Summary 



1. The broad objective of this study is to explore and, as far as possi- 

 ble, determine the effect of farm size on the ability of farm operators 

 to build up equity in farm capital. The problem is analyzed by use 

 of "representative" dairy farms whose organizations are based on a 

 survey of actual farms. This analysis is supplemented by a report of 

 how dairy farmers actually obtained their initial and subsequent capital. 



2. The general relationship between herd size and capital investment is 

 positive. For the farms analyzed, total capital ranged from $24,000 at 

 10 animal units to $104,000 at 90 animal units. There was a great 

 overlap in herd sizes between the one-, two-, and three-man farms. As 

 between the one- and two-man farms, total capital at each herd size 

 was not greatly affected by size of labor force. Total capital per ani- 

 mal unit falls rather sharply until a size of about 30 animal units is 

 reached. It then raises as herd size increases. This suggests some dis- 

 economies of scale. Equipment capital, through most of the herd size 

 range, on the two-man farms is higher per animal unit than on the 

 one-man farms. This suggests some tendency to equip men. There was 

 no evidence of capital-labor substitution. 



3. Inventories and budgets of one-, two-, and three-man farms of differ- 

 ent herd sizes are developed from the survey fanns. For these farms 

 there is shown capital, income, potential savings of ooerators, po- 

 tential ability to accumulate equity under full credit conditions, abili- 

 ty to meet maximum credit terms of leaders, and ability of farm 

 workers and tenant operators to accumulate the equities required by 

 lenders. The principal hypothesis of this study is substantiated: equity 

 accumulation is easier on the larger farms — indeed, it is only possi- 

 ble there. Accumulation is difficult on all the representative farms. 

 Larger sized farms are also necessary to repay maximum loans from 

 Cooperative Farm Credit, New Hampshire banks, or the Farmers' Home 

 Administration. The necessary size of herd to meet the terms of each 

 lender depends on prices, whether depreciables were bought new or 

 used, and on difference between lenders as to percentage of actual value 

 they will lend on capital. In all cases, obtaining the starter's equity is 

 a problem. Farm workers do not have the saving potential to accumu- 

 late the required equity for any of the reoresentative farms. Tenant 

 operators of several of the larger farms might accumulate the required 

 equities in those farms in 20 years but onlv on the largest farm and 

 under the higher prices could it be done in 10 years. 



4. The capital accumulation histories of the farmers in the survey are 

 summarized to show how operators of different sized farms and of 

 different ages obtained capital to become established and to grow. A 

 majority of the operators of the large farms got started through in- 

 heritance or family aid. A minority used credit heavily. The smaller 



