At the break-even prices, a dairyman would be indifferent as to whether 

 he raised or bought replacements. The effects of higher prices were also 

 computed. 



If all prices paid and received, except milk, were at situation I level, 

 the break-even price for milk would be $2.65 per hundredweight for each 

 of the six sizes of dairy farms. But if the price were S6 per hundredweight 

 for milk, the farm with 11 to 17 cows would have an additional net farm 

 income of S350 while the farm with 46 to 52 cows would have an addi- 

 tional net farm income of $1,330. The net effect of changes in the price 

 of milk on additional net farm income is shown for price situation I 

 in Table 27. 



Table 27. Net EfFect of Changes in the Price of Milk on Additional Net Form Income 



Possible on Dairy Farms with Flexible Farm Resources by Shifting from Raising to 



Buying Replacements for Farms of Various Sizes, Price Situation |1 



^ All prices paid and received, except those for milk, stay at levels consistent with the assumptions 

 of price Situation I. 



- Break-even price about $2.65 per hundredweight. 



The net effect of changes in the price of milk on additional net farm 

 income for price situation II is shown in Appendix Table 15. The break- 

 even price is about $.75 per hundredweight. Thus at a price of $.75 per 

 hundredweight for milk, it would be a matter of indifference to the farmer 

 in any of the six size groups whether they raised or bought replacements. 



The effects on net income of changes in the price of replacements under 

 price situation I is shown in Table 28. The break-even price was $363 

 per head of replacements for farms of all sizes. Thus, if the price of re- 

 placements reached $363, no additional income would be realized by shift- 

 ing from raising to buying replacements. However, if the price of replace- 

 ments were $200, the additional net farm income that could be obtained 

 by shifting from raising to buying replacements on the farm with 11 to 17 

 cows would be $695; and for the farm with 46 to 52 cows, the additions 

 to net farm income would be $2,650. If the price of a replacement was $450, 

 the 11- to 17-cow farm would lose $370 by the shift from raising to buy- 

 ing replacements and the 46- and 52-cow farm would lose $1,390 per year. 



Under price situation II, the break-even price per head of replace- 

 ments was $312 (Appendix Table 16). For the 11- to 17-cow farm, if 

 the price paid for replacements rose as high as $400, net farm income 



49 



