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Factors affecting dairy farm incomes in the lower Fraser valley Grahame, Richard Wallbank 1948

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^ 3 G 7 &7 FACTORS AFFECTING DAIRY FARM INCOMES IN THE LOWER FRASER VALLEY by Richard Wallbank Grahame Thesis Submitted i n P a r t i a l F u l f i l m e n t of The Requirements f o r the Degree of MASTER OF SCIENCE IN AGRICULTURE i n the Department of AGRICULTURAL ECONOMICS THE UNIVERSITY OF BRITISH COLUMBIA APRIL, 1948 ABSTRACT In order to determine the e f f e c t of o r g a n i z a t i o n and management on the s i z e of income secured by d a i r y farmers, the business records of 208 d a i r y farms i n the Lower Fraser V a l l e y were analyzed. The records were secured by the survey method and covered the operations during the calenda year 1946. Earnings secured by operators f o r t h e i r labour v a r i e d from minus $1,370 to plus $18,341. Labour earnings averaged $1,042. High earnings were as s o c i a t e d with the f o l l o w i n g f a c t o r s : 1. A farm business above average i n s i z e . 2. High b u t t e r f a t production per cow. 3. High y i e l d s of crops per acre. 4. E f f i c i e n t use. of labour. 5. E f f i c i e n t use of c a p i t a l . I t was not enough to be above average i n only one or two of the f a c t o r s mentioned. To be most s u c c e s s f u l the farm business had to be b e t t e r than average i n a l l of them. Much hard work and c a r e f u l planning were necessary.to e x c e l i n a l l the f a c t o r s which i n f l u e n c e d farm r e t u r n s . The r e s u l t s of t h i s study, however, show that the rewards were great. T A B L E 0 F C O N T E N T S PAGE ACKNOWLEDGMENTS I SUMMARY I I INTRODUCT ION 1 GENERAL DESCRIPTION OF THE AREA ......... 2 Locat i o n and extent • 2 Topography 2 S o i l s •... • 3 Climate i . . . . . . 3 A g r i c u l t u r a l development of the area. 4 METHOD OF COLLECTING THE INFORMATION...... 5 DESCRIPTION OF THE FARMS STUDIED ......... 6 TERMINOLOGY 8 FINANCIAL ORGANIZATION 10 Investment 10 Farm r e c e i p t s •• • 12 Farm expenses 14 Farm p r o f i t s • • 16 V a r i a t i o n s i n p r o f i t s • 18 SIZE OF BUSINESS 19 Size and p r o f i t s 20 Siz e and labour e f f i c i e n c y .. 21 Size and r a t e s of production ........ 23 Importance of s i z e of business 26 Ways to enlarge the farm business ... 28 TABLE OF CONTENTS - Cont. PAGE BUTTERFAT PER COW ,. 30 B u t t e r f a t per cow and various f a c t o r s 31 Factors c o n t r i b u t i n g t o high m i l k production per cow • 33 CROP YIELDS 34 Factors a f f e c t i n g crop y i e l d s ....... 37 LABOUR EFFICIENCY 38 Labour e f f i c i e n c y and var i o u s f a c t o r s 39 Ways to increase labour e f f i c i e n c y . * . 44 CAPITAL-EFFICIENCY .... 45 C a p i t a l e f f i c i e n c y and var i o u s f a c t o r s 46 C a p i t a l e f f i c i e n c y and f i n a n c i a l o r g a n i z a t i o n ...... 48 SPECIALIZATION IN DAIRYING .. 48 COMBINED EFFECT OF IMPORTANT FACTORS 50 CONCLUSIONS ..... 52 APPENDIX 61 BIBLIOGRAPHY 00 oOo ACKNOWLEDGMENTS I - The w r i t e r wishes to express h i s s i n c e r e thanks to a l l those who have a s s i s t e d him i n any way i n the prep a r a t i o n of t h i s t h e s i s * He wishes, i n p a r t i c u l a r , to thank Dean F. M. Clement of the F a c u l t y of A g r i c u l -t u r e whose e f f o r t s made t h i s study p o s s i b l e , and Professor W. J . Anderson.for h i s guidance and sugges-t i o n s throughout the study* The a s s i s t a n c e of R. H, Campbell, J * Kneale, and P. D. Thomas i n the enumeration and t a b u l a t i o n of the data i s g r a t e f u l l y acknowledged* Sincere thanks are a l s o expressed to the d a i r y farmers of the Fraser V a l l e y who co-operated i n supply-ing i n f o r m a t i o n about t h e i r business operations, and to milk d i s t r i b u t o r s f o r the records of mi l k s a l e s f u r n i s h e d * The study was c a r r i e d out w i t h f i n a n c i a l a i d from the P r o v i n c i a l Department of A g r i c u l t u r e , through the courtesy of the Honourable Frank Putnam, the M i l k D i s t r i b u t o r s ' A s s o c i a t i o n s of Vancouver and V i c t o r i a , and the Department of A g r i c u l t u r a l Economics of the U n i v e r s i t y of B r i t i s h Columbia* SUMMARY - I I . In order to determine the e f f e c t of o r g a n i z a t i o n and management on the s i z e of income secured by d a i r y farmers, the business records of 208 d a i r y farms i n the Lower Fraser V a l l e y were analyzed. The records were secured by the survey method and covered the operations during the calendar year 1946. Earnings secured by operators f o r t h e i r labour v a r i e d from minus $1,370 to plus $8,341. Labour earnings averaged $1,042. High earnings were a s s o c i a t e d w i t h the f o l l o w i n g f a c t o r s : 1. A farm business above average i n s i z e 2* High b u t t e r f a t production per cow 3* High y i e l d s of crops per acre 4. E f f i c i e n t use of labour 5* E f f i c i e n t use of c a p i t a l . Large farms held an important advantage over the small ones i n e f f i c i e n c y of o p e r a t i o n . This advantage t r a c e d c h i e f l y to a more e f f e c t i v e use of man labour on the l a r g e than on the small farms. Crop y i e l d s and b u t t e r f a t pro-duction per cow a l s o tended t o be greater on l a r g e farms* Another advantage of l a r g e r farms was that a l a r g e volume of output s o l d at a p r o f i t returned a l a r g e r t o t a l p r o f i t than a smaller volume* I t should be noted, however, that when farming i s u n p r o f i t a b l e a l a r g e volume may r e s u l t i n a sub-s t a n t i a l l o s s * Operators of l a r g e farms, t h e r e f o r e , must recognize the r i s k s as w e l l as the advantages which a l a r g e business i n v o l v e s * They should endeavour to increase pro- . ductive e f f i c i e n c y so as to a v o i d , or at l e a s t reduce, the r i s k s which a l a r g e volume e n t a i l s when farming i s un-p r o f i t a b l e * The production of b u t t e r f a t per cow was an important f a c t o r a f f e c t i n g r e t u r n s * As production of b u t t e r f a t per cow increased, there was a c o n s i s t e n t increase i n labour earnings* High producing cows re q u i r e d more a t t e n t i o n than lower pro-ducers but the l a r g e r production r e s u l t e d i n a much smaller labour charge per pound of b u t t e r f a t produced* Crop y i e l d s were a l s o shown to be important, since earnings increased as higher crop y i e l d s were obtained* Labour was used more e f f e c t i v e l y on the l a r g e - s i z e farms, although high e f f i c i e n c y was a l s o obtained on some small farms* Regardless of the s i z e of farm greater earn-ings were obtained when labour e f f i c i e n c y was above average* I n e f f i c i e n t use of labour was a s s o c i a t e d with a high degree of s p e c i a l i z a t i o n i n the d a i r y e n t e r p r i s e . Supplementary e n t e r p r i s e s , combined with the main e n t e r p r i s e , aided i n a f u l l e r u t i l i z a t i o n of labour throughout the day and through-out the year* E f f i c i e n t use of labour was a l s o a s s o c i a t e d with a l a r g e investment i n machinery and equipment per man* Many farms were too s m a l l , however, f o r the economical use of labour-saving equipment* Farmers who used l a r g e amounts of c a p i t a l i n r e l a t i o n t o the s i z e of t h e i r business were handicapped i n t h e i r * e f f o r t s t o obtain economical production* A l a r g e p r o p o r t i o n of c a p i t a l i n r e a l e s tate r e s u l t e d i n r e l a t i v e l y heavy ex-penses f o r ' d e p r e c i a t i o n , taxes, and r e p a i r s of b u i l d i n g s as w e l l as burdensome charges f o r i n t e r e s t . Some farmers a l s o had too l a r g e an investment i n machinery and equipment r e l a t i v e to the amount of productive work a v a i l a b l e . I t was not enough to be above average i n only one or two of the f a c t o r s mentioned. To be most s u c c e s s f u l the farm business had to be b e t t e r than average i n a l l of them. Much hard work and c a r e f u l planning were necessary' to excel i n a l l the f a c t o r s which i n f l u e n c e d farm r e t u r n s . The r e s u l t s of t h i s study, however, show that the rewards were great* P r e v a i l i n g weather and economic c o n d i t i o n s a l s o a f f e c t the s i z e of income which can be obtained'from d a i r y farming* Over these f a c t o r s , however, the d a i r y farmer has l i t t l e c o n t r o l * Previous d a i r y farm business studies i n the Fraser V a l l e y have shown that incomes of d a i r y farmers are, on the average, below those of workers of comparable a b i l i t y engaged i n non-farming p u r s u i t s i n B r i t i s h Columbia. Some maintain that t h i s i s because d a i r y farmers r e c e i v e p r i c e s f o r t h e i r milk which are g e n e r a l l y below t h e i r costs of pro-d u c t i o n . The steady upward trend of milk production i n the Fraser V a l l e y , however, r e f u t e s t h i s contention, since i n the long-run expansion of production w i l l not take place unless farmers are r e c e i v i n g t h e i r costs of production. The fundamental reason f o r the low average income of d a i r y farmers — and other a g r i c u l t u r a l producers — i s that they f i n d i t d i f f i c u l t to s h i f t to a l t e r n a t i v e forms of em-ployment where higher earnings can be secured* Improvement i n the incomes of farmers i s dependent upon p r o v i d i n g them with a means whereby they can r e a d i l y t r a n s f e r themselves to other employment. When other forms of employment are r e a d i l y a v a i l a b l e farmers w i l l not continue production unless earn-ings and amenities are.comparable to those which can be ob-tained i n a l t e r n a t i v e employment* FACTORS AFFECTING DAIRY FARM INCOMES IN THE LOWER FRASER VALLEY INTRODUCTION Business s t u d i e s of d a i r y farms i n the Lower Fraser V a l l e y have shown s t r i k i n g v a r i a t i o n s i n the incomes secured by t h e i r operators* Some of the f a c t o r s which- cause these v a r i a t i o n s are c l e a r l y beyond the c o n t r o l of the i n d i v i d u a l producer* The most important of these are the economic con-d i t i o n s and the c l i m a t e . In any given year, however, wide v a r i a t i o n s i n incomes occur amongst farmers who operate under s i m i l a r c o n d i t i o n s of p r i c e and weather* This i n d i c a t e s that the success of the farm business i s dependent mainly upon f a c t o r s which are w i t h i n the managerial c o n t r o l of the farm operator* In order to determine what some of these f a c t o r s are, and t h e i r r e l a t i v e importance, a study was made of the o r g a n i z a t i o n and management of 208 d a i r y farms i n the Lower Fraser V a l l e y f o r 1946. Dairy farmers i n the Lower Fraser V a l l e y r e c e i v e i n -comes which are, on the average, below those secured by workers of comparable a b i l i t y i n the n o n - a g r i c u l t u r a l indus-t r i e s of B r i t i s h Columbia* The usual reason which i s ad-vanced as an explanation f o r the low incomes of d a i r y farmers i s that they do not secure a p r i c e f o r t h e i r milk s u f f i c i e n t to cover t h e i r f u l l cost of production. To 2. suppose that t h i s i s so, however, i s to overlook the fundamental reason f o r the low average income secured by d a i r y farmers and other a g r i c u l t u r a l workers* A secondary purpose of t h i s report w i l l be to d i s c u s s the r e l a t i o n s h i p between the cost of producing m i l k , the r e s u l t a n t supply, and the p r i c e received f o r i t j and to suggest a permanent means of improving the incomes of d a i r y farmers i n the Fraser V a l l e y . GENERAL DESCRIPTION OF THE AREA  Location and Extent; The Lower Fraser V a l l e y i s one of the l a r g e s t blocks of a r a b l e land i n B r i t i s h Columbia, covering approximately 545*000 acres. As described by K e l l e y and S p i l s b u r y ( l ) , i t comprises that part of the d e l t a of the Fraser R i v e r which l i e s i n Canada. The d e l t a begins a few. miles east of Agassiz and extends westward f o r about 75 miles to the S t r a i t of Georgia. I t i s bounded on the north by the Coast Range and on the east by the Cascades. The southern l i m i t . o f the d e l t a i s i n the s t a t e of Washington and so the southern boundary of the V a l l e y i n Canada i s the 49th p a r a l l e l * The area i s d i v i d e d i n t o 14 d i s t r i c t m u n i c i p a l i t i e s * These are as f o l l o w s : Richmond, D e l t a , Surrey, Langley, Matsqui, Sumas, C h i l l i w a c k , Kent, Nicomen, Dewdney, M i s s i o n , Maple Ridge, P i t t Meadows and Coquitlam* Topography: The e l e v a t i o n of n e a r l y a l l of the area i s l e s s than 400 f e e t . For topographical d e s c r i p t i o n i t can be d i v i d e d i n t o two regions: (1) The uplands which have r o l l i n g to f a i r l y l e v e l upper surfaces l y i n g up to 400 fee t or more above sea l e v e l . The uplands are composed of g l a c i a l d e p o s i t s , d i s s e c t e d by subsequent r i v e r channels* (2) The lowlands or recent d e l t a region represented by the C h i l l i w a c k , Sumas, Matsqui Prairie, Pitt Meadows and Lulu I s l a n d areas, i s low and f l a t . The lowlands are dyked against the r i v e r and the sea, and the e l e v a t i o n i s . not more than 25 feet above sea l e v e l . S o i l s : The s o i l s of the e n t i r e area have been c l a s s i f i e d and mapped by K e l l e y and S p i l s b u r y ( l ) . The s o i l s of the recent d e l t a area are f i n e - t e x t u r e d and f e r t i l e , and the vegetative cover before settlement was comparatively l i g h t * Much of the s o i l of the upland areas i s w e l l s u i t e d f o r a g r i c u l t u r a l purposes. The cost of c l e a r i n g i t of o l d stumps and logs and the heavy second growth, however, has g r e a t l y retarded i t s use f o r a g r i c u l t u r e . Climate: The climate of a region i s of primary importance i n determining the crops which can be grown and the l i v e s t o c k which can be kept s u c c e s s f u l l y * I t i s a l s o a major f a c t o r i n i n f l u e n c i n g the he a l t h and comfort of the people who make t h e i r homes i n the area. The climate of the lower Fraser - 4 . V a l l e y f u r n i s h e s very favourable l i v i n g c o n d i t i o n s . The climate i s l e s s extreme both i n summer and i n winter than i n other major a g r i c u l t u r a l areas of Canada, Comparatively uniform temperatures, c h a r a c t e r i s t i c of a maritime c l i m a t e , are maintained throughout the year. The d i f f e r e n c e between the average temperature of the coldest month and the warmest month i s sm a l l . The average f o r the coldest month, January, i s 36°F.j and f o r the warmest month, J u l y , 63°F. This gives a v a r i a t i o n of 27°« The c h a r a c t e r i s t i c f eature of the P a c i f i c Coast pre-c i p i t a t i o n i s heavy winter r a i n f a l l succeeded by summer dry-ness. Because of the r e l a t i o n s h i p of d i f f e r e n t areas i n the v a l l e y to mountain ranges, p r e c i p i t a t i o n i s not uniform f o r a l l areas. The south-western areas r e c e i v e an annual p r e c i p i t a t i o n of from 36 to 40 inches. This increases to as much as 70 inches i n those areas immediately bounded by the Coast Range and the Cascades. A g r i c u l t u r a l Development of the Area: The type of a g r i c u l t u r e f o llowed i n the Fraser V a l l e y i s governed l a r g e l y by the c l i m a t e , q u a l i t i e s of the d i f f e r -ent s o i l s , d e n s i t y of the ve g e t a t i v e cover, drainage, and the requirements of the Vancouver market. The recent d e l t a areas were s e t t l e d f i r s t because the s o i l s were f i n e - t e x t u r e d and f e r t i l e and the v e g e t a t i v e cover was comparatively l i g h t . When not covered w i t h peat, these lowlands are w e l l s u i t e d f o r d a i r y i n g , mixed farming, g r a i n growing and the i n t e n s i v e production of vegetables f o r the Vancouver market and f o r canning. Within, recent years lar g e areas have been devoted to the growing of hops and to grass which i s dehydrated f o r i n c o r p o r a t i o n i n t o commercial feed mixtures. Development of the upland s o i l s f o r farming has been retarded because of the d i f f i c u l t y of c l e a r i n g i t of o l d l o g s , stumps and heavy second growth. The farms are s m a l l , ranging from 10 to 40 acres. P o u l t r y r a i s i n g and the grow-ing of small f r u i t s , vegetables, and bulbs are the p r i n c i p a l types of farming i n the upland d i s t r i c t s . Since 1942 numerous new farms have been e s t a b l i s h e d i n the upland d i s t r i c t s . Most of these are s p e c i a l i z i n g i n the production of small f r u i t s . The area i s w e l l served by a system of p r o v i n c i a l and municipal roads, by the in t e r - u r b a n routes of the B r i t i s h Columbia E l e c t r i c Railway and by the main l i n e s of the Canadian P a c i f i c Railway and Canadian N a t i o n a l Railway, METHOD OF COLLECTING THE INFORMATION Data were obtained from the d a i r y farmers by the survey method. Each farmer co-operating i n the study was interviewed and every e f f o r t was made to o b t a i n accurate inform a t i o n concerning r e c e i p t s , expenses, i n v e n t o r i e s , crop acreages and production. This i n f o r m a t i o n was recorded i n a f i e l d schedule designed f o r the purpose (see Appendix C), Many of the farmers v i s i t e d kept e i t h e r f u l l or p a r t i a l records r e l a t i v e to expenses and income. Such records were used when a v a i l a b l e , but when not, the co-operator was asked to make c a r e f u l estimates of those items r e q u i r e d to complete the f i e l d schedule* Figures on the q u a n t i t y of milk shipped, the pay-ment received f o r i t , and the charges f o r f r e i g h t were obtained from the o f f i c e s of m i l k d i s t r i b u t o r s i n Vancouver, In s e l e c t i n g farms to be included i n the study, a very d e f i n i t e attempt was made to choose farms which were r e p r e s e n t a t i v e f o r the areas being s t u d i e d . Complete i n -formation r equired f o r the study was secured f o r 208 farms. These, t h e r e f o r e , compose the sample upon which t h i s study i s based, DESCRIPTION OF THE FARMS STUDIED The 208 farms studied averaged 62 acres i n s i z e . (Table 1 ) . The average acreage i n crops was 27 acres and improved pasture 18 a c r e s . The hay crop on almost a l l farms was a mixture of cl o v e r s w i t h timothy or rye grass. Only 26 farms produced a l f a l f a as a hay crop. Oats were pro-duced as a hay crop on 21 per cent of the farms, and as a g r a i n crop on 45 per cent of the farms. Corn was the most popular s i l a g e and accounted f o r 58 per cent of the t o t a l amount used. Twenty-six per cent of the s i l a g e was put up from c l o v e r s and grasses. 7. TABLE 1. - CLASSIFICATION OF LAND UTILIZATION, 208 DAIRY FARMS IN THE FRASER VALLEY, 1946. Items Average Acres per Farm Percent of T o t a l Acres Acres i n crops 27 44 Improved pasture 18 29 Farmstead ( i n c l u d e s orchard) 2 3 U n t i l l a b l e pasture 9 14 Acres waste or not farmed 6 10 T o t a l 62 100 The remaining 16 per cent represented pea v i n e s , oats or vetch. Only 11 farms produced a root crop to provide a succulent feed f o r the d a i r y herd. The p r i n c i p a l cash crops were potatoes, canning peas, canning corn, and c l o v e r seed. Strawberries and r a s p b e r r i e s were produced f o r sale on se v e r a l of the farms. The average number of d a i r y cows kept per farm was 18, Eleven per cent of the herds were predominantly pure-bred and f i v e per cent were part purebred and part grade. The remaining 84 per cent of the herds were predominantly grade. The average number of h e i f e r s per farm was 6 and the average number of calves was 4* The average .number of hens i n the farm f l o c k was 58, F o r t y - f o u r farms reported hogs. These were kept mainly f o r use on the farm. Seven farms kept sheep* 8. TABLE 2. - FARMS CLASSIFIED ACCORDING TO SIZE OF DAIRY HERD, 208 FRASER VALLEY DAIRY FARMS, 1946 Number of per Farm Cows Number of Farms Percentage D i s t r i b u t i o n of Farms Less than 10 38 18 10 to 14 65 31 15 to 19 39 19 20 to 24 34 16 25 to 29 12 6 30 to 35 9 4 35 and over 11 6 T o t a l 208 100 Horses were used on 75 per cent of the farms. T h i r t y - s i x per cent used a t r a c t o r , and 18 per cent used both a t r a c t o r and horses* S i x t y - n i n e per cent of the farms had a car and 21 per cent a t r u c k * Nineteen per cent had n e i t h e r a car nor a truc k * Operators of 85 per cent of the farms v i s i t e d owned the e n t i r e acreage which they used, and seven per cent owned part of t h e i r land and rented the r e s t . Eight per cent of the operators rented t h e i r farms o u t r i g h t . TERMINOLOGY Farm Income i s the amount by which farm r e c e i p t s exceed farm expenses. I t represents the r e t u r n both f o r the operator's 9. time and f o r the use of c a p i t a l i nvested i n the farm business during the year. C a p i t a l Investment, as c a l c u l a t e d . i n t h i s study, i s the sum of the value of farm r e a l e s t a t e , l i v e s t o c k , feeds, s u p p l i e s , machinery and equipment which i s used p r i m a r i l y f o r the farm business. Labour Income, i s the r e t u r n which the operator receives f o r h i s year's work and management i n a d d i t i o n to the value of the house rent and products which he and h i s f a m i l y ob-t a i n from the farm. P e r q u i s i t e s represent the value of farm-furnished l i v i n g . They in c l u d e farm products used i n the operator's household and the use of the d w e l l i n g f o r one year. Labour Earnings i s the sum of the labour income and per-q u i s i t e s . I t i s the r e t u r n received by the operator and h i s wife from the farm f o r the year's work and s u p e r v i s i o n . Productive Man Work Uni t * ( a b b r e v i a t e d P.M.W.U.) represents the amount of any kind of income-producing work accomplished by one man i n a day at usual farm tasks and under average c o n d i t i o n s . I t i s used as a standard measure of the amount of work to be done on the farm and does not i n d i c a t e the amount of labour a c t u a l l y used i n g e t t i n g the work done. I t i s one of the best measures of the s i z e of the farm business since i t includes the productive work on a l l the e n t e r p r i s e s of the farm. See Appendix B f o r a d e t a i l e d explanation of method of c a l c u l a t i o n . 10. Man Equivalent i s the average number of persons, i n c l u d i n g the operator, working on the farm during the year, expressed i n u n i t s of full-.time men. Productive Man Work Units per Man Equivalent i s a measure of labour e f f i c i e n c y i n that i t i n d i c a t e s .the amount of work a c t u a l l y accomplished by the labour used on the farm. Crop Index i s the r a t e of y i e l d per acre expressed as a per-centage of average, with the average taken as 100. For example, a crop index of 107 would mean a y i e l d of 7 per cent more than the average f o r the group* C a p i t a l Turnover i s the number of years required f o r cash operating r e c e i p t s to equal the inv e s t e d c a p i t a l . I t i s a measure of e f f i c i e n c y i n the use of c a p i t a l . FINANCIAL ORGANIZATION Investment; Considerable c a p i t a l i s necessary f o r the oper a t i o n of a d a i r y farm i n the Lower Fraser V a l l e y * Operators of farms included i n t h i s study had an average investment of $19,867 i n l a n d , b u i l d i n g s , l i v e s t o c k , machinery, equipment, feeds and s u p p l i e s (Table 3 ) • TABLE 3. - DISTRIBUTION OF CAPITAL INVESTMENT, 208 FRASER VALLEY DAIRY FARMS, 1946 Item Average Value per Farm Per cent of T o t a l Real estate $13,226 67 Li v e s t o c k 3,8$5 19 Machinery and equipment 2,034 10 Feeds and s u p p l i e s 752 4 T o t a l C a p i t a l $19,867 100 Two-thirds of the c a p i t a l invested was i n r e a l e s t a t e . Of t h i s 40 per cent was i n b u i l d i n g s and 60 per cent i n l a n d . O n e - f i f t h of the investment was i n l i v e s t o c k , one-tenth i n machinery and equipment and about one-twentieth i n feeds and supplies,. The investment was l e s s than $10,000 on one-quarter of the farms, and l e s s than $20,000 on two-t h i r d s of the farms (Table 4 ) . (See next page f o r Table 4) 12. TABLE 4. - VARIATION IN TOTAL CAPITAL, 208 FRASER VALLEY DAIRY FARMS,1946 Number Per cent of Farms of Farms Less than I 15,000 8 4 $5,000 - 9,999 43 21 10,000 - 14,999 46 22 15,000 - 19,999 41 20 20,000 - 24,999 24 12 25,000 - 29,999 9 4 30,000 - 34,999 11 5 35,000 - 39*999 7 3 40,000 and over 19 9 208 100 Farm Receipts; T o t a l r e c e i p t s amounted to $5,718 per farm (Table 5)» The dominance of the d a i r y e n t e r p r i s e i s emphasized by the f a c t that 76*3 per cent of the gross income, or $4,361 per farm, came from the s a l e of m i l k and d a i r y l i v e s t o c k ; while an a d d i t i o n a l 5*8 per cent, r e p r e s e n t i n g the net increase i n l i v e s t o c k i n v e n t o r y , was derived mainly from d a i r y c a t t l e . Sales of crops and income from other l i v e -stock accounted f o r about 14 per cent of the r e c e i p t s . The $401 inven t o r y increase d i d not represent cash income since i t was made up of net a d d i t i o n s to the inventory 13. TABLE 5. - AMOUNT AND DISTRIBUTION OF RECEIPTS, 208 FRASER VALLEY DAIRY FARMS, 1946 Average Per cent per Farm of T o t a l Cash Receipts (a) Dairy e n t e r p r i s e $4,361 76,3 Other l i v e s t o c k enter-p r i s e s 270 4.7 Crop sales ^ 541 9.4 Other farm income 145 2.6 T o t a l cash farm r e c e i p t s 5,317 93.0 Inventory Increases Livestock 332 5.8 Feeds and s u p p l i e s 53 0.9 Machinery and equipment 16 0.3 T o t a l inventory increases 401 7*0 TOTAL FARM RECEIPTS $5,718 100.0 (a) Sale of m i l k and d a i r y l i v e s t o c k (b) Sale of p o u l t r y , eggs, hogs, e t c . (c) C h i e f l y potatoes, canning peas, canning corn, small f r u i t s and peas (d) Man labour o f f farm, custom work, equipment r e n t a l s , pasture r e n t a l s , wood, empty sacks, equipment, r e a l estate s a l e s , e t c . values of l i v e s t o c k , feeds and s u p p l i e s , and machinery and equipment. 14. Farm Expenses; T o t a l expenses, other than i n t e r e s t , amounted to $4,225 per farm (Table 6 ) , Purchased feed was the l a r g e s t s i n g l e item accounting f o r one-quarter of t h i s amount. Nearly a f i f t h was accounted f o r by charges of $780 per farm f o r labour other than t h a t of the operator. Of t h i s $470 was f o r h i r e d labour and $310 represented the value of labour c o n t r i b u t e d by unpaid members of the f a m i l y . There was a cash o u t l a y of $995 per farm f o r c a p i t a l pur-chases and improvements during the year. Part of t h i s ex-pense i s o f f s e t by the i n v e n t o r y increase shown under farm r e c e i p t s . The cost of operating power equipment was $204. M i l k hauling and custom work h i r e d cost $318, most of which was f o r m i l k h a u l i n g . Other operating expenses amounted to $713* This amount c h i e f l y represents the cost of seed, f e r t i l i z e r , l i m e , taxes, insurance, r e n t s , telephone, e l e c t r i c i t y , d a i r y herd expenses such as C.T.A. and R.O.P. fe e s , a r t i f i c i a l insemination charges, v e t e r i n a r y charges, and the costs of sprays, germicides, e t c . (Table 6 next page) TABLE 6. - AMOUNT AND DISTRIBUTION OF EXPENSES, 208 FRASER VALLEY DAIRY FARMS, 1946 Average Per cent per Farm of T o t a l Cash Operating Expenses Labour h i r e d $ 470 11.1 Feed purchased 1,039 24*6 Power equip* operating costs 204 4.8 F r e i g h t on m i l k ; Custom work 318 7.5 Repair and maintenance of b u i l d i n g s & equip. 126 3*0 Other expenses 713 2,870 16*9 67.9 C a p i t a l Purchases and Improvements L i v e s t o c k 273 6*5 Machinery and equipment 337 8.0 Real estate 385 995 9*1 23.6 T o t a l Cash Outlay $3,865 91.5 Inventory Decreases Real estate 50 1*2 Value of- unpaid labour 310 -7.3 TOTAL FARM EXPENSES $4,225 100.0 16. Farm P r o f i t s : The d i f f e r e n c e between r e c e i p t s and expenses averaged $1,493 per farm (Table 7)* This d i f f e r e n c e , common-l y termed "farm income," represents the amount l e f t , a f t e r a l l other business expenses have been deducted, as compen-s a t i o n f o r the use of c a p i t a l invested i n the farm and the year's labour and management of the operator. A f t e r deduct-i n g i n t e r e s t at f i v e per cent on invested c a p i t a l , a labour TABLE 7. - FINANCIAL RETURNS, 208 FRASER VALLEY DAIRY FARMS, 1946 Item - Average per Farm Farm Receipts $ 5,718 Farm Expenses 4,225 FARM INCOME 1,493 I n t e r e s t on C a p i t a l at 5% 993 LABOUR INCOME 500 P e r q u i s i t e s 542 LABOUR EARNINGS $ 1,042 income of $500 remained. In a d d i t i o n to t h i s monetary i n -come the farmer a l s o had, as part of the r e t u r n f o r h i s labour, the use of a house and products such as m i l k , eggs, meat, f r u i t s , vegetables, and wood which were obtained from 17. the farm f o r f a m i l y use. When the value of such p e r q u i s i t e s -is, added t o labour income a measure known as "labour earn-ing s " r e s u l t s . In t h i s study the average labour earnings per farm was $1,042. When r e c e i p t s from the farm, i n c l u d i n g the value of the p e r q u i s i t e s , are not s u f f i c i e n t to cover both expenses and i n t e r e s t , a "minus" labour earnings f i g u r e r e s u l t s f o r the operator. Labour earnings i s one of the best measures f o r com-paring the p r o f i t a b i l i t y of d i f f e r e n t farm businesses. Be-cause the unpaid labour of members of the f a m i l y i s counted as an expense, i t e l i m i n a t e s d i f f e r e n c e s i n returns between farms where members of the f a m i l y or other unpaid workers are a v a i l a b l e , and farms.where a l l help must be h i r e d . V a r i a t i o n s i n the c a p i t a l used are el i m i n a t e d by deducting an i n t e r e s t charge. Labour earnings a l s o recognizes the value of non-cash c o n t r i b u t i o n s from the farm as a part of the operator's r e t u r n . For these reasons labour earnings i s used as the measure of p r o f i t s i n t h i s study.. While "labour earnings" serves w e l l as a means of comparing the business e f f i c i e n c y of d i f f e r e n t farms, i t f a i l s to i n d i c a t e the amount of money a dairyman may e x t r a c t from the business f o r l i v i n g purposes. P r o v i d i n g the farm i s f r e e of debt, the amount charged as i n t e r e s t on c a p i t a l investment i s a v a i l a b l e f o r f a m i l y l i v i n g . The value of the work .contributed by unpaid members of the f a m i l y has been 18. charged as an expense to the business, but i t too i s a v a i l -able f o r f a m i l y l i v i n g . F i n a l l y the charges f o r d e p r e c i a t i o n on b u i l d i n g s and equipment represent non-cash expenses. In times of emergency such d e p r e c i a t i o n allowances may be used to cover l i v i n g expenses. Should such reserves be used f o r too long a p e r i o d , however, the c a p i t a l value of the i n v e s t -ment w i l l d e c l i n e because of the f a i l u r e to replace equipment and maintain b u i l d i n g s i n good r e p a i r . In t h i s study the average debt per farm was s l i g h t l y l e s s than $650. I n t e r e s t on t h i s at f i v e per cent i s $32 -and when subtracted from the $993 charged as i n t e r e s t on t o t a l farm c a p i t a l , l e f t a r e t u r n of $961 f o r the farm operator. This r e t u r n to c a p i t a l , plus labour earnings of $1,042 and f a m i l y labour returns of $310 gave an average t o t a l of $2,313 a v a i l a b l e f o r f a m i l y l i v i n g i n 1946 on the 208 Fraser V a l l e y d a i r y farms included i n the study. V a r i a t i o n s i n P r o f i t s t Among the 208 farms s t u d i e d , the range i n farm p r o f i t s -- as measured by labour earnings —. was from minus $1,370 to plus $8,341. T h i r t e e n per cent of the farms had labour earnings which were negative (Table 8 ) . Seventy-three per cent of the farms were i n the range from $0 t o $2,000, while 14 per cent had labour earnings i n excess of $2,000. The v a r i a t i o n s i n farm p r o f i t s i n d i c a t e that d a i r y -men met with varying degrees of success i n t h e i r productive 19.' TABLE 8. - DISTRIBUTION OF LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, 1946 Labour Earnings Number of Farms Per cent of T o t a l Plus $4,000 or more 5 2 3,000 - 3,999 7 3 2,000 - 2,999 19 9 1,000 - 1,999 57 28 0 - 999 93 45 Minus $ 0 - 999 21 10 1,000 or l e s s 6 3 TOTAL: 208 100 e f f o r t s . The p r i n c i p a l purpose of t h i s study i s to determine the f a c t o r s of farm o r g a n i z a t i o n which have a s i g n i f i c a n t e f f e c t on the p r o f i t a b i l i t y of d a i r y farms i n the Lower Fraser V a l l e y . SIZE OF BUSINESS The s i z e of the farming u n i t may be measured i n se v e r a l ways* The number of cows or the number of acres are measures which are i n common use* Another measure of s i z e which i s coming i n t o more common use i s the number of "productive man work u n i t s " * A productive man work u n i t 20. measures the amount of any ki n d of income-producing work accomplished on the farm by one man i n a ten hour day. For example, the feeding, m i l k i n g and care of one d a i r y cow f o r a year represents 13.5 man work u n i t s , since under average c o n d i t i o n s , about 135 hours per cow per year are required to do these chores. Because t h i s measure of s i z e i n c l u d e s the productive work on a l l the e n t e r p r i s e s , animals as w e l l as crops and miscellaneous income, i t i s one of the best measures to use i n comparing the s i z e of business on one farm w i t h that on another. Size and P r o f i t s : As the s i z e of the farm business increased the p r o f i t s a l s o increased (Table 9 ) . The labour earnings TABLE 9. - RELATION OF SIZE OF BUSINESS TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, 1946 To t a l P.M.W.U. per Farm Number of Farms Average T o t a l P.M.W.U. per Farm Labour Earnings Less than 160 16 141 526 160 - 259 61 209 679 260 - 359 58 309 836 360 - 459 37 404 1,039 460 - 559 17 512 1,561 560 and over 19 882 2,812 ALL FARMS 208 353 $1,042 21. averaged $526 f o r the group of smallest farms as compared with $2,812 f o r the l a r g e s t . Size and Labour E f f i c i e n c y ; There was a pronounced d i f f e r e n c e between the l a r g e and small farm businesses with respect to the e f f i c i e n c y i n the use of labou r . (Table 10). The average accomplishment per man on the 19 farms i n the l a r g e s t s i z e group was more than 2\ times that on the 16 farms i n the smallest group. This r e l a t i o n s h i p does not i n d i c a t e that good labour e f f i c i e n c y was not obtained on some small farms. I t does show, however, t h a t greater opportunity f o r increased e f f i c i e n c y was p o s s i b l e on the l a r g e r farms. The greater e f f i c i e n c y on the l a r g e farms r e s u l t e d i n lower labour costs i n p r o p o r t i o n to the business done, making p o s s i b l e a more economical o p e r a t i o n . -" One reason f o r the increased output per man on the lar g e farms seems to l i e i n the f a c t that t h e i r operators used more machinery and equipment per man than d i d the operators of small farms. The investment per man i n farm machinery and equipment ranged from $434 on the smallest group of farms to $1 ,754 on the l a r g e s t group (Table 10). The average was $1,196. 22. TABLE 10. - SIZE OF BUSINESS, EFFICIENCY IN THE USE OF LABOUR, AND CAPITAL INVESTED IN FARM EQUIP-MENT PER MAN, 208 FRASER VALLEY DAIRY FARMS, 1946 Number Average per Farm  of T o t a l P.M.W.U. C a p i t a l i n Equip-Farms P.M.W.U. per Man ment per Man Less than 160 16 141 108 *. . 434 160 - 259 61 209 161 808 260 - 359 58 309 206 1,225 360 - 459 37 404 224 1,341 460 - 559 17 512 269 1,571 560 and over 19 882 285 1,754 ALL FARMS 208 353 209 #1,196 Ce r t a i n other c h a r a c t e r i s t i c s of la r g e farms which can c o n t r i b u t e to the e f f e c t i v e use of labour may be l i s t e d b r i e f l y , though data regarding them were not s p e c i f i c a l l y secured during t h i s study. 1. Many of the d a i l y chores on a farm do not i n -crease i n p r o p o r t i o n to the increase i n the s i z e of business. For example, i t takes as long to climb up a si l f c to throw down feed f o r 10 cows as i t does f o r 30 cows. 2. The presence of two or more men i s necessary i n order to do some farm jobs most e f f i c i e n t l y . This i s w e l l i l l u s t r a t e d by r e f e r r i n g t o the va r i o u s operations which must be performed i n hay-making. 2 3 . 3* The average s i z e of f i e l d s u s u a l l y v a r i e s d i r e c t l y with t h a t of the farm. A l a r g e f i e l d i s more e f f i c i e n t i n the use of labour and machinery since a fewer number of turns are made per a c r e . Large f i e l d s are a l s o more e f f i c i e n t i n the use of f e n c i n g than small ones. 4 . The f a c t that there i s a l a r g e amount of work to be done on a l a r g e farm may s t i m u l a t e men to work harder than they otherwise would. Size and Rates of Production: In t h i s study crop y i e l d s tended to r i s e as the s i z e of the farm business i n c r e a s e d . The crop index f o r the s m a l l e s t - s i z e d group of farms was 91. This increased s t e a d i l y to 108 f o r the farms i n the l a r g e s t - s i z e d group. There was a l s o a tendency f o r m i l k production per cow to increase as the s i z e of farm increased. The 16 farms representing the s m a l l e s t - s i z e d group, however, provided an exception to t h i s tendency. The average number of cows f o r t h i s group was 8 and the average production of b u t t e r f a t per cow was 330 pounds. The f a c t t h a t the l a r g e r businesses tended to have b e t t e r rates, of production r a i s e s two questions. F i r s t , as s i z e increased, were the greater p r o f i t s due to the higher r a t e s of production? Second, what was the e f f e c t of rates of production on the p r o f i t s of v a r i o u s - s i z e businesses? 24, TABLE 11. - SIZE OF BUSINESS AND RATES OF PRODUCTION, 208 FRASER VALLEY DAIRY FARMS, 19,46 T o t a l P.M.W.U* per Farm Average per Farm Number of T o t a l Crop Lbs. B.F. Farms P.M.W.U. Index per Cow Less than 160 16 141 91 330 160 - 259 61 209 96 301 260 - 359 58 309 98 304 360 - 459 37 404 106 .304 460 - 559 17 512 108 308 560 and over 19 882 108 328 ALL FARMS 208 353 100 302 The farms were d i v i d e d i n t o two groups according to s i z e , then each of these groups was sub-divided i n t o three groups according t o crop y i e l d s and m i l k production per cow r e s p e c t i v e l y (Tables 12 and 13). Increased s i z e of business TABLE 12. - RELATION OF SIZE OF BUSINESS AND CROP .YIELDS TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, 1946 T o t a l P.M.W.U. per Farm Crop Index Less than 90 90 - 110 110 & more A l l Farms Less than 250 250,- 449 450 and over \ 602 653 1,294 * 739 $ 562 $ 616 994 1,064 922 1,635 2,889 " 2,133 ALL FARMS $ 700 $1,076 $1,286 $1,042 25. paid regardless of the crop y i e l d s or the r a t e s of m i l k pro-duction due to the greater sales turnover of the l a r g e r farms TABLE 13. - RELATION OF SIZE OF BUSINESS AND RATES OF • MILK PRODUCTION TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, i 9 4 6 Lbs. B.F. per Cow T o t a l P.M.W.U. per Farm Less than 250 - 350 and A l l 250 349 over Farms Less than 250 $ 346 $ 676 $ 703 $ 6 l 6 250 - 449 125 1,058 1,293 922 450 and over 679 2,247 2,667 2,133 A l l farms 278 1,148 1,393 1,042 and to f a c t o r s other than r a t e s of production. As r a t e s of production increased, however, the combined e f f e c t of good r a t e s of production and s i z e r e s u l t e d i n g r e a t l y increased r e t u r n s . On the other hand poor returns r e s u l t e d f o r those operators with small farms and low r a t e s of production. Small businesses w i t h r a t e s of production above average were more p r o f i t a b l e than small businesses w i t h r a t e s of production below average. This i s i n d i c a t e d by a study of Table 14. I t should a l s o be noted that small businesses with r a t e s of production above average were s l i g h t l y more p r o f i t a b l e than l a r g e businesses with r a t e s of production below average. This i n d i c a t e s the n e c e s s i t y of a c h i e v i n g good r a t e s of production before e n l a r g i n g the s i z e 26., TABLE 14. - RELATION OF SIZE OF BUSINESS AND RATES OF PRODUCTION TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, 1946 Items Number of Farms Average per Farm Lbs. B.F. Crop Labour per Cow Index Earnings Small Businesses: Both Crop Index and Lbs. B.F. per cow -Below average 76 Above average 28 Large Businesses: Both Crop Index and Lbs. B.F. per cow -Below average 56 Above average 48 290 344 272 352 86 $ 572 117 889 93 858 121 2,090 of the business. For example, i t would not pay to enlarge a dairy.herd by adding more poor producers. Rather, pro-duction of the present herd should be f i r s t b u i l t up and then the s i z e i n c r e a s e d . A study of Table 14 shows that a l a r g e - s i z e d business with good r a t e s of production i s necessary f o r high earnings. Importance of S i z e of Business: Large farm businesses have another advantage beside that of greater e f f i c i e n c y . When farming i s p r o f i t a b l e , the l a r g e r the volume of business, the more there i s on which to make a p r o f i t , and so the greater the p r o f i t from the b u s i -ness as a whole, and v i c e v e r s a . 27 . In order to show the importance of s i z e of business alone on p r o f i t s , an attempt was made to e l i m i n a t e the e f f e c t of other important f a c t o r s . This was done by p a i r i n g a , small farm business w i t h a la r g e farm business so that each had s i m i l a r r ates of crop y i e l d s , m i l k production per cow and labour e f f i c i e n c y . From the e n t i r e group i t was po s s i b l e to make 20 p a i r s i n t h i s manner. Labour earnings TABLE 15 . - RELATION OF SIZE OF BUSINESS TO LABOUR EARNINGS, 40 FRASER VALLEY DAIRY FARMS, 1946 Items Small Businesses* Large Businesses * Number of farms 20 20 P.M.W.U. per man 214 213 Crop index 98 98 Lbs. B. F. per cow 303 305 P.M.W.U. per farm 254 475 Labour earnings $745 $1,555 Small Businesses - those having l e s s than 353 P.M.W.U. per farm. ,-Large Businesses - those having more than 353 P.M.W.U. per farm. averaged $745 f o r small farm businesses as compared to $1,555 f o r the l a r g e farm businesses (Table 1 5 ) . This d i f f e r e n c e was due mainly to the l a r g e r volume of output marketed from the l a r g e r farms. I t should be noted, how-ever, that a la r g e volume of business may r e s u l t i n a sub-s t a n t i a l farm l o s s during periods when the p r i c e s of farm 28. products are low r e l a t i v e to c o s t s . In order to minimize such l o s s e s the operators of l a r g e farms must be e f f i c i e n t i n t h e i r use of c a p i t a l and labour, and they must secure good y i e l d s of crops and high production from l i v e s t o c k . Ways to Enlarge the Farm Business: I t has been shown that a moderately l a r g e farm business i s necessary i f a good r e t u r n i s to be secured from d a i r y farming i n the Fraser V a l l e y . The i n d i v i d u a l farmer, t h e r e f o r e , wants to know what, i f anything, he can do towards enlarging h i s own business. As a r e s u l t of the a n a l y s i s of these records, some observations can be presented. 1. Before attempting to enlarge the farm business, be sure that rates of b u t t e r f a t production and crop y i e l d s are good, and that labour w i l l be used e f f i c i e n t l y i n the new setup. Otherwise greater l o s s e s may r e s u l t . 2. The r e n t i n g or buying of a d d i t i o n a l land was a common method of e n l a r g i n g the farm business. 3. Some farmers had remodelled or extended b u i l d -ings i n order to make room f o r more d a i r y cows or space-for p o u l t r y . « -4. Provided the s o i l was s u i t a b l e , many operators increased the amount of productive work by s h i f t i n g part of t h e i r crop land from extensive crops, such as g r a i n , to i n t e n s i v e crops such as peas and potatoes. This was par-t i c u l a r l y e f f e c t i v e i n the Ladner and Sumas areas. Farmers on upland s o i l s achieved a s i m i l a r r e s u l t by growing straw-29. b e r r i e s and r a s p b e r r i e s . Farmers contemplating small f r u i t s , however, are advised before p l a n t i n g t o make a c a r e f u l study of v a r i e t i e s f o r which there i s a good market demand. 5. Where the area of land a v a i l a b l e f o r crops and pasture was d e f i n i t e l y the l i m i t i n g f a c t o r , some farmers were able to increase the s i z e of t h e i r d a i r y herd by de-v o t i n g most of t h e i r land to hay, pasture and s i l a g e crops; and buying most of the concentrate feeds. An increase i n the c a r r y i n g c a p a c i t y of pastures a l s o made an increase i n the s i z e of the d a i r y herd p o s s i b l e . The c a r r y i n g c a p a c i t y of pastures can be r a i s e d by the use of lime and f e r t i l i z e r ; plus proper management p r a c t i c e s such as mowing and g r a z i n g . One farm operator achieved considerably increased y i e l d s by the use of a s p r i n k l e r i r r i g a t i o n system. 6. Where the opportunity was present, some farmers increased the amount of productive work by doing custom work, t r u c k i n g , or part time labour o f f the farm. The best method to use i n i n c r e a s i n g the s i z e of the farm business w i l l vary w i t h the circumstances and the man. The,operator 1s a b i l i t y as a manager, th a t i s h i s a b i l i t y to plan and operate the business as a going concern, w i l l l a r g e l y determine the success of expansion. The man who i s enlarging h i s business, and the man who i s already operating a l a r g e farm as w e l l , must recognize the r i s k s which a l a r g e business i n v o l v e s . He must organize i n such, a way as to take f u l l advantage of a l a r g e r s i z e o p e r a t i o n i n good times and t o a v o i d , i f p o s s i b l e , or at l e a s t reduce the r i s k s which a l a r g e volume e n t a i l s when farming proves u n p r o f i t a b l e * PRODUCTION OF BUTTERFAT PER COW The average r a t e of b u t t e r f a t production per cow f o r the 208 farms included i n the study was 302 pounds* Production per cow was an important f a c t o r a f f e c t i n g farm r e t u r n s . Table 16 shows the r e l a t i o n s h i p between the pounds of b u t t e r f a t produced per cow and labour earnings* TABLE 16. - RELATION OF MILK PRODUCTION PER COW TO L4B0UR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, 1946 Pounds of B u t t e r f a t per Cow Number of Farms Lbs. B.F. Produced per Cow, Labour Earnings Less than 240 32 209 $ 215 240 - 289 36 260 765 290 - 339 73 319 1,241 340 - 389 48 364 1,283 390 and over 19 412 1,585 Operators w i t h herds producing an average of 412 pounds of b u t t e r f a t per cow made earnings seven and one-half times as l a r g e as herds producing an average of 209 pounds per cow. Although some of t h i s d i f f e r e n c e may have been due to other f a c t o r s that had an i n f l u e n c e on p r o f i t s , the importance of good m i l k production from the herd was i n d i c a t e d . 3 1 . In order to show that the production of b u t t e r f a t per cow was important i n i t s e l f , an attempt was made to eli m i n a t e the e f f e c t of other important e f f i c i e n c y f a c t o r s i n the same manner as was used to show the e f f e c t of the s i z e of farm on p r o f i t s . Table 17 shows the e f f e c t on p r o f i t s of b u t t e r f a t production per cow when other important f a c t o r s are approximately equal. TABLE 17 . - RELATION OF MILK PRODUCTION PER COW TO LABOUR EARNINGS, 60 FRASER VALLEY DAIRY FARMS, 1946 M i l k Production M i l k Production per Cow per Cow Below Average Above Average Number of farms 30 30 T o t a l P.M.W.U. - 319 319 Crop index 96 97 P.M.W.U. per man . 209 205 Lbs. B.F. per cow 243 346 Labour"earnings $333 $1,321 B u t t e r f a t per Cow and Various F a c t o r s ; Table 18 shows some i n t e r e s t i n g r e l a t i o n s h i p s be-tween the pounds of b u t t e r f a t per cow and various f a c t o r s . Higher r a t e s of production per cow allowed the t o t a l volume of production to be increased without any increase i n the,, s i z e of the d a i r y herd. This i n t u r n permitted some very decided management economies. The higher producing cows r e -32 . quired that more time be spent per animal on d a i r y chores. The t o t a l hours of d a i r y chores per pound of b u t t e r f a t , however, was almost 50 per cent l e s s f o r the group of highest producing herds as compared with the group of lowest TABLE 18 . - RELATION OF POUNDS OF BUTTERFAT PER COW TO VARIOUS FACTORS, 208 FRASER VALLEY DAIRY FARMS, 1946 Lbs. of B.F. Number Lbs. B.F. T o t a l Number Hours Hours of per Cow Lbs. of of of d a i r y of Farms B. F. Cows chores d a i r y Pro- per Cow chores duced per l b of BF Less than 240 32 209 3,635 17.4 138 0.66 240 - 289 36 260 .4,256.. .16.4 133 - 0.53 290 - 339 73 319 6,000 18.8 136 0.43 340 - 389 48 364 6,294 . 17.3 154 0.42 390 and over 19 412 6,425 15.6 146 0.35 producing herds. Because of the importance of labour as an expense i n milk production, such savings can have a s i g n i f i -cant e f f e c t on the p r o f i t s secured from d a i r y farming. The number of P.M.W.U. accomplished per man i s an-other method by which e f f i c i e n c y i n the use of labour can be measured. Table 19 shows the r e l a t i o n of b u t t e r f a t pro- -duction per cow and labour e f f i c i e n c y to farm p r o f i t s . An increase i n e i t h e r production per cow or labour e f f i c i e n c y r e s u l t e d i n an increase i n p r o f i t s . When both of these f a c t o r s were increased together, however, the p r o f i t s were -3 3 . g r e a t l y enhanced. Farms with poor production per cow and low labour e f f i c i e n c y had an average labour earnings of $157, whereas farms w i t h good production per cow and high labour e f f i c i e n c y made an average labour earnings of $ 2 , 3 5 4 . TABLE 19. - RELATION OF MILK PRODUCTION PER COW AND LABOUR EFFICIENCY (P.M.W.U. PER MAN) TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, 1946 •' P.M.W.U. per Man Lbs. D . r . Per Cow 'Less than 160 160-240 240 & over A l l Farms Less than $ 157 $ 250 $ 440 $ 278 250 250-350 441 1,033 1,958 1,148 350 & over 740 1,194 2,354 1,393 A l l farms 1,485 $ 894 $1,800 $1,042 Factors C o n t r i b u t i n g To High M i l k Production Per Cowt The importance of high r a t e s of milk production has thus been s t r i k i n g l y demonstrated. B a s i c a l l y high r a t e s of milk production are dependent on the inherent a b i l i t y of cows to produce, since care i n feeding and management w i l l not i n i t s e l f i n s ure economical milk production i f the- cows are i n e f f i c i e n t and low i n c a p a c i t y . Farmers w i t h herds which produced economically kept records of the production of each cow. This made p o s s i b l e more accurate c u l l i n g of uneconomical producers. Membership i n a l o c a l cow-testing a s s o c i a t i o n f a c i l i t a t e d such record-keeping. The use of pure-bred s i r e s 34. or a r t i f i c i a l insemination a i d i n i n c r e a s i n g the inherent p r o d u c t i y i t y of the d a i r y herd. Economical milk production per cow i s a l s o dependent on proper f e e d i n g . The r a t i o n of the d a i r y cow must be well-balanced i n n u t r i e n t s s u p p l i e d , and i t should be fed at a r a t e which y i e l d s the maximum p r o f i t . I t must be kept i n mind, however, that production at the lowest u n i t cost does not n e c e s s a r i l y r e s u l t i n the highest t o t a l * p r o f i t . The value of the extra pound of b u t t e r f a t produced may exceed the higher costs i n c u r r e d and hence s t i l l be p r o f i t a b l e . Good m i l k i n g p r a c t i c e must a l s o be used i f the great-est p o s s i b l e production per cow i s to.be achieved. Cows must not r e c e i v e rough treatment, and.loud d i s t u r b i n g noises i n the barn during m i l k i n g must be avoided. Proper stimu-l a t i o n of the cow's udder not more than a minute before m i l k i n g w i l l a i d i n .securing a f a s t and complete milk f l o w . CROP YIELDS For each farm the y i e l d s of the important crops were expressed as a percentage of the average f o r the area. This i s c a l l e d a crop index. As crop y i e l d s increased p r o f i t s a l s o increased (Table 20). There was a d i f f e r e n c e i n labour earnings of $1,058 between the group of farms w i t h the high-est crop index and the group with the lowest. The important r e l a t i o n s h i p between crop y i e l d s and farm p r o f i t s i s f u r t h e r emphasized i n - Table 21. A group of 23 farms having above-average crop y i e l d s was compared w i t h a TABLE 20. - RELATION OF CROP INDEX TO LABOUR EARNINGS 208 FRASER VALLEY DAIRY FARMS, 1946 Crop Index Number of Farms Crop Index (Average) Labour Earnings Less than 70 19 61 $ 628 70 - 89 42 80 769 90 - 109 66 98 1,036 110 - 129 54 115 1,086 130 and over 27 143 1,686 group of 23 farms having below-average crop y i e l d s * Farms i n these groups were so matched that the e f f e c t s of s i z e of the farm, labour e f f i c i e n c y and the r a t e of mi l k pro-duction were p r a c t i c a l l y e l i m i n a t e d . The average labour earnings was $ 515 f o r the group of farms with y i e l d s below average as compared with $1,402 f o r the group of farms with TABLE 21. - RELATION OF CROP INDEX TO LABOUR EARNINGS, 46 FRASER VALLEY DAIRY FARMS, 1946 Crop Index Below Average Crop Index above Average Number of farms 23 23 T o t a l P.M.W.U. 325 326 Lbs. B.F. per cow 302 302 P.M.W.U. per man 198 199 Crop index 86 118 Labour earnings $515 $1,402 3 6 . y i e l d s above-average* The crop indexes were 86 and 118 for the two groups respectively* , The farms with high crop y i e l d s had somewhat larger businesses and higher labour e f f i c i e n c y than the farms with low crop yi e l d s (Table 22). The importance of the crop enterprises as measured by the per cent of t o t a l P.M.W.U. on crops as a part of the entire farming operations, had l i t t l e influence on the crop y i e l d s obtained* TABLE 22. - RELATION OF CROP INDEX TO VARIOUS FACTORS, 208 FRASER VALLEY DAIRY FARMS, 1946 Number Acres Per cent P.M.W.U. Crop of Crop of Total P.M.W.U. per Index Farms Index Crop P.M.W.U. on Man Land Crops Less than 70 19 61 37 258 19 184 70 - 89 42 80 39 304 19 190 90 - 109 66 98 54 384 19 213 110 - 129 54 115 46 355 24 209 130 & over 27 143 54 413 20 243 Table 23 shows the effect of both crop y i e l d s and labour e f f i c i e n c y on earnings. An increase i n either crop yields or labour e f f i c i e n c y resulted i n higher earnings. When both of these factors were increased together, however, earnings were substantially increased. 37. TABLE 23 . - RELATION OF CROP INDEX AND LABOUR EFFICIENCY TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS, 1946 P.M.W.U. per man „ T . Less than 160- 240 A l l Crop Index l 6 Q 2 4 Q & o y e r F a r m s Less than 90 $ 468 $ 644 $1,143 $ 700 90 - 110 697 878 1,770 1,076* 110 and over 383 1,084 2,214 1,286 A l l farms $ 485 $ 894 $1,800 $1,042 Factors A f f e c t i n g Crop Y i e l d s ; • - - -The importance of good crop'yields- has been shown. The problem of the i n d i v i d u a l farm operator i s how t o o b t a i n them i n economical ways. This i s a study which r e q u i r e s the co-operation of the a g r i c u l t u r a l economist and the agronomist. Farmers interviewed during the course of the study made frequent e n q u i r i e s r e l a t i v e to s o i l a n a l y s i s , drainage, crop v a r i e t i e s , f e r t i l i z e r a p p l i c a t i o n s and c u l t u r a l methods. This i n d i c a t e s the d e f i n i t e i n t e r e s t on the part o f d a i r y farmers i n g e t t i n g i n f o r m a t i o n which w i l l a i d them i n securing l a r g e r and more economical crop y i e l d s . D e t a i l e d data r e l a t i n g to f a c t o r s which i n f l u e n c e crop y i e l d s were not c o l l e c t e d i n t h i s study. E s t a b l i s h e d d a i r y farmers can do l i t t l e to change the inherent c a p a c i t y of t h e i r s o i l t o produce. Increased crop y i e l d s , however, can be obtained by proper d r a i n i n g , f e r t i l i z i n g and l i m i n g . Crop v a r i e t i e s best adapted t o the p a r t i c u l a r area, i n s e c t 38. and disease c o n t r o l , and good c u l t u r a l p r a c t i c e s are a l s o important i n o b t a i n i n g s a t i s f a c t o r y y i e l d s . LABOUR EFFICIENCY E f f i c i e n c y i n the use of labour has been measured by the number of productive man work u n i t s accomplished per man. This i s one of the best measures of labour e f f i c i e n c y on farms which have more than one -enterprise as i t shows the amount of productive work accomplished per workery whether-i t be on crops, l i v e s t o c k , or other farm work. TABLE 24. - RELATIONSHIP OF LABOUR EFFICIENCY (P.M.W.U. per Man) TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRYFARMS, 1946 P.M.W.U. per Man Number of Farms Average P.M.W.U. per Man Labour Earnings Less than 100 8 83 $ 265 • 100 - 149 32 128 420 150 - 199 59 170 853 200 - 249 59 222 918 250 - 299 28 274 1,508 300 - 349 15 326 2,064 350 and over 7 398 3,350 There was a close r e l a t i o n s h i p between labour e f f i c i e n -cy and farm p r o f i t s (Table 2 4 ) . The group of farms w i t h the lowest labour e f f i c i e n c y had labour earnings averaging $265 as compared w i t h $3,350 f o r the group of farms w i t h the high-est labour e f f i c i e n c y . Part of t h i s d i f f e r e n c e must be 3 9 . a t t r i b u t e d to other advantages that went with the pronounced increase i n the s i z e of farm which accompanied the r i s e i n the number of P.M.W.U. per man. The e f f e c t of other impor-tant f a c t o r s was p r a c t i c a l l y e l i m i n a t e d , however, by com-paring two groups of farms which v a r i e d only i n labour e f f i c i e n c y (Table 25). Labour earnings amounted to $320 on a group of farms which averaged 182 P.M.W.U. per man as com-pared with $1,405 on a group of farms which averaged 242 P.M.W.U. per man. This d i f f e r e n c e of $1,085 can be a t t r i -buted mainly to labour e f f i c i e n c y . TABLE 25 . - RELATION OF LABOUR" EFFICIENCY (P.M.W.U. PER MAN) TO LABOUR EARNINGS, 32 FRASER VALLEY DAIRY FARMS, 1946 Below Average Labour E f f i c i e n c y Above Average Labour E f f i c i e n c y Number of farms 16 16 Lbs. B.F. per cow 297 297 T o t a l P.M.W.U. 393 394 Crop index 101 .99 C a p i t a l turnover 4.6 4 . 4 P.M.W.U. per man 182 242 Labour earnings $ 320 $ 1,405 Labour E f f i c i e n c y and Various Factors; Large farms were more e f f i c i e n t i n the use of labour than small farms (Table 2 6 ) . This was a l s o pointed out under the d i s c u s s i o n of s i z e - o f business. Part of the 1 TABLE 26. - RELATION OF LABOUR EFFICIENCY (P.M.W.U. PER MAN) TO VARIOUS FACTORS, 208 FRASER VALLEY DAIRY FARMS, 1946 P.M.W.U. Number AVERAGE PER FARM per Man of Farms P.M.W.U. per Man T o t a l P.M.W.U. Lbs. B.F. Crop per Cow Index % P.M.W.U. on Dairy Herd Hours of Dairy Chores per Cow Per cent of Farms w i t h M i l k e r Less than 100 8 83 158 340 98 76 235 38 100 - 149 , 32 128 205 303 ; 96 77 190 50 150 - 199 . 59 170 272 307 93 73 159 76 200 - 249 59 222 377 311 103 75 133 83 250 - 299 28 274 466 !311 103 74 ' 129 89 300 - 349 15 326 55-5 327 115 71 ' 117 100 350 and over 7 398 837 309 106 61 107 100 o 41. greater earnings a t t r i b u t e d to labour e f f i c i e n c y was due to t h i s f a c t o r . The production of b u t t e r f a t per cow was not r e l a t e d to labour e f f i c i e n c y (Table 2 6 ) . Pounds of b u t t e r f a t per cow v a r i e d regardless of labour e f f i c i e n c y . As was i n d i c a t e d under the d i s c u s s i o n of production of b u t t e r f a t per cow, how-ever, a combination of good milk production per cow and high labour ' e f f i c i e n c y r e s u l t e d i n l a r g e r average earnings. • There was a l s o no co n s i s t e n t r e l a t i o n s h i p between crop y i e l d s and labour e f f i c i e n c y , (Table 2 6 ) , Although crop y i e l d s were not c l o s e l y r e l a t e d t o labour e f f i c i e n c y , i t was pointed out i n Table 23 that higher earnings were obtained when good crop y i e l d s were combined wi t h high labour e f f i c i e n c y . The per cent of P.M.W.U. represented by the d a i r y herd i s a measure of the extent of the s p e c i a l i z a t i o n on d a i r y farms. As s p e c i a l i z a t i o n i n d a i r y i n g increased, labour e f f i c i e n c y decreased (Table 2 6 ) . This close r e l a t i o n s h i p i n d i c a t e d t h a t supplementary e n t e r p r i s e s were required i n order to insure the best p o s s i b l e use of the labour f o r c e employed. The number of P.M.W.U. per man i s a general measure of labour e f f i c i e n c y f o r the e n t i r e farm. E f f i c i e n c y i n the use of labour on the d a i r y herd has been measured by the number of hours of d a i r y chores per cow. Table 26 shows that i n e f f i c i e n c y i n the use of labour on the farms included i n t h i s study r e s u l t e d i n part from the i n e f f i c i e n t use of labour on the d a i r y herd. As the number of hours of d a i r y chores per cow increased, the o v e r - a l l labour e f f i c i e n c y of the farm decreased. The use of m i l k i n g machines aided i n reducing the hours of labour required f o r the d a i r y chores. E f f i c i e n c y i n the use of labour was l a r g e l y depen-dent upon the use of labour-saving machinery and equipment. Table 27 shows the marked r e l a t i o n s h i p between the c a p i t a l i n vested per man i n machinery and equipment and labour e f f i c i e n c y . Farms with l e s s than $500 invested i n machinery and equipment per man averaged only 148 P.H.W.-U. per man. On the other hand, farms w i t h over $2,000 per man averaged 282 P.M.W.U. per man. As a consequence of increased labour e f f i c i e n c y , earnings a l s o i n c r e a s e d . TABLE 27. RELATION OF THE INVESTMENT IN MACHINERY AND EQUIPMENT PER MAN TO LABOUR EFFICIENCY AND LABOUR EARNINGS, 208 FRASER 1946 VALLEY DAIRY FARMS, Investment i n Number Average per Farm Machinery and Equipment per man of Farms Investment i n machinery and equip, per man P.M.W.U. per man Labour Earnings Less than$500 33 . $ 313 148 $ 708 $ 500 - 999 70 769 186 877 1,000 - 1,499 47 1,224 215 966 1,500 - 1,999 34 1,806 248 1,325 2,000 and over 24 2,437 282 1,731 43 .< Although l a r g e farms were more e f f i c i e n t i n the use of labour than small or medium-sized farms, i t paid t o be e f f i c i e n t i n the use of labour regardless of the s i z e of farm. The sample was arrayed according to s i z e and on t h i s b a s i s was s p l i t i n t o three groups - s m a l l , medium and l a r g e - wi t h approximately the same number of farms i n each group. The average labour e f f i c i e n c y of each group was determined. Each group was then subdivided i n t o groups below average and above average i n labour e f f i c i e n c y . Table 28 shows th a t f o r each s i z e group, earnings were greater f o r those_ farms which were above average i n labour e f f i c i e n c y f o r t h e i r group. TABLE 28. - EFFECT ON LABOUR EARNINGS OF BEING BELOW AVERAGE AND ABOVE AVERAGE IN LABOUR EFFICIENCY ON SMALL, MEDIUM AND LARGE FARMS, 208 FRASER VALLEY DAIRY FARMS, 1946 „ ~ Average per Farm Number of P.M.W.U. Labour Farms per Man Earnings Small Farms . Labour E f f i c i e n c y — — Below average 28 107 . $ 389 Above average 41 183 772 Medium Farms Labour E f f i c i e n c y Below average 46 171 646 Above average 55 247 1,154 Large Farms Labour E f f i c i e n c y Below average 19 219 1,426 Above average .19 336 2,840 44. Ways to Increase Labour E f f i c i e n c y 1. Have a moderately l a r g e - s i z e business. The advantages of l a r g e r farms i n using labour e f f i c i e n t l y have already been discussed on page 22. 2. Provide a good labour d i s t r i b u t i o n . Minor enter-p r i s e s which are supplementary to the d a i r y e n t e r p r i s e , help . to d i s t r i b u t e the work throughout the day and throughout the year. Cash crops, p o u l t r y and part-time work o f f the farm helped many d a i r y farmers i n t h i s study to achieve greater labour e f f i c i e n c y . 3. Use labour-saving machinery. Economical labour-saving equipment and machinery such as m i l k i n g machines, t r a c t o r s , manure spreaders, and hay loaders were: common on farms which used labour to the best advantage. However, . o v e r - c a p i t a l i z a t i o n i n equipment must be avoided since too l i t t l e work f o r equipment makes i t a c o s t l y means.of saving labour. 4. Have a good f i e l d layout and b u i l d i n g arrangement. I f the f i e l d s are l a r g e and rectangular the work can be done i n l e s s time. S i m i l a r l y high labour e f f i c i e n c y i s found where b u i l d i n g s are conveniently arranged. A recent American study (2) of d a i r y barn chores shows that s u b s t a n t i a l savings i n labour can be made by improvements i n barn arrangement, i n equipment, i n work r o u t i n e s , and i n the p o s i t i o n i n g of equip-ment and s u p p l i e s . Have a farm work programme. Best r e s u l t s are obtained from labour i f the work i s planned and done on time. Keeping a l i s t of jobs to be done on a r a i n y day i s a good way t o avoid having to do these jobs during good weather. Likewise i t pays to/ make machinery and equipment r e p a i r s during the w i n t e r . CAPITAL EFFICIENCY E f f i c i e n c y i n the use of c a p i t a l was'measured by the years required f o r cash r e c e i p t s to equal the c a p i t a l i n v e s t -ment. This i s known as the c a p i t a l turnover* The more r a p i d the rate of the turnover of. c a p i t a l , the more e f f i c i e n t l y i t i s used. Because i t measures the o v e r - a l l use of c a p i t a l i n the farm business, i t provides the means f o r a farmer to check the r e s u l t s of h i s operations at the end of the year* TABLE 2 9 . - RELATION EARNINGS OF CAPITAL TURNOVER , 190 OWNER-OPERATED DAIRY FARMS, 1946 TO LABOUR FRASER VALLEY C a p i t a l Turnover Number of Farms Average per C a p i t a l Turnover Farm Labour Earnings Less than 2.5 14 2 .1 $ 2 ,239 2.5 - . 3 .4 49 2.9 1,412 3 .5 - 4 .4 53 4 .0 894 4 .5 - 5.4 44 4.9 658 5.5 - 6.4 19 5.9 362 6.5 and over 11 7.3 76 Because of the d i f f i c u l t y of securing complete i n -formation regarding the investments of tenant-operated farms, 46. the c a p i t a l turnover was c a l c u l a t e d only f o r owner-operated farms. The e f f e c t of c a p i t a l e f f i c i e n c y -- as measured by c a p i t a l turnover -- on labour earnings i s shown i n Table 29. I t w i l l be noted that there was a marked r e l a t i o n between c a p i t a l turnover and labour earnings secured from the farm operation. There was a d i f f e r e n c e of $2,163 i n labour earn-ings between the groups of farms w i t h the highest and lowest c a p i t a l turnover. C a p i t a l E f f i c i e n c y and Various F a c t o r s ; TABLE 30. - RELATION OF CAPITAL EFFICIENCY TO VARIOUS FACTORS, 190 OWNER-OPERATED FRASER VALLEY . DAIRY FARMS. 1946  C a p i t a l Turnover Number of Farm 8 Average per Farm C a p i t a l Turnover Lbs .B.F. per Cow Crop Index T o t a l P.M.W.fl. P.M.W.U. per Man Less than 2*5 14 2.1 341 102 461 230 2.5 - 3.4 49 2.9 332 100 328 193 3.5 - 4.4 53 4.0 313 99 327 204 4.5 - 5.4 44 4.9 315 108 383 213 5.5 - 6.4 19 5.9 268. 95 316 211 6.5 and over 11 7.3 262 98 319 188 E f f i c i e n c y i n the use of c a p i t a l i s dependent upon a la r g e volume of business i n r e l a t i o n to the c a p i t a l i n v e s t e d . On a d a i r y farm the volume of business can be increased by good r a t e s of mil k production and high grop y i e l d s . 47. Y e a r l y production of b u t t e r f a t per cow increased from 262 pounds on the group of farms w i t h the lowest c a p i t a l turnover to 341 pounds on the group of farms with the highest c a p i t a l turnover. Crop y i e l d s as measured by the crop index d i d not show such a consistent r e l a t i o n to c a p i t a l e f f i c i e n c y . I t i s evident from Table 30, however, that a r a p i d c a p i t a l turnover was a s s o c i a t e d with a crop index which was above average. On the other hand, farms w i t h a slow c a p i t a l turnover had crop i n d i c e s which were below average. The l e s s e r e f f e c t of crop y i e l d s on c a p i t a l e f f i c i e n c y as compared to the r a t e of b u t t e r f a t production per cow may be explained by the f a c t . t h a t on d a i r y farms, crops are marketed mainly through the d a i r y - h e r d . The e f f i c i e n c y of the operator as a feeder, that i s i n using t h e ' d a i r y herd i n order to market crops, l a r g e l y determines the e f f e c t of crop yi e l d s , on. the volume of b u t t e r f a t production. The s i z e of farm and labour e f f i c i e n c y were not important f a c t o r s i n i n f l u e n c i n g c a p i t a l e f f i c i e n c y . Table 30 shows, however, that the most r a p i d c a p i t a l turnover was associated with a l a r g e - s i z e d e n t e r p r i s e and high labour e f f i c i e n c y . These f a c t o r s alone, however, d i d not assure a r a p i d c a p i t a l turnover. A c a p i t a l turnover i n the range 2.5 to 3*4 can be considered very s a t i s f a c t o r y , yet there was no s i g n i f i c a n t d i f f e r e n c e i n the s i z e of farm and labour e f f i c i e n c y between t h i s group and the group which had the very u n s a t i s f a c t o r y turnovers of 6.5 and over. 48. C a p i t a l E f f i c i e n c y and F i n a n c i a l Organizationt I n e f f i c i e n t use of c a p i t a l was asso c i a t e d w i t h an excessive p r o p o r t i o n of i t i n r e a l estate (Table 31)• Such o v e r - c a p i t a l i z a t i o n of the farm meant that the productive • TABLE 3 1 . - RELATION OF CAPITAL TURNOVER TO FINANCIAL ORGANIZATION, 190 OWNER-OPERATED FRASER VALLEY DAIRY FARMS, 1946 C a p i t a l Turnover Number of Farms Average per Farm C a p i t a l Turnover T o t a l C a p i t a l Per cent C a p i t a l i n Real Estate C a p i t a l per P.M.W.U, Less than 2.5 14 2 .1 $15,153 64 $ 33 2.5 — 3.4 49 2.9 15,644 63 48 3 .5 — 4.4 53 4 .0 19,212 68 59 4.5 — 5.4 44 4.9 28,453 71 74 5.5 — 6.4 19 5.9 22,794 72 72 6.5 and over 11 7.3 29,589 73 93 operations had to bear high costs f o r i n t e r e s t , d e p r e c i a t i o n and taxes. The burden of these heavier expenses accounted, i n l a r g e p a r t , f o r the low incomes of the operators who had lar g e c a p i t a l investments r e l a t i v e t o the volume of business they d i d . This r e l a t i o n s h i p i s shown i n Table 31 by the c a p i t a l investment per P.M.W.U. SPECIALIZATION IN DAIRYING Records were taken only from farmers whose primary source of income was the d a i r y e n t e r p r i s e . Nevertheless, among the farms that were included there were wide d i f f e r e n c e s i n the extent of s p e c i a l i z a t i o n i n the d a i r y e n t e r p r i s e . One 49. measure of t h i s i s the percentage of income producing work (P.M.W.U.) represented by the d a i r y herd. TABLE 32.- RELATION OF PERCENTAGE OF P.M.W.U. ON DAIRY HERD TO VARIOUS FACTORS, 208 FRASER VALLEY DAIRY FARMS, 1946 Per cent of Number Average per Farm P.M.W.U. on of Per cent Dairy Herd Farms o f P . M . Labour Number T o t a l P.M.W.U, W.U. on Earn- of P.M. per Dairy ings. Cows W.U. Man Herd Less than 58 20 45 $1,605 13.6 440 232 58 - 67 32. 63 1,260 17.5 414 218 68 - 77 43 72 1 ,233 17.4 353 221 78 - 87 87 82 823 18.3 . 327 204 88 and over 26 91 756 18.4 294 196 S p e c i a l i z a t i o n i n the d a i r y e n t e r p r i s e was ass o c i a t e d w i t h r e l a t i v e l y low earnings. Farms with l e s s than 58 per cent of P.M.W.U. i n the d a i r y herd made earnings which were more than double those secured by farms with 88 per cent and over of t h e i r P.M.W.U. i n the d a i r y herd (Table.32). Farms which were h i g h l y s p e c i a l i z e d i n the d a i r y e n t e r p r i s e had s l i g h t l y l a r g e r herds but they were smaller when measured i n terms of income-producing work, t h a t i s P.M.W.U. As pointed out p r e v i o u s l y the number of P.M.W.U. i s a b e t t e r measure of s i z e when there are d i f f e r e n t types of e n t e r p r i s e s on the farm. The more d i v e r s i f i e d farms were more e f f i c i e n t i n the use of labour. This r e s u l t e d from the i n c l u s i o n i n the farm 50. business of e n t e r p r i s e s which were supplementary to the d a i r y herd i n the use of labour. The en t e r p r i s e s most f r e -quently combined with the d a i r y e n t e r p r i s e were cash crops, small f r u i t s , and p o u l t r y . The a d d i t i o n s of these enter-p r i s e s r e s u l t e d i n l a r g e r - s i z e d businesses, making p o s s i b l e more e f f i c i e n t use of labour, and l a r g e r farm p r o f i t s . COMBINED EFFECT OF IMPORTANT FACTORS I t has been shown that there are f i v e important f a c t o r s which a f f e c t the earnings of d a i r y farmers i n the Lower Fraser V a l l e y . These f a c t o r s are s i z e of farm, r a t e of milk production, crop y i e l d , labour e f f i c i e n c y , and c a p i t a l turnover. I t was also? shown that a moderate d i v e r s i f i c a t i o n of e n t e r p r i s e s was d e s i r a b l e , since supplementary enter-p r i s e s aided i n a f u l l e r u t i l i z a t i o n of the labour employed on d a i r y farms. TABLE 33. - RELATION OF THE NUMBER OF IMPORTANT FACTORS ABOVE AVERAGE TO LABOUR EARNINGS, 208 FRASER VALLEY DAIRY FARMS Above Average i n Following Number A l l of Factors Farms 0 1 2 3 4 5 Number of farms 12 46 • 53 46 34 17 208 Labour earnings $130 $402 $803 $849 $1650 $3468 $1042 Factors T o t a l P.M.W.U. 230 246 269 374 476 684 353 Lbs.'B.F.per cow 243 277 310 290 346 348 302 Crop index 80 92 96 105 116 120 100 P.M.W.U. per man 144 164 180 220 238 311 209 C a p i t a l turnover 5.7 4.6 3.7 4.0 3.7 2.6 3.8 51. In order to secure high earnings a farm operator must be above average i n more than one of these f a c t o r s * From Table 33 i t w i l l be seen that the number of f a c t o r s i n which a farm operator excels has a very strong r e l a t i o n s h i p to labour earnings* Only eight per cent of the farms studied were above average i n a l l f i v e f a c t o r s * The hard work and c a r e f u l planning required to o b t a i n such production e f f i c i e n c y , however, pai d o f f very handsomely i n f i n a n c i a l r e t u r n s * Labour earnings f o r t h i s group of operators averaged $3,468. On the other hand, the 12 operators who f a i l e d t o e x c e l i n any f a c t o r had labour earnings which averaged only $130. 52.. CONCLUSIONS The f a c t o r s t h a t a f f e c t the s i z e of income from d a i r y farming may be. d i v i d e d i n t o two groups, those w i t h i n the operator's c o n t r o l and those not w i t h i n h i s c o n t r o l . The weather and economic c o n d i t i o n s are the p r i n c i p a l f a c t o r s beyond the c o n t r o l of the farm operator. In any one area during a given year when a l l farmers are experiencing s i m i l a r weather and economic c o n d i t i o n s , however, there i s consider-able farm-to-farm v a r i a t i o n i n incomes. Such d i f f e r e n c e s i n incomes are due mainly to the f a c t o r s of farm o r g a n i z a t i o n and management discussed i n t h i s t h e s i s . The most important of these are: 1. S i z e of farm 2. Production of b u t t e r f a t per cow 3. Crop y i e l d s 4. E f f i c i e n c y i n the use of labour 5. E f f i c i e n c y i n the use of c a p i t a l . High incomes are obtained only by farmers who are above average i n a l l of these f a c t o r s . Furthermore the greatest improvement i n income comes about by improving the weakest f a c t o r r a t h e r than f u r t h e r improving a f a c t o r which i s a lready high. Increasing the s i z e of the farm business ,a^c;ts as a " m u l t i p l i e r " of the other f a c t o r s . Thus when a business i s operated e f f i c i e n t l y a l a r g e volume w i l l give a higher net income than a small volume. On the other hand, l a r g e l o s s e s are l i k e l y to occur through the i n e f f i c i e n t production of a l a r g e volume. 53. The study showed that the average labour earnings secured by operators of d a i r y farms i n the Fraser V a l l e y during 1946 was $1,042* This seems to be low and tends to r a i s e the question as to whether or not d a i r y farmers i n the Fraser V a l l e y are r e c e i v i n g a p r i c e f o r t h e i r milk which covers t h e i r cost of production. On many occasions, i n f a c t , producers have made the complaint that the p r i c e being r e -ceived f o r t h e i r m i l k i s below the cost of production. They ask that cost of production s t u d i e s be made, and demand that a p r i c e be f i x e d which s h a l l equal "the cost of production plus a reasonable p r o f i t . " Two separate s t u d i e s have been made i n an e f f o r t to c a l c u l a t e the cost of producing b u t t e r f a t i n the Fraser V a l l e y * Professor H. R. Hare (3) of the Department of Animal Husbandry of The U n i v e r s i t y of B r i t i s h Columbia c a r r i e d . o u t annual surveys of production costs between the years 1920 and 1930. In 1946 the Department of A g r i c u l t u r a l Economics of The U n i v e r s i t y of B r i t i s h Columbia (4) c a r r i e d out a survey of production costs f o r the year 1945. Both of these s t u d i e s reported costs of b u t t e r f a t production above the p r i c e being received at the time the studies were made* In summarizing the cost r e s u l t s f o r the f i v e year p e r i o d 1921 - 1925 H. R. Hare (3) reported as f o l l o w s : "A weighted average cost of production f o r the f i v e years was determined and amounted to 74*4 cents. The average p r i c e received f o r b u t t e r f a t was 50*5 cents* A l o s s of 23.9 cents per pound was thus r e g i s t e r e d . " In the study done by 54. the Department of A g r i c u l t u r a l Economics f o r the year 1945 the weighted average cost was,78.22 cents while the p r i c e a c t u a l l y received by producers was 73.24 cents. During most of the period under study, that i s from 1920 to the present time, there has been a steady increase i n milk production. Figure 1 shows the trend i n production f o r the e n t i r e province of B r i t i s h Columbia. This chart i s based on f i g u r e s compiled by the A g r i c u l t u r a l Branch of the Dominion Bureau of S t a t i s t i c s . Separate production f i g u r e s f o r the Fraser V a l l e y are not a v a i l a b l e , but as over 70 per cent (5) of the t o t a l number of milk cows i n B r i t i s h Columbia are loc a t e d i n the Lower Fraser V a l l e y i t i s safe to conclude that the trend i s re p r e s e n t a t i v e of production i n that area. In view of the f a c t that dairymen continue to produce milk i n i n c r e a s i n g amounts one may w e l l ask how the complaint a r i s e s t h a t the p r i c e being received by producers i s below c o s t . The studie s of d a i r y farms i n the Fraser V a l l e y have shown that these farms are c h a r a c t e r i z e d by low earnings f o r the labour of t h e i r operators. Are these low labour earnings the r e s u l t of p r i c e s below the cost of production? Or are they a surface m a n i f e s t a t i o n of a more fundamental d i s l o c a t i o n ? Ambiguity of the Word "Cost" The expression "cost of production" i s extremely ambiguous. According to Boulding (6) there i s no such t h i n g as "the" cost of production of a commodity. There are as many d i f f e r e n t costs of production as there are producers, and as many d i f f e r e n t costs of production f o r any given FIGURE 1. - MILK PRODUCTION IN BRITISH COLUMBIA, 1920 - 1946 (MILLIONS OF POUNDS). M i l l i o n s of pounds _» i i _ 21 22 23 24 25 26 27 28 2^  30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Year-Source: A g r i c u l t u r a l Branch, Dominion Bureau of S t a t i s t i c s . 56. producer as there are d i f f e r e n t q u a n t i t i e s of output. The Economists 1 D e f i n i t i o n of Cost To the economist the t o t a l cost of producing a given q u a n t i t y of output i s the value of the inputs used plus the normal p r o f i t which must be secured by the owners of a business i n order to encourage continued production. Thus the t o t a l cost of producing a d e f i n i t e q u a n t i t y of milk i n a given time i s the l e a s t sum which w i l l keep a l l the necessary f a c t o r s of production — l a n d , c a p i t a l , labour and manage-ment -- i n the business of producing m i l k . This sum depends on the p r o f i t a b i l i t y of r e a d i l y a v a i l a b l e a l t e r n a t i v e occupations. Thus con d i t i o n s i n one i n d u s t r y a f f e c t the t o t a l costs of other in d u s t r i e s * . I f the growing of small f r u i t s i n the Fraser V a l l e y becomes unusually p r o f i t a b l e , the t o t a l cost of production of milk w i l l be increased. This happens not only because the increased p r o f i t a b i l i t y of small f r u i t growing r a i s e d rents and wages, but a l s o because m i l k producers w i l l not be content w i t h a low r a t e of r e t u r n on t h e i r own labour and c a p i t a l i f they can get a higher r e t u r n by growing small f r u i t s . Cost of Production and Supply; As has already been pointed out, not a l l producers have the same cost of production. Producers whose cost of production i s equal to the p r i c e being received f o r the product are known as marginal producers; those with costs of production l e s s than the p r i c e are known as i n t r a - m a r g i n a l producers; and those with costs of production above the p r i c e 57. being received are known as sub-marginal producers. When the t o t a l production of milk i n a given area i s decreasing, some producers — the sub-marginal ones -•- are not making normal p r o f i t s and are l e a v i n g the i n d u s t r y . Producers w i l l continue to leave the i n d u s t r y u n t i l the l e a s t p r o f i t a b l e producer i s making normal p r o f i t s . I f , on the other hand, the l e a s t p r o f i t a b l e producer i s making p r o f i t s above normal, new producers coming i n t o the i n d u s t r y could probably a l s o make p r o f i t s above normal. There w i l l thus be a tendency f o r new producers to enter the i n d u s t r y w i t h the r e s u l t that t o t a l production i n the area w i l l i n c r e a s e . These, however, are long-run tendencies and i t should not be thought that adjustments.to c o s t - p r i c e r e l a t i o n s h i p s take place e a s i l y . When the c o s t - p r i c e r e l a t i o n s h i p i n milk production suddenly becomes unfavourable, some producers do not secure normal p r o f i t s . In the short-run many such pro-ducers w i l l continue production with„the hope that the un-favourable r e l a t i o n s h i p i s temporary. U l t i m a t e l y , however, sub-marginal producers w i l l leave the i n d u s t r y . Cost of Production and the Supply of M i l k i n the Fraser V a l l e y In view of the f a c t that there has been a long-run tendency f o r milk production to increase i n the Fraser V a l l e y i t would appear that the o p p o r t u n i t i e s of securing normal p r o f i t s i n the i n d u s t r y have been good. One can conclude then, that milk producers, on the average, i n the Fraser V a l l e y , have received t h e i r costs of production. .In no other way can one account f o r the con s i s t e n t expansion of the 58. i n d u s t r y . Because of the cl o s e r e l a t i o n s h i p between the cost of production and the r e s u l t a n t supply, i t appears a d v i s a b l e that accurate f i g u r e s should be compiled on the production of milk i n the Fraser V a l l e y area. Supply responses as a r e s u l t of.changes i n the p r i c e s of important inputs of m i l k production such as feed and labour, as w e l l as the response to changes i n the p r i c e ' r e c e i v e d f o r mi l k should be noted c a r e f u l l y . Once an adequate body of s t a t i s t i c a l i n f o r m a t i o n on production trends and responses has been b u i l t up, more r e l i a b l e f o r e c a s t s of supply w i l l be p o s s i b l e . Such s t a t i s -t i c s are already i n use i n s e v e r a l parts of the United States (7, 8, 9, 10, 11). An A p p r a i s a l of Cost of Production C a l c u l a t i o n s ; The r e s u l t s of the cost of b u t t e r f a t production studies which have been c a r r i e d out have been c o n s i s t e n t i n demonstrating an average cost of production above the p r i c e being received f o r the product. Thus there i s a c o n f l i c t between the conclusions a r r i v e d at by these s t u d i e s and the upward trend of production which could not have taken place i f producers were not r e c e i v i n g t h e i r costs of production. Many d i f f i c u l t i e s a r i s e i n the attempt to c a l c u l a t e the cost of production of a given supply of milk during a given time. In s p i t e of these d i f f i c u l t i e s i t appears that reasonable approximations have been made of many.of the costs entering i n t o the production of m i l k . An almost im-p o s s i b l e task a r i s e s , however, from the attempt to determine 59. normal p r o f i t , i . e . the r e t u r n required to induce a producer to continue the use of h i s labour i n the production of m i l k . This i s because the r e t u r n i s not e n t i r e l y monetary i n i t s nat.ure. To the extent that i t i s non-monetary i t i s im-p o s s i b l e to measure. Yet u n t i l the e n t i r e r e t u r n can be measured i t i s impossible to c a l c u l a t e an accurate cost of production. In h i s s t u d i e s from 1920-1930 Hare (3) allowed a r e t u r n of $960 per year f o r the operator's labour while the study f o r 1945 allowed $1,200. This i s i n a d d i t i o n t o any non-monetary advantages which may induce him t o continue production. Although these allowances appear modest when compared with the monetary re t u r n s of workers of comparative a b i l i t y i n non-farming p u r s u i t s , they were e v i d e n t l y more than was required to induce a farmer to continue i n the production of m i l k . A f t e r continuing h i s studies "for a number of years, Hare a l s o came to a s i m i l a r c o n c l u s i o n . In r e p o r t i n g on h i s r e s u l t s , which c o n s i s t e n t l y showed the average cost of production to be greater than the p r i c e r e -ceived, he wrote as f o l l o w s : "From the f a c t that dairymen continue to produce b u t t e r f a t i n i n c r e a s i n g amounts, i t would appear that items included i n costs as here c a l c u l a t e d amounted to more than was necessary to encourage production." The e r r o r made i n the cost of b u t t e r f a t studies has been to assume that low earnings secured by m i l k producers f o r t h e i r labour r e s u l t from a f a i l u r e f o r them to r e c e i v e t h e i r costs of production. In c a l c u l a t i n g the cost then, 60. the operator has been allowed a r e t u r n l a r g e r than that which i n f a c t he was a c t u a l l y w i l l i n g to accept and continue production. As a consequence the c a l c u l a t e d cost of pro-duction has been greater than the p r i c e received f o r the product, an impossible s i t u a t i o n when the output i s expanding. The problem, then, i s more fundamental. I t i s a question of why farmers as a group accept these low earnings and s t i l l continue producing. The answer i s that farmers f i n d i t d i f f i c u l t to s h i f t to a l t e r n a t i v e forms of employment where higher earnings can be secured. The adjustment which i s r e q u i r e d i n order t o r a i s e farm l i v i n g standards w i l l n e c e s s i t a t e p r o v i s i o n of a means whereby farmers can r e a d i l y t r a n s f e r themselves to other employment. When a l t e r n a t i v e forms of employment are r e a d i l y a v a i l a b l e farmers w i l l not continue production unless earnings and amenities are com-parable to those which can be obtained i n a l t e r n a t i v e employment. APPENDIX A 61. AVERAGE VALUES FOR IMPORTANT BUSINESS ANALYSIS FACTORS; CLASSIFIED FOR ALL FARMS, LOW EARNING FARMS, AND HIGH EARNING FARMS1 Items A l l Farms Low High Earning Earning Farms Farms Number of farms 208 52 52 Investment: Real estate Livestock Machinery and equipment Feeds and supplies Total investment Financial Returns: $13,226 3,855 2,034 Z l i $14,818 3,288 2,187 681 $16,622 .5,934 2,908 1,113 $19,867 $20,974 $26,577 Farm receipts $ 5,718 $ 4,508 $ 9,897 Farm expenses 4,225 4,240 6,555 Farm income $ 1,493 $ 268 $ 3,342 Interest on c a p i t a l at 5% ??? 1.049 1,32? Labour income $ 500 - $ 781 $ 2,013 Value of perquisites 542 568 64A Labour earnings $ 1,042 - $ 213 $ 2,657 Family labour earnings $ 1,352 344 2,943 Percentage return on c a p i t a l 4.0# - 2.0# 10.5* CONTINUED 1 Farms were arrayed according to labour earnings. The q u a r t i l e with the highest earnings was c l a s s i f i e d as the high earning group, and the q u a r t i l e with the lowest earnings as the low earning group. 62. A l l Low High Items Farms Earning Earning Farms Farms Size of Business; Number of P.M.W.U. 353 326 513 Number of cows 18 17 24 Acres of improved land operated 47 47 70 To t a l acres operated 62 65 91 Man-equivalent 1.7 1.8 2.0 Tot a l c a p i t a l $19,867 $20,974 $26,577 Rates of Production; Lbs. b u t t e r f a t per cow 302 276 3 3 2 Average t e s t of m i l k , percentage 4.5 ~ 4.4 4.5 Lbs. k% milk per cow 6,711 6,323 7,378 Value of milk s o l d per cow $ 221 $ 195 $ 246 Percentage m i l k sold Oct. -Mar. 41 42 43 Percentage of farms on C.T.A. or R.O.P. 34 27 50 Crop y i e l d index 100 94 109 Labour E f f i c i e n c y ; P.M.W.U. per man 209 181 2 5 6 Hours of d a i r y chores per cow 138 145 126 Hours d a i r y chores per l b . b u t t e r f a t 0.46 0.53 0.38 Cash r e c e i p t s per man $ 3,128 $2,521 $ 4,342 CONTINUED 6 3 . A l l Low High Items Farms Earning Earning Farms Farms Percentage of farms using milking machines 77 81 92 Capital invested i n machinery and equipment per man $1,196 $1,215 $1,454 Labour returns per man equivalent $1,072 $ 373 $1,972 Capital E f f i c i e n c y : Capital turnover 3.8 4.9 3.1 Percentage of c a p i t a l i n : Real estate 6 7 71 6 3 Livestock 19 . 16 22 Machinery and equipment 10 10 11 Miscellaneous 4 3 4 Capital investment per P.M.W.U. 56 64 51 Diversity of Business: Percentage of P.M.W.U. on dairy livestock • 73 77 69 Percentage of P.M.W.U. on crops Miscellaneous: 20 19 26 Age of operator 50 52 47 Percentage of farms owned by operator 92 98 81 Percentage of farms with mortgage 25 21 25 CONTINUED 64. Items A l l Farms Low Earning Farms High Earning Farms Percentage of farms with: Horses 75 79 79 Tractor 36 38 52 Horses and t r a c t o r 18 • 23 31 Car 69 79 65 Truck 21 19 27 Neither car nor truck 19 12 21 AVERAGE YIELDS OF CROPS, LOWER FRASER VALLEY,1946 Yield n Y i e l d (tons) C r o p (tons) Mixed hay 2.6 Carrots 27.0 A l f a l f a or clover hay 3.S Mangels and carrots 21.3 Oat hay 2.4 Peas (canning) 1.1 Oat grain . 1.3 Fibre f l a x 2.3 Barley 1.1 Corn (cobs, canning) 4.3 Vetch 1.0 Beans (canning) 3.2 Potatoes 8.1 Clover seed b . i Mangels 16,6 Strawberries 2.1 Turnips 24.0 Raspberries 3.2 65. APPENDIX Br METHODS USED IN COMPUTING DATA  Va l u a t i o n of Unpaid Labour: By t a b u l a t i o n from the re p o r t s i n the sample i t was found that the cash wage paid to h i r e d help which was boarded by the f a m i l y was $73*22, and the average value of board as reported by the operators was $25.00 per month. On t h i s b a s i s — the cost of h i r i n g a l t e r n a t i v e labour — the value of un-paid a d u l t labour was set at $100.00 per month. In c a l c u l a t i n g the value of unpaid labour of c h i l d r e n , i t was assumed t h a t a c h i l d of 15 years of age and under was equivalent i n work accomplished to one-half an a d u l t . Labour of c h i l d r e n 15 years and under was t h e r e f o r e valued at $50.00 per month when employed f u l l time. On the basis of a 26 day month, 10 hours a day, a wage of $100.00 per month represents an hourly labour v a l u a t i o n of 38 cents. This r a t e was used to value the t o t a l number of hours of adu l t unpaid labour devoted to farm chores during the year. A r a t e of 19 cents per hour was used to value the t o t a l number of hours of unpaid chores done by c h i l d r e n 15 years and under during the year. I f the farm was a p a r t n e r s h i p , one partner was con-sidered the operator and the labour of the other was valued at what i t would have cost to replace i t -- i . e . $100.00 per month. No value was placed on the chores.done by an operator's wife since the r e t u r n c a l c u l a t e d f o r the farm was considered as the r e s u l t of the j o i n t e f f o r t s of both husband and w i f e . 66. . C a l c u l a t i o n of D e p r e c i a t i o n ; For d e p r e c i a t i n g assets the values recorded i n the survey form were the depreciated values f o r the year under study. These values were assumed to be half-way v a l u e s , i . e . one-half of the o r i g i n a l purchase v a l u e . Adjustments were made f o r purchases and sales during the year. Since the assets were recorded at depreciated v a l u e s , beginning values were obtained by a p p l y i n g a d e p r e c i a t i o n and r e p a i r r a t e , deducting the value of r e p a i r s and adding the r e s u l t a n t amount which represented a c t u a l d e p r e c i a t i o n . The f o l l o w i n g d e p r e c i a t i o n and r e p a i r r a t e s were used; General machinery and equipment 1 5 $ S p e c i a l equipment (power)- Zk% B u i l d i n g s 10% The form on the f o l l o w i n g page was used to c a l c u l a t e the beginning values of d e p r e c i a t i n g a s s e t s , the net change i n i n v e n t o r i e s , and the average value of i n v e n t o r i e s . C a l c u l a t i o n of Productive Man Work U n i t s ; The accompanying schedule was used to c a l c u l a t e the t o t a l number of.productive man work u n i t s . Each head of l i v e s t o c k was m u l t i p l i e d by the s p e c i f i e d l i v e s t o c k standard and each acre of crops by the s p e c i f i e d crop standard. One day of labour on work o f f the farm was considered as one productive man work u n i t . C a l c u l a t i o n of T o t a l Man E q u i v a l e n t s ; A man equivalent i s one man working f u l l time on a 67. SUGARY 0? K.'iCqiiT-J?Y, •3'iUIPi;ZHT AND R3AI • 33TAT5 VA.LUSS Ending Value of Equip. Deduct Purchases Add Sales Deprec. at 15'/. (Add) Deduct Repairs Beginning Value Snding Value of Spec. Equip. Deduct Purchases Add Sales Deprec. at 24-f.(Add) Deduct Repairs Beginning Value Total Beginning Value of Equip. Total Snding Value of Equip. Change in Inv'ty. Average Inv'ty. • oOo-Snding Value of Bldgs. Deduct Value of Cap. Inp. Add Value of Bldgs. sold Depreciation at 10/.(.add) Deduct Repairs Beginning Value of Bldgs. Snding Value of Land Deduct Improvements Add Value of Land Sold Deduct Value Land Bought Beginning Value of Land Total Beg. Value Land & Bldgs, Total 2nd. Value Land & Bldgs. Change in Inv'ty. Average- Inv'ty. oOo'-68. farm f o r a year. F u l l - t i m e work i s considered as 10 hours per day f o r 312 days during the year, A farm operator devoting f u l l time to the farm work was considered as one man e q u i v a l e n t . The number of f u l l months of labour d i v i d e d by 12 gave the number of man equivalents employed as monthly labour; the t o t a l number of days of labour d i v i d e d by 312 gave the man equivalents employed as day labour; and the t o t a l number of hours spent on chores d i v i d e d by 3120 gave the number of man equi v a l e n t s employed on chores. C h i l d r e n 15 years and under were r e -garded as one-half a man e q u i v a l e n t . C a l c u l a t i o n of Crop Index; The accompanying schedule was used to c a l c u l a t e the crop index.. For each farm the t o t a l production of each crop was d i v i d e d by the average y i e l d per acre f o r a l l farms included i n the study (see Appendix "A" f o r average y i e l d s of c r o p s ) . The quotients so obtained were added, and t h e i r sum d i v i d e d by the t o t a l acreage of these crops on the farm. The q u o t i e n t , m u l t i p l i e d by 100, i s the crop index f o r the farm. 69. Name: Farm No. C A L C U L A T I 0 N OF P. M. W. ,U. Cows x 13.5 Heifers x 1.3 Calves — x 2.3 Bulls x 5.0 P.M.W.U. Dairy L/S Colts x 2.0 Sheep x 0.5 Brood Sows x 2.5 Pigs Raised x 0.5 Laying Hens x 0.25 Pullets Raised x 0.03 Roosters Raised x 0.03 Turkeys x 0.15 Bees per hive x 0.50 Other L/S — x . x x ' TOTAL P.M.W.U. FOR L/S: P.M.W.U. OF 'tfORK OFF FARM: Mixed hay Alfalfa hay Grain hay Oats grain Potatoes Mangels Corn Cannery Corn stalk silage Corn silage Corn soilage crop Hay silage Peas canning Pea vine silage Small fruits Clover seed Other crops • ~ 1.2 2.1 1.3 1.8 6.0 4.0 7.5 0.5 3.5 3.0 3.0 4.0 0.5 x 100.0 x 0.9 x X X X X X X X X X X X X X X X TOTAL P.M.W.U. FOR CROPS; TOTAL P.M.W.U. CALCULATION OF MAN EQUIVALENTS Operator Monthly Labour - — — • — mos. •? 12 Day Labour days * 312 Hourly Labour hrs. t 3120 TOTAL MAN 3Q"UIVALSNTS: TABLE FOR CALCULATION OF CROP INDEX CROP ACRES TOTAL PROD. * QUOTIENT Mixed Hay 2.5 Alfalfa Hay 3.8 Oat Hay 2,2 Oat Grain 1.2 Potatoes 8.1 Corn (Cannery) 4.4 Other Crops CROP INDEX F I N A N C I A L SUMMARY 70. Names Address: • Livestock Feeds & supplies Real Estate Machinery & equip. Total Inventory Increase TOTAL FARM RECEIPTS FISAM'IAL ANALYSIS Total Farm Receipts Total Farm Expense FARM INCOME Interest on Investment LABOUR INCOME Perquisites Farm products used in Operator*s hours Rental Value of House LA.BOUR EARNINGS Farm No..* CASH RECEIPTS Dairy (milk & dairy livestock sales) ________ Other livestock Crop sales •  Other farm income Equipment sales . Real estate sales Total Cash Farm Receipts INVENTORY INCREASES CURRENT EXPENSES Labour hired Feed purchased Cost of operating car, truck, tractor, gas engines, etc. Custom work hired (includes freight on milk) _ Repair & Maintenance of bldgs. & equip. Other expenses (Dairy herd expenses, fer-tilizer, lime, taxes, insurance, seed, rents, telephone, elec. etc.) Total Cash Expenses CAPITAL PURCHASES;OR IMPROVEMENTS Livestock Machinery & Equip. Real Estate Total Cash Outlay IffVMTO_RY DECREASES Livestock Feeds & supplies Real Estate ~ Machinery & equip. Total Inventory Decrease Value of Family Labour TOTAL FARM EXPENSES ATOAGE, iNVESTfe* Livestock Feeds and supplies Real Estate Machinery & equip. Total Average Investment Interest on Average Investment at 5% a APPENDIX C Survey form used f o r c o l l e c t i n g the in f o r m a t i o n used i n t h i s study. Report No Year THE U N I V E R S I T Y OF B R I T I S H C O L U M B I A FARM BUSINESS RECORD THIS REPORT IS ABSOLUTELY CONFIDENTIAL Name , Location Mailing Address Ship to Shipping No. D A I R Y S T O C K I N V E N T O R Y Beginning Year Purchases Births Sales Deaths Used on Farm End of Year No. Value No. Value No. No. Value No. No. Value No. Value Cows Gr. P.B. Heifers Gr. . P.B. Calves Gr. P.B. Veal Calves Bulls Gr. P.B. Age of Cows Breed Age 1 2 3 4 5 6 7 8 9 10 11 12 13 14 No. of Cows Notes as to dates of purchase and sales of cows: OTHER L I V E S T O C K I N V E N T O R Y rage z Beginning Year Purchases Births Sales Deaths Used on Farm End of Year No. Value No. " Value No. No. Value No.,. No. Value No. Value Horses Colts Sheep « Brood Sows J-Boars Pigs Hens Ducks Geese Turkeys Bees Others Total Total Page 1 Total Page 14 2 Average Inventory # Change in Inventory % Animal Units Average No. A.U's Average No. A.U's Average No. A.U's Cows Bulls Hogs Heifers Horses Poultry Calves Sheep rage o CROP AND F E E D R E C O R D Kind & Variety Beginning Inventory Acres In Total Yield Acre Yield Value Purchases Sales Farm Used Ending Inventory Acres In Total Yield Acre Yield Value Seed Feed Amt. Value Acres In Total Yield Acre Yield Value Amt. Value Amt. Value Amt. Value Seed Feed Amt. Value Hay 1. mixed 2. alfalfa 3. clover Oats Straw Other Grain Roots Potatoes Peas ° Corn Silage Garden Crops Other Crops Small Fruits Orchard Crops Seed Purchased Concentrates Dairy Poul try Others [ Average Inventory! Change in Inventory! Dairy Ration Purchased? (obtain tag or name of supplier) If constituted on farm outline formula below: R E A L Normal Value of Farm (land & buildings) # _ E S T A T E I N V E N T O R Y Page 4 Building Deprec. Value End of Year House Other House Dairy Barn Other Barns Silo Milk House Granary Chicken House Pig Pens Lnpl. Shed Tool Shed Garage Others Ending Value Cost of new buildings or capital imp'ments Beginning Value Pasture Management Notes LAND VALUE Total Acres Owned Improved land acres @ Unimproved land acres @ Total Land Value Value of new clearing new drains, etc. Value of land bought or sold during year Beginning Value TOTAL REAL ESTATE Beginning Value Ending Value Average Inventory_ Change LAND UTILIZATION Cropped area Improved pasture Farmstead Total Imp. Area Untillable pasture_ Waste land or other land not farmed Total Unimp. Area Total Acreage Farmed NOTES ON CROP ROTATION mos. Pasture period No. animals grazed Is rotational grazing used Fertilized pasture Date cows turned put Hayland grazed Average hours grazing per day Type of pasture drains Average size of pasture fields Irrigated pasture Subirrigated Condition of pasture How often new pasture seeded How is summer pasture deficiency met Control measures for pests and diseases Soil types and % of each type No. years pasture is used 76. I N V E N T O R Y OF M A C H I N E R Y AND E Q U I P M E N T No.' Kind Value No. Kind Value Horse Mower Discs Power Mower Spring Tooth Harrow Hay Rake Drag Harrow Side Delivery Rake Roller Hay Tedder Cultivator Hay Loader Manure Spreader Hay Bailer Fertilizer Spreader Grain Drill Ensilage Cutter Grain Binder Fanning Mill Corn Binder Potato Planter Thresher Potato Digger Wagons Spraying or Dusting Equip. Trailer Power Saw Walking Plow Platform Scales Tractor Plow Feed Carts Others Milking Machine Cans Water Heater Cooler Other Milkhouse Equip. Purchases During Year Harness Farm Tools & Carpentry Equip. Pumping Eauip. Honey Equip. Poultry Eauip. Total Sales or Trades Add Power Equipment Value End of Year Deduct Purchases Add Sales & Trades" Total Beginning Value Average Inventory $ Change in Inventory # RECORD OF POWER E Q U I P M E N T Page 6 Kind Make Tear Purchase Price Present Deprec. Value Operating Expense 194 Totals % to Farm Total to Farm Gas Oil Grease Repairs License InSo Tractor Auto Truck R E CORD OF L A B O U R Item J F M A M J J A S 0 N D Total Work Rate Value of Labour Value of Board Total Paid Labour Month Day Total Paid Unpaid Labour Total Unpaid Operator Total Labour Labour Notes: % labour to main enterprise Hours dairy chores winter months average hours. summer months average hours. Page 7 FARM E X P E N S E S Labour Hired (p.6) Miscellaneous Expenses Feed Purchased (p.3) Registration of Stock Power Equip, op. Costs (p.6) C. T. A. Machine Work Hired Exhibition Expense Threshing Breeding Fees (Nat. & Art.) Silo Filling Veterinary & Medicines Baling Germicides or Insecticides Grinding Whitewash Plowing & Cultivating Fly Spray Cutting, Binding, Combining Filter Discs Freight on Milk Crates, Sacks, Boxes, etc. Other Hauling Straw Mulch Other Custom Work Fertilizer & Lime Plants Purchased Total Taxes Building Insurance Repair & Maint. Bldgs. & Equip. Legal Fees House painting & repairs Rent of farm or pasture Other Bldgs. painting & repairs Telephone - % to farm Small Hardware Electricity - % to farm Blacksmithing Water - % to farm Hired repairs to implements Other Expenses Fence repairs Total Total -«3 FARM R E C E I P T S Milk Receipts Lbs. milk Lbs. B.F. Average Test Sales of Dairy Livestock Total Dairy Receipts Other Livestock Receipts (p.2) Crop Sales (p.3) Breeding Fees Labour off Farm — days Custom Work — days Trucking —days Eggs — doz. Honey Fruit Vegetables Wood Land, Pasture or Equip. Rentals Empty Sacks Others Total Misc. Receipts Total Receipts Age of operator years on farm Amount of mortgage i f any Accounts kept Page 8 FARM P E R Q U I S I T E S Amt. Value Milk Cream Butter Eggs Honey Meat Poultry Fuel Potatoes Fruits Vegetables Wood Others Total Milk fed to calves Ho. of head raised No. of lbs. per day No. of days fed Total lbs. Other livestock feeding Total milk fed to livestock Type of cult, on S.F. Power Horse Hand No. cultivations per yr. Hrs. per yr. Tears growing small fruits Future plans for expansion Reasons for expansion or non-expansion 80. BIBLIOGRAPHY 1. K e l l e y , C. C , and S p i l s b u r y , R. H.. S o i l Survey of the Lower Fraser V a l l e y . Dom. Dept. A g r i c . Tech. B u i . 20, 1939. 2. Carter, R. M., Labour Saving Through Farm Job A n a l y s i s . I . Dairy Barn Chores. Vt. A g r i c . Expt. St a . B u i . 503, 1946. 3. Hare, H. R», Dairy-Farming i n B r i t i s h Columbia. A F i v e Year Summary. B. C. Dept. A g r i c . B u i . 103, 1928. 4. Grahame, R. W., Dairy Farm Incomes and the Cost  v of Producing B u t t e r f a t i n C o a s t a l B r i t i s h Columbia. Dept. A g r i c . Econ. U.B.C., 1947. 5. Wasson, F. C., Personal Correspondence, 1946. 6. Boulding, K. E., Economic A n a l y s i s . Harper and Brothers, 1941. 7. Ross, H. A., The Supply Side of the New York M i l k Market. N. Y. ( C o r n e l l ) S t a . B u i . 527, 1931. 8. E z e k i e l , M., Rauchenstein, E., and W e l l s , 0. V., Farmers' Response to P r i c e i n the Production  of Market M i l k . U. S. Dept. A g r i c . Bureau A g r i c . Econ. Mimeo. Pub. 1932. 9. Parsons, M. S., E f f e c t of Changes i n M i l k and Feed P r i c e s and i n Other Factors Upon M i l k  Production i n New York. N. Y. ( C o r n e l l ) Sta. B u i . 688, 1938. 10. Christensen, R. P., and M i g h e l l , R. L., Supply Responses i n M i l k Production i n Dodge and  Barron Counties. Wis. U. S. Dept. A g r i c . Tech. B u i . 750, 1941. 11. Johnson, S. M.'. E l a s t i c i t y of Supply from Vermont P l a n t s . I I I . F o r e c a s t i n g the M i l k  Supply. Vermont A g r i c . Expt. St a . B u i . 480, 1942. 12. Patterson, H. L., The A l b e r t a Dairy Farm Business. A l t a . Dept. A g r i c . B u i . 73, 1945. 81. 13. Barr, W. L., Organizing Dairy Farms f o r E f f i c i e n t Production. Penn. A g r i c . Expt. Sta . B u i . 47$, 1946. 14. W i l l i a m s , S. W., Studies i n Vermont Dairy Farming. X I I . Dairy Farm Management i n  the Champlain V a l l e y and i t s R e l a t i o n  to the P r i c e L e v e l . Vermont A g r i c . Expt. Sta. B u i . 499, 1941. 15. B i e r l y , I . R., Factors that A f f e c t Cost and Returns i n Producing M i l k . N. Y. A g r i c . Expt. Sta. B u i . 804, 1944. 

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