Chapter III. Farm Size and Capital Acquisition Problems 



THIS chapter explores some basic relationships between farm size and 

 capital accumulation potential. Underlying the procedure is a hypo- 

 thesis that the theory of scale is relevant to the problem. More specifically, 

 as the theory of scale suggests the likelihood of an optimum size of firm 

 (or farm) in the sense of maximizing net income, we may hypothesize that 

 there is also an optimum size in the sense of relationship of potential sav- 

 ings to capital.'^ 



REPRESENTATIVE FARMS 



To study the relationship of scale and capital, farms which are similar in 

 all respects except size must be used. This can be done only by developing 

 synthetic or representative farms. The principal source of data used was 

 the farms surveyed in this study. The intent was to retain the general or- 

 ganization and size pattern of the surveyed farms. However, management 

 was standardized to the extent of using the same production rates and pro- 

 duction inputs (feed, fertilizer, etc.) for all farms. 



Development of Inventories and Budgets 



The first step was to develop inventories for representative farms which 

 retained, as far as practicable, the size and capital characteristics of the 

 surveyed farms. Labor force, herd size, and capital relationships on these 

 surveyed farms with between 12 and 48 months of labor became the starting 

 point for development of the representative farms. Herd sizes were selected 

 for each of the "man sizes" to cover most of the range of sizes as shown 

 for the respective man month groups in Figures 3 and 5 of Chapter H. 

 The representative farms tend to be a little larger than the survey farms. 



The equipment listed for the survey farms of similar labor force and 

 herd size was tallied and used as the basis for the equipment inventories 

 of the representative farms. There was considerable variation even in major 

 items on the survey farms. For instance, some of the larger farms still de- 

 pended on hay loaders. To some extent this probably was a result of differ- 

 ent farms being in different stages of the equipment modernization process. 

 The representative farms use the type of equipment toward which that size 

 group seemed to be moving. This is a divergence from the survey pic- 

 ture in the same direction as that of size mentioned above. 



Machinery was not "rationalized" in the sense of using only the most 

 efficient elements of a roughage harvesting system. Hence, there may be 

 some "surplus" of equipment but not more than there appeared to be on 

 the farms surveyed. 



8 For applied use, more specific terms have to be substituted for "savings" and 

 "capital" depending on the specific means by which farmers obtain and hold capital. 



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