206 WHEAT PRODUCTION IN NEW ZEALAND 
duction, the farmer should meet with as little difficulty 
as possible. 
(a) Definition of Capital—We now proceed to define 
the nature of the farmer’s capital. to analyse it into two 
main divisions, fixed and circulating, to discuss the 
facilities for obtaining capital, and finally, the methods 
of financing farmers. 
Broadly speaking, capital may be regarded as all those 
things which yield an income. Under this definition 
capital ‘‘will include all things held for trade purposes, 
whether machinery, raw material, or finished goods, 
home farms and houses, but not furniture or clothes 
owned by those who use them.’’ With this provisional 
definition we can roughly classify farmers’ goods as 
capital and non-capital. Briefly, farm capital may be 
defined as that part of a farmer’s goods which is used 
in the production of other goods. This will include all 
goods used in direct production, such as farm imple- 
ments, as well as goods used in transportation and 
communication in so far as these affect production. For 
the purposes of estimating the cost of production of 
wheat* it will be advisable to classify farm capital as 
fixed or circulating. Fixed capital is that part of capital 
‘‘which serves a purpose continually.’’ It is comprised 
of such goods as are not consumed at their first employ- 
ment. Circulating capital, on the other hand, serves its 
purpose but once, being consumed in its first use. The 
line of distinction between the two is not always clear, 
for certain goods, not consumed in their first use, are 
not sufficiently durable to be designated as fixed 
capital. Of more importance is the ratio of fixed to 
circulating capital. It is obvious that where relatively 
large quantities of capital have to be replaced year by 
year, that is where this ratio is small, cost of production 
*See Chapter IX. 
