206 WHEAT PRODUCTION IN NEW ZEALAND 



duction, the farmer should meet with as little difficulty 

 as possible. 



(a) Definition of Capital. We now proceed to define 

 the nature of the farmer's capital, to analyse it into two 

 main divisions, fixed and circulating, to discuss the 

 facilities for obtaining capital, and finally, the methods 

 of financing farmers. 



Broadly speaking, capital may be regarded as all those 

 things which yield an income. Under this definition 

 capital "will include all things held for trade purposes, 

 whether machinery, raw material, or finished goods, 

 home farms and houses, but not furniture or clothes 

 owned by those who use them." With this provisional 

 definition we can roughly classify farmers' goods as 

 capital and non-capital. Briefly, farm capital may be 

 defined as that part of a farmer's goods which is used 

 in the production of other goods. This will include all 

 goods used in direct production, such as farm imple- 

 ments, as well as goods used in transportation and 

 communication in so far as these affect production. For 

 the purposes of estimating the cost of production of 

 wheat* it will be advisable to classify farm capital as 

 fixed or circulating. Fixed capital is that part of capital 

 "which serves a purpose continually." It is comprised 

 of such goods as are not consumed at their first employ- 

 ment. Circulating capital, on the other hand, serves its 

 purpose but once, being consumed in its first use. The 

 line of distinction between the two is not always clear, 

 for certain goods, not consumed in their first use, are 

 not sufficiently durable to be designated as fixed 

 capital. Of more importance is the ratio of fixed to 

 circulating capital. It is obvious that where relatively 

 large quantities of capital have to be replaced year by 

 year, that is where this ratio is small, cost of production 



*See Chapter IX. 



