Extension implications of budgets in decision-making as illustrated by dryland alternatives for diverted
wheat acreage
by Thomas S Rackham
A THESIS Submitted to the Graduate Faculty in partial fulfillment of the requirements for the degree
of Master of Science in Agricultural Economics at Montana State College
Montana State University
© Copyright by Thomas S Rackham (1955)
Abstract:
This thesis is an exploratory study in the extension-farm management problem area. It is based on the
diverted wheat acreage problem in Montana. Wheat_acreage allocations generate enterprise selection
and combination problems for specialized wheat farmers. Extension agencies may be involved in
educating these farmers in how best to seek a solution to their current problems.
It is thought that farmers faced with problems of this kind can best prepare themselves for
decision-making relative to their individual circumstances by using a budgeting method of analyzing
the alternatives which lie before them. The objective of this study is to lay out a budgeting method
which can serve this end as well as provide a vehicle for extension demonstration of how on-the-farm
choices between alternatives may be made. A series of illustrative budgets for a synthesized case farm
is used as a model.
Analysis of this array of budgets indicates some of the short-comings of the method yet demonstrates
the potential effectiveness of budgeting in compelling the budgeter to make a critical study of his
business operation and an explicit selection of assumptions relevant to the problem.
The comparisons made bring the budgeter into decision-making areas of thought relative to purely
monetary considerations. However the budgets fail to take explicit account of the non-monetary aspects
involved in the farmer's considerations, which nevertheless have far-reaching effects on his economic
decisions.
Some thought is directed towards the development of a formalized consideration of these non-monetary
objectives of the farmer. Also considered is the possibility of improvement in the kind and sources of
data basic to farm budgeting. Further research in these two problem fields is indicated. EXTENSION IMPLICATIONS
OF BUDGETS IN DECISION-MAKING
AS ILLUSTRATED BI '
DRYLAND■ALTERNATIVES FOR DIVERTED
MHEAT ACREAGE
by
T„ S. Rabkham
A THESIS
S ubm itted to th e G raduate F a c u lty
tin
p a r t i a l f u l f i l l m e n t o f th e re q u ire m e n ts
f o r th e d eg ree of
M aster o f S cien ce i n A g r ic u ltu r a l Economics
at
Montana S ta te C ollege
Approved.
H e a d /M a jo 'r D e ^ ftm e n t
Chairm ap^Ji& am ining Committee
Bqzeinan5 Montana
J u ly 5 1955
''"/''I!/.-/
!//,,Yi
-V,-
ii
7
H i rI?
►2TABLE OF CONTENTS
T itle
Page
L is t o f T ables ......................................................................................................................
6
L i s t of B u d g ets......................................................................................................................
7
Acknowledgements ..................................................................................................................
8
A b s t r a c t ......................................................................
9
PART I .
INTRODUCTION...............................................
10
E xtension-E conom ics Problem A rea...................................................................10
Background t o e x te n s io n -fa rm managementproblem .........................
10
E x ten sio n f u n c tio n s i n farm management................................................... 12
The N ature of th e S u rp lu s Wheat P r o b le m ............................................ lit
D iv e rte d Acreage R esearch i n M ontana. . . .
P ro g re ss up t o 195U. . . . . . .
......................
. . .
17
.......................................................
18
Im p lic a tio n of re s e a rc h a lre a d y p u b lis h e d ............................... .
20
O rie n ta tio n o f C u rre n t S tudy. . ..............................................................
22
Wheat a c re a g e d iv e r s io n im p lic a tio n s f o r e x te n s io n
. . . .
P r o je c tio n in to o b je c tiv e s o f c u r r e n t s tu d y ..................................
22
23
Locale o f s tu d y ..................................................................................................2k
D e s c rip tio n o f s tu d y a r e a ............................................................................23
Type o f fa rm in g ..................................................................................................26
PART I I .
PROBLEM AND HYPOTHESES...............................................................................
30
The Problem ...............................................................................................................30
The f a r m e r 's p o in t of view . ..................................
30
116785
-3 -
T itle
Page
.
PART II.
PROBLEM AM) HYPOTHESES (continued)
The e x te n s io n w o rk e r's p o in t o f view ................................... ....
33
The r e s e a r c h problem . . . . . . . . . . . . . . . . . .
3k
.................... .
33
H ypotheses r e l a t i v e to th e r e a c tio n o f fa rm e rs t o th e
problem s i t u a t i o n . . ........................................................... .. . .
33
H ypotheses r e l a t i v e to th e re s e a rc h problem . . . . . . .
36
PART II I. ATTAdtiffi THE PROBLEM. . . . . . . . . . . . . . . . . . .
38
The F a rm e r's A pproach. . . . . . . . . . . . . . . . . . .
38
Hypotheses . . . . . . . . . . . . . . . . .
U n sy stem atic- fo rc e d a c tio n
S y s te m a tic . . . . . . . . .
........................... . . . . . . .
38
......................... . . . . . . . .
39
The E x te n sio n W orker's A p p r o a c h ............................................. . .
Ul
The R esearch Approach . . . . . . . . . . . . . . . . . . .
Ul
Technical methods* . . . . . . . . . . .
U2
. . . . . . . .
A p p ra is a l of a l t e r n a t i v e methods ........................................' . .
UU
Appraisal of the budget.
u?
.
Use of the budget
PART IV.
U8
ILLUSTRATIVE BUDGETS . . . . . . . . . . . . . . . . . . .
3l
S y n th e s is o f th e Case Farm Model
31
Sources of Da t a . » . * * . . . . e * . . . . . . . . . . .
33
Basic Budgets
33
T ria n g le a re a w heat farm w ith o u t acreag e r e s t r i c t i o n s . '.
33
■'ll.™
T itle
PART
Page
IV. ILLUSTRATIVE BUDGETS (c o n tin u e d )
T ria n g le a re a w heat farm w ith a c re a g e r e s t r i c t i o n and
d iv e r te d a c rea g e i d l e ............................................
Budgets f o r Cropping a l t e r n a t i v e s . . .
.................. . . . .
5?
......................
. . .
57
f o r seed. . . .
60
B udgets f o r liv e s to c k A lte r n a tiv e s . ............................................
62
D iv e rte d a crea g e i n b a r l e y . . . . . .
D iv e rte d a c rea g e in c r e s te d w heat g ra s s
PART V.
57
D iv e rte d acrea g e
as a
b a se f o r a tu rk e y e n t e r p r i s e . . .
D iv e rte d acrea g e
as a
Taasef o r
D iv e rte d a c rea g e
as a
b ase f b r a sheep e n t e r p r i s e . . .
70
D iv e rte d acrea g e
as a
baSb f o r a co w -ca lf e n t e r p r i s e . ..
72
a
THE BUDGET IN DECISION-MAKING
In te r—
B udget D
s
c
hog e n te r p r is e . . . . 67
..................................... ..
In tra -B u d g e t S e le c tio n s . . .
76
........................... . . . . . . .
x
s
x
o
n
76
s
E x tra-B u d g et Decxsxons
PART
f 6U
VI. CONCLUSION. ....................................................
77
61
88
E f fe c tiv e n e s s of th e Budget i n D ecision-M aking, . . . . .
88
E x ten sio n I m p lic a tio n s ..........................
93
R esearch L^fipIx c a tx b n s . . . . . . o * .
98
Improvement of b a s ic d a ta f o r b u d g e tin g p u rp o s e s. . . .
99
E xtending th e budget framework t o in c lu d e f e a t u r e s of
th e o p e ra tin g p ro g ra m .. . . . . .
...................... . . . .
103
E xtending th e budget framework t o in c lu d e a c o n s id e r­
a tio n o f th e f a r m e r 's p re fe re n c e s ........................................
lOU
T itle
PART TL.
Page
CONCLUSION (continued)
Extending the budget framework to include a consider^
ation of the farmer's objectives . . . . . . . . . . .
IOii
..Need for more accurate f o r e c a s tin g .................... .... . . . .
106
New Research Indicated . . . . . . . .
APPENDIX................ .... . .........................................
APPENDIX A . . . . . . . . . . .
.
................................. . .
107
111
112
Demonstration of Budget Development
112
Budget I . . . . .
.
113
Budget -H. o » . . .
ti .119
Budget III . . . . .
Budget V . . . . .
120
.
122
-6 “
LIST OF TABLES
Number
T itle
Page
I
Wheat su p p ly and d is a p p e a ra n c e 5 U nited S t a t e s , 195>0-5>i|. . . . .
16
II
Number o f farnjs by ty p e o f fa rm - s e le c te d c o u n tie s of
Montana - 1 9 5 0 .. . ........................... . . . . . . . . . . .
. . .
26
c o u n tie s o f M ontana - 1950. . . . . . .
27
III
Main la n d u s e - s e le c te d
IV
C e re a l crop d i s t r i b u t i o n - s e l e c t e d c o u n tie s of Montana - 1950. .
28
V
Average d ry la n d w heat farm a crea g es i n th e t r i a n g l e a re a
a c c o rd in g t o so u rce and d a te . ................... ....
52
F in a n c ia l summary f o r d iv e r te d acrea g e a l t e r n a t i v e s on a
tr ia n g le - a re a w heat fa rm . ............................................ ...........................
79
Comparison of b u d g eted a l t e r n a t i v e s r e l a t i v e to fa m ily la b o r
re q u ire m e n ts, v u l n e r a b i l i t y t o in s o lv e n c y , and tim e
f l e x i b i l i t y , on a t r i a n g l e a re a w heat farm . ...................................
8I4
VI
V II
'r l -
LIST OF BUDGETS
Number
T itle
Page
I
T ria n g le a re a w heat farm w ith o u t acrea g e r e s t r i c t i o n s . . . . .
II
T ria n g le a re a w heat farm w ith
d iv e r te d a c rea g e i d l e ........................
III
T ria n g le a re a w heat farm w ith
d iv e r te d acreag e i n b a r le y .
IV
T ria n g le a re a w heat farm w ith d iv e r te d acrea g e i n
c r e s te d w heat g ra s s f o r s e e d . . . . . . . . . . . . . . . . .
61
T ria n g le a re a w heat farm w ith d iv e r te d acreag e as a b a se
f o r tu r k e y e n te r p r is e . . . . . . . . . . . . . . . . . . . . .
65
T ria n g le a re a w heat farm w ith d iv e r te d acrea g e as a b a se
f o r a hog e n t e r p r i s e . . . . . . . . . . . . . . . . . . . . .
68
T ria n g le a re a w heat farm w ith d iv e r te d acreag e as a b ase
f o r a sheep e n t e r p r i s e . ............................... . . . . . . . . . . .
71
V
VI
V II
V III
T ria n g le a re a w heat farm w ith d iv e r te d acreag e as a base
f o r a c o w -c a lf e n te r p r is e . . . . .
£6
?
.
-59'
73
'
-
8
-
ACKTJOWLEDGEMEWTS
The w r i t e r w ish es t o tak e t h i s o p p o rtu n ity f o r e x p re s s in g s in c e r e
a p p r e c ia tio n to a l l th e members o f th e s t a f f who c r e a te d th e enco u rag in g
environm ent i n w hich t h i s t h e s i s was p ro d u ced .
T a r t i c u l a r th an k s a re due
t o P r o f e s s o r C. B. B aker who gave much o f h is tim e to d is c u s s io n s c o n tr ib ­
u tin g t o th e developm ent o f t h i s s tu d y .
Thanks a ls o a re due to th e o th e r
members o f th e t h e s i s com m ittee e s p e c i a l l y Mr. D. 0 . M yrick and P r o fe s s o r
M. Co T a y lo r f o r guidance and c r i t i c a l rev iew o f th e m a n u sc rip t.
A lso
a p p re c ia te d i s th e c o n tr ib u tio n of p re v io u s and contem porary w o rk ers who
dev elo p ed much o f th e budget in f o r m a t io n .. Any e r r o r s ,or om issions i n t h i s
t h e s i s a r e , how ever, e n t i r e l y th e r e s p o n s i b i l i t y o f th e a u th o r.
/
ABSTRACT
T his t h e s i s i s an e x p lo r a to r y s tu d y in th e e x te n s io n -fa rm management
problem area* I t i s b ased on th e d iv e r te d w heat acreag e problem in
M ontana. Wheat_.acreage...a llo c a tio n s g e n e ra te e n te r p r is e s e l e c t i o n and
co m b in atio n problem s f o r s p e c ia liz e d w heat fa rm e rs . E x te n sio n ag en c ie s
may be in v o lv e d in e d u c a tin g th e s e fa rm e rs i n how b e s t t o se e k a s o lu tio n
to t h e i r c u r r e n t p ro b lem s.
I t i s th o u g h t t h a t fa rm e rs fa c e d w ith problem s o f t h i s k in d can b e s t
p re p a re them selves f o r d e cisio n -m ak in g r e l a t i v e t o t h e i r in d iv id u a l c i r ­
cum stances by u s in g a b u d g e tin g method o f a n aly z in g th e a l t e r n a t i v e s which
l i e b e fo re th e m .' 'The o b je c tiv e o f t h i s s tu d y i s to la y o u t a b u d g etin g
method w hich can s e rv e t h i s end as w e l l as p ro v id e a v e h ic le f o r e x te n s io n
d e m o n stra tio n o f how o n -th e -fa rm c h o ic e s betw een a l t e r n a t i v e s may be made.
A s e r i e s o f i l l u s t r a t i v e b u d g e ts f o r a s y n th e s iz e d case farm i s used as a
m odel.
A n a ly sis o f t h i s a r r a y o f b u d g e ts in d i c a t e s some o f th e sh o rt-co m in g s
o f th e method y e t d e m o n strates th e p o t e n t i a l e f f e c tiv e n e s s o f b u d g e tin g
in com pelling th e b u d g e te r to make a c r i t i c a l stu d y o f h is b u s in e s s , o p e r­
a t i o n and an e x p l i c i t s e l e c t i o n o f assu m p tio n s r e le v a n t to th e problem .
The com parisons made b rin g th e b u d g e te r i n t o d ecisio n -m ak in g a re a s o f
th o u g h t r e l a t i v e to p u re ly m onetary c o n s id e r a tio n s . However th e budgets
f a i l to ta k e e x p l i c i t acco u n t o f th e non-m onetary a s p e c ts in v o lv e d i n ' "
th e f a r m e r 's c o n s id e r a tio n s , w hich n e v e r th e le s s have f a r - r e a c h in g e f f e c t s
on h is economic d e c is io n s .
Some th o u g h t i s d ir e c te d tow ards th e developm ent o f a fo rm a liz e d
c o n s id e r a tio n o f th e s e non-m onetary o b je c tiv e s o f th e fa rm e r. Also
c o n sid e re d i s th e p o s s i b i l i t y o f improvement i n th e k in d and so u rces o f
d a ta b a s ic to farm b u d g e tin g . F u r th e r r e s e a r c h i n th e s e two problem
f i e l d s i s in d ic a te d .
-1 0 -
PART I
INTRODUCTION
E xtension-E conom ics Problem Area
llWhat a man h e a rs he may d o u b t5 w hat he sees s he may d o u b tj b u t w hat
he h im s e lf d o e s, he cannot d o u b t.«' I /
T his sta te m e n t
illu m in a te s one of
th e b a s ic means o f a c h ie v in g th e o b je c tiv e o f a g r i c u l t u r a l e x te n s io n , th e
e f f e c t i v e tr a n s fo rm a tio n o f id e a s in to p r a c t i c e .
I t is p a rtic u la rly
apropos i n r e v e a lin g a w eakness i n th e f i e l d o f e x te n s io n farm management.
H e re to fo re w id esp read e f f o r t s in t e l l i n g and showing fa rm e rs th e v alu e o f
farm management as a c o n sc io u s a c t i v i t y Seem to have met w ith r a t h e r lim ­
i t e d a c c e p ta n c e , even i n th e e le m e n ta ry phase o f keeping ad eq u ate farm
re c o rd s . -2/
What l i e s b ehind t h i s slow a d o p tio n o f a w o rth w h ile p r a c t i c e
i n an environm ent c a l l i n g f o r in c r e a s in g ly u rg e n t farm a d a p ta b ilit y ?
Background t o e x te n s io n -fa rm management p ro b lem . —Two o f th e more obvious
c h a r a c t e r i s t i c s of th e a g r i c u l t u r a l in d u s tr y a re i t s m agnitude and wide
I/
Anonymous s ta te m e n t.a p p e a rin g i n Saskatchew an Farm S c ie n c e , E x t. D ept.
C o lleg e of A g r ic u ltu r e , U niv0 o f Saskatchew an, V ol. I , No. I , (F ebru­
a r y , „195k) p . 2.
£/
<
A ccording t o B ra d fo rd and Johnson, management i s an in ta n g ib le p a r t of
p ro d u c tio n seen o n ly th ro u g h o b se rv in g th e d e c isio n -m a k in g p ro c e ss and
i t s r e s u l t s . A good manager m ust have th e s e l f - d i s c i p l i n e t o :
" D ire c t th in k in g tow ard o p p o rtu n ity f o r a tta in m e n t.
A tta ck problem s p re v e n tin g a tta in m e n t o f h is o b je c tiv e s .
E x tra c t th e optimum in fo rm a tio n from h i s environm ent.
C arry a n a ly s is f o r each d e c is io n to a fa v o ra b le d e g re e .
Take prompt a c tio n on h is d e c is io n s .
Accept th e consequences o f h is a c t i o n s . "
B ra d fo rd , Lawrence A ., and Johnson, Glenn L ., Farm Management A n a ly s is ,
John W iley & Sons, I n c . , New Y ork, (1953)•
-1 1 -
d is p e r s io n .
Both of th e se f e a tu r e s te n d t o o b s tr u c t ra p id d is s e m in a tio n
o f in fo rm a tio n b e ca u se th e in d u s tr y depends n o t on e a s i l y re a c h e d , la rg e
s c a ld , c e n t r a l i z e d , and c o -o rd in a te d a re a s o f a c t i v i t y , b u t on th e in d iv ­
id u a l e f f o r t s of numerous in d ep en d e n t and v i r t u a l l y i s o l a t e d one-man f i l m s .
I n n o n - a g r ic u ltu r a l in d u s tr y p ro g re s s depends on th e s k i l l f u l and p e rs o n a l
c o m p e titiv e m a n a g e ria l c a p a c ity o f r e l a t i v e l y sm a ll and w e ll tr a in e d admin­
i s t r a t i v e g ro u p s.
P ro g re ss in a g r ic u ltu r e depends le s s on c o n c e n tra te d
managment and more on an i n f i l t r a t i o n o f id e a s ( o r e ls e o u tr i g h t r e g u la tio n )
th r o u g h o u t.th e in d u s try -w id e d i s t r i b u t i o n o f th e s i n g l e - c e l l e d farm e n t i t i e s
w hich com prise a c o u n try ’ s a g r i c u l t u r a l b a s e .
A ll manner o f means may be used in th e p r e s e n ta tio n o f th e s e id e a s
b u t the.consum m ation o f p ro g re s s w i l l n o t be com plete u n t i l an id e a i s
a c c e p te d , a s s im ila te d , and p u t i n t o a c tio n by each and e v e ry fa rm e r
co n cern ed .
Each one, by th e v e ry n a tu re o f h i s in d ep en d en ce, w i l l be
s tim u la te d a t a d i f f e r e n t tim e , b y a d i f f e r e n t means, and t o a d i f f e r e n t
degree o f a c t i v i t y th a n h is n e ig h b o r.
There was a tim e when d e c isio n -m a k in g on th e farm re v o lv e d around
th e p ro d u c tio n o f p e rs o n a l household re q u ire m e n ts o f s u b s is te n c e .
Changes
came slo w ly enough , t h a t consequences o f m istakes, could alm o st be ig n o re d ,
and i f th e y became to o o p p re ssiv e f o r th e fa rm e r to b e a r , he co u ld move on
and make a new s t a r t on th e f r o n t i e r .
Farm management d e c is io n s now re v o lv e around th o se e n t e r p r i s e s which
u ltim a te ly produce m a rk e ta b le goods from w hich th e g r e a te s t r e t u r n p o s s ib le
may be d e riv e d from th e re s o u rc e s a p p lie d t o t h e i r p ro d u c tio n .
F o r th e
-1 2 -
in d iv id u a l contem porary fa rm e r a f a u l t y d e c is io n r e s u ltin g i n p o o r tim in g ,
in a d e q u a te use o r a v a i l a b i l i t y o f r e s o u r c e s , o r a m is -e s tim a te o f m a rk e tin g
c o n d itio n s , may be so c r i t i c a l to th e w e ll-b e in g o f h is farm as' t o s p e l l
th e d if f e r e n c e betw een su c c e ss and f a i l u r e .
Year by y e a r th e consequences of m is ta k e s i n farm management have
become in c r e a s in g ly damaging t o in d iv id u a l w e ll- b e in g .
In te llig e n t
d e cisio n -m ak in g on th e p a r t o f a l l fa rm e rs i s th e re b y becoming o f paramount
im portance t o th e w e ll-b e in g of th e in d u s tr y .
The a l t e r n a t i v e s in d ic a te d
a re e i t h e r a g r i c u l t u r a l chaos and h a rd s h ip , o r an a ll-e m b ra c in g a d m in is­
t r a t i v e r e g u la tio n w hich re p la c e s a la r g e p a r t o f th e in d iv id u a l re sp o n s­
i b i l i t y f o r c o r r e c t d e c is io n a t th e farm l e v e l .
E x ten sio n fu n c tio n s i n farm management.-- E v e ry y e a r th e r e a re fe w er farm ers
i n th e l h i t e d S t a t e s .
ev er.
Farm firm s a re l a r g e r .
P ro d u c tio n i s h ig h e r th a n
Faced w ith buoyant c o s ts and s u b sid in g p ro d u c t p r i c e s , th e s e b u s in e s s
firm s a re more dependent th a n e v e r b e fo re on e f f i c i e n c y f o r s u c c e s s .
i s le s s and l e s s room f o r management e r r o r s .
There
There i s more and more room
f o r management te c h n iq u e s d e sig n e d t o overcome d i f f i c u l t i e s i n f i t t i n g p ro ­
d u c tio n system s to farm re s o u rc e p a tte r n s and m a rk e tin g o u tlo o k s .
E xtensicn
program s need to p ro v id e means f o r more i n t e l l i g i b l e i n t e r p r e t a t i o n of
in fo rm a tio n r e le v a n t to im m ediate problem s and t o c r e a te v e h ic le s cap ab le o f
draw ing fa rm e rs i n t o a c tiv e and co n scio u s p a r t i c i p a t i o n in d ecisio n -m ak in g
p ro c e sse s.
The aim should be t o b re a k down any i n e r t i a p r e s e n t in f a rm e rs ’
a t t i t u d e s tow ards farm management p ro b lem s, s tim u la te r e c o g n itio n o f problem .
-1 3 -
situ a tio n s5 stim ulate anticipation of forthcoming sh ifts in economic
environment5 and stim ulate lo g ic a l step by step reaction to these
situ a tio n s.
To sum Up5 extension should seek to lead the farmer ipfo
practicing systematic farm management decision-making procedures.
This c a lls for further study of any peculiar economic character­
i s t i c s of the farm firm from which stem obstacles to the application of
ordinary business management procedures.
' There are other obstacles
with so c io lo g ica l roots, p articu larly in the innate character of man
withdrawn into the secu rity of his own domain.
Every farm has elements
of a minute independent p r in c ip a lity which leads to a lack of uniformity
aswe11 as an economic and so c ia l disun ity not commonly found elsewhere
in so ciety .
Such attitu d es of independence and s e lf-s u ffic ie n c y assoc­
iated with farming are vestiges of past stages in s o c ia l development
which are not in keeping with the organization of contemporary society.
Yet ^wishful thinking1* of th is order is probably the main reason farmers
cling to th eir farms, even though they may be better o ff economica,p.y ip
other occupations.
Extension has to breach these barriers with farm management ideas
which impose on the prerogative of the farmer who may say wI know how to
run my own business” or "Nobody can t e l l me what to do on my farm.”
These fee lin g s go a long way in explaining non-receptive attitu des
encountered on many farms.
However these same farmers admit th e ir need
farm management help by the a l l too common retort, ”You don't need to
t e l l me how, I alreay know more than I can put into p r a c tic e .” This is
—ill.”
th e c ru x o f th e e x te n s io n problem in farm managementa to a ch ie v e an e f f e c t ­
iv e d e m o n stra tio n o f how to g e t from where you a re to where you would l i k e
to be in c o n c lu s iv e te rm s .
C e r ta in ly no panacea i s exp ected to be found w hich w i l l s o lv e t h i s
problem o f “g e ttin g a c r o s s 11 to fa rm e rs w ith farm management te c h n i q u e s .■'
The g r e a t h e te r o g e n e ity o f th e a g r i c u l t u r a l in d u s tr y d e n ie s t h a t any o v e r­
a l l d e t a i l e d method i s l i k e l y to be d e v elo p e d .
R a th e r i f each segment i s
ta k e n s e p a r a t e l y «, th e weak sp o ts may be a s c e r ta in e d and th e problem a tta c k e d
acc o rd in g to th e in d iv id u a l c h a r a c t e r i s t i c s of t h a t segm ent.
The w heat
p ro d u c e rs o f th e U nited S ta te s c o n s t i t u t e such a segment o f th e a g r i c u l t u r a l
in d u s tr y .
A weak sp o t o f f e r in g one p o s s ib le a re a v u ln e ra b le t o e x te n s io n
a t t a c k i s th e d iv e r s io n o f acreag e from w heat p ro d u c tio n r e s u l t i n g from th e
s u rp lu s w heat s i t u a t i o n .
The N atu re of th e S u rp lu s Wheat Problem
In th e U nited S ta te s th e r e a re la r g e a g r i c u l t u r a l a re a s .in which w heat
has c h a r a c t e r i s t i c s of a d a p ta tio n which make i t e a s i e r to grow th a n com peting
c ro p s .
Because i t i s more dependable th a n o th e r cash c ro p s s i t may be
grown i n p re fe re n c e t o o ther, k in d s o f g r a in w h e th er w heat p r ic e s a re f a v o r ­
a b le o r n o t.
There i s a ls o a h ig h d eg ree o f u n c e r ta in ty from one y e a r t o
a n o th e r as to th e e v e n tu a l o u t- t u r n o f each su cceed in g c ro p .
In th e fa c e
o f th e s e c o n d itio n s a n o v e rsu p p ly s i t u a t i o n i s l i t t l e d e t e r r e n t to p ro d u c ­
tio n .
H i s t o r i c a l l y , a s w e l l , th e r e a c tio n o f s i n g l e - e n t e r p r i s e wheat
fa rm e rs t o d e p re sse d p r ic e le v e ls h as been an 'e f f o r t t o p ro d u ce more of
t h e i r p ro d u c t, th u s a c c e n tu a tin g any e x is t in g s u rp lu s d i f f i c u l t i e s .
%
Ii
I
In th e
s h o r t- r u n j, th e r e f o re 5 w heat p ro d u c tio n i n t h i s c o u n try responds slo w ly
to u n fa v o ra b le m arket c o n d itio n s , and u n c e r ta in though i t may b e , te n d s
t o exceed n a tio n a l n e e d s .
The w o rld m arket f o r U nited S ta te s w heat i s e q u a lly c h an g e a b le, t h e r e ­
by in c r e a s in g th e problem s o f s u rp lu s d i s p o s a l.
F o r in s ta n c e th e p o st-w a r
r e tu r n o f o f f - s h o r e c o u n tr ie s to g r e a te r s e l f - s u f f i c i e n c y i n w heat p roduc­
t i o n te n d s to d ry up U nited S ta te s e x p o rt tr a d e i n w h e at.
I n th e rem aining
f r e e m ark ets U nited S ta te s w heat may sometimes be a t a d isa d v a n ta g e due to
exchange and q u a l i t y c o n s id e r a tio n s .
At t h e same tim e th e home m a rk e t,
r a t h e r th a n expanding w ith th e c u rre n t p o p u la tio n in c r e a s e , rem ains r e l a ­
t i v e l y s t a t i c due to a d e c lin in g tre n d i n p e r c a p ita consum ption o f b r e a d .3 /
Thus com m ercial w heat p ro d u c e rs as a group have o ccu p ied an in h e r e n tly
u n s ta b le p o s i t i o n in th e n a tio n a l economy.
In an e f f o r t to s t a b i l i z e th e
p o s i t i o n o f th e se w heat p ro d u c e rs b u t somewhat in c o n tr a d ic tio n t o th e
im port o f th e above c irc u m s ta n c e s , n a tio n a l a g r i c u l t u r a l p o lic y i n th e p a s t
s e v e r a l y e a rs has encouraged a c o n tin u in g f u l l - s c a l e p ro d u c tio n o f w h e at.
3/
G ray, S o ren se n , and Cochrane c i t e M. K. B en n ett as th e o r i g i n a l a u th o r
and then p ro c e e d to e la b o r a te on th e r e l a t i o n s h i p betw een w heat and
p o ta to consum ption e x p re ss e d as a n a t i o n a l " c e r e a l- p o ta to r a t i o " w hich
i s p r im a r ily a s s o c ia te d w ith th e l e v e l o f economic developm ent of a
c o u n try . The advancing economic developm ent o f th e U n ited S ta te s has
r e s u lte d i n a tr e n d tow ards an in c r e a s in g ly v a rie d d i e t w hich in t u r n
has le d t o d e c lin e s in b o th p o ta to and w heat p e r c a p it a consum ption.
O ther f a c t o r s le a d in g to c o n tin u in g a d ju stm e n ts may em erge. F o r f u r ­
t h e r d e t a i l s see Roger W. G ray, Vemon R. Sorenson and W illa rd W.
C ochrane, The Im pact o f Government Program s on th e P o ta to In d u s tr y .
IMiv^.,o f M inn,,pA gric.' Exp. S t a . , Tech.. B u ll; 211, (J u n e , 1951;), p p ; 1 521 .,
-1 6 This has been e f f e c t e d by g u a ra n te e in g a r e l a t i v e l y fa v o ra b le (by com­
p a ris o n w ith o th e r a g r i c u l t u r a l p ro d u c ts ) and f o r m ost c o n d itio n s a p r o f i t ­
a b le p r ic e l e v e l f o r w h eat, h /
T his high minimum p r ic e l e v e l has had th e
s u b s id ia r y e f f e c t o f s t i l l f u r t h e r r e s t r i c t i n g th e marie t f o r w heat by
s h u ttin g o f f i t s e f f e c t i v e c o m p e titio n w ith o th e r p ro d u c ts f o r use as l i v e ­
s to c k fe e d o r f o r i n d u s t r i a l non-food p ro c e s s e s .
Add to t h i s s i t u a t i o n
th e e f f e c t s of a run o f good y e a rs combined w ith te c h n o lo g ic a l advances
in a g r i c u l t u r a l p ro d u c tio n which to g e th e r have r e s u lte d i n w heat cro p s con­
s id e r a b ly above e x p e c ta tio n s b ased on p a s t e x p e rie n c e .
A lto g e th e r, many n a tu r a l and economic phenomena have le d to th e
accu m u latio n o f ample re s e rv e s to c k s and an a c t u a l l y burdensome s u rp lu s o f
many c la s s e s o f w heat i n th e U nited S t a t e s .
The growth o f t h i s s u rp lu s
i s i l l u s t r a t e d by Table I .
Table !.--W h e a t su p p ly and d is a p p e a ra n c e . U nited S ta te s , 195>0-5Iu a /
T ear BeSupply
D isap p earan ce
g in n in g
C arry ­ P ro d u ctio n T o tal
P ro cessed O ther
E xports T o tal
J u ly I .
ov er
f o r Food
Uses and
b/
c/
D isp o sa l
I , 000,000 b u sh els —
- 1> 000,000 b u s h e ls 1950
lk 5 6 .o
489.8
h 2 h .l
1019.U
1059.6
235.5
334.5
196.2
980.8
201.2
1951
1408.7
481.5
4 70.3
1153.0
1952
1299.0
1576.2
474.2
255.7
223.8
315.7
1013.7
1953
146.6
562.5
473.8
215.2
1169.5
1737.5
8 35.6
969.8
1951 d / 901.9
(18 7 4 .7 )
a / Compiled from th e Wheat S it u a tio n , U.S.D.A. A g r ic u ltu r a l M arketing
S e rv ic e , (F e b ru a ry 28, 1955)•
b / In c lu d e s sm a ll im p o rts; not a d i r e c t summation o f c a r ry o v e r and p ro d u c tio n ,
c / U, S. procurem ent f o r e x p o rt.
d / P re lim in a ry .
h/
Some in d i c a t i o n o f th e p o s s ib le e f f e c t s o f p r ic e s u p p o rts on th e w heat
in d u s tr y may be drawn from th e s tu d y o f G ray, Sorenson, and Cochrane,
op. c i t . pp. 8 6 -8 ?.
This5 then con stitu tes the current national problem rela tiv e to wheat
production.
How may the surplus be reduced or held to manageable size
without throwing the affected segment of agricultural industry intb chaos
or disrupting the currently accepted international economic relationships?
To handle the problem within the United States constraint of off-farm sa les
of wheat has been suggested.
the farmer.
This merely places the onus of storage upon
Although there may be more waste the surplus problem remains
since there is no strong force to lim it production as long as price
maintenance remains an in teg ra l part of agricultural p olicy.
The Dhited
States government has chosen to in s titu te a direct means of production
control through wheat acreage reduction^ with a supported wheat price only
d ir e c tly available to the production from the allocated acreage.
At th is
point the national problem generates a problem of direct concern to the
wheat farmer in that he must decide how he w i l l adjust h is farm operation
to comply with the new constraints.
Diverted Acreage Research In Montana
This problem of what to do with acreage diverted from wheat production
has been the subject of a study f i r s t in itia te d at Montana State College
in 19US.
B riefly Stated5 the objective of the .study at that time was to
J
find out the f e a s ib ilit y and cost of sh iftin g wheat land out of wheat
production into alternative uses.
The reason for startin g the in v est­
ig a tio n then was the prospect that a mounting surplus of wheat would either
n ecessita te an acreage control program or cause a decline in wheat prices.
-1 8 -
P ro g re ss up to 19Bbo~~0o Le Mimms l i s t s a number o f p o s s ib le a l t e r n a t i v e s in
th e use o f d iv e r te d w heat la n d „ 5 /
He a ls o d is c u s s e s th e o b s ta c le s which l i e
i n th e way o f s a t i s f a c t o r y use o f d iv e r te d a c re a g e .
F i r s t 5 he s a y s 5
f a r m e r s ’ "la c k o f in fo rm a tio n " impedes d e cisio n -m ak in g r e l a t i v e to acreag e
re d u c tio n becau se th e y s u f f e r u n c e r ta in ty as t o p r ic e le v e l s and th e
e c ti o n o f governm ent p o lic y .
d ir­
S eco n d ly 5 w heat fa rm e rs la c k ex p eriep p q w ith
o th e r crops and liv e s to c k e n t e r p r i s e s .
T h ird ly , many w heat farm s la c k th e
w a te r and p a s tu r e re s o u rc e s im p e ra tiv e f o r s to c k p ro d u c tio n .
F o u r t h ,‘th e s e
fa rm e rs fa c e f i n a n c i a l o b s ta c le s i n th e form o f th e in v e stm en t c o s ts re q u ire d
f o r e s ta b lis h in g new e n t e r p r i s e s .
F i f t h 5 some a re a s la c k ad eq u ate commun­
i t y f a c i l i t i e s , such as s c h o o ls , to p e rm it y e a r round re s id e n c e on th e fa rm .
S ix th many farm s a re to o s m a ll, a v i t a l f a c t o r , p erh ap s u n d e r - r a te d .
Mimms
d e s c rib e s th e c r i t i c a l f a c t o r h e re a s b ein g t h a t even w ith o u t acreag e
r e d u c tio n many w heat farm s a re so s m a ll t h a t " p re ss u re f o r s u r v iv a l i s
g r e a t . " 6 / Even a s u b s t a n t i a l re s o u rc e d iv e r s io n on th e s e farm s p ro v id e s
in a d e q u a te la n d o r o th e r re s o u rc e s t o su p p o rt a w orthw hile a l t e r n a t i v e
e n te rp ris e .
te n a n c y .
The se v e n th and l a s t o b s ta c le l i s t e d i s th e p re v a le n c e of
This c r e a te s o b s ta c le s t o e f f i c i e n t use of d iv e r te d acreag e b e ­
cause o w n e r-o p e ra to r agreem ents a re r i g i d and th e c o n tr a c tin g p a r t i e s
5/
Mimms5 0 . L. " D iv e rte d A cres i n th e W est. - Some Farm O rg a n iz a tio n and
O ther P ro b le m s," P ro c e e d in g s , W estern Farm Economics A sso c ia tio n ^ (1 9 5 0 ).
6/
F o r f u r t h e r d e t a i l s see- R a in e r S c h ic k e le 5 "Farmers A d a p ta tio n s to
Income U n c e r ta in ty ," J o u r n a l of Farm Economics, Vol,- 32, (A ug., 1950)
pp.. 363-371;.
ft
—1 9 “
r e s i s t change, w h ile th e lo c a tio n and s iz e o f re n te d t r a c t s r e l a t i v e t o th e
o p e r a to r ’s h e a d - q u a rte rs a re f r e q u e n tly unhandy.
R esearch up t o 1950«, re p o rte d by Himms, in d ic a te d t h a t in c r e a s e s of
sumitierfallo w (w ith some e x c e p tio n s ) to ta k e up th e d iv e r te d acreag e con­
s t i t u t e d one o f th e b e s t a l t e r n a t i v e s , assum ing t h a t crop y ie ld s responded
as ex p ected .
O th er a l t e r n a t i v e s had o b s ta c le s such as p ro b a b le a d m in is tr a tiv e
c o n tro ls f o r b a r le y and fe e d w h e at, p r ic e and y ie ld u n c e r ta in t ie s f o r
c r e s te d w heat g ra s s s e e d , s i g n i f i c a n t added in v e stm en t f o r c a t t l e o r hogs.
He in d ic a te d t h a t c o n s id e ra b le re fin e m e n t o f sta n d a rd s used i n s e t t i n g up
b u d g ets was n e c e s s a ry and t h a t c o n tin u in g re s e a rc h on th e problem would
y i e l d r e tu r n s i n more p e r f e c t know ledge.
However, i n t e r e s t i n th e problem rem ained r e l a t i v e l y dorm ant d u rin g
th e Korean h o s t i l i t i e s , and th e p r o je c t was s id e tr a c k e d .
I n 1953 Baker
re-o p e n ed a c ti v e c o n s id e r a tio n o f th e re s e a rc h when he re v is e d Mimms’ bud­
g e ts i n l i n e w ith th e n c u r r e n t p r i c e s . '? /
He p o in te d out t h a t a 25 p e rc e n t
re d u c tio n i n w heat acreag e w ould, i f no a d ju stm en t w ere made t o o th e r uses
o f th e re s o u rc e s , reduce n e t income on d ry la n d farm s by ab o u t 35 p e r c e n t.
The f e a s i b i l i t y o f th e p o s s ib le a l t e r n a t i v e s , r e l a t i v e t o Mimms’ r e s u l t s ,
rem ained much th e same incom e-w ise e x ce p t t h a t th e c o w -ca lf e n te r p r is e
assumed a lo w er p o s itio n due t o d e c lin e in c a t t l e p r i c e s .
For a l l a lte r ­
n a tiv e s th e l e v e l o f income had d e c lin e d s in c e 1950 b ecau se p ro d u c t p r ic e s
?/
Baker, Cb B ., wWhat Are Alternatives for Reduced Wheat Acres?”,
Montana Farmer-Stockman, (July 15, 1953).
-2 0 -
had rem ained s ta b l e o r f a l l e n o f f , w h ile c o s ts had re a ch e d h ig h e r l e v e l s .
B a k e r’s work in d ic a te d t h a t e n te r p r is e rep lacem en t p o s s i b i l i t i e s are
l a r g e l y lim it e d to th o s e w hich can m inim ize b u t n o t w h o lly re p la c e th e
lo s s o f income r e s u l t i n g from w heat a c rea g e r e d u c tio n .
In t h i s c o n n e c tio n th e r e i s a n o th e r c o u rse of a c tio n f o r which th e
p o s s i b i l i t i e s have been d e s c rib e d by M. C. T ay lo r i n a re c e n t a r t i c l e , 8 /
He d ev elo p s in s ta n c e s o f economic s i t u a t i o n s some of w hich would fa v o r com­
p lia n c e and o th e rs non-com pliance w ith th e a c re a g e a llo tm e n t program , a s i t
e x i s t s f o r th e c u r r e n t 19£>5 s e a s o n ,
Sb long as th e c o n tr o l l e g i s l a t i o n
rem ains p e rm is s iv e , as i t i s now, a fa rm e r i n h is own i n t e r e s t ( t h i s however
may n o t be i n th e n a tio n a l in te r e s t) m a y d e c id e t h a t h is b e s t a l t e r n a t i v e
could, be non-com pliance r a t h e r th a n com pliance.
C u rre n tly t h i s d e c is io n
would r e s t on th e amount of o v e r-s e e d in g and th e fa rm e r’s a n tic ip a te d w heat
y i e l d r e l a t i v e t o "norm al” y i e l d f o r h is fa rm , as w e ll as a n tic ip a ti o n s
re g a rd in g r e l a t i v e y i e l d and p r ic e of b a r le y i n re s p e c t t o w h eat,
A don-
tin g e n t f a c t o r would be a v a i l a b i l i t y of s to ra g e f o r any e x ce ss wheat t h a t .
m ight be p roduced,
Im p lic a tio n s o f re s e a rc h a lre a d y p u b lis h e d . —There, i s a r a t h e r g e n e ra l
id e a t h a t p o s s ib le a l t e r n a t i v e s f o r s p e c ia liz e d w heat fa rm e rs a re q u ite
re s tric te d .
This may r e s u l t from th e lo n g -tim e dominant p o s itio n of w heat
w hich has te n d e d to obscure r e c o g n itio n and a cc ep tan ce o f th e a l t e r n a t i v e s
8/
T a y lo r, M.' C. "Wheat Acreage A llo tm en ts — Compliance, o r N on -co m p lian ce,"
Montana Farm er-Stockm an, (March l £ , 1 9 5 5 ).
-
w hich a re a v a i l a b l e i
21 -
However exam ples o f s u c c e s s f u l developm ent o f e n t e r ­
p r i s e s o th e r th a n w heat can be found in w heat p ro d u cin g a r e a s . 9 /
' A review o f th e work a lre a d y done e s ta b lis h e s th e f a c t t h a t th e r e a re
many r e l a t i v e l y un ex p lo red a l t e r n a t i v e s w hich may te m p o ra rily r e lie v e th d
f i n a n c i a l s t r e s s imposed by acrea g e r e s t r i c t i o n .
In a d d itio n an e x te n s io n
• •
p u b lic a tio n p ro v id e s in fo rm a tio n and su g g e s ts u ses f o r d iv e r te d a c re a g e ,
-
aimed n o t o n ly a t m aintenance o f incom e, b u t a t i n d i r e c t b e n e f i t s such as
c o n s e rv a tio n and weed c o n t r o l .1 0 /
However i n th e l i g h t o f th e o b s ta c le s
l i s t e d b y Mimms a l l th e a l t e r n a t i v e s w hich may be pro p o sed cannot be con­
s id e r e d by a l l fa rm e rs fa c e d w ith acreag e re d u c tio n .
In f a c t i t appears
t h a t many w i l l n o t succeed i n f in d in g a s u ita b le a l t e r n a t i v e a t a l l .
I t can be seen t h a t th e number o f p o s s ib le a l t e r n a t i v e s a re n d t s o .
r e s t r i c t e d , b u t th e o p p o r tu n itie s f o r d e v e lo p in g them a r e .
The im p lic a tio n
i s t h a t p u b lic and p r iv a te re s e a rc h sh o u ld be aimed a t u ncovering n o t o n ly
a l l th e p o s s i b i l i t i e s t h a t a re p re s e n te d b u t a ls o means o f circu m v en tin g
th e o b s ta c le s t o t h e i r developm ent.
This f u r t h e r im p lie s t h a t e x te n s io n
s e r v ic e s sh o u ld be p re p a re d t o d em o n strate how th o se concerned can d ev elo p
t h e i r in d iv id u a l o p p o r tu n itie s f o r a d ju stm en t to new s i t u a t i o n s .
9/
The com bination sheep and w heat o r c a t t l e and w heat ran ch ap p ears on
a l l s i d e s . The w r i t e r has observed a b-,000 a cre w heat farm n e a r T aber,
A lb e r ta , from w hich tu r k e y s "have- been m arketed s in c e 19U6, re a c h in g a
volume of 12,000 b ir d s i n 1953»
1 0 / D iv e rte d A cres, E x t. Pub. Ag. - 26 (H e v is e d ), E x te n sio n S e rv ic e ,
Montana S ta te C o lle g e , (S eptem ber, 1 9 5 3 ).
::
C
-
»2 2w
Orientation of Current Study
Wheat..ac.reage .diversion im plications fo r extension. —The application of
wheat acreage allotments forces changes to be made on wheat farms.
The
extensive adjustments which have to be made may be best illu str a te d by
the remarks of 0. L. Mimms when introducing a 19^0 report on his study
dealing with the situ a tio n ,
He said's
’’Under wartime pressures and la te r incentives wheat fa r ­
mers in parts of the Great Plains and other areas extended th eir
acreage to the lim it. Some continued good practices and kept
near the optimum amount of fallow . But others stubbled in a
lo t of wheat, Several m illion acres of grassland were broken
and seeded to wheat, In to ta l the increase was 30 m illion acres
—from 23,000,000 in 19^2 to 8^,900,000 in I9h9<, .While I doubt
that we e ith er sh a ll or should cut back to the 19^2 acreage,
some cut i s in evitab le and desirable. We may need 20 to 23
m illion fewer acres in wheat. The 19$0 acreage is about 12
m illion below 1949. S p e c ific a lly where the cuts w ill be is
one thing and where they should be may be quite another. But
we may be quite sure that the big portion of any major cut,
acreage arid production w ise, w i l l be in the wheat country.
The Great Plains and the P acific Northwest had about 80 per­
cent of the 1949 acreage. Most of the wartime and la te r
increases were here also—84 percent of the 30 m illio n .
’’The big increase in wheat acreage is r ela tiv e ly recent
but many farm organizations are geared to the high le v e l.
A cut back of 12 or 20 or 22 percent would not be simple,
farm by farm, and i t would add up to one of the greatest land
use problems faced since the dust bowl and depression 1930’s . ”11/
Even without intervention by the government the surplus wheat s i t ­
uation would have n ecessitated eventual widespread adjustments among wheat
farm ers.- The remarks above hint at other mal-adjustments such as land
abuse.
The need fo r adjustment of farm practice is reason enough to expect
11/ Mimms, 6. L ., bp. c i t .
-2 3 -
the involvement of extension services in the problem areas„ These circum­
stances suggest that there could bewide-spread opportunities for worthwhile
communication between farmer and extension agent.
I
Ih th is situ ation adjustment problems are seen mainly as those of
enterprise combination and organization.
way or 'another.
Decisions have to be made one
This should provide a target fo r extension work in farm
management s since wheat farmers may be susceptible to management suggestions
when fa ilu re to respond to the acreage reduction program sp e lls a lo ss of
income.
Here perhaps progress could be made in introducing improved tech­
niques for resolving problems of enterprise combination on the farm.
Projection into objectives of current study. —The problem of surplus wheat
production may long be with us.
Consequently wheat farmers are moie and
more lik e ly to/be found w restling with problems concerning enterprise
a ltern a tiv es.
I f they can approach th eir problems in a systematic manner
and draw on any lo c a l features or individual circumstances which give them
an advantage, the resultant decisions should place them in the most favor­
able p osition p o ssib le.
Certainly the variation from farm to farm, in
p o s s ib ilit ie s for the use of resources diverted from wheat production,"is ■
great enough that the solution can more e a s ily be found on an individual
b asis than on a group b a sis.
Further i t may be anticipated that other
problems w ill develop from acreage diversion.
Perhaps there w ill resu lt
from th is a need to provide sin gle enterprise wheat farmers with additional
training in. how b est to cope with problems of enterprise combination.
This
th e sis attempts to anticipate th is need and suggest ways in which extension
services may go about the job.
»
I
-2kTbe work of th is th esis becomes, therefore, not an e ffo r t to find
suitable altern a tiv es, but a projection into the f ie ld of extension®
The
enterprises suggested by th is 'study are lik e ly to be useful to r e la tiv e ly
few farmers from the point of view of putting them in to actual practice.
However, the work i s developed only in part to be used as a guide for
those who may be best situated for adopting the altern atives considered.
Beyond th is point the methodology is designed to be h elp fu l to a larger
group as an illu s tr a tio n of a method of comparing enterprise alternatives
of any kind that might be of in terest to them.
The main objective w ill be
to demonstrate how a selec tio n may be made f ran among the known a ltern atives,
thus providing a to o l which the extension workers may use in th eir contacts
with wheat farmers.
Locale of study.- —A lternatives may be expected to vary greatly over a
widely dispersed group of wheat farmers such as would be found in the
sta te of Montana.
Previous work on th is project has related to two main
•‘dryland11 farming areas.
These differed markedly in environment so that
considerable difference in response to acreage reduction might be expected.
Consequently the area of consideration for th is study has been confined
to the wTrianglew area.
In order to reduce the scope of study s t i l l fu r­
ther the ensuing budgets apply primarily to a r ela tiv e ly homogeneous group
of winter wheat farms concentrated in the inverted apex of the so-called
tria n g le .
I t i s within th is environment that the reactions and needs of
the farmer w i l l be examined as a base fo r extension work.
i'
■
.,
-2 ^ -
Description of study area. —1 2 /•The area referred to occupies a large part
of the north central crop reporting d is tr ic t and the northern portion of
the central d is t r ic t .
S p e c ific a lly the counties receiving consideration
fo r comparative purposes are:
Judith Basin5 Fergus5 Cascade., Ghotdau5
Teton5 Pondera5 G lacier5 Toole5 Liberty5 and H ill.
, In the main5 dry farm land in th is central and north central part
of Montana varies from le v e l to gently r o llin g .
The chestnut and brdwri
plains s o ils are r e la tiv e ly deep and generally of loam to clay loam,
textures.
Altitudes range from below 3000 fe e t in the northeast p4rt of
the area and in excess of Ii-OOO fe e t in the western and southern portions.
At the higher a ltitu d es the fr o s t-fr e e season averages as l i t t l e as IOJ?
days5 although fo r the major part of the area the season w ill extend to
120 fr o s t free days or more.
The winters are shortened and moderated by
virtue of being in the Chinook b e lt, but the same winds for the balahcd
of the year are detrimental since they are very drying and th e ir tur­
bulence tends to l i f t the s o i l read ily.
P recipitation i s most favorable
adjacent to the Hocky Mountains in the northwest and p articu larly in the
apex of the trian gle north of the L ittle Belt Mountains5 where the average
annual p recip itation is in the fifte e n to twenty inch zone.
By contrast,
the northern base of the trian gle adjoining Canada i s in the ten tp
th irteen inch zone.
12/ B olster, H-. A. and Stucky5 H. R-., Montana’s Agriculture, Montana Agric.
Ext. Service B u lletin 228, (May, 19b5) .
i - .'- .
-2 6 -
Type o f fa n n in g . —The c lim a tic f e a t u r e s , which a re c h a r a c t e r i s t i c a l l y
e x tre m e ly v a r ia b le from y e a r to y e a r , have been m ain ly re s p o n s ib le f o r th e
developm ent o f th e predom inant k in d o f a g r ic u ltu r e in th e a r e a .
B esid es
c lim a te , topography and s o i l s g e n e r a lly fa v o r a l a r g e - s c a le m echanized
system o f fa rm in g .
to c e r e a l s .
The a l t i t u d e and l a t i t u d e a re w ith in a range fa v o ra b le
C o n seq u en tly , th e predom inant ty p e of farm i s th e cash g r a in
c l a s s i f i c a t i o n shown i n Table I I .
Table I I . — Number o f farm s by ty p e o f farm — s e le c te d c o u n tie s of M ontana.
____________1 9 # . a / ________
Acreage i n tio. o f Farms
ty p e o f Farm
County
Farms and
and Ranches
Cash G rain
L iv esto c k
O ther
Ranches
1 0 0 0 's
IT
T "
~T~
o m itted
J u d ith B asin
860
1*90
1*0.0
5 3 .5
6 .5
Fergus
201*6
1203
1*5.8
36 .7
1 7 .5
Cascade
11*98
111*6
31*.5
31*.5
31.0
Choteau
221?
111*3
80.0
1 3 .0
7 .0
Teton
1227
1001
6 5 .5
1 3 .5
21.0
Pondera
817
688
77.6
12.1*
10 .0
G la c ie r
1020
1*52
32.7
31*.6
32.7
Toole
1082
1*38
71*. 2
1 2 .6
13.2
896
362
7 8 .5
li*.9
6 .6
161*1
959
6 0 .9
22.1*
16.7
13 >301*
7882
100
1*653
59.0
1882
2 3 .9
131*7
1 7 .1
L ib e rty
H ill
T o ta l
%
a/
Compiled from F e d e ra l C ensus, (A p ril I , 1950).
v
-2 7 -
P r e c i p i t a t i o n i s a c r i t i c a l f a c t o r f o r crop growth as
d em o n strated
i n d i r e c t l y by Table I I I which shows a h ig h p ro p o rtio n o f t h e a ra b le lan d
,Table I I I . —Main la n d u s e —s e le c te d c o u n tie s o f Montana, 1950» a /
A cres 19^9
H arvested
C u l t l v ated
N o n -C u ltiv a te d
Acreage
County
C ropland
Summerfallow
P a s tu re
Irrig a te d
o th e r th a n Woodland
%
%
%
%
J u d ith B asin
19.6
io .5
69.9
1.0
Fergus
19.1
ll.k
68.3
0.6
Cascade
17.3
11.k
66.3
2.5
C hoteau
23.0
21.0
55.6
0.2
Teton
214.8
17.7
ko.5
8.5
Pondera
32.3
28.5
27.U
5.9
G la c ie r
13.0
7.6
76.2
1.6
Toole
19.0
17.7
63.3
0.2
lib e rty
26.3
26.3
k7.k
0.2
H ill
2k.6
26.U
U9.0
0.2
2,666,927
21.7
2,176,1467
17.7
7 ,k29,275
60.6
221,1149
1.8
T o ta l Acreage
%
a/
Compiled from F e d e ra l C ensus, ( A p r il, 1950).
c u l t i v a t e d f o r summer fa llo w i n o rd e r t o co n serv e o th e rw ise in ad eq u a te
ra in fa ll.
Crops a re fa v o re d which have a low w a ter re q u ire m e n t.
Those
c ap a b le of making maximum use of s p rin g m o istu re and a b le t o avoid mid­
summer drought have an added a d v an ta g e .
A lso d e s ir a b le a re crops which
can to some degree p r o t e c t b a re summerfallo w from wind in th e f a l l and
-2 8 -
spring.
Winter wheat succeeds best in relation to these determinants and
therefore is used wherever p ossib le.
However, the seasonally variable
nature of the clim atic factors resu lts in frequent -occurrences of unfavor­
able seeding and growth conditions so that harvested acreage of winter
wheat varies greatly from year to year.
Table
IV
shows that winter wheat
i s not by any means supreme, and is d e fin ite ly lea st predominant in the
Table IV
-Cereal crop distr ib u tio n —selected counties of Montana, 1953 a /
Acres Harvested 1953
Area
County
Winter
Spring
Barley
Wheat
Wheat
Sc Oats
57,300
57,500
21,500
Fergus
130,000
io6,Uoo
39,300
Cascade
153,200
36,200
19,600
Choteau
231,500
272,800
27,500
Teton b /
122,600
108,000
3U,900
Pondera
39,800
175,500
U8,900
Glacier
8 ,8 0 0
63,100
87,300
Judith Basin
Central Winter
Wheat Area
_
Census
Area VI
<
Triangle
Northern
>
Area
< Spring
S
Wheat Area
V
Toole
12,UOO
223,000
27,600
Libe rty
23,200
206,100
5,700
6U,300
Uo7,600
19,500
JtLll
a/
Montana A gricultural S t a t is t ic s , Montana Dept, of Agric.
(December, 195>i*).
b/
Preceding years, spring wheat acreage exceeded winter wheat acreage.
Sc
U.S.D.A.,
—2 9 “
dry northern segment of the trian gle.
One of the reasons fo r th is is that
the :lower p recip itation le v e ls experienced in that zone are inim ical to
strong f a l l establishment and winter survival of f a l l sown crops„ Some­
times winter k illin g is attributed to exposure due to lack of snow cover1.
Other reasons put forward are severe over-winter dessication in cold dry
s o i l regardless of snow cover^ and lack of adequate plant respiration
when the f ie ld s are iced over for extended periods of time a fter a heavy
thaw.
Therefore, even in the most favorable location s, secondary reliance
i s placed on a le s s productive spring wheat crop.
Table IV illu s tr a te s ,
i f examined in conjunction with a generalized precipitation map of Montana,
that -the spring wheat crop becomes almost completely dominant in the d riest
counties.
On the other hand, in relation to winter and spring wheat in
these dryland counties, feed grains have been' of minor importance due to
th e ir higher water requirement and greater su sc e p tib ility to drought when
grown on dry land.
However where somewhat more favorable moisture condi­
tion s e x is t, such as are found adjacent to the mountains and in the best
winter wheat areas, experience has shown that suitable v a r ie tie s of these
crops can be su ccessfu lly grown.
PART I I
THE PROBLEM AND HYPOTHESES
The Problem ■
The f a r m e r 8s p o in t o f "view. —F o r th e p u rp o se o f t h i s s tu d y we a re now con­
c e rn e d s p e c i f i c a l l y w ith th o se few th o u san d s p e c ia liz e d w h e at fa rm e rs o p er­
a t i n g i n th e w in te r w heat b e l t of c e n t r a l Montana#
I t may be p o s tu la te d
t h a t th e c ase o f one w i l l f a i r l y ,w e ll r e p r e s e n t th e s i t u a t i o n o f a l l because
o f th e environm ent u n d e rly in g th e developm ent o f a r e l a t i v e ] y homogeneous
group of cash w heat-sum m erfallow farm s i n th e a r e a .
The problem th e r e f o r e
i s narrow ed i n th e fo llo w in g d is c u s s io n s to th e approach t h a t any one such
fa rm e r m ight ta k e . .
C o n fro n ted by a management p roblem , w hich i n t h i s c ase i s one of
a d ju stm e n t to an economic s i t u a t i o n o f a d m in is tr a tiv e o r i g i n , th e farm
manager f in d s h im s e lf i n a s i t u a t i o n w here he has im p e rfe c t knowledge l / .
How a fa rm e r may behave i n t h i s s i t u a t i o n i s w e ll d e s c rib e d by Johnson and
H aver i n t h e i r c l a s s i f i c a t i o n o f f iv e knowledge c o n d itio n s summarized below.
They s u g g e s t t h a t th e r e a r e 't h r e e le v e l s o f s u b je c tiv e u n c e r ta in ty .
F irs t
i s th e in a c t iv e s i t u a t i o n w h e rein
. .' th e manager does n o t have
enough knowledge to be w i l l i n g to ta k e a co n tem p late d a c tio n and he does
n o t v a lu e p ro s p e c tiv e improvements i n h i s knowledge enough t o c o v er the
1c o s t 1 of making such im provem ents. 1,1 The second l e v e l i s th e le a r n in g
l / ■Johnson, Glenn L.., and H aver, C e c il B ., D e c isio n Making P r in c ip le s i n
Fhrm Management, Kentucky A g ric . E xp. S t a 0 B u ll. £ 93, (J a n u a ry , 19537,
PP. 1 1 -1 3 .
-3 1 -
situ a tio n which i s 11o o e . one:?.in ''which '■'&fperson8s knowledge ’ i s not complete
enough fo r him to he w illin g to- take a contemplated action but in which he
values improvements in h is knowledge more than the co st of making such
improvements.11 The third le v e l i s the forced action situ ation wherein a
farm manager may be
. . forced by circumstance to take a contemplated
action even thoughChe does) not know enough about i t to be w illin g to do so.11
Then there i s the subjective risk situ ation in which the manager
.
does not see the probable resu lts of a contemplated action p erfectly but
nevertheless has enough information to decide whether to a c t or not to act;
further he i s w illin g to accept the consequences of th is decision and acF in ally there i s the subjective certain ty or apparently perfect
knowledge situ ation in which the manager's knowledge
. . becomes nearly
enough perfect for (him) to operate as though (he) had perfect knowledge."
The imposition of a wheat acreage reduction program involves each farm
manager in a sequential decision-making process r ela tiv e to the successive
stages of knowledge in which he finds him self.
The manager of a wheat farm
f i r s t has to fin d out i f the regulations w i l l apply to h is operation.
In
,other- -words: he must leam : something-about the program or su ffer the conse­
quences o f not complying, with the constraints i t im plies.
Ifi he finds that
th e "p ro v isio n s e x c lu d e --h is'ty p e - o f o p e ra tio n he may p e rm it, h im s e lf to r e l a x
1
i n t o a n in a c t i v e r o le re g a rd in g th e program p ro v id e d he p la n s to co n tin u e
h is a c c u s to m e d 'p ra c tic e .
I f 5 a s i n th e c a se o f th e w in te r w h eat p ro d u cer
u n d e r d is c u s s io n 5 th e a d m in is tr a tiv e r e g u la tio n s a p p ly to h is O p e ra tio n 5 he
i s f a c e d w ith a f u r t h e r le a r n in g p ro c e ss b e fo re he can ta k e a p p ro p ria te
/■
“32”
•a ction ,
be,
He'-mill'want to Ieam what the consequences of non-compliance w ill
He- Yd-Il want to learn what demands compliance w ill impose upon him.
This then requires s t i l l further knowledge, in the form of appraisal of the
production altern atives available to him, in terms of th eir re]a tiv e advan­
tages knd disadvantages in the use of resources diverted from wheat pro­
duction,
On th is appraisal depends h is decision as to what action to take
in the present situ a tio n ,
He s t i l l must learn how to accomplish the desired
action e ffe c tiv e ly .
For any wheat rancher th is decision cannot await in d e fin ite ly the
weighing of pros and eons growing out of the learning process.
The ad­
vancing seasons sooner or la te r place him in succeeding forced action situa­
tions whether he thinks he knows w ell enough or not what alternative he
might b est adopt,
He find s that commitments should be made, such as for
a supply of seed which then should be planted a t the opportune time to
make a crop.
A ll the attendant chain of operations involved in h is farm­
ing system must be consummated1in their turn.
How then can th is manager, '
before he reaches these forced action p o sitio n s, go about making the de­
terminations necessary to reveal which of the altern atives known 'to him
may best su it h is individual circumstances? 2 /
2/
Here a lso are im plications rela tiv e to the f l e x i b i l it y of the farmer's
plant or h is a b ility combined with the capacity of the plant for con­
summating changes of organization as new information is forthcoming, As
Castle says "Since i t i s recognized that complete s t a b ilit y can never
be achieved an entrepreneur may desire an organization that is capable
of rapid"change,"
See Castle., Emery H ,, Adapting Western Kansas Fa.rms
to Uncertain Prices and Y ields, Kansas Tech, Bui, 75>1 (February, 195k) ,
p. 10,
-3 3 -
The e x te n s io n w o rk e r's p o i n t o f view . -= Ih e e x te n s io n Tiror k e r 1s o b je c tiv e
w i l l be t o p ro v id e th e fa rm e r w ith a m ethod f o r making th e b e s t s e le c tio n
p o s s ib le among th e a v a il a b le a l t e r n a t i v e s .
He w i l l d e s ir e to do th i s
w ith o u t a c t u a l l y making any c h o ice s f o r th e fa rm e r.
The problem i s to
g e t th e farm er la u n ch e d i n a le a r n in g p ro c e ss t h a t w i l l r e s u l t i n h is
re a c h in g d e f i n i t e c o n c lu s io n s a b o u t th e a l t e r n a t i v e s i n r e l a t i o n to h is
own s p e c i f i c en v iro n m en t.
On th e b a s is o f th e s e c o n c lu s io n s th e farm er
may be encouraged to make h is own d e c is io n s as to c h o ic e o f e n te r p r is e and
manner of o r g a n iz a tio n of r e s o u r c e s s p r i o r to f in d in g h im s e lf i n a fo r c e d
a c ti o n s i t u a t i o n .
Even i f th e e x te n s io n w o rk er c a n n o t re a c h t h i s o b je c tiv e
he sh o u ld c o n s id e r t h a t any le a r n in g he can s tim u la te would in c r e a s e th e
p r o b a b i l i t y t h a t th e fa rm e r c o u ld make th e r i g h t d e c is io n when i n a fo r c e d
a c tio n p o s itio n s
A b e t t e r com prehension of th e e x te n s io n w o rk e r’s t a s k may be i l l u s ­
t r a t e d l?y th e fo llo w in g q u o ta tio n s
"Today’s county a g e n t m ust n o t only u n d e rsta n d th e fa rm e r’s
n e e d s j b u t a ls o w hat m o tiv a te s him to make d e c is io n s . The p ro ­
c e ss o f a c c e p tin g new p r a c tic e s has alw ays been a slow,, te d io u s
one. The f o u r b a s ic s te p s th e farm er i n v a r i a b i l y fo llo w s have
been w e ll o u tlin e d by Eugene H. W ilk e n in g s a s s o c ia te p r o f e s s o r of
r u r a l s o c io lo g y a t th e U n iv e rs ity o f W isconsin:
^1F i r s t th e fa rm e r must h e a r a b o u t th e p r a c tic e b e fo re he can
p ro c e e d to make up h i s mind a b o u t i t . ■Second3 b e fo re d e c id in g
t h a t th e p r a c t i c e i s a ’good i d e a 13 he m ust I e a m enough a b o u t i t
to see t h a t i t s m e rits outw eigh the m e r its of e x i s t i n g p r a c tic e s
and th e C o s ts 3 I a b o r 3 and ’ t r o u b l e ' in v o lv e d i n p u ttin g i t i n t o
o p e r a tio n . ■T h ird ly 3 th e fa rm e r m ust o b ta in th e s p e c i f i c i n f o r ­
m ation needed to t r y o u t th e p r a c t i c e on h is p a r t i c u l a r fa rm .
-3 k n^ F in a lly s a f t e r tr y i n g th e p r a c t i c e , i t s com plete a d o p tio n
may.depend upon h i s u n d e rs ta n d in g th e re a so n s f o r an y f a i l u r e o r
problems-! that= occurred™ i n th e i n i t i a l t r i a l . " 3/
T h e--p ractices r e f e r r e d to h e re a re p h y s ic a l p ro d u c tio n te c h n iq u e s p u t
i n t o a c tio n fo llo w in g r e le v a n t fa rm management d e c is io n s „
However, th e
re a so n in g is - a p p lic a b le to th e p r a c t i c e o f farm m anagem ent,too.
W ill th e
method p ro p o sed f o r problem s o lu tio n m o tiv a te th e u s e r to make d e c is io n s ?
W ill a c c e p ta n c e o f th e m ethodology sp eed up d ecisio n -m ak in g a c t i v i t y ?
Does
r
th e m ethodology s a t i s f y c o n d itio n s o f c o m p re h e n s ib ility and f a c i l i t y o f u se
w hich w i l l " s e l l " i t w e ll enough t h a t i t w i l l su p e rse d e e x i s t i n g d e c is io n ­
making p ro c e sse s? '
Does th e m ethod p ro v id e enough in fo rm a tio n t h a t th e
fa rm e r can t r y i t o u t s u c c e s s f u lly ?
W ill th e re a so n s f o r any f a i l u r e be
s u f f i c i e n t l y c l e a r t h a t th e method i t s e l f w i l l be ex o n erate d ?
I t i s th e
su c c e ss w ith w hich a method s a t i s f i e s such q u e s tio n s , t h a t d eterm in es
w h e th er th e method p ro p o sed a s an e x te n s io n t o o l i n farm management i s
e f f ic ie n t or n o t.
The r e s e a r c h problem . — The problem o f t h i s t h e s i s i s to d ev elo p a method o f
e n t e r p r i s e s e le c tio n by w hich e x te n s io n w o rk ers can d e m o n strate to fa rm e rs
how th e y may go a b o u t r e s o lv in g on-the-f& rm c h o ice s betw een a l t e r n a t i v e s „
■The method s e t t l e d upon w i l l n e ed to s a t i s f y s e v e r a l c o n d itio n s a lre a d y
to u c h e d upon.
Has i t th e s i m p l i c i t y r e q u ir e d to be r e a d i l y com prehensible
an d dem o n strab le to fa rm e rs?
3/
I s i t a d a p ta b le to th e v a rio u s s i t u a t i o n s
B er^, Gordon L ., " in Summing Up," County Agent and Vo-Ag T each er.
V ol. 1 0 , No. 6 , (J u n e , 19J?i), p« !4.8 .
p r e s e n t i n the- preblem a re a ?
-3 5 Does i t p re p a re th e b udget u s e r f o r making
th o s e d e cisio n s- w hich w i l l i n i t i a t e a l i n e o f a c tio n l i k e l y to b e most
s u i t a b l e f o r him i n h i s p a r t i c u l a r environm ent?
Does i t p e rm it e x te n sio n
c o n s u lta n ts to p a r t i c i p a t e i n a problem s o lv in g program 5 y e t a v o id s p e c if y ­
in g th e c h o ic e s to be mgde?
H ypotheses
H ypotheses r e l a t i v e to th e r e a c t i o n o f fa rm e rs to th e problem s i t u a t i o n . —
The h y p o th e se s o f f e r e d in t h i s s e c tio n a r e advanced b ecau se i t i s f e l t t h a t
th e y illu m in a te su b se q u e n t p a r t s o f t h i s ■t h e s i s .
However5 th e s e may be
c o n s id e re d a s l i t t l e more th a n c o n je c tu r a l a ssu m p tio n s5 p a r t i c u l a r l y s in c e
no d i r e c t e f f o r t to t e s t t h e i r v a l i d i t y i s a n t i c i p a t e d f o r t h i s s tu d y .
U nless a method o f a tta c k in g th e problem i s b ro u g h t to t h e i r n o tic e i t
i s e x p e c te d t h a t many fa rm e rs w i l l ta k e th e e a s y way o u t and make a d e c is io n
a t th e moment when th e y a re fo r c e d i n t o a c t i o n .
Each f a r m e r 's d e c is io n may
be b a se d on h i s hunches a t th e tim e 5 th e wpy he f e e l s t h a t day i n th e l i g h t
o f any p a s t e x p e rie n c e he may have r e l a t i v e to th e problem , o r on any i n ­
fo rm a tio n t h a t may have so f a r come h is way which he th in k s has a b e a rin g
on w hat he sh o u ld d o.
He W i l l 5 However5 have no r e a l re a s o n to e x p e c t
t h a t the im m ediate s o lu tio n w i l l prove to be th e b e s t one f o r th e p ro d u c tio n
-p e rio d in v o lv e d .
There w i l l be o th e r fa rm e rs who w i l l acknowledge t h a t a problem s i t u a ­
t i o n e x i s t s and make a s y s te m a tic a t t a c k on i t .
A farm er i n t h i s p o s itio n
w i l l a tte m p t to f o r e s e e o r le a r n th e p ro b a b le r e s u l t s o f c e r t a i n l i n e s o f
a c tio n and p la n h i s o p e ra tio n s a c c o rd in g ly .
-3 6 “
I t may be e x p e c te d t h a t even w ith o u t a s y s te m a tic way o f a tta c k in g i t ,
th e fa rm e r ’ s "problem T d .ll be so lv e d so o n er o r l a t e r e i t h e r by h is own
l o g i c a l re a so n in g a s he g a in s e x p e rie n c e , o r t y th e p r o p i t i t i o u s prom ptings
o f su cceed in g fo rc e d a c ti o n d e c is io n s , o r by a sk in g someone e l s e (perhaps
th e governm ent) to s o lv e i t f o r him .
H ypotheses r e l a t i v e to th e re s e a rc h pro b lem . — I t i s th o u g h t t h a t among th e
methods t h a t m ight be u se d to s e l e c t betw een a l t e r n a t i v e s a b u d g e tin g p ro ­
ced u re w i l l b e s t f i t th e re q u ire m e n ts o f t h i s c a s e .
F i r s t of a l l , i t is
c o n s id e re d to have a degree o f s im p lic ity w hich w i l l make i t more compre­
h e n s ib le to fa rm e rs th a n o th e r m ethods.
For t h i s re a so n i t i s a n tic ip a te d
t h a t i t w i l l be u s e f u l a s an ex-tension a i d i n d e m o n stratin g how- e n te r p r is e
s e le c tio n may be u n d e rta k e n .
I t i s th o u g h t t h a t th e se c h a r a c t e r i s t i c s
w i l l make th e b udget method o f d e a lin g w ith th e problem u s e f u l to l a r g e r
numbers o f e x te n s io n p e rs o n n e l and farm ers th a n l e s s e a s i l y u n d e rsto o d
an d
d em o n strated means of e n te r p r is e s e l e c t i o n .
This s u i t a b i l i t y f o r
e x te n s iv e d i s t r i b u t i o n i s d e s ir a b le to a llo w f o r due c o n s id e r a tio n b e in g
giv en to th e s p e c i f i c environm ent o f each farm and th e a l t e r n a t i v e s a v a i l ­
a b le to i t s m anager.
S eco n d ly , th e b u d g et method i s th o u g h t to o f f e r a d eq u a te p re p a ra tio n
f o r d e cisio n -m ak in g on th e farm ( a t l e a s t r e l a t i v e to m onetary c o n s id e r­
a t i o n s ) , even though i t may n o t p ro v id e a s c l e a r c u t r e s u l t s a s may be
fo rth co m in g from o th e r m ethods.
In t h i s re g a rd i t i s e x p e c te d t h a t th e
-3 7 u se o f b u d g e tin g on a w ide s c a le w i l l in c re a s e d e lib e r a t e d e c is io n —
making
a c t i v i t y .a n d ^ e d u c e fo r c e d a c tio n d e c is io n —making^ b o th f o r th e in d iv id u a l
and i n an e x te n s iv e -a re a -w id e sense®
-3 8 -
I
PART I I I
ATTACKING THE PROBLEM
The E arm ert S Approach
U nsystem atic - fo r c e d a c t i o n . --The s in g le e n te r p r is e w in te r w heat fa rm e r
fa c e d w ith an a d m in is tr a tiv e o rd e r c a l l i n g f o r a crea g e r e d u c tio n may
approach h i s problem w ith o u t system,, a d o p tin g a "Wait and s e e " a t t i t u d e .
He may rec o g n ize t h a t com pliance w i l l mean fin d in g some o th e r use f o r a
p a r t o f h is Ia n d j and t h a t non-com pliance w i l l r e s u l t i n an u n a ttr a c tiv e ,
p r ic e f o r h is w h e a t.
p ro b le m s.
On th e o th e r hand h e w i l l have no d iv e r te d acreag e
Howeverj a t f a l l see d in g tim e he i s n o t com pelled to make a
c h o ice as t o w h e th e r to o v erseed o r n o t s in c e Compliance may be p u t o f f
u n t i l a l a t e r d a te .
There i s a ls o th e p o s s i b i l i t y t h a t a c re a g e ov erseed ed
may be reduced b y w in te r k i l l to th e re q u ire d l e v e l f o r co m p lian ce.
t h e r d e c is io n may be postp o n ed u n t i l s p r in g see d in g tim e a r r i v e s .
F u r­
At t h i s
tim e he w i l l have to s e l e c t a crop f o r What la n d i s s t i l l unseeded o r has
been w in te r - k ille d i
But f o r what a crea g e i s s t i l l o v e r-se e d e d to wheat
he h as a c h o ic e o f re -s e e d in g to some o th e r crop o r rem ain in g o u t o f com­
p lia n c e u n t i l th e f i n a l p e rm is sa b le d a t e .
I f th ro u g h in d e c is io n a t t h i s
p o in t he does n o t s p rin g -s e e d a l l th e la n d t h a t i s r e q u ir e d t o be d iv e rte d
to q u a l i f y f o r com plianceJ he w i l l lo s e th e s p rin g seeded g r a in t h a t m ig h t
have been h a rv e s te d from th e overseeded a c re a g e , o r ru n th e ris k , o f lo s in g
money by h a v in g to . a cc e p t, the...low er r e tu r n s im p lie d by th e .non-com pliance
i
p e n a lty .
,
:
-3 9 The fa rm e r who approaches h i s problem in ' t h i s way p a s s e s from one
fo rc e d a c ti o n p o s itio n to a n o th e r, s o lv in g h is problem more by a d e f a u lt
p ro c e s s th a n by any d e s ig n .
At any p o in t o f d e c is io n he may have v ery
. l i t t l e id e a as to w h e th er th e c o u rse o f a c tio n he s e t t l e s oh should tu r n
■ o u t b e t t e r th a n th e o th e r a l t e r n a t i v e s .
He p ro b a b ly w i l l te n d to ta k e th e
c o u rse f o r w hich th e r e s u l t a p p e a rs m ost c e r t a i n a t th e moment„
S y s te m a tic . .--On th e o th e r hand th e fa rm e r who fo llo w s a s y s te m a tic approach
t o h is problem s w i l l s e t t l e down and make some c a lc u la tio n s b y w hich he may
be g u id ed i n d e c is io n -m a k in g .
He may end up by fo llo w in g e x a c tly th e same
program as th e fa rm e r i n th e p re v io u s c d s e , exbept t h a t he knows ahead of
tim e w hat he p la n s to do and can make p r e p a r a tio n s f o r h is a c t i o n s .
He
a ls o may be f a i r l y w e ll a s s u re d from h is own e s tim a tio n s t h a t h is course
o f a c tio n i s th e b e s t one a v a ila b le under th e b irc u m s ta n c e s .
His p rim ary
co n cern may be assumed t o be a m ax im izatio n o f n e t income from th e re s o u rc e s
a t h is command, o r i n th e c u r r e n t problem s i t u a t i o n a m in im iz a tio n o f th e
hI o s s n he a n t i c i p a t e s from a re d u c tio n i n w heat acreag e o r non-com pliance
p e n a ltie s .
•
'
I f he rem ains out o f com pliance th e d iv e r te d a crea g e i s no problem .
I f he i s i n com pliance he h as d iv e r te d a c re a g e t o u t i l i z e , and-.under . employment o f equipm ent and l a b o r to c o n s id e r .
His f i r s t move may be
xto c a s t around i n s e a rc h o f a su p p lem en tary crop e n te r p r is e w hich w i l l
employ th e s e re s o u rc e s p r o f i t a b l y .
He w i l l atte m p t t o s e l e c t one which
w i l l compete t o a minimum d e g re e f o r re s o u rc e s re q u ire d f o r th e w heat
-I l-O =
e n te rp ris e .
Such a n 'e n t e r p r i s e would be l e a s t l i k e l y t o d is tu r b th e
e s ta b lis h e d r o u tin e o f h is farm o p e ra tio n s and h is o f f seaso n a c t i v i t i e s .
T his c o n s t i t u t e s a sto p -g a p k in d o f s o lu tio n to h is problem .
He may c o n s id e r a second b ro a d a l t e r n a t i v e - - t h a t o f in t e g r a t i n g a
com plem entary-supplem entary liv e s to c k e n te r p r is e w ith h is farm o rg a n iz a tio n .
Complementary use co u ld be made o f d iv e r te d acreag e c ro p s as fe e d in p u ts
f o r liv e s to c k .
S upplem entaiy use c o u ld be made of unemployed re s o u rc e s ,
l iv e s to c k co u ld u t i l i z e v a ca n t la n d f o r p a s tu r e 5 o ff -s e a s o n la b o r , and
unused f a c i l i t i e s such as b u ild in g s and w a te r .
But c o m p e titiv e a s p e c ts
o f th e liv e s to c k e n te r p r is e would need to be c o n sid e re d to o , s in c e th e s e
would o f f s e t th e g a in a c c ru in g from th e su p p lem en tary u s e .
C om petition
would be l i k e l y f o r th e use o f la b o r i n b u sy p e r io d s , f o r th e use of
c a p i t a l and management, f o r th e use o f o th e rw ise s a le a b le fe e d , and f o r
l e i s u r e tim e .
In p la n n in g h is c o u rse o f a c tio n and in o rd e r t o a r r i v e a t the n e c e s\
sa z y d e c is io n s th e f a r m e r w ould b a la n c e one' a l t e r n a t i v e a g a in s t a n o th e r
r e l a t i v e t o th e c r i t e r i a he was u s in g .
To compare a n t ic ip a te d perform ance
o f a l t e r n a t i v e s r e l a t i v e to income c o n s id e r a tio n s th e method he may be
e x p ec te d to u se i s a b u d g e tin g te c h n iq u e .
O ther com parisons such as com­
p e t i t i o n f o r la b o r he m ig h t a s s e s s b y o u tlin in g th e p ro s p e c tiv e o p e ra tin g
program s, b u t more th a n l i k e l y he w i l l make th e com parisons m e n ta lly .
he makes a c h o ice he w i l l be f r e e t o commit h im s e lf to , c e r t a i n lin e s of
Once
a c ti o n .
H is s y s te m a tic approach th u s p e rm its a r e l a t i v e l y l e s s c o m p licated
a tta c k on th e problem and p ro v id e s some k in d o f s o lu tio n upon which he may
p erh ap s be a b le to r e s t w ith some c o n fid e n c e .
The E x ten sio n W o rk er's Approach
Faced w ith th e problem o f h e lp in g th e farm er make an ad ju stm en t to th e
d iv e r te d a crea g e s i t u a t i o n th e e x te n s io n w orker would l i k e l y t r y to v i s u a l ­
iz e h im s e lf i n th e f a r m e r 's p o s i t i o n .
I n order- to do t h i s he would f in d i t
n e c e s s a ry to th o ro u g h ly f a m i l i a r i z e h im s e lf w ith th e e n v iro n m e n ta l c h a r a c te r
i s t i c s of th e a r e a .
Then he would make an e f f o r t to lo o k ahead and d e v ise
a p r o f i t a b l e p la n o f o p e ra tio n t h a t would b e s t f i t th e a n tic ip a te d circum ­
s ta n c e s .
He m ight a t t h i s s ta g e seek in fo rm a tio n r e l a t i v e t o th e problem
from w hatever re s e a rc h s e r v ic e s were a v a i l a b l e .
He would s y s te m a tic a lly
s tu d y th e a l t e r n a t i v e s i n o rd e r to e lim in a te th o s e t h a t w ere u n s u ita b le and
le a r n w hat p o s s i b i l i t i e s e x is te d f o r fa v o ra b le c o m b in a tio n s.
B ut th e
f a r m e r 's knowledge o f h i s own s i t u a t i o n and o b je c tiv e s a r e s p e c if ic t o h is
own case and l e s s w e ll known t o th e e x te n s io n p ersp n who w i l l f o r t h i s
re a so n o n ly t i y to d e m o n strate how th e farm o p e ra to r may s y s te m a tic a lly
a p p ra is e th e a l t e r n a t i v e s w hich l i e b e fo re him .
Taking income m ax im izatio n
o r lo s s m in im iz a tio n hs th e g o a l he w i l l a lm o st s u r e ly o u tlin e a b u d g etin g
a t t a c k on th e problem which may guide th e fa rm e r to a s o l u t i o n .
The R esearch Approach
A r e s e a r c h w orker i s i n a d e ta c h e d p o s i t i o n r e l a t i v e t o th e problem
on th e farm .
The co n cern h e re i s to la y ou t a m ethodology by w hich an
e x te n s io n w orker c o u ld d e m o n strate to farm ers th e value o f a c o n s tr u c tiv e
a n a l y t i c a l a tta c k on th e problem of s e le c tin g a n , a l t e r n a t i v e e
needs t o be one t h a t fa rm e rs can use as w e ll.
The method
The o b je c tiv e s of th e
re s e a rc h w orker w i l l in c lu d e a d e s ir e td p ro v id e a method t h a t i s c ap a b le
o f p ro d u cin g a s o lu tio n f o r each farm er w hich Isrill be a t o r n e a r th e
optimum p o in t o f p ro d u c tio n f o r th e com bination o f re s o u rc e s a p p lie d .
This would p ro v id e a c o n tr ib u tio n to farm e f f ic ie n c y w hich i s bound t o be
d is tu r b e d by th e a p p lic a tio n o f acrea g e a llo tm e n ts t o farm s w hich have
a ch ie v e d any degree o f e q u ilib riu m .
T e c h n ic a l m ethods.---B ecause o f an i n t e r e s t i n th e f a r m e r 's p o in t of view and
in o rd e r t o g e t a method m ost a d a p ta b le t o h is u s e , some form of b u d g etin g
i s in d ic a te d .
However, b e fo re p ro c e e d in g w ith a c o n s id e r a tio n o f t h i s
method th e re s e a rc h w orker would s tu d y th e p o s s ib le a l t e r n a t i v e methods
f o r c lu e s t h a t m ight improve h is a n a ly s is by illu m in a tin g s tro n g and weak
p o in ts o f th e a l t e r n a t i v e s ,
He m ig h t c o n s id e r u sin g a s t a t i s t i c a l , te c h n iq u e
such as was employed by D a rre l F . Fienup i n d e term in in g th e r e l a t i v e p ro - ■
d u c t i v i t i e s o f c e r t a i n f a c t o r s o f ,p ro d u c tio n on d ry -la n d w h eat fa rm s. I /
Fienup f i t t e d a m a th e m a tic a l e q u a tio n t o h is d a ta which in d ic a te d v a rio u s
p o in ts on a p ro d u c tio n s u r f a c e .
By h o ld in g one group o f v a r ia b le in p u ts
I
(r e s o u rc e s ) c o n s ta n t he was a b le to m easure th e e l a s t i c i t i e s o f o u tp u t w ith
I/
F ie n u p , D a r r e l l Fy R esource P r o d u c tiv ity on Montana Dry-Land Crop Farm s,
Montana S ta te C o lle g e 'A g r ic u ltu r a l E xperim ent S ta tio n , Mimeo. C ir c u la r
No. 66, (Ju n e , 1953).
'
-h3r e s p e c t t o o th e r re s o u rc e s s e g re g a te d as in d ep en d en t v a r i a b l e s .
The p e r ­
c e n ta g e d o l l a r r e tu r n p e r d o l l a r o f in p u t in d ic a te d th e p r o d u c tiv ity o f
t h a t in p u t.
J u s t how t h i s method co u ld be a p p lie d to th e problem a t hand
c o n cern in g th e p r o d u c t i v i t i e s of e n te r p r is e com binations i s a m a tte r o f
c o n je c tu r e .
P o s s ib ly , s in c e a la r g e p a r t o f th e re s o u rc e s on th e farm
would be c o n s ta n t w h e th er used o r n o t , th e income from th e d i f f e r e n t e n t e r ­
p r i s e com binations co u ld be e x p re sse d as a f u n c tio n o f th e r e c e i p t s of
each e n t e r p r i s e l e s s th e p a r t i c u l a r d i r e c t expenses a s s o c ia te d w ith i t .
A no th er method t h a t m ight be c o n sid e re d ife a m a th e m atica l d ev ice
commonly c a ll e d " l i n e a r program m ing."
I t i s a form o f " a c t i v i t y a n a ly s is "
th e use o f which i s w e ll i l l u s t r a t e d b y James TL B oles as he p ro ceed s
t o d eterm in e th e optimum r e s o u r s e a ll o c a t i o n s f o r farm s fa c e d w ith c o tto n
a c re a g e r e d u c tio n s . 2 /
E s s e n t i a l l y h i s method c o n s is ts o f so a rra n g in g h is
d a ta t h a t he i s a b le t o s e t down th e p e r a c re re s o u rc e re q u ire m e n ts and n e t
cash r e t u r n o f each a l t e r n a t i v e e n te r p r is e s e g re g a te d as a l i n e a r p ro c e ss
y ie ld in g c o n s ta n t r e tu r n s and having p e r f e c t d i v i s i b i l i t y o f a l l in p u ts .
The m a th e m atica l co m putations in v o lv ed i n th e l i n e a r programming te ch n iq u e
can th e n , be u sed to d e term in e which co m b in atio n o f " e n te r p r is e s would y ie ld
th e h ig h e s t n e t revenue w i th in .th e r e s t r i c t i o n s a p p lie d .
C o n tra ste d w ith th e s e two te c h n i c a l a p p ro ach es t o th e problem , th e
b u d g et method o f a n a ly s is i s r e l a t i v e l y sim ple in i t s m e ch a n ic al a s p e c ts .
2/
B o le s, James N.., " L in e a r Programming and Farm Management A n a ly s is ,"
jo u r n a l o f Farm Economics, Volume 37, (F e b ru a ry , 1 9 3 5 ).
A c tu a lly 5 th e method,, a lth o u g h w id e ly u sed i n r e s e a r c h , may r e a l l y be
re g a rd e d as more o f an e x te n s io n t o o l s in c e i t i s b ased on assum ptions and
r e p r e s e n ts e x p e c ta tio n s r a t h e r th a n f a c t s .
I t c o n s is ts o f a r e l a t i v e l y
e a s y a c c o u n tin g p ro ced u re s e t t i n g f o r t h th e in p u ts and o u tp u ts o f each
e n t e r p r i s e co m b in atio n o v e r s p e c if ie d tim e p e r io d s .
Comparisons a re made
on th e b a s is o f th e n e t farm income in d ic a te d , u sin g e s tim a te d v alu es
th o u g h t t o be m ost a p p ro p ria te to th e s i t u a t i o n c o n s id e rin g p a s t e x p e rie n c e
and a n ti c i p a t i o n s f o r th e f u t u r e .
A p p ra is a l o f a l t e r n a t i v e m ethods.--T h e lim i t a t i o n s o f th e th r e e methods men­
tio n e d a re c l e a r l y compared by R ich ard A. K ing. 3 /
The b u d g et method com­
p a re s each a l t e r n a t i v e as i t e x i s t s a t one s p e c if ic p o in t on i t s p ro d u c tio n
su rfa c e .
The main w eakness h e re i s t h a t th e p o in t of com parison may n o t
c o in c id e w ith th e p o s i t i o n o f optimum p ro d u c tio n f o r t h a t p a r t i c u l a r combin­
a tio n of i n p u ts .
F o r th e s t a t i s t i c a l ap p ro ach , a sam pling o f a wide d i s t r i b ­
u tio n o f th e v a rio u s p o s s ib le com binations p re s e n te d by th e p ro d u c tio n s u r ­
fa c e w ith a r e s u l t a n t r e la tiv e ly - la rg e number o f o b s e rv a tio n s i s d e s ir a b le i n
o rd e r t o make p o s s ib le th e f i t t i n g o f a m a th e m atica l e q u a tio n to th e d a ta .
From t h i s , one may p ro g re s s by c a l c u la tio n to d eterm in e an optimum p o in t o f p ro ­
d u c tio n . T his te c h n iq u e im p lie s a f o r e c a s t on th e b a s is o f p a s t e x p e rie n c e , a co n ­
c e p t n o t e n t i r e l y in keeping w ith th is s tu d y w hich i s co ncerned w ith a l t e r n a t i v e
3/
K ing, R ich ard A ., "Some A p p lic a tio n s o f A c tiv ity A n a ly sis i n A g r ic u ltu r a l
E conom ics," J o u rn a l of Farm Economics, Volume 35<> (December, 1933)«
co m binations t h a t may n o t have been t r i d d p r i o r to th e im p o s itio n of w heat
a c re a g e c o n t r o l s .
The l i n e a r programming te c h n iq u e assumes t h a t each p ro ­
d u c tio n p ro c e ss o r a l t e r n a t i v e com bination may be e x p re sse d in l i n e a r f Oim5
t h a t i s , th e in p u t- o u tp u t r a t i o s a re c o n s ta n t.
Also i t i s assumed t h a t
in p u ts w hich a re l e f t f r e e t o v a ry a re p e r f e c tly , d i v i s i b l e so t h a t th e
p ro d u c tio n f u n c tio n may be c o n tin u o u s i n n a tu re *
F u r th e r th e d i f f e r e n t
p ro c e s s e s ( e n te r p r is e c o m b in atio n s) w hich a re t o be combined need to be
V
a d d itiv e o r amenable to n o n - c o n f lic tin g sim u ltan eo u s developm ent.
One has
t o assume t h a t a m a rg in a l p ro d u c tio n s u rfa c e does n o t e x i s t —a t l e a s t i n
so f a r a s diagramming i s concerned*
Which o f th e s e m ethods i s s e le c te d f o r th e a n a ly s is o f any problem
depends on th e d a ta a v a il a b le f o r use and th e k in d .o f problem t o be d e a l t
w ith .
The s t a t i s t i c a l te c h n iq u e i n t h i s c a se i s ru le d o u t because th e
n e c e s s a ry o b s e rv a tio n s have n o t been made u n d er an a c re a g e c o n tr o l s i t u a t i o n
i n th e w heat p ro d u cin g a r e a u n d er c o n s id e r a tio n , nor does th e problem a t
t h i s p o in t a p p ea r am enable to s o lu tio n b y t h i s m ethod.
In any case th e
method can h a r d ly be c o n sid e re d s u ita b le f o r use by a la y fa rm e r who i s
n o t as w e l l a c q u a in te d as th e re s e a rc h w o rk er w ith th e re q u ire m e n ts i n
m a th e m a tic a l c o m p u ta tio n , th e s e g re g a tio n o f in d ep en d en t v a r i a b l e s , and
th e s ig n if ic a n c e o f t e s t s o f r e l i a b i l i t y .
F o r th e l i n e a r programming
approach some o f th e same argum ents may be u se d . F i r s t o f a l l , d a ta f o r
/
th e s o lu tio n o f a s p e c if ic c a s e have n o t been b ro u g h t t o g e th e r , and sec o n d ly
th e m echanics o f making- th e a n a ly s is , are- n o t u n d ersto o d b y th e o p e ra to rs o f
farm s i n t o whose hands we w ish to p la c e some method o f making a d e c is io n
r e l a t i v e t o th e s e l e c t i o n o f a l t e r n a t i v e s .
L in e a r programming p e rm its a r r i v a l n e a r a p o in t o f optimum s o lu tio n
d e s ir a b le from th e farm e f f i c i e n c y s ta n d p o in t.
'
However3 t h i s optimum
i s r i g i d l y c o n s tr a in e d by assum ptions o f l i n e a r i t y and d i v i s i b i l i t y 3
e s p e c i a l l y where p ro c e s s e s a re d e lin e a te d w hich may la c k th e s e c h a r a c te r ­
i s t i c s e x c e p t f o r s h o r t s e c tio n s o f t h e i r p ro d u c tio n c u rv e s .
J . D. S h a f f e r
argued t h a t most d a ta em anating from th e work o f p h y s ic a l s c i e n t i s t s i s
p a r t i c u l a r l y s u i t a b l e f o r l i n e a r programming s in c e th e g r e a t body of
r e s e a r c h done by e x p e rim e n ta l methods i n agronomy,, a n im al I n d u s tr y 3 and
so on3 d e a ls w ith d is c o n tin u o u s segm ents (o f p ro d u c tio n c u rv e s) which ta k e n
alo n e d is p la y c o n s id e ra b le l i n e a r i t y . U/
However3 th e v e ry f a c t o f d i s ­
c o n tin u ity d e n ie s re a so n a b le e x te n s io n b y e x tr a p o la tio n .
A c tu a lly in s u f ­
f i c i e n t o b s e rv a tio n s and e x te n s io n s o f ex p erim en ts have b een made3 as a
r u l e , to d is p la y th e m a rg in a l c h a r a c t e r i s t i c s Of th e whole p ro d u c tio n
fu n c tio n s in v o lv e d .
S h a f f e r a ls o p o in ts o u t t h a t l i n e a r programming
approxim ates th e way i n which farm ers make d e c is io n s s in c e th e y do n o t
c o n s c io u s ly in c lu d e m a rg in a l a n a ly s is i n t h e i r c o n s id e r a tio n s „
However3
in o rd e r f o r a fa rm e r to use t h i s method a g r e a t d e a l o f w ork would have
t o be u n d e rta k en i n th e p r e p a r a tio n o f ta b le s and p ro c e d u res f o r him to
b/
S h a f f e r 3 J . D ,3 " D isc u ssio n o f 'Use- o f Economic M o d e ls '" , J o u rn a l o f
Farm Econom ics, Volume 3S>j (December, 1953) s pp.' 81+9-851. •
f o llo w „
C o n seq u en tly , i n th e i n t e r e s t s o f s im p lic ity and f r e e u n d e rsta n d in g
b y la y u s e r s th e s e two methods a re abandoned f o r t h i s s tu d y and we r e tu r n to
a c o n s id e r a tio n o f th e b u d g et m ethod.
A p p ra is a l o f th e b u d g e t,- - G e n e r a lly s p e a k in g , farm ers m ight be ex p ected to
shy away from m a th e m a tic a l o r s t a t i s t i c a l approaches to t h e i r pro b lem s.
However, as in tim a te d p r e v io u s ly , many fa rm e rs a re f a m i l i a r w ith b u d g e tin g
i n some form and th e y p u t c o n s id e ra b le en erg y and -thought in to th e p ro cess*
I t i s a p a r t o f w h a te v e r n a tiv e a b i l i t y and know-how th e y have f o r farm ing
o r ra n c h in g ,
Any d e c is io n th e y make w i l l r e q u ir e some b a la n c in g o f p ro s and
c o n s, p a r t i c u l a r l y th o se which have a f i n a n c i a l im p a c t.
The more s y s te m a tic
o p e ra to rs w i l l reduce t h e i r d e lib e r a t io n s to some k in d o f a b a la n c e s h e e t.
Even w ith o u t t h i s , th e m e n ta l b u d g etin g p ro c e ss e s engaged in w i l l leav e
d e c isio n -m a k in g im p re ssio n s i n th e m inds o f th e o p e r a to r s .
T h e ir economic
c o n s id e ra tio n s w i l l in v o lv e com parisons o f p a d t o r a n tic ip a te d e x p e rie n c e s
such as m arket p r i c e s , c o s ts o f p ro d u c tio n , and r a t e s o f y i e l d , which a re
r e a d i l y s e g r e g a te d .
These same ite m s ,w ith o th e rs which a re l e s s obvious
e n te r in to th e more fo rm a l b u d g ets s e t up by th e p r o f e s s i o n a l a n a ly s t.
Here
th e n i s common ground on w hich th e fa rm e r and farm management s p e c i a l i s t
can meet
The b u d g et method o f a n a ly s is has a s im p lic ity a d a p ta b le to th e i l l u s ­
t r a t i v e p u rp o se of th e work s in c e a s o lu tio n to a s p e c if ic case i s no t
s o u g h t.
What i s d e s ir e d i s a guide to th e manner in w hich th e m anager o f
any s p e c i f i c farm m ig h t a r r a y th e in fo rm a tio n a v a ila b le t o him .
He i s n o t
so concerned w ith an optimum com bination f o r th e d i f f e r e n t p o s s i b i l i t i e s .
b u t w ith th e b e s t f i t p o s s ib le u n d er th e d e f i n i t e r e g i d i t i e s w hich h is own
c ase p r e s e n ts .
There may be o n ly a r e l a t i v e l y few p o in ts a t which he can
produce due t o l i m i t a t i o n s of h i s equipm ent5 a crea g es and k in d o f Ia n d 9
a v a i l a b i l i t y o f I a b o r 9 and so on.
With th e s e r i g i d i t i e s i n mind th e con-,
s t r u c t i o n o f a p e r t i n e n t b udget should d e m o n strate e f f e c t i v e l y th e m e rits
and d e m e rits o f t h e a l t e r n a t i v e s under c o n s id e r a tio n .
The b udget i t s e l f may c o v e r th e whole farm o p e ra tio n , o r i f d e s ir e d
may be drawn up t o d e a l w ith a s p e c if ic p h ase o f th e o r g a n iz a tio n .
This
c o n t r a s t s w ith th e ten d en cy f o r an a l l - i n c l u s i v e approach im p lie d by s t a ­
t i s t i c a l o r l i n e a r programming m ethods.
I t would a p p ea r t o b e e a s ie r to
in tro d u c e v a r ia tio n s in to th e b u d g et t h i n in to th e s e system s i n o rd e r to
sim u la te c o n d itio n s produced by changing economic e n v iro n m en t.
t h i s s i m p l i c i t y does n o t make th e method any more a c c u r a te .
be r e f in e d to as h ig h a d eg ree as f o r o th e r m ethods.
However9
D ata need to
Sm all m is -e s tim a te s
i n b a s ic d a ta may be so s i g n i f i c a n t b u d g e t-w ise as to d i s t o r t c o n c lu sio n s
s e r io u s ly so t h a t th e problem o f s e t t i n g up s a t i s f a c t o r y s ta n d a rd s of
to le r a n c e i s a s e r io u s one.
Use o f th e b u d g e t. —F o r t h i s problem th e b u d g et i s to be used f o r com­
p a rin g e n te r p r is e a l t e r n a t i v e s as a s te p tow ards th e s e l e c t i o n o f an
e n te r p r is e f o r com bination w ith w in te r w heat p ro d u c tio n . - The c h a r a c te r ­
i s t i c s o f th e a l t e r n a t i v e s to be compared a re a p p ra ise d a c c o rd in g to th e
e f f e c t on th e b u d g ets a s th e d i f f e r e n t e n te r p r is e s - o r re s o u rc e s a re
s u b s titu te d .
The b a s ic b u d g et need be changed only f o r th o s e item s f o r
w hich v a r i a t i o n s a re a t t r i b u t e d t o th e s u b s t i t u t i o n b e in g made.
-
4 i9 -
F o r farm s in th e c e n t r a l a re a o f Montana s p e c ia liz in g in w heat p roduc­
t i o n th e b a s ic farm o rg a n iz a tio n i s b u i l t around a s in g le e n te r p r is e crop
p ro d u c tio n system .
P r i o r to th e in tr o d u c tio n o f acreag e c o n tr o ls e n te r p r is e
a l t e r n a t i v e s w ere n o t a m a tte r o f c o n ce rn .
Any b u d g e tin g n e c e s s a ry m ight
have re v o lv e d around re s o u rc e a l t e r n a t i v e s such as use o f f e r t i l i z e r ,
v a ry in g p ro d u c tio n te c h n iq u e s , a d d itio n s to equipm ent, and changes in
fin a n c ia l s tru c tu re .
R e la tiv e ly sim ple ch an g es, i n p ro d u c tio n r a t e s , and
c o s t and in v e n to ry f i g u r e s , where a p p lic a b le , would have re v e a le d in s h o r t
o rd e r th e p ro b a b le e f f e c t s o f co n tem p lated chahges* '
W ith im p o s itio n o f w heat a crea g e r e d u c tio n , th e b u d g et must tak e
accb u n t o f an a d d i t i o n a l f a c t o r , e i t h e r th e p re se n c e o f i d l e a c re s o r th e
co m b in atio n and b a la n c e o f an a d d itio n a l e n te r p r is e o r e n t e r p r i s e s .
The
b u d g et needs an e x te n s io n i n th e form o f an o p e ra tin g p la n t o p ro v id e a
means of a p p ra is in g tim in g in th e use o f re s o u rc e s f o r w hich th e e n te r p r is e s
m ight be c o m p e titiv e .
The assessm en t o f p o s s i b i l i t i e s w i l l rem ain f a i r l y
s i m p l e .i f th e in tro d u c e d change i s an a d d i t i o n a l c o m p e titiv e cash crop o r
c ro p s , r e q u ir in g o n ly
a p p ro p ria te a l t e r a t i o n s in th e d i f f e r e n t s e c tio n s
o f th e b a s ic b u d g e t.
However, i f th e contem plated a l t e r n a t i v e i s of a (Complementary n a tu re
th e changes n e c e s s a ry in th e budget become more complex.
P ro d u cts may n o t
be sim ply s o ld f o r cash b u t may r e - e n t e r th e p ro d u c tio n p ro c e s s to e m erg e ■
as an
a l t o g e t h e r d i f f e r e n t s a le a b le p ro d u c t.
There w i l l be cash c o s ts f o r
one e n t e r p r i s e w ith no o f f - s e t t i n g cash re v e n u e , w h ile th e s e in te rm e d ia te
p ro d u c ts assume th e n a tu re o f n o n -cash c o s ts f o r dependent p ro d u c tio n
-5 o -
p re c e s s e s w hich r e s u l t i n cash y ie ld in g p ro d u c ts .
The b u d g e t may need to
be extended t o ta k e in to acco u n t a lo n g e r p e rio d o f tim e th ^ n a s in g le
crop p ro d u c tio n p e r io d .
I f th e com plem entary e n te r p r is e in v o lv e s th e add­
i t i o n o f liv e s to c k a s e c tio n s e t t i n g f o r t h th e liv e s to c k p ro d u c tio n system
needs to be added., w ith co rre sp o n d in g e x te n s io n s to th e m a rk e tin g o r d i s ­
p o s i t i o n s e c tio n and c o s t and in v e n to ry s e c tio n s o f th e b u d g e t.
To a c h ie v e e f f i c i e n c y , th e com bination ( i n th e b u d g et as w e ll as in
!
p r a c t i c e ) ' th e n has to be b ro u g h t in to a b a la n b e which w i l l allo w f o r
u t i l i z a t i o n o f a l l i n t e m e d i a t e u n s a le a b le p ro d u c ts .
T his b a la n c in g
r e q u ir e s d e t a i l e d knowledge n o t o n ly of a n tic ip a te d p ro d u c tio n r a te s b u t
o f such th in g s as n u t r i t i v e v a lu e s and consum ption re q u ire m e n ts ,
fin a lly ,
a c c u ra te in fo rm a tio n ab o u t m ark etin g th e p ro p o sed p ro d u c ts i s d e s ir a b le in
o rd e r to a s s e s s th e o v e r a ll r e tu r n o f th e proposed com bination as i t com­
p a re s w ith p o s s ib le a l t e r n a t i v e s '.
PART IV
ILLUSTRATIVE BUDGET SUMMARIES
S y n th e s is o f Case Farm Model
E xam ination o f T a b le s ' I I 5 I I I 5l and IV I / in d ic a te s t h a t th e predom inant
ty p e o f farm i n th e d ry la n d farm in g a r e a u n d er c o n s id e ra tio n may be ty p if ie d
by
a s in g le e n te r p r is e e x te n s iv e wheat' p ro d u c in g u n i t .
The norm al s iz e o f
such a u n i t . i s more . .d i f f i c u l t to v i s u a l i z e s in c e th e av erag e farm a crea g es
w hich may be c a lc u la te d from Table I I a re e n la rg e d b y an in d e te rm in a te
• amount th ro u g h th e in c lu s io n ,of l iv e s to c k ra n c h e s , 2 /
There a r e , however,
two a d d itio n a l so u rc e s w hich g ive a b e t t e r id e a o f th e - a c tu a l s iz e o f th e
g r a in farm s i n th e t r i a n g l e a r e a .
x
I n th e i n i t i a l s ta g e s o f r e s e a r c h on
\
t h i s p r o j e c t , s i x t y re c o rd s o f r e p r e s e n ta tiv e farm s were s e c u re d i n 19h9j>
o f which tw en ty -o n e were o p e ra tin g w ith norm al d ry la n d p r a c t i c e s and had
l e s s .than t e n head o f li v e s t o c k as w e ll a s '.no i r r i g a t e d la n d .
However,
th e a v e ra g e - ac re a g e f o r t h i s s m a ll sample may be d i s t o r t e d b y th e extrem es
o f th e range, h o v ered .
P erhaps a s t i l l b e t t e r guide as to s i z e o f t r i a n g l e
w heat farm s i s th e .19h5>. a g r i c u l t u r a l census m a ste r sample o f d ry la n d crop
farm s f o r c e n s u s -a re a V I,
I t in d i c a t e s i n i t s c l a s s i f i c a t i o n ( f iv e c l a s s e s
from o n e -h a lf s e c tio n o r l e s s to two s e c tio n s o r more) t h a t no s iz e group
c o n ta in s a s i g n i f i c a n t l y g r e a t e r number o f farm s th a n any o t h e r , w ith th e
l/
R e fe r t o P a r t I
pages
26, 27, & 28.
2/
F or th e t e n c o u n tie s l i s t e d i n Table I I (page 26 ) th e av erag e s iz e o f
a l l fa n p s and ra n c h es was. 1688 a c re s i n 1950.
-5 2 p o s s ib le e x c e p tio n o f th e group w ith 300 to 600 a c re s o f c ro p la n d .
C onsid-
s r in g th e s e s o u rc e s , and on th e b a s is o f o b s e rv a tio n s i n th e a re a a t y p i c a l
farm was th o u g h t to be one which m ight have ab o u t e ig h t hundred 3/ c ro p la n d
a c re s and ab o u t h a l f t h i s amount o f unused la n d .
fig u re s .
Table V s e t s f o r t h th e s e
T o ta l a crea g e i n th e case farm ap p ears d is p r o p o r tio n a te ly low due
to th e sm a lln e ss o f th e f ig u r e f o r w aste la n d , which i s h e ld down so as to
a v o id c o n s id e r a tio n o f liv e s to c k as p a r t o f th e o r i g i n a l farm o r g a n iz a tio n .
P e rc e n tag e summerfa llo w f o r th e tiase farm a l s o d iv e rg e s from th e com posite
a v erag e s f o r a c tu a l farm s s in c e some do n o t alw ays ad h ere t o th e h a l f fa llo w
system .
Table V .—Average d ry la n d w heat farm a c re a g e s i n th e t r i a n g l e a r e a , a c c o rd ­
in g to so u rc e and d a te .
Source o f S iz e D ata
T o ta l
Acreage
i n Farm
T o ta l
A cres
C ropland
P e rc e n t
Summer-f a llo w
Acreage
Waste o r
P a s tu re
Census a re a V I-21 farm
su rv e y re c o rd s-19li9
1169
„1281
U7.7
188
Census a re a V I-181 w heat
farm s-c en su s m a ste r
sample-19L5
1357
672
1 3.2
685
S y n th esized t y p i c a l case
farm
1160
800
5 0 .0
360
2/
M yrick, D. C. and A nderson, R. L ., i n p re lim in a ry ta b u la tio n s from ACP
L is tin g s s h e e ts f o r 509 w heat p ro d u c in g farm s i n seven sample commun­
i t i e s o f a re a VI found i n 1955 t h a t th e average s iz e o f farm was 1180
a c re s w ith Slit a c re s o f c ro p la n d .
-5>3-
F u r th e r c h a r a c t e r i s t i c s ) o f t h i s farm were th e n assumed®
F i r s t 5 because
o f th e p re v a le n c e o f r e n te d la n d i n th e a r e a 5 i t was c o n sid e re d t h a t th e
u n i t would be more r e p r e s e n ta tiv e i f 300 o f th e 800 a c r e s o f c ro p la n d were
se c u re d by l e a s e , y ie ld in g o n e - th ir d o f th e crop as re n t*
I n l i n e w ith
c o n d itio n s g e n e r a lly e x i s t i n g i n th e a r e a , i t was c a lc u la te d t h a t an a v e r­
age 10 p e rc e n t o f th e seeded w in te r wheat, a c re a g e would be w in te r k i l l e d
a n n u a lly c
U su a lly t h i s acrea g e Would be re -s e e d e d to s p rin g wheat*
It
was assumed t h a t th e farm would b e lo c a te d i n an a re a i n w hich i t was
n o rm a lly f e a s i b l e t o seed a l l th e summerfa llo w to w in te r wheat*'
The cro p ­
p in g system was assumed to be one i n which w heat and summerf a llo w were
a l t e r n a t e d , w ith no s tu b b le la n d b e in g seeded*
Thus, !(.00 a c r e s o f crop .
would be seeded each y e a r , o f which 15>0 a c r e s would be on r e n te d la n d ,
As
in d ic a te d , th e farm was assumed t o c a r r y no l i v e s to c k , n o r have f a c i l i t i e s
f o r accommodating liv e s to c k o th e r th a n an ad eq u ate w a te r su p p ly and p erh ap s
some n o n d e s c rip t unused b u ild in g s ,
A s in g le l i n e o f owned farm equipm ent
was assumed to be p r e s e n t and ad eq u ate to accom plish a l l th e ta s k s o f th e
g r a in farm i n a tim e ly and e f f i c i e n t manner*
The^farm er and h i s fa m ily
were c o n sid e re d to be y e a r-ro u n d r e s i d e n t s on th e f a r m ,. c ap a b le o f h a n d lin g
th e y e a r 's o p e ra tio n s w ith th e h e lp o f a man h i r e d d u rin g t h e ru sh cro p p in g
s e a s o n s.
S ources o f D ata
The m ain so u rce o f d a ta i s th e s e r i e s o f b u d g ets d ev elo p ed by p re v io u s
w orkers on t h i s p ro je c t*
r - r ' "
I n th e s e th e in v e n to ry v a lu a tio n s o f in v e stm en t
i n Ia n d 5 b u ild in g s ,, and m achinery,, a s w e ll as c o s ts o f o p e ra tio n ^ h a d been
worked o u t on th e b a s is o f th e su rv ey m a te r ia l c o lle c te d i n 19lt9*
For
th e s e b a s ic b u d g ets th e p r ic e in fo rm a tio n was r e le v a n t f o r t h a t p erio d *
From tim e to tim e as th e s tu d y p ro g re s s e d , v a rio u s ite m s e n te r e d i n th e s e
b u d g e ts were a d ju s te d a c c o rd in g to th e contem porary in d e x l e v e l f o r t h a t
ite m (1910-1911). ~ 100) e
T his p e rm itte d an e a sy method o f b y -p a s sin g
r e - c a l c u l a t i o n o f th e in p u ts from y e a r to y e a r ,
However5 th e p assag e o f
tim e and th e n th e in tr o d u c tio n o f a new b a se p e rio d (1935-1939 - iOO) in to
th e U. Se Be A,
fa c to ry *
nFarm C ost S i t u a t i o n 11 \x/ made t h i s p r a c t i c e l e s s s a t i s ­
C onsequently members 5 / o f P ro d u c tio n Economics R esearch Branch
c o o p e ra tin g i n t h i s p r o j e c t re-w orked th e b a s ic com putations i n l i n e w ith
1955 p r i c e s .
To a v o id u n n e c e ssa ry d u p lic a tio n o f work a number o f th e s e
b u d g e ts a re rep ro d u ced h e re w ith »
The y i e l d d a ta u sed a r e ap p ro x im atio n s
o f th e av erag e y i e l d e x p ec te d i n th e a r e a as drawn from s t a t i s t i c s o f th e
Crop R e p o rtin g S e rv ic e 6/ ,
I t i s . th o u g h t t h a t th e p r ic e s u sed f o r m ark et­
a b le p r o d u c ts ■a re th o se w hich may be a n t i c i p a t e d d u rin g th e 1955 season*
D a ta B a s ic to th e tu rk e y e n t e r p r i s e b u d g et which i s o r i g i n a l w ith t h i s
Ij/
Farm C ost S i t u a t i o n 5 The, U. S . D, A* B ureau o f ^ -A g ric u ltu ra l Economics*
5/
A nderson, R,- L* and M yrick5 D6 C*, P ro d u c tio n Economics R esearch Branch,
M ark etin g S e r v ic e , U .S .D .A ., Montana S ta te C o lle g e , Bozeman, M ontana.
6/
M ontana A g r ic u ltu r a l S t a t i s t i c s , Montana D epartm ent o f A g ric u ltu re
C o o p eratin g w ith U.S.D.A. A g r ic u ltu r a l M arketing S e r v ic e , 7 o l , 5,
December, 195U*
t h e s i s was drawn from p u b lic a tio n s o f th e P o u ltr y D epartm ent 7/ and
E x te n s io n S e rv ic e 8 / o f th e c o lle g e .
B asic B udgets
T ria n g le a r e a w heat farm w ith o u t a c re a g e r e s t r i c t i o n s . -«-9/. T h is i s b u d g et I
showing th e o r g a n iz a tio n , c o s ts and r e tu r n s t h a t m ight have b e en b a s ic f o r
a farm s i m i l a r to th e model b e in g u s e d i n t h i s study®
T his assumes u n re ­
s t r i c t e d w heat a c re a g e and m a rk e tin g , b u t a w heat p r ic e a t th e su p p o rt l e v e l
a n t i c i p a t e d f o r 19i>£>»
tinder s u rp lu s c o n d itio n s t h i s i s an u n r e a l i s t i c con­
d i t i o n which r e f l e c t s a p a s t s i t u a t i o n b u t i n no way r e p r e s e n ts th e p r e s e n t
o r known f u t u r e .
T h is b u d g e t, th e r e f o r e , does n o t i l l u s t r a t e a s i t u a t i o n
w ith which o th e r a l t e r n a t i v e s sh o u ld be d i r e c t l y compared e x c e p t i n so f a r
a s i t r e p r e s e n ts a g o a l i n l e v e l o f n e t farm income which i t i s hoped th e
r e tu r n s o f th e s e o th e r a l t e r n a t i v e s may a p p ro a ch .
However, B udget I i s
i
b a s ic t o th e developm ent o f su b seq u en t b u d g e ts becau se i t in c o r p o r a te s a l l
t h a t i s known ab o u t th e case fa rm .
Here we have in v e n to r ie s o f a c re a g e s ,
c u r r e n t o r g a n iz a tio n , in v e stm e n t i n r e a l e s t a t e and equipm ent, and expenses.
These l a t t e r a re developed d i r e c t l y from p a s t e x p e rie n c e a s re p re s e n te d
f o r in s ta n c e b y farm a c c o u n ts and su rv e y m a t e r i a l .
From t h i s known b a s e ,
p r o je c tio n s i n t o th e unknown can be made by e n su in g b u d g e ts .
7/
H a lb r00k , E . E . , B e e c k le r, A. F*, and S m ith , E. P . , Turkey Feeding
R e se a rc h ," F o n tan a' A g r ic u ltu r a l E xperim ent S ta t i o n , B u l l e t i n $01,
(S eptem ber,. I9$h) • .........................
8/
Cushman, H a f ie tte E*, and' W elch, B r. Howard, T u rk e y s 'i n M ontana, Montana
S ta te C o llege E x te n s io n S e rv ic e , B u l l e t i n 248,” (HovemBer, 19U7)®
2/
See Appendix A f o r d e t a i l e d developm ent o f Budget I .
-5 6 Budget I . - T riangle area wheat farm w ithout acreage r e s t r ic t io n s .
LAND USE AND CROP PRODUCTION
Crops &
Produc­
D is p o s itio n
Acres Y ie ld t i o n
Land Use
Feed Seed R ent
W in ter wheat
IiOO
18.0 7200 hi. XX
Uoo 900
S p rin g w heat
(IiO) 13.5 5L0hi. XX
H o- ~ w
Summer fa llo w
UOO
N ativ e p a s tu r e
E arm stead & w aste
TOTAL
Cash Income
S o ld P ric e
T o ta l
5900 $1,895 $11180
ii33 1.93
853
325
35
1160
$12015
CASH EXPENSE
Item
F u e l, o i l & g re a se
R e p a irs
Seed
Seed tre a tm e n t
Weed sp ra y in g
I n s e c tic id e s
F e rtiliz e r
H ired lab o r,
Custom h a u lin g
S u p p lie s & m isc .
li v e s t o c k p u rc h a se s
Feed p u rc h a se s
Amount
$815
91U
32
IilU
FINANCIAL SUMMARY
Cash Income
G r a in .. . . . . . . . . . . . . . __ _
L iv e s to c k ...............................
O th e r ................................ ..
—
T o ta l Cash Income
688
2ii2
315
T o ta l Cash Expense
NET CASH Income
XX
XX
D e p re c ia tio n
$ 12015
NET FARM Income
I n t e r e s t on E q u ity @ 5.0
In su ra n c e
Taxes
I n t e r e s t p a id
TOTAL CASH EXPENSE
112
32li
295
WilBl
LABOR AND
MANAGEMENT Income
INVESTMENTS
Item
EA
LO­
D e p re c ia tio n
Ave. r a t e
Amount
•—
—
$
170
3 .3 3 *
1558
e- —
—
XX
$1728
CO
Land
B u ild in g s & fe n c e s
M achinery & power
L iv e sto c k
TOTAL
VaILue
T o ta l
E q u ity
$ 11900
$ 9917
5130
U275
183UO
15283
XX
XX
$ 35370 "$29175
I 12015
$ —
%
—$
Ul8l
$
783k
- $
1728
$
6106
- $
IiiYli
$
1632
T ria n g le a r e a w heat farm w ith a c rea g e r e s t r i c t i o n and d iv e r te d acreag e
i d l e . — 10/B udget I I
r e p r e s e n ts th e case farm o p e ra tin g u n d er a 2j? p e rc e n t
r e d u c tio n i n w heat a c re a g e w ith d iv e r te d a c re a g e i d l e l
Because th e p r ic e
o f w heat i s g u a ra n te e d through com pliance w ith a know n-acreage a llo tm e n t
t h i s s i t u a t i o n i s an a l t e r n a t i v e which p ro v id e s a r e a l i s t i c s ta n d a rd w ith
which o th e r a l t e r n a t i v e s may be compared.
Budget I by a s u b s t i t u t i o n p r o c e s s .
T h is b u d g et may b e developed from
The changes i n th e la n d use and crop
p ro d u c tio n s e c tio n f o llo w as a m a tte r o f c o u rse th e b a s ic change from IiOO
to 300 a c re s o f w h e a t.
The v a r ia b le ex p en ses can a ls o be changed r e a d i l y
i n th e same p r o p o r tio n a s th e b a s ic change i n w heat a c re a g e , w h ile f ix e d
expenses and th e in v e stm e n t s e c tio n rem ain unchanged.
One f e a tu r e o f
Budget I I w i l l rem ain c o n s ta n t th ro u g h th e e n su in g b u d g ets', t h i s b e in g th e
a c re a g e s a llo c a te d t o w in te r and s p r in g w heat w ith th e dependent sch e d u le s
o f ite m s r e l a t i v e t o p ro d u c tio n , d i s p o s i t i o n , and income from w h eat.
B udgets f o r C ropping A lte r n a tiv e s
D iv e rte d a c re a g e i n b a r l e y . —T h is a l t e r n a t i v e , i l l u s t r a t e d b y Budget I I I jjI l / .
i n th e la n d u se and crop p ro d u c tio n s e c tio n r e q u ir e s o n ly one b a s ic change
from fo r e g o in g b u d g e ts .
I n p la q e o f 100 a c r e s o f wheat' o r i d l e la n d , as
th e case may b e , th e r e w i l l be 100 a c re s o f b a rle y ,-
T his crop, fo llo w in g
th e e s ta b lis h e d system , w i l l be o f f s e t b y 100 a c re s o f summerfa llo w .
IO /
See Appendix A f o r a d d i t i o n a l d e t a i l on Budget I I ,
ll/
See A ppendii A f o r a d d i t i o n a l d e t a i l on Budget i l l .
In
-5 8 Budget H e — T riangle area wheat farm w ith d iv e r te d acreage i d l e e
LAND USE AND CROP PRODUCTION
Crops &
ProducD is p o s itio n
A cres Y ield t i o n
Land Use
Feed Seed R ent
W inter wheat
300
1 8 .0 5U0 0bu. XX
300
675
S p rin g wheat
T 5 0 T 13.5 LOS bu. XX
30
5i
Summer fa llo w
300
I d le
S old
1125
32h
Cash Income
P ric e
T o ta l
$1,895 $8385
625
1.93
200
N ative p a s tu r e
F arm stead & w aste
TOTAL
325
35
1160
9901C
CASH EXPENSE
Item
Amount
F u e l5 o i l & g re a se
R e p a irs
Seed
Seed tre a tm e n t
Weed sp ra y in g
I n s e c tic id e s
F e rtiliz e r
H ired la b o r
Custom h a u lin g
S u p p lie s & m isc .
L iv e s to c k p u rc h a se s
Feed p u rc h a se s
9612
686
——
~w ~
311
I W
18 2
259
XX
X*
FINANCIAL SUMMARY
Cash Income
G ra in .............................................$
L i v e s to c k .............................. $
O th e r...................
$
T o ta l Cash Income
T o ta l Cash Expense
NET FARM Income
In su ra n c e
Taxes
I n t e r e s t p a id
TOTAL CASH EXPENSE
112
32h
295
93149
3lli9
$ 5861
- $
1728
I4I 33
I n t e r e s t on E q u ity @ 5.0% - $
lit? U
LABOR AND
MANAGEMENT Income
D e p re c ia tio n
Ave. r a t e
Amount
——
——
9 170
3 .3 3 *
1558
mmmm
——
XX
91728
1
LA
CO
Land
B u ild in g s & fe n c e s
M achinery & power
L iv e sto c k
TOTAL
VaIue
T o ta l
E q u ity
$ 11900
9 9917
5130
4275
19340
15283
XX
XX
9 35370
929475
- $
|
INVESTMENTS
Item
$ 9010
NET CASH Income
D e p re c ia tio n
9010
—
$ 2659
-5 9 Budget I I I . —T riangle area wheat farm w ith d iv e r te d acreage in b a r le y .
,LAND USE AND CROP PRODUCTION
B arley
Produc­
D is p o s itio n
Cash ,Income
Acres Y ie ld t i o n
Feed Seed Rent S o ld P ric e T otal
300
1 0 .0 5L00bu. XX
675 Ui25 *1.095 * 6385
(30) 1 3 .5 L0 5 bu. XX
30 ~5T
32li 1.9 3
625
UOO
I
Crops &
' Land Use
V in te r w heat
S pring w heat
Summer fa llo w
100
N ativ e p a s tu r e
Farm stead & w aste
TOTAL
325
“ 3T
1160
27.0 2700 bu.
XX
125
'318
J
Item
Amount
F u e l, o i l & g re a se
R ep a irs
Seed
Seed tre a tm e n t
Need sp ra y in g
I n s e c tic id e s
F e rtiliz e r
H ired la b o r
Custom h a u lin g
S u p p lie s & m isc .
L iv e sto c k p u rc h a se s
Feed p u rc h a se s
* 815 ,
“ 9 ll
In su ra n c e
Taxes
I n t e r e s t P aid
TOTAL CASH EXPENSE
112
32U
295
*1207
*10973
mtmm
FINANCIAL SUMMARY
Cash Income
"Grain
L iv e sto c k
O ther
* 10971
$
—
*
T o ta l Cash Income
* 10971
32
IilL
——
T o ta l Cash Expense
——
NET CASH Income
600
268
D e p re c ia tio n
' 315
XX
XX
- $
li207
*
6761j
- $
1728
S
5036
I n t e r e s t on E q u ity @ 5.0%- *
lii7lj
LABOR AND
MANAGEMENT Income
3562
NET FARM Income
INVESTMENTS
Land
B u ild in g s & fe n c e s
M achinery & power
L iv e s to c k
TOTAL
196]
.05
------- -----
CASH E X P E N S E __________
Item
2307
Value
T o ta l
E q u ity
5 11900
* 9917
5130
U275
183LO
15283
XX
XX
* 35370
*29175
D e p re c ia tio n
Ave. r a t e
Amount
——
* 170
3 .3 3 *
1558
6 .5 *
——
——
XX
*1728
*
"SO=
p r a c tic e t h is o rg a n iz a tio n should u t i l i z e th e reso u rces
o f
th e wheat farm
I
t o th e same deg ree t h a t would be th e qase o f th e u n r e s t r i c t e d w heat o p er­
a tio n .
C onsequently 5 cash expenses a re c o n sid e re d n o t t o d i f f e r g r e a tly
from th e s i t u a t i o n l a i d o u t i n Budget I .
Howevers changes i n th e o p e ra tin g
program w i l l be n e c e s s ita te d by th e s p r in g h a b it o f b a r le y i n c o n tr a s t w ith '
th e w in te r h a b i t o f w heat common to th e area*
D iv e rte d a c re a g e i n c r e s te d w heat g ra s s f o r S e e d .--B u d g et ISf} oh th e fa c e
o f i t j in d ic a te s l i t t l e d if f e r e n c e from th e p re c e d in g b u d g ets o th e r th a n
i n th e d i s t r i b u t i o n o f d iv e r te d a c re a g e .
th e new f a c t o r which i s in v o lv e d .
Howeverjl t h i s i s a t i p - o f f to
The p re v io u s b u d g ets d e s c rib e d s itu a tio n s
w hich w ere f l e x i b l e from y e a r to y e a r b ecau se.-o f t h e ' a n n u al n a tu re o f c e re a l
c ro p s . 1 2 /
T his b u d g et i s f o r a l e s s f l e x i b l e s i t u a t i o n b ecau se th e per-*
e n n ia l n a tu re and growth h a b i t s o f c r e s te d w heat graSs r e q u ir e commitments
o f re s o u rc e s ( c h i e f l y la n d ) f o r a b o u t two y e a rs b e fo re a cash crop can be
re a liz e d .
C onsequently i n o rd e r to make t h i s b u d g e t com parable w ith th e
o th e r s s th e tim e elem ent m ust be d is r e g a r d e d .
I t can th e n be assumed t h a t
th e b u d g et r e p r e s e n ts a farm w ith th e c r e s te d w heat g ra s s e n te r p r is e i n
f u l l -p ro d u c tio n .
Under th e s e c o n d itio n s v a r ia b le o p e ra tin g expenses f o r
.la n d work sh o u ld be somewhat, l e s s th a n f o r c e r e a l crops due to reduced
suA m erfallow and s e e d in g e f f o r t .
This s a v in g w i l l be p a r t i a l l y o f f s e t by
th e c o s ts o f h a r v e s tin g a g r e a te r a c re a g e .
12/
A gain th e o p e ra tin g program
F o r d is c u s s io n o f 11tim e f l e x i b i l i t y * s e e Es Os Heady, Economics Of
A g r ic u ltu r a l P ro d u ctio n , and R esource Upe/ New York, P r e n tic e - H a ll, In ca
(1952) pp.‘■
-61.
Budget IV.—Triangle area wheat farm with diverted acreage in crested wheat
grass for seed.
I
LAND USE AND CROP PRODUCTION
Crops &
Produc­
disposition
Cash Income
Acres Yield tion
Land Use
Feed Seed lent Sold Price Total
/Vinter Wheat
300 18.0 5400 bud X X
300 615 4425 $1,895 $8385
spring Wheat
(30. 13.5 405 bu. X X
30 51
324 1.93
625
summer fallow
300
'rested Wheat Grass
-Seed crop
160 125# >0,000#
XX
5.500k 173004 .15
2595
-New seeding
40
Mative pasture
Farmstead & Waste
TOTAL
Item
:u e l, o il & grease
lepairs
seed
seed treatment
/Veed spraying
[nsecticides
fe r tiliz e r
Mired labor
Custom hauling
supplies & misc.
Livestock purchases
Feed purchases
Seed cleaning
Insurance
Taxes
In terest paid
TOTAL CASH EXPENSE
325
35
$1160
$11605
Amount
$ 676
731
24
414
«* «*
FINANCIAL SUMMARY
Cash Income
Grain ................ . . . . . . .
Livestock ....................................
Other ............................................
—»«■»
466
182
302
Total Cash Income
Total Cash Expense
- $ 421E
XX
XX
692
112
324
295
$4218
NET CASH Income
Depreciation
Value
Total
Equity
Land
$11900
$ 9917
Buildings & fences
5130
4275
Machinery & power
18340
15283
Livestock
XX
XX
TOTAL
$35370
$29475
NET FARM Income
$ 5659
In terest on Equity fe 5.0%
Depreciation
Ave. rate Amount
—— •
3.33%
8.5 %
$ 7387
- $ 1728
LABOR AND
MANAGEMENT Income
INVESTMENTS
Item
$11605
-»«—
$
170
1558
——
*—=»
XX
$ 1728
- $ 1474
$ 4185
-6 2 -
w i l l have to be Changed5' p a r t i c u l a r l y i n r e s p e c t to d i s t r i b u t i o n o f la b o r*
M ark etin g u n c e r ta in t y w i l l be in tro d u c e d r e l a t i v e to q u a l i t y ( e , g a contam­
i n a t i o n by quack g ra s s ) and a p r ic e which i s n o t f ix e d .
Howevers i t i s
th o u g h t t h a t th e u n c e r ta in t y o f s e c u rin g a s tr o n g c a tc h o f th e g ra ss on
new ly seeded f i e l d s w i l l be m itig a te d by th e c a p a c ity o f th e crop to p ro ­
duce h ig h se e d y i e l d s from Ih in--^an d s.*
B udgets f o r L iv e sto c k A lte rn a t iv e s :
The f o u r l i v e s to c k b u d g e ts to be p r e s e n te d have g e n e ra l f e a tu r e s which
a re s i m i l a r .
As i n p re v io u s b u d g ets a l l a r e c o n s is te n t i n h a v in g th e same
amount o f la n d a l l o c a t e d to cash w heat p ro d u c tio n .
D iv e rte d a c re a g e i s
u t i l i z e d i n th e f i r s t two m a in ly f o r a n n u a l fe e d g ra in p ro d u c tio n , i n th e
o th e rs l a r g e l y f o r fo ra g e p ro d u c tio n .
Crop p ro d u c tio n expenses' th e r e f o r e
rem ain w ith in th e ran g e o b serv ed f o r th e p re v io u s ly c o n sid e re d cro p p in g
b u d g e ts .
Crop cash income i s red u ced to t h a t which i s fo rth co m in g from
w heat a lo n e ,,o r l i t t l e m ore.
Three b u d g e ts o u t o f th e fo u r co n tem p late
u se o f a h i t h e r t o unemployed la n d r e s o u r c e s th e uncropped p a s tu r e land*
F u r th e r c h a r a c t e r i s t i c s common to th e s e liv e s to c k b u d g e ts a re th e
a d d itio n o f s e c tio n s d e s c rib in g in v e n to ry , fe e d re q u ire m e n ts , p ro d u c tio n ,
and d i s p o s i t i o n o f l i v e s t o c k .
I n each case th e e^sh expense s e c tio n has
I
t o ta k e a cc o u n t o f d i r e c t liv e s to c k e x p e n se s.
The in v e stm e n t s e c tio n
in d ic a te s r e q u ir e d a d d itio n s to r e a l e s t a t e i n b u ild in g s- and fe n c e s and 'W
w orking c a p i t a l i n equipm ent and li v e s t o c k .
Each one o f th e s e liv e s to c k
—63“
o p e ra tio n s e x h ib its a d i v e r s i f i c a t i o n w ith some degree o f i n f l e x i b i l i t y "3j /
which i s n o t f u l l y r e f l e c t e d i n th e b u d g e ts e
F o r th e tu r k e y and hog e n te r ­
p r i s e s commitments o f re s o u rc e s f o r p ro d u c in g fe e d g ra in have to be made a
y e a r b e fo re th e l iv e s to c k p ro d u c t can b e p u t o u t a t a s e a so n a b le time#
For
sheep and c a t t l e t h i s d e la y i n g e ttin g i n t o f u l l p ro d u c tio n may be even
lo n g e r r e l a t i v e t o e s t a b l i s h i n g an ad eq u ate fo ra g e p ro d u c tio n b a s e .
At th e
same tim e c o n s id e r a tio n n e e d s •to be given t o th e lo n g e r p e r io d r e q u ire d b y
th e s e l iv e s to c k f o r b re e d in g and growth#
To make th e b u d g e ts com parable i t
i s assumed t h a t th e e n t e r p r i s e o r g a n iz a tio n s d e a l t w ith
have had ad eq u ate
tim e to 'd e v e lo p up to th e e q u ilib riu m p o s itio n s co nceived th e re in #
However, th e w r i t e r r e a l i z e s t h a t t h i s i s an u n r e a l i s t i c approach i n
view o f th e y e a r to y e a r im p o s itio n o f a c re a g e c o n tro ls which i n e f f e c t
demands f l e x i b i l i t y o f o p e r a tio n on an a n n u a l b a s is #
The im p lic a tio n i s
t h a t th e o p e r a to r would have had f o r e s i g h t enough t o a n t i c i p a t e th e acrea g e
a llo tm e n t o r e l s e th e c u r r e n t s i t u a t i o n w i l l p e r s i s t th ro u g h th e p ro d u c tio n
p e rio d s n e c e s s a ry to b r in g th e a l t e r n a t i v e e n te r p r is e s i n t o th e e q u ilib riu m
p o s itio n s v i s u a l i z e d i n th e s e b u d g e ts #
A r e a l i s t i c tre a tm e n t would in v o lv e
c o n s tr u c tin g a s e r i e s o f t r a n s i t i o n b u d g e ts t o approxim ate th e developm ental
c o n d itio n s a n t i c i p a t e d f o r th e p ro d u c tio n p e rio d s in te r v e n in g betw een th e
13/
C o n tra s tin g d i v e r s i f i c a t i o n w ith' f l e x i b i l i t y i n th e f a c e o f u n c e r ta in ty
Heady say s i n p a r t , " D iv e r s if ic a tio n i s m ain ly a method o f p re v e n tin g
la r g e l o s s e s 5 f l e x i b i l i t y i s more n e a r ly a method o f p re v e n tin g th e
s a c r i f i c e o f la r g e g a in s . ‘F l e x i b i l i t y allo w s f o r changing o f p la n s as
tim e p a s s e s # # # . » . # 1q u ic k changes’ a t a lo w er c o s t s a c r if ic e .* .* # # #
tu r n in g p o i n t s i n tim e f o r r e d e c is io n # ..# # ,# " E6 Oe- Heady, op# c it#
p# h2h#
-611-
current stage and the equilibrium aimed a t 0- Shen comparisons could be made
on the b asis of the aggregate r e su lts of each enterprise for the period
under consideration*
This study -will not be extended to include th is
approach*
(
Diverted acreage as a base for a turkey enterprise*--: Ilt/ Budget V is a
highly speculative projection since a number of unknowns and uncertainties
are involved*
Regarding crop production, wheat is the most desirable feed
grain for turkeys*
Yet under e x istin g regulations i t i s required to be
grown on allocated acres, which are, for th is se rie s of budgets:, restr icte d
to the production of wheat for sale*
Consequently, a wheat substitute has
been sought such as m ille t, sp e lts, grain sorghum, or even h u lless oats and
barley*
Not enough is. known about the performance and adaptation of such
crops hs turkey feed or for the area.
Added investment would be required
for. sh elter and feeding f a c i l i t i e s as w ell as for equipment to grind and
mix feed.
I t is assumed that adequate cash reserves and/or intermediate
credit i s available to provide these needs*
Insofar as crop production i s
concerned i t i s thought, that expenses w ill be the same as, for a l l grain
operations.
However, additional ^expenses w ill accrue from the greater use
of power equipment (truck, tractor, feed grinder) in the d aily tasks of
looking a fter the turkeys.
Because the birds lik e ly w i l l not appear on
tax r o lls no change in taxes i s contemplated.
lij /
However, the three large
See Appendix A fo r .d e ta ile d development of Budget V*
-6 5 B u d g e t Mo— T r i a n g le a r e a w h e a t farm w it h d i v e r t e d a c r e a g e a s a b a s e f o r a
tu rk ey e n t e r p r is e .
LAND USE AND CROP PRODUCTION
Produc­
DifejDOs i t i on
Cash n6 brie
Crops &
Acres Yield
tion
Feed Seed Rent Sold Price to ta l
Land Use
Winter wheat
300
18.0 5400 bu.
300
615 4425 $1,895 $8385
Spring wheat
130) 13.5
405 bu.
51
324 1.93
30
625
Summer fallow
400
ETIet
50 1 0 0 0 # 50,000# 43000# 750d 5250#
Barley
27.8
556 bu. 461
25
70
Dats
~50~ 28.2
846 bu. 680
60 106
Native pasture
325
Farmstead & waste “ 35"
TOTAL
T IW
CASH EXPENSE
Item
Fuel, o il & grease
Repairs
Seed
Seed treatment
!Weed spraying
In secticid es
F er tilize r
fired labor
Sustom hauling
Supplies & misc.
Livestock purchases
Feed purchases
Insurance
Taxes
In terest paid
TOTAL CASH EXPENSE
&901C
I
Amount
$ 925
989
FINANCIAL SUMMARY
Cash Income
Grain. .................................... .... $ 9010
Livestock. . . . . . . . . .
Other. . . . . . . . . . . O S 7895
——
33
362
—«=»
“•“
1488
182
437
1700
2566
Total Cash Income
$16905
Total Cash Expense
$ 9552
NET CASH Income
$ 7353
Depreciation
$ 1863
NET FARM Income
$ 5490
112
324
434
$9552
In terest on Equity @ 5.0%
LABOR AND
MANAGEMENT Income
INVESTMENTS
Item
Total
Land
$11900
Buildings & fences
7860
Vlachinery & power
18840
Livestock
—™
TOTAL
$33600
Value
Equity
$ 9917
6550
15700
——
$32167
- $ 1608
$ 3882
Depreciation
Ave. rate Amount
——
3.33%
8.5 %
——
XX
——
$ 261
1602
•*>™
»
$1863
(c o n t.)
-6 6 -
Budget
Vo—
(c o n t.)
LIVESTOCK ORGANIZATION
Kind
Disposition
Begin Born Bought Home Died
Sales
No.
No. No.
Use
No. Weight Amount Price Value
Turkey
Poults
(Broad
Breasted
Bronze)
--
—
240
2000
XX
XX
XX
XX
End
No.
——
XX
TOTAL
LIVESTOCK FEED REQUIREMENTS
Kind
No.
Grain
Head
Lbs.
3. B. Bronze
Turkeys
M illet 43000
2000
Barley 22128
Oats
TOTAL
113892
LIVESTOCK PRODUCTS
Product
No.
Pro­
of
duction
head
rate
Toms
lens
TOTAL
28764
Concentrates
Lbs.
P re-starter
2000
Turkey starter
10000
Grower Mash
8000
Bran
6000
Soy meal
6000
Dried skim
4000
Fish meal
2500
Meat scrap
3500
Other supplements 3000
880
880
22#
14#
Total
production
19360#
12320#
45000
Home
Use
110#
70#
Farm Use
For
Amt.
Sold
Amt.
Pasture Acres
Native Plantec
100
Price
•
17900# $.25
11400# .30
(Less 1%
shrink)
Value
$4475
3420
$7895
-6 7 “
cash items of Iabor 5 purchase of p ou lts 9 and purchase of supplemental con­
centrate feed s 3 pose a c r itic a l problem in th is enterprise» These about
/
double the cash expenditures norm.pl for cropping*
A ll these expenses have •
to be met in large part prior to angr possible receipts from flock or
current crop wheat s a le s.
The su sc e p tib ility of turkeys to unfavorable
events makes the flock i t s e l f poor c o lla te r a l even for short term borrowings.
Because wheat also i s an uncertain crop these cash demands would be lik e ly
to place the operator in a s u ffic ie n tly extenuating fin a n cia l p osition that
Xthe turkey enterprise would be prohibited unless there were substantial
cash reserves to put into the venture.
Consequently only a r e la tiv e ly
•
modest addition i s made to in te r e st on account of short term borrowings to
meet d irect cash expenses.
Also not read ily revealed by the budget i s a highly complex operating
program.
The changes in cropping system alone w ill not be easy to forecast.
Added to th is would be a greatly increased demand for Iabor 3 both family
and hired, to look after the turkeys through slack and busy tim es.
15/
Timing w ill be important in working out as smooth an organization as
possible between the competitive features of the combined crop and turkey
enterprises, p articu larly in respect to labor use.
Diverted acreage as a base for hog en terprise. —Hog production,.as can be
learned from Budget V I,offers a r e la tiv e ly prdblem free a ltern a tiv e.
15/
The p o s s ib ility of securing p artly raised poults ready to go on range
should not be overlooked. The additional cost would be o ffse t by
savings in m ortality, starter feed s, labor, and investment in broader
houses and equipment.
-6 8 B u d g e t V I . — T r i a n g le a r e a w h e a t farm w it h d i v e r t e d a c r e a g e a s a b a se f o r
a hog e n te r p r is e
Item
Fuel, o il & grease
Repairs
Seed
Seed treatment
Weed spraying
In secticid es
F e r tiliz e r
Hired labor
Custom hauling
Supplies & misc.
Livestock purchases
Feed purchases
Amount
$ 815
914
Insurance
Taxes
In terest paid
TOTAL CASH EXPENSE
112
Produc- L_ _ Disposition
Cash Income
tion
Feed Seed Rent Sold Price Total
5400 bu.
300 675 4425 $1,895 $8385
405 bu.
30 51 1524 1.93
625
— —
— —
2502 bu. 1328
112
348
714
b
LAND USE AND CROP PRODUCTION
Crops &
Acres Yield
Land Use
Winter wheat
300
18.0
Spring wheat
(SO) 13.5
Summer fallow
390
Barley
90
£7.8
A lfalfa hog pasture
20
Native pasture
325
Farmstead & waste
35
TOTAL
1160
607
$9617
FINANCIAL SUMMARY
Cash Income
Grain . ...............................
.$9617
Livestock . . . . . . . . . . . 2363
O th e r ........................ ....
— ™
32
414
Total Cash Incom e..................... . .$11980
— —
688
208
430
60
358
Total Cash Expense
. . . . . . .
NET CASH Income
Depreciation
336
321
$4688
In terest on Equity @ 5.0%
— «—
— =■
K
OJ
K
>
0
LABOR AND
INVESTMENTS
MANAGEMENT Income
Ta"Lue
Depreciation
Item
Total Equity Ave.rate Amount
Land
$11900 $9917
Buildings & fences
7810 6515
3.33% $ 260
Machinery & power
18840 15700
1602
8.5%
Livestock
500
500
TOTAL
$ 39050
$1862
XX
u» ■
$7292
- $1862
NET FARM Income
ammm
$4688
(c e n t.)
$5430
- $1632
$3798
-6 9
Budget V I.—(cen t.)
LIVESTOCK ORGANIZATION
Begin Born Bought Home Pied
D isposition
End
Kind
No.
No.
No.
Use No.
Sales
No.
No.
So. Weight Amount Price Valup
—
— — LI
Sows
11
—
0
320# 35 :20 # $ . 1 2 H l 22 ——
Boar
—
—
—
I
—
—
I
27#
27#
.1 2
33
Slaughter hogs
—-
66
—
I
I
?3
200 #
106005
.1 8
1908 11
TOTAL
$2 3 6 ]
LIVESTOCK FEED REQUIREMENTS
No. G rain
Hay, Tons
Kind
Lbs. N ative Tame
Head
C o n c e n tra te s
P a s tu re Acres
N ativ e
P la n te d
LbSw-
Sows
11
16160
1 .1
Tankage
Soy m eal
W*o
W10
Boar
I
1200
.1
Tankage
Soy m eal
IlO
IlO
S pring pigs 6 6
U3700
.8
Tankage
Soy m eal
Bone m eal
S a lt
TOTAL
61060
0
950
2380
IlOO
300
.2 .0
20
Investment in working cap ital i s modestly increased and new cash expenses
likew ise are moderate enough to be e a sily met even i f through the use of
cred it.
The simple cropping system d iffe r s from Budget HE only in having
s lig h tly le s s barley so as to leave a few acres for hog pasture.
With a
«70™
one l i t t e r system of production from home-raised g i lt s problems of caring
for the herd are minimized* l 6 /
Diverted acreage as a base for a sheep en terp rise.—Here in Budget VII
several features emerge which make th is enterprise le s s fle x ib le than the
preceding operations.
In the cropping system,long term (for land) commit­
ments must be made to provide hay and pasture.
At the same time the rented
land needs to be segregated in a use sa tisfa c to ry to the landlord.
There
w ill need to be a long term investment in fence and sh elter structures.
A
modest investment in working capital (haying equipment and a flock of ewes)
w ill be needed.
The c o lla te r a l value of these assets should present no
credit d if f ic u lt ie s i f loan funds are required to secure them*
The flock
of e w e s w ill require some additional cash expenses such as for replacements^
shearing, and fence repairs but these should not resu lt in financing obstacles
since, there are nearly concurrent sales of lambs or wool*
This enterprises
however9 w ill place a heavy burden on fam ily labor and management because
of the c r it ic a l ch aracteristics of the undertaking.
Vor instance, timing
w ill be important r e la tiv e to breeding, lambing,,and shearing to avoid
labor competition with cropping en terp rises.
Also pest control, cullin g,
and marketing w ill have -an important bearing on success and w ill require
serious atten tion .
16/
T his system may r e s u l t i n somewhat "lower fa rro w in g r a t e s . The a l t e r ­
n a tiv e i s ’ to m a in ta in a h e rd o f sows y e a r i n and y e a r o u t a t a some­
w hat h ig h e r c o s t. ' W ith adeq u ate f a c i l i t i e s two l i t t e r s p e r sow co u ld
be r a i s e d each y e a r .
;
-7 1 B u d g e t V I I . •— T r ia n g le a r e a w h e a t fa r m w it h d i v e r t e d a c r e a g e a s a b a s e f o r a
sh eep e n t e r p r is e .
LAND USE AND CROP PRODUCTION
1 8 .0
1 3 .5
D is p o s itio Cl
ProducCash Income
Feed
Seed Rent Sold P ric e T o tal
tio n
5U00 bu. —
300 675 U125 11.895 $8385
L05 b u . —0
30
51 32L 1.93
625
27.8
10Li2 b u .
215
1700#
3 5.7 T.
3 3 .LI
Vi*AI ri
1*7
3li7
133
.85
~ J5E
LA
CA
Crops &
A cres
Land use
W inter w heat
300
S pring wheat
(30)
Summerfallow
337.5
B arley
37.5
C.W.G. new se e d in g
20
C.W.G. hay
L2
C.W.G. p a s tu r e
63
N ative p a s tu r e
323
farm stead & w aste
TOTAL
1160
$9378
CASH EXPENSE
Item
F u e li o i l & g re a se
R ep a irs
Seed
Seed tre a tm e n t
Weed sp ra y in g
I n s e c tic id e s
F e rtiliz e r
H ired la b o r
Custom h a u lin g
S u p p lie s & m isc .
L iv e sto c k p u rc h a se s
Feed p u r c h a s e s - s a lt
V e te rin a ry s u p p lie s
S h e a rin g & ta g g in g
Fence r e p a i r s
In su ra n c e
Taxes
I n t e r e s t p a id
TOTAL CASH EXPENSE
Amount
$ 76k
9lii
32
30
36k
——
602
198
3ii5
760
~25~
~W ~
216
112
352
337
$5201
FINANCIAL SUMMARY
Cash Income
G r a i n ........................................... $ 9378
l i v e s t o c k .................................. $ 200b
O t h e r ...........................................$
718
T o ta l Cash Income
$1210C
T o ta l Cash Expense
- $ 5201
NET CASH Income
D e p re c ia tio n
NET FARM Income
Value
T o ta l
E o u ity
Land
$11900
$ 9917
B u ild in g s & fe n c e s
8391
6993
188kO
15700
M achinery & power
L iv esto ck
1300
108k
TOTAL
$kOk31
$3369k
- $ 18Si
$ 5018
I n t e r e s t on E q u ity @ 5 .0 % - $ 1685
LABOR AND
MANAGEMENT Income
[INVESTMENTS
Item
$ 6899
D e p re c ia tio n
Ave. r a te
Amount
«=>—
——
$ 279
3 .3 3 *
1602
8 .5 %
——
XX
$1881
$ 3333
-7 2 Budget V IIv— (c e n to )
Ewes
100
Lambs
Bucks
Home Died
Use
No.
No.
Disposition
Sales
No. Weight Amount Price Value
End
No.
100
--
55
--
8
47
125#
112
——
--
8
104
90#
2
--
I
I
2
5875# $.05
$294
9360#
h
-*
00
LIVESTOCK ORGANIZATION
Begin Born Bought
Kind No.
No.
No.
1685
—
25.00
Total
25
2
$2004
LIVESTOCK FEED REQUIREMENTS
No.
Grain
Hay, Tons
Kind
Head
Lbs.
Native
Tame
Ewes
——
104
8300
32.1
Bucks
2
160
.8
Lambs
104
1860
.5
13040
33.4
TOTAL
LIVESTOCK PRODUCTS
No.
Pro­
Product
of
duction
head
rate
Total
production
Wool
100
10.4
1040
Wool
2
16.0
32
Concentrates
Lbs.
325
Home Farm Use
Use For Amt.
TOTAL
Pasture Acres
Native
Planted
——
—
—
——
——
83
Sold
Amt.
Price
Value
1040
$.67
$696
32
.67
22
718
Diverted acreage as a base for a cow-calf enterprise. —Budget VIII has a
cropping system sim ilar to the foregoing sheep budget and thereby is equally
in fle x ib le rela tiv e to the crop base.
Investment in buildings and fences,
equipment, and livestock s h ifts upward su bstantially for th is enterprise.
-7 3 B u d g e t V I I I O - - T r i a n g l e a r e a w h e a t farm w it h d i v e r t e d a c r e a g e a s a b a s e f o r
c o w -c a lf e n te r p r is e .
LAND USE AND CROP PRODUCTION
Crops &
ProducD isposition
Cash Income
Acres Yield tion
Land Use
Feed Seed Rent Sold Price Total
Winter wheat
300
18.0 5400 bu.
675 4425 $1,895 $8385
300
Spring wheat.
130)
13.5 405 bu. ——
30
51
324 1.93
625
Summer fallow
357.5
Barley
37 05 27.8 1(542 bu. 2 oo
47
458
347
.85
589
3oW<,G<,new seeding 20
SoWoGo hay
42
1700# 56.7 T 35.7T
SoWoGo pasture
63
Native pasture
355
Farmstead & waste 35
TOtAL
il6 0
$9399
CASH EXPENSE
Item
Amount
Fuel, o il & grease
$ 764
FINANCIAL SUMMARY
Repairs
914
Cash Income
Seed
32
Grain . . .
. 0 0 $ 9399
Seed treatment
~ 55~ ~
Livestock .
. 0 0 $ 1683
Weed spraying
364
Other o . o
In secticid es
—C
F e r tiliz e r
Total Cash Income
$11082
Hired labor
~ T oT
Custom hauling
198
Total Cash Expense
- $ 4325
Supplies & misc.
345
Livestock purchases
100
$ 6758
NET CASH Income
Feed purchases-salt
20
Hay
“ ^0 “
Depreciation
- $ 2023
Veterinary supplies
2.0
NET FARM Income
$ 4375
Insurance
112
Taxes
In terest on Equity 6 5=0%
391
- $ 1899
In terest paid
372
TOtAL CASH ElffENSE
$ 4354 '
LABOR AND
MANAGEMENT Income
$ 2836
INVESTMENTS
Value
Depreciation
Item
Total
Ave. rate
Equity
Amount
Land
$11900
$9917
” C«=—
Buildings & fences
T 353
10607
8840
3.33%
Vlachinery & power
19140
15950
8.5% "
1670
Livestock
—«=
3775
3280
-»■=>
»45422 I 37987
TOTAL
$ 2023
(c o n t.)
XX
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
Budget V III. (co n t.)
LIVESTOCK ORGANIZATION
Kind
Home
Begin Born Bought Use Died
No.
No.
No. No.
No.
Cows
23
Bull
I
Calves
year olds
--
23
--
Yearlings
2
1/3
3
l/2
1100#
—™ 1/3
1450#
18
-a
2
*•—
Disposition
Sa Les
No. Weight Amount Price Value
--
2750# $
.1 0
$275
20
483#
.1 2
58
I
375#
6750#
.2 0
1350
3
——
-V
-~
--
3
3
3
Total
$1683
LIVESTOCK FEED REQUIREMENTS
No. Grain
Hay, Tons
Concentrates
Kind
Head Lbs.
Native Tame
Lbs.
Cows
20
6000
28.5
Bull
I
300
1.5
23
1800
2.25
3
600
3.15
3
900
3.15
Calves
Yearlings
2
year olds
Total
End
No.
9600
38.5
Pasture Acres
Native
Planted
325
83
However, c o lla ter a l value of these additions both for long-term and in ter­
mediate loan funds is good*
By contrast cash operating expenses are less
than for other kinds of liv e sto c k .
The operating program i s simple and may
be considered as le s s competitive than other livestock enterprises for
labor during the cropping season.
C attle, too, may be le s s sen sitiv e to
unfavorable events than other livestock and actually the greater investment
“7 5 -
in them c o n s t i t u t e s a form o f re s e rv e as in s u ra n c e a g a in s t crop lo s s e s ,
•These c h a r a c t e r i s t i c s a re o f f s e t by th e lo w er an n u al r e t u r n a n tic ip a te d
f o r t h i s e n t e r p r i s e which r e s u l t s from th e d e c id e d ly lo n g e r p e rio d r e q u ir e d
f o r tu r n - o v e r .
«76=
PART V
THE BUDGET IN DECISION-MAKING
In tra= B n d g et S e le c tio n s
The b u d g ets a lr e a d y d e s c rib e d may be re g a rd ed as th e c u lm in a tio n o f
th e d e t a i l e d stu d y w hich a fa rm e r, e x te n s io n d e m o n stra to r, o r re s e a rc h
w o rk e r, m ight g ive t o th e a l t e r n a t i v e s w hich he p ro p o ses to com pare. I /
Each b u d g et may be d e s c rib e d as an o rg a n iz ed sfet of a ssu m p tio n s.
These
assu m p tio n s may be a re p ro d u c tio n o f t h e :f a c t s of p a s t e x p e rie n c e such as
th e y i e l d o r p r ic e o f a crop p ro d u c t th d u g h t t o be r e p r e s e n ta tiv e o f th e
s i t u a t i o n a n t ic ip a te d by th e b u d g e t.
On th e y hay r e p r e s e n t th in g s known
w ith a h ig h d eg ree o f c e r t a i n t y l i k e f ix e d su p p o rt p r i c e s .
Qn th e o th e r
hand many assum ptions o f a p u re ly s p e c u la tiv e n a tu re may have been i n t r o r
duced i n t o th e b u d g et i n o rd e r t o s tu d y th e e f f e c t o f d i f f e r e n t le v e l s o f
y ie ld o r p ric e .
Thought o f in t h i s way each b udget ta k e s on th e c h a r a c te r
o f a t r i a l b a llo o n .
Even though th e p ro c e d u re fo llo w e d m ight have been l a i d o u t in extrem e
d e t a i l and v e ry e x a c t r e le v a n t in fo rm a tio n made a v a il a b le , -the s y n th e s is o f
th e s im p le s t b u d g et w i l l have ' re q u ire d innum erable s e le c tio n s to be made
from among a mass o f a l t e r n a t i v e a ssu m p tio n s.
Item by item th e b u d g e te r
m ust exam ine, and a c c e p t o r r e j e p t , th o s e t h a t a r e , p e r t i n e n t .
For in s ta n c e
a c h o ice has to be made r e l a t i v e , to th e c a p i t a l v a lu a tio n s and th e d e p re c i a t i o n and i n t e r e s t r a t e s t h a t would be used i n c o n n e c tio n w ith th e b u d g e t :
l/
See Appendix A,
i'.
,...... ..........
:
' Zif
”
:
•
.
:
----- p
-7 7 s e rie s .
Some c h o ice h as to be made i n O rder t o s e t t l e on which o f d i f f e r e n t
v a r ia n ts i n o p e ra tin g p la n s would be f ig u r e d on i n each t e n t a t i v e o rg an ­
iz a tio n ,
T e c h n ic a l p ro d u c tio n in fo rm a tio n has to be c o n sid e re d so as to
d e term in e w h e th er s p ra y in g expenses wou|pl JJe in c lu d e d o r ex clu d ed f o r
d i f f e r e n t kin d s o f c ro p s 5 o r w hat fe e d in g r a tio n s co u ld be b e s t u t i l i z e d
f o r l i v e s to c k .
B u d g etin g s no l e s s th a n o th e r methods o f a n a ly s is ^ draws
a t t e n t i o n t o m yriads o f th e se l e s s e r problem s o f d e c is io n w hich must be
s e t t l e d f o r e v ery ite m c o n sid e re d b e fo re /a n y c a lc u la tio n may be co m p leted .
To a c h ie v e a com plete b u d g e ts th e b u d g e te r i s fo rc e d in to a compre­
h e n siv e and c r i t i c a l c o n s id e r a tio n o f th e s u b je c t u n d er s tu d y . • E ig h t from
th e s t a r t th e n th e b u d g et te n d s to beconie a c o n d itio n in g p ro c e s s r a t h e r
th a n a m e ch a n ic al means o f s e c u rin g an answ er b y fe e d in g i n d a ta and
p u llin g o u t s o lu tio n s .
A c tu a lly s i n th e coUrfeC o f co m p letin g th e se b u d g e ts
i t w ill become d i f f i c u l t n o t to draw some t e t i t a t i v e c o n c lu s io n s r e l a t i v e t o
in d iv id u a l a l t e r n a t i v e e n t e r p r i s e s .
ThA b u d g et th u s becomes a v e h ic le f o r
fram in g a plan- of o rg a n iz a tio n b ased on th e assu m p tio n s th o u g h t most, l i k e l y ;
to f i t th e --c irc u m stan c e s a n tic ip a te d fo b th e p e rio d i n m ind.
I t i s th e
developm ent o f a farm ,.plan on th e -b a s is .of th e assum ptions o f th e b udget
w hich c a l l f o r d e c is io n to be made i n th e consummation o f a re le v a n t l i n e
o f a c tio n 5.
\
I n te r- b u d g e t D e c isio n s
P r i o r t o and i n th e c o u rse o f b u d g e tin g s th e b u d g e te r w i l l e s t a b l i s h
c e r t a i n s ta n d a rd s w hich he e x p e c ts t o use in m easuring th e com parative
m e r its o f th e v a rio u s a l t e r n a t i v e s .
Having developed a s e r i e s o f b u d g e ts }
“7 8 -
th e n e x t s te p i s to a r r a y t h e ' d a ta which a re p e r t i n e n t to s e l e c t i o n o f th e
b e s t o r m o s t' s u i t a b l e a l t e r n a t i v e s a c c o rd in g t p th e se c r i t e r i a .
He may
w e ll s t a r t o u t w ith a s in g le c r i t e r i o n upon' w hich he e x p ec ts to depend in
making h is s e l e c t i o n .
Suppose t h i s i s sim p ly th e m ax im izatio n o f m onetary
incom e5 w ith o u t any c l e a r d i s t i n c t i o n as t o w h eth er d e c is io n i s to be based
on g ro s s
o r n e t c a s h , o r some o th e r income ,,m easure.
Then he i s l i k e l y to
come up w ith an a r r a y com parable to Table VT w hich d is p la y s th e m onetary
r e l a t i o n s h i p s of th e e ig h t a l t e r n a t i v e s „
The b u d g e ts r may te n d to re g a rd A lte r n a tiv e I as re p re s e n tin g a
p o s i t i o n w hich w heat a c re a g e r e s t r i c t i o n p re v e n ts th e farm o p e ra to r from
a tta in in g .
The d if f e r e n c e s betw een A lte r n a tiv e I and A lte r n a tiv e I I w i l l
a p p e a r to r e p r e s e n t a p ro s p e c tiv e lo s s o f incom e.
Now r e v e r tin g f o r a
moment to p re -b u d g e t d e c is io n s t h i s wf e l t B problem i n th e case of th e farm
o p e ra to r has le d to th e developm ent o f such ah a r r a y of b u d g e ts .
F o r th e
fa rm e r t h i s i s an im p o rta n t d e c is io n in i t s e l f , in v o lv in g r e c o g n itio n of
a problem and h is d e te rm in a tio n to seek a s o l u t i o n . .
H is f i r s t move may
have been to c a s t around i n s e a rc h o f su p p lem en tary cro p e n t e r p r i s e s which
c o u ld p r o f i t a b l y u t i l i z e th e i d l e a c r e s .
Along th e way he has d ecid ed t h a t
th e environm ent i s such t h a t he can a ls o c o n s id e r th e supplem entary-com ple­
m entary l iv e s to c k e n te r p r is e s used as examples*
The r e s u l t a n t b u d g ets a re
e la b o r a tio n s o f h y p o th e tic a l s o lu tio n s t o his- problem . 2 /
2/
Table VI
la r r a b e e , H. A«, R e lia b le Knowledge,' Houghton M if f lin C o ., New York,
( W ) , P . 126.
^;
Table V I.—-Financial summary for diverted acreage alternatives on a trian gle area wheat
farm.
E n te r p r is e A lte r n a tiv e s
Gross
Cash
Income
Cash
Farm
Expense
Net
Cash
Income
Net
Farm
Income
In te re s t
on In ­
v estm en t
Labor &
Management
Income
- D o lla rs -
3rop
U n r e s tr ic te d w heat ( I )
D eprec­
ia tio n
12015
U lS l
7831
1728
6106
Hi 71
1632
D iv e rte d a c re s i d l e ( I l )
9010
31U9
5861
1728
U133
Hi7li
2659
B a rle y co m b in atio n ( I I I )
10971
1207
6761
1728
5036
Hi7ti
3562
C r. wh. g r . com binatio n
(IV)
L iv e sto c k
11608
U218
7387
1728
5659
lU7ii
U185
Turkey com bination (V)
16905
95$2
7353
1863
5U90
1608
3882
Hog co m b in atio n (VI)
11980
1688
7292
1862
5130
1632
3798
Sheep com bination (V II)
12100
5201
6899
1881
5018
1685
3333
C ow -calf com bination
(V III)
11082
U321|
6758
2023
U735
1899
2836
-8 0 -
. then represents the. .te st of these hypotheses j
Upon th is t e s t the farmer
w i l l plan to make a d ecision .
Suppose he decides to s e ttle on a net farm income as the indicator
to use."
His observation upon th is basis would be that any of these
altern atives could be used to recover a portion of the anticipated lo ss
of income.
Some a lter n a tiv es5 however, appear to be b etter than others.
I t is possible that at t h is point he w ill serisb the need of additional
c r ite r ia before he can make a fin a l se le c tio n ., „ '
Although these budgets, on the "basis of present knowledge, reveal a
r e la tiv e ly sa tisfa cto ry prospective fin a n cia l return, would th is be secure?
Hhat variation in net farm income might one expect from year to year due
to changing product prices and the exigencies of production?
R eflecting on the budgets and searching Table VI for additional clues
he might r e c a ll that one of the le s s attra ctiv e altern atives fin a n cia lly
was based on more certain data (e .g . the support price of b arley),
Also he
would r e c o lle c t that the liv esto ck and crested wheat grass budgets required
more than a one year period to complete th e ir production cy cles.
■ Perhaps a more adequate basis fo r d ecision on these points would be
obtained i f a series of budgets were s e t up involving various price and
y ie ld assumptions over time for each of these a ltern a tiv es.
Y et,this may
tend to create further obstacles to decision by multiplying the number of
p ossib le choices and incorporating wider ranges and combinations of uncer­
ta in ty .
_
-8 1 -
The budgeter may note from Table ¥1 the variation between alternatives
in the amounts of cash farm expense which each requires.
This too may
promote decision depending on the r e la tiy e anticipated a v a ila b ility of
cash in the season when i t w i l l be needed.
Continuing these fin a n cia l considerations ■> he might make his se lectio n
from among the altern atives on the b asis of his preference between a rela ­
t iv e ly low but sure incomes as represented by the barley combination, and
a higher but more uncertain prospect, as offered by the turkey enterprise.
Yet at the same time he may f e e l insecure in the resultant decision because
the monetary comparisons have not served to express a l l the differences
between these a ltern a tiv es.
Extra-Budget ~Decisions
Having exhausted the major p o s s ib ilit ie s for decision-making which
resulted from a d irect monetary comparison of the budgets, the budgeter
may delve into a comparison of other characteristics of the enterprises
themselves.
These may be in the realm of personal preferences or assoc­
iated with operating features pertaining to each enterprise.
He would
recognize that an operator may read ily, at any co st, decide against
turkeys because he can't abide th e ir stu p id ity, or crested wheat grass
because i t is too much trouble adjusting the combine and sacking and
marketing the seed.
Or perhaps the farmer’s wife cannot to lera te the
sm ell of pigs in the yard or the p ersisten t bleating of sheep.
-8 2 -
Items such ^ls these permit d ecisive negation of some alternatives
without the n ecessity of budgetinge Other determinants are le s s easy to
iso la te*
For instance, having s e ttle d on some enterprise, he may discover,
in synthesizing a stable management plan, that i t has a feature which makes
i t irreeo n cilia b ly competitive with the dominant wheat enterprise, however
suitable i t may otherwise be.
Such a feature may be the competition of the
turkey enterprise for liq u id funds or short term credit to meet cash
expenses.
The budgeter may probe into le ss tangible areas. of conscious decision
origination, which for d ifferen t individuals w ill have varying degrees of
emphasis.
Among the'se are the personal ch aracteristics of the operator (for
instance h is p r o c liv ity fo r , or in h ib ition against, risk-taking) and his
s e n s itiv ity to r e la tiv e ly small changes in h is economic environment (e .g .
prices of substitutable inputs or outputs).
The farmer's personal goals
may have a decided impact on the nature of decision even though th is impact
may be delivered by sub-conscious rather than conscious thought.
This
indeterminate influence springs from a generally vague formulation of such
personal goals in the mind of the individual.
They are shaped more by' the
heart and so u l, and hammered by ambitions, the search for secu rity, and
the d e sir e ' to b u ild .
The budgeter (esp e cia lly the extension or research .worker), woqld
conceivably lik e to segregate and bring a l l such factors to bear oh th eir
se le c tiv e d ecisio n s, p articu larly as the point of f in a l choice approaches.
Although economics alone does not o ffer a way of appraising a l l these g o a ls,
“83 -
some o f them have been s tu d ie d .r e la tiv e t o d e c isio n -m a k in g .
T h a ir d is c u s s e s
c o - e x is tin g g o a ls (o f income m ax im izatio n and Avoidance o f in s o lv e n c y ) f o r
fa rm e rs under c o n d itio n s of u n c e r ta in ty ^ 3 /
He r e l a t e s v u l n e r a b i l i t y
f a c t o r s (th o s e farm c h a r a c t e r i s t i c s o y e r which a fa rm e r h a s l i t t l e c o n tr o l,
a t l e a s t in th e s h o r t ru n , and w hich c o n tr ib u te t o th e dan g er o f b an k ru p tc y )
to s e c u r i t y p r a c t i c e s .
I t may o ccu r to th e b u d g e te r t h a t some th in g s l ik e
f i n a n c i a l v u l n e r a b i l i t y c o u ld be m easu rab le and th e re b y used as c r i t e r i a f o r
com paring e n te r p r is e a l t e r n a t i v e s w ith a view to s e l e c t i o n among them , k /
T h is l i n e o f th o u g h t le a d s t o th e r e - a p p r a i s a l o f th e b u d g ets i n term s
o f t h e i r c o n c u rre n t o p e ra tin g program s as a b a s is f o r making d e c is io n s .
Column I o f Table VII. d e m o n stra te s how re q u ire m e n ts f o r a re s o u rc e in p u t
such a s la b o r , w hich i s n e c e s s a ry to a l l e n t e r p r i s e s , may be m easured.
A
d e c is io n may r e s u l t from t h i s sim ply by com paring th e column w ith th e la b o r
a v a i l a b i l i t y (and d i s t r i b u t i o n , i f n e c e s s a ry , by b re a k in g down in to r e le v a n t
p e rio d s such a s th e sc h o o l summer r e c e s s ) .
Or i t m ight be d e cid e d t h a t th e
la b o r in p u t f o r an e n t e r p r i s e l i k e th e tu rk e y p ro p o s a l i s o u t o f p ro p o r tio n
to t h a t of o th e r e n t e r p r i s e s w hich make n e a r ly e q u a l r e tu r n s t o n e t farm
incom e.
3/
T h a ir5 P h il ip J . , -Meeting th e Im pact of C rop-Y ield R isk s i n G reat
P la in s F arm ing, N orth D akota Agr. E x p t. S t a . B u i. 392, F a rg o , N orth
D akota, (J u n e , 19%k)$ p p. 9-11. .
k/
F or a d is c u s s io n o f n e t income v u l n e r a b i l i t y f o r d i f f e r e n t o r g a n iz a tio n a l
a l t e r n a t i v e s see J e n s e n , C. ¥.,■ The Economics o f P a s tu re I n te g r a tio n on
I r r i g a t e d Farm s, M ontana A gr. E x p t. S ta . Mimeo. C ir c u la r 8? , Bozeman,
( J u ly , 19f?2), p p . 7U-78.
-S it-
Table V I I .—Comparison o f budgeted a l t e r n a t i v e s r e l a t i v e t o fa m ily la b o r
re q u ire m e n ts, v u l n e r a b i l i t y to in s o lv e n c y , and tim e f l e x i b i l i t y ,
on a t r i a n g l e a re a w heat fa n n ._____________________________________
Column I
Column 2
Column 3
E n te r p r is e
P e rc e n t Change
Degree of
Degree of
in Fam ily Laoor V u ln e r a b ility
A lte r n a tiv e
Time F l e x i b i l i t y c /
re q u ire m e n t a /
to In so lv e n cy b / Crop L iv esto c k Com bination
U n re s tric te d
w heat ( I )
D iv e rte d a c re s
id le ( I I )
B a rle y combin­
a tio n ( I I I )
C.W.G. combin­
a tio n (IV)
0 .0
.66
.500
——
.500
- 25.0
.76
.625
——
.625
+ 5 .0
.72
.581
——
.581:
—10.0
.68
.375
——
.375
+1:0 .0
.79
.1:25
.50
.1:25
+10.0
.70
.556
.625
.556
Sheep combin­
a tio n (V II)
+20.0
.I h
.265
.50
.265
C ow -calf com­
b in a tio n (V III)
+15.0
.66
.265
.25
.2 5
Turkey combin­
a t i o n (V)
Hog combin­
a tio n (VI)
a / ,Form ulas P e rc e n t change in fa m ily la b o r re q u irem en t =
[( D ie ~ D lw ) + ( P 2e ~ P 2w ) * ( P 3e ~ D jw ) * (D lte ~ D ltw ) J 100
Dlw + Dgw + D^w + D^w
w here: D = man days o f la b o r; I , 2 , 3, & It = c o n se c u tiv e q u a r te r s o f th e
y e a r; e = e n te r p r is e com bin atio n b ein g exam ined; w = u n r e s t r i c t e d w heat
e n te rp ris e .
Ec
b/
*
Ep *
D
Formulas Degree o f v u l n e r a b i l i t y to in s o lv e n c y = — 5— 7-7-----n c + 1C
w h e re 5 E = expenses (c = cash farm and p = p e rs o n a l l i v i n g , which i s
a r b i t r a r i l y s e t a t $2,000 f o r a l l co m b in a tio n s); D = d e p r e c ia tio n ;
R = r e c e ip ts (c = cash fa rm ); L = e q u ity in fo u n d a tio n liv e s to c k
(c = cash o r c o l l a t e r a l v a lu e ) .
(c o n tin u e d on n e x t page)
-85=
(C ontinued from p re c e d in g page) ■
c / F orm ulaes Time f l e x i b i l i t y o f crop e n te r p r is e
'Ac2\
..................
e » 'e -»",1
At /
Time f l e x i b i l i t y o f liv e s to c k e n te rp ris e , = I - %-P.
w heres P = 'p e rio d i n y e a rs t h a t re s o u rc e s a re com m itted t o p ro d u c tio n
b e fo re c ash r e tu r n i s fo rth c o m in g ; A => a c re s (w = w h e a t, t = t o t a l
c ro p ,a n d c^ = crop one, C2 = crop tw o, e t c . )
S t i l l , t h e o p tim is tic o p e r a to r may be a p lu n g e r and l i k e t o t r y th e
tu r k e y s .
He may re a so n t h a t he m ight save 125 more b ir d s and p a re fe e d
c o s ts a l i t t l e , i f th e range was good, th u s making a n o th e r fo u r hundred
to one th o u san d d o l l a r s I '
C o n v erse ly , w hat m ight be th e th in k in g o f a c a u tio u s man?
In o rd e r
t o s t a y in b u s in e s s an n u al farm cash expenses and a n n u al l i v i n g c o s ts must
be m et from farm p ro c e e d s .
To t h i s sh o u ld be added d e p r e c ia tio n .
F a ilu r e
to allo w f o r m aintenance o f p ro d u c tiv e equipm ent may im p a ir th e p ro d u c tiv e
a b i l i t y o f th e fa im .
co u ld b a n k ru p t him .
I f he has o n ly a s m a ll c a p i t a l e q u ity , one bad y e a r
In s p i t e o f th e h ig h n e t w orth in d ic a te d by th e
c a p i t a l e q u itie s o f th e case farm , th e p r e s s u r e o f s h o r t run l i a b i l i t i e s
could f o r c e him out o f b u s in e s s , even though he were n o t in s o lv e n t i n so
f a r as e q u ity i s c o n s id e re d .
C onsequently t o g a in s e c u r i t y , th e c a u tio u s
o p e r a to r w i l l s e l e c t th e m ost c e r t a i n e n te r p r is e even though a low er r e tu r n
i s fo rth c o m in g .
The d eg ree o f f i n a n c i a l v u l n e r a b i l i t y ( r e l a t i v e to
so lv en cy ) a s s o c ia te d w ith th e s e v a rio u s e n te r p r is e co m b in atio n s m ight be
gauged (w ith o u t re g a rd t o u n c e r ta in ty ) i n th e manner d em o n strated by th e
r a t i o s i n C.olumn 2 o f T able V II.
The s m a lle r t h i s r a t i o th e s a f e r m ight
th e o p e r a to r c o n s id e r h is b u s in e s s from u n fo rtu n a te e v e n ts .
I n t h i s case
'
-8 6 -
he might ^be s a tis fie d to keep range c a ttle , affording le s s income but more
fin a n cia l secu rity as w ell as advantages in hardiness and ease of handling
r e la tiv e to other liv esto ck .
S t i l l another factor may appeal to the operator who is sen sitiv e to
r e la tiv e ly small changes in the markets for agricultural products and who
has competence in diverse lin es of agricultural production.
He may b e '
in terested in the ra p id ity with which he can enter and get out of the
contemplated enterprise.
Assuming that h is farm f a c i l i t i e s permit th is
f l e x i b i l i t y , he w ill want to s e le c t an enterprise wherein his decision to
commit resources to i t s production may be delayed as long as there remains
a choice of a lter n a tiv es.
The ultim ate aim w ill be to s e le c t an enterprise
which fo r an equal return t ie s up resources for the sh ortest length of time,
Column 3 in Table VII ind icates the rela tiv e performance of the differen t
enterprises in the length of time resources are tie d up.
ra tio the more fle x ib le is the enterprise or combination.
r.
The larger the
Assuming that the
differences in net return are not large enough to a lte r the d ecision , the
lo g ic a l choice among crop alternatives would be to grow barley,.
Among the
liv esto ck enterprises, commitments fo r turkeys and hogs would be least
co n strictin g, making these enterprises most a ttra c tiv e .
In the case of complementaiy enterprises, lik e crop and livestock
combinations, the period resources are committed to crops in these calcu l­
ations includes time allowances to permit a crop to be grown, fed , and
transformed into a saleable product as liv esto ck marketable at the time
planned.
Thus grain has to be grown' for turkeys and hogs in the year
“8? “
p re c e d in g th e fe e d in g p e r io d .
For sheep and c a t t l e some re s o u rc e s a re
com m itted to c r e s te d w heat g r a s s f o r a y e a r and a h a l f b e fo re m a rk e tab le
liv e s to c k can be produced from i t .
The c r i t i c a l r a t i o to be c o n sid e re d
i s 5 t h e r e f o r e 5 th e s m a lle s t of th e cro p and liv e s to c k r a t i o s .
For
exam ple5 a ewe may be b re d i n th e f a l l o f th e y e a r and one y e a r l a t e r
th e lamb w i l l be m a rk e ta b le .
B ut in o rd e r t o s e c u re c r e s te d w heat g ra ss
p a s tu r e f o r t h a t .lamb th e se e d in g has t o be made a y e a r , o r u n d er f a v o r ­
a b le c irc u m sta n c e s s i x m onths, p r i o r to b re e d in g d a te .
-8 8 -
PART VI
CONCLUSION
E ffectiveness of 'the Budget in
Decision-Making
The farmer, extension worker, and research worker undertake budgeting
as la id out in the preceding sections because they entertain hypotheses
r e la tiv e to th e ir problem which they hope to p re-test by the budgeting
process.
An actual te s t by p ractice, of any organization selected through
budgeting, may never be accomplished since the assumptions employed in
developing' the budget almost never can be duplicated by experience! .
Budgeting i s an attempt to approximate what experience w ill-b rin g to pass
in order to guide oneself towards events that might be favorable rather
than unfavorable.
The budgeter's hypotheses take the form of anticipating
that some lin e s of action may be more favorable than others.
He wishes
to make organizational decisions that w i l l lead to the most satisfa cto ry
lin e of action.
The budget is expected to demonstrate the probable resu lt
of a' fam ily of inter-dependent choices associated with a lin e of action.
Does i t do this?
The budget as the ten ta tiv e consummation of a lin e of farm planning
leads to numerous budgeting se lectio n s but these are not active farm
planning d ecision s.
Only when the budget i s adopted as a guide for a lin e
of - action w i l l actual decisions be made.
The farm operator w ill in itia te
a d ecisive course of action eith er i f he has confidence in the budget and
\
the figures which enter into i t , or when he has no choice but to take some
=89=
a c ti o n . I /
I n th e f i r s t in s ta n c e b u d g e tin g can. be. expected, .to have con­
t r i b u t e d s u b s t a n t i a l l y t o th e re a d in e s s w ith which he can re a c h a .d e c is io n .
In th e second case some on th e s p o t crude b u d g e tin g u n d o u b te d ly ta k e s .p la c e
as a b a s is f o r th e i n i t i a l d e c is io n s w hich d e fin e th e d i r e c t i o n of th e l i n e
of a c ti o n .
In t h i s c ase th e la c k o f p r i o r b u d g e tin g may be ex p ected to
make th e d e c is io n s o f th e moment le s s d e p en d a b le .
Awareness o f th e p ro b a b le d iv e rg e n c e s i n e f f i c i e n c y i n d ecisio n -m ak in g
h as f o r a lo n g tim e i n t e r e s t e d th o se w o rk ers in v o lv e d i n e x te n s io n .
B udgeting h as been prom oted a s a means o f s tim u la tin g p u rp o s e fu l, sy ste m a tic
in d iv id u a l a c tio n tow ards d e s ir a b le e n d s.
The d eg ree to w hich t h i s g o al
may be a tta in e d depends i n p a r t on th e r e l i a b i l i t y o f th e b u d g et w ith in
th e c o n te x t o f i t s h ig h ly i n d i v i d u a l i s t i c en v iro n m en t.
T his f i r s t re q u ir e s
t h a t th e fram ework of th e b udget be such t h a t a l l r e le v a n t c o n s id e ra tio n s
a re in c lu d e d and sec o n d ly t h a t th e d a ta used a re a c c u ra te f o r e c a s ts of
coming e v e n ts .
The e x te n s io n w o rk er, in o rd e r to d e m o n strate th e e f f e c t i v e ­
n e s s o f b u d g e tin g , m ust need to have h i s bu d g eted lin e s o f a c tio n p erform
w e ll i n th e rough and tum ble o f a c tu a l e x p e rie n c e .
How w e ll would th e p la n s
as l a i d but by bud g ets th r e e to e ig h t f a r e in p r a c tic e ?
The framework o f th e s e b u d g e ts may be re g a rd ed as e f f e c t i v e i n draw ing
th e a t t e n t i o n of th e b u d g e te r t o r e le v a n t d e t a i l s o f im p o rtan ce f o r th e
s tu d y o f s i m i l a r p ro d u c tio n p ro c e s s e s .
I t c a l l s f o r in v e n to r ie s o f r e ­
so u rc e s i n p h y s ic a l te rm s , d e lin e a tio n o f in p u t- o u tp u t r e l a t i o n s h i p s , and
l/
Johnson, Glenn L ., and H aver, C e c il B ., op. c i t . , p . 13.
-9 0 f o r m u la t io n o f e x p e c t a t i o n s a s t o p r o b a b le p r i c e s t o b e r q c i e v e d .
c a s e i t h a s draw n a t t e n t i o n
to
r e s o u r c e s n o t c u r r e n t ly b e in g u se d .
e m p lo y m e n t o f t h e p a s t u r e l a n d an d o f f - s e a s o n
In t h i s
T hus t h e
la b o r in a p r o d u c tiv e m anner
m ay b e c o n s i d e r e d w h e r e o t h e r w i s e t h e f u l l p o t e n t i a l o f t h e s e r e s o u r c e s "
m ig h t h a v e b e e n o v e r lo o k e d .
H o w ev er t h i s fr a m e w o r k i s
a d e q u a te f o r o n ly
th o s e o p e r a to r s w e ll v e r se d in th e range o f a lt e r n a t iv e s
w o r d s b e f o r e a man c a n u s e i t
le a r n a t l e a s t
th e s a l i e n t
to
lik e ly
T he b u d g e t c a n n o t b e d e p e n d e d o n 5 f o r
t h e r e m ay b e a n e x p e n s e i t e m
Sheep5 or th a t in c a lc u la tin g
a c c o u n te d f o r .
h is a tte n tio n
T h is i s
In o th e r
t e s t t h e a l t e r n a t i v e s b e f o r e h im ^ h e m u st
o p e r a tio n a l f e a t u r e s
b u d g e ts w i l l h id e in c o n s i s t e n c i e s
covered.
o f e a c h One5iOr e l s e t h e
t o b e d e tr im e n ta l t o t h e i r r e s u l t s .
in s ta n c e s to
r e m in d t h e o p e r a t o r t h a t
c o n n e c t e d w i t h d o c k i n g la m b s a n d s h e a r i n g
r e tu r n s
on t u r k e y s t h e r e i s
s h r in k a g e t o b e
w h e r e t h e e x t e n s i o n w o r k e r m u st f i r s t
c o n c e n tr a te
i n s e e i n g t h a t t h e b u d g e tin g fa r m e r g e t s a d e q u a te in f o r m a t io n
t o m ake a l l h i s a s s u m p t i o n s e x p l i c i t .
In b u d g e tin g 5 assum ptions may be m a d e 'th a t management i s t y p i c a l , b u t
I
t h i s i s h a rd to m atch w ith r e a l l i f e c o n d itio n s . F o r even on a farm con­
s t i t u t e d e x a c tly l i k e th e c a se farm m odel th e framework o f th p budget
e x clu d e s an
e v a lu a tio n o f p e rs o n a l management f a c t o r s .
No p r o v is io n i s
made t o expose th e i n d i v i d u a l i s t i c non-m onetary o b je c tiv e s of th e fa rm e r
h im s e lf .
A lthough b a s ic t o farm management s in c e th e y a f f e c t h is economic
a c t i v i t i e s , th e se o b je c tiv e s may be h e ld i n r e l a t i v e l y i n a r t i c u l a t e form
-9 1 -
i n th e mind o f th e fa rm e r. 2 /
The b u d g ets a s drawn up i n t h i s s tu d y cu lm in ­
a te i n a d is tin c tio n :- betw een e n te r p r is e s - m a in ly on th e b a s is o f income
re s u lts .
The farm er a lm o st u n c o n sc io u sly may r e j e c t th o s e a l t e r n a t i v e s
Whichs by t h e s e c r i t e r i a , sh o u ld be th e b e s t .
Some th in g s i n such a b u d g et
have made an im p re ssio n , t h a t he may o r may n o t be a b le t o p in - p o i n t, w hich
in d ic a te s t h a t th e ty p e o f o p e ra tio n u n d er c o n s id e ra tio n does n o t c o in c id e
w ith h is g o a ls .
T his a g a in i s an a re a in which th e e x te n s io n econom ist
can b e p a r t i c u l a r l y h e l p f u l to th e b u d g e te r on a p e rs o n a l and d i s c r e e t b a s i s .
His job h e re w i l l be t o h e lp th e fa rm e r to d e f in e h is o b je c tiv e s and f in d
th e p o in ts a t w hich th e proposed p la n s a re a t v a ria n c e w ith them .
This
may prom ote th e 'f o r m u la tio n o f d e c is io n s w hich o th e rw ise may be b lo c k ed
by m is u n d e rsta n d in g .
However th e m onetary com parison o f a l t e r n a t i v e s
sh o u ld n o t be abandoned in any e v e n t, s in c e t h i s approach sp rv e s to
d e m o n strate th e p o s s ib le c o s t o f r e j e c t i n g a p la n which i s s u p e r io r in
m onetary te rm s.
In summary, th e n , i t may be s a id t h a t th e fa rm e r, b e fo re he s t a r t s
b u d g e tin g , sh o u ld be w illin g t o expend c o n s id e ra b le e f f o r t i n a s tu d y o f
d e t a i l s r e le v a n t to h is c irc u m s ta n c e s .
--
B ecause of th e in h e r e n t d if f e r e n c e s
■
Z-
betw een h i s farm and o th e r farm s i n p h y s ic a l f e a tu r e s and a rran g em en t, and
because he w ith h i s fa m ily have j o i n t g o a ls w hich w i l l in v a r ia b ly have a t
l e a s t s u b tle d if f e r e n c e s from th o se around him , th e b u d g e tin g , to be
2/
F o r a d is c u s s io n o f farm ers* o b je c tiv e s i n farm in g r e l a t i v e t o b u s in e s s
s u r v i v a l , see T h a ir, P h il ip J . , o p . c i t . ? p p . 8 -1 0 .
-92=
sa tisfa c to ry , needs to be done on an individual farm b a sis.
This is not
I
' to say the budgets as la id out herein are u se le ss, for they provide the '
framework by which such budgeting may be guided.
The farmer then, through
budgeting, is expected to arrive at a decision-making point which is
relevant to h is situ a tio n .
There probably is l i t t l e doubt that the bud­
geting brings him. in to decision-making areas of thought.
But whether i t
i s adequate to promote actual w illingness' to make a choice between a lte r ­
natives i s another matter.
,
I t seems to th is w riter that the budget needs an additional section,
p ossibly in the form of a balance sheet for non-monetary ob jectives, which
w ill su b stitu te for the. role of the extension economist, as stated above,
in probing out the real underlying objectives of the fam ily. . Such an
addition i s needed as a guide fo r the economist as w ell as the farmer.
The conclusion then i s that the budget method may be framed in such a way
as to be readily comprehensible for individuals to follow , and that i t is
a u sefu l planning to o l.
A further conclusion is that the budget in the
form used herein may bring the user into decision-making areas of thought
but f a i l s to answer a l l the questions that a s s a il the budgeter in le s s
than f u lly articu late f ozm.
In other words the budget is by no means a
"crystal b a ll^ but rather is a systematic co llectio n of assumptions J For
those with foresigh t in the form of sound economic perception the budget
may be a very considerable aid in probing future p r o b a b ilities.
For
those with le ss.p e r fe c t knowledge, the budget may serve merely to indicate
in which direction the most lik e ly p o s s ib ilit ie s of success might l i e .
-9 3 -
In any case the budgetsr should end up with a clearer notion' of the
most suitable altern atives availab le.
He has used the budgeting process
as an an alytical to o l to study the strengths and weaknesses of the current
farm organization and search out the factors affectin g success.
Almost
concurrently he has used the budget as a synthesizing to o l to reconstruct
a ten ta tiv e new organization for farm operation under a managment plan
which has been changed in response to a changed environment.
He can hardly
escape the process without gaining some new or rejuvenated id eas.
I t may
w e ll be that one of the most important features of budgeting i s the psychic
dividend to be obtained.
The lessons of system atization p ersistin g in the
mind of the budget user, become a production device ind issolub ly wrapped
up in his planning processes.
For. the farm user the provisions of the ■
budget ex istin g in his memory become a concrete part of his farm management
p ra ctices.
Extension Implications
In recent years much has been said about the increasing
of farming.
complexity
Most people are aware of the more conspicuous evidences of
th is as displayed broadly by mechanization, sp ecia liza tio n , and marketing
innovations.
Few non-agricultural people realize fu lly the intense organ­
iza tio n a l a c tiv ity underlying even the more simple agricultural e ffo r ts.
More and more, success of the farmer depends on his s k i l l in the management
of an involved production and marketing process.
A ll too often urban, and
rural/people as w e ll, have not recognized the -farmer’s way of l i f e as a
—9U™
business.
Nevertheless his operation has the ch aracteristics of a business
firm and reacts to many economic forces in e sse n tia lly the same manner.
The farmer him self has been r e la tiv e ly slow in recognizing these
economic influences to which he i s subject.
Changes5 to which adjustments
must be made5 are forced on farmers perhaps more frequently than on entre­
preneurs in other kinds of business.
Extension workers are
becoming more
concerned with these circumstances yet they may h esitate to presume on the
management prerogatives of the farmer by offering c lea rly defined detailed ■
management programs.
Piece-meal attacks on sp e c ific problem areas have
been the rule as for example animal health, s o il conservation, and promotion
of crop and breed improvement.
But l i t t l e , even in the way of business
train in g, and much le s s the overall farm management approach, has been
attempted, in management education.
The th e o re tica l economist i s able to delineate f a ir ly w ell the way in
which the farm .,organism and the agricultural industry w i l l react to various
economic stim u li.
But there is not a great deal he can do to guide the
individual farmer in
h is p ractical operations.
The th eorist makes con­
tributions in broader understanding, prediction, and p rob ab ilities WhidK
are in too nebulous a form fo r u tiliz a tio n by most men on the land.
By
contrast the economist as a farm management sp e c ia list has more to offer
when he can concentrate on an individual farm.
He can e ffe c tiv e ly appraise
i t s resources and for any point in time determine the most e ffic ie n t com­
bination of the known variab les.
But there his p ra ctica l service may end
other than in providing the method by which a solution may be found.
™9E>”
Because his solution in one case would rarely apply to another^ he can
only by demonstration direct farmers in general as to how they may bring
about an economical recombination of th eir resourcese Any sp e c ific recom­
mendations (except as to method) are l i t t l e better than the insubstantial
predictions upon which he must base his. judgement.
Back on the farm the farmer must s t i l l be his own economist.
Some­
how he needs to combine into a usable management procedure what are to
him the vague and chimerical outlines of the th eorist with the p ractical
balances of the management s p e c ia lis t.
Here is fr u itfu l ground fo r farmers
themselves to in it ia t e searching studies into problems p articu larly relevant
to th eir own operations.
But few possess to o ls other than native a b ility
and' know-how with which to attack the problem.
Most5 hOweVer5 do put con­
siderable energy and thought in to Moping out*' courses of action which
promise to return to them eith er sa tisfa c tio n or p r o fit.
Some w ill get
down to brass tacks with p en cil and Jpaper while others merely go through
a crude mental budgeting process.
Beyond changes in equipment and tech­
nology th e ir considerations w ill involve a Comparison5 of th e ir anticipa­
tio n s rela tiv e to markets5 y ie ld s5 Weather5 and so on5 with the resu lts
of past experiences.
I t i s an uncertain and often fru stratin g process5
not only because of unsatisfactory p r e d icta b ility 5 but also because there
is seldom an adequate t e s t of the r esu lts.
The e x te n s io n w o rk er i s " t h e b rid g e betw een th e b e t t e r inform ed
t h e o r i s t s and s p e c i a l i s t s on th e one s id e and th e l e s s w e ll inform ed
fa rm e rs on t h e o th e r .
Good com m unication depends on th e c a p a c ity of
-9 6 -
th is bridge*
The effectiv en ess of the bridges however<, depends on the .
amount of support i t gets from eith er sid e .
Extension services need
adequate comprehensible information from the research side for applica­
tio n to the problems at hand.
This must be presented by extension
personnel in such a way that the farming side w ill recognize that i t
applies to th eir problems.
A reverse flow of information i s ju st as
important 3 in that the farmers should bring their problems fr e e ly to the
extension service whence they are presented to the s c ie n t if ic side in a
manner that can resu lt in research directed towards finding solu tion s.
Up t i l l now farm management and economics as such have constituted a
rather small part of th is exchange system.
With economic pressures
building up on farms and continuing development of so c ia l science research
rela tiv e thereto, the resultant tr a ffic over the extension bridge is
expected to increase.
The budgets and analysis contained in th is th esis are intended to
f i t into th is framework.
From the research side the work has been
'
aimed at probing into the problem of converting s c ie n tific method into
action on the farm.
The budget method is developed to illu s tr a te how
extension personnel and farmers may attack the immediate problem of
enterprise selec tio n and combination on an individual farm b asis.
Because extension s ta ffs cannot expect to collaborate in working put
individual solutions fo r each .case.,, the. method also..has. to. be one that
is demonstrable on a mass b a s is.
I t i s thought that the budget' method
is b a sic a lly amenable to these purposes, whereas other more exact techniques
-9 7 w hich a re l e s s e a s i l y m a ste re d co u ld n o t serv e th e s e s e v e r a l ends
c o n c u r re n tly .
There a re f u r t h e r im p lic a tio n s f o r e x te n s io n ch an n els r e l a t i v e to
d e v elo p in g f u l l y th e e f f e c tiv e n e s s of any work done by b u d g e tin g as p r o ­
posed*
B esid es d e m o n stratin g th e use o f th e method- to p ro s p e c tiv e u s e rs
farm management c o n s u lta n ts w i l l have o th e r r e s p o n s i b i l i t i e s .
These
in c lu d e s
I.
M oulding th e budget framework t o be used f o r a tta c k in g any
i
problem so as t o b e s t serv e th e needs o f th e community in
w hich i t i s b e in g u sed by ta k in g cognizance of l o c a l f e a t u r e s .
This in v o lv e s d e t a i l e d developm ent o f each b udget s e c tio n so
a s t o in c lu d e p e r t i n e n t h e a d in g s s s tu b s ,a n d s p a c in g s .
20
P ro v id in g s u f f i c i e n t , s u i t a b l e , and c u r r e n t non-farm d a ta
where i t i s n eeded.
T his m ight in v o lv e co m p ilin g community
d a ta as w e l l as re fe re n c e t o a d eq u a te e x is t in g s o u rc e s .
3.
C u ltiv a tin g a p h ilo s o p h ic a l approach to t h e i r problem s by
th e in v o lv e d c o -o p e ra to rs th ro u g h g
(a ) d e v elo p in g among them ways o f a p p ra is in g t h e i r own in d iv ­
id u a l g o a ls o b je c t iv e ly .
(b ) i n s t i l l i n g th e id e a t h a t th e b u d g etin g o r any method of
a tta c k in g t h e i r problem s has w eaknesses w hich m ust be re c o g ­
n iz e d .
Thus d iscou rag em en ts may b e overcome, an d judgement
enhanced when th e in e v ita b le o c cu rrah c e s o f f a i l u r e su p p lan t
■
r o s i e r e x p e c ta tio n s .
"PS*=*
U.
S tim u la tin g farm, o p e ra to rs to keep ad eq u ate farm re c o rd s so t h a t
th e y develop a more p r e c is e n o tio n o f w hat has happened on t h e i r
fa rm s o
The e x is te n c e o f w hat amounts t o an ex ten d ed farm h i s t o r y
as a source o f p rim ary d a ta i s o f in v a lu a b le use in th e d e v e lo p ­
m ent of r e a l i s t i c assum ptions f o r b udget c o n s t r u c t i o n .'
In th e s e r e s p o n s i b i l i t i e s th e e x te n s io n c o n s u lta n t sh o u ld a c q u ire t h a t
d e g re e o f t a c t and f l e x i b i l i t y r e l a t i v e to h is c o n ta c ts w hich w i l l p e rm it
him t o u n d e rsta n d and r e f l e c t th e v alu e system s used b y th e fa rm e rs he i s
tr y i n g t o h e lp .
An approach developed alo n g th e s e s e v e r a l l i n e s and
a p p lie d w ith f in e s s e may h e lp to advance w hat i s seen as a b ro ad o b je c tiv e
f o r e x te n s io n i n farm management.
This may be summed up as c o n s ti tu tin g an
e f f o r t to improve th e f o r e s i g h t o f fa rm e rs .
Thereby th e fre q u e n c y of t h e i r
m is ta k e s s so e a s i l y se e n by h in d s ig h t^ may be reduced.
R esearch Im p lic a tio n s
• The fo rm a liz e d framework o f th e b u d g et .provides an ad eq u ate v e h ic le
f o r th e p r e s e n ta tio n o f th e s t r i c t l y m onetary r e s u l t s t h a t may be a n t i c i ­
p a te d from a group o f a l t e r n a t i v e s u n d e r.s tu d y .
However3 a t one p o in t o r
a n o th e r th e budget u s e r may be a s s a ile d by doubts as to th e r e l i a b i l i t y o f
the f ig u r e s w hich he f in d s i t n e c e s s a ry t o use o r e s tim a te i n o rd e r to com­
p l e t e h is budgets!,
There a re as w e ll th e a s p e c ts o f th e s tu d y problem
which th e b udget by i t s e l f does n o t f u l l y c o v e r.
F o r in s ta n c e th e b udget fo rm a lly s tu d ie d ex clu d es rig o ro u s c o n s id e ra ­
t i o n o f p e r s o n a l f a c t o r s a s s o c ia te d w ith farm management.
Hpwever3 th e
fa rm e r w i l l c o n s id e r th e more obvious no n -b u d g et f a c t o r s by n o t b u d g e tin g
-9 9 th o s e e n t e r p r i s e s t h a t h is p e rs o n a l knowledge warns him w i l l be u n s a t i s ­
fa c to ry .
F o r th e fa rm e r^ th e b udget in t h i s w ay ■i s more f l e x i b l e i n re g a rd
t o p e r s o n a l and p h y s ic a l l i m i t a t i o n s th a n i t i s f o r non-farm b u d g e te rs .
Also o n ly i n c i d e n t a l l y t r e a t e d b y use o f th e b udget a re f e a tu r e s o f
th e o p e ra tin g program such as th e u t i l i z a t i o n o f la b o r and th e tim in g o f
n e c e s s a ry e v e n ts i n th e p ro d u c tio n seq u en ces of combined e n t e r p r i s e s .
The budget may a ls o be c o n sid e re d as la c k in g i n n o t draw ing s p e c if ic
a t t e n t i o n to l e s s w e ll u n d e rsto o d phenomena such as v u l n e r a b i l i t y and
fle x ib ility .
I t i s i n th e s e a re a s r e l a t i v e t o th e b u d g et t h a t re s e a rc h
may be p ro d u c tiv e i n illu m in a tin g th e v a rio u s a d ju n c ts t o b u d g e tin g t h a t
a re n e c e s s a ry t o more f u l l y p re p a re th e b u d g e te r f o r d e c isio n -m a k in g .
Some t e n t a t i v e p ro p o s a ls fo llo w .
Improvement of b a s ic d a t a . f o r b u d g e tin g p u rp o s e s .- - F o r many b u d g e tin g
o p e ra tio n s on th e farm th e e x p e rie n c e o f th e fa rm e r h im s e lf may be th e
b e s t so u rc e o f in fo rm a tio n .
But when non-farm d a ta a re re q u ire d h is
e x p e rie n c e may n o t encompass a w ide enough f ie ld ,, n o r h i s re c o rd s
I
e x ten d f a r enough3 to p ro v id e him w ith a d eq u a te in fo rm a tio n . This i s
p a r t i c u l a r l y tr u e r e l a t i v e to any m arket and p r ic e in fo rm a tio n f o r w hich
assum ptions have to be made.
Even th e e x te n s io n and re s e a rc h w orker w i l l
be d isc o u ra g e d by th e u n s u i t a b i l i t y o f much o f th e d a ta a v a il a b le t o them .
As i n th e c ase o f th e b u d g e ts c o n s tr u c te d herein*, much o f th e in fo rm a tio n
i s n o n - s p e c if ic , in v o lv in g e s tim a tio n s and i n t e r p o l a t i o n s .
Take f o r
in s ta n c e th e c o n s tr u c tio n o f budget I: d e a lin g w ith a tu rk e y e n t e r p r i s e .
’ lllI'I;
7
111:785
- 100-
B asic in fo rm a tio n was c o n ta in e d in B u lle tin 2l*8 c o n s is tin g o f fo rty -tw o
p a g e s, 3 /
I t re q u ire d c lo s e re a d in g to s e c u re th e d a ta p e r tin e n t to
r a t i o n s s consumption,, and c a r e .
had to be se c u re d by h e a rs a y .
But p r ic e d a ta r e le v a n t to lo c a l c o n d itio n s
O th er m a rk e tin g in fo rm a tio n was v ery s c a n ty .
Development o f such a b u d g et would have b een n e x t to im p o ssib le f o r m ost
fa rm e rs .
The same i s t r u e o f th e c r e s te d w heat g ra s s budget f o r h ere a g a in
o n ly s c a tte r e d so u rc es o f in fo rm a tio n w ere a v a ila b le and d a ta so sc a n ty
as to appear c o n t r o v e r s i a l , Xsr/
R esearch w drkers a re i n a p o s itio n which p e rm its a c c e ss to n e a r ly
a l l so u rc e s o f d a ta and th e y a re a b le t o c a l l on s p e c i a l i s t s to sec u re
th e k in d o f d a ta th e y r e q u ir e .
But th e fa rm e r i s more lim ite d i n h is
r
so u rc e s o f in fo rm a tio n a lth o u g h he i s th e o n ly one t h a t has d a ta ' sp ec­
i f i c a l l y a d ap te d t o h is own farm,, o r knowledge of p e rs o n a l f a c to r s
p e r t i n e n t to h is management pro b lem s.
The whole th o u g h t b eh in d t h i s t h e s i s i s d ir e c te d tow ards in v o lv in g
more fa rm e rs i n b u d g e tin g on t h e i r own a c c o u n t,
T et i t a p p ea rs t h a t much
e s s e n tia ] , in fo rm a tio n i s n o t a v a ila b le i n a form t h a t i s ad eq u ate f o r
t h e i r use a t th e farm l e v e l .
To m inim ize th e s e d i f f i c u l t i e s th e th o u g h t
i s advanced t h a t some e f f o r t co u ld be p u t i n t o c o l l e c t i n g and a rra n g in g
3/
Cushman5, l i a r i e t t e
E ,s and W elchs D r, Howards op. c i t ,
V
See D iv e rte d A cress op. c i t . s pp„ 26-30 and p . IpL. A lso see F ie ld
Crop V a r ie tie s i n M ontana, Mont. A gr. E x p t. S t a . s C ir c u la r 19$^
( A p r il, 1952j s p . Wo
“•1 0 1 -
in fo rm a tio n p e r t i n e n t to b u d g e tin g .
T h is should be h e lp f u l t o fa rm e rs s
e x te n s io n p e rs o n n e l, and re s e a rc h w o rk ers a l i k e .
Much p u b lis h e d m a te r ia l r e l a t i n g t o a g r i c u l t u r e , w hich i s o f a
s t a t i s t i c a l o r s c i e n t i f i c n a tu r e , a p p ea rs i n a form which fa rm e rs g e n e r a lly
re g a rd w ith some s u s p ic io n b ecau se o f i t s o r ig i n and mode of e x p re s s io n .
They f a i l to use i t because i t la c k s in s t r u c t i o n s on how to a d ap t th e i n f o r ­
m atio n to t h e i r own use i n th e l i g h t o f t h e i r own o b je c t iv e s .
Because i t
te n d s t o be b u lk y and i s is s u e d p ie c e -m e a l, s u b je c t by s u b je c t, and
d ep artm en t by d e p a rtm e n t, i t i s seldom c o lle c te d o r f i l e d i n a manner t h a t
makes i t a com plete o r e a s i l y r e f e r r e d t o body of in fo rm a tio n .
There a re handbooks p i l e d on handbooks b u t a n o th e r one ap p ears as
th e m ost l i k e l y a i d .
The fa rm e r f r e q u e n tly r e f e r s to a p o c k et almanac
d i s t r i b u t e d by in s u ra n c e o r equipm ent f ir m s .
The co u n ty a g e n ts have
t h e i r e n cy c lo p e d ic f i l e s and lo o se l e a f handbooks.
N e ith e r a re to o
s u ita b le f o r b u d g e tin g u s e , f i r s t o f a l l b ecau se th e y a re n o t s p e c if ic
t o an a re a and se c o n d ly b e ca u se th e y p ro v id e no p r ic e in fo rm a tio n .
For
p h y s ic a l p ro d u c tio n d a ta th e r e a re p o s s ib ly b a s ic models i n th e e x te n s io n
p u b lic a tio n s "’D iv e rte d A c res’* £ / and "'Guide t o Farm P r a c tic e i n S a sk atc h ­
ewan?" 6 / ( re v is e d e v e ry th r e e y e a r s ) .
Some m ark etin g l e a f l e t s c a rry i n f o r ­
m ation r e v e a lin g p r i c e tr e n d s o f p ro d u c ts and com m odities from week to
£/
D iv e rte d A c re s, op. c i t .
6/
Guide t o Farm P r a c tic e . i n Saskatchew an, D ept, of E x te n s io n , U n iv e rs ity
o f Saskatchew an, S askatoon, S a sk a te h e irin , Canada.
-1 0 2 -
week^ o r month to m onth, 7 /
tr e n d s in to th e f u t u r e „
A few p u b lic a tio n s a tte m p t to p r o je c t th e s e
S t a t i s t i c a l s e r v ic e s com pile d a ta a n n u a lly r e l a t i v e
to p r i c e s , y i e l d s , and grades o f.fa rm p r o d u c ts f 8 /
In d ex es o f p r ic e s
re c e iv e d and p a id by Montana fa rm e rs and ra n c h e rs p ro v id e h i s t o r i c a l b a se s
o f com parison and o p p o r tu n itie s f o r r e v is io n on a m onthly b a s i s . £ / 1 0 /
A ll such in fo rm a tio n has to be drawn upon when one s t a r t s b u d g e tin g
s e r io u s ly .
I t i s th o u g h t t h a t p ro c e s s in g t h i s in fo rm a tio n and combining
i t i n a handbook d e sig n e d to p re s e n t b u d g et in fo rm a tio n co u ld le a d to
more e f f e c t i v e u se of p u b lis h e d re s e a rc h and s t a t i s t i c a l m a t e r i a l .
A fte r
a l l th e aim i s to make th e farm er more s e l f - s u f f i c i e n t i n in d iv id u a l
economic a n a l y s i s .
Y et we can h a rd ly e x p e c t him to a c q u ire th e b ro ad
economic t r a i n i n g t h a t w i l l p e rm it him to range o v er a l l th e economic
in fo rm a tio n t h a t i s a v a ila b le and s e l e c t th e item s t h a t a re r e le v a n t to
h is s itu a tio n .
I t would seem t h a t th e re sh o u ld be some in te rm e d ia te s ta g e
which would s o r t o u t and fu n n e l t h i s r e le v a n t in fo rm a tio n to him.
Such
a handbook i s co n ceiv ed as having th e p rim a ry purpose o f c o n s o lid a tin g ,
in to one e a s i l y r e f e r r e d to s o u rc e , th e non-farm in fo rm a tio n t h a t i s
7/
L iv e sto c k and Meat Trade R e p o rt, M arket In fo rm a tio n S e c tio n , M arketing
S e rv ic e , Canada, D ept, o f A g r ic ., O ttaw a, Canada, (w eek ly ).
8/
Montana A gricultural S t a t is t ic s , opy c i t .
9/
T a y lo r, M. C ., Indexes o f P r ic e s P aid by Montana Farm ers and R anchers
193^-19^2, B u lle tin U92, Ag. Exp. S t a . , Montana S ta te C o lle g e , Bozeman,
![November, 19^3).
1 0 / T a y lo r, M. C,, P r ic e s R ecieved b y Montana Farm ers and Ranchers 1910-19^2,
B u lle tin ^03, Ag. Exp# S t a . , Montana S ta te C o lle g e, Bozeman, (November,
M O .
- 103-
a v a ila b le .
The s e r v i c e a b i l i t y of such a volume m ight be in c re a s e d m a te r­
i a l l y by p ro v id in g a means o f keeping i t up to d a te w ith p e r i o d i c a l
r e le a s e s o f new re s e a rc h d a ta .
F i n a l l y b ecau se such a handbook i s proposed
to b e h e lp f u l i n b u d g e tin g i t co u ld c o n ta in a s e r i e s o f “c h e c k - l i s t s 11 f o r
b u d g e ts d e a lin g w ith v a rio u s e n te r p r is e s so t h a t no item t h a t should be
c o n sid e re d w i l l be o v e rlo o k e d .
This may a ls o in c lu d e b r i e f re fe re n c e s t o
r e le v a n t m a t e r i a l f o r s tu d y , o r th e lo c a t io n o f in fo rm a tio n elsew here i n
th e handbook.
I t i s th o u g h t t h a t many farm o p e ra to rs m ight f in d th e e f f o r t
th e y p u t i n t o farm p la n n in g more p ro d u c tiv e i f th e y were armed w ith th e
in fo rm a tio n p ro v id e d in such a handbook and b r ie f e d i n th e use o f ^Ucigbtg.
The simmering down o f th e a v a ila b le in fo rm a tio n , as p ro p o sed above, m ig h t
b r in g many more fa rm e rs i n t o th e f o ld o f th o s e who g ain im m ediate b e n e f its
from s c i e n t i f i c p ro g re s s i n a g r i c u l t u r e .
E xtending th e budget framework to in c lu d e f e a tu r e s of th e o p e ra tin g p ro ­
gram. —The b u d g et as p re s e n te d i n t h i s t h e s i s le a v e s out a fo rm a l con­
s i d e r a t i o n o f th e o p e ra tin g program s a s s o c ia te d w ith d i f f e r e n t a l t e r n a t i v e s .
However th e b u d g e te r can n o t e f f o r t to n e g le c t s tu d y o f th e v a r ia tio n s i n
o p e ra tin g re q u ire m e n ts.
In t h i s v ein an a tte m p t to a p p ra is e fa m ily la b o r
re q u ire m e n ts was made, 1 1 /
There i s a ls o th e c o n s id e ra tio n o f sc a rc e
re s o u rc e s such as w a te r f o r liv e s to c k t o be b a la n c e d b e tw ee n ■e n t e r p r i s e s .
Il/
See P a r t V ., Table V II, p . 8 k # F o r d i f f e r e n t tre a tm e n t o f problem see
Quenemoen, M„ E ., Economic A spects o f W ater S p read er Developments on
S o u th e a s te rn Montana Ran ch es, Mont. A gr. Exp. S ta . MimT"C ir. 69,
(December, 1952), p p . IJT-ZIJT
—10l|.‘=
Perhaps other aspects of the proposed combination of enterprises are
competitive as in the case of funds for cash operating expenses» How does
a budgeter uncover such features and give them the attention they require?
The suggestion is put forward that a section could be added to the
budget with an auxiliary or concurrent relationship which would s a t is ­
fa c to r ily afford consideration of any features such as th ese.
Some study
would be required to formalize the manner in which r ela tiv e information
could be adequately reduced to comparable terms.
The important thing would
be to get the terms in which comparison was to be made completely compre­
hensible to the budget User5 i f these were not of a quantitative nature„
■Extending the budget framework to include a consideration of the farmer’s
preferences, —This perhaps i s hardly necessary as ah adjunct to budgeting
since the farmer concerned may automatically consider h is preferences
through the strong feelin g that i s ordinarily associated with lik es
and d is lik e s „ However some appraisal may be desirable to account for the
preferences of other members of the family and to take cognizance of degrees
of preference.
I t is thought that such features could be handled by a
section designed to probe3 draw out9 and balance the farm fam ily's reactions
to the proposed a ltern a tiv es.
This perhaps could be handled in a manner
sim ilar to the techniques employed by testin g and counselling services.
Extending the budget framework to include a consideration of the farmpr.'s
o b jectiv es.-«,The suggestion has been made in th is th esis that before
making f in a l decisions the farmer w ill at le a st subconsciously consider
other aspects of h is environment in making his choice between enterprises.
=
105
j
>”
Such s i t u a t i o n s as v u l n e r a b i l i t y and f l e x i b i l i t y may be th o u g h t over i n
term s r e le v a n t t o th e f a r m e r 's experience=
There may be many o th e r e q u a lly
im p o rta n t c irc u m sta n c e s t h a t in f r in g e on t h i s a re a o f c o n s id e r a tio n .
E v i­
dence o f t h i s may be found i n th e a r t i c l e s o f r e s e a r c h jo u r n a ls which to u c h
on v a rio u s f a c e t s of t h i s a re a and p r e s e n t h y p o th eses on why farm ers
behave as th e y do and how th e y resp o n d t o c e r t a i n s tim u li.
In t h i s a re a o f thought th e b u d g e te r i s l e f t e n t i r e l y t o h is own
d e v ic e s .
Y et such m a tte r s may b e o f param ount im portance i n a r r iv in g
a t e f f e c t i v e d e te rm in a te d e c is io n s s which may be reached a t a p o in t f a r
beyond th e m onetary com parison co n clu d in g th e b u d g etin g o f a group of
a lte rn a tiv e s .
A fte r a l l how can th e layman reduce sensed r a t h e r th an
i n t u i t i v e l y known e v e n ts such as v u l n e r a b i l i t y ^ f l e x i b i l i t y , r i s k a v e r s io n ,
o r o th e r s i m i l a r phenomena to u n d e rsta n d a b le term s? 1 2 /
I s he aware o f them
beyond vague i n s t i n c t s to, seek o r f l o u t s a f e t y i n b u s in e s s ?
Yet d i f f e r e n t
e n t e r p r i s e s sh o u ld r e q u ir e v ary in g d e g re es o f concern r e l a t i v e to th e s e
a s p e c ts .
The approach t o t h i s problem which an e x te n s io n c o n s u lta n t m ight
ta k e i s t o l a y o u t th e m onetary com parisons o f th e b u d g eted a l t e r n a t i v e s
b u t e x p la in w hat t h e ■consequences m ight be in term s of th e s e o th e r f a c t o r s .
T his depends on th e c o n s u l t a n t 's u n d e rsta n d in g o f th e im p lic a tio n s in v o lv e d
and th e f a r m e r 's r e a l i z a t i o n o f t h e i r e x is te n c e .
12/
S u re ly i t would be
Income v u l n e r a b i l i t y i s d is c u s s e d i n a te c h n i c a l manner h a r d ly s u i t ­
a b le to la y u s e , b y Je n se n , C0 -P ,, op. c i t . , p p . 7 6 -7 7 ,
-1 0 6 -
desirable and helpfu l i f the budget demonstration had some means of
uncovering and laying out the objectives of the farmery and comprehending
what circumstances would divert him from his goals®
Clearer knowledge
and d efin itio n of these matters should be helpful to the farmer as well®'
Here again i t i s thought that research could provide an extension to
the budget framework which would be h e lp fu l'in decision-making.
F irst of
a l l a c la r ific a tio n and c la s s ific a tio n of farmers1 objectives in terms
which could be measurable and comparable would be necessary.
Then some
/
kind of balance sheet along the order of Table VII could be used to bring
the relevant considerations together fo r comparison®
I f the resu lts of such study were developed in readily understand­
able and e a s ily calculated terms the budget would be much more compre­
hensive in i t s application®
Extension workers and budgeters would be
armed with a more u sefu l to o l capable of reaching further into decision­
making problem areas and sta b iliz in g aspects of consideration of which
r e la tiv e ly l i t t l e i s y et known.
The outcome of certain lin e s of action
which before might have been in doubt due to obscure personal management
quirks mighty with such an extension,, be quite e a sily descernible®
Need for more accurate forecastin g. —The accuracy of the budget depends
on the degree to which assumptions may be made to approximate forth­
coming ■events.
I f y ield s and prices could be known beforehand within
r e la tiv e ly narrow lim its the value of the budget would be enhanced.
(Al­
though for comparative purposes a series of budgets' may include quite
u n re a listic assumptions., i f a l l biased the same way^ and s t i l l provide a
sound basis for a valid conclusion).
•=107=
D ecision-m aking would be made e a s i e r ' i f m a rk e t, p r i c e , y i e l d , q u a l i t y ,
and a l l such assum ptions co u ld be mad.e w ith a h ig h d eg ree o f c e r t a i n t y
t h a t th e y would c lo s e ly a n t i c i p a t e f u tu r e c irc u m sta n c e s »
To t h i s end
c o n tin u in g re s e a rc h i n p r i c e f o r e c a s t i n g I s im p o rta n t to budget e r s .
Out­
s id e th e realm o f econom ics and farm m anagem ent^im portant c o n tr ib u tio n s to
y i e l d f o r e c a s ts may be made by such in n o v a tio n s as improved lo n g range,
w e a th e r f o r e c a s t i n g , d e v e lo p in g p o s s i b i l i t i e s i n w e a th e r m o d if ic a tio n , o r
d e te rm in a tio n o f s o i l m o is tu re r e s e rv e s by p ro b in g o r' e l e c t r i c a l conI
d u c tio n m eanso In a c t u a l i t y alm ost any k in d o f a g r i c u l t u r a l re s e a rc h
im p lie s an .imprd.vement i n th e a b i l i t y of fa rm e rs t o d iv in e o r c o n tro l
w ith in a narrow ing range th e outcome of any l i n e of a c ti o n th e y choose
to fo llo w .
The d i f f i c u l t y a r i s e s , how ever, t h a t many f in d in g s open up
a d d itio n a l a l t e r n a t i v e s w h ic h ' c o m p licate th e o r g a n iz a tio n a l job of th e
fa rm e r.
D ecision-m aking th u s te n d s t o became more in v o lv e d when u n c e r ta in ty
in c r e a s e s due t o te c h n o lo g ic a l change.
New R esearch I n d ic a te d
The work o f 'th is t h e s i s s e rv e s as a b a re ' in tr o d u c tio n to f u r t h e r more
in te n s iv e s tu d y .
S u g g e stio n s so f a r made a re o f a hypotheticaZL-and .con­
j e c t u r a l n a tu r e which h a r d ly q u a lif y f o r 'c o n s i d e r a t i o n as m e th o d o lo g ic a l
re se a rc h .
P erhaps problem s have b een in d ic a te d tow ards w hich f u r t h e r
re s e a rc h may be d i r e c t e d .
a re a s r e - c a p i t u l a t e d b elow s
I n summary th e s e may be s e p a ra te d i n t o th e two
-1 0 8 -
1.
A f u r t h e r developm ent and c o n s o lid a tio n o f in fo rm a tio n on th e s o c io ­
economic b e h a v io r o f fa rm e rs ' r e l a t i v e t o v a rio u s c o n d itio n s o f
t h e i r e n v iro n m en t.
The problem h ere i s t h a t w ith o u t t h i s knowledge
th e developm ent o f farm management e d u c a tio n i s ham pered.
The
q u e s tio n may be posed t h u s s— "Would i t be p o s s ib le to c l a s s i f y th e
b e h a v io r p a t t e r n s and- e n v iro n m e n ta l c irc u m stan c es o f farm ers in
such a w a y -th a t some fo rm a l c o n s id e r a tio n could be .ap p lie d to
th e s e f a c t o r s when d e a lin g w ith farm management problem s which
a re now approached m a in ly from th e money income stan d p o in t?®
This ex am in atio n o f th e r e a c tio n and needs o f fa rm e rs would
seem t o be cine o f th e b a se s upon w hich e x te n s io n work in farm man­
agement m ight be b u i l t .
The q u e s tio n has been a sk e d S - llHow do we
go about doing t h i s job o f e x te n s io n e d u c a tio n i n farm management?®
This t h e s i s has n o t a tte m p te d to throw much l i g h t on t h i s p r e s s in g '
problem f o r w hich answ ers a re o v e r-d u e ,.
2,
The improvement o f d a ta a v a ila b le to fa rm e rs f o r b u d g e tin g p u rp o s e s .
One o f th e th in g s needed i s a developm ent o f te c h n iq u e s which w i l l
s tim u la te fa rm e rs t o keep more ad eq u ate farm b u s in e s s r e c o r d s .
On
th e s c i e n t i f i c - s i d e th e need i s f o r co n tin u ed improvement i n th e
manner o f p r e s e n ta tio n f o r th e m a t e r i a l p u b lis h e d f o r farm consumptio n ,
Means of c o -o rd in a tin g th e o u tp u t of in fo rm a tio n from d i f f e r ­
e n t so u rc e s could be s o u g h t.w ith d e s ir a b le r e s u l t s .
=>109=
How may re s e a rc h in to th e s e problem s be conducted?
One th o u g h t i s
t h a t th e c u r r e n t farm and home developm ent program o f th e e x te n s io n s e r v ic e
c o u ld p ro v id e c ase s tu d ie s i n b o th a re a s o f in v e s tig a tio n *
T h is would re ^
q u ire th e o b s e rv a tio n and re c o rd in g o f th e r e a c tio n o f fa rm e rs and t h e i r
f a m ilie s ,,in th e f i r s t c ase r e l a t i v e t o re c o g n iz a b le b e h a v io r p a t t e r n s and
e n v iro n m e n ta l c o n d itio n s ,,a n d i n th e second case to th e p r e s e n ta tio n of
e d u c a tio n a l in fo rm a tio n in v a rio u s fo rm s.
The s tu d y o f case d a ta s o •ob­
ta in e d cou ld p oint, to more e f f e c t i v e ways of p r e s e n tin g in fo rm a tio n f o r f a r
mer u s e s p e c i f i c a l l y f o r b u d g e tin g p u rp o s e s .
F u r th e r i t i s a n tic ip a te d
t h a t - t h e socio-econom ic b e h a v io r p a tte r n s ' o f fa rm e rs m ig h t be illu m in a te d
in such a - way a s t o advance our u n d e rsta n d in g o f th e fo r c e s a t p la y in
th is fie ld .
The developm ent o f knowledge in th e s e two a re a s co u ld be
a p p lie d t o .'an improvement o f our e x te n s io n e d u c a tio n te c h n iq u e s .
A second s u g g e s tio n f o r a method o f r e s e a r c h i s t h a t a su rv ey te c h = '
n iq u e m ight be em ployed.
The c r i t i c a l f a c t o r h e re i s in th e d e sig n o f a
su rv e y sch e d u le which would e l i c i t th e d e s ir e d in fo rm a tio n .
C oncerning
socio-econom ic b e h a v io r p a tte r n s n o t o n ly would th e p a ra m e te rs w ith in w hich
o b s e rv a tio n s a re to be made be d i f f i c u l t to e s tim a te b u t a ls o th e p e rs o n a l
r e a c tio n s o f th e in d iv id u a ls to q u e s tio n s o f a p r iv a te n a tu re and r e l a t i v e
to n ebulous a re a s o f th o u g h t m ig h t make i t e x tre m ely d i f f i c u l t to s e c u re a
c o o p e ra tiv e re s p o n s e .
The th o u g h t i s advanced t h a t r a t h e r th a n a d i r e c t
su rv e y i n t h i s a re a o f r e s e a r c h , c e r t a i n "sm all item s o f s tu d y co u ld be
in c o rp o ra te d in to th e schedule's o f numerous f i e l d s tu d ie s over a p e rio d
o f tim e..
The o b je c tiv e would be to b u ild up a fund o f in fo rm a tio n over a
=110"
period- o f tim e^w hich^by c o n s o lid a tio n a cc o rd in g to p r e c o n c e iv e d p la n ,
would c o n s t i t u t e a su rv e y o f farm er r e a c t i o n to th e c h a r a c t e r i s t i c s o f
environm ents d is p la y e d by the. sample s t r a t a and. problem s p robed i n th e
sp e c ific " su rv e y o f th e moment.
R e la tiv e to th e improvement o f d a ta used by fa rm e rs i n b u d g e tin g s
d i r e c t s u rv e y would s e rv e to f i n d ou t w hat farm ers th o u g h t th e y would
I i k e 5 w hat th e y a c t u a l l y u s e d 5 and th e in c id e n c e o f v a rio u s k in d s of
in fo rm a tio n on fa rm s .
Survey a ls o would in d ic a te th e re c e p tio n accorded
to d is s e m in a tio n s o f in fo rm a tio n p re s e n te d i n co n v en tio n al- and e x p e rim e n ta l
fo rm s.
W hatever method o f stu d y in g th e s e problem s may be employed th e deg ree
o f su c c e ss a tta in e d w i l l depend on th e in g e n u ity of th e r e s e a r c h e r .
I t is
hoped t h a t 5 somewhere w ith in t h i s t h e s i s , id e a s a re e x p re sse d which'rn^-y
su b se q u e n tly sp a rk such in g e n io u s and w o rth w h ile r e s e a r c h .
-1 1 1 -
A P P E. N D I X
APBENDH a
D em o n stratio n o f Budget Development
The purpose o f th e s e b u d g e ts i s to p ro v id e a means o f s y s te m a tic a lly
comparing^, on th e b a s is o f th e assu m p tio n s made? th e r e l a t i v e r e tu r n s from
a group o f p ro d u c tio n p o s s i b i l i t i e s a v a il a b le to th e case fa m u
In
e sse n ce i t i s an a tte m p t to f o r e c a s t th e f u tu r e consequences o f c e r t a i n
a c tio n s so t h a t d e c is io n s can be made f o r p la n n in g th e farm o rg a n iz a tio n
and th e a l l o c a t i o n o f' farm r e s o u r c e s »
To do t h i s i t i s n e c e s s a ry to
make e x p l i c i t th e assum ptions made and th u s expose c o m p letely th e w orkings
and p o t e n t i a l i t i e s o f th e case farm i n o rd e r t o la y a fo u n d a tio n f o r th e
p r o je c te d changes t o be in tro d u c e d i n su b seq u en t b u d g e ts 0
T h is may be
accom plished th ro u g h an ite m -b y -ite m ex am in atio n o f th e b a s i c farm b u s in e s s
s t r u c t u r e and a la y in g o u t o f th e p a r t s i n t h e i r l o g i c a l o rd er*
The t e n t a ­
t i v e r e c o n s tr u c tio n s o f th e farm b u s in e s s i n p a r a l l e l Io rm s9 a s re p re s e n te d
by o th e r b u d g e ts s th e n d is p la y some o f th e e f f e c t s o f th e changes which i t
i s d e s ir e d t o study*
The b a s ic b u d g e t9 fo llo w in g th e o r g a n iz a tio n s e le c te d f o r t h i s t h e s i s 9
h as f o u r m ain s e c tio n s w hich a re re p e a te d i n a l l su b seq u en t b u d g ets * ' How­
e v e r 9 where a l iv e s to c k e n t e r p r i s e i s in tro d u c e d i t i s n e c e s s a ry to
c o n sid e r a n o th e r a r r a y o f o r g a n iz a tio n a l and in p u t- o u tp u t r e la t i o n s h i p s *
T his i s done h e re by th e a d d itio n o f two s e c tio n s to th e o r i g i n a l fo u r
where liv e s to c k i s th e only, p ro d u c t and th r e e s e c tio n s where th e r e a re
-1 1 3 =
seco n d ary p ro d u c ts .
I n o rd e r t o d em o n strate th e u se o f th e v a rio u s
S e c tio n s s B udgets I s I I s I I I and T a re d ev elo p ed below as a b u d g e te r
m ig h t go th ro u g h them .
Budget I
Land u se and crop p ro d u c tio n s e c t i o n . — This s e c tio n s e t s f o r t h th e
o p e ra tio n o f th e c ro p p in g system g e n e r a lly u sed i n th e t r i a n g l e a r e a .
The
b u d g e te r sh o u ld have no d i f f i c u l t y h e re i n s e t t i n g down an in v e n to ry o f
a c re a g e s which w i l l add up to th e t o t a l f o r th e farm .
H alf th e c ro p la n d
w i l l be seeded' to w in te r w heat and h a l f w i l l b e l e f t f o r summer fa llo w .
But some w heat may be w in te r k i l l e d so th e b u d g e te r w i l l assume t h a t f o r t y
a c r e s w i l l be shown ( i n b ra c k e ts ) a s r e - p la n te d t o s p rin g w h e a t.
T his
le a v e s 360 a c r e s unacco u n ted f o r and he sh o u ld ’c l a s s i f y t h i s acc o rd in g to
i t s u se o r p o t e n t i a l u s e .
He sh o u ld re g a rd th e uncropped la n d on th e
r e n te d h a l f s e c tio n as w aste s in c e i t i s p o t e n t i a l l y u s e le s s to him u n le s s
it" i s fe n c e d and w a te re d o r a d ja c e n t to p o t e n t i a l l y u s a b le p a s tu r e a v a il a b le
t o h i m .i On h i s own la n d th e r e w i l l be u n u sab le acreag e i n farm stead^ f e n c e s s
ro a d s s and i s o l a t e d c o m e r s ,
He w i l l d e cid e t h a t th e b a la n c e s h e re s e t a t
323 a c r e s s may be p o t e n t i a l l y v a lu a b le a s p a s tu r e la n d ,
P efh ap s a t t h i s
p o i n t s b ro u g h t fa c e to . f a c e w ith an unused r e s q u re e s he w i l l s p e c u la te on :
th e p o s s i b i l i t i e s o f s e c u rin g so m e -re tu rn from i t s e s p e c i a l l y i f i t o ccu rs
t o him t h a t h i s o f f - s e a s o n i d l e p e rio d s a l s o r e p r e s e n t unused re s o u rc e s ,
Howevers to g e t a lo n g w ith th e b u d g e tin g ; he m ust now s e t down th e
p ro d u c tio n o f h i s w heat e n t e r p r i s e .
T h is p o ses a problem .
Because y i e l d
le v e ls are uncertain in the area he may regard, the y ield s of past years as
non-typicals. or anticipate an abnormality.) in the season for which he i s
budgeting^ due to circumstances of which he i s already awareo I f s as in
th is budget., he s e t t le s on the long term average y ield rate so that, i t w ill
be comparable with the p a r a lle l long term average y ield s of other cropss
for which he has no experience to refer td s he may s t i l l have to make
adjustmentso These w ill allow for differences between h is locality.an d the
averages or, as in th is budgets be based on seeded acreage of winter wheat
rather than harvested acreage0 In th is Case5 toos anticipated y ield has
been advanced by 3 bushels'per acre over average y ie ld to compensate for
returns to modern technology (p articu larly weed-spraying) not yet reflected
in long term averages*' The budgeted w ill, find him self hard pressed to make
these decisions without access to a source of outside information^ such as
reports of neighbor experience arid experiment sta tio n data,
He w ill fin d .
, i t necessary to take note of any assumptions or guesses he makes in order
to construct subsequent budgets with the same bias*
Following estim ation of to ta l production^ the budgeter w ill rea lize
that th is does not represent the quantity he w ill be able to market,
He
must account for other d isp osition —the reserve necessary for Seed5, and of
course the landlord's crop share„ The r e st he"may expect to eventually
s e ll.
But what price can he expect?
This' with a price supported at a
minimum percent of p arity i s e a s ily determined i f consideration i s given
to r e la tiv e prices for the location., kind^ and quality of wheat to be'
marketed.
But i f th is budget i s regarded as representing a non-compliance
~115>
a l t e r n a t i v e t o th e a c re a g e r e s t r i c t i o n problem th e r e tu r n s w i l l have t o b e
c a lc u la te d d if f e r e n tly * I /
The a r r i v a l a t a g ro ss r e t u r n f ig u r e com pletes
t h i s s e c tio n o f th e budget*
Cash expense s e c t i o n *--The b u d g e te r ( e s p e c i a l l y i f he keeps farm
re c o rd s ) sh o u ld have r e l a t i v e l y l i t t l e , d i f f i c u l t y niith t h i s se c tio n *
Some
o f th e cash expenses w i l l a p p ly to th e farm i n a g e n e ra l way such as ta x es*
O thers may be grouped a c c o rd in g to re s o u rc e as f o r in s ta n c e f u e l and grease*
S t i l l o th e rs a re s p e c i f i c to an e n te r p r is e and a re c o n v e n ie n tly added o r
s u b tr a c te d as i n th e case o f h a u lin g ch arg es f o r cash g ra in s b u t n o t f o r
g ra in s u sed f o r fe e d on th e farm*
Howevers b ecau se c o s ts o f p ro d u c tio n may
b e h ig h ly v a r i a b l e betw een farm s he needs t o work them o u t f b r h i s ' own ease
on th e b a s i s o f th e r a t e o f use and c o s t o f th e v a rio u s in p u ts which he
can approxim ate from h i s own ex p erien ce* S /
R e l a tiv e ly s m a ll changes i n
c o s ts o f in p u ts may be a n t i c i p a t e d arid allo w ed f o r ^ a lth o u g h p r ic e s o f
m ost ite m s u sed i n w heat p ro d u c tio n W ill, n o t o r d i n a r i l y change g r e a tly
from y e a r to year*
The g r e a t e s t d i f f i c u l t y e n co u n te re d w i l l be i n s e g re ­
g a tin g and a c c o u n tin g f o r a l l th e item s t h a t sh o u ld be co n sid ered ,, such as
numerous s m a ll r e p a ir and su p p ly expenses*
The im p o rta n t th in g w i l l be to
c o n s tr u c t th e expense s e c tio n s o f a l l th e b u d g e ts by fo llo w in g th e same
b a s ic p rem ises*
I f t h i s i s done th e r e s u l t o f one b u d g et r e l a t i v e to
l/
See T a y lo r5 M aurice C*5 nWheat A creage A llo tm en ts - Compliance o r NonCompliance 5n Montana Rarmer- S to Ckman5 March l $ s 1955*
2j
See S ta r c h 5 E* A*5 Farm O rg a n iz a tio n a s A ffe c te d b y M ec h a n iz a tion*
Mont* AgT* E x p t* S t a * B ull* 2765 May5'
-1 1 6 .
a n o th e r m i l rem ain c o n s is te n t and no e r r o r o f judgm ent i n s e l e c t i o n sh o u ld
o c c u r.
T o ta l cash expenses f o r . t h i s b u d g et were a r r iv e d a t by u s in g c u rre n t
1955 c o s t f ig u r e s a p p lie d t o th e in p u ts in d ic a te d f o r w in te r w heat farm s i n
th e l'9l|.9 farm su rv e y .
In v e stm en ts s e c t i o n *—-In th e p re v io u s s e c tio n th e b u d g e te r should
have s e g re g a te d payments o f i n t e r e s t from p r i n c i p a l paym ents on la n d o r •
equipm ent,
At' t h i s p o in t he co u ld have s p e c u la te d on w h eth er th e l a t t e r
payments were a c o s t f o r h i s fa rm .
I n a l l lik e lih o o d t h i s th in k in g would
le a d him t o a c o n s id e r a tio n o f a l l th e money he hrad poured i n t o Ia n d 9
im p r o v e m e n ts a n d equipm ente
Such c a p i t a l item s a re n o t a d i r e c t c o s t i n
th em selv es a lth o u g h th e y give r i s e , i n p ro p o r tio n to t h e i r r a t e o f a n n u al use
to i n d i r e c t farm c o s ts such as d e p le tio n * d e p re c ia tio n * a n d i n t e r e s t on
in v e stm e n t.
D e p le tio n o r d i n a r i l y i s n o t charged a g a in s t farm la n d so need
n o t be c o n sid e re d h e r e .
I n t e r e s t on th e in v e stm e n ts h e ld i n th e farm b u s ­
in e s s may be a r r iv e d ' a t by c o n s id e rin g th e o p p o rtu n ity r a t e o f r e t u r n w hich
i s fo rg o n e by h a v in g th o se funds t i e d up i n th e farm .
To a r r i v e a t d e p r e c ia tio n th e b u d g e te r w ill, need to make a c a r e f u l
in v e n to ry and e v a lu a tio n o f th e im provem ents such as b u ild in g s ' and fe n c e s
(a lth o u g h e x c lu d in g h i s p e r s o n a l re s id e n c e ) and c a lc u la te a r a t e o f d ep rec­
i a t i o n which would be s u f f i c i e n t to c r e a te a re s e rv e a d eq u a te to r e p la c e
them when th e y d e t e r i o r a t e to th e p o in t o f u s e le s s n e s s .
I f he i s a th o u g h t­
f u l man* t h i s ta s k w i l l d e la y him w ith c o n s id e ra tio n s o f o r i g i n a l cost*
re p la c e m e n t cost* o b so lesc en c e ( e , g , a h o rs e b a rn I n good c o n d itio n b u t
u n s u ita b le f o r c u r r e n t b u ild in g req u irem en ts)* and f l e x i b i l i t y (u s e fu ln e s s
-1 2 7 -
and th e r e f o r e v a lu e f o r p u rp o se s o th e r th a n t h a t f o r w hich i t was con­
s tr u c te d ) « 3 /
The same p ro c e s s w i l l be fo llo w e d i n e s tim a tin g d e p r e c ia tio n
f o r h i s equipm entg e x c e p t t h a t f o r many ite m s h e re he w i l l have a b e t t e r
id e a o f r a t e s o f d e t e r i o r a t i o n and o b so le sc e n c e .
At t h i s p o in t he may wonder i f he i s j u s t i f i e d from a b u s in e s s p o in t
o f view i n owning c e r t a i n p ie c e s o f equipm ent w hich e x h i b i t a h ig h aralu al
c o s t f o r th e s e r v ic e s t h a t th e y give o f f .
P o s s e s sio n o f such item s r e p r e ­
s e n ts a form o f unused re s o u rc e f o r w hich he. may be w e ll a d v ise d to develop
g r e a te r u se such as by custom work; e x p ah sio n o f h i s own o p e r a tio n , o r sub­
s t i t u t i o n o f one p ie c e o f equipm ent where two a re m a in ta in e d now (e'ogo noble
b la d e and duck f o o t c u l t i v a t o r , o r d is k e r and: t i l l e r , o r p r e s s d r i l l and
c o n v e n tio n a l d r i l l ) «
One o th e r c o n s id e r a tio n may be m entioned a t t h i s p o in t*
sh o u ld th e v a lu e o f la n d and improvements b e s e t?
At what le v e l,
The o b je c tiv e sh o u ld be
a v a lu a t io n i n k eep in g w ith a p r o d u c tiv ity o f th e la n d which co u ld r e t u r n
i n t e r e s t and recom pense f o r th e r i s k s in v o lv e d i n h o ld in g th e in v e stm en t
i n land*
Too low an e v a lu a tio n may le a d t o complacency w ith sm all r e tu r n s
w h ile to o h ig h an e v a lu a tio n may c r e a te d i s s a t i s f a c t i o n when a low r a t e o f
r e t u r n t o in v e s tm e n t, la b o r , and management i s in d ic a te d .
Such s i t u a t i o n s
may le a d to u n w arran ted d e c is io n s r e l a t i v e to non-farm o p p o rtu n itie s *
How­
e v e r , f o r th e p u rp o se s o f t h i s s tu d y o f e n te r p r is e a l t e r n a t i v e s w ith in th e
farm , th e b u d g e te r w i l l r e a l i z e t h a t th e s e c o n s id e ra tio n s a re b e s id e th e
3/
P o f d is c u s s io n o f p l a n t f l e x i b i l i t y see E= 0. Heady, op. c i t . ,
p p * 28P-283*
-l% r
p o in t so lo n g a s s f o r each su b se q u e n t b u d g e t9 ite m s o f in v e stm e n t a re
t r e a t e d e q u a lly .
F in a n c ia l summary s e c t i o n , —T his s e c tio n s e rv e s to b r in g a l l th e p a r t s
o f th e b u d g et to g e th e r*
From th e m onetary p o in t o f view i t i s th e c r i t i c a l
a re a w herefrom com parisons f o r d e cisio n -m ak in g may flo w .
The 'b u d g eter may
be im p resse d by th e h ig h l e v e l o f cash income in d ic a te d b y h i s c a lc u la tio n s .
I n f a c t 9 th o s e farm o p e ra to rs t h a t do n o t make a p r a c t i c e o f b u d g e tin g a re
f r e q u e n tly m is le d i n t o an u n s u ita b le l i n e o f a c tio n by th e ro s y p ic tu r e
p re s e n te d b y such g ro ss r e t u r n f i g u r e s ,
I n t h i s case th e t r a n s f e r o f t o t a l
cash expenses to t h i s s e c tio n w i l l p e rm it th e more c o n s e rv a tiv e n e t cash
income to be exam ined.
farm,
More s o b e rin g s t i l l i s th e d e te rm in a tio n o f n e t
income by s u b tr a c ti n g th e d e p re c ia tio n ^ which i s c a lc u la te d i n th e
in v e stm e n t s e c tio n on t o t a l v a lu e s n o t on e q u ity .
Net farm income i s th e
im p o rta n t I i g u r e 9 f o r on th e s a t i s f a c t o r i n e s s o f t h i s sum depends th e w el­
f a r e o f th e fa rm e r’ s fa m ily and th e a tta in m e n t o f h i s g o als i n l i f e .
T his
n e t farm incom e5 w hich r e p r e s e n ts th e economic p ro d u c t o f th e farm er owned
re s o u rc e s o rg a n iz e d a t a l e v e l o f e f f i c i e n c y i n k e ep in g w ith c irc u m stan c es
p r e v a ilin g up t o th e tim e o f acrea g e a llo tm e n ts 9 p ro v id e s th e m onetary g o a l '
o f su b seq u en t o r g a n iz a tio n s .
Here a g a in th e b u d g e te r may p au se to s p e c u la te
t h a t to j u s t i f y th e e x is te n c e o f th e farm th e r e sh o u ld b e an ad eq u ate n e t
income y i e l d ov er th e lo n g ru n to p ro v id e i n t e r e s t on e q u ity i n in v e stm e n t and a la b o r and management income s u f f i c i e n t to s a t i s f y th e needs o f th e
farm f a m ily .
T his n e t farm income sh o u ld be com parable w ith th e r e tu r n s
th e fa rm e r c o n tr o lle d re s o u rc e s would e a r n i n a l t e r n a t i v e employment.
Budget I I
B udget I I d e m o n strates th e p o s i t i o n o f th e o p e ra to r who com plies w ith
th e assumed w heat a c re a g e r e d u c tio n o f 25> p e rc e n t y e t makes no a tte m p t t o
s u b s t i t u t e a n o th e r e n t e r p r i s e to u t i l i z e th e acreag e removed from p ro d u c tio n .
The c ro p p in g system ( la n d u se and cro p p ro d u c tio n s e c tio n ) i s th e same a s
b e fo re b u t la n d u t i l i z a t i o n d i f f e r s i n t h a t Budget I I shows 200 cro p lan d
acres i d le .
la n d t o w ork.
T his i n p r a c t i c e would be th e l e a s t p ro d u c tiv e o r m ost c o s tl y
The a c t u a l o p e ra to r o f a farm would be a b le to make some
allow ance f o r t h i s s i t u a t i o n w hich would p e rm it more a c c u ra te c a l c u l a t i o n s ■
f o r cash income and cash e x p en se.
C o n seq u en tly t h i s b u d g e t9 which t r e a t s
a l l th e la n d as homogeneous, i s u n r e a l i s t i c i n t h a t th e r e i s no e f f e c t iv e
way i n w hich th e r e le v a n t p ro d u c tio n and c o s t f ig u r e s may be a d ju s te d
e x c e p t i n d i r e c t p r o p o r tio n to th e a c re a g e in v o lv e d .
Budget I l s on t h i s
a c c o u n ts p ro b a b ly shows a g r e a te r r e l a t i v e r e d u c tio n i n n e t farm income
th a n would o c cu r u n d er m ost a c t u a l farm s i t u a t i o n s „
I n d e a lin g w ith farm o p e ra tin g c o s ts ( cash expense s e c t i o n ) th e s e
can n o t a ll, be a d ju s te d a c c o rd in g t o t h e amount o f c ro p la n d a c t u a l l y se e d e d .
F o r th e re a so n s s t a t e d aboves some ex p en ses may be l e s s th a n i n p ro p o r tio n
to th e a c rea g e u s e d .
Taxes w i l l rem ain th e same as i n Budget I 5 and i n s u r ­
ance o r i n t e r e s t would o n ly be changed i n s p e c ia l cases where th e amounts
in v o lv e d r e l a t e t o chopping o p e ra tio n s (e ,.g , h a i l in s u ra n c e ) and n o t to th e
farm b u ild in g s and, equipm ent.
Even s u p p lie s and m is c e lla n e o u s expenses
( e l e c t r i c i t y , p a i n t , e t c , ) co u ld d e c lin e l e s s th a n p r o p o r tio n a l ly to th e
a c rea g e r e d u c tio n .
The f ix e d c o s ts , re p r e s e n te d by d e p r e c ia tio n o f
b u i l d i n g s and f e n c e s <, ( i n v e s t m e n t s s e c t i o n ) r e m a in t h e sam e^ a s d o e s t h e
d e p r e c ia tio n o f equipm ent} f o r a l l p r a c t i c a l p u rp o s e s s s in c e o b so lescen ce
and exposure c o n tr ib u te a r e l a t i v e l y la r g e p r o p o r tio n o f d e c re a se d v a lu e s
by com parison w ith d e t e r i o r a t i o n th ro u g h use*
C o n seq u en tly th e p e rc e n ta g e
d e c re a se i n income ( f i n a n c i a l summary s e c tio n ) th ro u g h a c r e a g e •c o n tr o l i s
g r e a te r th a n th e a c t u a l p e rc e n ta g e o f a c re a g e re d u c tio n , .
Budget I I I
Land u se and crop p ro d u c tio n S e c tio n 0--T he la n d u se system allow s f o r
lOO a c re s o f crop and lOO a c re s o f summerfa llo w as i n th e b a s ic o rg a n iz atio n *
Howevers th e s u b s t i t u t i o n o f 100 a c re s o f b a r le y f o r th e d is p la c e d wheat
in v o lv e s "a w hole new s e t o f management d e c is io n s *
T his a c re a g e would have
l a i n ov er w in te r u n p ro te c te d by th e custom ary w in te r w heat crop*
I t may .
have b e en s u b je c te d to v a ry in g d e g re es o f wind and w a te r e r o s io n and
u n d o u b te d ly w i l l have a c ru s te d s u rfa c e *
E a rly s c a r i f i c a t i o n i s n e c e s s a ry
t o c u t down m o is tu re l o s s and c r e a te a clo d d y su rfa ce *
The p la n tin g o f a cover crop i n th e p re c e d in g summer m ig h t have b een
a p r o f i t a b l e p r a c t i c e c o n s e rv a tio n -w is e s e s p e c i a l l y i f th e co v er crop co u ld
have b e e n u sed o r s o ld f o r grazing* h /
However a co v er crop would reduce
th e m o is tu re r e s e r v e s a v a il a b le f o r ,th e s p r in g e ro p s w hich w ould be c r i t i c a l
U / Wheat fa rm e rs i n s e c tio n s o f s o u th e rn A lb e rta have made a p r a c tic e o f
se e d in g p r o te c tiv e c e r e a l g ra in s on sum m erfallow i n l a t e J u ly o r e a r ly
A ugust, The s a le o f g ra z in g r i g h t s on th e s e f i e l d s to c a t t l e fe e d e rs
i n th e f a l l h a s been r e p o r te d as more th a n com pensating f o r th q c o s t o f
se e d in g p lu s any lo s s o f y i e l d on th e su b seq u en t s p r in g crop*
=121-
i n th e case o f b a r l e y o
The ch o ice betw een t h i s p a i r o f a l t e r n a t i v e s w i l l
depend on th e r e l a t i v e g a in p o s s ib le from th e co v er crop i n c o n tr a s t to th e
p ro b a b le lo s s o f r e t u r n from th e su b seq u en t b a r le y c ro p 5 as w e ll as on th e
v a lu e a s c r ib e d to th e c o n s e rv a tio n p r a c t i c e .
The fa rm e r m ust keep i n mind
t h a t b a r le y i s sh allo w ro o te d and does b e t t e r w ith a deep seed bed i n a
f i n e r s t a t e o f t i l t h th a n n e c e s sa ry f o r w h e at.
The e a r l i e s t p o s s ib le
seeding^ p ro v id in g t h a t f r o s t i s n o t a h a za rd s w i l l g e n e r a lly be most
p r o d u c tiv e o
The fa rm e r m ust 'p re p a re f o r t h i s s p rin g ta s k which i s a d d i­
t i o n a l t o h i s custom ary s p r in g w ork.
The v a r i e t y he chooses to grow w i l l a f f e c t h is l a t e r a c t i v i t i e s .
Howeverg among numerous v a r i e t i e s o n ly Compana i s recommended.
I t i s an
e a r I y 5 d ro u g h t r e s i s t a n t , two row,-' n o n - s h a tte r in g v a r i e t y w hich may be
s t r a i g h t combined, w h ile o th e r k in d s r e q u ir e more c a r e f u l h a r v e s tin g .
S p e c ia l a t t e n t i o n m ust be- given t o sec u rin g - see d f r e e from lo o s e smut and
s t r i p e m o sa ic .
A lthough b a r le y competes w ith e a r l y w eeds, sp ra y in g w i l l
g e n e r a lly be p r o f i t a b l e .
Here a g a in , more a t t e n t i o n m ust be given to b a r ­
le y th a n to w heat s in c e b a r le y i s more s u s c e p tib le to damage, e s p e c ia ll y
s in c e fa rm e rs a re l e s s aware o f th e s e n s i t i v e s ta g e s o f developm ent f o r
t h i s c ro p .
B a rle y , how ever, may p e rm it a b e t t e r d i s t r i b u t i o n o f l a b o r .
F irs t,
i t may r e l i e v e th e p r e s s u r e o f se e d in g f a l l w heat about h a r v e s t tim e .
S eco n d ly , th e u se o f an e a r l y v a r i e t y may a llo w th e b a r le y t o preced e
w in te r w heat i n th e h a r v e s tin g seq u en ce.
P ro v is io n w i l l need to be made
f o r a d d itio n a l g ra in s to ra g e f a c i l i t i e s due to th e b u lk y n a tu re o f b a r le y
and i t s h ig h e r' b u s h e l y i e l d r e l a t i v e to w heats
From seaso n to sea so n , th e
o u t- t u r n from b a r le y i s l e s s dependable and more v a r ia b le th a n w h eat, there-*
f o r e e x te n d in g th e extrem es o f u n c e r ta in t y i n th e farm b u s in e s s , n o t by any
means re d u c in g th e v a ria n c e 6 Market-1iri.se, th e p r ic e o f b a r le y i s su p p o rte d
i n th e same manner as w heat.- Hence9 no problem e x i s t s i n d e te rm in in g w hat
minimpm p r ic e may be a n t i c i p a t e d f o r a g iv e n grade a t a ry s e le c te d lo c a tio n .
Cash ex p en se. In v e stm e n ts, and f i n a n c i a l summary s e c t i o n s .--T h e cash
expense s e c tio n c o v ers ab o u t th e same s iz e o f o p e ra tio n f o r th e w h e a t-b a rle y
o r g a n iz a tio n as f o r w heat a lo n e so t h a t l i t t l e s i g n i f i c a n t change i s antic*ip a te d i n c o s ts e x c e p t f o r h a u lin g th e g ra in *
I t i s a ls o assumed t h a t th e
in v e stm e n t in v e n to ry c o v ers ad eq u ate s to ra g e c a p a c ity to lo o k -.a fte r th e bud­
g e ted in c r e a s e o f about one th o u san d b u s h e ls i n t o t a l g r a i n s .
The f i n a n c i a l
■summary i s com pleted as b e f o r e . ■
Budget V
Land u se and crop p ro d u c tio n s e c t i o n .
Again th e la n d u se system p ro ­
v id e s f o r h a l f crop and h a l f summerfa llo w w ith th e maximum acrea g e a llo w ­
a b le i n w h eat.
The d iv e r te d a crea g e i s d iv id e d betw een b a r le y , o a ts , and
some crop which can s u b s t i t u t e f o r w heat o r co rn i n th e tu rk e y d ie t*
5>/ A c tu a lly , w heat would make th e m ost s a t i s f a c t o r y and r e l a t i v e l y th e
th e l a r g e s t c o n s ti tu e n t o f a nom al- tu rk e y ra tio n * However, th e
, re g u la tio n s , re g a rd in g acrea g e a llo tm e n t would r e q u ir e any w heat pro-'
duced f o r fe e d to dbme from a c rea g e w ith in th e c o n tr o l l i m i t a t i o n .
W ith an a s s u re d su p p o rt p r ic e f o r th e cash w heat crop i t i s assumed
t h a t th e fa rm e r would be r e l u c t a n t to u s e w heat f o r fe e d i n view o f
i t s more u n c e r ta in r e t u r n th ro u g h th e l i v e s to c k .
(C ontinued oh n e x t page*)
r
-1 2 3 T his d iv is io n i s made on a b a s is w hich sh o u ld produce th e se g r a in s in
p ro p o r tio n s m ost n e a r ly ap p ro x im atin g th e d e s ir e d o v e r a ll g r a in r a t i o n f o r
th e grow ing tu r k e y s „
S e le c tio n s have t o be made betw een v a r i e t i e s which
w i l l provide a s u ita b le sequence of see d in g and h a rv e s tin g o p e r a tio n s ? as
w e ll as s u i t a b i l i t y f o r h a n d lin g w ith th e equipm ent on th e fa rm .
Perhaps
th e use o f h u lle s s o a ts and b a r le y v a r i e t i e s would p e rm it a h ig h e r p ro ­
p o r tio n o f th e s e g ra in s to be fe d t o th e tu r k e y s .
Some changes may be
in tro d u c e d depending on th e r e l a t i v e p r o d u c t i v i t i e s o f th e d i f f e r e n t g ra in s
i n pounds o r T.D.N. 1S p e r a c r e . Rye i s u n p a la ta b le to tu r k e y s , hence u n c
s u i t a b l e as a w heat s u b s t i t u t e , b u t hog m i l l e t and dw arf v a r i e t i e s o f g r a in
sorghum may s e r v e , a lth o u g h n o t enough i s known ab o u t y ie ld s and fe e d in g
c h a ra c te ris tic s lo c a lly .
Some th o u g h t sh o u ld be g iv e n , when in tro d u c in g
new v a r i e t i e s o r k in d s o f g r a in , t o th e p r o te c tio n of M ontana's h ig h
V
q u a l i t y w heat from c o n ta m in a tio n w ith v o lu n te e r g r a i n s . As w ith th e
b a r le y a l t e r n a t i v e , p a r t i c u l a r a t t e n t i o n m ust be g iv en to weed s p ra y a p p l i ­
c a ti o n i f i t i s u sed , s in c e o a ts a re s e n s i t i v e a t s ta g e s when w heat and b a r ­
le y a re s a f e from damage.
( C ontinued fro m ^p reced in g page)
5/
Because of i t s s u p e r i o r i t y as tu r k e y fe e d i t m ight ap p ear to be
*~ p ro d u c tiv e t o use some w heat i n th e tu rk e y r a tio n r a t h e r th a n s e l l i n g
i t . .However, a q u e s tio n th e n a r i s e s co n cern in g th e use o f th e d iv e r te d
acreag e w hich a lr e a d y , f o r th e s iz e o f p r o je c t c o n s id e re d , w i l l p ro ­
duce th e maximum o f c o a rse g ra in s w hich can be used i n th e fe e d r a t i o n .
To c o n s id e r .th e use o f w heat th e n would make an in c re a s e i n th e s iz e
of th e tu r k e y fe e d in g p r o je c t n e c e s s a r y , i n o rd e r to use th e d iv e r te d
acrea g e f o r fe e d p ro d u c tio n . A tu r k e y farm r a t h e r th a n a g r a in farm
would r e s u l t .
-
221; -
ConsideratIon of the land use system must also allow for turkey range0
In itia lly ., as in th is budget5 the unused pasture may be u tiliz e d i f i t i s
accessible*
I f turkeys are to be produced in succeeding yearss a longer-
run program should be in itia ted *
Turkeys should not be returned to the
same land oftener than once in three years due to danger of disease Io sses5
as w ell as the fa ct that n u trition al defieiences seem to show up very
quickly on continuously used range* 'In one year 2000 turkeys can use 20
acres of good pasture., but for dry unimproved range th is figure w ill, be
much larger*
Adequate good range may save up to 20 percent of the grain
(calculated at 10 percent for th is budget)* Consequently; i t may pay each
year to switch 20 acres of the diverted acreage into a lfa lfa i f a product­
iv e and convenient piece of ground i s available*
involve iso la tio n or fencing problems.
ThIs5 howevef5 would
Probably more sa tisfa cto ry would
be u tiliz a tio n of a cover crop seeded on summerfallow earmarked for spring
seeding*
With UOO acres in SummerfalIow5 an iso la ted area could be selected
to avoid the n ecessity of fencing.
Neither of these altern atives i s allowed
for in Budget V.
I
Cash expense se ctio n *—Farm costs are adjusted to conform to the
changed crop system*
Fuel5 o i l 5 and repairs are increased to take care
of additional, f ie ld operations 5 tractor use in moving turkey equipment5
and grinding grain for mash*
Also5 considerable daily use of truck and
car would be necessary in feeding and watering the birds., thus increasing
operating costs*
Grain hauling5 for wheat Oiily5 i s the same as in Budget II*
Seed treatment and spray m aterial are adjusted to f i t the needs of the
su b stitu te feed crops„ Supplies and miscellaneous expenses would increase
m aterially with additional e le c t r ic it y for brooding and pumping water^ sacks,,
veterinary expenses5 and san itation requirements e Four months additional
hired labor i s also added to provide for a turkey herder» Insurance and
taxes remain the same as in preceding budgets„ But the in te r e st item
w ill increasej f i r s t because of long term in te re st on addition to in vest­
ment (only 5>/6 of which i s paid for) and secondly5 because i t i s expected
that in te re st w ill need to be paid on short term borrowings to meet some
of the cash costs of p ou ltss feed., Iabors repairss or fuel,, O il5 and grease,,
A large amount of direct liv esto ck expenses i s associated with the
turkey project,,
The cost of the poults i s a major item which may be
reduced i f poults could b.e secured at le s s than the maximum price allowed
for hereo The th r ift of the turkeys w ill depend to a large extent on
supplements which w ill need to be purchased at r e la tiv e ly high costs
through the normal channels=
I t would be possible to pare feed costs by
careful ration reconstruction with the cheapest protein ingredients a v a il­
able o In th is budget expensive fis h o i l was partly replaced by cheape'r
soy bean (exp eller) meal=
A v a ila b ility of a source of skim milk or
buttermilk would reduce the cost of protein supplements»
Investments section=—This section allows for the additional invest­
ment necessary to accommodate the turkey enterprise=
Buildings of a mini­
mum nature for summer brooding of the p ou lts5 as w ell as the fencing and
equipment fq^ the feeding, watering,, and handling of the growing turkeys
i s estimated at a m aterial cost of #2730.
I t i s assumed that the farmer
c o u ld accom plish th e n e c e s s a ry c o n s tr u c tio n by u s in g th e o f f - s e a s o n o r
s la c k sea so n la b o r a lre a d y on th e farm*
Because su c c e ss h a s been a c h ie v e d
w ith tu rk e y s s le e p in g on th e ground w ith l e s s stam peding dan g er th a n when
r o o s ts a r e b u i l t $ in v e stm e n t i n t h i s i s n o t acco u n ted f o r .
Nor i s eq u ip ­
ment f o r h e rd e r l i v in g ^ p r o te c ti o n from p re d a to r s o r Storm9 c o n sid e re d i n
t h i s budget*
I t may w e ll be t h a t th e farm h a s unused b u ild in g s o r m a te r ia l
t h a t can be c o n v e rte d to b ro o d e r h o u sin g th u s sa v in g a p o r ti o n o f th e
above in v e s tm e n t.
A lso 9 new c o n s tr u c tio n o f g ra in o r im plem ent s to ra g e
may be so d e sig n e d as t o p ro v id e f a c i l i t i e s f o r d u a l u se d u rin g th e
b ro o d in g season*
B rooder h o u sin g may s e rv e as f a l l S h e lte r 5 p a r t i c u l a r l y
i f b u i l t w ith p o r t a b i l i t y i n m ind.
In t h i s b u d g et as w ell,, an allow ance
u n d er m achinery i s made f o r th e a d d itio n o f a fe e d g rin d e r and fe e d mixer*
L iv e s to c k o rg a n iz a tio n s e c t i o n*—The b u d g e te r* s h y p o th e s is ab o u t th e
tu rk e y a l t e r n a t i v e w i l l be c o n d itio n e d by th e d e s ir e t o u t i l i z e as fe e d
a l l th e p ro d u c t o f d iv e r te d a c rea g e *
An E x te n sio n r e l e a s e -r e v e a ls t h a t
2000 b ir d s h a n d le d somewhat l i k e a band o f sheep w i l l c o n s t i t u t e a one man
u n it * 6 /
G onsequently9 t h i s seems to be a re a so n a b le number to b u dget f o r
i n view o f th e f a c t t h a t one h a l f o r one q u a r te r o f t h i s number would n o t
u t i l i z e a l l th e fe e d y e t would demand, a la r g e p a r t o f one man8s time*
The liv e s to c k system s e t f o r t h i n t h i s b u d g e t f i r s t in v o lv e s con­
s i d e r a t i o n o f breed,, once a d e c is io n to r a i s e tu rk e y s h a s b e en made.
6/
A lso 5
D iv e rte d A eres9 E x te n sio n P u b lic a tio n Ag-3,6* (E e v ise d ) s E x te n sio n S e r­
v ic e 5 Hontana. S ta te C o lle g e 5 Bozeman9 H ontana9' (S eptem ber9 1935) p» 35®
an order for poults must be placed with a hatchery as early as January 1 st
in order to get' the delivery time and the kind desired*
For th is operation
Broad Breasted Bronze have been selected due to th eir large size,, rapid and
e ff ic ie n t growth ch aracteristics
and r ela tiv e hardihood for the open range*
B e lts v ille Whites may be le s s desirable for the extensive operation planned
in th is budget5 although they should market at a higher price * Both these
and White Hollands are le s s prone to fighting=, but th eir white color may
make them more vulnerable to predators*
Because turkeys are vulnerable to
many hazards9 certain lo sse s must be anticipated in sp ite of care which i s
assumed to involve continuous supervision of the flock*
Extreme watchful­
ness i s necessary to ward o ff troubles within the flock as w ell as from
outside sources*
Crippled and injured birds should be slaughtered and
salvaged to prevent cannibalism*
Diseased birds must be detected early=,
the cause determined=, affected birds destroyed, and stringent corrective
measures applied*
Losses as low as 5> percent are not impossible*
For
large supervised flo c k ss they should not exceed 10 percent, although th is
budget allows for about 12,percent loss*
Organization of th is turkey feeding project requires careful integra­
tio n with the seasonal operations of the farm*
In th is budget i t is
planned that the poults w ill arrive a fter the spring seeding i s .accom­
plish ed , probably between May I^th and June 1st*
I t i s assumed that the
farmer him self, with fam ily help, could care for the poults in the c r it ic a l
sta rtin g period of 8 to 12 weeks f it te d between spring work and harvest
time*
The regular hired man can keep up with the f ie ld work at th is time*
=2.28'=
Children coming out of school about June 1 st would be available to p artic­
ipate in the p roject.
Once the turkeys go out on range the labor load w ill
increase and with harvest approaching the farmer could revert to supervision,
hirin g an additional man to herd the turkeys for the remaining growth and
fatten in g period.
This additional hired labor accounts fo r the sharp
increase shown in farm labor c o st.
The alternative p o s s ib ility , that
already.started poults (ready t a gq on the range) could be secured, i s
remote,
However, such an alternative would make i t unnecessary to invest
in brooding equipment and housing.
Prohibitive added costs of the poults
and disease considerations.may make the scheme untenable although a case of
th is practice has been recorded in Montana, while development of ^pig
hatcheries" i s a precedent.
In any case the growing turkeys on range should be brought along with
three marketing periods in mind.
The e a r lie s t i s Thanksgiving, followed
by Christmas and then the Winter Pool of frozen turkeys.
The producer may
aim at any one of these markets but a d istrib u tion between them w ill afford
an opportunity to dispose of the birds as they reach prime condition.
Since
the flock w ill not a l l develop at the same rate, th is practice w ill resu lt
in a higher percentage of top quality product.
This i s p articu larly
important i f the producer plans on marketing other than liv e birds,
How­
ever, f a c i l i t i e s for on the farm processing are not lik e ly to be available
to the producer, and, without freezing equipment, processing such a large
number would not be p ractical on the farm.
=129=
The p ro d u c e r i n th e ’• tr ia n g le ” a re a would need to make arrangem ents
f o r m a rk e tin g w e ll i n advance s in c e p ro c e s s in g c a p a c ity i n -Great F a lls and
o th e r Montana p o in ts i s lim it e d i n c a p a c ity .
Consequently^ s e l l i n g th e
b ir d s a l i v e s i n c o n fo rm ity w ith c u r r e n t p r a c t i c e ^ i s l i k e l y to prove m ost
s a tis fa c to ry .
Modern tr u c k s can re a c h d i s t a n t m ark ets w ith o u t d i f f i c u l t y
w ith a l i v e lo a d and b id s can be se c u re d from v a rio u s p u rc h a s e rs ,
Thus5
th e fa rm e r may be a b le t o wind up h i s fe e d in g p r o je c t w ith in seven months
o f r e c e iv in g h i s p o u l t s .
F o r th o s e who p la n to le a v e t h e i r farm s d u rin g
th e w in te r t h i s i s a n ' advantage o v er o th e r k in d s o f l i v e s t o c k .
L iv e s to c k fe e d re q u ire m e n ts s e c tio n , - —Some c o n s id e r a tio n has to be
given to t h i s s e c tio n b e fo re ' th e la n d u se and crop p ro d u c tio n o r th e
liv e s to c k o r g a n iz a tio n s e c tio n s can be co m p leted .
The p ro d u c tio n o f fe e d
on one s id e needs t o be b a la n c e d by th e consum ption on th e o th e r , 7 /
S e rio tis s tu d y h as to be giv en to th e c o n s t i t u t i o n 8 / o f s u i t a b l e r a tio n s S j
from th e fe e d re s o u rc e s p u rc h a se a b le o r a v a ila b le on th e fa rm .
The quan­
t i t y and v a lu e o f th e s e p u rc h a se d fe e d s h a s to be c a lc u la te d b e fo re th e
cash expense s e c tio n can be com pleted.
P u rch ased mixed fe e d i s allow ed
f o r th e f i r s t te n weeks a t I e a s t p a s b e in g th e s a f e s t means o f s e c u rin g
?/
Cushmans H a r ie tte E, and W elehs D r, Howards op, o i t , P p» 25,
8/
Cuphmans H a r ie tte E , and Welch=, D r, Howard=, o p ,' -c it, s p , I l ,
9/
H albrdoks E , R ,s B e e c k le rs A, F e y and. S m iths E , P , P op, c i t ,
-13P=
an i d e a l s t a r t i n g r a t i o n .
F o r th e growing and f a t t e n i n g p e rio d th e home
grown g ra in s a re used,, w ith ab o u t h a l f a s whole grain,, and h a l f ground and
mixed w ith th e p u rc h a se d c o n c e n tra te s shown,, which a re ad eq u ate to m a in ta in
th e n u t r i t i o n a l re q u ire m e n ts o f th e tu rk e y s on ra n g e .
I f m o r t a lit y due to
f i g h t i n g and c a n n ib a lism i s to be h e ld t o a minimumg c a re sh o u ld be tq k e n
•
to m a in ta in th e l e v e l o f n u t r i t i o n a l supplem ents re p re s e n te d by th e s e con­
c e n tra te s .
L iv e s to c k p ro d u c ts s e c t i o n . —T his s e c tio n re c o rd s t h e o u tp u t and
r e t u r n a n t i c i p a t e d f o r th e tu rk e y e n t e r p r i s e .
been s o ld on a llNew York d re s s e d 19 b a s i s .
Turkeys c u s to m a rily have
Hens command a h ig h e r p r ic e th a n
tom s3 b u t a v erag e s e v e r a l pounds l i g h t e r when m ark eted a t s i x to seven ■
months o f a g e .
The o u t- t u r n i s e s tim a te d a t average' w e ig h ts b u t a s h rin k
o f sev en p e rc e n t i s e s tim a te d b ecau se i t i s a n tic ip a te d th e tu rk e y s w i l l
be moved a lo n g d is ta n c e f o r s la u g h t e r .
P r ic e p e r pound i s s l i g h t l y lo w er
th a n t h a t .p r e v a ilin g i n 195U due to a l e s s fa v o ra b le p ro s p e c t i n 1 9 ^ o
However5 i t i s e x p ec te d t h a t th e p r ic e s w i l l m a in ta in t h e i r r e l a t i o n s h i p
w ith th e p r ic e s o f o th e r m eats so t h a t a d r a s t i c p r ic e change i s n o t
lik e ly .
F in a n c ia l su m m a ry 'se ctio n . —T his p a r t can be com pleted when a l l o th e r .
s e c tio n s a re worked o u t.
The s i g n i f i c a n t change i s th e v e ry much la r g e r
cash income w hich in d ic a te s th e s u b s t a n t i a l in c re a s e i n th e Size o f th e
farm b u s in e s s .
T his i s a ch ie v e d th ro u g h in c r e a s in g and in te n s i f y i n g th e
u se o f I a b d r 5 management; arid s h o r t term c r e d i t o r cash r e s e r v e s 5 w ith o u t
a g r e a t in c r e a s e i n f ix e d in v e s tm e n t.
I
-
131
”
The f i r s t q u e s tio n may be w hether th e n e t farm income i s in c re a s e d
enough to o f f s e t th e in c re a s e d e f f o r t and th e f i n a n c i a l h a z a rd s involved*
U n c e r ta in tie s a re fa c e d a t e v e ry tu r n such as th e a v a i l a b i l i t y and s k i l l
o f I a b o r s p r ic e s of fe e d s and. th e p ro d u c ts th e t h r i f t and w eig h t g a in o f
th e tu rk e y s s ahds above a l l s th e m o r t a lit y o f tu rk e y s due t o w eath er e v e n ts ,
c a r e , and d is e a s e .
One e f f e c t i s p ro b a b ly an in c r e a s e i n th e v a r i a b i l i t y
o f n e t farm income th ro u g h th e
a d d in g
o f u n c e r t a i n t i e s which a re r o t neg­
a t i v e l y c o r r e la te d .
C o n sid erin g th e b u d g et developed h e r e s th e a d d itio n .o f a c e n t o r two
t o th e e s tim a te d p r ic e o r a pound o r two to th e average W eights i s q u ite
w ith in th e bounds o f p o s s i b i l i t y .
But l i k e lo s s e s co u ld o c c u r.
Both would s u b s t a n t i a l l y in c re a s e income.
S im ila r changes would r e s u l t from sa v in g o r
lo s in g an a d d i t i o n a l f i f t y tu r k e y s s o r e x p e rie n c in g more o r l e s s s h r in k .
In s p i t e o f t h i s v a r i a b i l i t y th e in c re a s e d s iz e o f b u s in e s s and- a l a r g e r
tu rn o v e r would l i k e l y r e s u l t I n a h ig h e r av erag e n e t farm income over
th e lo n g r u n s , given ad eq u ate management.
•>
-
132 -
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I
B o le s , James N0, "L in e a r Programming and Farm Management A n a ly s is ," J o u rn a l
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L a rra b e e , H0 A0, R e lia b le Knowledge, Houghton M if f lin Co0, New York, (19U5)»
Mimms9 0» L0, "D iv e rte d A cres .in th e West = Some Faim O rg a n iz a tio n and O ther
P ro b le m s," P ro c e e d in g s , W estern Farm Economics A s s o c ia tio n , (1950)«
Montana Ag r i c u l t u r a l S t a t i s t i c s , Montana D epartm ent o f A g ric u ltu re co o p er'
' S tin g w ith U0S 0D0A0 A g ric 0 M arketing S e rv ic e , V ol0 5 , (December, 195u)»
Quenemoen, M0 E„, Economic A sp e c ts of W ater S p read er Developments on
S o u th e a ste rn Montana R anches, Mont0 A gr0 E xpt0 S t a 0, Mimeo0 C ir 0 69,
Saskatchew an Farm S c ie n c e , E x t0 D ept0, C ollege, of A g r ic u ltu r e , Univ0 o f ■
S askatchew an," ^ T I , No0 I , .(F eb ru ary , 19510»
S ch ick el e , R a in e r, "Farm ers' A d a p tatio n s t o Income U n c e r ta in ty ," Jo u rn a l
of Farm Economics, V ol0 32, (A ugust, 1950)«
S h a f f e r , J 0 D0, " D isc u ssio n o f '.Use o f Economic M o d e ls '" , J o u rn a l o f Farm
Econom ics, Vol0 35, (December, 1953)«
S ta r c h c E0 A ., Farm O rg a n iz a tio n as A ffe c te d by M ec h a n iza tio n , 'Mont0 A gr0
Ekpt0 StLl-Suil0 2?8, W ,-I955T:
~
T a y lo r, M0 C0, Indexes of P r ic e s P a id b y Montana Farm ers and Ranchers
1935-195%, B u l l e t i n l t 9 2 , Ago Exp0 S ta 0, Montana S ta te C o lle g e , Bozeman,
"(November, 1953)»
'
T a y lo r, M0 C0, P r ic e s R eceived by Montana F a m e rs and R anchers 19M -1952,.
B u lle tin 503, Ag. Exp0 S ta 0, Montana S ta te C o lle g e , Bozeman, (Nov0, 1954)
T a y lo r, M0 C0, 'irWheat Acreage A llo tm e n ts—Compliance o r N on-C om pliance,"
Montana Farm er-Stockm an, (March 1 5 , 1955)»
i
-13UT h a irs P h il ip J ojl M eeting th e Im pact o f.-C rop^Y ield R isks in G r e a t, P lains.
ParBiings North D akota A gr0 E x p t0 S ta 0 B u ll0 392$ F a rg o s N orth D akotas
STATE UNIVERSITY LIBRARIES
762 1 001 5327 7
-
M378
RllSe
m
cop .2
116785
Rackham T S .
E x ten sio n im p lic a tio n s of bud­
g e ts in decision-m aking . . .
NS 7%
Rifs*
116785