PLANNING THE FARM BUSINESS 97 



Tlie total expense is tlien .$1762, or nearly $400 more than under the present 

 plan. Receipts imve increased nearly $800, however, so that tlie net return is 

 $2015. This makes a net gain of $369 above the return from the present or- 

 ganization. This may seem a rather small increase, but it must be remem- 

 bered that it rejiresents a large increase in proportion to the amount of 

 money that Mr. A now has left after figuring interest on iiis investment. If 

 liis labor and management return was formerly $946, it is now apjiroximately 

 $I.'300,- or about 40 ]ier cent larger. 



Effect of Price Changes on Financial Returns 



In planning farm reorganizations such as Mr. A is contemplating, it is al- 

 ways necessary to exercise care in estinuxting future prices. In this case he 

 estimates that milk and grain prices \vill continue at about the same level as 

 in 1929. If milk prices were likely to decline to approximately .$2.00 per 

 luiiulred pounds ^\ ith no ])articidar change in ])rices of grain or otiier ex- 

 j'.L'nsc factors, there would be nuicli less advantage in making the reorganiza- 

 tion. 



Tal:)le 6 sliows the effect of such a change in price. The net farm return 

 on the present organization would be reduced to $1253 and the net return for 

 tlie proposed organization to $1405. It would still be profitable to make the 

 ciiange. Tlie advantage, however, would be only $152 as compared with $369 

 increase in return wUU Mr. A's present estimate of future prices. 



Table 6. — Milk Prodl'ctiox. Receipts, axd Net Retltrns fuoji Phesknt axd 

 Pkoposei) Fauji Ouc.axizations with Milk Prices at Two Different Levels. 



Present 

 Orsaiiization 



Milk ]n-oduction, pounds (io,olO 



.Milk receipts @ $2.60 per cwt $1,703 



Milk receipts @ $2.00 per cwt 1,310 



Net farm returns (^' .$2.60 per cwt 1,646 



Net farm returns ^ .$2.00 per cwt 1,2.')3 



FARM B— A TWO-MAN FARM 



The planning and operation of a larger farm often presents certain ])rob- 

 lems not. found on farnks the size of Farm A. The 16 cows and 250 bearing 

 ap])le trees on Farm B re])resent an odd-sized business. It is too large for 

 one man and not large enough for two men. Mr. B and one married son 

 operate the farm together and are therefore interested in making it a large 

 enough business for both of them. In order to increase the size, they keep a 

 small poultry flock of about 250 birds and devote some attention to raising- 

 young dairy stock for sale. 3Ir. B decided several years ago, however, that 

 the best long-time plan to follow was to set out some apple trees and plan 

 on getting a larger net return from increased aj)ple receipts. It will still be 

 ten or twelve years before he begins to realize nnich from the young trees 



- Some allowance should be iiiadf for the increase in investment due to the extra 

 cows. 



