requires a purchase of 31 tons of hay which at $35 per ton amounts to 

 about SI, 080. The cropping program and, hence, crop expenses are un- 

 affected. The milk sales and cull sales increase by well over $2,500, while 

 the corn grain sales are eliminated. Expenses in addition to the cost of the 

 hay are those associated with keeping and feeding five extra cows. The re- 

 sult is a net increase of $383. 



Renting or Buying Additional Land 



Instead of purchasing hay, the farmer might choose to rent or buy addi- 

 tional land if the opportunity presented itself. In this case it is assumed 

 that 12 acres can be rented and the rental rate is $25 per acre.^ The extra 

 forage from these 12 acres permits an addition of five cows and two young 

 stock to the herd. Such an increase in land area would typically increase 

 the efficiency with which machinery and equipment are utilized in that, 

 within limits, land may be increased without thereby increasing the need 

 for new and larger machines. Typically, also, the available power is sufficient 



Table 13. Estimated Change in Annual Net Returns from Renting Twelve 

 Acres of Additional Land — Five Cows Added. 



Changes in Returns 



Milk sales 

 Livestock (culls) 

 Corn grain 



Total 



Changes in Expenses 

 Crops: Fertilizer 

 Seed 



Fuel and lub. 

 Machine hire 

 Rented land (12 acres) 

 Miscellaneous 



Livestock: Feed 



Breeding and veterinary 

 Milk testing and marketing 

 Miscellaneous 



Other: Building repair 

 Taxes 



Hired labor 

 Depreciation 

 Interest 



Total 



Estimated Change in Net Return to Labor and Management 



,500 



278 



65 



107 

 37 

 43 

 32 



300 

 48 



214 



56 



130 



155 



35 



28 



91 



52 



190 



$2,713 



$1,518 

 +$1,195 



1 Annual ownership costs of land valued at $300 per acre are about equivalent to a 

 rental rate of $25. Whether to own or to rent also depends upon other factors such as 

 availability of land for sale or rent, tenure security desired, amount of investment capital 

 available, and degree of decision-making freedom desired. Ownership cost is also affected 

 by inflation or deflation. 



16 



