Plans for farms using supplemental irrigation in the proposed South Saskatchewan River irrigation project
Sonntag, Bernard Henry
The overall objective of this study was to develop profit-maximizing plans for farms using supplemental irrigation in the initial phase of the proposed South Saskatchewan River Irrigation Project. The optimum farm organization for any particular farm depends on the quantity and quality of the resources available, the efficiency with which these resources can be combined and the prices obtained for the resultant products. This study attempted to develop optimum plans for a one-section farm under various resource supply, production efficiency and price situations. The variable resource programming procedure was used to derive these plans. With this procedure the supply of a scarce resource can be varied from zero to an unlimiting amount and the optimum plans commensurate with all levels of the variable resource can be obtained. By allowing irrigation capital to vary the optimum plans were derived for various combinations of irrigated and dryland farming on a one-section farm. The primary source of data for this study was the Irrigation Budget Standards developed by the Department of Agricultural Economics of the University of Saskatchewan and the Conservation and Development Branch of the Saskatchewan Department of Agriculture. Other sources included the Department of Animal Science and various research bulletins. In total eleven one-resource variable programs and one two-resource variable program were carried out. All of these were based on a one-section dryland farm which had a machine and building complement adequate for that size of dryland unit, no livestock or livestock facilities, and a labor supply of one full-time operator and a small amount of family labor. In an attempt to assess the effect of irrigation development and livestock production on the optimum farm organization provisions were made in the model for borrowing livestock development capital, irrigation development capital and additional operating funds. Other resources made available to the farm were seasonal supplies of hired labor, limited amounts of community pasture and off-farm hay and feed grain. The production alternatives included in the model allowed various combinations of these resources. Subsequent programs dealt with different labor supplies, production alternatives, production efficiencies and price ratios. Programs 2 and 3 excluded family labor and hired labor, respectively, from the situation posed in program 1. Program 4 was the same as program 1 except that the hay buying and selling alternatives were excluded. In programs 5, 6, and 7, the hog activities were eliminated from the situations posed in programs 1, 2, and 3, respectively. The effect of higher labor efficiency in livestock production on the optimum farm organization of program 1 was examined in program 8. Livestock feed efficiencies were reduced in program 9. The effects on farm organization of higher grain to livestock price ratios in situations with and without hogs were examined in programs 10 and 11. The results of the programs which dealt with different labor supply situations showed that without extra labor during key periods farmers would gain little from irrigation development. This was especially true in those programs in which hogs were included as a production alternative. The effect which irrigation will have on farm organization, income, labor use and investment will depend to a considerable extent on the policy adpopted with regard to operation and maintenance (0 and M) rates. When 0 and M was charged as a fixed cost per irrigable acre income differences between the dryland and final irrigated plans were larger and more acres were irrigated but net farm income was lower than when 0 and M was charged on the basis of acreage actually irrigated. In the situations programmed in this study, hog production acted as a substitute for irrigation development. The main effects of eliminating hogs were (1) reduced income, (2) larger irrigated acreages, and (3) larger changes in income due to irrigation development. The availability of capital will have important effects on the extent and profitability of irrigation development. Availability of capital for irrigation development alone will not guarantee profitable irrigation development. Funds will also have to be available to expand those enterprises which are complementary with respect to irrigation development. The two-resource variable solution indicated that the marginal value product of irrigation capital was low at low levels of operating capital. The irrigated cropping system at these low levels of operating capital was devoted entirely to the most extensive cropping system allowed in the program. The variable resource programming procedure seems well adapted to the type of analysis done in this study. This technique combined with modern electronic computers enables the researcher to generate considerable information about the effects of variations in the level of one or more resources. The technique does, however, have some important limitations which must be kept in mind when it is being used. One of the most severe limitations arises from the fact that coefficients for a particular activity are often valid over small ranges in the level of that activity. Interpretation of results must, therefore, proceed with caution when activity levels are inconsistent with the coefficients used.