• TABLE OF CONTENTS
HIDE
 Title Page
 Acknowledgement
 Table of Contents
 List of Tables
 List of Figures
 List of appendix tables
 Abstract
 Chapter I: Introduction
 Chapter II: Description of the...
 Chapter III: Design of study
 Chapter IV: Optimum plans for alternative...
 Chapter V: Optimum plans for peanut...
 Chapter VI: Summary and conclu...
 Appendix of tables
 Bibliography
 Biographical sketch






Title: Optimum farm plans to meet changing conditions in north and west Florida crop farms
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00053913/00001
 Material Information
Title: Optimum farm plans to meet changing conditions in north and west Florida crop farms
Physical Description: xii, 161 leaves : ill. ; 28 cm.
Language: English
Creator: Soliz-Valarezo, Romulo, 1946-
Publication Date: 1976
 Subjects
Subject: Farm management -- Florida   ( lcsh )
Field crops -- Florida   ( lcsh )
Food and Resource Economics thesis M.S
Dissertations, Academic -- Food and Resource Economics -- UF
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Thesis: Thesis (M.S.)--University of Florida.
Bibliography: Bibliography: leaves 158-160.
Statement of Responsibility: by Romulo Soliz-Valarezo.
General Note: Typescript.
General Note: Vita.
Funding: Florida Historical Agriculture and Rural Life
 Record Information
Bibliographic ID: UF00053913
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 000008236
oclc - 02172916
notis - AAA9891

Table of Contents
    Title Page
        Page i
    Acknowledgement
        Page ii
    Table of Contents
        Page iii
        Page iv
        Page v
    List of Tables
        Page vi
    List of Figures
        Page vii
    List of appendix tables
        Page viii
        Page ix
        Page x
    Abstract
        Page xi
        Page xii
    Chapter I: Introduction
        Page 1
        Page 2
        Statement of the problem
            Page 3
            Page 4
            Page 5
            Page 6
            Page 7
        Objectives
            Page 8
            Page 9
            Page 10
    Chapter II: Description of the area
        Page 11
        Selection of the area
            Page 11
        Physical factors
            Page 12
            Soils and topography
                Page 12
            Drainage
                Page 12
                Page 13
            Climate and weather
                Page 14
            Irrigation
                Page 15
        Social and economic conditions
            Page 15
            Population
                Page 16
            Labor force
                Page 16
                Page 17
            Income
                Page 18
            Transportation
                Page 19
        Agricultural trends
            Page 19
        Number and size of farms
            Page 19
            Page 20
            Page 21
            Value of farm products sold
                Page 22
            Changing capital requirements
                Page 23
        Crops situation
            Page 23
            Crop program review
                Page 23
                Page 24
                Page 25
                Page 26
            Production trends (by commodities)
                Page 27
                Page 28
                Page 29
                Page 30
            Prices
                Page 31
                Page 32
                Page 33
    Chapter III: Design of study
        Page 34
        Source of data--the budgets
            Page 35
            Page 36
            Page 37
            Page 38
            Page 39
            Page 40
        Theoretical concepts
            Page 41
            Mathematical assumptions of linear programming
                Page 41
                Page 42
            The model
                Page 43
                Page 44
        Planning situations and process restrictions
            Page 45
            Page 46
            Page 47
            Page 48
            Page 49
        The initial tableau--procedure of analysis
            Page 50
            Page 51
            Page 52
            Page 53
            Page 54
            Page 55
            Page 56
            Page 57
            Page 58
            Page 59
            Page 60
            Page 61
            Page 62
    Chapter IV: Optimum plans for alternative cropland and operating capital situations
        Page 63
        Page 64
        Hand-harvest system vs. machine-harvest system in flue-cured tobacco
            Page 65
            Page 66
        Optimum plans including all enterprises
            Page 67
            Page 68
            Page 69
            Page 70
            Page 71
            Page 72
            Page 73
            Page 74
            Page 75
        Optimum plans excluding tobacco enterprises
            Page 76
            Page 77
            Page 78
            Page 79
            Page 80
        Optimum plans excluding peanut enterprises
            Page 81
            Page 82
            Page 83
        Optimum plans excluding tobacco and peanut enterprises
            Page 84
            Page 85
            Page 86
            Page 87
        Optimum plans including irrigated corn enterprise
            Page 88
            Page 89
            Page 90
            Page 91
            Page 92
            Page 93
            Page 94
            Page 95
    Chapter V: Optimum plans for peanut farms and their acreage response functions to price changes: The peanut program abolished
        Page 96
        Optimum plans for a representative farm (400 acres and $100,000 of operating capital): Effects of programming with variable prices
            Page 97
            Plans including all enterprises
                Page 97
                Page 98
                Page 99
                Page 100
                Page 101
            Plans excluding Maryland tobacco enterprise
                Page 102
                Page 103
            Plans excluding both flue-curred tobacco and Maryland tobacco enterprises
                Page 104
                Page 105
                Page 106
                Page 107
            Stepped acreage functions for peanuts
                Page 108
                Page 109
                Page 110
                Page 111
                Page 112
                Page 113
                Page 114
    Chapter VI: Summary and conclusions
        Page 115
        Page 116
        On optimum plans for alternative cropland and operating capital situations
            Page 117
            Page 118
            Page 119
            Page 120
            Page 121
        On the effects of variations in peanut prices
            Page 122
            Page 123
            Page 124
        Implication of results
            Page 125
            Page 126
            Page 127
    Appendix of tables
        Page 128
        Page 129
        Page 130
        Page 131
        Page 132
        Page 133
        Page 134
        Page 135
        Page 136
        Page 137
        Page 138
        Page 139
        Page 140
        Page 141
        Page 142
        Page 143
        Page 144
        Page 145
        Page 146
        Page 147
        Page 148
        Page 149
        Page 150
        Page 151
        Page 152
        Page 153
        Page 154
        Page 155
        Page 156
        Page 157
    Bibliography
        Page 158
        Page 159
        Page 160
    Biographical sketch
        Page 161
        Page 162
Full Text









OPTIMUM FARM PLANS TO MEET CHANGING CONDITIONS
ON NORTH AND WEST FLORIDA CROP FARMS












By
Romulo Soliz-Valarezo


A THESIS PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTER OF SCIENCE










UNIVERSITY OF FLORIDA


1976








ACKNOWLEDGMENTS


The author wishes to express his deep gratitude and appreciation

to Drs. John E. Reynolds and John Holt, Co-chairmen of his Supervisory

Committee, for their generous and unending assistance throughout this

research. The author would also like to extend his gratitude to

Mr. George Westberry for his important contribution to this research and

for serving as a member of the Supervisory Committee.


The author is sincerely thankful to Mr. E. H. Finlayson, Jr.,

who was constant in his indispensable cooperation to this research, and

to Dr. Glenn Zepp for his valuable suggestions and encouragement.


A special word of thanks goes to Drs. Kenneth Tefertiller and

Leo Polopolous who made possible his appointment as Graduate Assistant to

undertake this study. The author would also like to thank the Instituto

Nacional de Investigaciones Agropecuarias (INIAP) of Ecuador for sponsor-

ing his graduate work.

His special appreciation goes to Ms. Debbie Bucci and Ms. Millie

'Pfeifler for typing the drafts of the thesis, and to Miss Sofia Kohli

for her excellent work in typing the final draft.

To his mother and father and brother, Marcelo, the author extends

his deepest gratitude for their faith and encouragement throughout the

time of his graduate studies.

Finally, but not least, special thanks and sincere gratitude

goes to his older brother, Rogelio Sgnchez-Valarezo, who oriented the

author on the path of Agricultural Economics.















TABLE OF CONTENTS


ACKNOWLEDGMENTS ...


LIST OF TABLES .


LIST OF FIGURES . .

LIST OF APPENDIX TABLES .

ABSTRACT . . .

CHAPTER I:

INTRODUCTION .. .....

Statement of the Problem

Objectives . .

CHAPTER II:

DESCRIPTION OF THE AREA .-.

Selection of the Area

Physical Factors .

Soils and Topography

Drainage .. ....

Climate and Weather


Irrigation .


Social and Economic Conditions

Population . .

Labor Force . .


iii


Page

ii


. . . . . vi


vii

viii

xi


.

.













Income . .

Transportation .. .

Agricultural Trends . .. .

Number and Size of Farms ..

Value of Farm Products Sold .

Changing Capital Requirements .

Crops Situation .. . .. .

Crop Program Review .....

Production Trends (By Commodities)

Prices . . . .


Page

. 18

. 19

. . . 19

. . 19

. . 22

. . 23

. . 23

. 23

. 27

. . 31


CHAPTER III:

DESIGN OF STUDY . .

Source of Data--The Budgets

Theoretical Concepts . .


. 34

S. 35

. 41


Mathematical Assumptions of Linear Programming

The Model ... . ......

Planning Situations and Process Restrictions .

The Initial Tableau--Procedure of Analysis .

CHAPTER IV:

OPTIMUM PLANS FOR ALTERNATIVE CROPLAND AND OPERATING
CAPITAL SITUATIONS . . . .

Hand-Harvest System vs. Machine-Harvest System in
Flue-Cured Tobacco ... . . ..

Optimum Plans Including All Enterprises . .

Optimum Plans Excluding Tobacco Enterprises ,. .

Optimum Plans Excluding Peanuts Enterprises ..











Optimum Plans Excluding Tobacco and Peanut
Enterprises . .. . . .

Optimum Plans Including Irrigated Corn Enterprise .


CHAPTER V:

OPTIMUM PLANS FOR PEANUT FARMS AND THEIR ACREAGE
RESPONSE FUNCTIONS TO PRICE CHANGES: THE PEANUT
PROGRAM ABOLISHED . ............

Optimum Plans for a Representative Farm (400 Acres
and $100,000 of Operating Capital): Effects of
Programming with Variable Prices . . .

Plans Including All Enterprises ... . .

Plans Excluding Maryland Tobacco Enterprise .

Plans Excluding Both Flue-Cured Tobacco and
Maryland Tobacco Enterprises .. . .

Stepped Acreage Functions for Peanuts ... ..

CHAPTER VI:

SUMMARY AND CONCLUSIONS . . . .

On Optimum Plans for Alternative.Cropland and
Operating Capital Situations . . .

On the Effects of Variations in Peanut Prices .

Implication of Results . . . .

APPENDIX OF TABLES . . . . .

BIBLIOGRAPHY . . . . . .

BIOGRAPHICAL SKETCH.. .. . . .


Page


. 96



S. 97

. 97

. 102


. 104

S. 108



S. 115


117

122

125

128

158

161


* *














LIST OF TABLES


Table


Page


1. Social and economic trends, Planning Districts
I, II and III, North and West Florida, 1960-
1970 ... ... . . . .. 17

2. Some agricultural trends; Planning Districts I,
II and III in North and West Florida, 1968-1973 .. 20

3. Data on peanut allotment and marketing quota
program and flue-cured tobacco acreage poundage
program, North and West Florida, 1973 and 1974 ..... 26

4. Production trends for selected crops, Planning
Districts I, II and III, North and West Florida,
1968-1973 . . . .... ..... .28

5. Product yields and prices used in preparing
budgets for North and West Florida, 1975 . ... .36

6. Input prices used in preparing budgets for crop
farms in North and West Florida, 1975 . ... .37

7. Basic form of the simplex tableau used to compute
optimum plans for crop farms in North and West
Florida . . ... ......... .56


8. Optimum plans for alternative levels of cropland
and operating capital on North and West Florida
farms: Plans including all enterprises ..

9. Optimum plans for alternative levels of cropland
and operating capital on North and West Florida
farms: Plans excluding tobacco . .

10. Optimum plans for alternative levels of cropland
and operating capital on North and West Florida
farms: Plans excluding peanuts .. .


11. Optimum plans for alternative levels of cropland
and operating capital on North and West Florida.
farms: Plans excluding tobacco and Peanuts . .


. 82








Table Page

12. Optimum plans for selected levels of cropland
and operating capital on North and West Florida
farms: Irrigated corn included and tobacco
excluded . . . . .. .. . 90

13. Optimum plans for selected levels of cropland
and operating capital on North and West Florida
farms: Irrigated corn included, tobacco.and
peanut enterprises excluded . . .. 93

14. Effects of peanut price variations on optimum
plans for 400 acres of cropland and $100,000 of
operating capital in North and West Florida:
Plans including all enterprises . . 99

15. Effects of peanut price variations on optimum
plans for 400 acres of cropland and $100,000 of
operating capital in North and West Florida:
Plans excluding Maryland tobacco enterprise .. 103

16. Effects of peanut price variations on optimum
plans for 400 acres of cropland and $100,000 of
operating capital in North and West Florida:
Plans excluding flue-cured tobacco and Maryland
tobacco . . . ... . .. 105






LIST OF FIGURES

Figure Page

1. The Study Area: Planning Districts I, II
and III, North and West Florida ... ....... 13

2. Firm Level Stepped Acreage Functions for Peanuts 110














LIST OF APPENDIX TABLES

Table Page

1. Peanuts: estimated costs and returns per
acre, North and West Florida, 1975 . .... .129

2. Peanuts: monthly labor and tractor require-
ments per acre, North and West Florida, 1975 . .. 130

3. Flue-cured tobacco: estimated costs and
returns per acre, North and West Florida . ... 131

4a. Flue-cured tobacco plant bed: monthly labor
and tractor requirements per plant bed (75
sq. yd./acre), North and West Florida, 1975 . .. 133

4b. Flue-cured tobacco field operations: monthly
labor and tractor requirements per acre,
North and West Florida, 1975 ... . .... 134

4c. Flue-cured tobacco harvest: monthly labor,
tractor and mechanical harvester requirements
per acre, North and West Florida, 1975 .. ...... 135

5. Maryland tobacco: estimated costs and returns
per acre, North and West Florida, 1975 . .. .. 136

6. Maryland tobacco: monthly labor and tractor
requirements per acre, North and West Florida,
1975. . . . . . .. 137

7. Irrigated corn: estimated costs and returns
per acre, North and West Florida, 1975 .... .. . 138

8. Irrigated corn: monthly labor, tractor and
combine requirements per acre, North and West
Florida, 1975 ........ . ... ... 139

9.1 Non-irrigated corn: estimated costs and returns
per acre, North and West Florida, 1975 . ... 140

10. Non-irrigated corn: monthly labor, tractor and
combine requirements per acre, North and West
Florida, 1975 . . ... .. 141


viii





142



143



144



145


11. Wheat; estimated costs and returns per acre,
North and West Florida,,1975 . .. .....

12. Wheat: monthly labor, tractor and combine re-
quirements per acre, North and West Florida,
1975 . . . . . . .

13. Single-cropped grain sorghum: estimated
costs and returns per acre, North and West
Florida, 1975 . . . .

14. Sorghum: monthly labor, tractor and combine
requirements per acre, North and West Florida,
1975 . . . . . . .

15. Double-cropped grain sorghum: estimated costs
and returns .per acre, North and West Florida,
1975 . . . . . . .

16. Double-cropped sorghum: monthly labor, tractor
and combine requirements per acre, North and
West Florida, 1975 . . . . .

17. Single-cropped soybeans: estimated costs and
returns per acre, North and West Florida, 1975 . .

18. Soybeans: monthly labor, tractor and combine
requirements per acre, North and West Florida,
1975 . . . . . . .

19. Double-cropped soybeans: estimated costs and
returns per acre, North and West Florida, 1975 .

20. Double-cropped soybeans: monthly labor, tractor
and combine requirements per acre, North and
West Florida, 1975 . . ... . .

21. Watermelons: estimated costs and returns per
acre, North and West Florida, 1975 . .. .

22. Watermelons: monthly labor and tractor require-
ments per acre, North and West Florida, 1975 . .

23. Costs of operating machinery: annual fixed
costs per unit, 1975 . . . . .


149


150



151


152


153


154


Page


Table


146












Table Page

24. Man-equivalent hours of operator labor
available by months, 1975 .... . . ... 155

25. Machinery and equipment utilized by enter-
prises in optimal plans . . . .... .156

26. Returns adjusted for fixed costs involved
in each optinfal plan ........ ......... 157








Abstract of Thesis Presented to the Graduate Council
of the University of Florida in Partial Fulfillment of the Requirements
for the Degree of Master of Science

OPTIMUM FARM PLANS TO MEET CHANGING CONDITIONS
IN NORTH AND WEST FLORIDA CROP FARMS

by

R6mulo Soliz-Valarezo

March, 1976

Chairman: Dr. John E. Reynolds
Co-Chairman: Dr. John Holt
Major Department: Food and Resource Economics

The major objective of this study was to develop optimum (profit

maximizing) farm organizations as a general model to evaluate income-

raising adjustment opportunities in crop production for the area comprised

of Planning Districts I, II, and III in North and West Florida. The analy-

sis can be classified under two headings: 1) Determination of effects on

optimum combination of enterprises and income levels of changes in alterna-

tive levels of cropland and operating capital, and 2) Impact on peanut

enterprises if the governmental price support and acreage allotment pro-

grams were abolished. This section included the development of acreage

response functions to alternative levels of peanut prices.

A "synthetic" firm approach was adopted to analyze typical one-

man crop farm operations. Linear programming techniques and parametric

procedures were used'to test the optimum solutions. Results depended on

the underlying assumptions, the input-output data and the price informa-

tion used in this study.

Eighteen production activities were considered as enterprises.

Under the model's assumptions, both single and double-cropped grain sorghum

did not enter any of the optimum solutions. For flue-cured tobacco, hand












harvest methods should be used for acreages up to 74'acres, at which

point it becomes feasible to use mechanical harvest. Optimum solutions

were obtained for several alternative resource situations and product

combinations. Overall, government-supported crops appeared to be the

best capital investment plan. Tobacco and peanuts combined well, and

the exclusion of peanuts did not increase returns. As more cropland

and operating capital was made available, extensive-type crops entered

the optimum plans in larger acreages. In farms specializing in extensive

crops, corn and soybeans appeared to have the best adjustment opportuni-

ties. Corn substituted for soybeans as operating capital increased.

Higher requirements of operator labor at harvest time made custom

harvest a profitable alternative.

As peanut prices decreased and peanut acreage allotment was

eliminated, other crops were substituted for peanuts and the resulting

income disadvantages were small under current relationships with com-

peting crops.





Chairman



SCo-Chairnfan













CHAPTER I

INTRODUCTION


Crop farming is the predominant type of agricultural production

in North and West Florida,1/ and, as in the whole agricultural sector

of the United States, farming in this area is becoming increasingly

complex. Rapid and expanded technological developments coupled with

inflated production costs, as well as current and potential changes in

national agricultural policies accelerate this trend.


Farmers continue adopting labor-saving techniques as well as

increasing the use of purchased inputs. The inflationary syndrome in-

creases the already high capital requirements. Rising wages heighten

the potential benefits of harvest mechanization and speed up its adoption.

Events associated with production control programs, price support

regulations and related policy implications create questions regarding

production decisions for the next cropping year.


The above situation may well continue to result in low incomes

for farmers if, as is consistently,observed in North Florida [23], a lack

of opportune adjustments in resource use prevails in the area. Therefore,

a need exists for economic adjustments at the farm level in the combination


1/North and West Florida, as used in this study, refers to those
counties included in Planning Districts I, II and III (see Chapter II).









of enterprises, level of investment and in the size and type of farm

operations in order for farmers to achieve the desired efficiency in

their enterprises. Therefore this study focused on the economics of

the optimal enterprise combinations for future production planning for

crop farms in North Florida.


The premise underlying this study is that it is possible,

through evaluating the economic opportunities for adjustments in re-

source use and by analyzing the decision-making components of production,

to suggest a plan or course of action that will result in economic

growth2/ of crop farms in North and West Florida.


The information in this study should be helpful in evaluating

alternative crop enterprises and alternative farm organizations in North

and West Florida. The estimates presented are not necessarily applicable

to an individual farm or an individual year. Results are presented in

such a manner that the estimates can be adjusted to a particular or

specific set of circumstances.

The results should provide information to producers, extension

agents and agricultural professionals so that crop farmers in North and

West Florida may improve their production decisions. And the linear

programming model developed for this study will serve as a nucleus for

later intensive farm planning efforts for that area.



2/Economic growth is measured in this study by farm income and
its relation to the factors causing changes in the distribution of limited
resources and their productivity,










Statement of the Problem


The North and West Florida area is an important commercial

crop farming area. Some sections within the area have specialized in

the production of certain crops. Suwannee, Hamilton and Madison counties

are largely dependent on flue-cured tobacco as a source of cash income.

Jackson County, which'harvested 27,240 acres in peanuts in 1974 [13],

had around half of the total peanut acreage in the study area. Soy-

beans are grown mainly in those counties in the extreme western part of

the area. Supplementary enterprises are, of course, carried out in

conjunction with those high-profit crops. Even so, the income of crop

farmers in this area is comparatively low when compared to the remainder

of the state. For quite a number of years most of the counties lying

immediately south of Georgia and Alabama have been classified as low-

income farming areas [9]. Census statistics [24] show a high concentra-

tion of farms in the low gross income levels as compared to the relatively

small number of farms with high gross income levels.

As briefly mentioned in the introduction, the problem addressed

in this study relates to the increased complexity involving the process

of production decisions as well as the adjustments implied in the adoption

of new technologies, farm size adjustments and agricultural policy changes.

These "economic and technological changes" are continuously occurring and

are influencing adjustments within farming systems. In general, farmers

have been slow to respond to these changes [23].

Although all crops are affected by this "farming complexity,"

they are not all affected to the same degree. Among the enterprises that








are important to production planning in the study area are the following:

flue-cured tobacco, Maryland tobacco, peanuts, corn (irrigated and non-

irrigated), soybeans, grain sorghum, wheat and double cropping activities

such as wheat-soybeans and wheat-grain sorghum. From these enterprises,

peanuts and flue-cured tobacco have higher potential incomes and thus

are the most attractive to farming. However, these two crops face a

series of economic, technological and institutional uncertainties which

complicate production planning and create a need for farmers to periodi-

cally re-evaluate their farm organizations.


As for tobacco, mechanical harvesters are now available for

harvesting flue-cured tobacco with the potential for substantially re-

ducing the labor input1/ and the per unit production cost. Tobacco's

high seasonal demand for labor together with a sharp upward trend in

wage rates4/ constitute a mounting problem in the hand harvest system.

Thus, the adoption of the mechanized system may increase tobacco

profitability by substituting capital for labor. Yet mechanization

is a costly endeavor. The cost of tobacco harvesters ranges from

$20,000 to about $24,000 and bulk barns cost about $6,500 each. At pres-

ent the mechanization question hinges on the size of the operation. The

rigid restraints in allotment leasing plus the small size of poundage

allotment (4,399.6 Ibs. in 1974) make it difficult for most farmers

to accumulate tobacco acreage into operating units large enough to

justify the purchase of mechanical harvesters.

3-/"Mechanization of its (flue-cured tobacco) harvest will about
half the average crew size of the current harvest systems in use" [27].
4/"A major contribution to rising costs to flue-cured tobacco
production is farm wage rates which rose 46 percent in the South Atlantic
states from 1967 to 1972" [3].








As for peanuts, the most limiting component governing their

production is the peanut allotment program. In 1974 the average allot-

ment for the area was 13.9 acres.


However, despite production control regulation and increasing

demand for edible-grade peanuts, production from the national minimum

allotment resulted in supplies greater than commercial requirements.

Due to this production surplus, prices received by farmers were near

the support price and the C.C.C. (Credit Commodity Corporation) acquired

the peanuts in surplus. The C,C.C. then distributed the peanuts at

prices below acquisition cost into crushing channels and into exports.

Consequently, the C.C.C. loses money on peanut price support operations.

In recent years the C.C.C.'s losses have averaged 6 cents per pound for

all peanuts acquired under the price support program. Moreover, due

to the uptrend in parity prices and with strong indications that peanut

production may continue to outrun commercial edible requirements, the

C.C.C. costs in supporting peanut prices will most likely continue to

increase. While the annual peanut program cost approximated 66 million

dollars in 1970, the estimate for 1980 is over 100 million dollars, as-

suming continuation of the current program, Thus, this high level of

government expenditure in the peanut program creates pressure for program

modifications.


In 1973 a bill was introduced to Congress in an attempt to

extend the target price concept to peanuts. This bill basically implied

a lifting of the price support policy and a change to a market-oriented

price. A 10 cents per pound target price was suggested, along with a








12 percent increase in the allotment acreage, The 1972 price averaged

14.25 cents per pound [25, p. 17]. This bill did not pass.


J. P. Marshall, et al. [19] presented some alternative modifica-

tions to the peanut program. They suggested market-oriented peanut price

incorporating acreage allotments. The peanut programs Marshall suggested

were aimed at reducing or eliminating government expenditures for peanut

price support, yet ai the same time, increasing grower's incomes and

insuring an adequate supply of peanuts.


In summary, a peanut program modification seems imminent. In the

event that the government program is lifted or altered, changes in the

peanut industry are likely to occur. Price is likely to drop. If so,

will peanuts still be a competitive crop, or will peanuts go out of the

area's product mix? This study will attempt to provide insight on this

issue.


The facts surrounding the other crops in the area also merit

attention. The 1975 feed grain and wheat programs had no set-aside

requirements and they provide farmers freedom concerning what to produce

for the market place. No land will be removed from agricultural produc-

tion under these programs, Soybeans will compete for acreage on an

economic basis with feed grains and other crops.

The main question concerns the product cost-returns relationship

and its implications on the farm enterprise organization and farmers'

incomes, "Costs for growing wheat, corn and soybeans were up 12-13

percent over 1974, while at the same time, farmers were selling for less









than a year ago. Net farm income is decreasing" [17], Thus, the need

exists for a better pattern in allocative resource efficiency oriented

to raise the crop farmers' incomes,


In brief, several instances reflect the need for more information

on production planning and economic adjustments in crop farming in North

and West Florida: (a) The existence of recent technological, developments,

specifically those implementing the transition from conventional to

mechanical harvesting systems; (b) potential changes in policy programs

in farming may transform the crop production structure of North and West

Florida; (c) many crop farms with adequate resources are not achieving

acceptable income levels perhaps due to non-optimal organization of

enterprises; (d) the inflationary trend contorts the cost-returns rela-

tionship which might result in changes in the relative competitive

situation among crops; (e) some farms, even though managed efficiently,

are not able to satisfy desired levels of income due to limited unit

size (size as defined by both operating capital requirements and cropland

area).


As the complexity of crop farming increases, the need for careful

production planning also increases. This study was intended to analyze

this general problem. Its overall purpose was to evaluate the adjustment

opportunities in crop production in order to organize productive factors

for higher returns. These enterprise organizations must be within the

constraints placed by resource availability and institutional framework

in the study area.







Objectives


The major purpose of this study was to develop optimal crop

farm organizations as a general model to meet changing conditions in

the crop agriculture of North and West Florida. The achievement of

this purpose lead to the evaluation of adjustment opportunities in crop

production in order to organize productive resources for higher returns.

These resources and enterprise organizations were within the constraints

placed by resource availability and within the framework defined by

technical, economic, and crop policy conditions.


This major purpose was based on the hypothesis that the conditions in

crop farming are changing and consequently crop farm managers find it neces-

sary to re-evaluate their farm organizations in light of those changes.


The major purpose consisted of the following specific objectives:

(1) To determine the effects on optimal enterprise organi-

zations and on income levels of alternative farm

resource and enterprise situations defined as:

(a) Differences in size of crop farms as expressed

by alternative levels of cropland availability.

(b) Differences in farmers' levels of operating

capital.

(c) Alternative types of crop harvesting as determined

by harvesting with owned machinery and custom harvesting5/*

5All enterprises except tobacco and watermelons included the
custom harvesting alternative. This difference in type of harvesting
reflected the economics of combine purchase when size of cropping war-
ranted it,












(d) Alternative harvesting systems in flue-cured

tobacco, where mechanical harvesting and hand

or conventional harvesting were considered.

(e) Changes in the product mix involving four

situations: a). all enterprises included, b)

excluding flue-cured tobacco and allowing

peanuts as the allotment crop, c) peanuts ex-

cluded and allowing flue-cured tobacco as the

allotment crop, and d) excluding both peanuts

and tobacco enterprises.

(2) .To describe and evaluate the different farm plans

obtained under the above farm situations. This analy-

sis focused on:

(a) Optimum enterprise organizations.

(b) Optimum income levels.
(c) Limiting resources, with emphasis on cropland

and operating capital./.

(3) To determine optimum plans for peanut farms under the

following alternatives:

(a) Price variations considered.

(b) Flue-cured tobacco included and Maryland tobacco

excluded.

6/For this evaluation, marginal value products (MVP) of restric-
tive resources under those alternative farm situations were determined.









(c) Not including either flue-cured tobacco or

Maryland tobacco.

Objective three implied two parts in the analysis: (a) an evaluation

of the competitive position of peanuts relative to the other crops as

its price decreased and as the enterprise composition changed, and (b)

an estimation of acreage response functions for peanuts.


The achievement of the above specified objectives make it pos-

sible to:

(1) Explore the possibilities of improving farm profit-

ability and efficiency by either adjusting farm size

or by reorganizing the farm enterprise mix.

(2) Provide guides to farmers choosing among income

alternatives and combinations of products, when

those opportunities are affected by degree of harvest

mechanization and resource availabilities.

(3) Provide information needed by farmers, extension

workers, reserachers and public agencies engaged with

the development of the crop sector in North and West

Florida, in developing farm plans that can increase

the income level of the farm families concerned.














CHAPTER II

DESCRIPTION OF THE AREA



The area selected for study is a 27 county area of North and

West Florida composed of Planning Districts I, II and III. Figure 1

shows the geographic location, and counties included in the study area.


Selection of the Area


This area was selected.because:

(1) Planning Districts I, II and III comprise an area

which needs economic and agricultural development

opportunities. This is clearly identified in

Tyner's report: "As a group, the counties in North

and West Florida comprise an area that is considerably

less well developed than the remainder of the.state.

Employment is limited and incomes are very low in this

area" [23, p. 3].

(2) North and West Florida is an area where crop produc-

tion is highly concentrated in the product mix.

"General farm crops tend to be grown in northern

and northwestern Florida where conditions are not

favorable for the production of citrus and early

vegetables" [5, p. 7].














CHAPTER II

DESCRIPTION OF THE AREA



The area selected for study is a 27 county area of North and

West Florida composed of Planning Districts I, II and III. Figure 1

shows the geographic location, and counties included in the study area.


Selection of the Area


This area was selected.because:

(1) Planning Districts I, II and III comprise an area

which needs economic and agricultural development

opportunities. This is clearly identified in

Tyner's report: "As a group, the counties in North

and West Florida comprise an area that is considerably

less well developed than the remainder of the.state.

Employment is limited and incomes are very low in this

area" [23, p. 3].

(2) North and West Florida is an area where crop produc-

tion is highly concentrated in the product mix.

"General farm crops tend to be grown in northern

and northwestern Florida where conditions are not

favorable for the production of citrus and early

vegetables" [5, p. 7].









(3) The area has a fairly uniform climate such that

the results of the study will be applicable over

a wide area.



Physical Factors


Physical factors, in combination with economic, social and

biological factors, determine the type of agriculture and combination

of enterprises selected by farmers in any area. Physical factors are

perhaps the most limiting and thus they will be described first.

Soils and Topography


The soils in the area are predominantly fine sand and are

deficient in lime [5, p. 5]. A generalized soil map of Florida [5,

p. 5] shows that the study area has mostly "well to moderately well

drained" and "well to somewhat excessively drained" sands and loamy

sands. The soils are thick to thin acid sands and sandy loams, some

of which overlie finer-textured subsoils [16, p. 4].


The topographyis defined by a rather flat land with no large

differences in elevations. There are some rolling hills that sometimes

create a minor water erosion problem.

Drainage


In some cases there is a problem of drainage associated with

the flatness of the area. Much of the land is subject to flooding in

periods of heavy rainfall [5, Figure 4]; "Heavy rainfall and warm









(3) The area has a fairly uniform climate such that

the results of the study will be applicable over

a wide area.



Physical Factors


Physical factors, in combination with economic, social and

biological factors, determine the type of agriculture and combination

of enterprises selected by farmers in any area. Physical factors are

perhaps the most limiting and thus they will be described first.

Soils and Topography


The soils in the area are predominantly fine sand and are

deficient in lime [5, p. 5]. A generalized soil map of Florida [5,

p. 5] shows that the study area has mostly "well to moderately well

drained" and "well to somewhat excessively drained" sands and loamy

sands. The soils are thick to thin acid sands and sandy loams, some

of which overlie finer-textured subsoils [16, p. 4].


The topographyis defined by a rather flat land with no large

differences in elevations. There are some rolling hills that sometimes

create a minor water erosion problem.

Drainage


In some cases there is a problem of drainage associated with

the flatness of the area. Much of the land is subject to flooding in

periods of heavy rainfall [5, Figure 4]; "Heavy rainfall and warm









(3) The area has a fairly uniform climate such that

the results of the study will be applicable over

a wide area.



Physical Factors


Physical factors, in combination with economic, social and

biological factors, determine the type of agriculture and combination

of enterprises selected by farmers in any area. Physical factors are

perhaps the most limiting and thus they will be described first.

Soils and Topography


The soils in the area are predominantly fine sand and are

deficient in lime [5, p. 5]. A generalized soil map of Florida [5,

p. 5] shows that the study area has mostly "well to moderately well

drained" and "well to somewhat excessively drained" sands and loamy

sands. The soils are thick to thin acid sands and sandy loams, some

of which overlie finer-textured subsoils [16, p. 4].


The topographyis defined by a rather flat land with no large

differences in elevations. There are some rolling hills that sometimes

create a minor water erosion problem.

Drainage


In some cases there is a problem of drainage associated with

the flatness of the area. Much of the land is subject to flooding in

periods of heavy rainfall [5, Figure 4]; "Heavy rainfall and warm






















PENSACOLA


r/, -


Figure l*--The Study Area: Planning Districts I, II and III, North
and West Florida




*Multi-county Planning Districts Boundaries. Established by State
Secretary in January 1973.








climate have furthered the processes of leaching and oxidation on ridge

soils. Imperfect drainage on flatwood lands has tended to retard these

processes" [5, p. 5], In the poorly drained areas, removing excess

water can be a problem at certain times of the year.

Climate and Weather

The climate in the study area is classified as subtropical, with

lower average temperatures than the remainder of the state.


The growing season-!/ in North and West Florida ranges from 240

to 310 days, with a killing frost likely to occur annually. Cold waves

are of short duration, rarely lasting more than three days, but reaching

minimum temperatures of 150 to 200 F [5, p. 6].

Differences in temperature are particularly important because

they reflect the potentials for crops, The study area is located pri-

marily north of a line that marks a normal annual temperature of 690

[5, Figure 2]. Major vegetable and citrus producing areas are located

south of this line.

The study area receives abundant rainfall with average annual

totals that range from 52 to 64 inches. Planning District III receives

about 52 inches per year. Average rainfall increases as you move

westward with the western counties in Planning District I averaging

between 60 and 64 inches [5, Figure 3].



1/"Number of days between average date of last killing frost in
spring and average date of first killing frost in the fall" [5- p. 6].









Rainfall distribution throughout the year is very uneven. The

rainy season in the summer, from June to September or early October,

accounts for 45 to 55 percent of the annual average rainfall in the

area. However, rainfall distribution differs from season to season

during fall, winter and spring. The months of April and May have

relatively low precipitation and are the critical growing months for

tobacco, the.major cash crop in Planning District III.


Irrigation


Irrigation in the area is very important because of the sandy

character of the soil, irregularity of rainfall, increased intensity

of farming and the high price of farm products. At present, irrigation

is mainly confined to those counties that produce tobacco. Many of the

irrigation operations are single farm installations which draw water

from wells, lakes, springs and streams. The sprinkler system is the

most commonly used [5, p. 10]. The area has high potential for in-

creasing irrigated crops and irrigation is expected to play an important

role in the future.


Social and Economic Conditions

Among the economic and social forces that help to explain the

level of development found in the study area are the trends and current

status os such variables as population and its distribution, labor

force, income levels, transportation facilities and nearness to mar-

kets.









Rainfall distribution throughout the year is very uneven. The

rainy season in the summer, from June to September or early October,

accounts for 45 to 55 percent of the annual average rainfall in the

area. However, rainfall distribution differs from season to season

during fall, winter and spring. The months of April and May have

relatively low precipitation and are the critical growing months for

tobacco, the.major cash crop in Planning District III.


Irrigation


Irrigation in the area is very important because of the sandy

character of the soil, irregularity of rainfall, increased intensity

of farming and the high price of farm products. At present, irrigation

is mainly confined to those counties that produce tobacco. Many of the

irrigation operations are single farm installations which draw water

from wells, lakes, springs and streams. The sprinkler system is the

most commonly used [5, p. 10]. The area has high potential for in-

creasing irrigated crops and irrigation is expected to play an important

role in the future.


Social and Economic Conditions

Among the economic and social forces that help to explain the

level of development found in the study area are the trends and current

status os such variables as population and its distribution, labor

force, income levels, transportation facilities and nearness to mar-

kets.









Population


From 1960 to 1970, the population of the study area increased

by almost 20 percent, while the population of the rest of the state

increased by 37 percent (Table 1).


Urban population showed a 45 percent increase, while rural

population decreased 5.4 percent during the same 1960-1970 period. The

state percentage changes are 49.4 and 2.3 percent increases for urban

and rural populations respectively.


As for farm populations in the area, all three planning districts

lost population, with an aggregate change of -1.8 percent for the total

area, while the state's farm population has remarkably increased by

44 percent during the same period of 1960-1970. In 1970 farm population

counted for 5.7 percent of the total area population while rural popula-

tion represented 40 percent.


Labor Force

Typically, the area under study has excess labor resources.

Table 1 shows the labor force by major sectors of the economy. Agri-

culture, unlike most sectors in the economy, has had a decline in its

labor force. While the study area showed a notable decrease of 26.5

percent, the corresponding decrease for the state was only 4.6 percent

during the 1960-1970 period. The state's percent is negative due to

the decreasing effect of the study area. The rest of the state increased

its labor force by 1 percent during this period.









Population


From 1960 to 1970, the population of the study area increased

by almost 20 percent, while the population of the rest of the state

increased by 37 percent (Table 1).


Urban population showed a 45 percent increase, while rural

population decreased 5.4 percent during the same 1960-1970 period. The

state percentage changes are 49.4 and 2.3 percent increases for urban

and rural populations respectively.


As for farm populations in the area, all three planning districts

lost population, with an aggregate change of -1.8 percent for the total

area, while the state's farm population has remarkably increased by

44 percent during the same period of 1960-1970. In 1970 farm population

counted for 5.7 percent of the total area population while rural popula-

tion represented 40 percent.


Labor Force

Typically, the area under study has excess labor resources.

Table 1 shows the labor force by major sectors of the economy. Agri-

culture, unlike most sectors in the economy, has had a decline in its

labor force. While the study area showed a notable decrease of 26.5

percent, the corresponding decrease for the state was only 4.6 percent

during the 1960-1970 period. The state's percent is negative due to

the decreasing effect of the study area. The rest of the state increased

its labor force by 1 percent during this period.









Table 1.--Social and economic trends, Plar.nning --~ s-+cts : and 11; io,' Nr*h and West Flori r ~ 0-1970
SFlorida districtt I 01strict II Cistrit III Stt.dv Area
Social and Econc=ic Variables r.n-e Cnge _nage Cha,:e i-an-e
-.;inge Cna~ige i-nge Chjr.e LhanjC
G60-70 1970 1960-70 1970 1960-70 1970 1963-70 1970 1960-70 1970

percent number percent nu-'be percent number percent number percent numer

Pooulatia'
T,: J. 37.2 6,789,443 25.2 331,262 11.5 333.413 24.5. 215,142 19.5 379,852
Urban 4S.4 5,46S,117 46.0 240,273 33.7 176,955 59.3 109,65 45.0 526,339
(30.51 (7z.5) (53.i) (51.0) (63.0)
Rural 2.3 1,321,32Z -11.1 90G,93 6.2 156,503 1.4 1u5,436 5.4 352,973
(19.5) (27.5) (46.9) (49.0) (43.1)
Farm 43.9 143,657 18.5 7,413 8 2 20.939 0.9 21,561 1.8 49,:13
(11.3) (3.1) (13.4) (20.4) (5.7)
:.-farm 1.3 1,172.669 -14.9 83.371 5.8 135,564 2.0 33,925 6.0 33.;53
(88.7) (91.0) (86.6) (75.6) (34.4,
L _jr _orce: by Major Sectors
A4ri:liture 4.6 110,994 -11.2 1,313 -26.3 9,349 -30.4 5,950 -26.5 17,112
(4.6) (1.9) (7.9) (7.7) (5.9)
Construction 31.2 205,265 16.7 7,i3S 13.9 9.193 27.6 5,364 17.9 22,465
(8.5) (8.2) (7.8) (7.0) (7.7)
Manufacturing 52.0 341,336 4.0 15,525 7.8 13,035 25.9 10,357 10.5 39,078
(14.1) (1 .l) (11.1) (13.4) (13.4)
Trade 52.0 571,051 42.3 20,i1 34.3 23.!07 37.4 14.439 37.9 58.337
(23.5) (21.4) (19.5) (13.7) (20.0)
Service ard Misc. 73.3 725,082 69.0 23,. j 56.9 26.115 74.9 17,451 62.1 66,805
(29.9) (23.;) (C2.1) (22.5) (22.9)
Gover--ent & Educ.tion 81.9 3i6,641 51.4 21,j23 71.5 22,76) 87.9 18,413 68.5 68,755
(13.1) (2,.Z) (24.4) (23.3) (23.5,
Other -37.6 154,399 -31.6 6,ill -32.1 8,2:4 -33.0 5,1:9 -33.7 19,599
(6.4) (F.:) (5.2) (6.7) (23.5)
otal empioyed 41.1 2,426,263 27.3 97.j63 23.2 117,912 29.4 77.173 26.1 292,151


Percent dollars Percent Dollars Percent dollars Percent Ooil.rs Percent DoInars

Ir.c-.e
Perscnl! income per capital 39.7 3.659 84.2 3,33 11.3.4 2,c;- 118.8 2,956 104.8 3.053
Xeian family income 75.1 3,267 41.7 7.94c 3 6,259 38.0 5,1.7 52.4 6,472
Families by income level Percent ;j.:bers Percent l'-b.'rs Pe-cent NJbcrs Percent N::n Percent ;;umbe*s
Ur.cer $2,000 -39.3 1-7,445 -23.5 5,5: .-47.1 9,363 -45,0 5,.25 -41.0 21,~35
(7.1) ( .0O ) (11 .5) (li.i)
Under $3,000 -40.7 217,892 -30.0 130,. -45.0 15,232 -43.4 9,173 -40. 35,276
(14.6) (13.') (15 .5) (18.1)
$2,.3 $4,999 -33.3 335,7E0 -35.3 14.75. -27.4 19.132 -30.6 11,019 -31.1 44.53
(13.7) (13.3) (23.6) (21 .)
$5,300 $9,939 35.8 625,551 25.4 32.30.; 49.4 28,728 61.7 17,633 40.7 78.745
(34 .,) (39.4) (35.4) (34.9)
$10,000 and over 314. 693,651 334.7 29,iC7 349.8 23.SS3 334.7 16.23d 359.4 69,208
(39.1) (35.4) (29.4) (32.2)


Source: Social a-d Economic Trends; 1953 1970; State of Florida Planning Districts.








Agriculture's labor force is the smallest among major sectors

of the economy. In 1970, area employment was 292,151 but agriculture's

share was only 6 percent of this labor force.


Income


Limited statistics on income are presented in Table 1. Personal

income per capital figures and the data on family incomes indicate the

disparity between economic opportunity in North and West Florida as

compared to the remainder of the state.


In 1970 the average personal income in all 27 counties in the

study area was about $600 below the state average ($3,659). However,

per capital income increased by 104.8 percent in the study area, compared

to 89.7 percent for the state during the 1960-1970 period.


Median family income was $6,472 in 1970, which was well below

the state average of $8,267 for the same year. The percent change in

family income during the period 1960-1970 was 52.4 for the study area

and a higher 75 percent for the state.


The number.'of families with incomes under $5,000 has decreased

considerably in the area under study. However, at incomes higher than

$5,000, this number has increased. Family incomes ranging from five

to ten thousand dollars have increased 40.7 percent, while family incomes

$10,000 and over have risen 359,4 percent during the analysis period.


These trends in family income in the study area are similar to

those at the state level,









Transportation


The study area enjoys good transportation facilities. Federal

and state highways extend to all sections in the area. Since most farms

are located on or are near all-weather roads thus small and large

cities are readily accessible to farmers for trading purposes. The

railroad lines running in and through the area connect the study area

with the rest of the state as well as with the north-bordering states.

Like the road system, the railway system can also be classified as ade-

quate.


The study area is served by two important ports: Pensacola on

the west side of the study area, and Jacksonville on the east. While

a large volume of the area's agricultural production is not shipped out

of the area by water, many agricultural supplies are shipped into the

state by this means.



Agricultural Trends

The trends of several agricultural variables provide some in-

sight on the adjustments that farmers have made over time.


Number and Size of Farms


By 1969 there were 11,139 farms that averaged 285.5 acres in

the 27 county study area (Table 2). The number of farms decreased by

51.4 percent during the 15 years from 1954 to 1969 and from 1959 to 1969

the number of farms with sales over $2,499 decreased only 6,8 percent.

The number of farms in the rest of the state decreased by 29 percent.









Transportation


The study area enjoys good transportation facilities. Federal

and state highways extend to all sections in the area. Since most farms

are located on or are near all-weather roads thus small and large

cities are readily accessible to farmers for trading purposes. The

railroad lines running in and through the area connect the study area

with the rest of the state as well as with the north-bordering states.

Like the road system, the railway system can also be classified as ade-

quate.


The study area is served by two important ports: Pensacola on

the west side of the study area, and Jacksonville on the east. While

a large volume of the area's agricultural production is not shipped out

of the area by water, many agricultural supplies are shipped into the

state by this means.



Agricultural Trends

The trends of several agricultural variables provide some in-

sight on the adjustments that farmers have made over time.


Number and Size of Farms


By 1969 there were 11,139 farms that averaged 285.5 acres in

the 27 county study area (Table 2). The number of farms decreased by

51.4 percent during the 15 years from 1954 to 1969 and from 1959 to 1969

the number of farms with sales over $2,499 decreased only 6,8 percent.

The number of farms in the rest of the state decreased by 29 percent.









Transportation


The study area enjoys good transportation facilities. Federal

and state highways extend to all sections in the area. Since most farms

are located on or are near all-weather roads thus small and large

cities are readily accessible to farmers for trading purposes. The

railroad lines running in and through the area connect the study area

with the rest of the state as well as with the north-bordering states.

Like the road system, the railway system can also be classified as ade-

quate.


The study area is served by two important ports: Pensacola on

the west side of the study area, and Jacksonville on the east. While

a large volume of the area's agricultural production is not shipped out

of the area by water, many agricultural supplies are shipped into the

state by this means.



Agricultural Trends

The trends of several agricultural variables provide some in-

sight on the adjustments that farmers have made over time.


Number and Size of Farms


By 1969 there were 11,139 farms that averaged 285.5 acres in

the 27 county study area (Table 2). The number of farms decreased by

51.4 percent during the 15 years from 1954 to 1969 and from 1959 to 1969

the number of farms with sales over $2,499 decreased only 6,8 percent.

The number of farms in the rest of the state decreased by 29 percent.

















Table 2--Some agricultural trends; Planning Districts 1, II and III in North and West Florida. 1954-1969

District I -istrict II District III Study Area Rest of State
Agricultural Variables Change Change Change Change Change
1954-59 1969 ]954.-6 19g9 1954-1969 1969 1954-69 1969 1954-69 1969
% nun:oar % n1 ber % number % number number

NuL.ber of Farms -54.4 1,549 -52.5 5.226 -48.9 4,364 -51.4 11,139 -29.3 24,447
Number with sales over
$2,499er it sal-2.8es 540 0.4/ 2,274 6.8 2,976 5.8 5,790 6.8/ 14,306

% areas % acre; 3 acres % acres % acres

Average size, all far:s 68.7 184.9 60.8 273.7 41.1 393.4 52.6 285.5 1.0 443.9
Average size, farms with
sales over $2,499 with -16.3 308.9 -14.5 513.8' -23.62/ 736.8 -19.42/ 519.8 -12.8-/ 678.5
Dollars dollars Dollars Dollars Dollars
S (thousands) thousandss) S (thousands) % (thousands) I (thousands)

market value agricultural
products sold, major cat-
eco'ies
All agricultu- products 143.2 14,626 114.4 67,G47 181.7 77,746 145.7 159.419 155.1 972,655
Crops (incl. nursery pro-
ducts & hay) 201.4 8,940 83.4 35,066 36.5 24.278 71.4 69.284 130.6 662,444
(61.1) (53.8) (31.2) (43.5) (68.1)
Forestry products 0.7 292 -30.5 1,139 42.3 1,170 6.0 2,601 -91.2 2,498
(2.0) (1.7) (1.5) (1.6) (.25)
Livestock, poultry and
their products 95.8 5,395 168.0 29,902 481.4 52,299 282.4 87,596 264.2 307.646
(36.8) (44.6) (67.3) (54.9) (31.6)


li= Percentage change from 1959 to 1969 only.
= Percentage change from 1964 to 1969 only.


Data not available for 1954.
Data not available 'or 1954 and 1959.


Source: Social and Economic Trends, 1950-1970, State of Florida.











This overall trend in the number of farms is an indication of the con-

solidation of farms which has occurred as a response to a need for

larger acreages to adjust to more efficient sized units. Consolidation

has occurred as farms with sales less than $2,499 have been combined

with other farms. Small farms involved in consolidation either consoli-

date with each other or are bought by larger farms. Consolidation has

been, as seen above, much more evident in the area under study than in

the rest of the state.


Average farm size in the study area was about 160 acres smaller

than the corresponding figures for the rest of the state. In 1969, the

average size for all farms in the study area was 285,5 acres as compared

to 443.9 acres for the rest of the state. For those farms with sales

over $2,499, the corresponding study area farm size was 519.8 acres as

contrasted to 678.5 acres for the rest of the state. It is interesting

to notice, however, that the percent change in average size of farms in

the study area is by far higher than the analogous figure for the rest

of the state for the period 1954-1969. The study area's change was an

increase of 52.6 percent while the rest of the state's figure was only

one percent. One other meaningful point is that, during the 1964-1969

period, the average size of farms with incomes over $2,499 decreased

notably at both study area and rest of state level. This decrease seems

to reflect the adoption of technological improvements so that now smaller

farm sizescan obtain given levels of income,









Value of Farm Products Sold


Supplementary relevant information is provided by changes in

the market value of agricultural products sold. Table 2 shows the

levels of sales for all farm products as well as for crops and other

major categories, During the period 1954-1969, sales of all agricultural

products increased 145.7 percent, similar to the trend for the rest of

the state.


In 1969, the value of total crop sales in the area accounted

for 43.5 percent of the total sales of all agricultural products.

District III (31,2 percent) is way below Districts I and II (61.1 and

53.8 percent respectively) which pulled down the study area percentage.

The corresponding percent for the crops' share at the rest of the state

level was 68.1 This higher crop participation in the total value of

sales at the rest of the state level seems to be associated with the

large volumes of citrus, sugar cane, and nursery products in the rest

of the state.

A leading district in sales of crop products in 1969 was District

II with $36,066,000 which represented 53.8 percent of the market value

of all agricultural products in that area. District I, on the other

hand, had a comparatively low volume of crop sales ($8,940,000), but it

represented 61 percent of the total volume of sales of agricultural

products in that region. As for the whole study area, the value of crop

sales increased by 71.4 percent.









Changing Capital Requirements

The increasing requirements for capital is another important

aspect of the changing conditions of agriculture in the study area.

Farm expenses associated with technology improvements (such as

mechanization, higher levels of fertilization and better disease control)

as well as purchase of land for expansion are decreasing the attractive-

ness of farming relative to less risky non-farm investments. "... total

capital requirements for Florida's farm economy increased by one-half

from 1959 to 1964. The most significant increase in the study area

(North and West Florida) was in the substantially enlarged total capital

values for land and buildings on farms .,." [23, p. 38]..Between 1959

and 1964, the average value of land and buildings per farm increased

by 54.5 percent in North and West Florida, 12.3 percent higher than the

rate of increase for the rest of the state [23, Table 16].

In 1969, the average value of land and buildings per acre in

the area under study was considerably lower than the corresponding figure

for the rest'of the state ($178.1 as compared to $406,30) [24].


Crops Situation


Crop Program Review

Government agricultural production regulations, price supports

and loans for farm products are based on the Agriculture and Consumer

Protection Act of 1973, Increased production costs in 1973 and 1974,









Changing Capital Requirements

The increasing requirements for capital is another important

aspect of the changing conditions of agriculture in the study area.

Farm expenses associated with technology improvements (such as

mechanization, higher levels of fertilization and better disease control)

as well as purchase of land for expansion are decreasing the attractive-

ness of farming relative to less risky non-farm investments. "... total

capital requirements for Florida's farm economy increased by one-half

from 1959 to 1964. The most significant increase in the study area

(North and West Florida) was in the substantially enlarged total capital

values for land and buildings on farms .,." [23, p. 38]..Between 1959

and 1964, the average value of land and buildings per farm increased

by 54.5 percent in North and West Florida, 12.3 percent higher than the

rate of increase for the rest of the state [23, Table 16].

In 1969, the average value of land and buildings per acre in

the area under study was considerably lower than the corresponding figure

for the rest'of the state ($178.1 as compared to $406,30) [24].


Crops Situation


Crop Program Review

Government agricultural production regulations, price supports

and loans for farm products are based on the Agriculture and Consumer

Protection Act of 1973, Increased production costs in 1973 and 1974,









Changing Capital Requirements

The increasing requirements for capital is another important

aspect of the changing conditions of agriculture in the study area.

Farm expenses associated with technology improvements (such as

mechanization, higher levels of fertilization and better disease control)

as well as purchase of land for expansion are decreasing the attractive-

ness of farming relative to less risky non-farm investments. "... total

capital requirements for Florida's farm economy increased by one-half

from 1959 to 1964. The most significant increase in the study area

(North and West Florida) was in the substantially enlarged total capital

values for land and buildings on farms .,." [23, p. 38]..Between 1959

and 1964, the average value of land and buildings per farm increased

by 54.5 percent in North and West Florida, 12.3 percent higher than the

rate of increase for the rest of the state [23, Table 16].

In 1969, the average value of land and buildings per acre in

the area under study was considerably lower than the corresponding figure

for the rest'of the state ($178.1 as compared to $406,30) [24].


Crops Situation


Crop Program Review

Government agricultural production regulations, price supports

and loans for farm products are based on the Agriculture and Consumer

Protection Act of 1973, Increased production costs in 1973 and 1974,









combined with declining commodity prices, stimulated interest in raising

the target prices and loan rates stipulated in the 1973 Act.

Provisions of the 1975 feed grain program were virtually un-

changed from 1974. Most often, farmers have a wide choice of which prod-

ucts to produce and how much. Producer flexibility continues in substi-

tuting feed grains, wheat, and other commodities for allotted crops.

Thus allotments for wheat, corn, and grain sorghum do not limit the

acreage of these crops that farmers can plant. Allotments for the above-

mentioned grains are used in calculating deficiency payments to producers

if market prices fall below target price levels or if growers qualify

for disaster payments. The average loan rates for these products in

1975 continued at the same levels as for the 1974 crops. These loan rates

were $1.10 per bushel for corn, $1.05 per bushel for grain sorghum, and

$1.37 per bushel for wheat. The target price levels (guaranteed price)

for 1975 were also at the same level as in 1974. These target prices

were $1.38 per bushel for corn, $1.31 per bushel for grain sorghum, and
$2.05 per bushel for wheat [31].

The loan rate for soybeans was discontinued for 1975 because

market prices in 1974 ran strong relative to the loan rates, However,

due to declining 1975 soybean prices, Congress passed an emergency one-

year bill that would have raised the loan rate for soybeans. This bill

was vetoed and consequently there was no program supporting soybean

prices for 1975.

Although changes were proposed, the programs for peanuts and

tobacco (including marketing quotas and price support) were extended over









1975. Transfer of allotments by lease or sale within counties was

provided for in the 1975 programs, which allows for size consolidation

of those otherwise small peanut-and tobacco operating units. Table 3

shows the figures corresponding to peanuts and tobacco allotment

programs. In peanuts, under the 1974 program, there were 3,983 allot-

ment farms in the study area, as compared to 4,099 in 1973. The average

farm allotment was 13.9 acres. In flue-cured tobacco, the number of

allotment farms was 7,001 in 1974, only 1.2 percent higher than in 1973.

The average tobacco allotment was 4,400 pounds.

The prices of peanuts and tobacco-were supported by loans and

direct purchases under the price support program. The objective of this

program was to stabilize prices at announced levels to protect farm

income. The price support level for flue-cured tobacco in 1975 was up

12 percent over 1974 as required by law. This meant a 93.2 cents per

pound support price [31, Table 4], which reflected higher prices for

goods and services bought by farmers. For the 1975 crop year, tobacco

production costs again increased: "... tobacco crop will probably cost

a minimum of 5 to 6 cents per pound more to produce than in 1974" [32,

p. 16]. As for peanuts, the 1975 crop was supported at a minimum average

price support of $393.10 per ton (19.64 cents per pound). This level

was 7.4 percent above the previous year's rate (18.3 cents per pound)

and reflected a rising minimum support level resulting from an up-trend

in peanut parity price, At this level the price of peanuts was above

the world market price. Even so, the C,C,C, s minimum sales policy for

diversion sales was 100 percent of the loan level,











Table 3.--Data on peanut allotment and marketing quota program and flue--
cured tobacco acreage poundage program, North and West Florida
1973 and 1974.

Item Unit 1973 1974


PEANUTS:
Number of Allotment Farms
Allotted Acreage
Average Farm Allotment"
Harvested Acresl/
Production
Actual Yield
Average Price

TOBACCO:
Number of Allotment Farms
2/
Allotted Acreage-
Total Poundage Quota 2
Average Farm Allotment
Harvested Acreage
Total Mdrketings
Yield per Acre based on
marketing
Average Price


No.
acres
acres
acres
1bs-
Ibs.
Dol./Ton


No.
acres
1bs.
1bs.
acres
Ibs.

lbs.
Dol./cwt.


4,088
55,350.6
13.5
53,665.8
147,623,230
2,751
328.5


6,918
14,019.4
25,713,718
3,716.9
11,605.4
20,966,558

1,807
88.3


3,983
55,340.5
13.9
53,775.7
167,380,126
3,113
374.8


7,001
16,915.6
30,801,942
4,399.0
11,679.6
25,052,331

2,145
100.9


1/Excludes acreages of peanuts
includes non-allotment farms


harvested green for boiling purposes but
of one acre or less.


2/Total effective allotments and poundage quota after adjustments for
undermarketings and overmarketings in 1972 and 1973 respectively.

Source: U.S. Agriculture Stabilization and Conservation Services,
Florida Annual Report, 1973 and 1974.









Credit needs of farmers increased substantially in 1975 as

prices of production inputs continued to rise, while the own-capital

availability of farmers was reduced in real terms due to the relative

decline in incomes, "In general, the financial condition of farmers

is less favorable than in 1974" [30, p. 11]. The Production Credit

Association (P,C.A.) provides for most of the operating capital available

to growers. There was no specific limit on the size of loans.

Production Trends

Through the years, economic prosperity of North and West Florida

has been closely tied to the production of such field crops as corn,

small grains, tobacco and peanuts. The major sources of cash income

have come from tobacco and peanuts. Soybeans and grain sorghum are more

recent crops in the state's farming system. Production of all these

crops can increase substantially in the years ahead, especially corn

and soybeans. In addition, double-cropping activities are becoming

increasingly important, particularly those built around wheat, such as

wheat-soybeans and wheat-sorghum. It is believed that double-cropping

activities together with better crop practices will lead to substantial

growth in field crops output,

Table 4 shows the production trends for peanuts, flue-cured

tobacco, corn, soybeans and wheat, during the five-year period from 1968

to 1973.


Peanut production has grown mainly due to yield increases and

is expected to expand by more than 40 percent in the next decade with

















trends for selected crops, Planning Districts I, il and II!, North and West Florida, 1963-1973


District I District I!
Acres harvested YielTd per acre Prtfifon Acres narvesfe- -- feTl per acre production
Change Change Chance Change Change Change
Crop 196S-73 1973 1968-73 1973 1963-73 .973 1963-73 1973 1908-73 1973 1938-73 1973

% acres pConds I pounds acres 1 pounds % pounds
Peanuts 3.9 6,430 22.6 2,850 34.6 19,030,000 7.5 38,270 42.7 2.442 O3.0 93,840,003

Flue-cured tobacco 15.3 657 -ii 1,246 10.7 925,200
(Type 14)
S acres bushels % bushels : acres % bushels % bushels
Corn 3.4 17,900 29.4 65 35.6 1,233.000 -24.2 122,500 11.2 44 -10.9 5,2r3,000

Soybeans 36.7 108,000 6.6 26 46.7 2,876,000 120.2 131,000 20.47 26 7.1 2,826,000

Unreat -83.3 11,40O -16.1 23 -111.4 264.600' -34.4 15,100 -30.7 20 -61.7 31,.300


Table 4.--Continued

District III Study Area
Acres harvested Yie~o per acre Production Acres harvested Yield per acre Production
Change Change Change Ciange. Change Change
Crop 1968-73 1973 1968-73 1973 1953-73 1M73 1963-73 1973 1963-73 1973 1963-73 1973

acres pounds pounds acres f pounds 1 pounds
Feanuts 5.7 4,820 44.6 2,514 72.3 13,8'7.000 6.8 49,470 60.0 2,664 71.0 131,777,000

Flue-cured tobacco 1.2 13.732 1.2 1,796 2.8 '9,344,400 1.9 11.389 1.2 1,823 3.1 20,770,500
(Type 14)
1 acres 2 bushels bu.heli 2 acres bushels % bushels
Corn -9.9 179,100 -9.5 40 -17.3 7,238,700 -12.2 322,100 3.6 43 -9.0 13,900,900
Soybeans 733.3 5,000 10.0 22 816.7 110,000 75.4 244,000 12.2 25 74.3 .5,842,000

Wheat 241.7 2,900 -19.1 21 103.0 60,900 -44.2 29,400 -21.5 21 -71.5 643,800

Source: Florida Agricultural Statistics. Field Crops Summary, 1973.


Table 4.--Production









further development in yields, From 1968 to 1973 production of peanuts

in the study area increased 71 percent; acreage went up only 6.8 percent,

while the yield per acre substantially increased by 60 percent. Total

production increased by 25 percent between 1973 and 1974 because a record

yield of 3,000 pounds per acre was realized [30]. Notice that, in 1973,

District II was responsible for 75 percent of that year's total production.

Flue-cured tobacco production (type 14) increased by only 3.1

percent from 1968-1973. Its average yield per acre increased slightly

(1.2 percent) and the acreage harvested moved up very little (1.9 percent)

since allotment regulations have been restricting any potential expansion.

Flue-cured tobacco production is higly concentrated over most areas in

Planning District III, where 96 percent of a total of 20,770,500 pounds

were produced in 1973. Growers planned to harvest 12,900 acres in 1975

[12], which is up 10 percent from 1974 and 11 percent above 1973. On
the horizon are innovations in harvesting and curing methods which could

revolutionize the flue-cured tobacco business in the future.

Maryland-type tobacco is a new crop in Florida with a promising

future if markets and marketing systems are developed. Although it does

not receive government price support, its production in 1974 was larger

than in the past years. For the 1974-1975 season the supplies were about

4,000,000 pounds above 1973-1974 [32, Table 17]. The production pros-

pects indicated that its acreage last year was down 4 percent from 1974

[32].

Corn, from the standpoint of acreage harvested, is the most

important field crop grown in Florida. Corn planted for all purposes









totaled 464,000 acres in Florida in 1975, up nearly 3 percent from the

previous year and 16 percent above 1973. Yield outlook was favorable

because of the 1975 crop. Thus, a large 1975 output that could lead

to price easing for the season was expected, In contrast with these

production prospects, the trends observed in the study area during the

five-year period of 1968 to 1973 show that corn production declined 9.0

percent due to an acreage reduction of 12.2 percent (from 366,800 acres

to 322,100 acres). Yields had an increase of 3.6 percent during the

same period and were 43 bushels per acre in 1973. Corn production was

highly concentrated over most areas of Planning Districts II and III,

which accounted for 90 percent of total production in 1973.


Soybeans are produced under two distinct systems in the study,

as a full-season crop and as a second crop after wheat. During the

period between 1968 and 1973, soybean production increased 74.3 percent,

reaching 5,842,000 bushels in 1973. These soybeans were grown mainly

in the extreme western counties located in Planning Districts I and II,

which accounted for 98 percent of total production in 1973. This

notable growth in production resulted mainly from a substantial 75.4

percent increase in the acreage harvested. As of 1975, planting of

soybeans continued its upward surge with a record 305,000 acres planted.


Wheat production in Florida is highly concentrated in Planning

Districts I and II, accounting for 582,900 bushels, or 90 percent, of

the total production of 643,800 bushels in 1973. The trend. in production

is downward and for the five-year period under consideration the decrease

was 71.5 percent. This decline was due to reductions in both acreage









harvested (-44.2 percent) and yield per acre (-21.5 percent). The

1975 crop continued to reflect declining production prospects, Acres

harvested for grain in the spring of 1975 totaled 20,000 acres, down

33 percent from the two previous years [12],


Prices

Prices received and their prospects are of major interest to

farmers and varying them in the analysis will help establish the impact

of changing prices.


The price situation for field crops during the last season

appeared rather unfavorable for farmers, All products in this study,

except tobacco, experienced declining prices. This downward'movement

in farm prices reflected a nationwide condition. Farm product prices

averaged 10 percent lower for the first five months of 1975 than in the

same period in 1974. On the other hand, the index of prices paid for

production items, interest and farm wages was 11 percent higher than

during January-May of 1974 [28].


Feed grains prices in the 1974-1975 season were a record high.

During the present season, however, market prices have declined mainly

due to the sharp reduction in the domestic use of feed grain (costs of

feed grain have been high in relation to market prices of livestock and

poultry) [31]. Good weather for crops will continue to support easing

of prices during the re;t of the season, The most likely situation

for corn production is a large output that could lead to corn prices

well below the 1974-1975 season, However, corn producers in the study









area harvest their crop before the market opens for the rest of the

nation. This early harvesting might partially offset those declines.

In the 1974-1975 season the national average price was $2.95 per bushel

[29]. As for grain sorghum, nationwide supplies this year were the

smallest in 18 years, and its price dropped due to the weak domestic

feed demand,

Most signs indicated a big wheat crop in 1975, at levels higher

than 1974. Supplies of that size would likely soften wheat prices,

perhaps down from the 1974-1975 season average farm price of $4.04

per bushel, which was 9 cents above the 1973-1974 price and the highest

on record for the United States [33]. "Forces seem to be building which

could push prices downhill towards $3 per bushel at harvest time" [33,

p. 7].

Soybean prices decreased below 1974 levels due to reductions

in its usage, largely due to a lagging demand for soybean oil and meal.

However, its price behaved less erratically than in previous years when

it rose to a record $10 per bushel in June of 1973. "Mid-month soybean

prices received.by farmers declined from $8.17 per bushel last October

to $5.31 in March, a drop of nearly $3. So far this season they are

averaging around $6.15, about $1 above a year ago" [30, p. 8].


Peanut prices fell last marketing season mainly due to record

large supplies in 1974 crops and also because the economic forces of

recession curtailed its demand, In fact, peanut market prices fell

1.6 cents below CC,.C.'s minimum 1975 support price and averaged 18 cents

per pound [30, Table 12],









In 1974 the flue-cured tobacco prices received by farmers in

the study area averaged 100.9 cents per pound (Table 3). These prices

constituted a record high and were 17.6 cents higher than the price

support level. In 1975, however, due to higher production expectations

and a shortfall in cigarette production [32], prices received by growers

were expected to stabilize near 1974's record or about 7 cents above

1975's support price of 93.2 cents per pound. As for Maryland-type

tobacco, in the 1973 crop (marketed mostly in 1974), growers received

a season average price of 62.5 cents per pound in other states than

Maryland2/ [32, Table 17].




























2/90.5 cents per pound in Maryland State (highest on record)
[23].














CHAPTER III

DESIGN OF STUDY



This study was designed to evaluate possibilities for improving

crop farm profitability and efficiency under the changing conditions

affecting crop agriculture in the study area.


Selection of optimal enterprise combinations and evaluation of

the potential economic adjustments feasible in the study area were made

on the basis of efficiency defined in terms of maximum net revenue;1/

The application of this optimization criteria to obtain the net returns

estimates was made under a set of simplifying assumptions and constraints

so that interrelations among the studied variables could be traced.


This study was oriented toward a short-run planning situation.

Most crops are capable of maturing once per year, thus the length of

the planning period was one year. In the short-run many productive

resources must be considered as fixed with no opportunity to dispose

of or acquire resources. For this planning period, the relevant costs

were those that vary with the output for that production year.


The approach adopted in this study was a firm level approach

where "typical crop farms" for the study area were determined by defining


1/In this analysis, net revenue was defined as gross farm income
less variable costs of inputs and crop operations (fixed costs, operator
labor and management were excluded).


34










several alternative farm planning situations which were largely defined

by area economists, top farmers, Extension specialists and Experiment

Station recommendations.


A linear programming model was designed to fit as realistically
and accurately as possible those situations faced by crop farmers in

the area under study. All major crops suitable to the soil-weather
conditions were included. As provided for in this model, the selection

of an alternative crop was determined by the enterprise possibilities

of the farm and the realtive profitability of alternative enterprises,

all these being within the constraints imposed.


Source of Data--The Budgets

The major source of data for this work was the enterprise budgets
for the study area prepared by Mr. George Westberry, Extension economist

in the Food and Resource Economics Department, University of Florida.
These budgets have been modified to make them adaptable to all specific

objectives of this study. In addition, Florida Crop and Livestock

Reporting Service data [10, 11, 12], Agricultural Stabilization and

Conservation Service (A.S.C.S.) data [25], Census data, information from
personal interviews and data from other miscellaneous publications for

North and West Florida have been used in this study,


The estimates of prices paid andreceived by farmers are present-
ed in Tables 5 and 6 and they are not to be interpreted as predictions
of prospective prices in any future year. The custom work rates for

harvesting operations were taken from Economic Information Report 34














Table 5.--Product yields and prices used in preparing budgets
for North and West Florida, 1975

Item Unit Yield Price
--dollars--


Peanuts


Flue-cured tobacco

Maryland Tobacco

Corn:
Irrigated
Non-irrigated

Wheat

Grain sorghum:
Single-cropped
Double-cropped

Soybeans:
Single-cropped
Double-cropped


cwt.


bu.


cwt.
cwt.


bu.
bu.


2,100

1,500


115
65

25


36
29


30
25


18.00


1.10

.95


2.50
2.50

3.50


4.00
4.00


5.50
5.50


lb. 18,000


Watermelon












Table 6 .--Input prices used in preparing budgets for crop farms
in North and Wlest Florida 1975

Item Unit Price
--dollars--


Seeds:
Peanuts
Flue-cured tobacco
Maryland tobacco
Corn
Wheat
Grain sorghum
Soybeans
Watermelons


Fertilizers:
Lime, spread
0-14-14, spread
Nitrogen
4-12-12
5-10-15
6-9-3
Nitrate of Soda
4-8-12
Potassium nitrate (13-0-44)
10-10-10, spread
15-0-15 (bag)

Chemicals:
Soybean innoculant
SyLteric (sucker control
chemical)
Contact (sucker control
chemical )
Lasso (herbicide)
Sutan-Mtrez (herbicide)
Balan (herbicide)
Sevin (insecticide)
Dasanit (insecticide)
Bravo (fungicide)
Fumazone (insecticide)
Dysiston (insecticide)
Lannate (insecticide)
Toxaphene (insecticide)
Parathion (insecticide)
Custom work:


lb.
oz.
oz.
Ib.
bu.
lb.
bu.
lb.


ton
cwt.
Ib.
cwt,
cwt.
cwt.
cwt.
cwt.
cwt.
cwt.
cwt.


pkg.

gal.

gal.
lb.
lb.
lb.
Ib.
lb.
gal.
gal.
lb.
lb.
Ib.
lb.


Peanuts: Spray (air) acre
Custom harvest' acre
Tobacco:
Plant bed: Fumigation (with
methyl bromide) and
plastic cover 100 sq. yd.
Herbicides acre
Insecticides acre
Insurance acre
Corn: Harvest and haul bu.
Wheat: Harvest and haul acre
Grain sorghum: Spraying
(custom air) acre
Harvest and haul acre
Soybeans: Spraying customm air) acre
Harvest and haul acre


.425
20.00
20.00
.70
7.50
.65
12.00
4.00


11.00
5.30
.28
5.90
5.30
5.90
9.50
6.00
10.00
5.85
8.25


.90

14.00

7.25
3.71
2.24
4.60
1.00
5.10
2..75
14.00
3.08
9.00
1.00
.29


1.75
28.00


21.00
16.00
52.18
42.50
.25
10.00

1.50
10.00
1.50
10.00

9%


Operator capital


---


dol.









[7]. There is a fear that under current conditions of inflation, energy
shortage and devaluation, the price expectations are highly uncertain.

The input-output relationships reflected the 1975 situation and

assumed a level of technology defined as "recommended practices." These

coefficients were considered to be appropriate for the North and West

Florida area.

Eight enterprises (which made up to 18 crop activities when most

crops were considered under two harvesting conditions regarding machinery

ownership and when flue-cured tobacco included two harvest systems) were

considered as alternatives to which the resources for a given farm

situation may be allocated. A sufficient market was assumed to be

available to permit the enterprise to be considered for all farmers as

an adjustment opportunity. These cash crop enterprises were peanuts,

flue-cured tobacco, Maryland tobacco, corn, wheat, grain sorghum, soy-

beans and watermelons.2/ The exclusion of any enterprise means only

that it was not considered widely adaptable within the study area.

Data were assembled on the following aspects of farm enter-

prises (Appendix Tables 1-23):

(1) Costs and returns using advanced management practices
and recommended levels of technology.

(2) Monthly distribution of farm operations and labor and

machinery requirements.

2/The tobacco and peanut enterprises were classified as intensive-
type crops while the other crops were classified as extensive-type crops.









(3) Annual fixed costs of machinery. -

The structure of the budgets used in this study was designed

primarily for use in linear programming and this structure differed

somewhat from those of conventional budgets used for other purposes.

In each of the main-crop enterprises, two levels of returns
were calculated. In the first level, harvesting costs were based on

owned harvesting machinery and equipment. In the second level, the

harvesting costs were based on present custom hiring rates in North and

West Florida. In the flue-cured tobacco enterprise, returns were

calculated for both conventional/ (hand) and mechanical harvesting
systems.

For all enterprises, returns were defined as yield times the

product market price. Annual operating expenses (variable costs)

included costs such as seed, fertilizer, hired labor, custom operations

(when applicable), operating costs of tractor and equipment plus an

operating capital cost. The budgets did not include charges for inputs

that were drawn from the quantity in the constraints column or that

were debited through a system of purchasing or renting activity and

appropriate transfer rows in the model (for example, combine purchase

was not included in the budgets). Machinery operating costs were

included in the budgets on the basis of assumed performance rates and

an hourly charge for necessary machines.-



3/A tractor drawn priming aid with field racking and bulk
curing.








Consequently, for all crop enterprises, net returns were

calculated over variable costs, that is, net returns were allocated

to land, operator labor and management, tractor and machinery invest-

ment and overhead costs. In the flue-cured tobacco and peanut budgets

net returns also included returns to the allotment quota since no

charge was included for leased quota. Due to the fact that the amounts

of non-charged items were different for some crop enterprises (i.e.,

barns needed in tobacco production were not necessary in the production

of other crops), the returns per acre should be compared accordingly.

In calculating costs of growing and harvesting a farm enter-

prise, a level of equipment and a set of production practices must

be assumed. Crops in this area were primarily produced with four-row

equipment with appropriate tractor power and small grain equipment

(Appendix Table 23). Other assumptions were: normal weather conditions

prevailed, soil quality was fairly uniform for given enterprise situa-

tions, all labor other than operator labor was hired and enough of this

labor was available in peak seasons. Perhaps, the most basic assumption

was that of the level of technology. Since the concern was planning

the income growth of crop farms, the level of efficiency was one of the

potential adjustments pertaining to this work. This study assumed a

"recommended practices" technology that was suitable for crop farming

within practical limits in the study area. Since all these assumptions

on the budgets existed for the duration of the planning period, the

maximization of returns in this study was relative rather than absolute.










Theoretical Concepts


To accomplish the objectives, linear programming techniques

were used along with the utilization of budgets as main sources of

data. The conditions for the model structure were dictated by the

potential changes and economic opportunities facing crop farms in the

study area.

Linear programming is a technique Which may be used to deter-

mine the equilibrium position-4 of a firm that operates under factor

restrictions and usually, as used in this study, under constant returns

to scale over some specified range of production. The technique can

be used to maximize (or minimize) an objective function defined by a
specific objective and-subject to a given set of constraints. The

objective, which is quantifiable, can be attained by means of alternative

activities which operate under restrictions given by resource limitations

and specific farm situations.' Many of the questions arising from the

objectives required different set-ups of the basic model.

Mathematical Assumptions of Linear Programming

The use of linear programming involved the following critical

assumptions [14, pp. 97-100] which must be considered in order to

construct the simplex tableau and to interpret the results. These as-

sumptions are:

4/A firm may be considered in equilibrium when there is no economic
incentive to change the combination of inputs and products, nor to change
the level of production of any of the products.










Theoretical Concepts


To accomplish the objectives, linear programming techniques

were used along with the utilization of budgets as main sources of

data. The conditions for the model structure were dictated by the

potential changes and economic opportunities facing crop farms in the

study area.

Linear programming is a technique Which may be used to deter-

mine the equilibrium position-4 of a firm that operates under factor

restrictions and usually, as used in this study, under constant returns

to scale over some specified range of production. The technique can

be used to maximize (or minimize) an objective function defined by a
specific objective and-subject to a given set of constraints. The

objective, which is quantifiable, can be attained by means of alternative

activities which operate under restrictions given by resource limitations

and specific farm situations.' Many of the questions arising from the

objectives required different set-ups of the basic model.

Mathematical Assumptions of Linear Programming

The use of linear programming involved the following critical

assumptions [14, pp. 97-100] which must be considered in order to

construct the simplex tableau and to interpret the results. These as-

sumptions are:

4/A firm may be considered in equilibrium when there is no economic
incentive to change the combination of inputs and products, nor to change
the level of production of any of the products.









(1) Linearity--The ratio of one resource to another and

of each resource to the quantity of product is

constant and independent of the level at which a

particular process is used. The mathematical model

for this relationship is homogeneous in the first

degree and yields a geometrically straight line

relationship. This assumption rules out the possibility

of increasing or decreasing returns to scale by fixing

the input-output coefficients.5/

(2) Additivity--The resources required and the products

produced by a combination of enterprises must be equal

to the sum of resources.used and products produced by

each individual enterprise. No interaction is possible.

(3) Divisibility--It is assumed that the resources used and

the products produced are divisible at infinitely small

levels. However, the practical aspects of farming lead

to discreteness rather than continuity in the input-output

relationship. This, however, is not usually a serious

limitation.

(4) Finiteness--It is assumed that the number of activities

available is finite. An exact optimum combination of

enterprises cannot be obtained unless all possible

enterprises are considered. In agriculture, therefore,

since the possible number of activities is infinite, no

5/Diminishing returns can be analyzed by establishing several
processes with varying levels of inputs for an individual enterprise.










claim can be made that the best combination of enter-

prises is obtained.

(5) Single-value Expectations--The input-output coefficients

and prices for each productive process are considered

as single-valued, that is, they are assumed to be known

with certainty. This assumption also implies that,

given a productive situation, the output can be pre-

dicted with certainty.


The Model

The model pertinent to this study was an economic firm operating

under conditions of pure competition,6/ in the short-run, with the ob-

jective of profit maximazation.l/ The firms were the typical farms

selected to represent the designated crop farm situations in the area

of study.

Considering the foregoing basic assumptions involved in any

linear programming model, this study's maximum net returns model can be

6/For pure competition to exist, the following conditions must be
evident. First, a large number of buyers and sellers of homogeneous
products must be involved. Second, the buyers and sellers must be well
informed concerning market conditions affecting the goods in question.
Third, collusion in any form must not exist. Fourth, government inter-
ference must not forestall the determination of the price of products by
the forces of supply and demand. This condition is not entirely met by
the farm. Acreage allotments and price supports are in effect on peanuts
and tobacco. Although the conditions of pure competition are not com-
pletely fulfilled by the farms and the economic environment in which they
operate, they are sufficiently satisfied to warrant use of the economic
firm operating under pure competition in the short run.
Z!Here the implicit assumption exists that farmers are profit
maximizers, not just profit satisfiers.









expressed in equation form as follows:

n
Maximize Zo = E (P Xj CjX) (1)
j=1


where Zo is the net return for all activities when the price, per unit

cost (here per unit cost refers to costs per acre), and level of the

jth activity are P.,C. and Xj respectively. The number of activities

is n.


Subject to the linear restriction

n
E aij Xj < Bi i = 1, ..., m (2)
j=1 1

where a.. is the amount of the ith constraint required to produce a unit
13
of the jth activity. The utilization of resource or constraint i cannot

exceed the total amount of restraint B.

n
E a X > 0 (3)
j=l kj 3j

where akj is the amount of machinery required to produce a unit of the

jth activity. No direct restriction was placed on machinery.

X. > 0 (4)


where this inequality states that no enterprise (or any other activity)

may be produced at a negative level.










Planning Situations and Process Restrictions


The main criteria used in the identification of the different

farm situations and restrictions was that they should realistically
reflect the conditions faced by crop farmers in the study area.

The key advantage of these situations was that they allow for

asking "what if" questions concerning the potential changes and adjust-

ment opportunities. Further analysis shed light on the required or
desirable production adjustments to be suggested in the area planning

for the crop farming sector.

The possibility for larger incomes lies largely in the efficient

handling of the land and other resources. However, combinations of crop-

enterprises under various land, capital and othe constraint situations,

offered widely varying income opportunities. Several alternative plan-

ning situations were determined so that a close tailoring of alternative-

plans was possible to simulate the crop farmer's particular situation.
Initially, two types of farm situations were developed, one being

alternative levels in the resource situations and the other being

alternative considerations in the product-mix situation.

As for the farm resources, two basic situations were identified

after several preliminary runs of an initial model. One situation-

related to cropland availability and considered three levels of crop-

land: 250 acres, 400 acres, and an "unconstrained" level. The other

situation related to operating capital requirements and provided for a









parametric variation of capital at $20,000 intervals, starting from the

basic constraint of $20,000 and increasing up to an "unconstrained"

level.


The above resource situations were to determine the effects of

alternative cropland and capital restrictions on the income and enter-

prise organization of crop farms. Also, they allowed for some inquiry

on the economic potential of land equity as well as some insight on the

credit requirements of crop farmers,


Two other important resource restrictions, on which no alterna-

tive levels were placed, were those related to labor and machinery.

Intuitively, one looks upon man hours as the most likely restraint.

In this study, operator labor was established as a limiting factor on

a monthly basis. The labor restraint formed for every month of the

year implied a rigidity in the timing of farming operations and con-

sequently of labor use. This may be unrealistic. This model, however,

did allow for operator labor to be transferred across months, even

though this might have overstated labor flexibility for some crops in

some months. In forming the labor restraints, it was considered that

the farm operator was willing to work more hours during those critical

months of the year (see Appendix Table 24).


As for machinery and accompanying equipment, rather than forming

a separate set of constraints for each machine, the most limiting ones

were determined. "Large tractor" and "combine" were identified as the

most limiting because more hours of these machines were required than










any other type of equipment involved in the cropping operations. In

the model, these constraints were treated by linking them to the operator

labor constraint.

Ultimate adjustment in each farm was limited by the above-

mentioned resource constraints in critical time periods when performing

field operations. However, the adjustment potentials were also deter-

mined by some external and subjective restrictions./

One very important external restriction on the crop enterprise

organization was the government allotment program on peanuts and flue-

cured tobacco. In 1975, the average allotment for peanuts was 13.9

acres and for flue-cured tobacco was 4,399 pounds. The model provided

for allotment rental with upper bounds of 80 acres for peanuts and 42

acres (90,000 pounds) for flue-cured tobacco.

An alternative farm situation was defined when no peanut allot-

ment was considered. This alternative of "unrestricted production"

allowed for the evaluation of no government intervention in peanut

production. Since the allotment provision is linked to the price support

policy, in the event the allotment is lifted, the price support policy

most likely is going to be lifted too and the peanut price is likely

to drop. Consequently, optimal enterprise organizations were evaluated

when no peanut allotment or price support were considered. Peanut price

decreases were parametrically programmed and acreage response functions

8-External restrictions, as implied in this study, are those limit-
ing conditions not determined at the farm level, such as acreage allot-
ments. Subjective restrictions, on the other hand, consider those re-
strictions imposed by the operator himself. Their limits are usually
hard to determine, but they are real and significant-:to farm planning.








for peanuts were estimated. Significant changes in production decisions

in the peanut industry may occur as a result of changes in peanut prices.


Regarding the enterprise composition, the area under study had

four categories: (1) All enterprises included; (2) peanuts as the

allotment crop and excluding flue-cured tobacco; (3) flue-cured tobacco

as the allotment crop and excluding peanuts; and (4) both peanuts and

tobacco enterprises excluded. These categories were not well defined

geographically but it is common for farms to produce either peanuts

or tobacco, but not both. For instance, Suwannee, Hamilton and Madison

counties are largely dependent on flue-cured tobacco as a source of cash

income. Jackson County has developed peanuts as its specialty crop.

Thus, these alternatives in the product mix were aimed at those farms

where either of these situations prevails.

In all crop enterprises except tobacco and watermelons, two

considerations regarding harvesting were defined. One considered custom

harvest and the other harvest with owned machinery. These two situations

provided for additional realism. Some farmers do not buy combines.

Others do in order to better realize economies of scale. Consequently,

these considerations in the type of harvesting provided for alternative

plans for both farmers with small scale crop operations and farmers with

large enough operations to afford the purchase of a combine.

In the flue-cured tobacco enterprise, two harvesting systems

were considered: hand or conventional harvesting, and mechanical

harvesting. These alternatives were designed to evaluate the economics

of mechanical harvester purchase when size of cropping warrants it.










Finally, two subjective restrictions were included: (a) Maryland

type tobacco is a new crop in the area and as such it affects the area's

enterprise mix in two ways. Farmers either do not include this crop

among their production possibilities or they are just not willing to

plant in large acreages with this crop due to the risk associated with

any new crop. Because of this situation, two alternative plans were

developed, one not including Maryland tobacco and another including

Maryland tobacco. (b) Watermelon acreage is restricted due to two con-

ditions. Disease build-up prevents planting watermelons on the same

plot two years in a row. Also, severe price fluctuations at harvest

can introduce high risk. Thus a maximum of 25 acres was allowed for

watermelons.

Restrictions arising- from' ins-titutional ni.gid-iti.es ~ and imperfect

factor markets tend to misallocate resources, and the scope of this

study did not include these aspects.

The purpose of the foregoing farm situation analysis was to

determine differences in the results obtained with respect to income

levels, enterprise organizations and total resource requirements. The

information obtained out of these alternatives might well reflect the

different and relevant economic opportunities that crop farmers are to

face since these combinations of farm situations result in substantial

changes in income and enterprise organizations.









The Initial Tableau--Procedure of Analysis

As indicated earlier in this chapter, the maximization of net

revenue was determined by linear programming techniques. After describ-

ing the components of the initial tableau, a brief recount of the dif-

ferent programs designed to achieve the objectives of this work is

presented.


The initial tableau for the simplex method of solution, Table

7, contains all basic input-output coefficients which were organized in.

32 columns and 42 rows. These coefficients reflect the resources re-

quired by each activity represented by each column. All negative

coefficients in the matrix, except for those in row 01, indicate addi-

tions to the system, and all positive coefficients indicate requirements.

By-means of an iterative-,procedure, differet- combinat-ions-of.enter.-

prises were systematically evaluated until an optimum organization of

enterprises, with the number of units of each enterprise, was obtained-

which produced the greatest profit for a crop farm while optimizing the-

use of resources.

In the tableau, columns 01 through 20 are crop growing and

harvesting activities. The return coefficients (row 01) for these

columns are negative because they represent the cash expenses related.

to these producing activities. The output from these activities was,

placed in transfer rows (rows 50 to 57).

The model permitted two alternatives in the production of most

enterprises. These alternatives were those ones related to harvest with









owned machinery and custom harvest. These enterprises were peanuts

(colums 01 and 02), corn, irrigated and non-irrigated (columns 06

through 09), wheat (columns 10 and 11), grain sorghum (columns 12 and

13), double crop wheat-sorchum (columns 14 and 15), soybeans (columns

16 and 17), and double crop wheat-soybeans (columns 18 and 19). Regard-
ing systems of harvesting, flue-cured tobacco (columns 03 and 04) also

had two alternatives. These alternatives consisted of mechanical harvest-

ing and conventional or hand harvesting. Only one production alternative

for the other crop activities, Maryland tobacco and watermelons (columns

05 and 20, respectively) were included.

Columns 21 through 28 are crop selling activities. The return

coefficients represent the price per unit received by farmers, therefore,

these coefficinets are positive. The selling procedure was performed

by using the product transfer rows.

Columns 29 and 30 permit the purchase of a tobacco harvester and

a combine respectively. These activities are bounded alternatively at
zero and one units, providing the information to evaluate custom harvest

versus owned machinery harvest. The return coefficients for these

activities are negative since they represent the annual cost of this

machinery. The field-work time purchased with each tobacco harvester

is 357 hours, and for each combine this time is 500 hours. These field-

work times are used by the producing acitivies through the appropriate

transfer rows 46 and 47.

Columns 31 and 32 provide for leasing of allotments for peanuts

and flue-cured tobacco respectively. The return coefficients of these










activities are negative and represent the cost of leasing one unit of

allotment. The -1 coefficients in these columns, lined to the allotment

constraints (rows 44 and 45), indicate additions of units of allotments

to the current constraint. The leasing of peanut allotment is upper-

bounded at 80 acres, and the leasing of flue-cured tobacco allotment

is upper-bounded at 42 acres or approximately 90,000 pounds.


As for the rows in the matrix, row 01 represents the objective

function of this study, which is the profit equation to be maximized.

As stated earlier, this equation calculates the maximum net revenue for

each program. According to the adopted -definition of net revenue, no

provisions were made to meet fixed costs in the model itself, therefore,

the fixed cost component must be subtracted from the value of the program

before any estimate of net income is imputed to land and operator labor

and management.-/


Rows 02 through 13 represent the availability of operator labor

on a monthly basis (see Appendix Table 24). These equations restrict

the production activities to the amount of labor specified as constraints.

The coefficients in the tableau indicate the amount of operator labor

required to produce one acre of the different enterprises. Whenever

needed and whenever possible, transfer of labor between two consecutive

months is considered. This procedure implies additional column activities

in the matrix but this is not shown in the initial tableau.


!/See Appendix Table 26 for returns adjusted for fixed costs
involved in each optimal plan.









Rows 14 through 25 and rows 30, 34, and 36 are related to machin-

ery requirements. Coefficients for large tractor and combine require-

ments are in the tableau. The level of constraint for these rows is

zero (unconstrained) so that the solution provides for the level of

machindery required on a monthly basis. As provided for in this model,

no time requirement of machinery can exceed the operator labor available.

As seen earlier in this chapter, the cropland requirement was

set at three different levels (250 acres, 400 acres, and unconstrained).

In row 38 of the initial tableau, the cropland constraint is set at

zero, or unconstrained, which assures that this equation calculates the

amount of cropland required to optimize returns given all other restric-

tions. The other two alternatives in this resource availability were

handled simultaneously in the model by using the "multiple right hand

side" procedure [1, pp. 71-73].

As for the operating capital, row 40 in the initial matrix shows

the capital constraint at the starting level of $20,000. Through the

use of the parametricc routine" [1, pp. 124-129] capital increases were

considered at intervals of $20,000 and up to an "unconstrained" level.

The coefficients of operating capital requirements were determined by

the annual variable costs per acre for each activity.

Rows 44 and 45 are for complying with the government provisions

on peanuts and flue-cured tobacco allotments. Constraints of 13.9 acres

for peanuts and 4,399 pounds for flue-cured tobacco are placed, However,

as pointed out earlier when describing the column activities, these limits

in production can be expanded by the leasing of allotments.









Rows 46 and 47 relate to the activities of purchase of tobacco

harvester and combine machinery. These rows facilitate the transfer of

field-work time purchased to be used in the producing activities so that

no more than what is purchased can be used.


Rows 50 to 57 are crop transfer equations permitting the amount

produced in the crop producing activities to be sold through the selling

activities.


The programs designed to achieve the objectives of this analysis

were classified into two sets of plans. The first set was comprised of

those plans associated with the different farm resource levels and the

product mix alternatives. The second set of plans considered the situa-

tion regarding the peanut program as expressed by the allotment provisions

and price support policy.

The first set of plans was basically designed to comply with

the overall purpose of comparing results when three criteria of farm

size were optimized while maximizing returns. In order to make these

comparisons, all those plans formed by the combinations of the different

resource alternatives were analyzed simultaneously. Then later the

product mix alternatives were introduced by appropriate changes in the

basic initial model. In other words, a first computer run was made

including in the model all the enterprises.and considering all those

stated situations in cropland and operating capital availability, as

well as the alternatives in types of harvesting. Then further, similar

computer runs were made, first, excluding flue-cured tobacco and allowing









peanuts as the allotment crop, and second, excluding peanuts and allowing

flue-cured tobacco as the allotment crop, and third, excluding both

peanuts and tobacco enterprises,


In the second set of programs, the possibility of "unrestricted"

peanut production was analyzed and the potential effects of abolishing

the peanut program on the area's product mix and the acreage response

to declines in peanut prices were determined. This task was attained

by first selecting one representative farm resource situation for the

peanut industry, and second, by running a computer program that included

parametric procedures to obtain solutions for declines in peanut prices

from 22 cents down.(zero cents per pound. The enterprise compositions

evaluated were, first, all enterprises included, second, Maryland to-

bacco excluded, and third, both Maryland tobacco and flue-cured tobacco

excluded.


As can be seen, a study of this nature, with many alternative;

plans in the solutions, can provide a great variety of information.

However, the main criteria.in deciding the type and amount of informa-

tion used in the presentation and analysis of the results was whether

the variations in the alternative crop farm situations resulted in

substantial changes in the optimum enterprise organizations and associ-

ated income levels.






Table 7--Basic form of the simplex tableau used to compute optimum plans
for crop farms in North and West Florida

Row No. Description Row Type Unit Constraints


01 Returns N Dollar
02 Labor: January L Hour 208
03 February L Hour 192
04 March L Hour 208
05 April L Hour 234
06 May L Hour 234
07 .June L Hour 260
08 July L Hour 260
09 August L Hour 260
10 September L Hour 260
11 October L Hour 234
12 November L Hour 234
13 December L Hour 208
14 Large Tractor:January N Hour 0
15 February N Hour 0
16 March N Hour 0
17 April N Hour 0
18 May N Hour 0
19 June N Hour 0
20 July N Hour 0
21 August N Hour 0
22 September N Hour 0
23 October N Hour 0
24 November N Hour 0
25 December N Hour 0
30 Combine: May N Hour. 0
34 September N Hour 0
36 November N Hour 0
38 Cropland unconstrained N Acre 0
40 Operating Capital L Dollar 20,000
44 Peanut allotment L Acre 13.9
45 Tobacco allotment L Pound 4399
46 Tobacco harvester
row L Hour 0
47 Combine purchase
row L Hour 0
50 Peanuts transfer L. cwt 0
51 Flue-cured tobacco
transfer L Pound 0
52 Maryland tobacco
transfer L Pound 0
53 'Corn transfer(grain)L Bushel 0
54 Wheat transfer L Bushel 0
55 Grain sorghum
transfer L cwt 0
56 Soybeans transfer L Bushel 0
57 Watermelons transferL Bushel 0








Table 7--(continued)


Peanuts
Own Custom
Harvest Harvest
01 02


Flue-Cured Tobacco
Mechanized Conventional
Harvest Harvest
03 04


-269.56 -274.92


.85
.60
.86
.72
1.29"

2.99

.60



.74
.52
.33
.62


.52




1
269.56
1



-30


.85
.60
.86
.72
1.29

2.99

.60



.74
.52
.33
.62


.52




1
274.92
1



-30


Row No.


-810.37
3.34
1.54
5.37
.74
1.38


.89
1.0


1
810.37

2100
6


-2100


-870.91
3.34
1.54
5.37
.74
1.38


.89
1.0


1.0
1.50
.50


1
870.91

2100



-2100


_ __ _
_ ___ __








Table 7--(continued)


wMaryland Irrigated Corn Non-Irrigated Corn
Row No. Own Custom Own Custom
Tobacco Harvest Harvest Harvest Harvest
05 06 07 08 09


-737.98
1.18

1.38
.70
1.40
.63
4.50
5.30


1.02

.52


1
737.98


-1500


-176.82
.55

.60
.38
.72


.30
..48

.52
.33
.31





.26

.50

1
176.82


-200.15
.55


-114


-124.83
.55


.30
.48

.52
.33
.31





.26


1
200.15


1
124.83


-115


-115







Table 7--(continued)

Wheat Grain Sorghum Wheat-Sorghum
Row No. Own Custom tom Own Custom Own Custom
Harvest Harvest Harvest Harvest Harvest Harvest
10 11 12 13 14 15


-73.35 -79.24


-102.99 -108.72
.55 .55


.85
.46


.26
.33
.62


.30
.48

.26
.33
.62





.26


-172.57 -183.98


.55
.98
.36

.85
1.10





.85
.31


.74
.40


.98
.36

.85
.46





.85
.31


.74
.40


1 1
73.35 79.24


-25


-25


1 1
102.99 108.72


-36


1
172.57


1
183.98


-25
-29


-25
-29







Table 7--(continued)


Soybeans Wheat-Soybeans
Row No. Own Custom Own Custom
Watermelons
Harvest Harvest Harvest Harvest
16 17 18. 19 20


-94.28
.55


-158.32 -170.08


.55
.98
.72


.85
1.01


-88.50
.55


.60
.38
.72




.58
.30
.48


.52
.33'
.62





.26


1 1
88.50 94.28


.98
.72


.85
.46






.85
.62


.74
.40


.40

.40
1 1
158.32 170.08


.85
.62


.74
.40


-237.11
.55
1.05
.69
1.15
5.46


.26



1
237.11


-18000







Table 7--(continued)

Grain
Peanut Flue-Cured Maryland Corn Wheat Sorghu
Row No. Sale Tobacco Sale Tobacco Sale Sale Sale Soreum
21 22 23 24 25 26


1.10


2.50


3.50 4.0








Table 7--(continued)


Soybean
Sale
27


Watermelon
Sale
28


Tobacco
Harvester
Purchase
29


Rent
Peanut
Allotment
31


Rent
Tobacco
Allotment
32


Row No.


5.50


-4487


-60


Combine
Purchase
30


01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
34
36
38
40
44
45
46
47
50
51
52
53
54
55
56
57


-4097


























1500


3450


-357


-500.


Table 7-- (continued)














CHAPTER IV

OPTIMUM ENTERPRISE ORGANIZATIONS FOR
ALTERNATIVE CROPLAND AND OPERATING CAPITAL SITUATIONS


This chapter deals with an evaluation and comparison of effects

on optimal enterprise organizations and on income levels of alternative

farm resource and enterprise situations. Overall, the analysis is aimed

at the evaluation of crop production alternatives in order to maximize

returns in specified resource situations.


Although the analysis was performed for all the alternative

farm situations originally considered, this discussion of results is

limited to the cases where variations in the alternative crop farm

situations resulted in substantial changes in the optimum plans and

resulting income levels.


As for the harvest systems included, results relate to own-

machine harvest. The possibility of having only custom harvest was

discarded, and the discussion of custom harvest was restricted to

those instances where it was necessary to supplement own-machine harvest

whenever operator labor at harvest time was too limiting.


Custom harvest was not discussed separately because the optimal

enterprise organizations obtained were very similar to those of own-

machine harvest. The pattern of changes in the product combinations

and in the levels at which each enterprise came in the plans, followed the










same trend as resource levels were increased. Furthermore, the gap

in the value of the programs between both systems was small and became

smaller at higher levels of operating capital. In other words, for

both systems, at a given resource situation, the optimal combination

of enterprises as well as the levels at which each enterprise came in

the plans, were the same or very similar, If operating capital and/or

farm size were increased, the resulting changes in the mix of enterprises

and their levels, were quite similar in direction and magnitude. Finally,

own-machine harvest, and not custom harvest, was chosen due to the fact

that for the study area as a whole, own machine harvest is the most

common case among crop farmers.


Because of the high profitability of watermelons under the

assumed price conditions, the preliminary analysis indicated watermelons

usually entered the optimal solutions at the upper limit allowed in

the model. Since this was generally the case at alternative resource

levels, watermelons were not included in the final analysis. Water-

melons are not an alternative that is considered by a majority of

farmers in the study area due to disease build-up and severe price

fluctuations at harvest. Nevertheless, watermelons may be recommended

in optimum plans wherever the above restrictions are not present.


Irrigated corn was excluded from basic analysis due to difficul-

ties arising from the integer nature of center-pivot irrigation systems.

However, this enterprise was evaluated for selected farm situations by

forcing this activity into units determined by the size of the irriga-









tion system. Results on this regard are presented in a later section

of this chapter.


In the farm resource situations considered, the basic level

of operating capital was $20,000. However, results were tabulated

starting at $40,000 due to the fact that optimal plans at the basic

$20,000 level were severely constrained by operating capital, and

thus results were limited to a few acres of the most profitable crop,

usually flue-cured tobacco, depending on the mix of enterprises being

considered. Operator labor was restricted to one man-equivalent on

a monthly basis.


Before presenting the analysis of optimal crop plans, discussion

of the harvest systems in flue-cured tobacco situation is in order.


Hand-Harvest System vs. Machine Harvest System
in Flue-Cured Tobacco

In the flue-cured tobacco enterprise, a break-even analysis in

a partial budgeting context was performed to evaluate the purchase of

a mechanical harvester. The basic approach used was to replace the

hand-harvest system if its annual net revenue per acre falls below

the annual net revenue per acre from the machine harvest system. The

break-even analysis indicated that only at flue-cured acreages higher

than 74 acres, is it advisable to shift from hand to machine harvest.

However, preliminary solutions including machine harvest alternatives

showed that flue-cured tobacco never reached acreages high enough to

justify mechanization. Therefore, the machine-harvest system was









dropped from the crop activities in the analysis, and only hand-harvest

was left as an alternative.


Although in general, machine harvest systems are justified only

in large acreages, some flue-cured tobacco growers do go into mechanized

harvest at acreages much lower than the estimated break point. This

situation is understandable since although the decision to mechanize

is primarily based on the economics of costs and returns, other factors

like the producer's desire, or the extent to which adequate sized units

can be aggregated to economically adopt mechanical harvesters, influence

the final decision. The present use of mechanical harvesters may be

explained by risk considerations in procuring harvest labor at peak

seasons as well as prospects for modifications in the tobacco legisla-

tion regarding the allotment system.


The results of this study showed that hand harvest was the best

alternative and no harvest mechanization should be considered unless

flue-cured acreage exceeded 74 acres. This statement assumes that labor

,was available for hiring during peak seasons. If farmers are not able

to stand the risk arising from the uncertainty in labor supply at

harvest time, or if they have the desire to use mechanical harvester,

then they may use the machine-harvest system.


Although consolidation of flue-cured tobacco allotments has

occurred through leasing, more flexibility is needed if growers are

to optimize the returns from mechanical harvest. The present tobacco

allotment and quota system, insofar as it inhibits the formation of









larger producing units, is a barrier to adoption and optimal use of

machine-harvest systems.


Optimum Plans Including All Enterprises-


Eight crops represented in eighteen growing and harvesting

activities were considered as profitable alternatives for those areas

where flue-cured tobacco as well as peanuts are suitable enterprises.

Grain sorghum and wheat-grain sorghum did not enter the optimum solutions

in any of the resource situations considered. Therefore, these enter-

prises are not emphasized in the discussion subsequent to this point.

While solutions were obtained for 12 cropland-operating capital situa-

tions, only seven different plans resulted since operating capital was

limiting at its lower levels. For example, situations for 250 acres--

$40,000, and for 400 acres--$40,000 resulted in the same plan because

capital was.limiting before land or any other resource became limiting.

Table 8 shows optimum enterprise organizations, limiting resources,

marginal value products (MVP),2-/ and returns./ for each of the final

cropland and operating capital situations.

1/Irrigated corn was not included here. As indicated earlier
it is evaluated in a later section in this chapter.
2/The MVP of a resource represents the amount that returns could
be increased by utilizing one more unit of the restrictive resource.
Stated negatively, it is the cost of letting one unit of that resource
remain idle. Stated positively, it is the price that can be paid for an
additional unit of that resource.
3/As stated earlier, this value represents returns over variable
costs or cash expenses, and therefore it does not give an accurate
estimate of the profitability of the resources utilized. In Appendix
Table 26, a summary of the returns adjusted for fixed costs involved in
each plan is presented.














Table 8.--Optir.um plans for alternative levels of c-opland and ope.ratr.g capital on. North and West Florid& farms: Plans including all enterprises


Ite U250 acres _400 acres- Unconstrained acreage2/
ItemI Unit t $40,030 5$6303 Sao0 ,0,0 $103,000 1 $10T0,00 $120,000


CROPS
Peanuts


Acres


Flue-cured tobacco

Maryland tobacco

Corn (non-irrigated)

'heat

Sov/a-.s

..eat-soybeans

LIi:TI::G RESCLCES 3

Labor: Jant;ary

March

;?,- 1

ra/

June

Oct.

Nov.

Allotment: tcbacco


184.2


13.9

30.1

25.0




138.0


13.9

30.1

25.0




236.2

16.6


203 (71.3)

208 (47.6) 201 '210.7) 208 (94.7)

234 (0)


Pounds (.23) 6,


peanuts Acres

Cropland Acres

Operating capital Dollars

RETURNS dollars


35.4

40,000 (1.1)

41,724


(.20) (. 1.1)
76,942 5,~;2:



222.9 23 (76.5)

60,000 (.86) 72.482

59,870 656,t;


I 8,830 I P


(69.2)

321.9

80,000 (.42)

71,779


13.9

30.1

25.0


29.3

233.2

65.5


13.9

30.1

25.0


155.7

139.2-47.1*

25.8-39.6*


203 (43.2) 208 (44)

208 (195.5) 208 (105)

234 (0) 234 (10.a)

234 (10.3)

260 (43.7) 260 (43.7)


'1158,830

(45.2)

400 (14.2)

89.689

75.451


234 (11.4)

'58,83033

(42.7)

526.4

100,000 (.04)

76,473


*The asterisk indicates the acreage to be custom harvested. Otherwise harvesting Is performed using cen harvesting machinery.
-'At this farm size, solutions for $43,00and $60,000 are the same as those at 250 acres of size.
-At this farm size, solutions for $40,000, $50,030 and S30.GCC are the same as those at 400 acres of size.
/Figures within parenthesis represent the I!VP of limiting resources.


13.9

30.1

25.0


181.5-28.3*

170.7-65.5*

65.4*


208 (46)

208 (192)

234 (10.7)

234 (10.7)

263 (47.6)

234 (3.8)

234 (11)
(11Le-se
'" ',830

(45.3)

50.6

104,572

76,651









250-Acre Crop Farm


For this farm size, operating capital was varied up to $80,000.

As a result, three different farm organizations were obtained.


At $40,000 of operating capital level, the production of 35.4

acres of flue-cured tobacco was the only activity included. This

activity provided substantially greater returns than the next most

profitable crop and used all the available operating capital.. This high

profit crop is an intensive user of capital. The potential benefit from

expanding this crop by using additional operating capital was high at

this point. This can be seen by looking at the MVP of operating capital

and tobacco allotment. At the solution, an additional dollar would

have a 110 percent rate of return, which is by far higher than the

9.5 percent market rate of return for capital assumed in this study.

An additional pound of tobacco allotment would generate 23 cents, as

compared to 11 cents per pound assumed as the cost of this allotment.


The value of the program was $41,724, which revealed a high

returns situation for this resource alternative.


At $60,000 of operating capital, flue-cured tobacco and soy-

beans were in the optimum organization of enterprises. Additional

operating capital allowed for a higher acreage in tobacco, but its

expansion was restricted by March labor. Soybeans did not compete

with tobacco for March labor and 184 acres were included in the optimum

solution,









Operating capital was again the limiting factor in the solution

and its marginal rate of return at this point was a high 86 percent.

Also, an additional hour of operator labor in March would generate

$47.60 extra as it was restricting a high profit enterprise like tobacco.

Returns for this solution amounted to $59,870. The availability

of an additional $20,.000 in operating capital increased returns by

$18,146.


At $80,000 of operating capital, two additional enterprises

came into the optimum plan, peanuts in the amount of its allotment

and Maryland tobacco at its upper limit. It is interesting that flue-

cured tobacco acreage went down b 30.1 acres, a level that seems to

be its equilibrium point of production since the MVP of its allotment

equaled the marginal cost of an additional unit of allotment. The

joint profitability of peanuts and Maryland tobacco seemed to be high

enough for them to substitute for flue-cured tobacco.

The additional cropland used for this situation was relatively

small. With land reaching the limit, soybeans acreage was reduced by

three acres to allow for the acreage of peanuts and Maryland tobacco.

Low MVP and upper limits in the intensive-type crops, prevented a

higher substitution for soybeans.

When operating capital and cropland go up, an increase in re-

turns should be expected. In this resource situation, an additional

27 acres and $12,480 of operating capital allowed the returns to increase

to $66,445, an increase of $6,576 or 11 percent.









In brief, in this farm size intensive-type crops dominated

the enterprise organizations for the specified resource situations.

The returns situation revealed high profitability of the resources

utilized.


400-Acre Crop Farm


For this farni size, the solutions at $40,000 and $60,000 were

the same as those in the 250 acre farm size. This was due to the fact

that at those levels operating capital became limiting before cropland

did. The use of operating capital was increased to the $100,000 level

for the 400-acre farm. Any addition to this resource would not help

the returns situation because cropland and operator labor prevented

further expansion of the total output of the farm. Therefore, the

discussion below focuses only on those plans resulting from $80,000

and $100,000 of operating capital.


At $80,000 of operating capital, as in the former farm size,

peanuts and Maryland tobacco entered the solution at the amount of

the allotment and upper limit, respectively. Flue-cured tobacco

remained the same because it is restricted by January, March, and

April labor required for the plant bed and field work operations. The

additional cropland allowed for the extensive-type crops. Single-

cropped soybeans increased substantially and the double-crop enterprise

wheat-soybeans came in as a new activity filling up the laSt. 16.6 acres

of cropland,









As expected, more of the available.resources were used. Oper-

ating capital and operating labor during January, March and April became

limiting.


An increase in operating capital from $60,000 to $80,000 for

the 400-acre farm increased returns by $11,900,.or about 20 percent.

An increase of 71.9 acres in cropland increased returns by $5,334.

At the $100,000 level of operating capital, the intensive-type

crops, peanuts, flue-cured tobacco, and Maryland tobacco, remained at

the same level. That is, peanuts were at the allotment limit, and be-

cause MVP of its allotment was lower than its leasing cost, no expansion

of peanuts acreage was feasible. Maryland tobacco was at its upper

limit and flue-cured tobacco was at its equilibrium point of production.


The other enterprises in this plan were extensive-type crops.

Soybeans were the dominant crop with respect to acreage and its level

did not change from the former resource situation, perhaps due to the

fact that its expansion was restricted by limiting operator labor for

field work in January, April and June. Wheat and soybeans in double-

cropping activity came into this plan at an increased level, and

wheat as a single enterprise was a new enterprise. This result was

consistent with what was expected since at higher levels of cropland,

extensive-type crops should be anticipated in the solutions, provided

that no other resource limited their expansion.

This plan with increased extensive-type crops augmented the

returns by $3,672, or 5 percent above the former capital level.









In summay, the plans obtained for this farm size seem to be

reliable. It was expected that crops supported by governmental programs

would appear in the optimum solutions, and this was the case. Flue-cured

tobacco, the cash crop with greater returns per acre than any other

corp, came up in all resource situations. Its complete allotment

was utilized and it was profitable to lease about 58,000 pounds. The

second and third most profitable crops, Maryland tobacco and peanuts,

started appearing in the optimum plans at the $80,000 level.. This

occurred because these capital-intensive enterprises were competing for

operating capital with flue-cured tobacco. When capital was available,

peanuts and tobacco combined very well since they did not compete for

operator labor during peak months.


Extensive-type crops entered the optimum solutions at the

higher operating capital levels. At higher resource levels, emphasis

on these crops should occur. Single-cropped soybeans was a profitable

enterprise, and since its operator labor requirements did not compete

strongly with the labor requirements of peanuts and flue-cured tobacco

during the peak months, this enterprise entered the solutions in large

acreages when land and operating capital were available. Soybeans also

came into the plan as a second crop. Although its.yield as a second

crop was lower, its operator labor requirements came during months that

are less limiting. This allowed for double-cropped wheat to come into

the solutions. Wheat as a single crop proved to be profitable in the

last optimum plan, Although its returns per acre were low, it came to

the plan due to the fact that its labor requirements came at a time









when there was less competition for labor, Its largest operator labor

requirement was in October, when no other crop was using operator labor.

Grain sorghum, even with higher returns per acre than wheat, did not

come into the optimal solutions simply because its labor requirements

made it competitive with higher profit crops such as soybeans.


The rates of return to resource use at $80,000 seem to reflect

the best farm adjustment since higher resource levels implied declining

rates of return to resource use. This statement is corroborated with

the observations made in the next farm size situation.

Plans for the Unconstrained-Acreage Situation


For the unconstrained-acreage situation, solutions up to $80,000

of operating capital were the same as the 400-acre farm. This was due

to the fact that it was capital that first became limiting. The

$120,000 level of operating was the highest level of capital considered.


At the $100,000 level of operating capital, the enterprises

included in the optimal plan were the same as those in the 400-acre farm

size. Although the intensive-type crops remained unchanged, some dif-

ferences arising from the inclusion of custom harvest in the extensive-

type crops were relevant to this solution.

Soybeans remained at 236 acres, but 47 acres were custom

harvested. The resulting reduction in operator labor during harvest

time was transferred to wheat, which increased to 156 acres. Soybeans

also were produced as a second crop after wheat, and 40 acres out of

65 acres were custom' harvested,









Operator labor was a most prominent factor in this plan since

it was the limiting resource during six critical months. Operating

capital was also limiting; however, its low MVP (.04) suggested that

any increase in this resource was not advisable simply because its op-

portunity cost, as given by the market interest rate (9.5 percent), was

much higher than its present marginal contribution to returns.

When comparing this solution with the corresponding one at 400-

acre size, it could be seen that the relatively small increase in re-

turns ($1,000) did not justify the associated increases in resource use.

This situation of low returns to additional resources arose from

operator labor being limited in critical months to most enterprises.

At the $120,000 level of operating capital, the solution was

very similar to that at the $100,000 level, -More acreage in extensive-

type crops was transferred to custom harvest operations, a larger

acreage of wheat was produced, more cropland was used and operator labor

became limiting during a seventh month. The rate of return on additional

resources was extremely low since the returns were increased by only

$178.

The fact that operator labor was limiting for seven months,

even though total operator labor was not exhausted, reflects what seems

to be the limits for a one-man farm operation in handling resources other

than labor, under the conditions specified in the model.


In summary, the additional use of resources implied in the uncon-

strained solutions seems not to be profitable in view of the small in-

crease in returns to additional cropland and operating capital.









Optimum Plans Excluding Tobacco Enterprises


The enterprise combination in this section of the.analysis in-

cluded peanuts as the allotment crop and excluded both flue-cured tobacco

and Maryland tobacco. A total of six crops were considered as enter-

prises. The optimum plans here were designed for those areas where

tobacco is not suitable for cropping, or for areas like District II

where the production of peanuts accounted for 75 percent of the area's

crop production in 1973. Table 9 shows the optimum programs obtained

for each of the cropland and operating capital situations included in

the analysis.

250-Acre Crop Farm


At the $40,000 and $60,000 levels of operating capital the only

enterprises included in the optimum solutions were peanuts and soybeans.

They exhausted the cropland and operating capital available.


At the level of $40,000, operating capital restricted peanut

acreage to 69.8 acres and soybeans exhausted the remaining cropland.

About 56 acres of peanut allotment were leased. The MVP for peanut allot-

ment at this point suggests that an expansion in peanut production could

be profitable if more operating capital were available. In fact, that

was also the case when an additional $20,000 of operating capital was

available. Peanuts went up to its upper limit allowed in the model.

This result was expected due to the higher profitability of peanuts over

soybeans. These two enterprises seem to combine very well as they ef-















Table 9.--Optimum plans for alternative levels of cropland and operating capital on North and Wcst Florida farms:


15 a| rc 250 acres __ 00 acres
It,0 Unit -O $0,00 -0.000 S601000 80,-000
;0,0300 i60,C00 i 40.00 560,000 80 ,000


Plans excluding tobacco


Unconstrained acreage
$80,000 $100,000


CROPS

Peanuts

Corn (non-irrigated)

Wnr.aat

Sonbeans

Wheat-soybeans

LI!ITISN RESOURCES 2/

LaLtr: January

March

April

May

june

October

November

Alloticr.t: Peanut

troplarna

Operating Capital


RETURNS


Acres


180.2


2?.9


331.2


93.9

37.2


267.2


93.9

38.9


267.2


Hours


234(0)


234(0)


234(0)


26C(42.1) 250(54) 260(3..9)


Acres


lease lease
(91) 55.9 (186.6) 80.0


250(30.3) 250(76.5)

Dollars 'O,C000.52) 45,930


Dollars


27,439


31,533


(9 se


361.1

4,00 n(.52)

o-0,8C8


loose 1. .-6ase


,0o.3 G40(1f. 5)

60,000(.43) 60,197


40,835


40,919


93.9

128.1

37.9*
193.9

53.9*


93.9

213.6

150.9*

28-4.4*
124.4*


234(37.5)

234(37.5)

260(41.7)


260(7.0)
( .6 %ease


557.6

80,o000.05)


208(13.8)

234(36.6)

234(3G.C)

260(47.6)

234(3.8)

260(11.0)

(159

650.7

98,310


*The asterisk indicates the acreage to be custom. harvested, Otherwise harvesting is performed using own harvestir.ng machinery.
1'At this farm size, solutions for $40,003 and 560,000 are the same as those 0t 400 acres of size.
Figures within parenthesis represent the MVP of limiting resources.


43,320


I


---------------- -- --------


- I -- --.-I




78


ficiently share the use of.operator labor, a resource that did not

become limiting,


The value of the program at the $40,000 level was $27,439 in-

dicating the high profitability of this plan. The optimum solution for

$60,000 of operating capital (although only $45,930 was used) increased

returns to $30,533, an increase of 11 percent. This solution resulted

in an increase of $3,094 in returns as a result of an increase of $5,930

in operating capital.

In brief, when tobacco was excluded, peanuts took its place and

came in strong in both solutions. It competed successfully with soybeans

in the use of resources, especially operating capital. In this farm

situation, expansion in size seems highly profitable.

400-Acre Crop Farm


In this farm size, the usage of operating capital varied from

$40,000 to $80,000 and, consequently, three different optimum plans are

presented.


At the $40,000 level of operating capital the optimal combination

of enterprises was the same as in the 250-acre farm size. However, since

more cropland was available and peanuts used more operating capital per

acre, soybeans came in stronger and dominated the solution with 331 acres.


If these results are compared to the corresponding ones in the

preceding farm size, this implied a strong substitution of peanuts for




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