32 CIRCULAR 905, U. 8. DEPARTMENT OF AGRICULTURE 
required to replace an initial investment made in each livestock feed- 
ing system in 1930 was about three times as long as that required to 
replace a similar investment made in 1940. 
RELATIONSHIP OF FEED-UTILIZATION SYSTEM TO RISK 
AND UNCERTAINTY 
In the organization of a farm the risk element is important. Be- 
ginning farmers or those with low capital equities may prefer a live- 
stock system that provides a steady return—one that does not result 
in large losses, even though average returns may be relatively low. 
Occasional large losses are not so important to farmers who have 
ample capital if average returns are relatively high. If losses are 
incurred in one year, their capital position will allow them to remain 
in farming to gain the high returns in later years. But if a farmer 
who is short of capital loses heavily one year he may have to close 
down his business before the big rewards are forthcoming. 
Farmers often express the idea that different feed-utilization sys- 
tems involve different degrees of risk or uncertainty. High-forage 
rations may involve greater risk or uncertainty because of (1) the 
greater capital invested per dollar of returns and (2) the added time 
required to produce 400 pounds of livestock or livestock product. In 
this section, some estimates are made of the degree of risk or uncer- 
tainty involved in different utilization systems. The data are for 
the same livestock systems that were considered above. 
FEED COMBINATIONS AND MARKET UNCERTAINTY 
Risk and uncertainty undoubtedly play an important part in 
farmers’ judgments of the relative desirability of alternative systems 
of utilizing feed. Their individual attitudes toward risk and un- 
certainty may be influenced by financial position, previous training or 
experience, and such personal traits as timidity, desire to gamble, and 
love for adventure. Most farmers probably are as much concerned 
with the degree of uncertainty associated with alternative investments 
as they are with the relative average returns that can be expected from 
each investment through the years. 
How does the presence of risk and uncertainty affect selection of 
the most desirable grain-forage combination? ‘To most farmers the 
ideal combination would be the one that returns maximum profit 
over time and involves the least risk. Unfortunately, a system that 
combines these qualities may be more than can be expected. Higher 
returns will often be at the expense of greater risk and uncertainty. 
As forage is substituted for grain in the livestock ration the length 
of the production process tends to increase. That is, it takes longer 
to produce a pound of livestock product by feeding forage than by 
feeding grain. Extending the time involved in production may have 
two important effects. First, it may cause the marketing of the 
product to fall into a period of lower seasonal prices. This problem 
can ordinarily be handled by a change in the timing of production; 
for example, the date of farrowing may be adjusted. A second pos- 
sible consequence of extending the production period is that market 
