in this study follows. The Objective Function The solution to a specific problem.maximized the "Objective val- ue" (20) within the constraints and activities available. In this study the objective value was the return to the fixed labor force (Op- erator's labor plus that supplied at base wages by his regular hired labor), the milking facilities and a basic machinery complement. .Af- ter finding the Objective value, the costs associated with these fixed factors, excluding that Of the Operator were deducted. The remainder was the return to the operator for his labor, management and risk bearing. _ 32 - The objective function of the model used herein was: 7 15 23 (1) 20 = c1x1— szz- C3X3- 2 Cij' 2 Cij' 2 Cij + C24X24 j=4 j=8 j=16 where: 20 is the Objective value, Clxl -- is the total cost Of producing the milk sold. c1 is the cost of producing milk from ten cows plus replacements, less returns from culls and calves. This cost figure includes the cash and capital costs Of milking, caring for the dairy, raising replacements, and pro- ducing the forage requirements with the exclusion Of all labor costs, and ownership cost Of the milking facility and basic machinery com- plement. x1 is the number Of ten cow units produced. c2x2 -- is the total cost Of producing corn grain. c2 is the cost Of producing an acre Of corn grain including land and specialized machin- ery costs. x2 is the number Of acres Of corn grain produced. c3x3 -- is the total cost Of all corn grain purchased. c3 is the ac- quisition price Of corn grain. x3 is the number Of bushels Of corn grain purchased. 7 Z c.x. -- is the total cost Of hiring seasonal labor during four la- j=4 J bor periods (July, August, September and October). cj j=4...7 is the acquisition price Of seasonal labor. xj j=4...7 is the number of hours Of seasonal labor hired. 15 jig cjxj -- is the total cost of hiring overtime labor during eight labor periods (1. November - March, 2. April, 3. May, 4. June, -33- 5. July, 6. August, 7. September, 8. October). Cj j=8...15 is the acquisition price Of overtime labor. xj j=8...15 is the number Of hours Of overtime labor hired. 23 2 j: cjxj -- is the total cost of hiring overtime labor for the milk- 16 ing Operation during the eight labor periods. Cj j=l6...23 is the acquisition price Of overtime labor. xj j=16...23 is the number Of hours Of overtime labor. czax24 -- is the total returns from selling milk. c24 is the blend“ price Of milk after hauling. x24 is the cwt. of milk sold. The Constraints The Objective Of the problem was to maximize equation (1) sub- ject tO the resource restrictions: N b aljxj SL1 L is labor resource available in period 1 (Nov. to March). L2...L is labor resource of remain- ing 7 months. Many Of the a1 '3 will be 0 due , to no labor required in that Beriod for a particu- (2) , lar activity. For example, activity 3 -- buy corn -- requires no labor in period one so a1,3 = 0 a1 8 will have a -1 value because it is a hirihg Ll. ll H 24 a .x. 5L labor activity and thereby, adds to the labor re- j=1 83 J 8 sources Of that period. 24 a .x. SL These restraints are like the first 8, but refer j=l 9:] J 9 to the labor resource available to milk cows only. “13"‘16 4...7 will all be 0 because seasonal 1a- bor cannbt be used in the milking operation. (3) 24 a16,ij SL16 La. ll H (4) (5) - 34 - 817,8x8+al7,l6x16 SO17 ¢17...¢24 are the limits put on the hiring Of overtime labor. For example, a 8x8 is the amount Of overtime 1a- bor’hired for the total labor force for Nov. - March and a17 16 x16 is that hired to milk in Nov. - March. a18,9X9+a18,17x17 S"’18 a24,15X15+824,23X23 S9’24 a25,1x1 - a25’24x24 = M25 = 0 This is just the transfer of milk pro- duced to milk sales. It says that the milk sold must equal that produced for sale. (6) a x - (a x This is the corn transfer. 26’1 1 26’2 2 It says that the amount pro- + 826 3x3) duced plus the amount purchased ’ must equal the amount required by the herd. (7) a27 1x1 S 150 (cows) These last twO are limits on herd size ’ due to limit of fixed factors, and rele- (8) a28,1x1 2 150 (cows) vancy Of coefficients. Within each labor situation, there were six problems analyzed reflecting six combinations Of technology. These six combinations include: 1. All corn silage forage program (CS) Bunker silo (B) Conventional manure system (C) 2. A 50-50 corn silage and haylage forage program (CH) Tower silos (T) Liquid manure system (L) 3. CS-T-C 4. CS-T-L 5. CS-B-L 6. CH-T-C The other two possible combinations (CH-B-C and CH-B-L) were not studied because Of lack of research relative to storage losses Of -35- haylage in bunker silos. After running the six programs, the one giving the largest 20 value was run through two more times. These two runs, however, used parametric procedures to study the changes resulting from varying the price of milk and the price of corn. Next, the six regular runs and two parametric runs were made again but with new restraints; that is, two full-time hired men in- stead Of one. After this, two more series Of six programs plus two parametric programs each were run but the aij's were adjusted tO reflect econo- mies of size in herds of over 150 cows. The restraints in these pro- grams reflected three full-time men for the first six-plus-two programs and five full-time men for the second six-plus-two programs. In addition to these programs, an edit function was performed on all runs in which the hiring Of seasonal labor in October was blocked out. The availability of seasonal labor for forage harvest in October was questionable. Some dairymen are able to find any amount necessary, and others can find none. Therefore, by using this edit function, solutions could be found for both situations. In total then, there were 64 problems: a) 6 technological combinations in 4 labor situations with seasonal labor available July through October = 24. b) 6 technological combinations in 4 labor situations with seasonal labor available July through September = 24. - 36 - c) parametric function for the price Of milk run on the solu- tions with the highest 20 value in each labor situation under_§ and b above = 8. d) parametric function for the Price Of corn run on the solu- tions with the highest 20 value in each labor situation under 5 and b above = 8. Return to Operator Given a specific 20 value, the return to the Operator is: (9) 20 - (FcL + FCP + FCM) = R0 where: Z is the Objective value arrived at through the program. 0 It was explained at the beginning Of this section. FCL -- is the fixed cost Of labor. It is the annual base salary Of the regular hired workers. Overtime pay for this labor and cost of seasonal labor were considered variable costs and were therefore, within the program itself. FCP -- is the ownership costs Of the milking facilities. This in- cludes the depreciation, interest on investment, insurance and taxes on the parlor, milk house and Office. For those programs dealing with 150 cows or less there was one double-4 herringbone parlor. For those programs pertaining tO herds Of over 150 cows, there were two double-4 herringbone parlors. FCM -- is the ownership costs connected with a basic machinery com- plement. There is some equipment such as tractors and plows that is necessary regardless of the type Of technologies studied here. Such -37... a basic complement was calculated for three herd sizes: a) 150 cows or less; b) 151 tO 300 cows and; c) over 300 cows. The ownership costs Of the appropriate complement was deducted from the 20. R0 -- is return to the operator. This is what is left after deduct- ing all costs from the gross returns. This is the amount the Operator receives for his labor, management and risk bearing. It is the resid- ual available to service debts, meet consumption expenditures, and growth. Since an interest charge was made on every dollar invested in the business, any capital in the business owned by the operator would return tO him that interest. This amount would be in addition to the "return to operator". CHAPTER III THE ESTIMATES In a study such as this where a linear programming model is em- ployed, estimates Of the prices of inputs and outputs, the constraints (b-values), and the coefficients must be made. The importance of ac— curacy Of the estimates is just as crucial as the relevancy of the as- sumptions outlined in the last chapter. It is particularly important that the relationship between the estimates be correct because, if all price estimates, for example were doubled, the solution would not change. On the other hand, when one price is doubled with the others left constant, the solution is changed. Another reason why particu- lar care should be taken to make the estimates accurate, is that Oth- ers may want to use these same estimates in other studies. The estimates were determined by studying data from a number of sources and making judgments based on these data. For example, in making an estimate of the labor requirements to handle manure using a liquid system, use was made of a number of studies made by agricul- tural engineers and agricultural economists. The data from these studies were compared and checked for relevancy to Michigan dairying, and specifically to the synthetic-firms assumed in the model. In ad- dition, specialists in the field were interviewed. For some of the less important or less controversial items, the specialists' sugges- tions were taken at face value. For more important and/or controver- sial items, the suggestions of the specialists were compared with the - 39 - results of studies done in other states or at other times. Very Of- ten it was necessary to synthesize coefficients on the basis of lim- ited research results. The approach of this study then, was to make use of all avail- able data that the researcher considered relevant to the innovations and activities under consideration; for the purpose of analyzing the use of these innovations and activities within specific farm situa- tions where the regular labor force was limited and relatively high priced. Prices The prices of many items relevant to this study need no discus- sion or documentation because they have a very small impact on the sol- ution, such as the price of washing detergent, and/or they are rela- tively standardized, such as the price of gasoline and electricity. The prices of a few items, however, should be discussed in.more detail due to their impact on the solution and/or their uncertainty. Such items and their prices are listed in Table 3-1. - 4o - Table 3-1 Price Estimates of Milk and Major Dairy Farm Inputs, Michigan, 1967 Item Unit Price Range Studied Milk (cwt.) $ 5.008 $4.00-$6.00 High-moisture corn (bu.) $ 1.20b $ .75-$l.20 Labor: Regular (hr.) $ 3.37c Seasonal (hr.) $ 3.00 Land (acre) $350.00d Capital: Short term 7%8 Long term 6%? a) Price after deducting hauling charge. Source: MMPA monthly price report, Detroit, Michigan. b) Average delivered market price, Southern Michigan, 1967. c) Source: Michigan Manpower Quarterly Review, III, (No. 2, 2nd Quarter, 1967). d) Average market price of Capability Class I and II land not infl- uenced by nonfarm.demand; Michigan, 1967. e) Source: John D. Brake, Department of Agricultural Economics, MSU. The "range studied" for milk and high-moisture corn refers to the range covered by the parametric function. For milk, the range covered was on both the negative and positive side of $5.00 because it was ex- pected that the solution might change with price changes in either di- rection. - 41 - The range studied on high-moisture corn was entirely on the negative side of $1.20 because the solutions of the original runs included no purchased corn. Therefore, an increase in price would have had no effect on either the solutions or the returns. However, by running the range in a negative direction the price could be found where it would be more profitable to buy corn than to produce it. The price estimates for corn, land and capital were based on 1967 prices observed in the market and recorded by specialists in the rele- vant fields. The price estimates for milk and labor, however, were based on other sources of data. A discussion of these two items fol- lows. Milk The price estimate of $5.00 per cwt. was based primarily on those reported by the Administrator of the Southern Michigan Milk Marketing Area for the first eight months of 1967.1 In addition, the trends in milk prices at Detroit were studied, using those of the last decade.2 There has been a major increase in milk prices over the last two years. The average blend price in 1965 was $3.99/cwt.; in 1966--$4.64; and in January - August, l967--$5.03. (These prices assume a deduction of 1Michigan Farm Economics, NOs. 288-297, (Cooperative Extension Service, Michigan State University, 1967). 2ZJOhn Ferris, "Monthly and Annual Average Prices on Michigan Farm Products and Inputs," Agricultural Economics Repgrt Number 2, Michigan State University (March, 1967). ll! - 42 - $ .30/cwt. hauling charge.) However, it is the judgment of special- ists in the field that this increase will slow down or even stop due to the potential threat of milk entering from other states, or sub- stitution of non-dairy products. Therefore, $5.00 was judged to be a price reflecting the 1967 market, and not unrealistic for the near future. Labor The hypothesis of this study was: Michigan dairymen by using the Optimunicombination of available technological innovations, could Offer wages and hours to regular hired help competitive with those of- fered in urban industries, and still make returns to their own labor, management, and risk bearing equal to or greater than opportunity cost. Therefore, in the programming model, wages had to be set at a level comparable to that paid in urban industries for jobs requiring the same level of skills. The estimated wage of $3.37 per hour was the average hourly earnings, corrected to exclude overtime pay, for manufacturing workers in Michigan during the first six months of 1967.1 This figure com- pares with the average for 1966 of $3.23. The manufacturing wage in- cludes the wages of those workers producing durables ($3.43 per hour) and those producing non-durables ($3.07 per hour). The wage is the lMichrgan Manpgwer Quarterly Review, Vol. III, No. 2, (Michigan Employment Security Commission, Lansing, Michigan). - 43 - average of only the production workers. It does not include the wages of foremen, administrators and Others not directly involved in production. Since these data were published, wages have been increa- sed considerably in some major durable producing firms (Ford Motor Company) so $3.37 is probably a conservative estimate for the year 1967. Also, if use were to be made of this research at a future date it would be necessary to take into account the changes in wages, since it is certain that wages will continue to increase in Michigan for at least the next three years.1 In addition to an average wage of $3.37 per hour, the urban in- dustrial worker receives fringe benefits. However, the value of these benefits are difficult to determine. The dollars costs of them.vary from firm to firm and their worth as perceived by the worker is Often far less than their cost. The same statements can be made concern- ing the fringe benefits paid to workers on farms. Due to this difficulty of determining the value to place on fringe benefits offered to both farm and non-farm workers, it was de- cided to exclude them from the discussion. For a specific dairyman wishing to use these results, adjustments can be made if fringe bene- fits are to be considered. Dairymen will probably not have to pay wages of this magnitude 1This certainty is based on the recent three year wage contracts signed by Ford, Chrysler and General Motors: three major manufac- turers in Michigan. _ 44 _ to acquire and retain qualified help. There are probably numerous workers in factories who would be willing to accept somewhat less pay if they were offered an hourly wage with time-and-a-half for over- time, On a farm. They also would probably be willing to work more than 40 hours at base wage if they did not have to commute. Such men have a disutility for factory work relative to farm work, but the present disparity in wages more than offsets this disutility. Few workers would leave a job paying $3.37 per hour plus time-and-a-half for overtime with a basic 40-hour week for a job paying $1.50 per hour and a 50- to 60-hour week with no overtime pay. The $3.37 wage, 40-hour week and time-and-a-half overtime for dairy workers then, is an estimate that can be considered the most liberal offer a Michigan dairyman would have to make in 1967. If a specific dairyman had a farm situation parallel to any assumed in this study, except for his labor cost being less, he could add the differ- ence in labor cost to his profits. The estimated price of seasonal labor was $3.00 per hour. This estimate was not based directly on what farmers pay or what industry pays. Farmers pay approximately $1.50 per hour for teenagers or lab- orers of marginal value. Such labor is usually lacking in skills rel- ative to that of the operator and regular hired labor. It was assumed here, that: seasonal labor hired at $1.50 per hour is only 50 percent as effective as the operator and regular hired labor, so $3.00 per hour was judged to be an adequate price to get qualified seasonal labor. - 45 - This $3.00 figure was also judged adequate from another point of view. Some dairymen acquire fully qualified seasonal help by hiring some men in the neighborhood who have regular urban jobs. The farmer hires these men evenings, weekends and during their vacations. They are usually young, ambitious men who wish to supplement their regular income. They are willing to work for wages equal to or slightly less than their regular wages, but since they do have a regular job they put a fairly high utility on leisure. Therefore, farm operators must pay these men about $3.00 per hour. Most farmers who follow this practice are satisfied that his "moonlighting" type of labor is well worth the extra cost. Furthermore, it is Often the only satisfactory labor available. Constraints The constraints on the program.are the values placed on the limi- ted resources. They are referred to as constraints, resource restric- tions, limitations, b values or right hand sides (RHS). In Chapter II, there was a discussion concerning what resources would be limiting--what restrictions were placed on the program. In this section the levels at which these resources become limiting or the level at which the restrictions stop the program, are discussed. Labor was the only resource physically limited in this study. However, because certain jobs require certain kinds of labor there was not only a limit put on total labor available, but also a limit - 46 - on labor available for a specific job, namely the milking operation. Also, since the available supply of labor to dairy farms typically varies between months, the year was divided into eight labor periods to reflect this variation in supply. The periods were: 1. November through March 2. April 3. May 4. June 5. July 6. August 7. Septermber 8. October In addition to the limits on labor available, restrictions were placed on the number of cows that could be handled with the milking parlor. These restrictions were also used to reflect the capacity of certain other coefficients, that is certain costs and labor require- ments were considered constant per unit over a range of 75 to 150 cows and then another set of coefficients were relevant to herd sizes Of more than 150 cows. (The minimum of 75 cows was never made explicit in the program because the data clearly indicated that a labor force consisting of the operator plus one full-time hired man plus some seasonal help would be able to handle at least 75 cows.) The limits on the labor available are discussed in detail follow- ing; first in terms of the total amount available for the various per- iOds and then the amount available for the milking operation. - 47 _ Total Labor During the periods when labor was limited, the labor supply was made up of that provided by the Operator and the regular hired labor. The Operator - It was assumed that the operator worked 60 hours per week for 50 weeks, or 3000 hours per year. This figure is consis- tent with reports by operators of large Michigan dairy farms in the TelFarm Record Project. The two weeks not accounted for was consid- ered vacation time and it was assumed this vacation would be taken in August. An amount had to be deducted from this 3000 hours to reflect the time needed for management. Very little research has been done on this question but a study carried out at Cornell University presents some rough guidelines.1 From that study it was assumed that a farm being operated within the assumptions made here and with an operator plus one full-time hired man would require 600 hours of management time. For larger farms it was assumed that an additional 280 hours was required for each additional full-time man employed. Using these figures, the hours of labor available by the manager when one full- time man was employed was 2400 hours per year or 208 hours per month (except for August, when only 112 hours was available due to two weeks vacation). When two men were employed the manager contributed 2120 1E. M. Hughes, Jr. and B. F. Stanton, "Time Spent on Entrepre- neurial and Related Activities," Agricultural Economics Resgarch Report 187, (Cornell University, December, 1965). - 43 - hours (3000 - (600 + 280)) per year to the labor supply. When three men were employed, this figure fell to 1840 hours and with five men it was 1280 hours. On a typical dairy farm, the manager allows himself considerable flexibility as to when he carries out some of his management duties. During peak periods of labor requirement such as harvesting silage, the manager will spend very little time on the books or consideration of major changes in the business. This factor was handled in the mo- del by assuming the manager had this labor-management time flexibility within the month. That is, it was assumed that if the manager per- formed only the day to day management duties for two weeks due to peak labor requirements, he would make up the management time during the remainder of the month. (Labor period #1 is an exception because this flexibility was allowed over a five month period.) Regular §l£2§.L222£ - The contribution to the labor supply when two, three or five full-time men were employed were just multiples of that supplied by one full-time man so the case of one regular man will be discussed here. It was assumed that the regular hired man would be employed 40 hours a week for 50 weeks plus two weeks vacation. This totals to 2000 hours per year or 173.3 hours per month except during the month when he takes his vacation; then he contributes only 93.2 hours. In addition to the regular 40-hour week, it was assumed that the hired man would be willing to work about 15 hours per week or 65 hours per month overtime at time-and-a-half pay. Assuming a $3.37 _ 49 - basic wage, this amounted to $5.05 per hour for overtime work. The amount of overtime labor used was determined by the program. Handling it this way, the hired man was not hired overtime unless the MVP of his labor was equal to or greater than $5.05 per hour. It was assumed that the hired man would take his vacation in July. When more men were employed, the vacations were spread over July and August. Seasonal Labor - Seasonal labor was assumed available from July 1 through October 31, in the original program and from July 1 through September 30 in the edit function. There was no limit on the amount of seasonal labor that could be hired so during those months when seasonal labor was available, labor was not a limiting resource as far as the total labor requirements were concerned; if the MVP of 1a- bor was equal to or greater than $3.00 per hour. It will be shown, however, that the labor to milk was limited for all periods. During the periods when seasonal labor was available, no over- time labor would ever be hired for general work because the seasonal labor was unlimited in amount and considerably lower in price ($3.00 compared to $5.05 for overtime). It may seem.unrealistic for a dairy- man to hire seasonal labor when his own hired man has only worked 40 hours. However, on large dairy farms where the regular hired men are relatively specialized, such a situation is not too unusual. Further- more, it makes economic sense to hire the lower priced labor. It could be assumed that the hired man could work overtime at $3.00 per hour if he wished when working with the seasonal workers. Such an - 50 - assumption would not change the results of the program. Table 3-2 summarizes the total labor available during the eight periods for the four labor supply situations. Table 3-2 Restrictions on Labor For Total Work: Four Labor Supply Situationsa Labor Supply I II III IV Operator + Operator + Operator + Operator + Labor Period I hired man 2 hired men 3 hired men 5 hired men hrs. hrs. hrs. hrs. 1. Nov.-March 1906.5 2651.5 3397.0 4887.0 2. April 381.3 530.3 679.4 977.4 3. May 381.3 530.3 679.4 977.4 4. June 381.3 530.3 679.4 977.4 5. July 301.2 370.1 519.2 737.1 6. August 285.3 445.4 525.6 766.0 7. September 381.3 530.3 679.4 977.4 8. October 381.3 530.3 679.4 977.4 Tot- hrs-lyr 4,400 6,119 7,839 11,277 a) This is the fixed labor supply. It is viewed as a free good with- in the program since it's cost is deducted from the objective val- ue given by the program solution. The cost Of this labor was de- ducted regardless of whether or not it was used. In addition to the supply shown here, the program.cou1d buy limited amounts of overtime labor during all periods and unlimited amounts of season- al labor during certain periods. - 51 - Milking Labor The labor available for milking was considered separately because of the assumption that seasonal labor would not be used in the milk- ing operation. When estimating the hours available for milking, it was assumed that the hired man could spend his entire time milking if necessary. Of course, the time to milk was also included in the total requirements to produce milk so double counting was avoided. Under labor situation I when one full-time man was hired, it was assumed the hired man could spend eight hours per day, five days a week milking if necessary. It was further assumed that the operator would be willing to perform the milking operation the other two days per week. Since the operator normally worked a ten hour day, he should be able to milk the herd even if he were slower than the regu- lar milker. The total labor available to milk then when one man was employed was 173.3 hours hired plus 86 hours Operator or 259.3 total hours per month. When either was on vacation, it was assumed the other would substitute. Under the second labor supply situation when two men were em- ployed, it was assumed that the operator would never milk except while the hired men were on vacation. Therefore, the two hired wor- kers could divide the milking chores equally or one could milk five days and the other two days. Since it was assumed they were both skilled in milking, there was a potential of 173.3 x 2 or 346.6 hours of milking labor available per month. -52- It was assumed that both men would take their vacations in July but at different times. The operator substituted for a regular mil- ker during his vacation. When three men were employed, it was assumed that two double- four milking parlors would be available. In this situation the mil- king could be divided into the following routine. Man #1 milks Sunday through Thursday in Parlor #1. Man #2 milks Tuesday through Saturday in Parlor #2. Man #3 milks Friday and Saturday in Parlor #l and Sun- day and Monday in Parlor #2. This means that under normal situations, man #3 would milk only four days, so he would have the fifth day available to work at other chores, or in emergencies substitute for man #1 or #2. In total, therefore, there were 519.9 hours available for milking per month. The vacation schedule assumed for these men was as follows: one during the first two weeks and one during the last two weeks of July and one during the first two weeks of August. With this schedule it was not necessary to assume need for the operator's time to milk at any time. The total milking labor available during these two months was 359.7 hours in July and 439.8 hours in August. Under the fourth labor supply situation when five men were em- ployed it was assumed that if necessary, the milking parlor could be used two shifts per day. One possible arrangement would be that the men's hours could be changed to about six and a half hours per day for a six day week. If four men worked this schedule then the fifth man could milk on the seventh day for each of the other four men if their shifts were staggered. With this size crew, there are many different milking schedules possible; the one chosen depending on the -53- on the wishes of the men and the operator. Regardless of how it is arranged, it was assumed that there was a total monthly supply of 866.5 hours. In July, with three men on vacation, the supply was 626.2 hours and in August, with two men on vacation, the supply was 706.3 hours. In addition to this supply of labor for milking under the various labor supply situations, it should be remembered that there was an ad— ditional 65 hours per month per man available at $5.05 per hour if the MVP of labor was greater than that amount. Coefficients There were only two production activities in any specific pro- gram run. These were activity #l--the "milk production" activity and activity #2--the "corn grain production" activity. All other activi- ties were buying or selling activities and required no estimates other than prices which have already been discussed. The "milk production" activity included the inputs required to milk and feed the cows, clean the parlor and yards and produce the forage for the cows and the replacements. Since the technologies stu- died influenced the inputs in the feeding, cleaning and forage pro- ducing operations, the coefficients in the milk production activity varied according to the combination of technological innovations em- ployed. Since there were six combinations and each combination had a set of coefficients reflecting two size ranges, there were twelve sets of coefficients for the milk production activity alone. As mentioned - 54 - earlier, the analysis of these twelve sets of coefficients or proces- ses were handled by having twelve programs, the only difference be- tween programs being the set of coefficients used in the "milk pro- duction" activity. Since labor was the only fixed resource, other than the capacity of the parlor system, the labor requirements for the various opera- tions will be discussed in detail. Following the labor requirement discussion, there will be a discussion of the variable costs. In all the discussions, estimates relating to the dairy herd reflect the re- quirements for cow plus replacement. Since it was assumed that the replacements would be raised under the same conditions as the herd, (cold-covered free-stall housing, all silage roughage) it was easier and more realistic to just include the requirements for the replace- ments with those for the herd for any specific Operation. Labor Requirements for Milk Production Milking - The labor requirements for the milking operation are given in Table 3-3. These estimates are based primarily on a time study made by D. Lyall MacLachlan at Michigan State University between August, 1966 and February, 1967.1 He studied 16 dairy farms, all with large modern set-ups. He spent one day per month for seven months on each farm recording the minutes and seconds required to carry out 1D. Lyall MacLachlan, "A Study of Dairy Chore Labor Under Dif- ferent Systems of Free Stall Housing," unpublished M.S. thesis, (Mich- igan State University, 1967), pp. 24-46. -55- the various operations involved in operating a dairy enterprise. Re- sults were tabulated for each individual farm as well as averages of all the farms included in the study. It was an excellent source of data for making estimates of labor requirements for the relevant op- erations. Table 3-3 Estimated Labor Requirements Per Cow for the Milking Operationa Item Hrs. per cow per year Collect cows .50 Prepare equipment .75 Milk 16.55 Clean equipment 1.65 Clean parlor .85 Total hrs/cow 20.30 Total hrs/cow/yr assuming a 10 month lactation (19 x 20.30) 16.9 12 a) Source: L. D. MacLachlan, "A Study of Chore Labor Under Dif- ferent Systems of Free Stall Housing," unpublished M.S. thesis, (Michigan State University, 1967), with modifications based on: E. J. Fuller and H. R. Jensen, Alternative Dairy Chore Systems 12 Loose Housing, University of Minnesota, Agricultural Experiment Station Bulletin No. 457, February, 1962. - 56 - MacLachlan's data were checked against that collected by Fuller and Jensen,1 and then the estimates were made on the basis of these various sources. The time required to milk a cow (16.55 hours per year) is equal to milking 44 cows per hour while milking. This speed is not uncom- mon on large farms with the type of facilities and management assumed in this study, including the assumption that no grain is fed in the milking parlor. All the estimates in Table 3-3 reflect good management practices but not necessarily the best observed. It should be pointed out also, that no estimate is based upon the theoretical capacity of the equip- ment. They all can be verified by empirical evidence. On a typical dairy farm, the number of cows in production at a specific time varies during the year. Typically, due to the base- surplus plan of payment for milk produced in Michigan, the number in milk reaches a maximum in the fall, this number is held during the winter and then tapers Off with the minimum number being reached in the summer. Table 3-4 shows the variation in number of cows milked by periods of the year. This variation assumes a two month dry period for each cow and a 12 month calving interval. The last column in this table is the labor requirement per labor period per cow for the milking 1E. J. Fuller and H. R. Jensen, Alternative Dairy Chore Systems .23 Loose Housing, university of Minnesota Agricultural Experiment Sta- tion Bulletin No. 457, (February, 1962). -57- chores assuming the variation in freshening pattern and cows milked by periods. The labor requirements given in Table 3-4 are assumed to be rele- vant over the entire range of size considered. In the range "greater than 150 cows," the milking facilities were duplicated so no loss in efficiency should be expected. If herd size went over 300 cows, two shifts of milkers were assumed and thereby prevented any loss in labor efficiency. Feeding - The feeding Operation included the mechanical distri- bution of grain and silage together in the feed bunks. Since both the tower silo and bunker silo were studied and since the labor required to feed from these two structures varied, they will be discussed sep- arately. The estimates of the labor requirements for feeding are based primarily on MacLachlan's data1 and on informal interviews with dairy- men using practices and equipment the same as those under considera- tion here. Also the work done by Fuller and Jensen of the USDA was considered.2 cit., MacLachlan, p. 46-51. 1?; 292. cit., E. Fuller & H. Jensen. - 5g - Table 3-4- Estimated Variation in Number of Cows Milked and Labor Requirements for Milking Operation by Labor Periods Cows milking in Hours required Labor Period a 100 cow herd per cow 1. Nov. - March 100 8.45 2. April 90 1.52 3. May 80 1.35 4. June 70 1.18 5. July 50 .85 6. August 50 .85 7. September 70 1.18 8. October 90 1422 Total hrs. required/cow/lactation 16.9 Tower silo - It was assumed that when tower silos were used, they would be concrete stave, 30 feet in diameter, and equipped with unloaders. The silage and grain were moved mechanically the length of the bunk located in the free-stall barn. Theoretically, this sys- tem could be set up in such a way as to require no labor, the swit- ches being controlled by clocks and unloaders adjusted automatically by power winches. However, MacLachlan found that most dairymen at least supervised the feeding, especially when grain was mixed with the silage.1 They were, of course, also performing other tasks at #92. cit., MacLachlan, p. 47 - 59 - the same time such as bedding cows and watching for cows in heat. Some even scraped the barn while the feeding Operation was proceeding. For purposes of this study, it was estimated that on farms of 150 cows or less, about 25 minutes per feeding would be required to start, adjust, check and stop the feeding mechanism” For a herd of 100 cows, this is 15 seconds per cow per feeding. This estimate is assumed to be constant per cow between 75 and 150 cows. On farms with more than 150 cows, we can expect only a slight increase in efficiency because the additional building layout of this size range is a duplicate of the first range. Estimates of these labor requirements are given in Table 3-5. Bunker silo - There has been very little research relative to the labor requirements in feeding from a bunker silo. However, from the literature that is available and from interviews with farmers who own bunker silos, estimates were made. For farms with 150 cows or less, it was assumed that the equipment used to feed from the bunker was a loader on a tractor and a self-unloading wagon. These were included in the basic machinery complement so no additional equipment was need- ed. The silage was distributed in the feed bunk directly from the wagon so no mechanical equipment in the bunk was necessary. For any herd of 150 cows or less, the silage requirement can be supplied with one load twice daily. The time required to load the si- lage, add the grain, and unload the mixture was estimated to be 40 minutes per feeding. - 60 - For farms with over 150 cows it was assumed that a tractor-moun- ted ensilage loader would be supplied. This method reduces feeding time to about 25 minutes per feeding. Furthermore, it was assumed that since there was some time required in getting equipment ready to operate regardless of herd size, there would be greater efficiency on the larger farms. Estimates of these labor requirements are given in Table 3-5. Table 3-5 Estimated Labor Requirements Per Cow Plus Replacements to Feed Forage and Grain Hours/Cow + R/Year Herd Size Range Tower siloa Bunker Silob S 150 cows 3.0 4.7 > 150 cows 2.8 3.0 a) Source: L. D. MacLachlan, "A Study of Dairy Chore Labor Under Different Systems of Free Stall Housing," unpublished M.S. thesis, MSU, 1967. b) Source: Informal interviews with owners. Manure disposal - Cleaning and spreading manure is the second most time consuming job in the dairy enterprise. Considerable time has been spent researching the problem of how to save time in this operation. Liquid manure systems require less labor and allow for more flexibility than the conventional system but are more expensive. Slatted floors may very well become an important innovation in answer _ 61 _ to this problem in the future, but as yet, it has not been adopted by enough dairymen in the United States to adequately research its potential. The two systems considered in this study, conventional and liquid, are in operation on a number of Michigan dairy farms. The estimates made relative to the labor requirements with the two systems are based on data from Michigan, New York and Europe.1 Conventional system - As explained earlier, the conventional sys- tem consists of scraping the alleys and pushing the manure into a pile at one end of the barn or outside the barn, then loading the man- ure into a spreader. In this study it was assumed that the estimates of the labor requirements would be relevant for the entire range of herd size under consideration. Estimates are given in Table 3-6. Liquid system - This system consists of scraping the manure into openings over pits. These Openings are located in convenient loca- tions within the barn. It was assumed that the floor would be scraped once each day. The size of pit assumed was large enough to handle a 90 day supply of manure. Therefore, the manure could be spread in in- tervals from daily, up to 90 days depending on labor availability, weather and field conditions for spreading. 1Ibid., MacLachlan, pp. 55-66, G. L. Casler and E. L. LaDue, "Liquid Manure Systems in Free Stall Dairy Barns," Agricultural Eco- nomics Research Report 218, (Cornell University, 1967). GUnner Oy- gard, "A Review of Recent Studies of Liquid Manure Handling and Use of Slatted Floors," Dairy Systems in N.W. Europe, 1960-1965, Agricul- tural Economics Research Report 197, (Cornell University, 1966). - 62 - The estimates of the labor requirements are given in Table 3-6. It can be seen that the bedding Operation is unaffected by the system used. Scraping takes a little less time due to less distance trav- eled. There is a significant amount of time saved in the loading and spreading operation. Table 3-6 Estimated Labor Requirements Per Cow Plus Replacements for Two Manure Disposal Systemsa Item Conventional Liquid Hours/Cow + R/Year Bedding 4.0 4.0 Scraping 3.0 2.5 Load and Spread i0 g_._0. Total hrs/cow + R/yr. 12.0 8.5 a) Source: L. D. MacLachlan, "A Study of Dairy Chore Labor Under Different Systems of Free Stall Housing," unpublished M.S. thesis, MSU, 1967. (L.L. Casler & E. L. LaDue, "Liquid Manure Systems in Free Stall Dairy Barns," Agricultural Economics Research Report N9, 218, Cornell University, 1967. G. Oygard, "A Review of Recent Studies of Liquid Manure Handling & Use of Slatted Floors," Agricul- tural Economics Research Rpport‘Ng. 121, Cornell university, 1966. This is due to two factors: (1) it takes less time to load with a pump than with a tractor loader and; (2) since many loads can be spread in one day with the liquid system, there is considerably less time required in getting ready to do the job. As in the conventional system labor requirements were assumed constant per unit over the en- - 63 - tire range of herd size considered because no significant savings in time required could be found in herds of over 75-80 cows. Forage Production - In this study it was assumed that all forage requirements for the cows and replacements would be produced on the farm. This assumption was made because it was assumed that all forage fed would be in the form of silage and at present there is not a ready supply of this input on the market. Since it was assumed that all forage was produced, the requirements of the forage enterprise were included in the milk production activity. Two forage systems were considered: (1) 100 percent corn silage and; (2) 50 percent corn silage and 50 percent haylage on a dry matter basis. Since these two systems require different amounts of labor, different labor patterns and different investments and both systems are becoming more popular on dairy farms, it was decided a comparison between them would be meaningful. 100 Percent Corn Silage - The estimates of labor requirements per acre per labor period and yield are given in Table 3-7. The labor requirement estimates were based on various studies plus suggestions made by specialists in the Agricultural Engineering Department at Mich- igan State University. It was assumed that all tillage and harvest equipment would be modern including a self-propelled forage harvester. The yield estimates reflect those suggested by the Crop Science De- partment at Michigan State University for the type of soils and man- agement assumed herein. Their suggestions correlated closely with yields recorded on TelFarm records by the better farmers Operating - 64 - on these soils. The yield estimate of 18 tons per acre is the yield of 35 percent dry-matter silage after storage loss. The labor requirements for corn silage production were assumed to be constant over the entire range under consideration. The smal- lest firm was expected to produce at least 100 acres of silage and such acreage makes efficient use of the equipment assumed. Effi- ciency resulting from use of larger equipment on larger farms may be offset by longer distances traveled. Table 3-7 Estimated Labor Requirements Per Acre For Two Forage Cropsa Alfalfa Labor Period Corn Silage Haylage Hours/Acre 1. Nov. - March 0.2 --- 2. April 0.4 0.1 3. May 0.5 1.1 4. June 0.4 1.0 5. July 0.1 2.0 6. August 0.1 0.5 7. September 2.0 1.5 8. October 2:9 .;21 Total hrs/acre/yr. 5.7 6.2 a) Sources: C. D. Kearl, "Livestock Costs and Returns," Agricultural Economics Research Report 32. 213, Cornell University, 1966. _ 65 - R. C. Suter, "Forage CrOps, Harvesting," Research Progress Report ‘N9. 218, Purdue University, 1966. V. W. Davis, "Economic Con- siderations in Choosing a Corn Harvesting Method," Agricultural Experiment Station Bulletin N9. AERR-QQ, University of Illinois, 1963. Corn Silage-Haylage Mix - The production program of 50 percent corn silage and 50 percent haylage on a dry matter basis, resulted in a larger amount of labor being used as well as a different distribu- tion pattern. The estimates of the labor requirements for producing haylage are given in Table 3-7. The estimates were based on the same studies as those used to make the estimates on corn silage labor re- quirements. It was assumed that a self-propelled windrower and a self-propelled chopper would be used in the haylage production. The annual labor requirement per acre for haylage was only 0.5 hours more than for corn silage. However as will be diScussed later, 2.0 acres of haylage were required to meet the annual requirements for a cow plus its replacement while only 1.3 acres of corn silage met these requirements. Therefore, not only does the corn silage- haylage mix require more labor per acre, but it also requires more acres per cow plus replacements. The yield of haylage at 50 percent dry matter, after accounting for storage loss, was assumed to be 7.8 tons per acre. Like corn silage, the haylage estimate was based on the judgment of Crop Science and Farm Management Specialists at Michigan State University. -66- Variable Cost of Milk Production The costs discussed in this section are those assumed to be variable in the program. They include the cash costs, and for build- ings, cattle, machinery and equipment, the capital or ownership costs. As explained earlier, these ownership costs are assumed variable and only the labor, the milking parlor and the basic machinery complement were assumed fixed. The annual ownership costs of all buildings and storage facilities were calculated on the following basis: Depreciation =.§Ei£§ Life in years + Interest = (6% of 1/2 price) InsuIance, taxes = (3.4% of price) The annual ownership costs of all machinery and equipment were calculated on the following basis: Depreciation = Price-Sa1vage value Life in years + Interest = (7% of 1/2 price) Insufance, housing 8 (1% of price) All repairs and maintenance were included in the cash costs. Costs and Receipts Unaffected EZ.§$£§.2£ Technological Compari- §2§§ - Table 3-8 is a list of those costs that were assumed to remain constant per unit regardless of the combination of technology used or the size under consideration. The source of data used in determining the estimates are given below the table. The "capital costs" require some additional explanations. The - 67 - Table 3-8 Estimated Costs and Receipts Per Cow Plus Replacements of Items Unaffected by Farm Organization or Size Item Dollars/Cow + R/Year Cash costsa Bedding $ 4.00 Breeding $ 7.25b Veterinary $10.00 DHIA $ 5.10c Insurance $ 1.50 Light, heat, power $10.00 Miscellaneous $10.00 Capital costs Cows & replacements $27.00d Housing $52.40e Grain s torage §_8._40f Total cost/cow + R/yr. $135.65 Livestock receipts $ 60.753 a) Unless specified, these costs are based on data from: C. D. Kearl, "Livestock Costs and Returns," Agricultural Economics Research Report N2. 213, Cornell University, 1966. b) Source: MABC rates for 1967. c) Source: 1966 Michigan DHIA Annual Summary. d) 6% interest on market value. e) Source: Building contractors' estimates on designs submitted by MSU. - 68 - f) Source: "Michigan Farm Management Handbook," Agricultural Eco- nomics Research Report Ng.'3§, Michigan State University, 1967. g) Includes cull cows at $160 each plus all bull calves adn excess heifer calves at $30 each. 1967 market price in Michigan of dairy cows capable of producing 13,000 pounds of milk was approximately $350. The value of a replacement was assumed to be equal to 1/4 of the value of a bred heifer at the market price of $240 plus 1/4 the value of a yearling at the market price of $160. This put the value of a replacement at $100 (1/4 of $240 + 1/4 of $160), so that the total value of a cow plus replacement was $450. Since cows can be considered a long term.investment the capital cost for a cow plus replacement is 6% of $450 or $27.00. The cost of housing includes the ownership costs of the cold- covered, free-stall housing for milking cows, dry cows and replace- ments, plus feed bunks, maternity pens, and small calf facilities. By submitting the designs suggested by specialists in Agricultural Engin- eering, Dairy and the Agricultural Economics Departments to building contractors, a price of $300 per milking cow, plus $160 per dry cow and replacement or $460 per cow plus replacement was arrived at. The grain storage cost was based on the depreciation, interest, and insurance costs of concrete stave silo storage 24 feet in diameter. This type of storage was assumed since only high-moisture corn would be fed for grain. The livestock receipts in Table 3-8 are the only receipts in the milk production activity. The only other receipts considered were - 69 - the milk sales, and they were placed in a "milk sales" activity so that the effect of changes in milk price could be studied more easily. The livestock receipts were based on the assumptions that each year 25 percent of the cows would be sold as culls for an average price of $160 each, all bull calves would be sold as young calves at an average price of $30 each, and all but 25 Percent of the heifers would be sold as young calves at an average price of $30 each. As- suming a 50-50 bull-heifer ratio and a 10 percent calf mortality rate, the livestock receipts added to $60.75 per cow plus replace- ment per year. Qgggg Q; Storing and Feeding Forage - The costs involved in the storage and feeding of silage varied according to whether tower or bunker silos were used. The costs included those connected with own- ing the storage facility, unloading equipment and feeding equipment plus the costs of operating this equipment. Tower Silos - The costs involved in the use of tower silos are given in Table 3-9. The ownership cost of the silos themselves is the depreciation, interest and insurance on an investment of $11.32 per ton stored multiplied by 22.6 tons required per cow plus replace- ment per year. The costs of unloaders and conveyors should vary with the number of silos instead of number of cows, but since this would be very difficult to program (it would require integer programming); and since the annual cost per cow on these items is relatively small, it was decided to make the cost constant per cow plus replacement by dividing the annual cost reflecting the maximum of the herd range by - 70 - the average of that range. For example, the average number of cows expected in the "150 or less" cow range was 100 cows plus replace- ments (with the minimum labor force considered, it was absolutely certain no solution would contain less than 50 cows). The annual cost of the conveyor equipment necessary for a herd of 150 cows or less was $87.00. Therefore, based on the average number of cows in this range the annual cost was $.87 per cow plus replacement. The mechanical feeder included in the costs is the mechanical equipment installed in the feed bunk. The feed bunk itself was included in the housing cost. There were no economies of size over the range considered here. Since the size of silo used for the smallest farms (30' diameter) are the largest Offered, additional cows would result only in more of these silos. Bunker Silos - From the data studied and from personal observa- tion it could be determined that some economies of size relative to bunker silo storage and feeding does exist. Cost of construction is lower for larger silos on a per ton basis and a special silo unloader (ensilage loader) can be used economically when the amount of silage handled is in the magnitude of 4,000 tons. - 71 - Table 3-9 Estimated Costs of Storing and Feeding Forage Item New Life Annual Cost/Cow +*R 150 Cows Over 150 Price Years Cost or less cows Cash cost Tower Silos Elec. & repairs $ 5.50 $ 5.50 Capital costs Silos $256/cow + R 20 $ 29.18 29.18 29.18 Unloaders 2200 10 319.00 6.38 6.38 Silage conveyor 600 10 87.00 .87 .87 Mechanical feeder 19/cow + R 10 2.76 2.76 2.76 Total cost/cow + R/yr. $44.69 $44.69 Cash costs Bunker Silos Fuel & repairs $ 5.20 $ 4.75 Add. silage loss 7.91 6.33 Capital costs Silo (53500 T.) $90/cow + R 20 $ 10.26 10.26 ----- Silo (23500 T.) 79/cow + R 20 9.01 ----- 9.01 Ensilage loadera 2800 10 378.00b ----- 1.68 Total cost/cow + R/yr. a) Ensilage loader was assumed to be uneconomical on farms of 150 cows or less. b) In calculating depreciation of this item, a 10% salvage value was deducted. Source: Michigan Farm Mgt. Handbook, A.E. Rept. Ng.‘§§, MSU, 1967. - 72 - The costs relative to the bunker silo system are given in Table 3-9. The item "additional silage loss" allows for the difference in storage loss between tower and bunker silos. The item "ensilage loader" is a piece of special equipment at- tached to a small tractor that claws the silage from the face of the silage pack with fingers on a revolving drum and then the Silage is elevated into a wagon. Silage can be loaded with this machine much faster than with a tractor loader. Like the tower silo unloader, this piece of equipment is adequate for herds over a large range in size. Therefore, cost per cow plus replacement was assumed to be total an- nual cost divided by 225 cows--the average size expected in the "over 150 cow" range. On farms of 150 cows or less the silage was assumed to be loaded with a tractor loader. This equipment plus wagons and tractors to pull them were included in the basic machinery complement, so their costs were not included here. Table 3-9 illustrates the difference in cost between the two storage and feeding systems. Of course, these are not all the costs since some costs of machinery were included in the basic machinery com- plement, and no charge was made here for the labor input since it was assumed fixed. ‘Qg§£§.gf Handling Manure - The costs of owning and operating two different manure disposal systems are given in Table 3-10. These costs are in addition to the cost of items included in the basic ma- chinery complement and the cost of labor. -73- Table 3-10 Estimated Cost of Handling Manure Under Two Systems Item New Life Annual Cost/Cow + R 150 Cows Over 150 Price Years Cost or less cows Cash costs Conventional Fuel & repairs $ 8.00 $ 8.00 Capital costs Storage area $8/cow + R 20 $ .91 .91 .91 Spreader $1800 10 243.00b 2.43 2.43 Total cost/cow + R/yr. $11.34 $11.34 Cash costs Liggid Fuel & repairs $ 5.00 $ 5.00 Capital costs Storage pit $100/cow + R-20 $ 11.40 11.40 11.40 Pump $1600 10 446.008 4.46 2.00 Tank spreader $1700 10 Total cost/cow + R/yr. $20.86 $18.40 a) In calculating depreciation of these items, a 10% salvage value was deducted. 1) Sources: G. L. Casler and E. L. LaDue, "Liquid Manure Systems in Free Stall Dairy Barns," Agricultural Economics Research 3g- port 39. gig, Cornell, 1967. "Michigan Farm.Management Handbook," Agricultural Economics Research Report N3. 36, Michigan State University, 1967. - 74 _ Conventional System - The costs listed in Table 3-10 for this system are relatively low. This is because only small amounts of specialized facilities and equipment are needed, so most of the equip- ment costs (for items such as scraper, and tractor loader) were in- cluded in the basic machinery complement. There was no evidence to indicate that costs per unit should be changed for herds of more than 150 cows. Liquid System - The figures in Table 3-10 indicate that the li- quid system had lower costs per unit on larger farms. This is be- cause the pump and spreader necessary for a herd of 150 cows or less was assumed to be sufficient for herds considerably larger. The flex- ibility of this system which allows for many loads being spread in one day was the factor that made one spreader and pump sufficient over a wide size range. The storage pit cost reflects a storage requirement of approxi- mately 3.0 cubic feet per day per cow plus replacement for 90 days.1 This requirement allows for some unusable space at the top of the pit and some room for waste water from the milking parlor and milk house. This additional liquid is essential for the successful Operation of the system. Table 3-10 illustrates that with the items considered, the li- quid system is almost twice as expensive as the conventional system. 1G. L. Casler and E. L. LaDue, "Liquid Manure Systems in Free Stall Dairy Barns," rgric. Econ. Res. Report 218, (Cornell University, 1967). -75- The merits of the two systems can only be evaluated, however, when considered in conjunction with the other facets of the business and in the light of the available labor supply. Qgsr‘gf Producing Forage - The estimated per acre costs of pro- ducing corn silage and haylage are given in Table 3-11. As in the other operations discussed earlier, these costs are not complete since they do not include cost of machinery in the basic machinery comple- ment or labor costs. NO significant reduction in per unit costs were found for pro- ducing forage within the range of herd sizes studied. There might be a reduction in ownership cost of specialized machinery when using it on more acres but maintenance costs, and costs of traveling greater distances tend to offset the reduction in ownership cost. Further- more, the fact that much of this specialized machinery comes in a wide range of sizes, justifies the assumption that the ownership costs of this machinery are a variable cost. Corn Silage - The sources of data for the items in Table 3-11 are given at the bottom of the table. Urea is not a cash cost direct- ly related to producing corn silage, but is a necessary addition when comparing corn silage with haylage. It is also a low cost source of protein for dairy cows. The reason that no machinery and equipment costs appear in Table 3-11 for corn silage is that all necessary equipment was included in the basic machinery complement. This was done because both forage programs considered contained corn silage so the equipment to produce _ 76 - it was necessary regardless of which program.was used. The annual cost per acre of land includes a charge of 6 percent interest on the market value of land of the type assumed herein, plus $4.20 per acre for taxes. It could be argued that a 6 percent interest charge to the land is too high in light of the fact that most land of this type in south- ern Michigan is appreciating at a rate of approximately 5 percent per year. Since this appreciation varies from area to area, and since the typical dairyman is not primarily concerned with land speculation, this appreciation factor was not considered. If an individual farmer studying these results is aware of, and can specify the amount of ap- preciation on his farm, he can add that amount to his income figure or deduct it from his costs. One other cost associated with the corn silage program but not appearing in Table 3-11 is the cost of soybean oil meal added to corn silage when fed to the herd. This cost was not included here because the meal is supplied on a per cow plus replacement basis instead of per acre basis. It is supplied at the rate of 500 pounds per cow plus replacement at a price of $130 per ton. This item is included in Table 3-12, the summary table of the milk production activities. Haylage - The cash costs in Table 3-11 related to haylage in- clude the costs of the cover crops needed to establish the haylage crops. The capital costs include the ownership costs of the special- ized equipment necessary to produce haylage and the charge made for land. - 77 - Table 3-11 Estimated Costs of Producing TWO Forage Crops New Life Annual Item Price Years Cost Cost/A Corn Silage Cash costs1 Seed $ 3.00 Fertilizer 18.00 Spray 5.00 Fuel & repairs 6.50 Ureaa 9.00 Capital costs2 Machinery Land $350/A $25.20 25.20 Total cost/A/yr. $66.70 Haylage Cash costs Seed 2.00 Fertilizer 9.00 Spray 1.00 Fuel & repairs 7.50 Capital costsb2 Hayhead $600 15 Seeder 600 15 $546 $10.92 Harrow 400 15 Self-PrOp. windrower 3600 15 Land $350/A $25.20 $25.20 Total cost/A/yr. $55.62 a) Based on 500# required/cow + R @ $130/ton. b) When calculating depreciation on these items, a 10% salvage value was deducted. 1) Source: C. D. Kearl, "Livestock Costs and Returns," Agricultural . Economics Research Report 213, Cornell University, 1966. 2) Source: C. R. Hoglund, "Which Forage System Fits Your Farm," Agricultural Economics Report #32, Michigan State University, 1965. - 7g - Summary of Milk Production Activity The labor requirements, costs and receipts for the milk produc- tion activity are summarized in Tables 3-12 a and b, and all are put on the basis of "cow plus replacement" units. Some of the figures in this table were just transferred from other tables already discussed in this chapter. The figures representing costs and labor require- ments of the forage programs, however, had to be multiplied by a con- version factor in order to arrive at "cow plus replacement" figures from "per acre" figures. For corn silage, this conversion factor was 1.3. That is, given the yields per acre and forage requirements per cow plus replacement assumed herein, it required 1.3 acres of corn silage to meet the re- quirements of a cow plus its replacement. For the corn silage-haylage mix program the figures in Table 3-12 were determined in the following manner. It was found that it took two acres of haylage to meet the requirements of a cow plus it's re- placement. Therefore, to find the figures representative of a corn silage-haylage mix, the "per cow plus replacement" figures were calcu- lated for a 100 percent corn silage program, then figures for a 100 percent haylage program were added to them and then the sum was divi- ded by two. This procedure was not followed, however, when calculating the equipment and machinery figures since this equipment must be char- ged in full if any of the crop is raised, to which it pertains. The item labeled "miscellaneous chores" in Table 3-12 did not ap- pear in any other table. It includes the estimate of the labor requ- irements to care for freshening cows and to make minor repairs. Table 3-12a Labor Requirements, Costs and Receipts Per Cow Plus _ 79 - Replacement for Producing Milk Under Various Combinations of Farm Technology on Farms with 150 Cows or Less (150 Cows 1 2 3 4 5 6 Item CS-T-Ca CS-T-Ld CS-B-Ca cs-E-La CH-T-Ca CH-T-La Labor Requirement Milk Labor per 1 8.45 8.45 8.45 8.45 8.45 8.45 2 1.52 1.52 1.52 1.52 1.52 1.52 3 1.35 1.35 1.35 1.35 1.35 1.35 4 1.18 1.18 1.18 1.18 1.18 1.18 5 .85 .85 .85 .85 .85 .85 6 .85 .85 .85 .85 .85 .85 7 1.18 1.18 1.18 1.18 1.18 1.18 8 1.52 1.52 1.52 1.52 1.52 1.52 Feed per yr. 3.0 3.0 4.7 4.7 3.0 3.0 Manure handl/yr 12.0 8.5 12.0 8.5 12.0 8.5 Forage Productionb Labor per 1 .26 .26 .26 .26 .13 .13 2 .52 .52 .52 .52 .36 .36 3 .65 .65 .65 .65 1.43 1.43 4 .52 .52 .52 .52 1.26 1.26 5 .13 13 .13 .13 2.07 2.07 6 .13 .13 .13 .13 .57 .57 7 2.6 2.6 2.6 2.6 2.8 2.8 8 2.6 2.6 2.6 2.6 1.3 1.3 Misc. chores/yr.C 3.1 3.1 3.1 3.1 3.1 3.1 Total Labor Req. Labor per 1 16.26 14.81 16.96 15.51 16.13 14.68 2 3.55 3.26 3.69 3.40 3.39 3.10 3 3.51 3.22 3.65 3.36 4.29 4.00 4 3.21 2.92 3.35 3.06 3.95 3.66 5 2.49 2.20 2.63 2.34 4.43 4.24 6 2.49 2.20 2.63 2.34 2.93 2.64 7 5.29 5.00 5.43 5.14 5.49 5.20 8 5.63 5.32 5.77 5.48 4.33 4.04 Costs General 135.65 135.65 135.65 135.65 135.65 135.65 Forage stor., feed 44.69 44.69 23.37 23.37 44.69 44.69 Manure handling 11.34 20.86 11.34 20.86 11.34 20.86 Forage Production 86.71 86.71 86.71 86.71 93.52 93.52 Soybean O. M. 32.50 32.50 32.50 32.50 16.25 16.25 Receipts Livestock 60.75 60.75 60.75 60.75 60.75 60.75 Net Cost (C Row) 250.14 259.66 228.82 238.34 240.70 250.22 - 30 - Footnotes for Table 3-12a 8) b) C) CS refers to a 100% corn silage program; CH refers to a 50 % corn silage-50% haylage program; T refers to a tower silo sys- tem; B refers to a bunker silo system; C refers to a convention- al manure disposal system; L refers to a liquid manure disposal system. Conversion factor to arrive at labor requirements per cow + re- placement from labor requirements per acre were: for corn si- lage 1.3, for corn silage haylage mix 1.65. Includes labor for maternity and minor repairs. Table 3-l3b - 81 - Labor Requirements, Costs and Receipts Per Cow Plus Replacement For Producing Milk Under Various Combinations of Farm Technology on Farms With MOre Than 150 Cows Item >150 Cows l 2 3 4 5 6 CS-T-Ca CS-T-L CS-B-C CS-B-L CH-T-C CH-T-L Labor Requirement Milk Labor per 1 8.45 8.45 8.45 8.45 8.45 8.45 2 1.52 1.52 1.52 1.52 1.52 1.52 3 1.35 1.35 1.35 1.35 1.35 1.35 4 1.18 1.18 1.18 1.18 1.18 1.18 5 .85 .85 .85 .85 .85 .85 6 .85 .85 .85 .85 .85 .85 7 1.18 1.18 1.18 1.18 1.18 1.18 8 1.52 1.52 1.52 1.52 1.52 1.52 Feed per year 2.8 2.8 3.0 3.0 2.8 2.8 Manure hand1./yr. 12.0 8.5 12.0 8.5 12.0 8.5 Forage Productionb Labor per 1 .26 .26 .26 .26 .13 .13 2 .52 .52 .52 .52 .36 .36 3 .65 .65 .65 .65 1.43 1.43 4 .52 .52 .52 .52 1.26 1.26 5 .13 13 13 .13 2.07 2.07 6 .13 .13 .13 .13 .57 .57 7 2.6 2.6 2.6 2.6 2.8 2.8 8 2.6 2.6 2.6 2.6 1.3 1.3 Misc. chores/yr.C 3.1 3.1 3.1 3.1 3.1 3.1 Total Labor Req.c Labor per 1 16.16 14.71 16.26 14.81 16.03 14.58 2 3.53 3.24 3.55 3.26 3.37 3.08 3 3.49 3.20 3.51 3.22 4.27 3.98 4 3.19 2.90 3.21 2.92 3.93 3.64 5 2.47 2.18 2.49 2.20 4.41 4.22 6 2.47 2.18 2.49 2.20 2.91 2.62 7 5.27 4.88 5.29 5.00 5.47 5.18 8 5.61 5.30 5.63 5.32 4.31 4.02 Costs General 135.65 135.65 135.65 135.65 135.65 135.65 Forage stor., feed 44.69 44.69 21.77 21.77 44.69 44.69 Manure handling 11.34 18.40 11.34 18.40 11.34 18.40 Forage production 86.71 86.71 86.71 86.71 93.52 93.52 Soybean O. M. 32.50 32.50 32.50 32.50 16.25 16.25 Receipts Livestock 60.75 r60.75 60.75 60.75 60.75 60.75 Net Cost (C Row) 250.14 257.20 227.22 234.28 240.70 247.76 - 82 - Footnotes for Table 3-12b 8) b) C) CS refers to a 100% corn silage program; CH refers to a 50% corn silage-50% haylage program; T refers to a tower silo system; B re- fers to a bunker silo system; C refers to a conventional manure disposal system; L refers to a liquid manure disposal system. Conversion factor to arrive at labor requirements per cow + re- placement from labor requirements per acre were: for corn si- lage 1.3, for corn silage haylage mix 1.65. Includes labor for maternity and minor repairs. - g3 - Labor Requirements and Costs of Corn for Grain Production Each program had a corn grain producing activity and a cory buy- ing activity. The program could pick out which activity or combina- tion of the two that maximized the return to the fixed factors. The program could not, however, produce or buy corn for sale. Only that amount needed to fulfill the requirements of the dairy herd could be produced or purchased. The per acre labor requirements to produce corn for grain are given in Table 3-13. The reason that the labor required for harvest is so small is that it was assumed that the corn would be custom har- vested with only a very small portion of the harvest operation being performed by on-farm labor. This assumption was made to allow the firm to produce a small acreage of corn grain without buying addi- tional machinery. It is a realistic assumption as many dairymen in Michigan who grow corn for grain have it custom harvested. There were no machinery and equipment ownership costs because the equipment needed for producing corn grain was the same as that needed to produce corn silage, except for the harvesting equipment, and custom handling eliminated those items. The net yield of corn grain on the type of land considered here was assumed to be 95 bushels per acre. The grain requirement per cow plus replacement was assumed to be 95 bushels per year.1 Therefore, the conversion factor to determine "per cow plus replacement" was 1.0. 1Based on suggestions of Don Hillman, Dairy Department, Michigan State University and C. R. Hoglund, Department of Agricultural Eco- nomics, Michigan State University. - 84 - Table 3-13 Estimated Labor Requirements and Costs of Corn for Grain Production Per Acrea Item or Per Cow + R .Labor requirementsb Hours 1. Nov. - March .5 2. April .4 3. May .5 4. June .4 5. July .1 6. August .1 7. September -- 8. October _;2_ Total labor req./yr. 2.2 Cash costs Seed $ 3.00 Fertilizer 18.00 Spray 5.00 Fuel & repairs 3.20 Custom hire 6.00C Capital costs Machinery --- Land 25.20 Total cost/A or/cow + R $60.40 a) Both measures apply as the conversion factor from acres to per cow + R is 1.0. - 85 - Footnotes for Table 3-13 (continued) b) Sources: C. D. Kearl, "Economic Considerations in Producing Corn for Grain in New York State," Agric. Econ. Res. Rep_. 168, Cornell University, 1965. c) W. A. Tinsley, "Rates for Custom.Work in Michigan," Ext. Bul. .E 458, MSU, 1967. Fixed Factors When a specific program is put into the computer, the output in- cludes an optimum solution. In the model developed for this study, this solution maximized the return to selected fixed factors. The costs of all but one of these fixed factors were then deducted by hand to find the return to that one remaining fixed factor. The factors assumed fixed in this study were: a) the milking parlor and milk hourse facilities; b) a basic machinery complement; c) the basic annual wage of the regular hired labor, and; d) the op- erator's labor and management. In this study, §,'b and g were deduc- ted from the return to fixed factors so that the final figure would be return to the operator for his labor, management and risk bearing. Milking Parlor and Milkhouse The investment figures and annual costs of the milking parlor facilities are given in Table 3-14. These figures are based pri- marily on a study recently completed by Hoglund, Speicher and Boyd _ g6 - at Michigan State University.1 Most of the figures are self-explana- tory and the notes at the bottom of the table should clarify the re- maining ones. As was discussed in Chapter II, even though a double- 8 herringbone parlor requires less investment than two double-4 her- ringbone parlors; two double-4's were used when herds exceeded 150 cows due to their slight advantage in labor efficiency and flexi- bility over the double-8 system. 10. R. Hoglund, J. A. Speicher and J. S. Boyd, "Milking Effi- ciency, Investments, and Annual Costs for Different Milking Parlors," Agricultural Economics Repgrt Number 85, (Michigan State University, October, 1967). _ 87 - Table 3-14 Estimated Costs of Basic Milking Facilities for Herd Size Ranges Herd Size Range Item 5150 Cows 151-300 ‘300 Cows Investment Buildinga $ 5,400 $ 8,400 $ 8,400 Stallsb 1,200 2,400 2,400 Milk system 3,200 4,800 4,800 Bulk tankC 7,200 14,400 16,200 Heat, light, water 1,500 2,500 2,500 Total Investment $18,500 $32,500 $34,300 Annual Cost Depreciation Buildings $ 405 $ 665 $ 665 Equipment 1,040 1,920 2,100 Interest Buildings 243 399 399 Equipment 364 672 735 Insurance, taxes, Buildings 275 452 452 Insurance, housing, equipment ___194 192 210 Total Annual Cost $2,431 $4,300 $4,561 8) b) C) 1) Building investment represents one double-4 herringbone parlor sys- tem for size range #1 and two double-4 herringbone parlor systems for size range #2 and #3. No feeders included Bulk tank investment represents one 1,200 gallon tank for size range #1; two 1,200 gallon tanks for size range #2 and two 1,500 gallon tanks for size range #3. Source: Based on C. R. Hoglund, J. A. Speicher and J. S. Boyd, "Milking Efficiency, Investments and Annual Costs for Different Milking Parlors," Agricultural Economics Repprt Number 85, Michi- gan State University, October, 1967. - 88 _ Basic Machinery and Equipment Complements The statement that certain items relevant to the particular op- eration being discussed "are included in the basic machinery comple- ment" has been.made numerous times in th 8 chapter. The basic ma- chinery and equipment complement included those items assumed to be essential to the operation of the hypothetical dairy farm regardless of which combination of technological innovations were used. There were three Complements, each representing a specific herd size range over which the items were considered adequate in both number and size. The investment and costs associated with these basic machinery and equipment complements are given in Table 3-15. 1 mo 1 Hmon wuHm anHanma nomno om womwn Zonrwoonw noBonSmonm mos arnmo moan mHNm woommmH Zm€ wHHno UmonoHonHoo mono mwnm ”memo mono mHnm ”memo H N w H N w Hnt memo. mHmo HmHuuoo vwoo flan. mmH. mHmo HmHuwoo «woo Humanon ACmmav we we me00 meoo «H900 Hm Ho m we m we m we Humanon we so wooo weoo wooo Hm No How How How Humanou we so omoo bwoo omoo Hm No who who who Humanon as so nun oNoo mmoo Hm No nu: wwo wwo ammonon on we :1: sun owoo Hm No :1: us: wwo Humanow we so mmoo emoo nun Hm No www wmu nun Humanou om so 1:: nun uwo Hm No :1: us: moo mnmoomn mos we so woo woo woo Hm Ho Hm HN Hm romamn mon we so woo woo woo Hm Ho hm pm pm wHos wnHm: woo woo woo Hm Ho mo we we wHoa mnHm: Hmoo nun Hw Ho NM NM :1: wHoz buHo: nun woo woo Hm Ho :1: am am wHoz ouHo: an: :1: Hmoo Hm Ho nun nun co UHmo Hp. HHoo nun nun Hm Ho mo 1:: an: UHmn He. nun Hwoo nun Hm Ho 11: um nun UHmo mo. 1:: sun Hooo Hm Ho sun In: we now: meOHmH a no: HHoo In: 1:: HM Ho mo :1: In: con: ononmn m not nun Hmoo Hmo Hm Ho us: How How mouse onn. b not H00 1:: II. Hm Ho o In- nu: mvnme mnn. o no: nun Hmo Hmo Hm Ho .1. o o oo 1 HmUHm wun Anosnwocoov mmnHSmnmo oomnm Om wmmHn zoorHomuw ooBoHoBmonm mow Hrnmo mono memo woommm 2m: wHHnm omonmnwmnHoo mono mHum memm mono mHNm wmnmm H m w HHmm H N w Hnma moon. meo HwHuwoo Vwoo «no. moH. meo HwHuwoo Nwoo mon. UmuoocoH ZonrHomuw ooBoHoBmon oOmn mwao mbowo mmmow Hv mocnnmm mow oHHommu :ZHnermo wows zmoomoamon .mm. MM. ZHOIHmmo mnmnm cowdemHnw. Hoou. monocoow.: >mHHocanan mooooaHnm womonn - 91 _ Labor The fixed cost of labor is just the annual basic wage of a hired man multiplied by the number of full-time men hired. The annual ba- sic rate is $3.37 per hour x 40 hours per week x 52 weeks, or $7,010 per year. Therefore, the four labor supply situations will have fix- ed labor costs as follows: 1. One hired man $ 7,010 II. Two hired men $14,020 III. Three hired men $21,030 IV. Five hired men $35,050 To find the return to the operator for his labor, management and risk bearing from a specific program, the number of cows plus re- placements were observed in the solution and then the parlor and ma- chinery complement costs relevant to that herd size were deducted; finally the fixed labor cost relative to the labor supply situation used in that program was deducted. Conclusion These estimates were all incorporated into the linear programming ‘model developed and then the model was analyzed on the Control Data 3600 computer. The tableau of the activities, constraints and coef- ficients appear in Appendix A. CHAPTER IV RESULTS OF THE ANALYSIS Six basic systems were studied, reflecting six different com- binations of technological innovations. The six systems were iden- tified by the following code: System #1 CS-T-C System #2 CS-T-L System #3 CS-B-C System #4 CS-B-L System #5 CH-T-C System #6 CH-T-L where CS referred to a 100 percent corn silage program and CH refer- red to a program of 50 percent corn silage and 50 percent haylage on a dry-matter basis; T referred to the use of tower silos and B referred to the use of bunker silos; C referred to a conventional ma- nure disposal system and L referred to a liquid manure disposal sys- tem. The six systems were analyzed first when the regular labor force consisted of the Operator and one full-time hired man. Then the six systems were analyzed with labor forces containing two, three and five full-time hired men. For the two larger labor situations, some 0f the coefficients were adjusted to account for economies of size. - 93 - In the first analysis of these problems, it was assumed that seasonal labor could be hired from July first through October. Then this assumption was changed so that seasonal labor was available only from July first through September. The problems were all analyzed again with this new assumption. Finally, the problems were analyzed twice more, once with the price of corn grain ranging from $1.20 to $.75, and the other with the price of milk ranging from $4.00 to $6.00. The major results of these analyses are given in the tables in this chapter. Tables 4-1 through 4-4 are the results of the analy- ses of the various problems with the four labor situations. These tables are very similar in format so Table 4-1 will be discussed in detail and Tables 4-2, 4-3 and 4-4 will be discussed only in terms of how they differ from Table 4-1. Two points will be discussed before dealing with the individual labor situations since they are relevant to every program run, re- gardless of the circumstances. The first point is the restriction placed on milking labor. Due to the labor requirements of the other Operations and the amount of labor available to milk, the milking labor never became limiting in any program. Therefore, this item was not included in any of the tables in this chapter. The other point concerns the corn grain purchasing activity. The optimum solution in every program run, contained enough acres of corn grain production to fulfill the herd requirements when corn grain - 94 - was assumed at a price of $1.20 per bushel. That is to say, the corn grain purchasing activity was never activated. Therefore, since the bushels of corn purchased were always zero, this item was not inclu- ded in Tables 4-1 through 4-4. Labor Situation I -- One Full Time Hired Man The optimum solutions of the six problems reflecting the six dif- ferent combinations of technological innovations and labor situation #I are given in Table 4-la and 4-1b. The only difference between the results given in these two tables is that in Table 4-1a, season- al labor is available for hire July through October and in Table 4-1b it is available in July through September. With Seasonal Labor Available July - October When seasonal labor was available July through October, the com- bination of technology that resulted in the highest return to the se- lected fixed factors and highest return to the operator was the system consisting of a 100 percent corn silage program, bunker silos and a liquid manure system (CS-B-L in Table 4-la). This combination re- sulted in 116 cows plus replacements, and all corn grain requirements produced. The solution used seasonal labor in September and October, and overtime labor in April, May and June. Thus for nine of the twelve months, the hired man worked no more than forty hours per week. There were 77 hours of the fixed labor force that was not used. This - 95 - means that although it was assumed that the operator was available 60 hours per week for 50 weeks and the hired man was available 40 hours per week for 50 weeks, in the final analysis 77 hours were left unused during the year. However, since the hired man's basic time was assumed fixed, a charge for this time was included in the fixed cost even if it was not required to operate the farm. Thus, it can be assumed that the hired man worked 40 hours and the opera- tor 58.5 hours per week. The next most profitable solution included tower silos in place of bunker silos (CS-T-L in Table 4-1a). More cows plus replacements could be kept but the return to the selected fixed factors was about $1000 less. The extra cows were possible because less labor was re- quired to feed forage from tower silos but the income from the extra cows was not sufficient to offset the greater investment costs of the tower silos. However, this difference of only $1000 might disappear under different assumptions regarding labor inputs, costs of silos or storage loss. The poorest combination including a 100 percent corn silage pro- gram (CS-T-C in Table 4-la) still had $3300 more return to the selec- ted fixed factors than the highest returning combination containing a corn silage-haylage program (CH-T-L in Table 4-la). Both systems with the corn silage-haylage program resulted in relatively less re- turn to the selected fixed factors than those with a 100 percent corn silage program. This is because the labor requirements in May needed _ 96 - to produce haylage were relatively greater than for corn silage and May labor was the resource that stopped the program when corn silage was produced. Therefore, with haylage requiring more May labor, sys- tems containing corn silage-haylage programs were stopped sooner. In general, the results as shown in Table 4—la illustrate that, under these assumptions and resource limits, a 100 percent corn si- lage program was more economical than a corn silage-haylage program; bunker silos were more economical than tower 51103 and a liquid manure disposal system was more economical than a conventional system, The solution to each of the six problems used all of the fixed supply of labor available in May plus all the overtime labor that could be hired (65 hours). This resulted in the last hour of over- time May labor having a positive marginal value product (MVP). For the CS-B-L combination the MVP was $73.09. This does not necessar- ily mean that if the hired man worked one more hour in May the return to the selected fixed factors would increase $73.09. It means that the optimum organization and size of firm resulting from the activi- ties and constraints given.were such that when May labor became limit- ing the MVP of the last hour was $73.09 assuming all other resources free. If more May labor were added, labor in another period might become limiting after a small increase in size and then May labor would have an MVP of zero and the labor in the new period would have a positive MVP. The fixed costs in Table 4-la were deducted from the objective - 97 - value given in the solution. The remainder return to operator is the income to the operator for his labor, management and risk bearing. On this income, he must service all debts and consumption expendi- tures and provide for any provision for growth of the firm. However, in addition to this "return to operator," the operator would receive 6 percent on any equity he had in long-term capital and 7 percent on any equity in short-term capital. Since most commercial dairymen have at least 40 percent equity in their businesses, this additional cash income based on the optimum solution of the CS-B-L setup would be at least $11,000. Column one of the Table 4-1a, the "b value" column, includes the limits put on the program. In this labor situation there were 4400 hours in the fixed labor supply and 520 hours of overtime labor available. More overtime was available, but it was available during months when unlimited amounts of seasonal labor were also available at a lower price, and therefore; the overtime labor was never used. The only other constraint, cow limit, was included to assure that the solutions would not go beyond the range of relevancy of the coeffic- ients and fixed factors. With Seasonal Labor Available July - September When there was no seasonal labor available in October, the pro- gram could only hire up to 65 hours of overtime labor in that period. Table 4-1b gives the results when this was assumed. A 100 percent - 98 - corn silage program required a relatively greater amount of labor in October than in May. Therefore, when there was a limit put on labor supply in October as well as May, the October labor became limiting first, and stopped the program. In fact, overtime labor became limiting in October before any had been hired in any other month. no.ao oa.am oo.mh ma.ao me.os ww.oo .Hoo max <29 «EH ozv H coauom om am «so oea ooa mos own .anm ooh: noose masonoao mmm.mem Hma.oaa omH.sHN ooH.waa o-.~m~ mao.mam .Hoo osoaoao>sa House New oom new mom one mom a sauna onoaaono as no oHH woo owe HHH omH .oz mosoaoooaooe o mace oa-a-mo no-9-mo ou-m-mo ou-m-mo no-9-mo suue-mo oaas> oars gone a moowuoofinaoo HmOHwOHocsooa o n o m N H Hooouoo u mash .oHooHao>< Honda Hooommom mods wouflm oEHH uoouowwwo :uHB mange magma oonwmonuohm mo 1 mm 1 HHom moo ”honoonOOH mo moowuoowoaoo mammHms< mo muHomom «Him 033. mowuoso wcHHso: woauooooo Houwo oo.mw on ou ooadmmo XHHE mo oOHHm Au Eoumhm Homoemao oaoome ou muowou nouuoH umoH Eoumhm owououm owouom oo summon HouuoH ouwsu has aw oHooHHo>o HoooH Houou ou muomou ask Ao oaaoea - a Hoooauoo>coo n u moHfim noxoom moHHm nosoH use oonmm: uooouoo on .oonam coco usoouoa on 1 mo oonam unamuwouo owouom ou momma anoo ucoonoo ooH 1 mo muoquH can umuwm one Am Hma.ma ooo.aa mmm.om Nso.mm «on.mm oeo.- .Hoo nooosoeo so choose Ham.ma enm.ma Hem.ma sen.ma sem.ma hem.ma .Hoa House o~o.~ cools oHo.s oHo.s oHo.e oao.s .Hoo noes; oma.o oma.e oma.o oma.o oma.o omH.e .Hoo sandstone oanom Hm4.~ Hmo.~ ems.~ Hmo.m Hmo.~ Hme.~ .Hoo ooaoaaaooo mosses: mumou UOXHM «on.mm mwa.um Nmo.wm moo.om aem.em Hmo.mm .Hoo voaHo> .Hoov onoooom @OXHM Umuuwawm Ou fihflumm oa-a-mo 40-8-30 oa-m-mo ou-m-mo no-9-mu ou-e-mo oaHo> see: some n mcowuoowoaoo Hoowonooaooe o m s m N H Honouoo a mHoh .oHoonm>¢ Honda Hooomoom ”cox muse: mafia HHom moo mmonocnooa mo mcowuooaosoo acouommao £uw3_mahem hogan oouwmosuamm mo mammHmo< mo muHsmom A.uooov oHuq OHooh .03. on.mm o~.Hm MH.mm on.nm mo.nm on.mm .Hoo m>z ¢2H o<2H OOH DOB DOB o09H. OOHSOmOH onuHEHH ass mom NNH.H HNO.H Noa.a uho.H ooe.o .on: season HHQQSm uoomH moxHH omH omH mm mm me am 8 .nem H.oaomv H In: II: nun 1:: In: In: 8 .mu: Aumowoozv H oOHuom mmH omH no no we no mom .mum com: HoomH oaHuuo>o www.mHN HNH.aoH NmH.omH ms~.ooa omm.ooH mem.me 8 .Hoo osoaoaoana House New oem ewe msa owe use 8 mooo< onoHaoou as no on me He as one .oz anooaoooHaos a sane Hnaumo Unfinmo Hnmumo Oumumo Hanmo oaHumo ooHo> uHoo EouH a chHuooHnEoo Houdonoa£ooH o m a m N H Hooaouoom u mHoh .oHomHHo>< noomH HooOmoom new: oonHm oEHH HHom moo mkonoosOOH mo mGOHuooHoBoo uoouomeo nuHa mahHm mnHmo oONHmosuohm mo mHmmHmo< mo muHamom . HoH a eH-a mHamH hoz_aH oHomHHo>o HoomH Houou mH ¢2H An Honouoo oH oHomHHo>o HoooH Houou mH Dow Am Nno.wH NNm.NH NNo.mH Naa.NH NoN.NH oHo.NH .Hoo nooaaoao on soaoom NNm.mH NNm.mH NNm.MH NNm.mH NNn.MH NNm.mH .Hoe Hosea oHo_N oHo_N oHo.N oHo.N oHo.N oHo.N .Hoo noeoH oMH.s omH.o omH.o omH.e omH.e oNH.s .Hoo snooHrooa oHaom Hme.N Hmo.N Hmo.N Hme.N Hme.N Hme.N .Hoo ooHoHHHooH wsHsHHz mumoo Umxfih omN.Nm aoo.Hm «ON.NN oom.oN aNN.oN Nmm.mN .Hoo AoaHo> .Heov onooooo Howxfim @Ouomamm ou dun-Hum H-H-mo o-e-mo H-m-mo o-m-mo H-H-mo o-e-mo oaHa> oHea aooH e maOHuooHoEoo HoOHmoHoooooH o m o m N H HooEouoom a hHoh .oHomHHo>< ooooH HmoOmoom Hoax mouHm mafia HHom moo mhonoonooH mo mGOHuooHoaoo usouommHo suH3_mEHHm huHoo mouHmoauohm mo mHthoo< mo muHomom A.uooov aHuq mflnma -NoH- - 103 - Haylage, on the other hand, had no demand for labor in October. When seasonal labor was available in October, the solutions of the systems containing the corn silage-haylage program used less than 65 hours of October seasonal labor. Therefore, when seasonal labor in October was eliminated and overtime was limited to 65 hours, it did not affect the solutions of these combinations. However, due to the large labor requirements for corn silage during October the solutions to those systems including a 100 percent corn silage program were so restricted that the returns to the selec- ted fixed factors were considerably less than for the combinations containing the corn silage-haylage program, On any specific farm the restriction in size and returns due to limitations on October labor might be removed by hiring custom harvesting of part of the silage crop if this service were available. It was noted that when seasonal labor was available in October, the system with the highest objective value (CS-B-L in Table 4-la) had, in the solution, overtime labor hired during three months and 77 hours of the fixed labor supply unused. When there was no seasonal labor available in October, the solution of this same combination (CS-B-L in Table 4-1b) had overtime labor used only one month and 1122 or over 25 percent of the fixed labor supply unused. When there was no seasonal labor available in October, then, the combination of a corn silage-haylage program, tower silo and liquid manure system (CH-T-L in Table 4-lb) had the highest objective value - 104- and also largest number of cows. Regardless of whether or not seasonal labor was available in October, when other things were equal, a liquid manure system was more economical than a conventional system.for all alternatives, and bunker silos resulted in only slightly higher returns than tower si- los for the alternatives with 100 percent corn silage. Labor Situation I; -- Two Full Time Hired Men With Seasonal Labor Available July - October The results of the analysis of the various combinations of tech- nology when two full-time men were employed and seasonal labor was available for hire from July through October are given in Table 4-2a. The first important factor to note is that in this labor situa- tion, it was the restriction on number of cows carried and not labor limitation that stopped the program for all problems containing a 100 percent corn silage program. This means that there was labor avail- able to keep more cows, but it was assumed that two men, one double-4 milking parlor and the basic machinery complement had a capacity of not over 150 cows and replacements. These same problems were re-analyzed without the 150 maximum cow restrictions just to see at what point the labor would become limiting. Then the fixed costs deducted from the objective value rep- resented those relevant to the 150-300 cow range. The results of this analysis are in appendix B. It is interesting to note that removing - 105 - the restrictions added 15 and 9 cows, respectively, to the 100 percent corn silage and conventional manure systems for both tower and bunker silos. Returns to Operator were relatively unchanged. For the two programs including all corn silage and liquid manure, number of cows was increased by 28 and 21, and return to operator by $3,773 and $2,345, respectively, for the programs with tower and bunker silos. Adding more cows resulted in a shift in the most profitable solution to the programs including liquid manure. It must be remembered, how- ever, that 150 cows was considered the limit of relevancy of the coef- ficients used in the program. Since those systems with a 100 percent corn silage program in their technological combinations were limited by number of cows and those containing a corn silage-haylage program in their combinations were not, the variation in the objective value due to the type of forage program was not nearly as great as was the case when both were limited by labor in situation #I (Table 4-1a). No.Ho 4H.am NH.HomN oo.wNmN HH.HHoN Ho.ommN .Hoa as: ¢ZH oazH zoo sou zoo asou OOHSOmOH onuHEHH owe mom son we NHm «NH NHH.o .anm oases: hHoeom HoomH oome No so NNm mom woN 44m 8 .nem H.ooov w mNN oNN HoN owN oNN moN 8 .88m H.8aomv N nun nun 1:. nun II: In: 8 .mum Aumomoozv H oOHHom moH aeH am NoN Ne ooH coo.H .msm eons noeoH oaHonoso ewo.oom mm4.NmN nNo.NNN ooo.eoN omN.oaN mNN.NwN 8 .Hoo assauao>sH Hosea com eon men men men mom 8 monoa osoHaono NeH wNH omH omH omH onH omH .oz oosoaoooHooo o nsou m.e-mo o-e-mo Hum-mo o-m-mo H-H-mu o-enmo oaHo> oHsa soeH o mooHuooHoEoo HoOmeHocnooa o m e m N H Honouoo u hHso oHomHHm>< Hogan HooOmoom moo: oouam mafia HHsm 039 mhmoHooaooa mo mcoHumaHoaoo uoouommHo :uHa mahHm HHHoo oouHmonuohm mo mHmmHoo< mo muHomom n ooH oN-o oHeoH has oH oHooHHo>o HoooH Hou0u mH <29 An muooaoo 300 so aOHuOHHumou mH 300 Am Hme.oN NNN.8N moo.aN mHo.om NHH.NN oNN.NN .Hoo noonnoao on choose Non.ON Nwm.ON Nwm.oN Nwm.ON Non.ON Nwm.oN .Hoe Hosea oNo.eH oNo.sH oNo.oH ONo.oH oNo.oH ONo.oH .Hoo noooH omH.o omH.e oMH.o oMH.o omH.o oNH.e .Hoo aeozHrooa oHaam Hme.N Hmo.N Hmo.N Hme.N Hme.N Hmo.N .Hoo noHoHHHooH onxHHz muwoo ooxwm wmo.Ne som.me mmm.om Noo.Hm «ON.No HHm.we .Hoo HoaHoa .Hooo anoooom oome wouOOHoo ou assume H-H-mo o-e-mo H-m-mo o-m-mo H-H-mo .o-eimw. oaHo> oHse sooH 111 a moOHumoHoaoo HoOHonoonooH o m e m N H Honouoo n mHoh oHooHHo>< HoooH HooOmoom "so: oOHHm mafia HHom 039 mhonosoooH mo mooHuooHoaoo uooaommHo nuHa maHHm mono ooNHmosunhm mo mHthoo< mo muHomom ouna oHooH I noH os.on oN.Nm mH.mm 0N.Nn mo.Nm on.mm .Hon as: axe haze ooe ooe ooe oooH oonaoaos onoHsHH ewe mom Nmm.H oaH.H maN.H NoN.H oHH.o .azm noose: 9Hooom HoooH oome NNN oNN No oN we so 8 .oom H.8aomv N nun 1:: In: In: In: In: 8 .mum Aumswsev o How «mm -1: nu- nun us: 8 .mum AmHowv n oOHuom oom owe no Oh we we 8 .mum wow: uoomH Hmoowmom No, as omH OMH omH OMH omH .onm H.8oov m me so --- --- --- --- omH .onm Hosaev o omH omH --- --- --- --- omH .nnm Hanzo N --- --- --- --- --- --- omH .anm HHHsoav N :1: :1. nun nun nu: 1:: omo .mum A.umzu.>ozv H oOHHom NmN moN OMH OMH omH omH oNH.H .oam one: noesH oaHonoao owo.oom mme.NmN omH.NHN mNm.NON ONN.NMN mm4.aHN 8 .Hoo onoaooopsH Hosea can eon NoN mmN oNN ooN 8 mosoa oeoHooso NoH me oHH HHH ONH MHH omH .oz aosoeoonHaos o osoo H-eumo 0-9-mo H-m-mo o-m-mo H-e-mo 0-H-mo “meHo> uHs: sooH mGOHumaHoeoo HmOHonoonOOH o o m o m N H Hooaouaom u mHoh oHooHHw>< uoomH HoGOmoom moo: oouHm 0899 HHam 039 memoHoosoo9 H0 moOHuooHoaoo ucouommHo :uH3 mauHm huHoo oONHmoouahm m0 OHthoo< m0 muHomom moH oN-e oHeoe 9mz_oH oHowHHo>o HoowH Hmuou mH ¢29 An noncooo cH oHomHHo>m HoooH Houou mH oO9 Am NON.0N ewm.eN amm.oH Noo.0H 0No.wH NNN.0H .Hoo nooaooao on assume N0h.0N Nmm.oN Nmm.0N Nwm.0N N0h.0N Nmm.oN .Hoo House 0N9.4H 0No.eH 0N0.eH oNoqu 0No.eH 0N0.eH .Hoo nooaH oMH.o omH.o oMH.e omH.o oMH.e oMH.o .Hoe anosHtoaa oHaom HN4.N Hme.N Hme.N Hme.N Hme.N Hme.N .Hoo noHoHHHooH wstHHz mumoo oome mew.oe HNH.mo on.am om0.am Noo.wm mwm.Nm .Hoe HoaHoa .Hooo anoooso oowa oOHOOHom ou cuouom H-H-mo 0-H-m0 H-m-m0 0-m-m0 H-H-we‘ 0-9-00 oaHo> 0H8: asse- maOHuooHoaoo HmOHuoHocsoo9 o o m e m N H uoofiouoom - HHoh oHooHHo>¢ HoooH HmoOmoom moot oouHm oaH9 HHsm 039 m9w0H0o5009 H0 0:0HumoHoaoo ucopomeo SuH3 mahHm 9HHoo oouHmOSHohm m0 0H09H00< m0 muHSmom A.ucoov oN-a oHoo9 n moH - 110 - Solutions with two regular hired men were like those with one man in that bunker silos were more economical than tower silos and a 100 percent corn silage program was more economical than a corn si- lage-haylage program. When a conventional was compared to a liquid manure system, however, the conventional was more economical in the combinations in which the program was limited by the cow restriction instead of labor. With Seasonal Labor Available July - September The results of the analysis involving two full-time men but with seasonal labor available from July through September only, are given in Table 4-2b. The ranking of the six combinations in terms of return to the selected fixed factors was the same as that in labor situation # I (Table 4-1b). The systems containing a corn silage-haylage program were more economical than those with a 100 percent corn silage pro- gram due to the labor requirement pattern. However, in all solutions the percentage of fixed labor left unused was considerably less than in the corresponding problems in which one full-time man was employed. Labor Situation III -- Three Full Time Hired Men When the regular labor force included the Operator plus three full-time hired men, the coefficients in the model were changed to reflect economies of size of herds over 150 cows. Because of this, - 111 - the 150 cow restriction was dropped from the program. To be statis- tically consistent with the previous programs, the program should have included a restriction that would have stopped the program at a minimum of 151 cows. As it was, the solutions to only two problems within this labor situation called for herds of less than this num- ber and then only when seasonal labor was limited in October. These two solutions will be interpreted when comparing them with the other solutions. With Seasonal Labor Available July - October The results of the analysis of problems when three full-time men were hired and seasonal labor was available July through October are given in Table 4-3a. The most profitable system when three regular men were hired was the same as when there was one--the system with a 100 percent corn si- lage system, bunker silos, and a liquid manure system (CS-B-L in Ta- ble 4-3a). The ranking of the other five combinations was similar to that in the first labor situation except for the CS-T-L and CS-B-C systems which were equally profitable. An important difference between this labor situation and the situation with one regular hired man is the amount of overtime labor that was hired and the amount of fixed labor left unused. Extra la- bor was hired every month of the year (seasonal where it was avail- able, overtime when not) for all systems containing the 100 percent - 112 - corn silage program. Since the program had to use the fixed supply first, this action resulted in every hour of the fixed labor supply being used. Those systems with the corn silage-haylage program had some hours of the fixed labor supply left unused, but this remainder was a much smaller percentage of the total available than in the first labor situation. The limiting resource for all systems was the labor available in May with an MVP of this resource varying from $42.28 to $60.74 de- pending on the combination considered. If May labor were made un- limited, the program would have been stopped again very soon by the April labor supply for all combinations with a 100 percent corn silage program. (Note that there were only 13 hours of April overtime 1a- bor unused in the solutions of CS-T-C and CS-B-C systems.) The fixed costs in this labor situation included items relevant to herd sizes 150 to 300 cows. The "milking facilities" cost was in- creased considerably to reflect the addition of a second double-4 herringbone parlor and the increase in the basic machinery cost was made to reflect the larger and additional machinery needed. Using the CS-B-L system in labor situation # I as a base, the return to the operator was increased $5113 by adding the second hired man and $21,527 by adding the third hired man. The reason for the considerably greater jump between the second and third man compared to that between the first and second, is explained in part by the fact that the second hired man could not be used to capacity due to the limit placed on size of herd. - 113 - With Seasonal Labor Available July - September When there was no seasonal labor available in October, all prob- lems containing a 100 percent corn silage program in their combina- tion were severely restricted by the October labor supply that re- mained (see Table 4-3b). For the CS-B-L system, for example, the re- turn to the operator was reduced by over $21,500 due to this one change in the labor supply. ¢H.oo on.mm oo.mm mm.nd H¢.n¢ wN.N¢ .Hoo m>£ <29 axe axe are 42H maze sonaoaon moHoHaHH one Nom 0 o o o mmw.N .asm sonata mHamom HoooH oome eoH NeH 0H0 Nam 0N0 «an 8 .osm H.ooov 0 Nmm NNm ooe 8N8 Noe 0N4 8 .88m H.0aomv N m 0N mH on NH 0m 8 .aom Homewaav o eNm 00m HN 84 ON so 8 .nne HNHaeo m ooHooa now 400 omH.H HmH.H omH.H NmH.H 8 .anm one: noeoH Hosannom NoH eHH HoH moH 00H NoH maH .88: Hooaev o noH ANH maH moH meH maH moH .onm HNozv N -- NH HwH NwH HwH N0H mNH .ssm HHHnoav N -- -- N0N 0mN NNH omN mNo .oom H.st-.>ozv H ooHnom eon HNN 000 meN NNo NNN oom.H .88m 0888 ooaoH oaHonoso OHm.Noe HHe.on wom.oNe mN0.N0m NmN.aee «mo.oHe 8 .Hoe osoeoooasH Hosea NHm has Hem Hom mom sea 8 moooa oooHaono moH mmH mmN 0HN omN NHN 8 .oz noaosoooHoos o aso0 H-H-mo 0-H-m0 Meme-m0 0-m-m0 H-H-m0 0-9-00 oaHo> 8H8: sooH n maOHumoHoaoo HoOHuoHoosoo9 o m a m N H Honouoo - hHoo oHooHHo>< HoooH Hooomoom “cox oouHm OEH9 HHsm moun9 mmmoHooaoo9 m0 moOHuaoHoaoo ooooomeo :uHB mahwh mHHoo oonwmonuahm m0 mHmmHoo< m0 muHomom om-a oHno9 I oHH a 9oz 0H oHooHHo>o HoooH Houou 0H <29 Am 0Hm.Nm m00.mN Nwm.0o mmn.Ho coo.Ho Nmo.om .Hon nounsoao o0 assume omN.om omN.om omN.0m omN.om omN.om amN.om .Hoa Hosea omo.HN omo.HN omowHN omowHN emolHN omoaHN .Hoo noeoH aNa.o aNo.o NNo.e NNN.¢ oNo.o oNa.e .Hoo asosHtooa oHaom 00m.o oom.o oom.o 00N.o oom.o oom.o .Hoo ooHoHHHooH onxHHz mumoo H0335 ooN.No eNa.om Hoo.0N 0H0.HN NN0.HN HHN.No .Hoo HoaHoa .Hooo nooooso mowed-um fimuomfiwm Ou Ghflumm H-H-m0 0-H-m0 H-m-m0 0-m-00 H-H-m0 0-9-00 oaHa> 0H8: sooH a mSOHuoaHnaoo HoOHmoHoosoo9 0 m e m N H Honouoo - hHon OHAoHHo>< uoooH Hooomoom moo: oouHm oEH9 HHom oous9 mhonoosoo9 m0 moOHuooHoaoo uoouommHo ouH3 mEHHm muHoo oouHmoauohm mo mHthoc< m0 muHamom A.usoov om-a oHoo9 u mHH H0.0m N0.Hm mo.H0 so.om NN.Nm HN.mm .Ho0 a9: <29 a<29 009 009 009 8009 nonsense wsHoHaHH 400 N09 Hmo.H one.H oeo.H Noe.H omm.N .899 088888 hHooow HoooH oome Nmm mNm mHH eHH NHH «HH 8 .88: H.0aomv N m cm -- -- -- -- 8 .8:- Auosmsfi 0 on 00m -- -- -- -- 8 .nnm H.303 m 0339 H00 Nmo NHH oHH NHH oHH 8 .89: some noeoH Hosoooom 44H NoH moH maH moH 99H moH .onm H.0800 m 00H oHH -- -- -- -- noH .nnm Honawo a moH 99H -- -- -- -- mmH .89: HanV 9 -- NH -- -- -- -- maH .890 HHHnaav N -- -- -- -- -- nun mnm .mum A.uoz-.>ozv H oOHoom woo woo moH maH 99H mmH mmN.H .899 some aoasH oaHososo 0Hm.Noo HHo.oNN 00H.moN mNn.mNN 000.mHm ooN.maN 8 .Ho0 seasonoanH Hooo9 NHm mmo mom mom oom mom 8 noso< oaoHooN0 90H 00H 09H 00H omH 09H 8 .oz noooaoooHeos a 8880 H-9-e0 0-9-00 H-m-m0 0-0-00 H-9-m0 0-9-00 oaHo> 0980 5809 o meHuooHoaoo HmOHonoonoo9 o m o m N H Hooeoueom n hHsh oHooHHo>< 9000A Hoochmom ”so: oouHm oaH9 HHom 009:9 m9m0Hoosoo9 mo mooHuooHoaoo uoouommHo 5093 05999 9990a oouHmoauahm mo mHmmHoo< Ho 00H=0om - oHH ammo oH939 u HHH u Hmva o-wv Aooon.v womeHnm 0m >oonmHm 0m mwonrmmHumo omwnw wHHBm 8H"? onmonoon noBoHoonHoom 0m HonrsoHomww arnmm wcHH H980 mHHmo Zoom mmomoooH bacon >ozv H 0oH9om 000 N00 N0N.H N00.H 00N.H 0N0.H 000.N .090 0008 9o00H 08999090 000.000 0N0.Ne0 000.NH0 00N.N00 000.N00 000.N00 8 .Hoo 9908900>oH H09o9 HNN 0NN 000 00N 0H0 00N 8 00900 esoHoo90 HON 0NN 000 0N0 N00 0N0 8 .oz 09908000H009 0 0so0 Hu9umo 0-9-30 Humnmo Cum-mo Hu9nmo 0191mo o=Hm> 090D EouH woOHumoHoEOU HoOHMOHoonoo9 o 0 0 a 0 N H 9000000 - hHoh 0H00HH0>< 9000A Hooommom moo: 0099: 0899 HHom 0>Hm mmonoasoo9 m0 moOHuooHoaoo uoouoHMHo :uHs 08999 ooNHmosuahm mo 0909H00< mo muHsmom I oNH mono oHoo9 902 09 0H00H90>0 9000H H0909 09 029 A0 0N0.00 000.00 000.00 00N.00 0N0.00 000.N0 .Ho0 9o909oao 09 898900 0NN.00 0NN.00 000.00 000.00 000.00 000.00 .Ho0 H0909 000.00 000.00 000400 000000 000400 000.00 .H80 9oooH 0N0.o 0N0.o 000.0 000.0 000.0 000.0 .Hoo 990890808 89000 000.0 000.0 H00.o H00.o H00.0 H00.0 Ho0 00999HHoo9 0990HHz mumoo 90¢me 000.N0 000.00 000.NHH 00N.00H N00.00H N00.00 .Ho0 HoaHo> .9000 09o9o00 00x99 mouooHom 09 898909 0-9-00 0-9-00 H-0-00 0-0-00 11000-00 0-9-00 00H0> 9900 8099 o 000990890800 H009w0H00£009 0 0 0 0 N H 9000900 - 9Hoo 0H00H90>< 90009 Hmoomoom 0002 00999 0899 HHD9 0>99 H9w0H005009 90 000900090800 900909999 5093 08999 00090059090 90 0909H00< 90 0uH=0om A.uooov 00-0 0H009 - HNH - - 122 - With Seasonal Labor Available July - September The pattern in this situation is the same as that found when three men were hired under the same circumstances (compare Table 4-4b with 4-3b). The lack of October labor limited the systems contain- ing 100 percent corn silage programs to the extent that those with corn silage-haylage programs made greater returns. For the CS-B-L system the fact that no seasonal labor could be hired in October resulted in 114 less cows being kept, the equivalent of one man in the fixed labor supply going unused, and a reduction of almost $30,000 in returns to the operator relative to that when sea- sonal labor was available in October. In fact, with a CS-B-L sys- tem when three men were hired and seasonal labor was available in October, (Table 4-33), the same size herd could be kept as when five men were hired and no seasonal labor was available in October, plus the fact that return to the operator was $9,000 greater. Table 4-5 is a summary of the returns to operator resulting from the various farm situations considered. mm.qm No.Nm mo.Ho q¢.am NN.Nm NN.mm .Noa m>z <29 n<2H OCH OCH OCH «OCH mUMDOmmH wcHuNEHA mom «NM ooN.N Nmm.H oNN.N nmm.N NNN.NN .mum wmmnas %Hma5w Henna vmxam wNm on NON «ON NON «ON a .mum A.uammv N mN om --- --- --- --- 8 .mum Aumsmsozv H vowumm mow 0mm mNm mNm mNm mNm nNm.N .mum umms magma maNuNmpo wmo.wwm on.qu NNo.NN¢ omm.omm ¢¢¢.om¢ qu.qu e .Noa unmaumm>cN Nmuoa ANN NNN m¢m mNm m¢m mHm a m¢po¢ wcmaaouo NmN mNN omN mNN NNN ¢NN 3 .oz muamamomfiamu w msoo Ananmo O'Hnmu Aumnmo oumnmu AuHumo oueumo m=Ho> mafia: EmuH a macaumcwneou HmoaonoanuwH o n q n N N I MNH umnamuamm u haSh mHanNm>< Hanan anaemmmm mam: vmuwm mafia Hash m>wm mhonocsooa mo mcoaumaanaoo uamumwmwn Sufi? maufim hufiwn vmnwwmsuflhm mo mflw%amc< mo muHSmmm nq-¢ mNnma hszcfi maanHm>m gonna Hmuou mg <2H An awDOuoo a“ maanHm>m momma Hmuou m« 00H Am uoumnmmo ou annumm kuOH momma mum:H£omE uwmwm meuNNNomN waNxNNz mumoo umxfim Amsam> .npOV muouomm vmxwm kuomHMm ou ausumm me.N¢ mom.m¢ mom.NN NN¢.qm omH.Nm mom.mN .Noa mNN.¢¢ mNN.¢¢ mNN.¢¢ NNN.¢¢ NNN.¢¢ NNN.¢¢ .Noo omo.mm omo.mm omo«mm omQNWW omoqnm omo.mm .Noa on.¢ aNm.¢ NNN.¢ mNm.¢ on.¢ aNm.¢ .Noa com.¢ oom.q oom.¢ oom.¢ oom.¢ oom.¢ .Noa Nmo.Nm ¢¢N.Nm Nwm.Nm ooNawN moq.oN N¢N.NN .Non A-E-mo 0-9-mo g-m-mo o-m-mo A-E-mo o-a-mo msamm [wuNcs mcowumaanaoo kuwwoaoasomH n o n u m N N EmuH uwnsmunmm u hash mHanHw>< Honda anaemmmm mums vmufim mafia Hank m>am ”honocsomH mo meowumcanaoo uamummwwn saws mahwm magma vwnammsuahm mo mwmhama< mo muasmmm A.uaouV n¢nq mHan n ¢NH mNm.N¢ www.mq wom“NN NN¢.¢N owN.Nm mom.mN .uamm-NH=m mNm.wq owo.q¢ mwm.oo mON.mm wNm.am mqm.Nn .uuo-NN=n .Hfimurm Honwa .mwmm + :m8 m + .ngo qNN.Nm Nom.mN moN.¢N moN.NN moN.Nm mon.aN .uamm-NNsa ONm.Nm moo.oN Nmm.oq omn.N¢ o¢¢.N¢ Nnm.om .uoo-NN=w 3:6?“ “"0an .mmwm + sea m + .ume NoN.oN «mm.¢N mwm.mN a¢¢.ma ONo.mN mam.oN .uamm-zfisa qu.0N NNN.¢N momnmN n~¢.om NNN.NN NNN.NN .uoo-NN=N .Hwa>m gonna .mmmm + see N + .umao Nmo.wH NNm.NN NNo.mN Nam.NN NoN.NN oNo.NN .uamm-NN=m NNN.me moo.NHm mmm.¢Nw NNo.me Nom.mNm qqo.NNm ..uuo-NH=a .me>w gonna .mmmm + :m8 H + .umao A-E-mu 0-9-mo gum-mu o-m-mu A-E-mo o-a-mm o n q n N N mfimasm Nona; maowumcfinaou HmonOHoasomH n mNH mamasm Henna Hmaomwmm van .vumm mo muwm .chNumawnEoo HmoaonocsomH macaum> saws Heumummo ou mausumm mn¢ manna - 126 - Results gf Varying Prices The effect on the problems of changing prices were studied by parametric programming. This method makes it possible to determine the price range over which the optimum plan remains stable. The production possibility curve assumed in linear programming is made up of a series of linear segments, so adjustments caused by changing prices are discreet shifts. That is, one plan will remain stable over a range of prices and then at some point the plan will shift. By varying the price of products, a normative supply function can be developed and by varying the price of an input a normative de- mand function for that input can be developed. The functions are nor- mative, because they say what the firm should do given these prices.1 In this study the Prices of milk and corn grain were each varied independently. The price of milk was varied to: a) determine if at any point in a relevant range, the price of milk would be high enough to make it more profitable to buy corn and use the released labor to produce milk, and; b) see at what price of milk the firm would stop hiring overtime or seasonal labor. The price of corn was varied to determine: a) at what price the marginal rate of substitution between corn grain produced and corn grain purchased would be equal to one, and; b) at what price all of the corn grain requirements would be purchased. 1An excellent discussion and illustration of varying price is given in Heady and Candler, 92¢ Cit., p. 265 ff. - 127 - The parametric programming was carried out on the systems that produced the highest returns. It was applied to the "optimum.sys- tem" in each labor situation and with seasonal labor both available and unavailable in October. The major findings from the parametric functions are discussed below. Detailed results from all the parametric functions can be found in Appendix C. Varying the Price of Milk The effects of changing the price of milk were first analyzed by ranging the price of milk upward from it's original $5.00 per cwt. to $6.00 per cwt. Of the eight problems analyzed with this paramet- ric, only one resulted in adjustments in input and output. This was the situation where a system consisting of 100 percent corn silage, bunker silos and a liquid manure disposal arrangement was used (CS-B-L) one full-time man was employed and seasonal labor was available July through October. With this situation, the corn purchasing activity was activated when the price of milk reached $5.74 per cwt. At that price it was more profitable to use labor previously needed to pro- duce corn grain, to produce forage and milk. Another shift in solu- tion was made at $5.78 where an even greater proportion of the corn grain requirements were purchased. No other changes were made be- tween $5.78 and $6.00 per cwt. The shift to purchasing some of the corn grain resulted in an in- crease of only four cows, but this increase plus the increase in price - 128 - made the return to the operator rise from $24,693 (at $5.00 per cwt.) to $36,361 (at $5.78 per cwt.). Detailed results of the shifts can be found in Appendix C. By ranging the price downward, it was believed that since milk could be produced with the limited resources only, that as the price fell, a point would be reached when the cost of overtime labor($5.05) would be greater than the MVP of producing milk with that labor and, therefore; a new solution would be reached where no overtime labor would be hired. Of course, it is possible that before the price reached this point, a solution might be reached to stOp production altogether. With the recent upward trend in the milk price and with the pre- sent level of non-farm incomes, it was decided that it would not be relevant to study the effects of ranging the price below $4.00 per cwt. In essence, it was assumed that given the present conditions in Michigan, if the milk price should fall to $4.00 per cwt. and stay there, a dairyman would soon change enterprises or take a job off the farm. Varying the price of milk from $5.00 to $4.00 resulted in no change in the solution of any problem. That is, over this range, the original plan remained optimum and stable under all conditions studied. The objective value, of course, varied directly with price change. For the corn silage-haylage, tower silo, liquid manure combination under labor situation # I, and with seasonal labor available July through September, the return to the operator with milk price at $5.00 per cwt. was $18,657. At $4.00 per cwt. this figure fell to $5,764. - 129 - Varying the Price of Corn Grain The price of corn grain was set at $1.20 per bushel for the ori- ginal analyses. Using the parametric function, the Price of this in- put was allowed to range downward from the $1.20 figure to $.75. A fairly typical example of the effects of this price variation was when one full-time man was employed and seasonal labor was available only from July through September on a firm.with a system consisting of a corn silage-haylage program, tower silos and a liquid manure disposal arrangement (CH-T-L). With corn at $1.20 per bushel, 99 cows were kept and all corn grain was produced on the farm. As the price ranged downward, no change was made in the solution until the price reached $.99. At that price the marginal rate of substitution between purchased corn and produced corn was one, so the objective value did not change. However, more than 50 percent of the corn grain was purchased. Another shift in the solution was made at $.98 (over 85% purchased) and at $.82, all corn grain was purchased. As this price ranged downward from $1.00 per bushel, more and more purchased corn was substituted for corn produced on the farm and more labor was released from the corn grain enterprise. The result was more cows kept. The additional cows plus the lower price for corn ($1.20 down to $.82) resulted in a $1,500 increase in the return to the operator. Detailed results of this situation and others considered are in Appendix C. - 130 - From these results it can be seen how a farm plan should be shifted when prices change, if profits are to be maximized. Of course, these shifts are relevant only within the assumptions and estimates used. If a particular farm.has, for example, yields of 15 bushels per acre less than assumed here, other things being equal, the decision to buy corn grain would be made at a higher price than was the case in this study. CHAPTER V CONCLUSIONS AND IMPLICATIONS The purpose of this study was to find a solution to the problem of acquiring and keeping qualified full-time labor on Michigan dairy farms. A low unemployment rate, relatively high wages in the nonfarm sector and out-of-date technology on dairy farms, all tend to make labor one of the most serious problems for Michigan dairymen. The objectives of the study were: 1. To determine the labor requirements and costs of some tech- nological innovations available to Michigan dairymen. 2. To determine the optimum size of herd, acres of crops and investment given the application of different combinations of these innovations on firms with restricted labor sup- plies. The hypothesis tested in this study was: Michigan dairymen can offer wages and hours competitive with urban industries and still make returns to their own labor, management and risk bearing equal to or great- er than opportunity cost, by using an Optimum combination of technological innovations. It was assumed that if a dairyman offered hours and wages com- petitive with urban industries, they could acquire and keep qualified workers. For any individual worker, other criteria for accepting a - 132 - particular job enter in. Such things as, status of the job, place of residence, chance for promotion, job security and employer-employee relations all are important but these aspects are weighed differently by different individuals and; therefore, in the aggregate it can be assumed they cancel each other out and that the wage and hours are the determinants. The hypothesis was tested by developing synthesized dairy firms organized around various combinations of technological innovations and various sized labor forces and; then, determining the optimum utilization of the available labor and the profitability by the use of linear programming techniques. Some of the innovations incorpora- ted in the study were used on all firms because conclusive evidence from other studies illustrated their economic superiority over their closest alternative. These innovations included such things as, free-stall housing, herringbone parlors, all silage forage programs, bulk feeding of grain and the use of high-moisture corn as the pri- mary concentrate. Other innovations were compared with alternatives; these included: 1. A 100 percent corn silage program and a 50-50 corn silage- haylage program. 2. Tower silos and bunker silos. 3. A conventional manure disposal system and a liquid system. For all firms and in all labor situations, the wages assumed for the regular labor were $3.37 per hour for the first 40 hours per week, and $5.05 per hour for any time worked over 40 hours. In addition, - 133 - seasonal labor could be employed during the summer months at $3.00 per hour. Four labor situations were considered; they included the operator plus one, two, three and five full-time men. The labor time contributed by the operator in the various sit- uations was a function of the number of men employed, the remainder being needed for management. The objective value of a specific program solution was the re- turn to: (l) the milking facilities; (2) the basic machinery com- plement; (3) the regular hired laborers basic annual time, and; (4) the operator's labor, management and risk bearing. By deducting l, '2 and 3 from the objective value, the return to the operator was determined. Conclusions The most significant finding in the study was that even the firm with the least profitable technological combination considered, when operated at an optimum level within the limits imposed, yielded a re- turn to the Operator relatively larger than the average reported by Michigan dairymen in the same size range. This implies that if a dairyman hires at least one full-time man, uses technology already demonstrated to be economically superior such as free-stall housing and herringbone parlors, has management ability of a degree whereby he can acquire a herd average of 13,000 pounds of milk per cow and crop yields such as 18 tons of corn silage per acre on moderately productive land, and receives $5.00 per cwt. for his milk, he can -134- pay wages competitive with urban industries and still have an "ade- quate" income regardless of which combination of technological in- novations considered here he uses. An "adequate" income is a relative concept. In this study, ade- quacy was measured by comparing the return to the operator with his opportunity cost. In Michigan, a dairyman's alternatives are many and varied. They might include production work in a factory, working for another farmer or some position with an agricultural allied busi- ness such as, a mechanic or truck driver for a farm machinery dealer. These opportunities vary as to their economic returns but few would exceed $12,000 and many would fall in the $6,000 to $7,000 range. An annual income of around $8,000 would be a realistic opportunity cost for the type of operator assumed in this study. In this study, assuming 13,000 lbs. milk sold per cow at $5.00 per cwt., the return to operator ranged from about $12,000 to $67,000 depending on the size of labor force, availability of seasonal labor in October and system of technology used. If the operator had one full-time hired man he could receive $24,700 with the proper arrange- ment if he could hire seasonal labor July through October and, $18,500 if he could only hire seasonal labor July through September. There- fore, if it is assumed that the Michigan dairyman's opportunity cost is around $8,000, the hypothesis is true--he can offer hours and wages competitive with urban industry and still make or exceed his oppor- tunity cost. - 135 - In addition to the important finding that by using high levels of technology dairymen can compete on the labor market and still make his opportunity cost, other significant findings were: 1. A 100 percent corn silage program.is considerably more eco- nomical than a 50-50 corn silage-haylage program but only.if.£hg£gui§ jg relatively large labor supply available during September and Octo- ‘225. If a ready supply of seasonal labor is not available during that period, the corn silage-haylage program is a more economical alternative. 2. Bunker silos were more profitable than tower silos on all size firms considered, but the difference was only economically sig- nificant on the large farms (3 to 5 full-time men employed). 3. Liquid manure disposal systemS'were slightly more econo- mical than the conventional system. The findings relative to selection of a forage program point out the importance of having an adequate labor supply available dur- ing harvest time if a high corn silage program is to be carried on. This labor requirement may possibly be met by trading work.with neighbors, custom Operators or regular seasonal labor but the opera- tor should know whether these Opportunities are available before em- barking on a high corn silage program. . Bunker silos were more economical than tower silos under all four labor situations but when one full-time man was employed, the difference in returns was only about $1,000. However, when five full- - 136 - time men were employed the difference was around $7,000. This im- plies that on farms with one full-time man the decision to use bunker or tower silos is not too important but on larger farms, employing three to five men, bunker silos have a definite economic advantage in the storage of corn silage. The findings relative to bunker silos only apply when a 100 percent corn silage program is used. At pre- sent, storing haylage in bunker silos is not generally recommended since prevention of spoilage requires very close management in fil- ling, packing, and sealing. In comparing conventional and liquid.manure disposal systems, the liquid system was more profitable under all labor situations and size of farm did not significantly alter the degree of relative pro- fitability. The difference in profitability ranged from about $1,000 to $3,000. Such a finding would imply that if a dairyman is building a new housing facility he should consider a liquid manure disposal system. The fact that such a system offers more flexibility in the manure spreading schedule would make it even more advantageous. When the most profitable of each alternative were combined, the returns from such a combination were considerably greater than a com- bination composed of the less profitable alternatives. When seasonal labor was available and one full-time man employed, a system composed of a 100 percent corn silage program, bunker silos and liquid manure disposal (CS-B-L) returned $7,000 more than a system composed of a corn silage-haylage program, tower silos and conventional manure dis- K. _- ‘- - 137 - posal (CH-T-C). When five men were employed, this difference was $22,000. However, the influence of the availability of seasonal 1a- bor for harvest on the corn silage program more than offset the prof- itability of the bunker silos and liquid manure system over their al- ternatives. When seasonal labor was not available in October and one full-time man employed, the CH-T-C system.returned $4,000 more than the CS-B-L combination. When five men.were employed, this difference was over $6,000. This illustrates again the relative profitability of the 100 percent corn silage program over the corn silage-haylage program when seasonal labor is available for harvest; but it also stresses the importance of having relatively large amounts of labor or custom hire service available in both September and October if a 100 percent corn silage program is to be used. Limitations gf the Study and Future Research Needs A major limitation of the study was the lack of input-output data needed in evaluating new technologies not included in this study. These included slatted floors, spreading manure through an irrigation system and disposing of manure by aerobic bacteria action as possible improvements on the liquid manure system. "Conveyor belt" milking parlors may replace the herringbone parlor and a mixture of urea, straw and sawdust has been demonstrated to be a high milk producing ration in experiments carried out in Europe. These innovations and others of equal importance should be researched as soon as possible - 138 - so that an evaluation of their merits can be passed on to the dairy- men who want to continue to stay in business and compete. Another limitation was the lack of data relative to large herds. Economies of size studies usually do not consider herd sizes of over 200 cows. There have been no studies that indicate when or if dis- economies of size become important. There aren't enough herds in the 500 to 1,000 cow range in the country where conditions are similar to those in Michigan to make such a study at this time. Still another limitation of this study and any study which must include assumptions concerning management, was that some of the es- timates made relative to management were based on inconclusive and qualitative data. There is an urgent need to research the various facets of management such as time required, cost, necessary qualities and structure. In this study, the goal was profit maximization. It was assumed the operator had management ability of a degree necessary to acquire the yields estimated. The findings from such a study are important and can be very helpful to dairy farm.managers in making adjustments. It would be much more meaningful, however, if costs, more accurate time requirements, other goals and the results to variations in man- agement abilities could be included in the program. Although this study explored how returns were affected by various technological combinations, sizes of labor force, availability of sea- sonal labor, and prices of inputs and outputs, answers to other prob- lems could be found by making slight modifications in the model. - 139 - These include such things as making adjustments in labor require- ments to reflect different levels of labor efficiency, adjustments in yields to represent different levels of management or effect of weather and adjustments in other input prices. Items such as capital and land, assumed unlimited herein could be made limited and inclu- ded in the constraints or be included as buying activities. These modifications could be very helpful in answering other important questions. Suggested Action These findings and limitations imply the following actions to the relevant people: The Researcher 1. Time and motion studies on the many new technologies not yet studied. 2. Collection of investment and operating costs on these tech- nologies. 3. Mere intensive research; maybe even case studies on some very large dairy farms in Michigan and neighboring states with emphasis on the economies and diseconomies of size especially in the area of labor utilization. 4. Develop techniques to measure management. 5. A study involving modifications of the model used herein to answer other relevant questions. - 140 - The Extension Worker Continue to educate the dairyman concerning the relative advantages of the new technologies where conditions merit their adoption. The gap is great between what is available and what is typically used. Strive to break down the traditional policies used by dairy- men in employing workers such as long hours, no overtime pay, low wages, requirement that hired men live in tenant house and no plan for advancement. The farmer must recog- nize the worker as a human being, not just another neces- sary input to be treated like a tractor. The Dairyman Modernize--adopt the technologies that research has shown to be economically superior to alternatives. Manage first, then help the hired labor on production ac- tivities if there is time. Don't be afraid to pay the price necessary to get qualified help. This study implies that it will pay. APPENDICES APPENDIX A This appendix consists of the various right hand sides, the coefficients for the various activities and the basic Linear Pro- gramming Tableau used. :Ou Hunvm HO swan Houwmuw: OOHMHame amHm u w an :0» Hence no saga mmmH: mmHmHamHm cmHm + a An omH n nomH u omH + omH + msoo uHEHH 300 300 o o o 0 .sn Hmmmcmuu aHsuw cuoo you 0 o o o .u3o nommamuu HHH: HHS mNm + mmH + OMH + me + z : : HmnHOuUO DOC WNM + de + OMH + n0 .7 : : : Hmnamummm mmo SN + CH + o2 + me + ._ _. ._ “Sara 35 2N + m2 + 2 + mm + .. __ .. .33. N8 MNM + mmH + OMH + me + : : : GGHHH. a0 mNm + m3 + o2 + 3 + .. .. .. has <20 mNm + moa + OMH + no + : : : HHHQdN mO .umzn.>oz zzo m.oom + m.mHm + e.o¢m + m.mmN + : : : umaouoo uoz m.oom + m.mHn + o.e¢m + m.mmN +. : .. : Hmnamummm mmz meoN + Name + seem + m.mnN + .. _. ._ brewer BE NeNe + Name + seem + TEN + .. .. .. 33. NE n.oow + a.mHm + c.0qm + m.mmN + : : : mash mm: meow + min + 99% + mNmN + .. .. .. as as meow + 93m + ream + m.mmN + .. .. r 3.23 as; m.Nmm¢+ m.mmmN+ o.NMNH+ n.0mNH+ : HocwH maHxHHE .uu::.>oz zzz ¢.NN¢ + ¢.mno + m.omm + m.me + : : Muscuoo OOH q.nnm + ¢.mno + m.omn + m.me + : : nunamuamm mmH 9.02 + e.mNm + :3 + «ANN + .. .. 03mg. :3. HNNN + N53 + H6?” + N43. + .. _. 32. N2. ¢.NNm + «.mno + m.omm + m.me + : .. mash may ¢.NNm + «.mmo + m.omm + m.me + : .. has oz 22H .How own: you umou no awe .wmu m sea .wou m doe .wmu N cmfi .wmu H OOHQ .umno msHm .Homo msHm .uoao man .umao uHcD awuH 36¢ a m N H Hopoz wcHaamuwoum ummnHH 05H OH OOOHuwsuHm HOHOH usom waHuomeom :mOOHa> a: use H4 OHLOH -NS - OH oH oH 0H OH OH maoo uHEHH 300 3CD one one one one one one .se neurones afieum csoo Boo oomHn oomHn oomHn oomHu oomHa oomHu .uso ummmamuu xHHZ HHS : : : HGQOUUO DOC : : : umnamunmm mmo : : : u 3&3. :3 .. .. .. %H:n who 3 = 2 was.” who .. : : .32 $8 : : : HHHQ< mo .uqzu.>oz zzo N.nH N.nH N.nH N.nH N.nH N.nH e r r Hrecto ooz w.HH o.HH o.HH o.HH o.HH w.HH r z r Herseeeem mm: m.w m.w m.w m.w m.w new : : : umfiw3< Doz zzz e.oe m.ne o.on e.Nn N.mn m.on = : umeoeuo ooe o.Nn e.en e.Nn m.en o.on e.Nn z e emeaeeoen mes e.oN m.eN e.NN N.eN o.NN e.eN : : seem=< ore e.Ne N.ee e.nN N.eN o.NN e.eN = : ease Noe o.on n.en o.on n.nm N.eN H.Nm z e «are use o.oe e.Ne o.NN n.on N.Nn H.nn .. r ea: axe o.Hm e.nn o.on e.om e.Nn n.nm : : HNue< may o.oeH m.HoH H.nnH o.eoH H.oeH o.NoH .eer NoeeH .rez-.>oz zze oN.NonN oo.NoeN oe.nomN oN.NwNN oo.oenN oe.HonN .Hoo “No: use “moo Ho Ha+soe oHo Am+soe oHo Hm+eee oHv Hm+soe oHo Hm+soe oHo Hm+soe oHo A-E-mo o-a-mo a-o-mo o-m-no A-E-no o-e-no ear: amuH ram 0 m a m N H mama no mzoo omH nuHB mahwm munn OHumsuahm so mcoeum>oaaH HOOHonOcnOOH mo mOOHumaHnEoo me menueeHNem HHe eue>auuaue< aoauesooum aaHz.eon mueeneannooo Na eHeee - eeN - oH oH oH on oH oH mace uNaHH zoo zoo one one one one one one .ee sewerage eNeum eroo Boo oonH- oomN- oonH- ooNH- oomH- oomH- .ure ueneeeee ran: AHz : : : H0£Ou00 COO : : : Hwnawumwm mmO .. .. .. reams... ooz zzz N.oe H.mo N.nn o.on o.en H.on r = renoueo ooa o.Hn N.en o.on e.Nn o.oe e.Nn = r renamueen any N.eN H.eN o.NN e.eN o.HN N.eN : : “manna one N.Ne N.ee o.NN e.eN o.NN N.eN r r earn Nos o.on o.eN N.eN H.Nm o.eN e.Hn : = mean may o.em e.Ne N.Nn H.nn o.Nn e.em r r em: axe o.on N.mm o.NN n.nm e.Nn m.nn : r HNee< may w.neH m.ooH H.on o.NoH H.NeH o.HoH .eer “oneH .eez-.>ez zze oo.NNoN oo.NoeN oo.NenN oN.NNNN oo.NNnN oe.HonN .Hoe one: “we eeoo no Nm+3oe oHo Nm+see oHo Am+3ou oHo Hm+soe oHo Am+eee oHo \Nm+30e oHo A-E-mo o-e-mo a-m-no o-m-no A-E-no o-e-no ear: area rem :|,o n e m N H msoo onH one”. 0.32 533 mag .0125 0.39388 so mOOHum>o§H HmOHmoHoasomH. No 30333800 me weauemanem AHe euapneooo eeN>Hue< coauoeooum NHH: Hon eeeoaennnmoo m< «Home n muH u $80 38.3 300 300 o.Hn o.mmu .sn u0mmcuuu chuw Ouou Boo .uzo u0m0cmuu xHHz HHZ : : : HmDOuUO UGO : : : Hmnfiwumwm mmO _. .. .. 3&3. 3o : r e ease woo : : : mflDH WHO : : : hflz <20 e e e Haeeo eO .uuzn.>oz zzo : : : HmnouoO 002 : z : Hmnfiwuamm HMS : : : uwaD< Doz zzz N. .. .. 0388 ooe : : H0na0um0m mmH H. .n< our N< e0Hnee : : seams< :49 H. ea oeueaH 00m e0re .Ha 0Heee an o0umNH r e ease Nos 0. .v0EEmuwoua 0u03 0H0 >05H .wmeamuw : : 0::H th n. Hfi zuH>HuOO Mom 005H0> noun 0903 :mmva : : >02 H039 was: uswfim: “Dom : : HHHQ< moz 229 ON.H o¢.oo .Hoo and: u0a umoo no m< N< H¢ H.2nv H0ueeo Hm + see oHo 0=H0> n one: a0eH rem ouoo choc HHH: mam .voum 0O=voum coanowz cu0su=om aH mauHm muHmn 0HO0£OGNm How =00Hn09 wcHEEONwoum H00OHH OHmwm ¢< 0Hn0H u qu o.H o.H- mo.m o.H o.H o.H o.H o.H o.H- o.H- o.H- o.H- o.H- o.H- mo.m mo.m mo.n mo.m mo.m mo.m o.H o.H- o.H- mo.m oo.m oo.m 300 900 HHS mmo Do OHHm n 50H A.munM HOOOH Honom00m 0NN: HoeeeaeeOOV ea easea 300 HOD o.H HHS o.H DOC o.H Mmo o.H Do ouNm Ao0=oHuooOV o< 0Hooe n wuH u APPENDDC B Under labor situation II when two full-time men were employed and when seasonal labor was available from July through October, the optimum solution for four of the technological systems contained 150 cows each. That is, the program was stopped by the "150 cow limit" and not by the limit placed on labor (see Table 4-2a). The herd size limit was included in the constraints because it was assumed that the coefficients, milking facilities, and basic machinery comple- ment used were only relevant for herds of 150 cows or less. The problem was analyzed again after removing the "150 cow'limit" restriction. The results are given in Table B-1. The cost of milk- ing facilities and machinery complement reflect those relevant to herds of 150-300 cows. Due to economies of size, if the coefficients used also had been relevant to herds of over 150 cows, the solution would have resulted in even more cows and higher returns. MHm.Nm mn¢.eN oem.om mmo.wN .Hoo Heumu0oo ou ausu0m eoN.nN eeN.nN eeN.mN eeN.MN Hoooa oNo.eH oNo.eH oNo.oH oNo.oH .Hoo uoeoH eNe.e eNe.e eNe.e eNe.e .Hoo NooeHeooa.oHooo oon.o oon.e oom.e oom.e .Hoo ooHoHHHooH onxHHz ”ooooo ooxHo Non.nn NHN.Nn emH.on NnN.Hn .Hoo opoooom ooan oooooHon o0 ransom nN.on me.no oH.oe NN.mo .Hoo m>z <2H ¢SH ozo H ooHooo een moo oNn NNn ooo.H .ooe omen HoooH oaHooooo oNo.on OMN.mwN omw.mNm oom.qu .5 .H00 uc0au00>cH HauOH men one eoe one a moron oooHoooo HNH mnH wNH moH 8 .oc mua08000Ha0H + 0300 H-m-mo o-m-no H-a-mo o-H-no ooHo> oHoo aooH e n N H o H0nou0o u NHOH 0H20HH0>< Hoan H0OOo00m .aoS v0uHm 0EHH HHOm 039 “SonOGSOOH mo 0OOH00cHnaOo ua0u0mmHn nuHa mauHm NHHmo v0uHm0£uchm we mHmmHma< mo muHsm0N Hum 0Hnms u omH APPENDIX C This appendix involves the results of the parametric functions performed on the various synthesized firm problems by varying the price of milk and the price of corn. were run: A. On the price of milk 1. From $5.00 to $6.00 a. b. g. h. CS-B-L, Labor Situation CS-B-C, CS-B-L, CS-B-L, CH-T-L, CH-T-L, CH-T-L, CH-T-L, Labor Labor Labor Labor Labor Labor Labor Situation Situation Situation Situation Situation Situation Situation The following parametrics I, Seasonal labor July-October II, Seasonal labor July-October III, Seasonal labor July-October IV, Seasonal labor July-October I, Seasonal labor July-September II, Seasonal labor July-September III, Seasonal labor July-September IV, Seasonal labor July-September 2. From $5.00 to $4.00 on (a) through (h) above B. On the price of corn from $1.25 to $.75 on (a) through (h) above On the positive range in milk price, only (a) resulted in any shifts in solution. The results are in Table Cl. On the negative range in milk price there were no changes in the solutions of any problem. Therefore, there are no tables pertaining to those runs. All but one of the parametrics on the corn price range resulted in shifts in solution. The results of these shifts are in Tables C2-C9. - 152 - Table C-l Effect of Varying the Price of Milk8 on a Synthesized Dairy Firm with CS-B-L Combination,b One Full Time Man and Seasonal Labor July-October Original lst Sol. Final _I£em Unit solution change solution Price of milk Dol. $ 5.00 $ 5.74 $ 5.78 Corn grain produced Acres 116 103 85 Corn grain purchased Bu. 0 1,399 3,344 Cows & replacements No. 116 118 120 Overtime labor used Hrs. 142 143 146 Seasonal labor used Hrs. 488 506 534 Fixed labor supply unused Hrs. 77 48 11 Objective value Dol. 38,432 49,512 50,100 Total fixed costs Dol. 13,577 13,221_ 13,211 Return to operator Dol. 24,855 35,935 36,523 a) Price varied from $5.00 to $6.00 b) CS-B-L refers to a combination of technology consisting of a 100 percent corn silage program (CS) bunker silos (B) and a liquid manure system (L). - 153 - Table C-2 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CH-T-L Combination,b One Full Time Hired Man and Seasonal Labor July - September Item Price of corn grain Corn grain produced Corn grain purchased Cows & replacements Overtime labor used Seasonal labor used Fixed labor supply unused Objective value Total fixed costs Return to operator Original 1st 801. Final Unit gglggion chgggg, solution Dol. s 1.20 s .99 s .32 Acres 99 40 0 Bu. 0 6,298 10,495 No. 99 107 110 Hrs. 125 147 149 Hrs. 263 328 366 Hrs. 449 357 324 Dol. 32,234 32,234 33,721 D01 M M 1_3.a_5.7_7 Dol. 18,657 18,657 20,144 a) Price varied from $1.20 down to $.75. b) CH-T-L refers to a combination of technology consisting of a corn silage-haylage program (CH) tower silos (T) and a liquid manure disposal system (L). - 154 - Table C-3 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CH-T-L Combination,b Two Full Time Hired Men and Seasonal Labor July - September Original lst Sol. Final Item Unit solution change solution Price of corn grain Dol. $ 1.20 $ .99 c Corn grain produced Acres 147 121 Corn grain purchased Bu. 0 2,793 Cows & replacements No. 147 150 Overtime labor used Hrs. 287 297 Seasonal labor used Hrs. 500 528 Fixed labor supply unused Hrs. 484 406 Objective value D01. 46,849 46,849 Total fixed costs Dol. 39,581 ‘gQ,§§Z Return to operator Dol. 26,262 26,262 a) Price varied from $1.20 to $.75. b) CH-T-L refers to a combination of technology consisting of a corn silage-haylage program (CH) tower silos (T) and a liquid manure disposal system (L). c) "150 cow limit" constraint prevented further change - 155 - Table C-4 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm.with CH-T-L Combinationb Three Full Time Hired Men and Seasonal Labor July - September Original lst Sol. Final Item Unit solution change solution Price of corn grain Dol. $ 1.20 $ .98 $ .82 Corn grain produced Acres 195 29 0 Corn grain purchased Bu. 0 17,790 20,664 Cows & replacements No. 195 216 218 Overtime labor used Hrs. 448 509 493 Seasonal labor used Hrs. 661 879 890 Fixed labor supply unused Hrs. 454 234 235 Objective value Dol. 62,473 62,473 65,369 Total fixed costs Dol. 39,252_ 39,252 ‘§9,g§g Return to operator Dol. 32,214 32,214 35,110 a) Price varied from $1.20 to $.75 b) CH-T-L refers to a combination of technology consisting of a corn silage-haylage program, (CH) tower silos (T) and liquid manure system (L). - 156 - Table C-5 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CH-T-L Combination,b Five Full Time Hired Men and Seasonal Labor July - September Original lst Sol. Final Item Unit solution change Solution Price of corn grain Dol. $ 1.20 $ .98 $ .83 Corn grain produced Acres 291 43 0 Corn grain purchased Bu. 0 26,499 30,778 Cows & replacements No. 291 322 324 Overtime labor used Hrs. 805 892 858 Seasonal labor used Hrs. 1,072 1,397 1,414 Fixed labor supply unused Hrs. 503 173 163 Objective value Dol. 92,092 92,092 96.092 Total fixed costs Dol. 44,212_ 42,594 [42,224 Return to operator Dol. 47,813 46,588 50,588 8) Price varied from $1.20 to $.75 b) CH-T-L refers to a combination of technology consisting of a corn silage-haylage program (CH) tower silos (T) and a liquid manure disposal system (L). - 157 - Table C-6 Effects of Varying Price of Purchased Corna on a Synthesized Firm with CS-B-L Combination,b One Full Time Hired Man and Seasonal Labor July - October Original lst Sol. Final Item Unit solution change Solution- Price of corn grain Dol. $ 1.20 $ 1.07 $ .93 Corn grain produced Acres 116 103 0 Corn grain purchased Bu. 0 1,399 12,470 Cows & replacements No. 116 118 131 Overtime labor used Hrs. 142 143 274 Seasonal labor used Hrs. 488 506 659 Fixed labor supply unused Hrs. 77 48 0 Objective value Dol. 38,432 38,432 39,084 Total fixed costs Dol. 13,211 '13,211 13,211 Return to operator Dol. 24,855 24,855 25,507 a) Price varied from $1.20 down to $75. b) CS-B-L refers to a combination of technology consisting of a 100 percent corn silage program (CS) bunker silos (B) and a li- quid manure system (L). - 158 - Table C-7 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CS-B-C Combination,b Two Full Time Hired Men and Seasonal Labor July - October Original lst Sol. Final Item Unit solution change solution Price of corn grain. Dol. $ 1.20 c c Corn grain produced Acres 150 Corn grain purchased Bu. 0 Cows & replacements No. 150 Overtime labor used Hrs. 207 Seasonal labor used Hrs. 688 Fixed labor supply unused Hrs. 68 Objective value Dol. 51,002 Total fixed costs Dol. 20,587 Return to operator Dol. 30,415 a) Price varied from $1.20 down to $.75 b) CS-B-C refers to a combination of technology consisting of a 100 percent corn silage program (CS), bunker silos (B) and a conventional manure system (C). c) "150 cow limit" constraint prevented any change in solution - 159 - Table C-8 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CS-B-L Combination,b Three Full Time Hired Men and Seasonal Labor July - October Original lst Sol. Final Item Unit solution change, solution Price of corn grain D01. $ 1.20 $ 1.00 $ .95 Corn grain produced Acre 235 102 0 Corn grain purchased Bu. 0 14,573 25,481 Cows & replacements No. 235 256 268 Overtime labor used Hrs. 686 939 1,058 Seasonal labor used Hrs. 1,150 1,401 1,545 Fixed labor supply unused Hrs. 0 O 0 Objective value Dol. 76,641 76,641 77,330 Total fixed costs Dol. 30,259 30,259 30,259 Return to operator Dol. 46,382 46,382 47,071 8) Price varied from $1.20 down to $.75 b) CS-B-L refers to a combination of technology consisting of a 100 percent corn silage program (CS), bunker silos (B) and a liquid manure system (L). - 160 - Table C-9 Effects of Varying the Price of Purchased Corna on a Synthesized Dairy Firm with CS-B-L Combination,b Five Full Time Hired Men and Seasonal Labor July - October Original lst 801. Final Item Unit solution change solution Price of corn grain Dol. $ 1.20 $ 1.00 $ .95 Corn grain produced Acres 350 152 0 Corn grain purchased Bu. 0 21,707 37,953 Cows & replacements No. 350 381 400 Overtime labor used Hrs. 1,287 1,675 1,853 Seasonal labor used Hrs. 1,835 2,209 2,423 Fixed labor supply unused Hrs. 0 O 0 Objective value Dol. 112,393 112,393 113,418 Total fixed costs Dol. 42,294 .42,294 42,294 Return to operator Dol. 66,889 66,889 67,914 a) Price varied from $1.20 down to $.75 b) CS-B-L refers to a combination of technology consisting of a 100 percent corn silage program (CS) bunker silos (B) and a liquid manure system (L) BIBLIOGRAPHY Brown, L. D., Thomas, J. W., and Emery, R. 8., "Effect of Feed- ing Various Levels of Corn Silage and Hay with High Levels of Grain to Lactating Dairy Cows," Journal 22 Dairy Science, Vol. 48, No. 6, June, 1965. Buxton, B. M5, "Economies of Size in Minnesota Dairy Farming," unpublished Ph.D. dissertation, University of Minnesota, 1967. 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R., and MOchrie, R. D., "Corn Silage as the Only Roughage for Dairy Calves," Journal 22 Dairy Science, Vol. 42, No. 5, May, 1959. Oygard, G., 4 Reviewing Recent Studies 2£_Liqnid Manure Handling and the Use 22 Slatted Floors: Dairy §ystems 1n Northwestern Europe, 1960-1965, A. E. Res. 197, Cornell University, Agricultural Experi- ment Station, April, 1966. Project 99 - Rural Michigan Now and 1n 1980, Michigan State Uni- versity Agricultural Experiment Station and Cooperative Extension Service, Research Report 45, January, 1966. Suter, R. C., Forage Crnps: Harvesting, Research Progress Re- port 218, Agricultural Experiment Station, Purdue University, April 1966. BIBLIOGRAPHY (Continued) Tinsley, W. A., Rates for Custom Work 1n Michigan, Extension Bulletin E-458, Michigan State University, February, 1967. United States Department of Agriculture, U.S. Census ggnAgri- culture, 1959. Vol. 1, Part 13, Washington: U.S. Department of Commerce, 1959. Wright, K. T., and Caul, D. A., Michignn1§ Agriculture, Ex- tension Bulletin 582, Michigan State University, August, 1967.