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An economic study of the small fruits industry in British Columbia Gray, James Melrose 1947

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<£ 7 £T-v AN ECONOMIC STUDY OF THE SMALL FRUITS INDUSTRY IN BRITISH COLUMBIA -by-James Melrose Gray, B.S.A. A Thesis submitted i n Partial Fulfilment of the Requirements for the Degree of MASTER OF SCIENCE IN AGRICULTURE in the Department of AGRICULTURAL ECONOMICS THE UNIVERSITY OF BRITISH COLUMBIA May 1947 CONTENTS v Page No* Introduction. • 1 The Areas Studied 2 The Agricultural Economic Eoology within these Areas 4 Economic Pressures and S o i l F e r t i l i t y Requirements*. 5 Report on the Farm Business Survey 8 lifethods of Collecting Data... 8 Accounting Techniques and Methods of Analysis Used.. 8 Farm Incomes and Farm Costs 10 Different Types of Farm Organization .. 11 Very Small Enterprises 11 Average-sized Plantings 13 Larger than Average-sized Small Fruits Farms 16 Size as Related to Income 17 Size as Related to Efficiency in the Use of Land.... 17 Efficiency as Related to Specialization. 18 Production by Size Groups 19 Profit per Unit of Product by Size Groups 23 The Probable Effects of Price Changes 24 Possible Future Trends i n the Small Fruits industry. 25 Strawberry Production and Marketing • 25 LIST OF TABLES Page No* Table I —Average Beturns, Costs and Labour Income from Small Fruits for the 78 Farms Studied.•• 10 Table II—The Average Size of the Small Fruits Enterprises on the 78 Farms Studied 10 Table Ill-Labour Income per Acre by Groups............. 14 Table 17—Showing Percentage of Total Capital not i n Land 16 Table 7 —Comparing the Efficiencies of Specialized and Diversified Farms of Similar Size 19 Table 71—Showing Production by Size Groups 20 Table 711-Showing Breakdown of Tonnage Shipped Through the One Organization by Size Groups (1945)... 22 Table T i l l — P r o f i t per Unit of Product by Size Groups.• 23 Table IX—Showing the Total Acreage and Number of Farms in the Fraser 7alley for 1940, 1944 and 1946 24 Table X —Annual Strawberry Production, Price and Total Value 26 Table XI—Showing the 7alue s of a l l Strawberry Crops from 1914-1941 i n Descending Order 27 Table XII-Showing the Various Quantities of Strawberries Consumed at Prices Adjusted to the Urban Cost of Living Index 28 Darin® the e w e r of wm, e s tudy was i n i t i a t e d o f t h e S m a l l t r a i t s i n d u s t r y of B r i t i s h Columbia* S e v e n t y - e i g h t CW f a r e s p roduc ing 8*aal i F r u i t s were v i s i t e d and f ro ia e a c h , d e t a i l s o f the fa rm b u s i n e s s f o r the y e a r 1946 were eeenred* She purpose of t h i e p a r t o f t h e woritwa© t o o b t a i n d a t a m f a rm incomes f r e a feall F r u i t s p r o d u c t i o n * l a a d d i t i o n t o the fa rm ineom© survey , a s t u d y was made of t h e Indus t ry as a wa©l®t and t h e r e s u l t s ©f t h e fa rm survey were r e l a t e d t o t h e o v e r a l l p i c t u r e * She f i n d i n g s o f t h i s s t u d y s a y he s f w a e r i s e d a s follow© (1) She average l a h e a r income fro© Basalt fruit© p r o d u c t i o n on t h e s e v e n t y - e i g h t farms s t u d i e d was #X2Oi*00* t h e average acreage l a b e r r i e s was.4*10 acre®. • CM Very g r e a t variation© were observed i n t h e e l s e of enter p r i s e * the degree of s p e c i a l i s a t i o n * and t h e l a b o u r income * CM She l a r g e r ©lead enterprise® 'were u s u a l l y more suooes©-f u l t han t h e s m a l l e r ©nee* Shree a c r e s i n S m a l l F r u i t s was the ©iaiiaasi acreage a s s o c i a t e d w i t h eu©cees* (4) S p e c i a l i s e d e n t e r p r i s e s were mere ©uceeeefux and isore e f f i c i e n t than d i v e r s i f i e d enterprise©* CM She s u l k o f the S a a l l f r u i t s oroo i s produced by a r e l a t i v e l y e m a i l p r o p o r t i o n o f t h e growers C 9 0 per cent o f t he f r u i t i s grown by 10 per cent of the p roduce rs ) * Those tmtmm. Umm l a r g o ontorp*l*at and produoa most o f th© to*isage» . <?hay al®© produoo a t a gvoftor margin of p r o f i t . An ©semination o f th© p r i c e s and tem»$©' xmrisatod duffing Wio y a a r s 1914-41 i n d i c a t e d t h a t the t r e n d i s towards i ao raasod produQtioa aad a coaetaa t . p r i c e * f H * t o t a l va luo o f tte c r o p ha© boon- t a o r e a s i a g s t e a d i l y , A l a r g o crop i s mvth mom t h a a a m a i l c r o p * ©ven though the l a t t e r raay ©all a t a soostdiat h igho r p r i c e * T h i s mm& t h a t the domad f o r s t r a w -horrio© i s elastic» t h a t th© ciarfcot eaanot ha f l o o d e d r e a d i l y * f a t s my ho an i a p o r t a a t f a c t o r i n th® f u t u r e of. i a & u a t r y y F i n a l l y 8 m&Xl. F r u i t s ' are important 1B tho r u r a l ocoaosy of th© Wmmv v a l l e y and vaaoouvw X@l@n4» ffe*** ai-oao e n j o y a., ooapara t l va advantage i n S m a l l t r a i t s p r o d u c t i o n and h a r r y c r o p s toad t o d r i v e o t t e r o ^ r i o a l t u r a l o a t e r p r i e o o o u t , ' - l o r r y , growing I® a moan® Of u t i l i s i n g t t e uniquo o l l m t i o fesouroos o f .. ACKHO WLE DGrMEET S The author wishes to acknowledge the generous assistance he has received from many people in the collec-tion and preparation,of the material for this study* Several Professors and other members of the staff of the University of British Columbia have been most generous with their time and advice* Appreciation i s expressed to Bean 3P.M. Clement for his direction, help and encouragement, and to Dr. Barss and Dr. Harris for their unstinted assistance and interest. Thanks are expressed to Mr. E.D. Woodward, with whose help, and under whose supervision, much of the work was done, and to Mr. B.C. Blair lor his assistance with the f i e l d work. Various o f f i c i a l s of the Department of Agriculture and of private and co-operative business concerns kindly provided much of the needed information. Thanks are expressed to tnem for their helpful interest. Particular thanks are also expressed to a l l the berry growers of the Fraser Valley and of Vancouver Island, who so wholeheartedly co-operated to make the project possible. i This study was carried out with f i n a n c i a l aid from Safeway Stores, l t d . The author wishes to voice his appre-ciation of this assistance. AH ECONOMIC STUDY OP THE SMALL FRUITS IHDUSTBY IH BRITISH COLUMBIA Introduction She purpose of this project, as outlined at i t s i n i t i a t i o n i n June 1946, was to study the economies of Small Fruits production and marketing in the Province of British Columbia. The term "Small Fruits" includes strawberries, rasp-berries, loganberries, boysenberries, blackberries and currants, etc. In addition, farms with plantings of rhubarb, grapes and asparagus were included in this study* Although many types of plant are represented, a l l are crops which tend to have somewhat similar climatic requirements, and a l l require large amounts of hand labour per acre* For these reasons, these crops are found in the same general d i s t r i c t s and on the same type of farm, and, therefore, i t has become customary to consider them under the inclusive heading of "Small Fruits" or "Berry Crops". She areas studied were the principal berry-producing sections of tne Province of British Columbia; namely, the 36ower Fraser Valley, from Bo se dale to the Delta, and the Saanich Peninsula of Vancouver Island. She i n i t i a l problem was to decide which sections of the general area studied produced most of the Small Fruits crop. Paralleling this question was that of explaining the shifts i n production from one part of the Valley to another. 2. The next step was to secure a number of farm business records, from growers who were producing Small f r u i t s , throughout the Fraser Valley and on Vancouver Island* Farm reoorde supply data on returns per acre, costs per acre, and incomes to the grower* Such figures enable one to state, in terms of the general average, the economic conditions under which the berry farmer works, and to examine quantitatively the varying efficiencies of different farmB. The number of farm reoordB taken in each section was in approximate proportion to the importance of that section as measured by i t s share of the total production* The method of collecting data was to v i s i t the growers, s o l i c i t their Interest and co-operation in the study, and obtain detailed information on the farm business for the calendar year of 1945. She questionnaire used in these interviews provided for detailed records of production, cash receipts, expenses, inventory and inventory changes* Seventy-eight usable records were obtained* The Areas Studied - The fraser Valley and Southern Vancouver  Island: ! '. ~ She lower Fraser Valley i s that land area situated on either side of the Fraser Eiver, north of the forty-ninth parallel of latitude and south of the Coast range of mountains, running from the Strait of Georgia, east to the Cascade range of mountains, a distance of sl i g h t l y under one hundred miles. Shis area takes in a t o t a l of 645,000 acres, of whioh about 3 . 58 per cent i s arable f l ) . She climate i s mild, the average temperature, in the month of January being thirty-six degrees Fahrenheit, and in July, sixty-three degrees Fahrenheit, the coldest and the hottest months, respectively. The r a i n f a l l i s heaviest during the winter and averages from forty to seventy inches annually, depending on the l o c a l i t y . The Saanioh Peninsula, which i s the principal berry-producing area on Vancouver Island, has a somewhat warmer and drier climate. Both of these areas are pbsessed of a climate which i s unique in Canada with respect to year-round warm temperatures. Crops may be grown here that cannot survive the winters elsewhere. The amount of agricultural land in Canada with such a favourable climate i s di s t i n c t l y limited* For this reason, most of the arable land i n these areas i s used i n either of two ways* She land i s used to raise products for local consumption in the coast c i t i e s , products which are highly perishable or products which are too bulky in relation to their value to absorb the costs of long-haul transporta-tion; or the land i s used to raise those products which cannot be grown easily in the other colder parts of Canada* Fluid milk and Small Fruits are, respectively, examples of these two kinds of product. Shis results i n a considerable degree of competition between crops for the use of the land, and between produce for the local supply trade and produce for shipment oat of the area. Consequently, an intensive form of agriculture has developed, and land values are high. She farms are generally relatively small in acreage and the farmer must stand ready to apply large proportions of labour and capital to the scarce factor, which i s land. Berry production enjoys a high priority for the use of the arable land i n the Fraser Valley and the Saanich Peninsula. Small Fruits return a large sum of money,per acre, to the grower, and in this way provide a means of u t i l i z i n g the climatic factor* Shis climate i s a natural resource of limited abundance, and so produotB dependent upon this factor may be expected to command a high price in the market, over a period of years* It i s f e l t that the fact should be emphasized that this kind of agriculture, involving hign-prieed and very scarce land, i s unusual in Canada* In Canada, generally, land i s the relatively p l e n t i f u l factor i n (agricultural) production, while labour and (to a lesser extent) capital are the scarce factors* She Agricultural Economic Ecology within these Areas: Small Fruits enjoy a high priority for the use of the land in the Fraser Valley and the Saanich Peninsula, because they provide one of the best means of maximizing the farmer's monetary returns from his land* When Small Fruits are intro-duced into the cropping programme of a farm, they have the tendency to drive the other crops and livestock-raising projects off that farm. Shis comes about because a relatively 5. small acreage i n berries i s capable of providing a farmer with an adequate income* She study of the seventy-eight farm reeords indicated that, in 194b, the average gross returns from one acre of Small Fruits was over $1200*00, while about one-quarter of this was nett. At the same time, tne Small Fruits project on any farm w i l l have a parallel tendency to absorb a l l of the available labour and capital* Thus the grower may find himself with an adequate income, with employment for a l l his labour force and for a l l his capital resources, but with an excess of land. Shis land, capable of producing a crop yielding a nett revenue of about $200*00 per acre, i s valuable, and so finds a ready sale at a good price. When the land i s sold, the transition from a large-acreage diversified farm to a small-acreage specialised berry farm i s complete. In this way, i n response to the economic forces which are at work, large farms are being broken up into small holdings. Shis economic pressure i s strongest at times like the present, when the demand for berries i s great, and the price is high. It should also be noted that,as the larger farms are subdivided, each holding must be farmed intensively i f i t i s to yield i t s owner a satisfactory income* In this way. Small Fruits not only drive other crops off the individual farm, but out of the d i s t r i c t * Economic Pressures and S o i l F e r t i l i t y Requirements: Such a trend would appear to be desirable in that i t would ultimately lead to the most complete u t i l i s a t i o n of the land and climatic resources of these areas* However, i t was observed that the f i n a l result of this trend towards more intensive land use through specialized berry production was often the development of numerous uneconomic a l l y small holdings* Some farms comprising only one or two acres, a l l planted to berries, were encountered* Such enterprises can have no organized crop rotation programme, because the farmer with such a small t o t a l amount of land cannot afford to take some of i t out of cash crops and seed i t down to s o i l -improving crops* Shis situation i s aggravated by the fact that livestock-raising i s probably the f i r s t farm enterprise to be ousted by more intensive cropping practices, and so in many areas of the Fraser Valley there i s practically no s o i l * fibe-supplying manures available for the land* In time, such practices would seem to lead to a wearing out of the soils for berry-growing purposes* It was noted that, in the Saanlch area, especially, many of the farmers stated that "new land" would have to be broken i f production were to be sustained* Over a period of years, the centres of production have shifted* For example, production on Vancouver Island has declined, while production on the Lower Mainland has increased. Within the Fraser Valley i t s e l f , the centres of production have moved from the western end to the middle and to the eastern end, and from the north side of the Fraser Biver to the south side* It may he that this has been caused by a wearing out of the soils in the older areas* When an entire area i s broken up into uneconomically small unite, i t would be very d i f f i c u l t for the farms to be consolidated into larger,more economic units again* It i s f e l t that study should be devoted to the organ-ization of Small Fruits farms on a sufficiently large scale to permit the oulture of s o i l improvement crops and at the same time to provide sufficient acreage for enough cash crops to give the operator an adequate income* A more permanent type of farm organisation would benefit the grower, for worn-out farms result in financial losses to individual owners* This does not mean that self-sufficient farming i s being recommended for the Fraser Valley or for the Saanich Peninsula, but rather that provision be made for sustained s o i l produc-t i v i t y , within the framework of specialized farming* Essentially the same idea i s embodied in the following extract from a recommendation published for the American corn belt<-nAs markets and transportation f a c i l i t i e s develop, the trend in farming i s towards somewhat greater specialization in the products that are sold* Shis does not mean that a farmer cannot plan to advantage for diversification among the crops that he raises* He may have a cropping system that provides a l l the advantages of diversification, and s t i l l specialize in the product he s e l l s . " (2) 8. A REPORT OH THE FARM BUSINESS SURVEY OF 78 FARMS PRODUCIHG SMALL FRUITS IH THE FRASER VALLEY AND OH VANCOUVER ISLAND: Alt no ugh the geographic and climatic background, the state of the soils and the regional comparative advantage of the area cannot be neglected in any study of an agricultural industry, i t i s f e l t that a detailed examination of farm incomes and costs i s essential to an understanding of the overall production picture* For this reason, a detailed study was made of the economics of Small Fruits farming* Metnods of Collecting Data: She method of collecting data was to v i s i t each of the (Voo-operating growers and obtain information regarding the farm business for tne year 1945* It was necessary to secure details of one complete year's expenses and receipts, in order to have a true picture; and,therefore, the operations for the past, rather than the current year,were studied. These interviews provided for a detailed record of production, income, inventory changes and expenditures. The berry-growers contacted,co-operated wholeheartedly in making a l l the details of their businesses available to the University's represen-tative. Accounting Techniques and Methods of A n a l y s i s Used: A study of the records taken showed that the seventy* eight farms included in the study may be divided into two main types; specialized berry farms and diversified farms producing some berries. The more highly specialized group was made up of forty-nine farms a l l of which received more than 80 per 9. cent of their gross cash receipts from the sale of^Saall Fruits, and which, on the average, derived 96 per cent of their income from this source. For the purpose of computing the cost of the f r u i t produced on these farms, i t was assumed that the products other than f r u i t were sold at cost. When calculated in this way, the cost of the f r u i t i s influenced to some extent by the price and the cost of the other products of the farm. However, since such a small percentage of the income was from other sources, i t was considered justifiable to regard Small Fruits as the item on which a l l costs and profits could be calculated (3). The remaining twenty-nine farms, because of their greater diversification, were treated on a commodity basis. The cost of f r u i t was computed by adding together the proportions of the various cost items which were chargeable to the berry enterprise. Returns are expressed as Labour Income. This term i s used to denote the amount l e f t after a l l costs, including interest on the* investment, depreciation of capital goods and unpaid family labour, but not including the labour of the operator, are deducted from the gross receipts. The cost per pound was calculated on a basis of a l l Small Fruits produced. Labour income represents the return which the farmer receives for his year»s work, in the capacity of worker "and/or" manager, but does not include the money which accrues to the owner of the land equipment (usually the farmer himself). 10. Farm Incomes and Farm Costs in the Small Fruits Industry: Some of the results may be presented by f i r s t describing the average berry farm or Small Fruits enterprise in terms of total returns, costs, income secured, and size. TABLE I Average Returns, Costs and Labour Income from Small Fruits for the 78 Farms Studied Total revenue per acre of Small Fruits.. $1201.00 Total costs " « it « « 901.00 Labour Income " " " " " 300.00 Average Acreage in Small Fruits 4.18 acres Average Labour Income , 125&.00 Production per farm averaged 22,781 pounds of Small Fruits of a l l kinds, and hence the farmer's nett income or profit, when a l l expenses direct and indirect, actual or imputed, were paid, was on the average 5-3/10 cents per pound. TABLE II. The Average Size of the Small Fruits Enterprises on the 78 Farms Studied Total Capital invested per farm $5,650.00 Total Capital in land per farm 4,370.00 Total Capital not in land per farm 1,280.00 Percentage of Capital not in land per farm 24.7% Acreage of Small Fruits per farm 4.18 acres Of this 4.18 acres, 0.6 acre was new planting, not producing a crop in 1945. 11. At this point, i t may be pointed out that the proprietor of a farm has sources of money from his farm business, in addition to the labour income, for limited periods of time. This means that the labour income may be negative, and yet a farmer can survive and his farm continue to produce. These sources of revenue,over and above the labour income figure, on which the individual farm operator may l i v e , are the interest which i s received on the capital investment of the farm, the/labour charge (not paid out in cash) for work done on the farm by members of the farmer's own family, and f i n a l l y the depreciation fund i t s e l f . Thus, farmers with low labour incomes are, in fact, l i v i n g on the interest of their capital, exploiting their families or using up and wearing out the substance of their farms. Different Types of Farm Organization Observed i n the Sample: Yery Small Enterprises (less than three acres in Small  Fruits: Excluding, for the time being, six farms which were just being started, and which had not reached f u l l production in 1945, i t i s found that the least successful group of Small Fruits enterprises, from the point of view of labour income, were those on diversified farms receiving less than 40 per cent of their income from berry crops. There were"thirteen in this category and each had an average labour income of $123.00. Half of the thirteen sustained losses. The average acreage of these berry plantings was 1.82 acres. 12. This; group of t h i r t e e n farms had an average labour income of $529.00 from a l l sources. Apparently the operators merely got a bare subsistence out of t h e i r farms f o r the year 1945. There were a l s o t h i r t e e n s m all acreage e n t e r p r i s e s which r e c e i v e d over 80 per cent of the t o t a l r e c e i p t s from Small F r u i t s s a l e s . These had an average labour income of $212.00, w h i l e the average acreage was 1.23 acres. The highest, labour income f o r t h i s group was $896.00, but the low average would seem t o i n d i c a t e that s m a l l p l a n t i n g s are not a very sure source^of a good labour income. The growers on t h i s type of farm have no other source of farm revenue as do the small acreage growers w i t h mixed farms r e f e r r e d to above. In many cases, the farm revenues must have been i n s u f f i c i e n t to provide f i n a n c i a l support f o r the year, and, w i t h t h i s thought i n mind, c e r t a i n general observations were made i n the f i e l d on the subject of sources of outside income. Although no q u a n t i t a t i v e data are a v a i l a b l e , i t i s b e l i e v e d by people a s s o c i a t e d w i t h the i n d u s t r y that the farmers on these very small holdings support themselves by money de r i v e d from "casual l a b o u r " o f f the farms during the off-season. This " c a s u a l l a b o u r " may range a l l the way from p r a c t i s i n g some trade, such as carpentering or truck d r i v i n g which probably y i e l d s a f a i r income, t o working spasmodically on neighbouring farms. Not many have steady jobs. Hop yards i n the S a r d i s area p l a y an important p a r t i n p r o v i d i n g a source of revenue for small berry-growers, and may In part even carry their production in an economic sense. These growers are looking forward to expanding farm activity and, consequently, to less work off the farms. Their desire i s to become full-time farmers. There are also a certain number of retired people on these small holdings, l i v i n g off invested incomes. At the same time, i t is f e l t that a number of the growers on these small specialized berry farms do not succeed in augmenting their farm incomes sufficiently, and consequently are forced to accept a relatively low standard of l i v i n g . Average-sized Fruit Plantings (3-7 acres): Of the seventy-eight farm records studied, twenty were specialized farms with over 80 per cent receipts from Small Fruits sales and with from three to seven acres in Small Fruits crops. These twenty farms averaged labour incomes of $1,841.00, and not one of them had a negative labour income figure. These farms also seemed to represent the most intensive type of land use of a l l the enterprises studied. The average labour income per acre was much greater than in any other group. TABLE III. Labour Income Per Acre by Groups Gross Returns per Acre No. of Farms Average Acreage % Receipts from Berries Labour Income from Berries Gross Costs per Acre Labour Income . per Acre $1134.00 19 1.5 Over 80% $212.00 $859.00 $267.00 1009.00 13 1.8 Under 40% 123.00 908.00 101.00 1387.00 16 3.7 40-80% 991.00 1073.00 293.00 1380.00 20 4.0 Over 80% 1841.00 921.00 460.00 1001.00 10 13.6 Over 80% 3988.00 707.00 271.00 15. Similar sized Small Fruits plantations (average acreage 3.71 acres), on diversified farms with between 40 and 80 per cent of the total receipts from Small Fruits sales, had somewhat smaller labour incomes on the average. The average labour income for the sixteen berry enterprises in this classification was $991.00. From Table III i t w i l l be noted that associated with this lower labour income there are slightly smaller acreages but higher costs per acre. It m should be noted that the t o t a l labour incomes on these sixteen farms averaged $846.00 from a l l sources, or $75.00 less than the amount earned i n the Small Fruits enterprise alone. This means that the farmer's income was earned by producing Small Fruits, and that the berries were oarrying these farms financially. It would seem, therefore, that the other enterprises on these farms were absorbing "inputs" of labour, land, and capital, but were not producing revenue at as great a rate as were the berries. At the same time, this drain on the resources of the farmer was associated with a lower financial productivity in Small Fruits growing than on the similar-sized specialized berry farms. It w i l l be noted that these sixteen farms netted practically the same gross returns per acre as did the twenty specialized farms with similar acreages of Small Fruits. However, the average gross cost per acre was over $150.00 on the diversified farms, which explains the difference in the incomes. This may be associated with a greater degree of mechanization on the 16. specialized farms. The following table indicates the relative amounts of equipment, expressed i n terms of percentage of capital invested in buildings and equipment, on the different types ,of farm. TABLE IV. Showing Percentage of Total Capital not in Land No. of Average Percentage Percentage Farms Acreage Receipts from Capital not in Berries Land 19 1.5 Over 80 22.5 13 1.8 Under 40 14.2 16 3.7 40-80 19.9 . 20 4.0 Over 80 28.2 10 13.6 Over 80 46.2 Most of the growers on diversified farms with over, three acres of Small Fruits, when interviewed, indicated that their future programme called for a greater degree of specialization in Small Fruits production. This would seem to add emphasis to the cost and profit picture, obtained from their farm records. Larger than Average-sized Small Fruits Farms: The remaining ten farms were a l l rhighly specialized in the Small Fruits business (over 80 per cent of the total receipts from the sale of Small Fruits products) and were of greater-than-average size. They averaged 13»63 acres in berries and a total capital investment of $14,958.00. This group of farms had an average labour income of $3,988.00, but the range was from minus $256.00 to plus 17. $18,6B89.00. This i s a higher degree of variation than was found in any of the other groups, especially as there i s a smaller number of farms in this group. However, a wide range of income among larger producers i s often found in Farm Management studies, and i t i s attributed to the fact that large size and s k i l l f u l management produce large-scale positive returns, while large size and unskillful management produce negative returns on a similar scale. That i s to say, generally large size has a tendency to amplify the direction in which the managerial policies lead the business. Size as Related to Income: From the above discussion, i t may be noted that specialized berry farms with more than three acres in Small Fruits appear to be more successful than those with less than three acres, from the point of view of total incomes earned by their operators. At f i r s t this might seem to be a more/or less self-evident fact, that the greater the volume of production, the greater w i l l be the pro f i t . However, failure as indicated by a negative income occurred in 50 per cent of the enterprises (with over 80 per cent receipts from berry sales) having less than three acres in Small Fruits, while only one specialized farm with more than three acres had a negative labour income. Size as Related to Efficiency in the Use of Land: The figures (Table III) on labqur income per acre 18. i n d i c a t e a much greater degree of e f f i c i e n c y i n the use of land on s p e c i a l i z e d farms w i t h more than three acres than on the smaller scale e n t e r p r i s e s . From t h i s , the i n f e r e n c e may be drawn that very small p r o j e c t s do not lend themselves to as e f f i c i e n t a programme of production as do the l a r g e r ones. The c r i t i c a l s i z e would seem to be around three acres. The same a p p l i e s to the berry p l a n t i n g s on d i v e r s i f i e d farms. Where the p l a n t a t i o n i s very s m a l l , i t s t o t a l success and i t s e f f i c i e n c y are both low, while a l a r g e r scale p r o j e c t i s apparently a b e t t e r paying u n i t . The land i s u t i l i z e d i n a more e f f i c i e n t manner. I n the case of the l a r g e r than average s i z e d p l a n t i n g s there i s again a f a l l i n g o f f i n the labour income per acre. I t w i l l be noted from Table I I I that these la r g e farms achieve the lowest c o s t s per acre and at the same time have the highest percentage of c a p i t a l not i n land (Table I V . ) . The p r o p o r t i o n of c a p i t a l equipment (t h a t i s , b u i l d i n g s and machinery) to land i s high. While the r e t u r n s per acre and labour income per acre d e c l i n e as the s i z e i n c r e a s e s , the l a r g e r volume o f business more than compensates f o r t h i s r e d u c t i o n i n the e f f i c i e n c y i n the use of land. The l a r g e r farmers use more land and do not depend upon as great a margin per u n i t . E f f i c i e n c y as Related to S p e c i a l i z a t i o n : The s i x t y - e i g h t farms w i t h l e s s than seven acres i n Small F r u i t s may be d i v i d e d i n t o two groups, on a b a s i s of 19. acreage. Each of these size groups may then be redivided into two sub-groups, on a basis of percentage receipts from berries. Thus there are two sets of comparable groups of farm, specialized and diversified. This i s shown in Table Y. Table V. Comparing the Efficiencies of Specialized and Diversified Farms of Similar Size Receipts from Berries Per cent Labour Income per Acre of Berries Average Acreage in Berries Number of Farms Under 40%, $101.00 1.8 acres 13 Over 80% $267.00 1.5 acres 19 40% - 80% $293.00 3.7 acres 16 Over 80% $460.00 4.0 acres 20 From Table Y, i t may be noted that the more efficient farms, measuring efficiency by the Labour Income from one acre of Small Fruits, were the specialized farms. This appears* to hold true for both the small and the large scale enterprises. 5The larger than average-sized enterprises are not included in Table V, for a l l these were highly specialized, and so there was no basis for comparison. Production by Size Groups: TABLE 71. Showing Production by Size Groups No. Farms Average Acreage Percentage Receipts from B e r r i e s Production per Farm (l b . ) Percentage of T o t a l Tonnage Percentage of T o t a l No. Farms Percentage of Tonnage Cumulative Percent-age of Farms Cumula-t i v e 13 1.8 Under 40 7,605 6f. 17% 6% 17% 19 1.5 Over 80 6,198 7 25 13 42 16 3.7 40-80 22,489 20 21 33 63 20 4.0 Over 80 25,210 28 25 61 88 10 13.6 Over 80 6-9,985 39 12 100 100 o 21. From, the above t a b l e , i t may be noted that 42 per cent of the farms stud i e d had l e s s than three acres of Small F r u i t s , and they produced only 13 per cent of the t o t a l tonnage. At the same time, the ten farms of over average size, making 12 per cent of the t o t a l number, produced 39 per cent of a l l the f r u i t . T h i s means that the s m a l l farms, although they are very numerous, do not produce a propor-t i o n a t e amount of the Small F r u i t s crop. At t h i s p o i n t , the question a r i s e s as to whether the sample of 78 farms s t u d i e d i s r e p r e s e n t a t i v e w i t h respect to s i z e of farm, or whether i t i s weighted i n favour of the l a r g e r e n t e r p r i s e s . That i s , does the p r o p o s i t i o n that two-t h i r d s of the e n t i r e berry crop i s produced by o n e - t h i r d of the farmers h o l d true f o r the e n t i r e i n d u s t r y , or does i t apply merely to the seventy-eight farms studied? I n order to v e r i f y t h i s q u e s t i o n , a study was made of the volume of the shipments by i n d i v i d u a l growers to one of the o r g a n i z a t i o n s handling Small F r u i t s i n the Fraser V a l l e y . This o r g a n i z a t i o n handles f r u i t from a l l s e c t i o n s of the Fraser V a l l e y . I t has about 40 per cent of a l l the growers as members, and i t handles about 30 per cent of the t o t a l tonnage produced i n the Fraser V a l l e y . Thus t h i s group of growers i s not r e c r u i t e d from those w i t h l a r g e r than average-sized farms. I t may a l s o be s t a t e d that the o f f i c i a l s of t h i s o r g a n i z a t i o n b e l i e v e that the members ship through them e x c l u s i v e l y , and t h i s was v e r i f i e d by f i e l d o bservations. TABLE VTI. SHOWING BREAKDOWN OF TONNAGE SHIPPED THROUGH THE ONE ORGANIZATION BY SIZE GROUPS (1945) Percentage of Percentage of Cumulative Cumulative Tonnage per Shipper Total Tonnage Total Number of Percentage Percentage Growers Tonnage Growers Under 5,000 lb. 20,6%, 61.1% 20.61 61.1% " 10,000 " 14.8 17.3 35.4 78.4 " 15,000 » 11.0 7.4 46.4 85.8 " 20,000 " 7.4 3.6 53.8 89.4 " 25,000 " 2.8 61.3 92.2 » 50,000 " 8.2 2.6 69.5 94.8 " 35,000 •» 5.9 1.6 75.4 96.4 * 40,000 " " 45,000 » 4.7 .8 80.1 97.2 1.4 .3 81.5 97.5 * 50,000 » 2.5 .6 84.0 98.1 n 55,000 » .9 .1 84.9 98.2: " 60,000 «• 1.9 .3 86.8 98.5 " 65,000 » 2.0 .3 88.8 98.8 ?» 80,000 » 6.4 .7 95.2 99.5 " 85,000 ** 1.4 .1 96.6 99.6 " 105,000 " 3.4 .3 100.0 100.0 From the above table, i t may be noted that 10 per cent of the growers shipping to this organization, produce 50 per cent of the tonnage handled. Therefore, i t would seem safe to accept the generalization that there i s a large group of producers (90%) who produce a disproportionately small percentage of the total crop (actually only 20%). ro ro F( dure / \ 0f ?rfofi/T$ Mo. farms = 20 of Tota/ '- fro da et tort yVa farms 39^ 0f fro *' ° * tfo • /army \ N N 4 of ffiO 23. Profit per Unit of Product by Size Groups: TABLE VIII. Showing Weighted Average Profit per Pound on a l l Fruit Produced on the 78 Farms. No. Average % Rec'ts Pdtn. f. of Weighted Average Farms Acreage from l b . / Total Average Labour Fruit Farm Pdtn. Profit Income per lb. 19 1.5 Over 80% 6198 6% 3.40 $ 212.00 13 1.8 Under 40 7605 7 1.7 123.00 16 3.71 40-80 22489 20 5.4 991.00 20 4.01 Over 80 25210 28 7.1 1841.00 10 13.6»3 Over 80 69985 39 5.7 - 3988.00 From Table VII i t may be seen that those farms with less than three acres in berries (that i s the small enter-prises) produced f r u i t at a much lower margin of profit than did the larger farms. Figure 1 illustrates the profit margins and the resultant incomes of the various size groups of Small Fruits farms. The factors diagramatically expressing the farmer's income are the length and width of the profit triangles and the number of farms in each category. It w i l l be seen that no group i s in a marginal or submarginal position (although individuals are). This i s in accord with the fact that the industry was going through a period of expansion with respect to both the number of growers and total acreage planted in 1945, as illustrated by the following table:-24. TABLE IX. Showing the T o t a l Acreage and Number of Growers i n Fraser V a l l e y from 1940, 1944, and 1946. Year T o t a l Acreage T o t a l No. of Growers 1940 4600 1853 1944 3106 1625 1946 4683 2661 The Probable E f f e c t s of P r i c e Changes; The b e n e f i t to the i n d i v i d u a l farmer of a r i s e i n p r i c e i s weighted by h i s volume of production. I n t h i s way, a l a r g e r grower w i l l derive a much greater b e n e f i t from a high p r i c e than a s m a l l grower w i l l . Conversely, i f p r i c e s f a l l , the grower w i t h a s m a l l p r o f i t margin w i l l s u f f e r more than the grower w i t h a l a r g e p r o f i t margin. As long as the p r i c e l i n e does not drop below the cost of p r o d u c t i o n , the man w i t h a lar g e volume of production w i l l r e a l i z e a greater r e t u r n than the man w i t h a sma l l volume. Of the 78 farms s t u d i e d , those w i t h a small volume and those w i t h s m a l l margin of p r o f i t were u s u a l l y the same ones. Therefore, should p r i c e s f a l l , the sm a l l producers w i t h a low margin of p r o f i t might be e l i m i n a t e d , w h i l e the l a r g e r producers w i t h a wider margin of p r o f i t might be expected to continue. They could perhaps maintain t h e i r incomes by expanding production. 25. Possible Future Trends in the Small Fruits Industry: In the broad, general sense, i t w i l l be readily conceded that future prices w i l l be governed, in the long run, by the forces of supply and demand. The question i s , just where w i l l the price-quantity equilibrium establish i t s e l f ; can the industry look forward to continued high prices, or must production in the future, of necessity, be accompanied by lowered prices. To answer this question in exact terms i s not possible within the scope of this report. A study was made, however, of the past price-volume relationships i n the hope of deriving certain general principles which would be useful in illuminating the present situation. ' Strawberry Production and Marketing: In attempting to lay bare the underlying trends in the industry, i t was necessary to simplify the material as much as possible. At the same time, adequate and complete data had to be available. For these reasons, strawberry prices and production were studied alone, for the years 1914-1941, and subsequently, i t i s f e l t that using date on the strawberry crop, by i t s e l f , may be justified on the ground that the strawberry i s the most rapidly maturing of a l l the Small Fruits. At the same time, a strawberry plantation can be ploughed out and the land put to some other use relatively readily. For these reasons, the strawberry may well be a sensitive barometer of economic conditions in the Small Fruits industry. 26. TABLE X. ANNUAL STRAWBERRY PRODUCT!ON, PRICE AND TOTAL VALUE Year T o t a l V a l u e / 4 i of Crop (|) Production/ , j \ ( l b . ) ' W P r i c e - Average / 4 \ Fresh & Processed 1914 135,438 1,472,436 !•¥ 1915 194,977 1,876,788 8.6 1916 200,802 189,437 2,071,494 8.8 1917 1,720,980 9.0 1918 305,268 560,155 2,275,884 13.1 1919 3,126,510 18.5 1920 439,389 2,056,212 21.8 1921 694,682 7,183,170 8.0 1922 576,480 5,568,337 10.8 1923 450,545 6,441,305 4,808,660 8.7 1924 444,309 331,361 1925 2,425,130 13.6 1926 507,162 4,172,888 12.4 1927 704,619 6,951,181 10.3 1928 657,598 7,429,298 8.1 1929 564,562 6,701,636 10.8 1930 568.725 5,256,384 9.4 1931 . 470,003 5,896,743 6.7 1932 347,631 5,590,952 6.2 1933 387,141 6,644,098 5.6 1934 531,070 9,407,534 5.6 1935 794,332 11,177,027 8.6 1936 513,834 5,909,059 8.2 1937 651,349 9,051,384 8.0 1938 682,578 12,163,427 6.7 1939 873,081 14,891,932 7.0 1940 744,246 12,251,395 6.9 1941 930,099 13,929,204 8.1 1942 693,089 7,352,523 11.3 1943 735,063 3,491,967 20.5 1944 701,803 4,356,781 18.4 From Table X , i t may be pointed out that the t r e n d i n production has been s t e a d i l y upward, from 1914 - 1941. At the same t ime, the t o t a l value of the crop has also been i n c r e a s i n g . F i g u r e s 2 and 3 i l l u s t r a t e these p o i n t s g r a p h i -c a l l y . I n F i g u r e 2, both p r i c e and t o t a l value of the crop are adjusted to the p r i c e index f o r a l l farm p r o d u c t s . The 27. adjusted priee from 1914 - 1941 has shown l i t t l e tendency to increase or decrease, except for very short periods, but both the tonnage and the total value of the crop have been increas-ing steadily. TABES XI. SHOWIHG THE VALUES OP A l l STRAWBERRY PROPS PROM 1914 - 1941 IJSf DESOEflPIUS ORDER Year Total Value Adjusted Quantity Price Adjusted to to Index of a l l ( 5 ) Index of a l l Farm; Farm Products (1) fib.) Products ( 5 ) 1939 1,357,824 14,891,932 10.9 1941 1,306,319 13,924,204 11.4 1935 1,260,916 11,177,027 12,261,395 13.5 1940 1,109,169 10.2 1938 927,416 12,163,427 9,407,534 9.1 1934 900,119 9.5 1931 834,819 5,896,743 11.9 1933 769,100 6,644,098 11.0 1937 747,817 9,051,384 9.2 1936 740,396 5,909,059 5,590,952 11.8 1932 718,246 12.8 1930 691,089 5,256,384 11.4 1927 690,126 6,951,181 10.1 1921 669,896 7,183,170 7.7 1928 655,091 5,568,337 12.3 1928 663,027 7,429,298 8.0 1929 560,081 6,701,636 6,441,305 10.7 1923 552,816 10.7 1926 507,162 4,172,888 4,808,660 12.4 1924 504,323 10.6 1919 381,837 3,126,510 12.6 1925 328,080 2,425,130 13.5 1920 273,592 2,056,212 13.6 1916 250,291 1,876,788 11.0 1918 230,217 2,276,884 9.9 1916 223,610 2,071,494 9.8 1914 192,932 1,472,436 10.5 1917 147,422 1,720,980 7.0 From Table 21, i t i s apparent that a high value for the strawberry crop i s more dependent upon a large volume than upon a high price. The most valuable crops are the heaviest crops. Shis means that a big crop i s worth more than a small crop, even though the price unit of the latter may he greater* In turn, this means that strawberries apparently enjoy a relatively elastic demand; that i s , as the price f a l l s , the amount consumed increases proportionately more rapidly. TABLE XII. SHOWING THE VARIOUS QUALITIES OF STRAWBERRIES CONSUMED AT PRICES ADJUSTED TO THE URBAN COST OF LIVING , n  Production fib.) Price Adjusted to Urban Living Co at 8 (5) Year 14,891,932 13,924,204 11,177,027 12,251,395 12,163,427 9,407,534 5,896,743 6,644,098 9,051,384 5,909,059 5,590,952 6,266,384 6,951,181 7,183,170 5,668,337 7,429,298 6,701,636 6,441,305 4,172,888 4,808,660 3,126,510 2,425,130 2,056,212 6.9 7.2 8.9 6.5 6.6 5*8 6.1 5*9 7.9 8.4 6.3 7.8 8.6 6.0 8.9 6.7 8.9 7.1 10.2 7.8 14.2 11.3 14.5 1939 1941 1935 1940 1938 1934 1931 1933 1937 1936 1932 1930 1927 1921 1922 1928 1929 1923 1926 1924 1919 1925 1920 Figure 4, derived from Table XII, graphically repre-sents tne demand for strawberries. It i s the 'demand curve*. 29. It shows the prioes (adjusted to the urban cost of l i v i n g index) which consumers have paid for the various-sized crops which have been put on the market during past years. It w i l l be observed that as the curve moves to the right, i t flattens out, indicating that the e l a s t i c i t y of the demand increases as the price becomes lower. As price decline advances, the volume of sales increases at a pro-gressively more rapid rate. It w i l l be noticed that once a sales volume of about eight million pounds has been reached, the curve becomes almost a straight line. Shis would indicate that a very large crop can be moved into consumption at almost as high a prioe as a moderately large one. Most of the larger crops were marketed i n the later 1930*8 rather than in the 1920*s. As time went on, appar-ently the market was expanded and when the price was lowered, new consumers (either of processed or fresh f r u i t ) were attracted into the market, and i t was possible to s e l l much greater quantities. She Past Demand Picture and the Current Situation: She last point for which complete tonnage-price data was available was 1944. She situation i n 1944 i s represented on the Figure 4 to the l e f t of centre. Here there i s a small crop but a high price, and the demand may be rather less elastic. At the time of writing and immediately previous, an increase i n acreage has been taking place. When this 3 0 . increased acreage becomes f u l l y effective, the industry may expect to find i t s e l f back in a position whioh w i l l be described by the lower reaches of the demand curve (to the right of the centre in Figure 4 ) . She price w i l l be lower but the t o t a l value of the crop w i l l be greater. Thus increased production and f a l l i n g prices may be anticipated. However, as soon as the price reaches the more elastic segment of the demand schedule, a relatively small reduction in the price would take care of a relatively large increase in the crop. Of oourse a l l these price changes are postulated i n terms of price adjusted to the price index. She prioe i n cents per pound w i l l be high or low, depending upon the general price level as well, but the r e a l price may be expected to follow the trend indicated by the demand schedule for the product. Application of the Demand Situation in the Industry to the  Business of the Individual Grower: She foregoing has pointed out that the prosperity of the strawberry industry i s more closely related to a large volume of sales than to a high price. Shis w i l l be true as long as i t i s sound to measure prosperity by the total value of the orop. Shis fact i s an important one and would seem to be very favorable to future prosperity i n the Small Fruits industry. She individual grower can benefit from elastic nature of the demand situation, only i f his production costs are 31. below the prices received for his crop, creating a margin of p r o f i t , and i f his volume of production i s sufficient to convert tnis margin of profit per unit into a satisfactory income • Fortunately, efficiency and average, or larger than average, size of enterprise seem to be linked, as pointed out earlier in this report. Therefore, i t would seem that smaller producers should attempt to increase• the scale of their operations, to compensate for reduced prices, by larger turnovers. Such a policy would, of course, result in an overall increase in production, but in view of the elastic nature of the demand for strawberries, this need not be viewed with alarm. The Small Fruits Industry and Price-bolstering Programmes: Most of the conventional government sponsored price supporting schemes in Canada and elsewhere depend, essentially, upon higher prices secured through a reduction in the volume of produce being produced. The efficiency of such planning i s dependent upon a short crop at a high price being worth more than a long crop at a low price. That i s dependent upon the demand for the product being el a s t i c . This i s commonly the situation with the staple foods. However, prosperity in the Small Fruits industry, i f we can measure i t by the value of the t o t a l crop, would seem to be adversely affected by such a programme. It would only be applicable with small crops, being marketed at prices whioh S2. were very high, in the region of inelastic demand. Generally speaking, i n the case of the strawberry industry, and l i k e l y in the whole Small Fruits industry, the large crop seems to he more desirable, even i f the price i s not as good as i t i s when production i s not as great. The individual producer would f i t into this scheme by emphasizing volume of production as well as efficiency. 33 • SUMMARY During tne sommer of 1946, a study was init i a t e d of tne Small Fruits industry of Britiah Columbia. Seventy-eight (78) farms producing Small Fruits were visited and from each, details of the farm business for the year 1946 were secured. She purpose of this part of the work was to obtain data on farm incomes from Small Fruits production. In addition to the farm income survey, a study was made of the industry as a whole, and the results of the farm survey were related to the overall pieture. She findings of this study may be summarized as follows: (1) She average labour income from Small Fruits production on the seventy-eight farms studied was $1201,00, She average acreage in berries was 4,18 acres, (2) Very great variations were observed in the size of enter-prise, the degree of specialization, and the labour ineome, (3) She larger sized enterprises were usually more success-f u l than the smaller ones* Shree acres in Small Fruits was the minimum acreage associated with success, v. ' (4) Specialized enterprises were more successful and more efficient than diversified enterprises, (5) She bulk of the Small Fruits crop i s produced by a relatively small proportion of the growers (90 per cent of the f r u i t i s grown by 10 per cent of the producers). 34. These farmers have large enterprises and produce most of the tonnage. They also produce at a greater margin of pro f i t . An examination of the prices and tonnage marketed during the years 1914-41 indicated that the trend i s towards increased production and a constant price. The t o t a l value of the crop has been increasing steadily. A large crop i s worth more than a small crop, even though the latter may s e l l at a somewhat higher price. This means that the demand for straw-berries i s el a s t i c , that the market cannot be flooded readily. This may be an important factor i n the future of industry. Finally, Small Fruits are Important in the rural economy of the Fraser Valley and Vancouver Island. These areas enjoy a comparative advantage in Small Fruits production and berry crops tend to drive other agricultural enterprises out. Berry growing i s a means of u t i l i z i n g the unique climatic resources of these areas. 35. B l BMP GRAPH Y Clement, P.M. and ForBhaw, B.P. "A FACTUAL STUDY OF FRASER VALLEY DALEY INDUSTRY AND THE GREATER VANCOUVER FIrUID MILE MARKET". 1942. Case, H.C., Wilcox, R.H. and Berg, H.A. "ORGANIZING THE CORN-BESD FARM FOR PRO FIT ABIE PRODUCTION", University of I l l i n o i s . Agric. Exp. Sta. B a l l . 329. 1934. Woodward, E.D. "SOME FACTORS THAT INFLUENCE POULTRY FARM INCOMES - A STUDY MADE ON FORTY-SIX POULTRY FARMS IN COASTAL BRITISH COLUMBIA", p. 13, 1946. White, E.W. - Province of British Columbia Dept. of Agric. Hort. Circ. No. 68. "STRAWBERRY CUKEUBE". 1945. The Economic Annalist - Indexes computed by Dom. Bureau of St a t i s t i c s . Feb., 1946. 


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