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The University Research Farm at Oyster River - an economic evaluation of its operation and some alternative enterprise combinations Nisbet, Thomas George

Abstract

The objective of this study was to examine the farm organization and management of the University Research Farm at Oyster River. Its present resource use and a normative analysis postulating a more desirable organization of enterprises is presented. The method for the positive analysis was to prepare inventories, net worth statements and operating statements for the fiscal years 1962-63, 1963-64, and for the calendar year 1964. From this data, measures of performance were calculated and compared with similar data from regional studies of dairy farming on Vancouver Island and in the Fraser Valley. In addition, comparisons were made with budget studies in Washington State. The University Farm operated at a loss in each of the three periods, although the results for the 1964 calendar year showed considerable improvement. Costs at Oyster River farm were higher than in the studies used for comparison, due to higher overhead costs and higher wage rates. However, measures of physical performance were generally equal to regional averages. In making this evaluation, consideration was given to the development and expansion programs undertaken in recent years. The record keeping system was reviewed, and an alternative method proposed which will facilitate the evaluation of factor use. Linear programming was chosen for the normative analysis, because it had the advantage of being able to recommend optimal enterprise combinations after considering a relatively large number of alternative activities and resource constraints. Although more activities could have been considered in the programmes, it was decided a priori to limit the number to those which could reasonably be established immediately, or in a period of a few years. Included in this study were 15 dairy activities, two for beef, one for sheep, and one for potatoes. It was necessary to consider the purchase of hay and the employment of additional labour. Resource constraints were included for land, nine labour periods, operating capital and building space. Of the five analyses undertaken, one included as a prerequisite 30 Ayrshire cows and permitted labour purchases for all periods. This particular analysis is of interest in view of the necessity for maintaining the Ayrshire herd for experimental purposes. With this initial herd requirement the optimum plan also introduced 56 Holstein cattle and 40 acres of potatoes. The return to fixed factors of production was maximized at $29,324.51, representing a rate of return on investment of 5.8%. The stability of the optimum plans with respect to price changes was determined. The normative analysis specifies a higher level of production per cow than is presently being achieved, but the level is within the reach of a commercial operation. A more serious limitation lies in the establishment of a shipping quota for potatoes. It would take a number of years to establish an adequate quota and the initial acreage would have to be on a smaller scale. However, in principle the situation is no different from that encountered in building up a milk quota, and therefore the establishment of a potato enterprise may be regarded as a desirable long-run objective. The remaining four analyses define optimal programmes for recommended activities under varying conditions of enter; prise combination and resource availability.

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