An economic appraisal of agricultural development and adjustment possibilities for a low income farm area
Gartner, Gerald John
The general objective of the study was to develop profit-maximizing plans for a low income farm area and to indicate the magnitude of resource adjustment required to meet this optimum. The study set out to develop optimum plans for the individual farm units and for the area using the variable resource programming procedure. This procedure allowed the supply of a scarce resource to vary from zero to an unlimited amount. In this study capital was the resource allowed to vary. The area studied was a portion of the Broadview Rural Development Area in southeastern Saskatchewan. Only the section containing Oxbow-Ryerson soils was analyzed so that assumptions made with respect to one farm unit in the area would have some relevance to other farms in the area. The major source of information in connection with present farm production organization was obtained from a survey conducted in the area by the Saskatchewan Department of Agriculture in 1963. Another source of data was the Irrigation Budget Standards developed by the Department of Agricultural Economics at the University of Saskatchewan. Information was also taken from various research bulletins and the work of many Departments at the University of Saskatchewan. Three programs were conducted which developed optimum plans for three representative farm sizes at varying levels of capital use. Each program allowed a selected group of internal development alternatives to compete for the varying levels of scarce capital, thus assuring that a maximum profit position was attained. Various selected optimum farm plans thus derived were then used in an area model in order to determine a maximum development plan tor the area. Again capital was allowed to vary, with area net returns and farm unit organization indicated for each level of capital use. Two area programs were carried out. The first program allowed the area to develop a maximum profit position given a fixed farm unit size distribution in the area. The second program retained land as the only fixed resource in the model and developed a maximum profit position given this assumption. An additional program was conducted on the small farm in order to assess the competitive position of a land purchase alternative with that of the internal development measures available to the farm in the previous analysis. Another program was carried out on the medium farm to determine the extent to which development action would have to proceed in order to achieve specific minimum living standards at some time in the future. The results of the individual farm programs indicated that there is considerable income development potential for these farms through internal measures alone. The most significant possibility lies in the area of land clearing and breaking of arable bush and pasture land on the farms. In addition, the program results indicated a substantial development potential in the form of fertilizer use on cereal crops and in the form of a forage-cattle production combination. While these development alternatives added greatly to net returns for the farms, the profit increases were realized only through the use of large amounts of operating, intermediate and long term capital funds. The results of the area programs indicated the extent to which area net returns could be expanded given the various development alternatives and varying levels of capital use on the farms included in the area model. When farm numbers and size distribution were held constant, capital was utilized more profitably than when no restriction was placed on farm numbers. The maximum return to the area was reached at a higher number of farms using more capital and labour. Additional analysis of the small farm unit indicated the level of internal development necessary before land purchase became the most profitable alternative. Below that level the poor utilization of labour made internal development look more profitable. The final program involving the medium farm indicated the need for farm acreage expansion after intensification alternatives were exhausted in order to meet the higher living needs of the farmer in the future. The variable resource programming procedure appears well adapted to analysis of individual farm situations at a given point in time. The procedure was less useful in relating the dynamic elements in the development process. Further refinement of the area model is required. However, because the technique can be combined with electronic computers capable or handling large amounts of data, it should prove to be an invaluable aid in policy-making and in individual farm planning.