grain production activities besides the beef and hog enterprises men- 

 tioned previously. 



Extent of Resource Constraints 



The major constraints in the model were those pertaining to the 

 representative farm's land, labor, and capital resources. It was assumed 

 for the intermediate run conditions that the farm's 1960 inventory of 

 land could not be expanded. The reason for constraining the land re- 

 sources of the representative farm to those that existed in 1960 was that 

 while land supply of an individual farm is not actually fixed, the aggre- 

 gate supply for the region is fixed. From a methodological standpoint, it 

 was requisite to constrain land supply of the individual farm to insure 

 the fixed land supply of the region. 



Five labor constraint equations were used ; one was for each of four 

 seasonal periods and one for regular hired labor. Full-time hired labor 

 and seasonal labor could be hired in the models. 



Winter labor was constrained to that available in the form of the op- 

 erator's family labor and the regular full-time hired labor on representa- 

 tive farms as of 1960. 



A reservation price was placed on the available family labor to 

 reflect the condition that a farmer may not be willing to spend time on 

 some marginal activities unless the return was great enough to cover a 

 minimal reward for this effort. 



Funds for capital expansion were constrained to 50 percent of the 

 farm's 1960 real estate value, minus the 1960 outstanding debt.i^ These 

 capital funds could be used for barn and silo expansion. The model was 

 designed to permit expansion in cow carrying capacities of a farm, but 

 limited to an investment ceiling which reflected the credit base of the 

 farm. Funds for annual production were not limited; however, an 

 annual return of 6 percent was required on all production investment 

 capital. 



Variable Prices 



Two considerations were confronted in regard to price variation. 

 Should only the price of milk vary with all other prices assumed 

 constant, or should other prices vary also? What is an appropriate range 

 of price variation? On the first question, it was decided to variable- 

 price program by varying only the price of milk. For the second ques- 

 tion, solutions were obtained for the $2.80 to $6.40 per hundredweight 

 range in milk price. 



15 The survey schedules provided information concerning farm debt. Real estate 

 appraisals of representative farms by areas were made by members of the Farmers 

 Home Administration. Net worths for study farms were then calculated and borrow- 

 ing capacities computed. If it were determined that a particular farm had a negative 

 borrowing capacity, it was rounded up to zero. 



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