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An economic analysis of technological progress on diary farms in the Lower Fraser Valley, British Columbia 1962

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AN ECONOMIC ANALYSIS OF TECHNOLOGICAL PROGRESS ON DAIRY FARMS IN THE LOWER FRASER VALLEY, BRITISH COLUMBIA by HUGH V. HILLARY WALKER B.S.A., UNIVERSITY OF BRITISH COLUMBIA, I960 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN AGRICULTURE i n the Department of AGRICULTURAL ECONOMICS We accept t h i s thesis^as conforming to the require/fl^tan^^rtl THE UNIVERSITY OF BRITISH COLUMBIA. A p r i l , 1962 i i ABSTRACT This study i s based on the hypotheses that technical advances have increased the efficiency with which factor-inputs are converted into output on dairy farms, and have induced shifts i n the input structure of dairy farms. The method used to test these hypotheses has been to measure changes i n : ( l ) the r e a l savings i n the use of factors during the period ±9k6 to 195UJ and then to make a linear projection of the trend, which existed during the 1°U6 - ±9%k period, into l96l; and (2) the relative importance of inputs over the period 19U6 to 195A. Inputs have been divided into seven categories v i z : feed purchased; custom workj labour; cost of operating farm machinery and repairs and maintenance of machinery, equipment and buildings; depreciation; interest on investment; and miscel- laneous items. Milk was the onry output considered i n this thesis. Efficiency was measured as the ratio of t o t a l output to t o t a l input within a given year. The results of the study support the hypothesis. They show that sh i f t s had taken place i n the relative importance between labour, and the other factors of production, and that associated with these s h i f t s had been an increase i n overall efficiency between 19I4.6 and 195U of 20 percent, which i f projected to 1961 would amount to 3h percent. l i i Thus technological progress had resulted i n gains i n overaxl efficiency, with which inputs were converted into out- put on dairy farms. The study has also shown the types of ad- justments on dairy farms which were necessary i n order to achieve gains i n overall efficiency. I t has aiso been indicated that the dairy farm industry of the Lower Fraser Valley has the po t e n t i a l i t i e s for increasing i t s output of milk i n response to future increases i n demand^ which growth i n population would render necessary. TABLE OF CONTENTS Page INTRODUCTION 1 THEORY AND MEASUREMENT OF TECHNOLOGICAL PROGRESS k Concept of Technological Progress . . . . . . . . . k The Supply Function i n Relation to Technological Progress. . . 6 Method of Measurement 10 DATA FOR EMPIRICAL STUDY l 6 Source, Method of Collection, and Nature of Data l 6 Sampling Problems and Limitations of Data . . . . . ±9 RESULTS AND INTERPRETATION 23 The Data 23 Analysis 26 Changes i n the Quantity of Different Factors Used • 32 Changes i n the Relative Importance of Inputs. . . . 35 Conclusion 37 BIBLIOGRAPHY ijO APPENDIX U3 V LIST OF TABLES TABLE F age I FREQUENCY DISTRIBUTION OF FARMS BASED ON PERCENTAGE OF GROSS CURRENT RECEIPTS FROM DAIRY PRODUCTION, LOWER FRASER VALLEY, J-9U6 AND 195U 18 I I ANNUAL PRODUCTION PER COW, DAIRY HERD IMPROVEMENT ASSOCIATION, 19±k - i960 AND SAMPLE FARMS l9i|6 AND 195U 27 I H SINGLE FACTOR RATIOS 1 9 H 6 , 195k AND 196l (PROJECTED) LOWER FRASER VALLEY 29 I? DISTRIBUTION OF FARM CAPITAL ON l60 DAIRY FARMS IN 19U6 AND $0 DAIRY FARMS IN 195l|, LOWER FRASER VALLEY 30 V MEASURES OF CHANGES IN AVERAGE SIZE OF FAR!© 19U6 TO 195U, LOWER FRASER VALLEY 32 VI INDEX NUMBERS (19U6=100) OF INPUTS PER HIJNDREDWEIGHT OF MILK LOWER FRASER VALLEY, 19U6, 195U, AND I96l (PROJECTED) . . . 33 VII RELATIVE IMPORTANCE OF INPUTS, LOWER FRASER VALLEY, 19l|6 AND 195U 35 v i ACKNOWLEDGEMENT The writer wishes to express his sincere gratitude to Drs. Walton J. Anderson and Joseph J. Richter for their kind help and guidance i n the preparation of thi s thesis. Their suggestions, criticisms and comments are genuinely appreciated. Appreciation i s also expressed to the Canada Department of Agriculture, Economics Division, Marketing Service, University of B r i t i s h Columbia} aid the Dairy Herd Improvement Association for their assistance and f a c i l i t i e s extended i n gathering some of the data for this work. In presenting this thesis i n p a r t i a l fulfilment of the requirements for an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t freely available for reference and study. I further agree that permission for extensive copying of t h i s thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It i s understood that copying or publication of this thesis for f i n a n c i a l gain shall not be allowed without my written permission. Department of fi^ri tu^ord , The University of B r i t i s h Columbia, Vancouver 8, Canada. Date 7/4̂  q jfc t Cj AN ECONOMIC ANALYSIS OF TECHNOLOGICAL PROGRESS ON DAIRY FARMS INTRODUCTION Economic anaiysis of dairy farm organization may be useful to public boards, which are responsible f o r establishing milk prices, and to entrepreneurs who make the resource use and production decisions i n the industry. The l a t t e r need the information to assist i n effecting adjustments i n t h e i r plans In order to maximise net Income. Since 1920, three economic surveys have been made of the industry. The f i r s t of these was carried out i n the Arrow Lakes, Chilliwack, Courtenay, Ladner and Salmon Arm d i s t r i c t s In the years 1920 - 1921. 1 The aim of th i s survey was to determine the factors that contributed to gain or loss on farms i n those areas. In 19U5 - 19lt6 a study was made of farms costs, farms organisation, and labour earnings of whole milk producers i n the Lower Fraser Valley.^ This was followed by a similar study i n 195k*^ Using the data from the 1 Hare, H.R., "Dairy Farm Survey", B r i t i s h Columbia Agriculture Department B u l l e t i n No. 91, B r i t i s h Columbia Department of Agriculture, 1921. 2 (i) Anderson, W.J., Farm Organisation and Labour Earnings of Mhole Milk Producers i n the Lower Fraser Valley, 19U6, University of B r i t i s h Columbia, 19k$. (ii)Department of Agricultural Economics, University of B r i t i s h Columbia, Dairy Farm Incomes and Cost of Producing Butter fat i n the Coastal Areas of B r i t i s h Columbia, University of B r i t i s h Columbia, Vancouver, February, 19L7. 3 Campbell, R.H., Dairy Farm Organisation i n the Lower Fraser. Valley of B r i t i s h Columbia, Economics Division, Marketing Service, Department of Agriculture, Ottawa, June, 1957, 2 1951+ study, along with standard input-output data, a management manual was produced i n 1957 which was designed for use by dairy farmers and extension staff Based on general observation and to some extent from the farm records compiled during these investigations, i t often has been stated that technological progress has ra d i c a l l y changed input- output coefficients and through those changes the input structure of dairy farms. The three surveys cited above were directed towards recording the state of the industry, but no empirical work has been done to measure the contribution of technological progress to over- a l l efficiency or the extent to which I t has shifted the Input struc- ture of dairy farms. This study therefore i s designed to concentrate, by economic analysis, on the effects of technical change within dairy farms and pa r t i c u l a r l y to measure i t s effect upon (1) the overall gain i n efficiency, (2) the changes i n the input structure which have been associated with the advance in physical efficiency of inputs. This study proceeds by reviewing the theory and method relevant to the measurement of technological progress and then ex- amines the source, nature and methdd of collection of the data. Con- sideration i s also given to the sampling problems, and the limitations associated with the data, which may affect the results. The theoretical k Menzie, E.L., et a l , Dairy Farm Management Manual, B r i t i s h Columbia Department of Agriculture and Department of Agricultural Economics, University of B r i t i s h Columbia, 1957. 3 model i s then set up, and the s t a t i s t i c a l problems which are inherent i n the model, are then considered. The remainder of the thesis i s devoted to the actual measurements, and the interpretation of the results. THEORY AND MEASUREMENT OF TECHNOLOGICAL PROGRESS Concept of Technological Progress M i l l , the synthesist of c l a s s i c a l economic doctrines, has stated that A l l inventions by which a greater quantity of any commodity can be produced with the same labour, or the same quantity with less labour, or which abridge the process so that the capi- t a l employed need not be advanced for so long a time, lessen the cost of production of the commodity.1 He, therefore, has envisaged that progress has taken place when less of the factors of production are used to produce a given quantity of goods and services i n the subsequent period as compared to the amount used i n an earlier period. M i l l also has pointed out that The characteristic features of what i s commonly meant by in d u s t r i a l progress resolve themselves mainly into three, increases i n capital, i n - crease i n population, and improvements i n pro- duction; understanding the l a s t expression, i n i t s widest sense, to include the process of pro- curing commodities from a distance as well as that of producing them.^ M i l ' s theories were supported, i n part, by George, who i n his writings on the effects of material progress concluded that The changes which constitute or contribute to material progress are three: ( i ) increase i n population; ( i i ) improvements*in the arts of production and exchange; and ( i i i ) improvements 1 M i l l , J.S., Principles of P o l i t i c a l Economy, D. Appleton and Company, New York, 1 9 0 7 , p. U 7 7 . 2 Ibid., p. 1|89. 5 i n knowledge, education, government, policy, manners, and morals so far as they increase the power of producing wealth.3 He also said that: The effect of inventions and improvements i n the productive arts i s to save labour - that i s , to enable the.same result to be secured with less labour, or a greater result with the same labour.^ Later, Boulding defined progress as consisting i n "an improvement i n the efficiency of the use of means to attain ends". He said too that: Whenever, we discard an old method of doing something i n favour of a new method that has proved i t s worth without doubt, then economic progress i s taking place. Economic progress, therefore, means the discovery and applica- tion of better ways of doing things to satis f y wants.^ Kaldor i n outlining his views on technical progress has stated that: A change i n technique (in the widest sense of the term, as referring to changes i n the methods of production) can be i n i t i a t e d by one or more of three causes: (x) inventions, or "autonomous" improvements} ( i i ) a change i n the relative scarcity of factors, o r i g i - nating from the supply side; ( i i i ) a change i n the price of factors, their relative scarcity remaining the same. The main d i f - ference, of course, i s between ( i ) and the 3 George, Henry, Progress and Poverty, Robert Schalkeribach Foundation, New York, 195k, p. 228. k Ibid., p. 2UI4.. 5 Boulding, K.E., The Economics of Peace, Prentice H a i l Inc., New York, ±9h5, p. 7U 6 Ibid., p. 7U. 6 others i . e . the adoption of methods which were not previously known, and the adoption of methods which were not previously p r o f i t - able. Only ( l ) can be properly called economic progress.7 From the above concepts, technological progress can be defined as a change i n the technical coefficients, which makes i t possible to procure a larger quantity of goods and services with a given quantity of resources. An improvement i n technology i s there- fore interpreted to mean using the factors of production so that a smaller amount of resources i s used i n one period than i n a pre- vious period to produce a unit of goods and services. An example to i l l u s t r a t e this concept can be taken from th i s study. In 1 9 1 + 6 , dairy farmers i n the Lower Fraser Valley used, on the average, L . 3 hours of labour to produce a hundredweight of milk, whereas i n ±95k, they used 2 . 6 hours, a saving of kt) percent i n the use of this factor over an eight year period. During the same period the outlay on non-labour inputs was reduced by 1 6 percent. The Supply Function in Relation to Technological progress Heady has stated that the nature of the supply function 7 Kaldor, Nicholas, "A Case Against Technical Progress?", Economica, Volume X l l , Numbers 3 5 - 3 8 , London School of Economics and P o l i t i c a l Science, 1 9 3 2 , p. 1 8 I 4 . For an elaboration of this argument, see J.R. Hicks, "The Theory of Wages", Peter Smith, New York, ± 9 l + 8 , pp 1 2 1 - 1 3 0 . Also Ameri- can Economic Association, "Readings i n the Theory of Income Distribution", J. Robinson, "The Clas s i f i c a t i o n of Inventions", No. 9, p. 1 7 5 . 7 depends on (1) the nature of the physical production functions i n the relevant supply period, ( 2 ) the nature of the market for factors used i n production including, - (a) the supply function of agricul- t u r a l resources, and (b) the f l e x i b i l i t y of factor prices, ( 3 ) the structure of the firm costs as related to fixed and variable outlays, (U) the nature of the firm-household inter- relationships including the motivating forces behind the production response to farmers, and ( 5 ) the expectations of farmers.^ Movements along the supply function are called changes i n supply. These are r e a l l y short-term phenomena to which the i n - dustry adjusts i t s e l f through the pricing mechanism. Distinct from these short changes i n supply, are complete movements of the supply function from i t s former position. These are really s h i f t s i n the supply function. The forces i n the long run which cause the supply function to change i t s former position are independent of, and are d i s t i n c t from those which cause a movement along the supply function. There are three forces which, i n the long run, can cause the supply function to s h i f t outwards and downwards to the right, ( 1 ) an improvement i n technology i. e . i n the technical coefficients, ( 2 ) discovery of new resources, and (3) a decline i n prices of 8 Heady, E.O., Economics of Agricultural Production and Resource Use. Prentice-Hall, Inc., Engiewood C l i f f s , New Jersey, 1 9 5 7 , Chapter 2 3 , p. 6 7 7 . 8 factors of production. The overall effects of these forces on the position of the supply function are i l l u s t r a t e d i n Figure 1. With given technology, resources, and factor prices, the supply func- tion of the industry i n i t i a l l y was SS. With a discovery of new resources or a decline i n factor prices or an improvement i n technology i n a l a t e r period the supply function has taken up the new position S'S'. Figure 1. Effects of changes i n technology on the position of the supply function our for In making this study, the effects of new resources and changes i n factor prices on the position of the supply function were eliminated, and only the effects of technological innovations were evaluated. This means that the study i s r e a l l y concerned with the s h i f t that has taken place i n the production function which i s basic to the supply function. Heady has stated that there are two general properties to 9 technological improvements v i z : - 1. The development of a new production technique such that a greater output i s forthcoming from a given t o t a l input of resources. X X X 2. The marginal physical rates of substi- tution (the e l a s t i c i t y of substitution) are always altered i n favour of one factor by specific innovations. In other words the entire production surface i s altered. The production i s increased more for some factors than for others.? The nature of these phenomena are i l l u s t r a t e d i n Figure 2 below Figure 2. Mature of innovations. (pi ^a"1 In Figure 2(a) the production function I represents a s h i f t induced by technological innovation from production function I I such that with a given resource input (OX^) output i s increased from OE to OF. 9 Ibid., pp 802 - 80£. 10 Regarding t h i s type of phenomenon, Heady has pointed out that development of production function I I after I i s already known could not be considered technological advance where the transforma- t i o n coefficients (rates at which resources are transferred i n products) are known with (or near) certainty. However, i t would qualify as an improvement under a situation where uncertainty Is reduced and hence the value of anticipated returns i s increased.-1-0 In Figure 2(b) B and C are two iso-product functions f o r the same output. B represents the new technique and C represents the old technique. The siope of B i s different from that of C and has changed i n the direction of one factor. The position of the new contour i s lower and to the l e f t as compared with the old technique. Hence, less of one factor (capital i n t h i s particular case) w i l l be required to replace a given amount of labour after the entrepreneur adopts the new technique. To i l l u s t r a t e , A G has been held constant under both techniques which made /A L greater i n the case of the new technique as compared to c> L i n the old. The slope of B therefore indicates that the rate of substitution has been increased i n favour of capital, and i t s marginal physical productivity has increased relative to that of labour. An example of this phenomenon i s the substitution of machinery for labour. Method of Measurement The hypotheses i n this study are that technical advances 10 Ibid., p. 803. have increased the efficiency with which factor-inputs are converted into output on dairy farms, and have induced shi f t s i n the input structure of dairy farms. The purpose of th i s study i s to measure the changes which have occurred. For the main objective of t h i s study, i . e . to measure changes i n the efficiency with which input as a whoxe i s converted into output on dairy farms, measures of aggregate input and output are required. In order to obtain the measures of inputs the constant dollar method was used. This method involves weighting the inputs of each year by the prices which existed i n the base period. Then the re- sulting constant dollar values of a n inputs for each year were added to give aggregate input. The measure of output did not involve aggre- gation since one output only was involved i n the analysis; i t was ex- pressed i n i t s physical unit (hundredweight of milk). Inputs consist of physical items such as tons of hay, pounds of f e r t i l i z e r and man hours of labour. In order to aggregate these factors i n a form that i s meaningful, the different physical units of each input must be converted into the same units, i . e . their dollar value. The aggregate outlay for year 1 can then be expressed in the forms (Px x l.Qx n) + (^ 2 1.Qx 2 1) + (Px 3 i.Qx 3 l) + (Px^.Qx^) + (fx .Qx ) + (fx, .Qx ) + (fx .Ox) + .... + (fx .Qx ,) p i 51 o l 61 71 71 n l n l where Fx.,... Px refer to the prices of factors X, .... X 11 n l r * I n i n year 1 and Qx ... .Qx .. are the quantities of X ... .X i n 11 n l I n year 1. Similarly the aggregate outlay for year 2 can be obtained from (1) 1 2 (Fx i 2.Qx i 2) + (PX22.QX22) + ( P X 3 2 . Q X 3 2 ) + ( P X ^ . ' Q X J ^ ) + (2) ( P x ^ Q x ^ ) + (•F:x62,Qx62) + ( • t ^2* < 2 s72^ + ' " + ^xn2,<3ni2-> where Px^' • •iJxn2 <^x±2***^Xn2 a r e ^ e P r l c e s and quanti- t i e s respectively of factors XJ_....Xn i n the year 2. In equations ( i ) and (2) the input aggregation i n each year therefore i s the sum of the quantities of inputs weighted by the current prices. Since the price levels may have changed the aggregates from ( l ) and (2) cannot be compared di r e c t l y . Thus the prices used should be those of one year. In this study inputs for each year were weighted by the prices which existed i n year 1 . In making the calcu- l a t i o n the outlay for each input was divided by i t s price index for year 1 . The price indexes for year 1 are the ratios 1 1 .... n l . fx 11 F x n l Thus the expression for the aggregate outlay weighted by prices i n year 1 i s given by ^ l l ' ^ H i Jx 2 l.Qx2 1 Px 3 l.Qx 3 l Px^.Qx^ Px^1.Qx^i r x 2 1 F x 3 1 F x k l ^ 1 1 i J x 2 1 P x 3 1 r x k l P x 5 i Px 6 i.Qx 6 l fXy ̂  • QX,̂ ^ " X 6 l + -rj + P 2 7 i Px , n l ^ 6 1 F x ? i ^ n l ( 3 ) which simplifies into (Px^.Qx^) + (Px 2 i.Qx 2 l) + (Px31.Qx31) + (Px^.Qx^) + (Px ^ . Q x ^ j + ( F x 6 r Q x 6 l ) + (Px^.Qx^) +....+ ( ^ . Q x ^ ) The expression f o r the aggregate outlay f o r year 2 weighted (h) by prices existing i n year 1 was determined as follows:- ^12 .../Xn2 ? x l l "ST Px PTT The price index for year 2 i s the ratio 1 2 . . . . n 2 • 13 The value of the outlay for each input was divided by the index. The expression f o r input X^ i s (Px l 2)(Qx l 2) _ (Fx l 2)(Qx l 2) ( P x n ) F x i 2 = I x ~̂ ~7 ^ 1 1 which simplifies to the form (Px^.Qx-j^) Proceeding i n this manner with each of the inputs, the expression for the weighted aggregate outlay for year 2 i s given by:- (FXj^.QXj^) + (Px 2 J_.Qx 2 2) + (Px 3 i.Qx 3 2) + (Pxj^.Qx, 2) + (5) (Px^.Qx^) + (Px 6 l.Qx 6 2) + (Px^.Qx^) + (Px n J L.Qx n 2J This model was then used to aggregate input factors. One of the problems involved i n the use of this model i s the weight period bias which occurs when prices of a given period are used to weight the respective input categories. Lok has shown that the discrepancies among the aggregate input indexes for agriculture can be considerable. J" L From Lok's study i t was seen that some Items comprising the aggregate index number of inputs w i l l tend to make the Laspeyres index larger than the Paasche index, whereas i n some other cases the opposite effect may occur. Lok notes that The way i n which different weighting affects aggregate index numbers in time series can be shown by a simple i l l u s t r a t i o n . Suppose that a time series consists of four periods, and that the prices of each are used to weight quantities. 1 1 Lok, S.H., An Enquiry into the Relationship between changes i n overall Productivity and Real Net Return per farm, and between changes i n t o t a l output and E-eal Gross Return, Canadian Agriculture, 1 9 2 6 - 1 9 5 7 , Technical Publication, Canada Department of Agriculture, Economics Division, Ottawa, October, 1 9 6 1 . lU The four sets of L index numbers and one F index are indicated as follows (the f i r s t subscript of each index number refers to the period i n time, the second to the period whose prices are used as weights): " " Laspeyres Index Numbers Using Dif- Faasche Ferxod ferent Weight .Periods Index Numbers t : t : t : t 0 1 2 3 t I I I I I 0 00 01 02 03 00 t I I I I I 1 10 I I 12 13 11 "t DL" I "E T 2 20 21 22 ^23 22 S X30 S i I 32 I 33 1 33 The discrepancies between any two of the constant weight indexes ( a l l indexes having the same base period) can be explained by considering the indexes with weight periods t„ and t ^ . The changes between tp and i n the quantities and prices of the items that make up the aggregate index determine Hie d i f - ference between I , Q and Ijj_ Although the price weights remained the same for periods t 2 and t.,, the quantities between tg and t ^ , and between x„ and to w i l l have changed differently than between tg ana t . Consequently the discrepancies between IJ_Q and I . , between l„ n and I , and between I and I 3 I  w i l l be different. l L 3 0 For one period each of the L indexes w i l l have an index number that i s the same as the F index number. For the other periods the L and F index numbers w i l l be different and the discrepancies w i l l vary because i n these cases not only the quantities but also the prices of the items are l i a b l e to change. Where discrepancies exist between index numbers which are based on different weight periods, the problem arises as to the selection of the period which provides a set of weights that would form a true aggregation of input. 12 Lok, op. c i t . pp 38 - 39 15 Prices i n 19U6 were distorted by the effects of World War I I but those i n 195U were affected by the Korean War and the post war i n f l a t i o n , and the removal of price controls. Hence 19U6 seemed to be as good a weight period as 195U for purposes of the comparisons to be made i n th i s study. 16 DATA FOR EMPIRICAL STUDY Source, Method of Collection and Nature of Data The empirical data of input and output used i n t h i s study were obtained from the information sheets, compiled from actual farm records taken i n i 9 U 6 and l 9 5 > U . The surveys included 2 0 8 farms In 1 9 U 6 and 6 5 i n 195>U. The sampling technique used i n selecting the farms i s explained by the following extract taken from a report on the 19i+6 survey. ..Data were obtained from the dairy farmers by the survey method. Each farmer co-operating i n the study was personally interviewed by a f i e l d - man from the University and every effort was made to obtain accurate information concerning receipts, expenses, inventories, crop acres and production. This information was recorded i n the f i e l d schedule designed f o r the purpose. Many of the farmers v i s i t e d kept either f u l l or p a r t i a l records relative to expenses and income. Such records were used when available, but when not, the co-operator was asked to make careful estimates of those items required to complete the f i e l d s chedule. X X X X In selecting farms to be included i n this study, a very definite attempt was made to choose farms which were representative for the areas being studied.1 The same sampling technique was used i n the 19%k survey. Dairy farms i n the Lower Fraser Valley, l i k e a l l other farms are 1 Department of Agricultural Economics, University of B r i t i s h Columbia, Dairy Farm Incomes and Cost of Producing Butter- fat i n the Coastal Areas of B r i t i s h Columbia, University of B r i t i s h Columbia, Vancouver, 19U7, p. 2. 17 heterogeneous i n regard to the scale of operation, amounts of re- sources available and the l e v e l of managerial a b i l i t y . I t would seem then, that for any particular sample of farms to be studied, there i s a p o s s i b i l i t y that the distribution w i l l be skewed to either the l e f t or right depending on the particular variable used. Hansen, Hurwitz and Madow have pointed out that two aspects of the distribution of a population are of particular importance i n the i r effect on sample design. The f i r s t i s whether or not the population i s highly skewed, i.e. whether or not a small proportion of the units i n the population account f o r a high proportion of an aggregate or average value being measured. The second aspect which needs to be considered i s the geographic distribution of the population.2 Since the locus of the study i s the Lower Fraser Valley, the second point I.e. the geographical distribution of the population, does not apply. However, with regard to the problem of skewness Hansen, Hurwitz and Madow have stated as follows! The sampling of farms, business establishments etc., to estimate magnitudes such as aggregate or average production, stock, sales, and employ- ment, or absolute or relative changes i n such magnitude, or sampling for certain types of data for individuals or families, such as average or aggregate income where a few individuals or units contribute a considerable part of the t o t a l , c a l l s f o r emphasis on sampling procedures that have not been treated i n the preceeding sections of this chapter. In these problems, for example, s t r a t i f i - cation, and the use of special l i s t s assume es- peci a l l y important and significant roles.3 The method of sampling i.e. the method of selecting, or choosing the elementary units i n a sample, actually used i n the surveys might be Z Hansen, M.H., William N. Hurwitz and William G. Madow, Sample Survey Methods and Theory, John Wiley and Sons Inc., New York Chapman and H a i l , Limited, London, 1953, Volume 1, Chapter 3, Section 3, p. 93. 3 Ibid., p. 102. 18 termed "purposive sampling" rather than random sampling, i n which one chooses a sample which i s "representative" with respect to certain known characteristics of the population. An evaluation of purposive sampling and limitations of the data i s included l a t e r i n the study. Since this study was limited to measuring the effect of tech- n i c a l change i n milk production an arbitrary basis of selection was used to eliminate those farms i n which other sources of income were im- portant. Those farms retained included a x l those that received 75 per- cent or more of the i r gross current receipts from the sale of milk. Using this test 160 farms (77 percent of t o t a l sample) from the 1°U6 survey and $0 farms (77 percent) from the 195U survey were used i n t h i s analysis. Table I shows a frequency distribution of the farms retained i n the study, made on the basis of the percentage of gross current receipts received from dairy production. The purpose i s to note the dis- tribution within the l i m i t s set by the 75 percent test. TABLE I FREQUENCY DISTRIBUTION OF FARMS BASED ON PER- CENTAGE OF GROSS CURRENT RECEIPTS FROM DAIRY PRO- DUCTION, LOWER FRASER VALLEY, 191+6 AND 195U Class Intervals Year Percent 1 9 U 6 No 195U No 75 - 7 9 12 k 80 - 8U 19 k 85 - 8 9 25 6 90 - 9k 37 k 95 - 100 6 7 32 Total 160 50 19 Further to Table I, i n 19)46 k l farms, i . e . 25 percent of the sample, received between 97 and 100 percent of t o t a l receipts from dairy production. In 195U, 19 farms, i.e. 38 percent of the sample, were one hundred percent dairy producing units, and 30 farms i . e . 60 percent of the sample were i n the class i n t e r v a l 97 to 100 percent. In both 19U6 and 195U 8 percent of the farms i n the samples received less than 80 percent of their gross current receipts from milk production. Sampling Problems and Limitations of Data I t was mentioned e a r l i e r that there are some problems i n the nature of the sample which may impose certain limitations on the results derived from the measurements to be made i n this study, Hansen, Hurwitz and Madow state that precision of the results obtained from a sample survey depends not onxy on the size of the sample but also on the other parts of the sample design, i.e. on the way i n which the sample i s selected and the way i n which the estimates are prepared from the sample survey returns.^ They also recommend that for a population as skewed as the one under study s t r a t i f i e d random sampling may have been more adequate. The central idea i n selecting a simple random sample and subjecting i t to s t a t i s t i c a l treatment i s to estimate from the sample the population parameters so that inferences can be made about the population. With a population of size N, and from which the sample to be choosen i s size n h Hansen, Hurwitz and Madow, op. c i t . , p. lw 20 the sample should be chosen such that each of the items "haS the same probability of being included and that the probability of selection i s known, i . e . the probability w i l l be - ~ . Of essence here i s the n fact that the surveyor gives up control as to which units are to be included i n the sample because a sample chosen at random i s one i n which a i l the elements or units i n the population have the same proba- b i l i t y of selection. S t r a t i f i e d random sampling i s a special case of simple ran- dom sampling i n which the population i s divided into several strata, and then the principles of simple random sampling dm, applied to each stratum separately. To derive gains from the use of s t r a t i f i e d random sampling, s t r a t i f i c a t i o n of the population should result i n strata which are homogeneous with regard to the characteristic to be measured, and there should also be heterogeneity between strata. Hence the virtue i n using s t r a t i f i c a t i o n for a population with highly variable characteristics l i e s i n the increase i n the r e l i a b i l i t y of the results. However, the 1 9 U 6 and the 1 9 5 U surveys used a method i n which a definite attempt was made to choose farms that x̂ rere represen- tative of the area to be studied. These surveys made use of what appears to be "purposive sampling" to choose a sample that i s represen- tative of the area with respect to the characteristics to be studied. I t i s obvious that the f i r s t l i m i t a t i o n i n this method of sampling Is that a representative sample could only be as representative as the judgement of the person as to what a representative sample i s . In this connection reference w i n again be made to Hansen, Hurwitz and Madow 21 who advise that reliance upon relationships observed i n past experience may be particularly dangerous i n times of important economic or social change, yet i t i s i n such times that the need for reliable results i s most v i t a l . 5 In defence of purposive sampling, however, i t may be stated that this method i s usefux where I t i s necessary to Include a comparatively small number of units i n the sample. Compared with random selection purposive sampling tends to be biased, but the biases probably would be smaller for a sample of say one area selected purposively to repre- sent B r i t i s h Columbia, than the random errors would be i n a measurable method that depended on a random selection of a single area. Where, however, the sample i s to include a considerable number of units, then the bia.ses of the purposively selected samples w i l l often be more serious than the random errors Introduced where random or chance selection rather than purposive selection i s used. The efficiency of any sample design must be considered In the light of the cost and time involved. Both of these factors undoubted- l y played a part i n the choice of the particular sample design. To s t r a t i f y the dairy farm population i n the Lower Fraser Valley would be expensive and time consuming. Depending on the particular population characteristic to serve as the c r i t e r i o n for deciding on strata l i m i t s , l i s t s and statements would have to be taken clearly defining each unit with respect to the characteristic. This i s a time consuming and expensive task. 5 Hansen, Hurwitz and Madow, op. c i t . , p. 6. 22 Thus having regard to the time factor, the outlay and the other problems involved, those who assemble data may decide against s t r a t i f i c a t i o n and so sacrifice some r e l i a b i l i t y of the estimates. To terminate the defence of the method of sampling here used, reference w i l l be made to Hansen, Hurwitz and Madow who have stated s i c : I f i t i s important that reliable results be obtained, and i f a f a i r i y heavy loss may be involved i f the wrong action or decision i s taken as a consequence of having depended on results the actuaxly turn out to have large errors that are considered tolerable, then a method for which the risk of error can be controlled should be used i f possible. On the other hand, i f conditions are such that only f a i r l y rough estimates are required from the sample, and important decisions do not hinge on the results, then only a small sample i s required, and the price to be paid for using a sample whose accuracy can be measured may not be j u s t i f i e d . Under these conditions I t may be that the biases of low- cost non random method w i l l be considerably less important than the random errors result- ing from the small size of the sample, and then such methods may be expected to produce results of sufficient r e l i a b i l i t y more economically than would more rigorous a l t e r - native methods.^ 6 Hansen, Hurwitz, and Madow, Op. c i t . , p. 73. 2 3 RESULTS AND INTERPRETATION The Data Inputs were divided into seven categories, v i z ; - ( i ) feed purchased, ( 2 ) custom work hired, ( 3 ) labour, (k) cost of operating farm machinery, repair and maintenance of machinery, equipment and buildings, ( 5 ) depreciation, ( 6 ) interest on investment, and ( 7 ) miscellaneous expenses. Feed Purchased-1 - The outlay on this input, which does not Include feed grown on the farms, was determined by dividing the out- lay on purchased feeds by the index of feed prices ̂  (J.9I46 = 1 0 0 ) , Custom Work Hired - This item includes the use of machinery and equipment and the labour to operate i t . I t was a small item which was d i f f i c u l t to include elsewhere. The outlay on this input was ob- tained by dividing the expenditure incurred by the index of farm wage rates. 3 Labour - This Input includes the outlay on hired labour, an In 1 9 5 U hay was purchased usually only when a shortage of farm- grown hay was anticipated. Silage as such was not purchased but materials for making silage, such as grass, corn pulp, corn stalks and pea vines were purchased on about 2 5 per- cent of the farms. In a few cases wet Brewer's mash was purchased and fed as a substitute during part of the year. Vide: Campbell, R.H., Dairy Farm Organisation i n the Lower Fraser Valley of B r i t i s h Columbia, Economics Division, Marketing Service, Department of Agriculture, Ottawa, June, 1 9 5 7 . Dominion Bureau of S t a t i s t i c s , Prices and Price Indexes 1 9 U 9-1952. Queen's Printer and Controller of Stationery, Uttawa, 1 95u. Volume 23, p. 9 5 . Price Index Numbers of Commodities and Services used by farmers, August 1 9 5 6 {1935-1939}, Queen's Printer and Con- t r o l l e r of Stationery, Ottawa, 1 9 5 6 , Volume 1 2 , No. 3, p. 2 . 2 3 2k imputed vaiue to operators' labour, and the value of family labour. The number of man-hours of labour per year was calculated at 3-L20 hours on the basis of a 26 day month and a lO hour day. The monthly wage rate for farm labour without board i n B r i t i s h Columbia i n 19U6 was | l05.56^ and $159.00 for 195lu^ The annual wage rate for farm labour was therefore $1,26? for l9U6 and $1,908 i n l9$k< The outlay on this input was determined by multiplying the t o t a l number of man hours for the year by the annual wage rate and then dividing the current outlay so obtained by the index of farm wage rates. Cost of Operating Farm Machinery, Repair and Maintenance of Machinery, Equipment and Buildings - The value of t h i s input was determined by dividing the expenses incurred i n operating tractors, trucks, automobiles, engines and combines by the index of prices of gaso- l i n e , o i l and grease,^ and adding to this amount the outlay for main- tenance and repair of farm buildings, machinery and equipment, which had been calculated by dividing the current outlay on these items by the price index of building material or the price index of farm machinery prices.7 Depreciation - Depreciation on buildings was computed at k Dominion Bureau of S t a t i s t i c s , The Canada Year Book 19I48 - ±9k9, King's Printer and Controller of Stationery, l$k9, p.678. 5 The Canada Year Book 1956, Queen's Printer and Controller of Stationery, 1956, p. 757. 6 Prices and Price Indexes,' X$k9 - 1952, op. c i t . , p. 98. 7 Price Index Numbers of Commodities and Services used by farmers, August, 1956 U935-i939=lOO), op. c i t . , 2 5 5 percent of the replacement cost. Machinery and equipment were c l a s s i f i e d into 2 groups, v i z : ( i ) general equipment and ( 2 ) special equipment. The l a t t e r included such items as automobiles, trucks and tractors. The rate of depreciation on special equipment was 2 k per- cent of replacement cost while that on general equipment was 1 5 per- cent of the replacement cost. The expenditure on t h i s input was de- termined by dividing the outlay on buixdings by the price index of building material, and then adding to this amount the outlay on machinery and equipment which had been divided by the price index of farm machinery prices. Interest on investment - The outxay on t h i s input was ob- tained by taking 5 percent of the operator's average net worth, and then dividing this amount by the Index of interest rates. Miscellaneous Expenses - This Input includes the value of such items as hardware and small tools, taxes, telephone, e l e c t r i c i t y , sprays, germicides, disinfectants, a r t i f i c i a l insemination charges, and other miscellaneous expenditures not specificaxly c l a s s i f i e d i n the other s i x categories. The value of this input was determined by divid- ing the t o t a l outxay by the price index of hardware prices. Thus, the value of Input used on the individual farms i n 1 0 U 6 and 1 9 5 U could be added i n current dollars for the particular year, or the value of input could be found i n constant dollars according to equations k (in the case of 19k6) and (in the case of 1 9 5 U ) °n pages 1 2 and l 3 respectively. By dividing output into the aggregate input, the ratio of input to output was determined. Another calculation of these ratios was made by aggregating the results from a l l the farms, rather than the average of the ratios calculated for the individual farms. 2 6 Analysis The f i r s t part of the analysis presents some of the gross changes i n the input - output ratios, and i n the factor-factor ratios which have occurred from 19I46 to ±95h* The best gross output data available are from the records of the Dairy Herd Improvement Association, which reveal changes i n the output per cow for the period l 9 i . i l - to i 9 6 0 as shown i n Table I I . This table shows that, apart for the years 1 9 3 6 , 191+8-19k9 and I 9 5 I + - 1 9 5 6 , there has been a steady rate of increase i n the average production of k percent fat corrected milk per cow over the period i 9 l i | . - 1 9 6 0 . The t o t a l increase i n the average output per cow was 62.k percent, and the average annual rate was 1 . 3 percent. The average output per cow i n i9k6 was 9 , 1 3 6 pounds of k per cent fat corrected milk. This average was based on the performance of k98 cows. In i95>k, the average output per cow was 9,?6l. Within this 8-year period the t o t a l increase i n the average output per cow was 6 . 8 percent, and the average annual rate was . 8 percent. In i 9 6 0 , the Dairy Herd Improvement Association showed that the average output per cow was 1 0 , 7 9 5 pounds of k percent corrected milk. The average t o t a l Increase over the period i 9 5 > k - i 9 6 0 was 1 0 . 6 per cent, and the average annual rate was 1.8 percent. This study of the records of the Dairy Herd Improvement Association shows a 1,3 percent average annual rate of increase during the period 1 9 5 V - 1 9 6 0 i n contrast to a .8 percent rate of annual Increase f o r the period i 9 k 6 - l 9 5 k . The dairy farms studied i n this investigation showed that i n 27 TABLE I I ANNUAL PRODUCTION PER COW, DAIRY HERD IMPROVEMENT ASSOCIATION, I9lA-l960 AND SAMPLE FARMS I9U6 AND ±95k PRODUCTION FOUR PERCENT MILK FAT FAT CORRECTED MILK Dairy Herd Sample Dairy Herd Sample Dairy Herd Sample Year Improvement Farms Improvement Farms Improvement Farms Association Association Association lbs lbs lbs lbs lbs I9i i|- i9i6 1930 1932-193U 1936 1938 19U0 19U5 19k6~i9U7 19k8 19A9 1950 1951 1952 1953 195k 1955 1956 1957 1958 1959 i960 6,563 8,oi5 8, n 3 7,857 7,959 8,265 8,606 8,627 8,588 8,623 9,088 9,363 9,382 9,538 9, U77 9,ii38 9,A98 9,759 10,330 10,576 10,600 6,757 7,782 8,700* 268 6,61*5 337 8 ,26i 3h3 8,390 338 8,213 8,389 31+7 362 8,736 37k 9,052 379 302 9,136 378 9,105 375 9,07k 393 9,530 393 9,6k0 kQO 9,753 U02 9,81x5 398 322 9,761 395 9,700 39U 9,709 9,96k kok U25 10,507 k35 io ,755 137 35U* 10,795 7,233 7,9U3 8,790* Source: {&) For period l 9 l k - l 9 3 U - B r i t i s h Columbia Department of Agricu_Lture Settlement Series Circular No. 5, p. 8. (b) For period 1936-1960, Reports of the Dairy Herd Improvement Association, vide Appendix f>P- * These figures are based on a linear projection of the trend observed i n the Dairy Herd Improvement Association records between the period 195k and i960. 28 l°k6 there were 2909 dairy cows i n the 160 sample farms. These cows produced 2I,OkO,797 pounds of k percent fat corrected milk, and the average production per cow was 7,233 pounds. In l95>k there were l3l6 dairy cows which produced I0 ,k52,988 pounds of k percent fat corrected milk and the average production per cow was 7,9k3 pounds. The totax increase i n output per cow over this 8-year period was, therefore, 9.8 percent, and the average annual rate was X.2 percent. On the as- sumption that the annual rate of increase i n the case of the sampxe farms during the period x95k-l960, was the same as the Dairy Herd Improvement Association, a projection of t h i s trend would show an average output per cow of 8,790 pounds of k percent fat corrected milk i n I960; and a t o t a l increase over the 6-year period of 1O.6 percent. The average annua.i production of k percent fat corrected mixk per cow for I9k6 and 195k a s shown i n the records of the Dairy Herd Improvement Association are higher than the averages for the sampxe farms, presumabxy because the production figures from the Dairy Herd Improvement Association are based on herds that do better than the whole population because of being on test, and probabxy because the owners of these herds are better dairymen. I t i s noted, however, that the annual average rate of In- crease i n the output per cow during the period 19k6-x95k was O.k per- cent greater In the case of the sample farms as compared to the records of the Dairy Herd Improvement Association. The reason for this greater rate of increase i s that the l e v e l of average output per cow i n l9k6 and 195k i n the case of the records of the Dairy Herd Improvement Association was higher than the level of average for the sample farms. 29 I t i s expected that the rate of increase i n output w i l l be greater at lower levels than at higher levels of production. Table I I I shows the changes i n output singxe-factor ratios which are based on the data from the sample farms studied i n this investigation. This table shows that average physical productivity of labour had increased by 59.2 percent over the period I9k6-195k, and that the average annual rate of Increase i n productivity was 7.11- percent. TABLE I I I SINGLE FAGTOR RATIOS 191*6, 195k, AND I96i (PROJECTED) LOWER FRASER VALLEY Output Single Factor Ratios l ? k 6 lbs Uhange 19k6-i95> percent Projected lbs k percent fat corrected milk output per cow 7,233 7,9k3 9.8 8,610* k percent fat corrected milk output per man year 78,k23 12k, 886 59.2 189,577* k percent fat corrected milk output per farm acre 2,083 3,17k 52.k k,6k0* Butterfat out- put per cow 302 322 6.6 31*0* * These estimates are based on a linear projection of the trend observed between the period I9k6-195k. 30 I t i s indicated also that the average milk output per acre has undergone a 52.1+ percent increase over the period x.9h6-L95h', and that the average annual rate of increase i n milk output per acre was 6.6 percent. Table VI shows that feed purchased had changed very l i t t l e i n real terms during the period, and Table V indicates that the increase i n average acreage per farm had been rather insignificant over the period. Hence the increased rate of change i n milk output per farm shows the efficiency of land use which was associated with increased output per cow during the period. The impact of technical progress had changed the amount of capital used by the farm and i t s allocation within the farm. Table IV shows that the t o t a l capital investment had more than doubled over the period l9k6 to ±951+# TABLE TV D I S T R I B U T I O N O F F A R M C A P I T A L O N i60 D A I R I F A R M S I N l9l+6 A N D 50 D A I R Y F A R M S I N 1.95k, L O W E R F R A S E R V A L L E Y Items of Capital Average value per farm 19k6 Percent of Total Average value per farm 1951+ Percent of Total Real Estate $13,102 67 125,978 63 Livestock 3,808 19 8,321+ il+ Machinery and Equipment 1,899 10 5,883 20 Feed and supplies 76k k 1,329 3 Total Capital #19,576 100 . fi+1,1+78 100 This tabxe shows that the Investment i n real estate, l i v e - stock, feed and supplies had doubled approximately, whereas investment 31 i n machinery had t r i p l e d . Thus machinery and equipment constituted 10 percent of farm capital i n 19k6, and 20 percent i n 195k. Real estate, livestock, feed and supplies declined by k, 5 and 1 percentage points respectively. These changes represent the capital readjustment which was necessary to achieve the saving In labour input which was realized. In addition to the changes In the output single-factor ratios In the amount of capital, and i n i t s distribution within the farm, technological progress had also caused changes i n the size of the farms during the period under study. Table Y shows some of the changes which had occurred i n the size of the average farms i n I9k6 to 195k. This table indicates that there had been an increase i n the output per farm of 59.0 percent during the period 19k6 to 195k. The annual average rate of increase i n output over this 8 year period was therefore, 7«k percent. During the same period the t o t a l increase i n acreage per farm was k.8 percent and the annual average rate was .6 percent. Over the same period the size of the dairy herd had increased by kk percent and the annual average rate of increase was therefore 5.5 percent. These figures show that during the period investigated, associated with a .6 percent average annual increase i n the number of acres per farm plus an average annual increase i n the size of the milk- ing herd of 5*5 percent, there was an average annual increase i n the output per farm of 7»k percent. This phenomenon i s indicative of the pot e n t i a l i t i e s that exist for possible expansion i n the output of the industry i n response to the future increases i n the demand for dairy products i n the Vancouver and surrounding d i s t r i c t s . 32 TABLE V MEASURES OF CHANGES WITHIN FARMS 191+6 TO 195U, LOWER FRASER VALLEY Criterion 19kS I95k per farm per farm k percent fat corrected milk output (lbs) 131,505 209,060 Acres No. 63 66 Cows No. 18 26 Labour earnings $ 899 $ 1,61*0 Gross receipts t 5,317 $ii,0l+5 Gross outlay $ 3,915 $ 9,950 Changes i n the Quantity of Different Factors Used Changes were also made i n the quantities of the various factors used. These are presented i n Table VI. In calculating these input-output ratios, the base year i n the Dominion Bureau of S t a t i s t i c s price indexes for the various inputs, was shifted from 1935-1939 to 19U6. This table shows that there had been re a l savings i n factor- use to the extent of 20 percent between the years 191+6 and 195U. Based on the assumption that the rate of growth i n economic efficiency was the same i n l95Vi96l as that i n 19I+6-195I+, the real savings i n factor- use i n i96l has been approximated by a linear extrapolation of the trend which existed between 19I46 and 195U. This projection shows a real savings i n factor-use for the period 195U to 1961 of ±k percent, and, 33 TABLE VI INDEX NUMBERS (l°li6=100) OF INPUTS PER HUNDREDWEIGHT OF k PERCENT FAT CORRECTED MILK MEASURED AT 19hS PRICES, LOWER FRASER VALLEY, 191*6, 19gk AND 1961 (PROJECTED) I9k6 ±95k 1961 Projected INPUT Input per cwt milk Index Input per Index cwt milk Input per Index cwt milk Feed purchased "~ § •73*(.08) 100 .68*(.03) 93 $ .6k 81; Custom work .06*(.pC)k) 100 ,05*(D0k) 83 .Ok 67 Labour l . k 7 * ( . 1 3 J 100 .92*(.15) 62 .62 U2 Cost of operating farm machinery, Re- pai r & maintenance of machinery equip- ment & buildings .23*(.Ol) 100 .23*(.Ol) 100 .23 100 Depreciation .70*(,06) 100 .k9*(.oi) 70 .36 51 Interest on Investment .7lt*(.08) 100 .69*(.0U) 93 .65 88 Miscellaneous .6k*(.Ok) 100 .59*(.02) 92 .55 86 Total L.5Y*(.i8) 100 3.65*( . l6) 80 3.01 66 *( ) signifies that there i s 95% confidence that the true population mean for the characteristic i s the number outside the bracket ± the number i n the bracket. therefore, an annual average rate of decrease i n cost of 2.0 percent. This i s an estimate made by using the trends method. In the absence of empirical data. In order to determine the r e l i a b i l i t y of this estimate, i t i s necessary that a survey be undertaken so that data be collected and analysed, i n order to obtain the true savings i n factor-use for 1961. The most significant fact which these tables show i s that the input of most factors per hundredweight of k percent fat corrected milk 3 k had decreased, but the input represented i n the cost of operating farm machinery, and i n the repair and maintenance of machinery, equipment and buixdings had remained the same. There had been a savings i n labour used to the extent of 3 8 percent between the years I9k6 to l 9 5 k . I f projected to l ° 6 i , I t would mean a saving of 5 8 percent i n labour input. The decreasing use of labour was made possible by the extent to which machinery and other forms of capital were substituted for labour as i n - dicated i n Table I?. A significant change also had occurred i n the input represen- ted by depreciation of buildings, machinery and equipment. Real savings i n the use of this factor were 3 0 percent between the years I9k6 and 1 9 5 U , which i f projected to 1 9 6 1 would amount to 1 * 9 percent. Significant changes were also made i n the input represented by the cost f o r the use of capital i n the Industry. Table IV Indicates that more than twice the amount of capital per farm measured i n current dollars was used i n 1 9 5 1 * as compared to 191*6. There was an increase i n the real porductivity of capital i n 1 9 5 1 * over I9k6 which amounted to 7 percent. Projection of this trend to 1 9 6 1 would make this sum 12 percent. There were savings i n the use of miscellaneous Items amounting to 8 percent over the period 191*6 to 1 9 5 1 * , which I f projected to 1 9 6 1 would show a savin: 3 of Ik percent. Over the entire period 1 9 k 6 to 1 9 5 1 * , the real savings i n a l l factors used amounted to 2 0 percent. Projection of this trend to 1 9 6 1 gives real savings of 3 k percent. 35 Changes i n the Relative Importance of Inputs Technical change had also caused shifts i n the relative amount of each input used, and a small s h i f t occurred i n the order of importance of inputs. Table ¥11 shows t o t a l inputs measured i n constant dollars and their distribution among the seven categories of inputs. TABLE VII RELATIVE IMPORTANCE OF INPUTS, LOWER FRASER VALLEY, 19l|6 AND 195k 19U6 195k Inputs input I9U6 (dollars) Percent of t o t a l Input 19k6 (dollars) Percent of t o t a l Feed Purchased 153,970 16.0 70,676 18.5 Custom work 13,00k 1.3 5,092 1.3 Labour 309,251 3 2 . 1 9.6,267 25.3 Cost of opera- ting farm machi- nery and repair and maintenance of machinery, equipment and buildings k7,366 5x> 2k,5k9 6.k Depreciation l k 6 , 8 0 2 15.2 50,963 13.3 Interest on Investment 156,602 16.2 72,200 18.9 Miscellaneous Expenses 13k, 930 Ik. 2 62,130 16.3 Total 961,925 100.0 381,877 100.0 36 The data i n this table indicate that the order of impor- tance had not changed, except that i n 1 9 5 U miscellaneous expenses have displaced depreciation as the fourth most important input factor. However, changes had occurred i n the relative amount used of each input. The most significant change had been made i n the case of labour, whose share as percent of t o t a l outlay had been decreased by 6.8 percentage points. Ihspite of t h i s , however, labour had remained the most important single factor of production both as a percentage of t o t a l input and i n the amount of i t used per hundredweight of milk. Less significant changes were made i n the distribution of t o t a l input among the other six factors. The proportion of t o t a l input that went to depreciation! had declined by 1.9 percentage points, whereas the share to interest on investment had risen by 2.7 percent- age points. The proportion that was all o t t e d to feed purchased i n - creased by 2 . 5 percentage points, and the share to miscellaneous expenses had risen by 2 . 1 percentage points. The proportion spent on the cost of operating farm machinery and repair and maintenance of machinery, equipment and buildings had been increased by l.A percent- age points, while the share to custom work had remained unchanged. Although the inputs had a l l maintained their relative positions, but for the exception noted above, small changes were made i n the amounts of each factor used. The use of some factors had i n - creased whereas the use of others had decreased. In summary, this analysis has demonstrated that there was a decrease i n the input of most factors per hundredweight of milk, but 37 the input represented i n the cost of operating farm machinery and i n the repair and maintenance of machinery, equipment and buildings had remained unchanged. The most substantial decrease was i n the case of labour. The decrease i n the amount of labour used per hundredweight of milk had been induced by labour-saving innovations i n dairy farm- ing, which involves the substitution of capital for labour. F i n a l l y , the analysis has shown that real savings had been made i n input-output conversion i n milk production. C onclusion In this investigation, an attempt was made to test and measure the rate at which technical change has Increased the efficiency with which factor inputs are converted into output on dairy farms, and to measure also the changes i n the input structure of dairy farms i n the Lower Fraser Valley. The results of this study indicate that shifts have taken place i n the relative importance between labour and the other factors of production, and that associated with these sh i f t s had been an i n - crease i n overall efficiency between l 9 l | 6 and 19 5k of 20 percent, which i f projected to 1 9 6 1 would amount to 3k percent. From this s tudy indications are that the industry has the pote n t i a l i t i e s for increasing Its output of milk, i n response to future increases i n demand, which growth In population would render necessary. 3 8 The annual rate of population growth i n the Vancouver 8 Q area was i percent during the 5 year period 1956 to ±960y. The r e - port of the dyne Commission had estimated an annual rate of popu- l a t i o n growth i n the Vancouver area of 3 percent - 1- 0 between the years i960 to 1970. I t was noted e a r l i e r that associated with an average annual increase of .6 percent i n the number of acres per farm plus an a average annual increase of 5 - 5 percent i n the number of d a i r y cows per farm and an increase i n the average annual output per cow of 1.2 percent, there was an average annual increase i n the milk output per farm of 7.U percent. Hence i f the population grows at the rate of 3 percent per annum, with an average annual rate of increase i n the annual output per farm of 7.U percent, the d a i r y industry i n the Lower Fraser V a l l e y w i l l have very l i t t l e d i f f i c u l t y i n meeting the milk requirement of the increasing population. However, i n t h i s process d a i r y farmers w i l l have the need to continue making re-adjustments i n resource use. On the basis of the tre n d noted i n t h i s study, i t Is a n t i c i p a t e d that there w i l l continue to be a steady decline i n labour input, both as percentage of t o t a l input and In the amount used per hundredweight of milk. In order to o f f s e t the decline i n labour input, i t i s 8 This includes the c i t i e s of Hew Westminster, North Vancouver, Hort Coquitlam, f o r t Moody and Vancouver," the m u n i c i p a l i - t i e s of Burnaby, Coquitlam, North Vancouver, Richmond, West Vancouver, and Fraser M i l l s , and the unorganized areas. I t does not include the u n i v e r s i t y of B r i t i s h Columbia t r a n s i e n t population. 9 Dominion Bureau of S t a t i s t i c s , Canada Year Book, i960, Queen's P r i n t e r and C o n t r o l l e r of Stationery, i960, pp 1 7 3 - 1 7 5 • 10 Ciyne, J.V., Report of the B r i t i s h Columbia Royal Commission on M i l k , P r i n t e r to the Queen's Most Ex c e l l e n t Majesty, V i c t o r i a , 1955, p. l8k. 39 anticipated that there will be an increase in the total amount of capital used in the form of machinery and equipment, livestock, and to a lesser degree in real estate. There need hardly be an appreciable increase in total acreage per farm. Intensification of land use, irrigation and more efficient f e r t i l i z e r application and rotational system would render unnecessary a substantial increase in acreage. It i s expected that the average size of the herd will increase, and hence the milk output per farm will continue to rise. With better management, there w i l l probably continue to be also a steady increase in the output per cow which could reach 10,000 to 12,000 pounds of milk per cow by 1970. Along with these re-adjustments in resource use, and the estimated increases in the physical productivity of labour and capital, i t is anticipated that the indus- try will effect further real savings in the use of factor inputs. BIBLIOGRAPHY A. BOOKS Ajves, C. E., Theory of Economic Progress, University of North Carolina rress, Chapel H i l l , ±9kk> Boulding, K.E., The Economics of Peace, New lork, Prentice H a l l , Inc., 191+5. George, H., Progress and Poverty, New York, Robert Schalkenbach Foundation, l95U. Hansen, H.H., et a l . , Sample Survey Methods and Theory, Volumes I and I I New York, John Wiley & Sons, Inc., London, Chapman & H a l l , Limited, i 9 6 0 . Heady, E.O., Economics of Agricultural Production and Resource Use, Engiewood C l i f f s , New Jersey, Prentice Hall Inc., 1 9 5 7 . Hicks, J.R., "Distribution and Economic Progress',' The Theory of Wages, New York, Peter Smith, 1914-8, pp. U.2-13U. Leftwich, R.H., The Price System and Resource Allocation, New York, Rinehart & Company, Inc., 1 9 5 8 . Malthas, J.R., An Essay on the Principles of Population, New York, E.P.j Dutton & Co., Book 2, n.d. Migheil, R.L., and Black, J.D., Interregional Competition i n Agriculture, Cambridge, Massachusetts, Havard University press, 1 9 5 i . M i l , J.S., Principles of P o l i t i c a l Economy, Volume 1 1 , New York, D. Appleton and Company, i 9 0 9 . Schultz, T.W., Agriculture i n an Unstable Economy, New York, Mac Graw H i l l Book Company, Inc., 191)5. Schultz, T.W., The Economic Organisation of Agriculture, New York, Wheeler, R.G., and Black, J.D., Planning for Successful Dairying i n New England, Cambridge, Massashusetts, Havard University Press, 1 9 5 5 . I l l B. PUBLICATIONS OF THE GOVERNMENT, LEARNED SOCIETIES AND OTHER ORGANISATIONS Anderson, ¥.J., Farm Organisation and Labour Earnings off Whole Milk Producers i n the Lover Fraser Vaxxey, i°U6, Vancouver, University of B r i t i s h Coxumbia, 191+01. Campbell, R.H., Dairy Farm Organisation i n the Lower Fraser Valley of B r i t i s h Columbia, Ottawa, Economics Division, Marketing Service, Department of Agriculture, 1957. Canada, Dominion of S t a t i s t i c s (D.B.S.), The Canada Year Book 19ii.6-I9l4.9, Ottawa, King's Printer and Controxler of Stationery, 191*9. > The Canada Year Book 1956, Ottawa, Queen's Printer and Controller of Stationery, 1957. > Price and Price Indexes, 19U9-1952, Ottawa, Queen's Printer and Controller of Stationery, 195U. > PPJce Index Numbers of Commodities and Services used by FTrmers, August 1956 (1935-39=100), Volume 12, No. 3, Ottawa, Queen's Printer and Controller of Stationery,1956. — ' > Quarterly B u l l e t i n of Agricultural S t a t i s t i c s , January - March, 195U, Ottawa, Queen*s"Printer and Controller of Stationery, 195U. > Quarterly B u l l e t i n of Agricultural S t a t i s t i c s , January - March, "1956. Ottawa, Queen's Printer and Controller of S tationery, x956. , The Canada Year Book I960, Ottawa, Queen's Printer and Controller of Stationery, i960. Clyne, J.V., Report of B r i t i s h Columbia Royal Commission on Milk, 195^-1955, V i c t o r i a , Printer to the Queen's Most Excellent Majesty, 1955. Department of Agricultural Economics, University of B r i t i s h Columbia, Dairy Farm Incomes and Cost of Producing Butterfat i n the Coastal Areas of British* Columbia, Vancouver, University of B r i t i s h Columbia, 191+7. Hare, H.R., "Dairy Farm Survey", B r i t i s h Columbia Agriculture Bulletin No. 91, Vict o r i a , B r i t i s h Columbia Department of Agriculture, l 9 2 l . U 2 Kaidor, Nicholas, "A case Against Technical Progress?" Economica Volume XII, Numbers 3 5 ~ 3 6 , London, London School of Economics and P o l i t i c a l Science, 1 9 3 2 . Lok, SAH., An Enquiry into the Relationship between changes i n Overaid-Productivity and Real Net Return Per Farm and between changes i n Total Output and Real Gross Return, Canadian Agriculture, 1 9 2 6 - 1 9 5 7 , Ottawa, Economics Division, Canadian Department of Agriculture, October, 1 9 6 1 . Lower Mainland Regional Planning Board of B r i t i s h Columbia, Land for Farming, New Westminister, March, i 9 o 2 . Menzie, E.L., et a l . , Dairy Farm Management Manual, Vancouver, Department of Agricultural Economics, University of B r i t i s h Columbia, B r i t i s h Columbia Department of Agriculture, 1 9 5 7 . Robinson, J., "The Class i f i c a t i o n of Inventions" i n American Economic Association^,' Readings i n the Theory of Income Distribution, No. 9. 191+8'. C. PERIODICALS Hopkins, J.A., "Technological Development Affecting Farm Organisa- tion", Journa.1 of Farm Economics, The American Farm Economics Association, XXI, (February 1 9 U 9 ) , 1 6 5 . Schultz, T.W., "Changes i n Economic Structure affecting Agriculture Journal of Farm Economics, The American Farm Economics Association, XXVIII'(February 1 9 U 6 ) , 1 9 . k3 A P P E N D I X DESCRIPTION OF THE REGION AND ITS FARMS The locus for this study i s the Lower Fraser Valley, which constitutes the delta of the Fraser River, and extends from Hope to the P a c i f i c Ocean i n an east west direction. I t Is bounded on the north by the Coastal Mountains and on the south by the State of Washington. The p o l i t i c a l units include the municipalities of Delta, Surrey, Sumas, Chilliwack, Richmond, Langley and Matsqui to the south of the river and P i t t Meadows, Mission, Nicomen, Dewdney, Kent, Maple Ridge and Coquitlam to the north. As a farming area, the Lower Fraser Valley, i s set apart from the remainder of the country by topography, s o i l , climate, h i s - tory and par t i c u l a r l y i n regard to i t s location with respect to large concentrations of populations. There are approximately 700,000 acres of land i n the region 1. About 320,000 acres of this amount are cultivated, 200,000 acres of which are i n hay and pasture. Elevation In the region ranges generally from sea-level to some U00 feet. In the v i c i n i t y of Chilliwack and Agassiz, there exist some rock h i l l s , which vary i n height to about 1,000 feet. The soils 1 B r i t i s h Columbia Department of Agriculture, Settlement Ser- vices Circular No. 5, The Fraser Valley of B r i t i s h Columbia, Canada, Don McDairinio, Printer to the Queen's Most Excellent Majesty, 1953. 16 of the Valley were mapped and c l a s s i f i e d by Kelley and Spilsbury^ i n 1939. Much of the upland s o i l i s suitable for agricultural purposes, but the cost of clearing has impeded i t s adoption for farming. The soi l s of the recent delta, hox^ever are fine textured and f e r t i l e . Several factors influence the climate of the area. The most important ones are the mountains to the north, and the modifying effect of the Pac i f i c Ocean. Comparatively uniform temperatures, characteristic of a maritime climate, prevail throughout the year. 'The difference be- tween the average temperature of the coldest month and the warmest month i s small. The average for the coldest'month, January, i s 36°F., and for the warmest month, July, 63°F. This gives a variation of 27°. Industrial expansion i n the c i t i e s has been associated with the rapid urbanisation of some parts of the area. The growth of the c i t i e s has brought a corresponding growth i n the demand for farm products. The agriculture of the region has responded by increasing the production of f l u i d milk and other bulky perishable products, which can be produced to advantage i n areas r e l a t i v e l y close to the market. Livestock production primarily dairy and poultry constitutes the source of over 80 percent of the farm cash income i n the area. The population of the Fraser Valley i n 1956 was estimated to be 750,000 persons comprising 57 percent to 60 percent of the provincial t o t a l . About 7 percent of these people l i v e d on 9,900 farms, which comprised 38 percent of a l l the farms i n the Province. 2 Kelley, C.C., and Spilsbury, R.H., S o i l Survey of the Lower Fraser Valley, Dominion Department of figricuiture Technical Bu l l e t i n 20, 1939. U6 I t has also been estimated that there were 110,000 head of cattle - mostly dairy cattle. The estimated number of milk cows was 56,000, producing upwards of kOO,000,000 pounds of milk annually, about h$ percent of which i s sold as f l u i d milk i n the Vancouver market. About 66 percent of the Provincial t o t a l dairy output i s produced i n the Lower Fraser Valley. The output i n the Lower Fraser Valley was valued at $2.5 m i l l i o n . With regard to dairy-herd improvement work i n the Fraser Valley there are two major agencies which are available to dairy farmers v i z : (1) the Dominion Record of Performance for pure-bred registered dairy cows, and (2) the Dairy Herd Improvement Association. In any part of the Valley where dairy farming i s engaged i n to any considerable extent, one of these agencies serves the dairy farmers. Tabxe I I indicates that through the f a c i l i t i e s of the Dairy Herd Im- provement Association, and with better care and management, dairymen have been successful i n improving the performance of their herds. hi DEPARTMENT OF AGRICULTURE PROVINCE OF BRITISH COLUMBIA VICTORIA November 9, 1961 Mr. Hugh V. Walker, Department of Agricultural Economics, c/o Faculty of Agriculture, University of B r i t i s h Columbia, VANCOUVER 8, B.C. Dear Mr. Walker: Replying to your request for D.H.I.A. annual production figures we are sending you our f u l l annual report for the past five years. Unfortunately, these reports for previous years are not now available, however, here b r i e f l y are the figures f o r the other years requested: lbs. Fat 31k 379 378 375 393 393 kOO k02 398 395 Trusting this Is the information you require. Yours sincerely, H. Johnson (sgd) H. Johnson, Inspector. D. H. I. Services. HJ/djb Year 19U5 19k6) 19k7) 19k8 19U9 1950 1951 1952 1953 195k 1955 Completed Periods 5,179 11,527 6,358 6,6k5 7,309 7,k32 8,086 9,530 n,,333 11,278 lbs Milk 8,606 8,627 8,588 8,623 9,088 9,363 9,382 9,538 9,1+77 9,k38 Fat$ k.3k k .39 k.kO k .35 k.32 k.26 k.26 k.2l k.20 k.l8 Enclosures: 5 1+8 BRITISH COLUMBIA DEPARTMENT OF AGRICULTURE (Livestock Branch) DAIRY HERD IMPROVEMENT SERVICES ANNUAL SUMMARIZED REPORT FOR 1956 Average ACTUAL production of a l l Dairy Herd Improvement Association Records completed during the year (or which milked 180 days or over) Number of Milking Periods Milk lbs Fat % Fat lbs 11,918 9,1*98 U.15 39k A further increase of 6kO completed milking periods took place during 1956. This increase of 5.7$ combined with severe Winter k i l l i n g of hay and pasture grasses and exceptionally dry spring weather, contained the potential for a sharp drop i n average production. However, 1955 pro- duction was maintained and, given average weather conditions during the following year, a definite rise should take place during 1957. The following figures i l l u s t r a t e the progress that has been made during the past 20 years. 19U6 8627 k.39 319 1936 7857 k.30 338 Of a l l cows at present on test i n D.H.I. Association, 23.2% are purebreds. Their average butterfat production i s k05. BREED AVERAGES FOR 1955 % of Total D.H.I, records Milk lbs k.2 Ayrshire 8,1+65 17.k Guernsey 8,139 1+8.6 Hoistein 10,987 19.3 Jersey 7,508 10.5 Unclassified (Crossbreds etc) 8,931 Fat % Fat lbs l+.H 31+8 k.77 388 3.69 U05 5.10 383 1+.33 387 100.0 I t i s interesting to note that the number of animals with a life-time production of a minimum of a ton of butterfat i s steadily r i s i n g , for this i s an important factor i n the economical operation of a herd of dairy cows. 191+0 1+17 cows: I9k6 1*98 cows: 1953 — 9l+8 cows. 1955 1312 cows: 1956 1379 cows. h9 BRITISH COLUMBIA DEPARTMENT OF AGRICULTURE (Livestock Branch) HAIRY HERD IMPROVEMENT SERVICES ANNUAL SUMMARIZED REPORT FOR 1957 Average ACTUAL Production of a l l Dairy Herd Improvement Association Records completed during the year (or which milked 180 days or over) Number of milking periods Milk lbs Fat % Fat lbs 12,01k 9,759 k.lk kOh These figures represent a new high for both completed periods and production in herds on D.H.I, test i n B r i t i s h Columbia. The ten pounds of fat increase means that approximately 500 dairymen had earnings of around $90,000 more than the cost of the feed needed to se- cure this increase over l a s t year.. The following figures i l l u s t r a t e the progress that has been made during the past 20 years. 19k6 8,627 h.39 379 1936 7,857 k.30 338 Of a l l cows at present on test i n D.H.I. Associations, 22.7% are purebreds. Their average butterfat production i s k l8 lbs. BREED J iVERAGES FOR 1955 % of Total D.H.I. Records Milk lbs Fat % F a t lbs 3.9 Ayrshire l 6 . 2 Guernsey 51.6 Holstein 18.7 Jersey 9.6 Unclassified 8,700 8,291 H , l 6 5 7,6k7 k.Ll k.79 3.72 5.1U 358 397 Li5 393 (Crossbreds etc.) 100.0 I t i s interesting to note that the number of anlrmls with a life-time production of a minimum of a ton of butterfat i s steadily r i s i n g , for this i s an important factor i n the economical operation of a herd of dairy cows. 19k0 — kl7 cows: I9k6 — k98 cows: 1955 — 1312 cows: 1957 — lkk8 cows 50 BRITISH COLUMBIA DEPARTMENT OF AGRICULTURE (Livestock Branch) DAIRY HERD IMPROVEMENT SERVICES ANNUAL SUMMARIZED REPORT FOR 1958. Average ACTUAL Production of a i l Dairy Herd Improvement Association Records completed during the year (or which milked 180 days or over) Number of milking periods Milk lbs Fat % F a t lbs 13,075 10,330 l+.il 1+25 These figures represent a new high for both completed periods and production i n herds on D.H.I, test i n B r i t i s h Columbia. The following figures I l l u s t r a t e the progress that has been made during the past 20 years. 191+8 8,627 U.39 379 1938 7,959 1+.36 31+7 23.0 percent of the cows on test i n D.H.I. Associations are purebreds. Their average butterfat production i s k33 lbs. BREED AVERAGES FOR 1958 % of Total D.H.I. Records 3.2 Ayrshire 15.0 Guernsey 51+.5 Holstein 17.1 Jersey 10.2 Unclassified (Cros sbreds etc) Milk lbs Fat % F a t lbs 9,192 8,870 11,692 7,936 l u l l U.75 3.73 5.11+ 378 L 2 l U36 108 9,581+ iu36 1+18 100.0 The number of animals with a life-time production of a minimum of a ton of butterfat i s steadily r i s i n g . This i s an important factor i n the economical operation of a herd of dairy cows. 191+0 — 1AL7 cows: 191+6 — 1+98 cows: 1955 — 1312 cows: 1958 — 1621 cows 51 BRITISH COLUMBIA DEPARTMENT OF AGRICULTURE (Livestock Branch) DAIRY HERD IMPROVEMENT SER,VICES ANNUAL SUMMARIZED REPORT FOR 1959 Average ACTUAL Production of a l l Dairy herd Improvement Association Records completed during the year (which milked i80 days or over). Number of Milking periods Milk lbs Fat % Fat lbs 111,286 10,576 k . l l 135 These figures represent a new high for both completed periods and production i n herds on D.H.I, test i n B r i t i s h Columbia. The increase i n milking periods was i , 2 l l a.nd i n production, 2l|6 pounds of milk and 10 pounds of butterfat. Butterfat percentage remained constant. The following figures I l l u s t r a t e the progress that has been made during the past 20 years. Milk lbs. Fat % Fat lbs 19U9 8,623 k.35 375 1939 8,292 k.37 363 Pure bred cattle on D.H.I, test have axways outproduced grades u n t i l t h i s year. The foxxowing table could well cause a re-examination of some breeding p o l i c i e s . 3,139 pure breds (22.0$ of tot a l ) produced an average of k3k lbs of B.F. i l , l l l 7 grades (78.0$ of total) produced an average of 1*35 lbs of B.F. BREED AVERAGES FOR 1959 % of t o t a l D.H.I Records Milk lbs Fat % Fat lbs (1958) Fat lbs TT95TO 3.2 3.3 Ayrshire 9,k07 k . l l 387 378 i 5 . o 13.9 Guernsey 8,920 l l , 8 7 k k.82 k30 1x21 5k. 5 58.0 HolsteM 3.76 kk7 k36 17.1 15.5 Jersey 7,833 5.17 k05 k08 10.2 9.3 Unclassified (cross breds etc) 9,937 k.ko k37 kl8 100.0 (1958) figures shown for comparison The number of animals with a life-time production of a minimum of a ton of butterfat i s steadily r i s i n g . This i s an important factor i n the economical operation of a herd of dairy cows. 19k0 — ki7 cows: 1958 ~ 1,621 cows: 1959 — 1,780 cows: 52 BRITISH COLUMBIA DEPARTMENT OF AGRICULTURE ~ (Livestock Branch") DAIRY HERD IMPROVEMENT SERVICES ANNUAL SUMMARIZED REPORT FORlJEO Average ACTUAL production of a l l Dairy Herd Improvement Association records completed during the year (or which milked l80 days or over). Number of milking periods lbs Milk Fat % lbs. Fat Ik,665 10,600 k.12 k37 These figures again represent a new high f o r both completed periods and production i n herds on D.H.I, test i n B r i t i s h Columbia. The following figures i l l u s t r a t e the progress that has been made during the past 30 years. 1950 8,606 h.3k% 37k 19k0 8,265 k .38$ 362 1930 8,015 337 20.6 percent of the cows on test i n D.H.I. Associations t h i s year were purebreds. Their average butterfat production was k3l pounds. BREED AVERAGES FOR i960 % of t o t a l D.H.I, records 3.2 Ayrshire 13.3 Guernsey 60.7 Hoistein Ik.2 Jersey 8.6 Unclassified (Crossbreds etc.) The number of animals with a life-time production of a minimum of a ton of butterfat i s steadily r i s i n g . This i s an important factor i n the economical operation of a herd of dairy cows. lbs. Milk Fat % l b s . Fat 9,321 8,918 H , 7 3 5 7,86k k.13 k.8k 3.80 5.21 385 k31 kk6 klO 1 0 , l 8 l k.35 kk3 19kO — kl7 cows: 1958 ~ 1,621 cows: i960 — 2,007 cows:

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