Citation
Minimum resource requirements for specified levels of income on crop-livestock farms in the Sinu River Valley of Colombia

Material Information

Title:
Minimum resource requirements for specified levels of income on crop-livestock farms in the Sinu River Valley of Colombia
Creator:
Meyer, Neil L. ( Dissertant )
Eddleman, B. R. ( Thesis advisor )
McPherson, W.W. (Woodrow Wilson) ( Reviewer )
Polopolus, Leo ( Reviewer )
Geithman, David ( Reviewer )
Place of Publication:
Gainesville, Fla.
Publisher:
University of Florida
Publication Date:
Copyright Date:
1969
Language:
English
Physical Description:
168 leaves : ill. ; 28 cm.

Subjects

Subjects / Keywords:
Agricultural land ( jstor )
Capital income ( jstor )
Cotton ( jstor )
Crops ( jstor )
Farms ( jstor )
Income level ( jstor )
Land use ( jstor )
Livestock ( jstor )
Pastures ( jstor )
Valleys ( jstor )
Agriculture -- Colombia ( lcsh )
Agriculture -- Economic aspects -- Colombia ( lcsh )
Genre:
bibliography ( marcgt )
non-fiction ( marcgt )

Notes

Abstract:
Abbreviated introduction: Colombian peasant population is applying pressure for changes on the agrarian sector. These changes affect economic, political, social, and equalitarian rights (18, p. 3). Historically, the traditional agrarian sector has denied the peasant the essential opportunity for gaining social, political, and economic rights and privileges. For the peasant, agrarian reform affords opportunities which enhance his social and political status as well as help him to realize his economic aspirations.
Thesis:
Thesis (M.S. in Agr.)--University of Florida, 1969.
Bibliography:
Includes bibliographical references (leaves 165-166).
General Note:
Typescript.
General Note:
Vita.
Funding:
Electronic resources created as part of a prototype UF Institutional Repository and Faculty Papers project by the University of Florida.
Statement of Responsibility:
by Neil Larry Meyer.

Record Information

Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
The University of Florida George A. Smathers Libraries respect the intellectual property rights of others and do not claim any copyright interest in this item. This item may be protected by copyright but is made available here under a claim of fair use (17 U.S.C. §107) for non-profit research and educational purposes. Users of this work have responsibility for determining copyright status prior to reusing, publishing or reproducing this item for purposes other than what is allowed by fair use or other copyright exemptions. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder. The Smathers Libraries would like to learn more about this item and invite individuals or organizations to contact Digital Services (UFDC@uflib.ufl.edu) with any additional information they can provide.
Resource Identifier:
000401604 ( ALEPH )
37700368 ( OCLC )
ACE7454 ( NOTIS )

Full Text
MINIMUM RESOURCE REQUIREMENTS FOR SPECIFIED LEVELS OF INCOME ON CROP-LIVESTOCK FARMS IN
THE SINU RIVER VALLEY OF COLOMBIA
By
NEIL LARRY MEYER
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 IN AGRICULTURE
UNIVERSITY OF FLORIDA 1969




Abstract of Thesis Presented to the Graduate Council in Partial
Fulfillment of the Requirements for the Degree of Master of Science in Agriculture
MINIMUM RESOURCE REQUIREMENTS FOR SPECIFIED LEVELS OF
INCOME ON CROP-LIVESTOCK FARM4 IN THE SINU RIVER VALLEY OF COLOMBIA
By
Neil Larry Meyer
December, 1969
Chairman: Dr. B. R. Eddleman
Major Department: Agricultural Economics
The objective of this study was to determine the enterprise organization and the magnitude of resource levels needed under alternative conditions to obtain specified levels of income to crop-livestock producers in the INCORA Cordoba 11 project area of Colombia. Effects of variations in crop and livestock yields, product and factor prices, and land quality on minimum quantities of land for obtaining specified income levels were determined., The organization of crop and livestock activities remained relatively stable over all ranges of yield and land quality variables. The minimum land requirements, as well as the requirements of operating capital and labor varied inversely with yield levels and with the prices of rice and cotton. Operating capital and land requirements varied inversely with land quality; labor varied directly. Land and labor requirements increased with rising interest rates; operating capital requirements decreased but only slightly. Increases in hired labor wages slightly increased operating capital and total labor requirements; the quantity of labor hired decreased and farm size was unaffected.




4
This thesis is dedicated with love to my mother and father (Helen and Orville Meyer), for their understanding, encouragement and personal sacrifices in making all of my studies possible.




ACKNOWLEDGMENTS
The author wishes to express sincere appreciation to Dr. B. R. Eddleman, Chairman of the Supervisory Committee, for his guidance, contributions, patience, and encouragement throughout all phases of this research.
Thanks are also due to Dr. W. W. McPherson, Dr. Leo Polopolus,
and Dr. David Geithman for reviewing the manuscript and offering helpful assistance.
An expression of appreciation is due to Dr. Hugh Popenoe and the Center for Tropical Agriculture for their financial assistance. The assistance of the University of Florida's Computing Center is recognized and appreciated.
The author is grateful for indispensable assistance given by the staff members of the INCORA, in particular Mr. Jorge Villamizar, and by the staff members of other public agencies in the Department of Cordoba.
The assistance given to the author by Dr. Peter Hildebrand is sincerely appreciated.
Appreciation is also extended to Miss Claire Kurtgis, Mrs. Sherri Smith, and Mrs. Robin Lowe for assistance on the preliminary drafts, and to Mrs. Barbara Altieri for typing the final manuscript.
iii




TABLE OF CONTENTS
ACYINOWLEDGMENTS ............. ...........
LIST OF TABLES ......................... ...i
LIST OF FIGURES ,. ....... ...... .. .,. .. .... xiii
I. INTRODU TIO.. N.. . . . .,. .. ... 1
Objective .. ........................... .. .. .....5
Previous Research.......................6
Description of the Study Area .. .. .. . . 8
TI. CONCEPTUAL MODEI .. .......................15
Decision Environment. ....................15
Technical Environment ....................17
Economic Environme.t.. .. .. .. .. .,. . 17
Alternative Conceptual Models .. .. . .. .. 19
Basic Minimum Resource Model. ...............19
Minimum Resource Model. with Variable Yields or
Product Prices. ....................22
Variable Land Quality Model ................24
Summary of Conceptual Models................26
III. METHOD AND RESEARCH PROCEDURE . . .,,. .. .. 27
Linear Programming Model ... .................27
Operational Problems. ....................28
Resource to be Minimized 29
Definition of LandResource Base . .. ,.. 30
Technology, Management and Input-Output Data .. 31
Resource Restrictions 32
Production Alternatives ,. .. .. .. 34
Prices and Costs .,..,..,.. . .,. . ,.. 34
Institutional Restraints.................35
Resource Requirements per 1,000 Pesos of Net Revenue. 37
iv




Paize
IV. THE EFFECTS OF VARIATIONS IN YIELDS ON MINIMUM RESOURCE REQUIREMENTS 42
Basic Solutions 44
15,000 Peso Income 45
25,000 Peso Income 47
Summary of Variable Yield Results . . . . . 49
Eff ects of Yields on Farm Organization . . . 49 Effects of Yields on Land Requirements . . . 50 Effects of Yields on Capital Requirements . . . 50 Effects of Yields on Labor Requirements . . o 52
Implications of Yields for Farm Size Planning
Decisions 53
Area Implications of Yield Variations . ... . . 56
V. THE EFFECTS OF DIFFERENCES IN LAND QUALITY ON MINIMUM
RESOURCE REQUIREMENTS . . . . . . . . 59
Summary of Variable Land Quality-Results . . . 59
Effects of Land Quality on Farm Organization . . 60 Effects of Land Quality on Land Requirements . . 60 Effects of Land Quality on Capital Requirements. . 62 Effects of Land Quality on Labor Requirements . . 63
Implications for Farm Management and Area Policy
Decisions 64
VI. THE EFFECTS OF PRICE CHANGES ON MINIMUM RESOURCE
REQUIREMENTS 66
Effects of Increases in Interest Rates . . . . 66 Effects of Increases in Hired Wage Rates . . . 67 Effects of Reductions in the Price of Cotton . . 71 Effects of Reductions in the Price of Rice . . . 72
VII. SUMMARY AND CONCLUSIONS . . . . . . . . 77
Results 78
Summary of Yield Results . . . . . . . 82
Summary of Land Quality Results . . . . . 83
Summary of Interest Rate Increases . . . . 83 Summary of Hired Wage Rate Increases . . . . 84 Summary of Decreases in Cotton Revenues . . . 85 Summary of Decreases in Rice Revenues . . . . 85
v




implications for Farm Adjustments ........... 86
Implications for Area Adjustments. .. ...........87
Need for Further Study. .. ................88
APPENDICES
A. General Input and Output Data for Enterprise Budegets. 89
B. Crop and Livestock Enterprise Budgets .. ..... .....102
C. Farm Organizations and Resource Requirements for Three
Land Qualities and Three Yield Levels .. .... .....136
D. Farm Organizations and Resource Requirements for Two
Income Levels with Varying Costs of Capital and
Labor and Varying Prices of Cotton and Rice .. .. ....156
BIBLIOGRAPHY .. ............... ...........165
BIOGRAPHICAL SKETCH. .. ................ ......167
vi




LIST OF TABLES
Table Page
3.1 Resource requirements per 1,000 pesos of net return, selected crop enterprises--INCORA Cordoba II Project,
Sinu River Valley, Colombia .... ............... ... 38
3.2 Resource requirements per 1,000 pesos of net return, selected livestock enterprises--INCORA Cordoba II
Project, Sinu River Valley, Colombia ... .......... 40
4.1 Resource requirements to obtain specified operator and family incomes with high, average, and low yields,
average land quality--INCORA Cordoba II Project, Sinu
River Valley, Colombia ..... ................. 51
4.2 Effect of high, average, and low yields on numbers of farms and area net farm income for specified income
levels--INCORA Cordoba II Project, Sinu River Valley,
Colombia .......... ........................ 57
5.1 Resource requirements to obtain specified operator and family incomes with good, average, and poor land,
average yield levels--INCORA Cordoba II Project, Sinu
River Valley, Colombia ..... ................ 61
6.1 Resource requirements for a 15,000 and 25,000 peso net income, alternative levels of interest rates and average
land quality--INCORA Cordoba II Project, Sinu River
Valley, Colombia ....... .................... 68
6.2 Resource requirements for a 15,000 and 25,000 peso net income, alternative wage rates and average land
quality--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ 70
6.3 Resource requirements for a 15,000 and 25,000 peso net income, variable cotton prices and average land quality-INCORA Cordoba II Project, Sinu River Valley, Colombia 73
6.4 Resource requirements for a 15,000 and 25,000 peso net income, variable rice prices and average land quality-INCORA Cordoba II Project, Sinu River Valley, Colombia 75
7.1 Summary of resource requirements to obtain various levels of net income for alternative yield levels and land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ....... ................. . .. 79
vii




LIST OF TABLES (Continued)
Table Page
7.2 Summary of resource requirements to obtain a 15,000 and 25,000 peso net income for average land, average yields, variable interest rates, variable wage rates,
variable cotton prices, and variable rice prices-INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ 80
A.1 Product and input prices used in preparing crop and livestock enterprise budgets--INCORA Cordoba II Project,
Sinu River Valley, Colombia .... ............... ... 90
A.2 Estimated total man-days of labor available by months-INCORA Cordoba II Project, Sinu River Valley, Colombia 96
A.3 Total investment, salvage value, expected life, and
estimated costs per hour for machinery .......... .. 99
A.4 Estimated total machine days and machine hours available
by months and periods--INCORA Cordoba II Project, Sinu
River Valley, Colombia ...... ................. 100
A.5 Land class and valuation per hectare for good, average,
and poor quality land--INCORA Cordoba II Project, Sinu
River Valley, Colombia ...... ................. 101
A.6 Estimated per hectare costs of owning good, average, and
poor quality land--INCORA Cordoba II Project, Sinu
River Valley, Colombia ...... ................. 101
B.1 Cotton: estimated per hectare revenue, variable expenses,
labor requirements, machine hours, and net return-INCORA Cordoba II Project, Sinu River Valley, Colombia 105
B.2 Corn: estimated per hectare revenue, variable expenses,
labor requirements, machine hours, and net return-INCORA Cordoba II Project, Sinu River Valley, Colombia 107
B.3 Grain sorghum: estimated per hectare revenue, variable
expenses, labor requirements, machine hours, and net return--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ 109
B.4 Rice: estimated per hectare revenue, variable expenses,
labor requirements, machine hours, and net return-INCORA Cordoba II Project, Sinu River Valley, Colombia 111
B.5 Sesame: estimated per hectare revenue, variable expenses,
labor requirements, machine hours, and net return-INCORA Cordoba II Project, Sinu River Valley, Colombia 113
viii




LIST OF TABLES (Continued)
Table Page
B.6 Soybeans: estimated per hectare revenue, variable expenses, labor requirements, machine hours, and net return--INCORA Cordoba II, Sinu River Valley,
Colombia . ........ ..................... 115
B.7 Man-day labor requirements per hectare for crop enterprises by months--INCORA Cordoba II Project, Sinu River
Valley, Colombia ....... .................... 117
B.8 Machine-hour requirements per hectare for crop enterprises by months--INCORA Cordoba II Project, Sinu River
Valley, Colombia ....... .................... 118
B.9 Para pasture: estimated per hectare forage production,
variable expenses, and labor requirements--INCORA
Cordoba II Project, Sinu River Valley, Colombia. . . 121
B.10 Beef cattle: estimated revenue, variable expenses, and
net return for a 100 cow herd under traditional management--INCORA Cordoba II Project, Sinu River Valley,
Colombia .... .............. .. ............ 128
B.11 Beef cattle: estimated revenue, variable expenses, and
net return for a 100 cow herd under improved management--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ 130
B.12 Beef cattle: estimated revenue, variable expenses, and
net return for a 100 cow herd under best management-INCORA Cordoba II Project, Sinu River Valley, Colombia 132
B.13 Beef bull fattening: estimated revenue, variable
expenses, and net return per head--INCORA Cordoba II
Project, Sinu River Valley, Colombia ... .......... 134
B.14 Estimated man-day labor requirements for Para pasture
production, beef production (cow unit), and beef bull
fattening--INCORA Cordoba II Project, Sinu River
Valley, Colombia . .. . . . . . .. . 135
C.1 Resource requirements and enterprise organization for a 15,000 peso income, high yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ 137
C.2 Resource requirements and enterprise Organization for a 25,000 peso income, high yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ 138
ix




LIST OF TABLES (Continued)
Table
C.3 Resource requirements and enterprise organization for a 35,000 peso income, high yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ....................... ....139
C.4 Resource requirements and enterprise organization for a 45,000 peso income, high yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ ... 140
C.5 Resource requirements and enterprise organization for a 15,000 peso income, average yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia . ........... ............... ... 141
C.6 Resource requirements and enterprise organization for a 25,000 peso income, average yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ ... 142
C.7 Resource requirements and enterprise organization for a 35,000 peso income, average yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia .......... ...................... ... 143
C.8 Resource requirements and enterprise organization for a 45,000 peso income, average yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ ... 144
C.9 Resource requirements and enterprise organization for a 15,000 peso income, low yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia .......... ...................... ... 145
C.10 Resource requirements and enterprise organization for a
25,000 peso income, low yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia . . . . . . . . . . 146
C.11 Resource requirements and enterprise organization for a
35,000 peso income, low yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ....................... ... 147
C.12 Resource requirements and enterprise organization for a
45,000 peso income, low yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ........................ ... 148
x




LIST OF TABLES (Continued)
'able Page
C.13 Resource requirements to obtain alternative income
levels with good, average, and poor land; high,
average, and low yields--INCORA Cordoba II Project,
Sinu River Valley, Colombia .... ............... ... 149
C.14 Resource requirements and enterprise organization considering all crops and only fattening beef bulls for a
15,000 peso income, average yields and specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ......... ...... ................ 150
C.15 Resource requirements and enterprise organization considering all crops and only fattening beef bulls for a
25,000 peso income, average yields and specified land qualities--INCORA Cordoba Project, Sinu River Valley,
Colombia .... .............................. 151
C.16 Resource requirements and enterprise organization considering only semi-mechanized cotton, semi-mechanized
rice, improved managed pasture, and fattening beef bulls
for a 15,000 peso income, average yields and specified
land qualities--INCORA Cordoba II Project, Sinu River
Valley, Colombia ....... .................... 152
C.17 Resource requirements and enterprise organization considering only semi-mechanized cotton, semi-mechanized
rice, improved managed pasture, and fattening beef bulls
for a 25,000 peso income, average yields and specified
land qualities--INCORA Cordoba II Project, Sinu River
Valley, Colombia .................... 153
C.18 Resource requirements and enterprise organization considering only semi-mechanized cotton, mechanized rice, improved managed pasture, and fattening beef bulls for a 15,000 peso income, average yieldsand specified land
qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia ... ................ .............. 154
C.19 Resource requirements and enterprise organization considering only semi-mechanized cotton, mechanized rice, improved managed pasture, and fattening beef bulls for
a 25,000 peso income, average yields and specified land qualities--INCORA Cordoba II Project, Sinu River Valley,
Colombia . . . . . . . . . . . . 155
D.1 Resource requirements and enterprise organization for a 15,000 peso income, average quality land with average
yields and variable interest rates on operating
capital--INCORA Cordoba II Project, Sinu River Valley,
Colombia ........ ....................... .. 157
xi




LIST OF TABLES (Continued)
Table Pae
D.2 Resource requirements and enterprise organization for a
25,000 peso income, average quality land with average
yields and variable interest rates on operating
capital--INCORA Cordoba II Project, Sinu River Valley,
Colombia . . . . . . . . . . . . 158
D.3 Resource requirements and enterprise organization for a
15,000 peso income, average quality land with average
yields and variable costs of hired labor--INCORA
Cordoba II Project, Sinu River Valley, Colombia. 159
D.4 Resource requirements and enterprise organization for a
25,000 peso income, average quality land with average
yields and variable costs of hired labor--INCORA
Cordoba II Project, Sinu River Valley, Colombia ........ 160
D.5 Resource requirements and enterprise organization for a
15,000 peso income, average quality land with average
yields and variable prices of cotton--INCORA Cordoba II
Project, Sinu River Valley, Colombia .. ......... ... 161
D.6 Resource requirements and enterprise organization for a
25,000 peso income, average quality land with average
yields and variable prices of cotton--INCORA Cordoba II
Project, Sinu River Valley, Colombia ........... 162
D.7 Resource requirements and enterprise organization for a
15,000 peso income, average quality land with average yields and variable prices of rice--INCORA Cordoba II
Project, Sinu River Valley, Colombia ... .......... ... 163
D.8 Resource requirements and enterprise organization for a
25,000 peso income, average quality land with average yields and variable prices of rice--INCORA Cordoba II
Project, Sinu River Valley, Colombia .......... 164
xii




LIST OF FIGURES
Figure Page
1.1 Colombia and the Sinu River Valley. ..............10
1.2 Project map of Cordoba II. ..................11
2.1 Theoretical production function .. ...............18
2.2 Theoretical basic minimum resource model for specified
income levels. ......................20
2.3 Theoretical minimum resource model showing effects of
variable yields or product prices on farm size . .. 23
2.4 Theoretical. minimum resource model showing effects of
different land qualities on farm. size .. ..........25
4.1 Hectares of land required to obtain specified net
income levels with high, average and low yields
on average quality land ..... . .. 55
xiii




CHAPTER I
INTRODUCTION
Colombian peasant population is applying pressure for changes on the agrarian sector. These changes affect economic, political, social, and equalitarian rights (18, p. 3). Historically, the traditional agrarian sector has denied the peasant the essential opportunity for gaining social, political, and economic rights and privileges. For the peasant, agrarian reform affords opportunities which enhance his social and political status as well as help him to realize his economic aspirations.
Land is primarily equivalent to economic opportunity in agriculture. Economic opportunity with respect to land has three dimensions: production opportunity, or the right to use land as the operator sees .fit; market opportunity, or the right to dispose of the products of the land; and credit opportunity, or the right of access to the opportunity to purchase adequate factors of production (15, p. 9). Therefore, land ownership and its use is only meaningful for enhancing the economic well-being of peasants when credit, technical assistance, transportation, and market facilities are made available. These are some of the factors required to break the traditional equilibrium and give peasants the economic means to participate actively in the economy of Colombia.
Modern agrarian reform was accepted in Colombia when Congress passed Law 135 in 1961. The objectives of the legislation are stated
1




2
in the following translation of Chapter I of the law:
(a) To reform the agrarian social structure through procedures designed to eliminate and prevent the inequitable concentration of property in land or its subdivision into uneconomic units; to reconstitute
adequate units of cultivation in the zones of
minifundia (small peasant farms) and to provide lands
to those who lack them, with preference being given to those who will utilize them directly through the
use of their own personal labor.
(b) To promote the adequate economic use of unused or
deficiently used land, by means of programs designed
to secure their well-balanced distribution and
rational utilization.
(c) To increase the total volume of agriculture and livestock products in harmony with the development of other sectors of the economy; to increase the productivity of the farms by the application of appropriate techniques; and to endeavor to have the lands
used in the way that is best suited to their locations
and characteristics.
(d) To create the conditions under which the small tenants
and sharecroppers shall enjoy greater guarantees, and
they, as well as the wage hands, shall have less difficult access to land ownership.
(e) To elevate the level of living of the rural population,
as a consequence of the measures already indicated and also through the coordination and promotion of services
related to technical assistance, agricultural credit,
housing, the organization of markets, health and social
security, the storage and preservation of products,
and the promotion of cooperatives.
(f) To insure the conservation, defense, improvement, and
adequate utilization of the natural resources (19,
pp. 253-254).
The Colombian government organized the Instituto Colombiano de
la Reforma Agraria (INCORA) to carry out the objectives of its agrarian
reform law. INCORA directs agrarian reform toward the kind of agrarian
structure outlined in the law's objectives.
In accordance with the agrarian reform law, INCORA has undertaken the Cordoba II Project in the Sinu River Valley. Cordoba II is a




3
land parcelization project directed to the draining of low moist pasture land and transforming it into highly productive arable land. Future plans include an irrigation system to permit cultivation throughout the year. This study considered only the drainage aspects of the project on farm resource requirements because INCORA has undertaken some redistribution of land before large scale irrigation work can be completed. The effects of drainage entered into the study through the assumptions concerning yield levels, land quality, and land costs. INCORA also provides peasant farmers with financial-, marketing, and technical assistance to aid in establishing and improving production.
The family agricultural units which are established consist of a plot of land large enough which, when worked under conditions of reasonable efficiency, will provide an average size family with an adequate net income. An adequate net income must provide for sustenance, payment of debts originated in the purchase and conditioning of the land, progressive improvement of the home, acquiring and maintenance of work implements, and general improvement of the living level, while utilizing the labor of the owner operator and his family. If any of these demands cannot be met out of net farm income, the farm unit will not provide an adequate economic opportunity. The units established should combine resources and enterprises as economically efficient as possible.
INCORA's stock of resources to be made available in the form of a resource bundle to the family agricultural units is fixed for any given region. The project plan drawn up for a specified region allocates these resources--land, labor, capital, etc. --in accordance with the unit size and farming system to be adopted.




4
Another major feature of establishing efficient family farm
units is that Colombia's population increase, a rate in excess of 3 percent annually in recent years, must be considered (7, p. 14). In 1960, approximately 1.5 million families were directly dependent on agriculture for employment and livelihood. Thirty-five percent of them were headed by farm operators while the remaining 65 percent belonged to the farm laborer category (19, p. 110).
INCORA's resource allocation program has become one which prov'ides the minimum resources necessary to achieve a specified level of income for each farm unit. Consequently, the maximum number of peasants is given an economic opportunity with the hope that a large enough part of the peasant population is affected to i nsure evolutionary agrarian reform. The problems*INCORA faces include determining the most efficient farm size, enterprise organization, and resource allocation for obtaining the specified levels of income per unit and providing these income earning opportunities to as many peasant farm families as possible.
The administrators and policy makers 'of INCORA in Cordoba II need information on resource requirements of farm units which is commensurate with current and prospective economic conditions of the area. The restriction on land availability within a given project area, and indirectly on farm size, is a serious limitation facing peasant operators seeking to increase farm family income. A second limitation is a dearth of capital which is needed for improvements in facilities, purchasing production inputs, and operating equipment. A third important restriction is the limited entrepreneurial experience and technical knowledge of many peasant farmers.




5
This study provides information on minimum resource requirements and the effects of increased productivity of farm crops, forages, and livestock on these requirements for obtaining given farm income levels in the Cordoba II Project area. Further, it indicates the influence of changes in farm product and factor prices, crop and livestock yields, production technology and costs and institutional structures such as capital borrowing limitations and land development policies. These factors influence the size of farm unit necessary for long-run survival and fulfillment of minimum income levels for farm operators and their families. The study also provides a framework for the analysis of resource adjustments and income effects of increased productivity in other study areas throughout Colombia.
The Sinu River Valley area was selected because of INCORA's need for information on the size of farm required to meet the specified income goals in the project area, the availability of input-output data from INCORA and the Turipana Agricultural Experiment Station within the project area, and the wide applicability of results to surrounding areas.
Object ive
The objective of this study was to determine the nature of
enterprise organization and the magnitude of resource levels needed to obtAin specified levels of income to crop-livestock producers in the area under selected sets of alternative conditions. Specifically, the objectives included the determining of the effects on enterprise combination and on the minimum amounts of land required for specified levels of income to farm operator-owned resources for conditions consisting of:




6
(a) Differences in the managerial ability of the farm
operator as expressed by crop and livestock yield
levels or yield expectations.
(b) Differences in land quality as expressed by the proportion of the productivity classes of land comprising
a representative hectare.
(c) Changes in capital structure as expressed by the
interest rate, and short, intermediate, and longterm loan limits.
(d) Changes in farm product and resource price levels or
price expectations.
Previous Research
The concept of "minimum resources for specified income levels" is relatively new in agricultural economic research. In his research, published in 1958, J. Brewster instituted the basic concepts of minimum resource research, raising the following questions which he felt could be answered by his work:
What bundle of resources is needed to enable farmers with
average ability to obtain earnings from labor and management
'similar to the median earnings of semi-skilled and skilled
workers in non-farm employment? . For various regions and types of farming systems, what bundle of resources represents the minimum size of farms and the minimum earnings that would
offer a reasonable chance for success? . What is the nature
and magnitude of the adjustments involved in raising all farms
that are now below a specified level of operator earnings up
to that level (4, p. 4)?
Brewster later discussed the methodological problems of a minimum resource study from the standpoint of the attributes of income requirements, resources to be minimized, and construction of resource situations to be considered (3).
Several empirical studies have been made to determine minimum resource requirements for specified income levels in various geographical areas of the United States. In 1957,Brewster determined the




7
minimum resources required for specified income levels in six different areas by farm types. In 1962, H. Barnhill expanded Brewster's findings to include 15 major types of farming areas; in further research in 1964, he extended it to 29 types of farming areas (2).
In 1962, P. L. Strickland determined minimum resource requirements for an area in the low rolling plains of Southwestern Oklahoma
(20). His study was based on variable hired labor prices, land prices, and soil types. In addition, it introduced the concept of owned resources (nonlabor resources owned by the operator)-into minimum resource studies.
J. S. Plaxico and J. W. Goodwin in 196, compared the minimum resources needed to obtain the equivalent of an average factory wage for three areas of the South (16). Their work was researched under alternative assumptions with respect to product prices and institutional restrictions.
In 1962, A. P. Varley and G. S. Tolley pointed out what the aggregate effects on input prices might be within an area if resource adjustments were made (21). They found that prices of factors fixed to the area, such as land, will change as adjustments are made. The minimum resource model under varying land prices approaches the profit maximization model--or economic equilibrium--under these conditions.
In 1964, L. J. Conner further developed the analytical approach suggested by Varley and Tolley and'applied this method to a minimum resource study of the Oklahoma Panhandle (6). Connor's study extended the owned resource concept as an adjustment criterion under different yields, land prices, and soil resource conditions.




8
In 1967, W. A. Halbrook used the theoretical framework developed by Varley and Tolley and the operational model developed by Connor to determine minimum resource requirements and adjustment alternatives for livestock producers on the eastern prairies of Oklahoma (12). Halbrook considered the impact of off-farm employment, yield levels, owner equity levels, and land quality on minimum land requirements for specified levels of income to operator-owned resources.
The theoretical framework developed by Varley and Tolley and the operational model developed by Connor and extended by Halbrook were used in achieving the objectives of this study. This approach was consistent with meeting the informational requirements of INCORA; furthermore, it was compatible with the conditions faced by many farm producers in Colombia.
In his study of Colombian minifundistas (small peasant farmers) in 1969, Grunig found that peasants, when provided with access to resources, markets, and education, will develop their entrepreneurial abilities (11). Assuming INCORA participants have adequate land resources, the prerequisites for improving peasant conditions are: an intensive crop, a stable market, and relevant technical assistance. Grunig ascertained that improved transportation and credit are significantly useful to the peasants in later stages of entrepreneurial development.
Description of the Study Area
The Department of Cordoba is located in the northwestern part of Colombia and is part of the Caribbean Coastal Plain (Fig. 1.1). The northwestern part of the Department constitutes the lower Sinu River Valley flood plain.




9
The Department is bordered on the west by the Gulf of Turbo, on the southwest by the Abide Ridge, on the east by the Ayapel Ridge, and on the north by the Caribbean Sea. The San Jeronimo Ridge divides the Department with the San Jorge River Valley to the east and the Sinu River Valley to the west.
The lower Sinu Valley, where the Cordoba II project is located, is between the Abide and San Jeronimo Ridges. The Valley has a width of approximately 18 kilometers and has an elevation of about 15 meters above sea level (5, p. 3) It is a typical alluvial plain, slightly sloping away from the Sinu River toward the east and toward the Betanci Ravine. Before drainage work began, at least 60 percent of the area flooded at least once a year (5, p. 1). This flooding brought accompanying sedimentation which formed high fertility soils appropriate for various tropical cultures. These lands have produced the lush green forage which, in turn, provides a basis for the prominent livestock industry of the area. I
The valley is level butbecause of sedimentation along the river bank, there is a very gentle slope away from the river. This is the reason a large part of the valley is flooded during the wet (winter) season. The area has a large variety of poorly drained soils located over fine or medium grain sand. The surface soils consist of fine silt or clay, especially in the zones subject to flooding. The land in the project area has less than a 3 percent slope (7, p. 3).
The total project area of 70,000 hectares is boijnded o.n the west by the Sinu River, on the south by Monteria, on the southeast and east by the San Jeronimo collector canal, and on the north by the Cienaga Grande (Fig. 1.2). This study refers to the drainage aspects of the




/1
ATLANTIC / Area
GULF OF MEXICO/ Studie
OCEAN /
/er
Sinu
/River
Valley
//
Cartagena
MonRtrver
Venezuela
Colombia
PACIFIC OCEAN
Source: Adapted from (13, p. 15). Figure l.l.--Colombia and the Sinu River Valley.




L A kC A
PLA GEERL E6)
Canal* Coetr iu
AECUaC; It 20 0.000 S. Suce:VENCIONS AdMO o.T~teri/
Sogurce:TCA (1.--roet mof ordoba Ia.




12
7,000 hectares that comprise the first phase; it also has wider implications for the total project and other similar areas.
The soils in the project area have similar chemical and physical characteristics. The textures vary generally from medium-light to I I heavy, with medium subsoils occasionally interspersed with total horizons of heavy soils. The permeability is moderately rapid in the light and medium textured soils to very slow in the heavy textured soils. The average pH is slightly above 7.0 with the exchange capacity varying from medium io h't.gh, depending on the clay content of the soil.
The region alternates between two contrasting rainfall patterns. In the dry months, December through March, rainfall ranges from 10.4 mm. to 36.9 mm. per month, with an average of 23.0 mm. During the high rainfall period, April through November, the monthly precipitation varies from 91.8 mm. to 169.1 mm. per month, with an average of 124.3 mm. The annual average rainfall is 1201.7 mm., with a range from 867.5 mm. to 1620.5 mm., based on 13 years of records from the Turipana Experiment Station. A study of the rainfall pattern affords a clearer picture of the water distribution problem. Because it is a tropical area, great amounts of rainfall are not uncommon; in a single month, as much as 350 mm. has been known to fall, which is over 25 percent of the average annual rainfall (5, p. 5).
The area has been mainly a livestock producing area because of the low elevation, long intense wet season, and the periodic flooding of the Valley. In the flood free and the newly drained areas, many crops are presently grown; more significant, however, is the fact that more crops can be grown commercially.




13
The annual average temperature of the lower Sinu Valley is
27.50 C., with an average maximum of 34.00 C. and an average minimum of 22.00 C. (13, p. 35). Throughout the wet (winter) season, the humidity is in excess of 80 percent. Several months during the dry (summer) period, winds blow from the northeast causing the temperature and humidity to drop slightly. Normally in this area there is a brief secondary dry season in July or August called the Veranillo de San Juan, permitting harvesting and replanting when a double cropping system is employed.
Air transportation to the area is available both to passengers
and to cargo from Berastegui Airport located within the project boundary. Flights from Berastegui connect to Medellin, Cartagena, and Barranquilla, from which further connections can be made to all parts of the country. Aerotaxis fly between municipalities of the Department.
River transport is possible for boats up to 200 tons throughout the year to Lorica, but it is limited to approximately six months (September-February) for those traveling to Monteria. Navigation from the Sinu passes into the Gulf of Morrosquillo and follows the coast to Cartagena, an important commercial and industrial center.
Monteria, Cerete, and the project area are connected with Cartagena and Medellin by all-weather roads. Trucks are presently the most important means of product transport. Cargos of cattle, cotton fiber, rice, and corn are shipped to Medellin. Return hauls include textiles, machinery, and processed food products. The cargos to Cartagena and intermediate points are oil and oil seed, as well as some grains, such as rice and corn. Return trip cargo consists of processed foods, beer, other finished products, and livestock to be fattened.




14
Buses and taxis provide communication between all the rural
villages and the municipalities of the area. In addition to all-weather roads between the major municipalities of the lower Sinu, INCORA is improving existing roads and constructing new farm-to-market roads within the projected area.
Agricultural production is transported from the field storage
area to commercial or government storing and processing depots by hired truck or farm tractor and wagon. In the field, transport is provided by man, burro, horse, and tractor and wagon. Human and-animal portage are common methods of bringing production to the home as well as transporting workers between home and the farm plots.
The majority of the marketing and primary processing of agricultural products is carried out in Monteria, the Department capitol and its largest city, and in Gerete, the second largest city and most important marketing center. Some elementary exchange and processing is completed in smaller municipalities. Products not processed or consumed locally are transported to industrial centers such as Medellin and Cartagena.
The Cotton Growers Association, INCORA, Rice Producers Association, and numerous private businesses provide production inputs and buy, store, process, and distribute production locally or transfer it to other regions and nations.




CHAPTER 11
CONCEPTUAL MODEL
This chapter describes the decision environment and the economic environment in which the study was made. It also explains the theoretical concepts of the minimum resource model. Considering land as the resource to be minimized, the effects of yields, lana quality, prices, and institutional restrictions to capital borrowing on minimum land requirements for given farm income levels are evaluated.
Decision Environment
By specifying the decision environment, many extraneous variables and certain levels of exogenous variables can be specified so that the effects of the variables of interest to the study may be analyzed. The components of the decision environment are: (a) the objectives of decision makers, (b) the technical production relationships, and (c) the economic relationships. Assumptions were, therefore, made about the components in order to analyze the effects of the variables of interest.
The objective assumed for this study was that peasants and their families are interested in at least a minimum income level from the resources they command, and that they are motivated to change when incomes fall below this minimum. This objective was consistent with the goals of INCORA in the establishment of family agricultural units. Only in the special case where the minimum income is equal to maximum profit would this objective correspond to the traditional economic objective 15




16
of profit maximization. Some economists have questioned whether farm producers actually do maximize profits and whether profits are the relevant criteria on which decisions are made. These questions are especially relevant to agricultural decisions in Colombia since studies have found little support for the profit maximizing motive among traditional farmers (10). Rather, it has been hypothesized that this large group of farmers in Colombia seeks a minimum adequate level of income with a minimum use of capital, not considering that invested in land.
The satisfactory income level is not the same for all peasant
farmers. The needs and wants of the farmer and his family determine the acceptable income level. The quantity and quality of resources determine the attainable income level. In this stud y, four income levels were specified: a 15,000 peso income ($900 U.S.), a 25,000 peso income ($1,500 U.S.), a 35,000 peso income ($2,100 U.S.), and a 45,000 peso income ($2,700 U.S.). These incomes represent different levels of operator aspirations. The higher levels represented the possible effects of anticipated inflation of future years on resources required to maintain a constant purchasing power for the farm operator. The two highest income levels also reflected the opportunity cost of farming for they were comparable to earnings from Colombian industrial employments.
The terms income, specified income, minimum income, and income levels are used throughout this report. Income herein is defined to mean the total net income of the peasant and his family, derived from all farm sources. The income may represent a return to peasant and family labor only, or to labor plus other owned resources. The only restriction was that the nonlabor-owned resource returns must come from the farm business.




17
Technical Environment
Production theory traditionally begins with the production function which shows the relationships between resource inputs and product outputs. This technological information can be summarized as:
Y = f (Xl,X2,...,Xn)
where Y represents physical output, and XI...Xn represent the resource inputs.
For a specific analysis, inputs are assumed to be either (a)
variable inputs, or (b) fixed inputs. The technical relationships can then be written as:
Y = f (XIX2,...,Xk:Xk+l,...,Xn)
where XI.. .Xk represent the variable resource inputs, and Xk+l.. .Xn represent given levels of specified fixed inputs.
With appropriate assumptions about divisibility and homogeneity of inputs and outputs, and diminishing returns to the variable factor, the production function in its simplest form can be represented as OA in Figure 2.1. This study specifies a single production function, OA, for the area which can be shifted to OB or OC by: (a) changing the quality of the variable input, or (b) changing the quantity of the fixed factor.
Economic Environment
The economic environment included the prices paid for resources and those received for products; it also included those assets owned by the peasants and the changes in their value over a period of time. Since the returns to the peasants were the main concern of this study, the prices were specified so that the effects of key variables could be analyzed under a variety of conditions.




18
Output
B
A
C
0
Variable input X1 /X2 ... ,Xn
Figure 2.1.--Theoretical production function.




19
All resource and product prices were assumed to be known with certainty and to be determined by a competitive market or specified by a governmental agency in the cases of product price supports. Even though this assumption may eventually be invalid in the case of land which is physically fixed, the area is small enough in terms of the production of agricultural commodities and the purchase of inputs that it may be assumed that supply and demand conditions within the area will have no effect on product and input prices. At present, however, INCORA specifies the prices of land in their buying and parcelization (selling) programs.
The reservation price (i.e., the minimum return for owned
resources that is acceptable) which the peasant places on his and the family's labor and other owned resources may vary under different assumed conditions. Depending upon the motives and objectives of the owneroperator, these reservation prices may or may not be those indicated by the competitive model.
Alternative Conceptual Models
In the study area, the decisions of peasant farmers to enter into or to remain in farming are generally made within the decision environment described above. Conceptual models are now specified to evaluate the theoretical effects of key variables on the minimum size of farm unit necessary to obtain a specified income level. Basic Minimum Resource Model
In the basic conceptual model assumed (Fig. 2.2), the revenue
curve portrays the typical pattern of diminishing returns for additional increments of land. It approximates a smooth curve by a series of




Pesos
Land, labor, management and unallocated fixed resources E Return to land, labor, management and unallocated fixed resources
y Labor, management and
unallocated fixed resources
X Unallocated fixed resources
0 LI L2 L3 L5 L4
Farm size in hectares Figure 2.2.--Theoretical basic minimum resource model for specified income levels.
0




21
linear segments with kinks toward lesser slope as different levels and combinations of enterprises enter the solution within the resource restrictions and with the increasing hectares of land. These r elationships are indicative of: (a) increases in activities that are land intensive, (b) reduction of enterprises that are land extensive, (c) indivisibilities of certain inputs, and (d) exhaustion of a certain type of input and substitution of another, with different costs such as hired labor for peasant and family labor.
The segmented revenue curve, QABODE (Fig. 2-2), represents the return to land, peasant and family labor and management, and. unallocated overhead costs from various farm sizes before land, peasant and family labor, and management costs have been deducted. All costs such as, feed, seed, interest on operating capital, fertilizer and fuel have previously been deducted from gross revenue to give OABCDE.
If OX represents fixed overhead costs, a farm size of Lwould
be required to cover fixed costs. If XY represents the specified returns for peasant and family labor and management, then OY is a fixed cost, and a farm size of L2 is required to cover fixed overhead costs plus a specified return to peasant and family labor and management. Land costs, rent or interest on investment plus taxes, are represented by the slope of line YZ. Total costs for land; peasant and family labor and management, and unallocated overhead costs are represented by the height of line YZ. A minimum farm size 'of L3 is required to cover all imputed costs of these factors.
Given the costs and returns of Figure 2.2, farm sizes larger than L3 will. provide profits. If profit maximizing were allowed by INCORA and followed by operators, before any area impact of adjustments




22
on land prices, the profit maximizing solution would be farm size L4. If profit maximizing motives were followed, land prices or rent in the area would tend to increase, thereby increasing the slope of YZ to YZ'. The minimum land required to cover all costs would then become L5, which also represents the profit maximizing size of farm after area adjustments. However, given INCORA's satisfactory income objective and its desire to establish as many farm units as possible in the project area, the size of farm may not be increased beyond size L3, at least for the duration of the project investment.
Minimum Resource Model with Variable
Yields or Product Prices
The minimum resource model with variable yields or prices includes a family of revenue curves. The segmented revenue curves OABCDE, OA'B'C'D'E', and OA"B"C"D"E" in Figure 2.3, represent the returns to land, peasant and family labor and management, and unallocated overhead costs under different price or yield levels. To obtain the specified income level, a farm size of L2 hectares would be required under average yield or price conditions. With the same land quality and under conditions of high yields or prices, a farm size of Ll hectares would be required. Under conditions of low yields or prices a farm size of L hectares would be necessary to obtain the specified income level. If the cost of land or the slope of YZ were greater than shown in Figure 2.3, no farm size could provide the specified income level with low yields or product prices. The smallest farm size which could obtain the specified income level would occur for high yield levels or product price conditions.




Pesos
Land, labor, management and Z unallocated fixed resources C' : EHigh yields or prices
B...E Average yields or prices
B11D E1Low yields or prices
Y Labor, management and
unallocated fixed resources
0
LI L2 L3
Farm size in hectares
Figure 2.3.--Theoretical minimum resource model showing effects of variable yields or product prices on farm size.




24
This same model can be used to designate the possible effects on the minimum size of farm resulting from alternative levels of factor costs, such as interest rates on capital or hiredwage rates. The only theoretical modification necessary is that the higher segmented curve (OA'B'C'D'E') represent lowest factor costs and the lower segmented
curve (OA"B"C"D"E") represent highest factor costs. Since restrictions on capital borrowing by INCORA may force operators to go into the private capital market (at substantially increased interest rates on capital funds), this model is also relevant for considering the effects of capital limitations.
Variable Land Quality Model
Variable land qualities can be analyzed employing the same basic model as variable yields and prices if OE in Figure 2.4 is defined as representing the return from average quality land, if OE' is defined as the return from good quality, and if OE" is defined as the return from poor quality land.
Land price is a function of productivity illustrated by lines YZ", YZ, and YZ' in Figure 2.4. Each increase in slope indicates an increase in the per hectare cost of land. In Figure 2.4, a farm of size L3 would be required to provide the specified return to land, peasant and family labor and management, and unallocated fixed costs when producing on poor quality land. On average quality land, a farm size of L2 is required, and on good quality land a farm size of L1 is required. Whether more or less of the different land qualities would be required to return a specified income than of the average quality land would depend upon the relative prices and productivity, even though Figure 2.4 shows decreasing quantities of land with increasing quality.




Pesos
Good land
Average land
Return to land, labor, management and unallocated fixed D resources
B C1Poor land
E Return to land, labor, management and unallocated tixed E" resources Return to land, labor, management and unallocated fixed y A'resources
Labor, management and unallocated fixed resources
0
L1 L2 L3
Farm size in hectares
Figure 2.4.--Theoretical minimum resource model showing effects of different land qualities
on farm size.




26
Summary of Conceptual Models
This chapter described the theoretical framework in which the
study was made. The basic conceptual model with its variations used in the analysis was discussed. The minimum land quantities associated with variation in prices, yields, and land quality for achieving given income levels were theoretically specified.
The decision environment considered the goals of the peasant and his family, the technical relationships of production, and the economic factors affecting farm operation. Beginning with the basic conceptual model, alterations were explained for variations in crop prices, yields, factor prices, and land quality. Conceptually, the smallest size of farm would occur under conditions of above average yields or product prices, good land quality, and lowest factor costs. The largest size of farm would occur under conditions of below average yields or product prices, poor land quality and highest factor costs. The actual size of farm that provides the specified income level may fall somewhere between these two extremes.




CHAPTER III
METHOD AND RESEARCH PROCEDURE
The purpose of this chapter is to present the analytical procedure used in the study. A discussion of the linear programming model, the problems involved in data collection, and how these problems were handled is included.
Linear Programming Model
Linear programming was used to determine the minimum resources required for a specified income to operato'. and family-owned resources. For various price, yield, capital structure and land quality situations, minimum land requirements were determined.
The linear programming technique can be used to minimize (or maximize) a criterion function subject to a set of restrictions. This technique assumes that the production process can be broken down into elementary processes or activities combining to form a set of linear relations. The components of a linear programming problem are: (a) a quantifiable objective, (b) alternative methods or processes for attaining the objectives, and (c) restrictions under which the activities must be operated (14, p. 11). The assumptions required are: (a) additivity and linearity of activities, (b) divisibility of resources and products, (c) a finite number of activities and restrictions, and
(d) single-valued expectations (14, pp. 17-18).
27




28
Given these assumptions, the necessary conditions may be expressed as follows:
(a) The objective function to minimize a resource, L, can be represented as:
Ea.X= L, with X. > 0, j=l,2,...,n
where aj is the quantity of resource required per unit of 1th product produced, Xj is the quantity of the jth product produced, and n is the number of production alternatives.
(b) The minimum income requirement is given by: EC CX > Y
where Y is the minimum specified income, and C. is the net income from producing one unit of the jth product.
(c) The resource restrictions are:
ZaijXj < Bi with i=1,2,...,m
J
where ai is the quantity of the ith input required to produce one unit of the jth product, Bi is the amount of the ith restricted input for the firm, and m is the number of restricted inputs.
Operational Problems
Within the linear programming framework, certain crucial operational and procedural decisions that are vital to the operation of the model and to the usefulness of results must be made. The alternative decisions which required specific answers for this study were:
(a) Determining which resource should be minimized.
(b) Definition of the land base and population to which
the results apply.




29.
(c) Determining which level of technology, management and
input-output data to use.
(d) Specifying the resource restrictions applicable to
the area.
(e) Determining which relevant crop and livestock production alternatives to use.
(f) Determining which prices, machinery, and overhead costs
to use.
(g) Determining the relevant institutional restraints.
These decisions point to the desired features of the operational model and the following informational requirements. Resource to be Minimized
To achieve the objectives of this.study two criterion functions were originally considered for the operational model specified. They were to minimize land and to minimize capital. Labor was not considered a resource to be minimized because previous research indicated that labor was not a significantly restrictive resource in this farming area. Restrictions of both capital and farm size were considered serious handicaps to peasants in their efforts to increase farm incomes. Consequently, for the following reasons, land was chosen as the resource to be minimized: (a) Land is a major input and accounts for a large proportion of the total capital requirements of crop and livestock activities included in this study. Therefore, minimum land and minimum capital solutions would be similar. (b) The quantity of land has absolute limits within the given geographical area, while capital does not, (c) The focal point of this study is the minimum size of farm unit required to meet specified income levels. Within the area, the pressure on fand price will be greater than on capital price because of




30
the supply situation of each. (d) After area adjustments are made, the price of land will directly affect the farm income level attainable. Definition of Land Resource Base
In cooperation with personnel from INCORA, and based on a study by Instituto Geografico Agustin Codazzi, the geographical institute, an inventory of the soil resource base was made (1, 5). This inventory included the acreage of total land and soil classification according to productivity. These land classes were related to the crop and forage enterprises capable of being produced in the area. .
The recommendations relating to land use and management are discussed in the following land classes.
Class I land is suitable for all shallow rooted crops. Soil
textures vary from light to heavy, with deep topsoil and drainage varying from medium well-drained to imperfectly drained. The production on this soil class would be limited to shallow rooted crops because of a high water table and, in some cases, a clay hard pan.
Class II land is also suitable for all shallow rooted crops.
These soils are heavy textured, with a moderately deep level topsoil and imperfectly drained. Because of excess moisture, yields are at a lower level on this class than on Class I land.
Class III land is suitable only for rice and pasture. Lower
elevation, level soils of heavy texture and poorly drained with moderately deep topsoil constitute this class. Often these lands are very high in organic matter. With proper moisture control, much of the land in this class can be transferred to one of the previously mentioned classes.




31
Class IV land is suitable for pasture only. Soils in this class are similar to those of Class III but they are very poorly drained. In addition, there is little or no possibility for moisture control.
Technology, Management and Input-Output Data
It was difficult to separate the effects of management and technology since shifts in the production function may be caused by either. The effects may take the form of increased yields, reduced costs, or both. Based on the analysis of producer experiences, government extension workers' experiences and recommendations, personal field surveys, and experimental results at the Instituto Colombiano Agropecuario (ICA), Turipana Experiment Station, input-output coefficients for crop and livestock enterprises were developed. The input-output coefficients were based on current as well as on potentially new and improved crop, forage, and livestock management practices under conditions of dry land production but with drainage facilities.
Under certain conditions yields were assumed to vary and shift the production function. Different yield levels may be attributed to management, technology, weather, or other causes. The yield levels used were defined as follows:
(a) Average yields are those of all crops, forages or
livestock expected for the area based on improved
or current production practices under the best
weather (rainfall and drainage) conditions.
(b) High yields are those of all crops, forages or livestock that are 10 percent above average expected
yields for the area and are based on potentially new
and improved practices for the area.
(c) Low yields are those of all crops, forages or livestock
that are 10 percent below average expected yields for
the area.




32
Although yield variation was generalized to include other technical and economic variables, the terms were used in the programming model as defined above.
Resource Restrictions
Area studies, surveys, interviews, and agency policies were used to establish the land, labor, and capital. restrictions.
A representative hectare of land was assumed to be a variable
resource that could be added in completely divisible and homogenous units. The proportion of cropland, pasture, and waste land was determined from an area study (1, p. 5). Under alternative land quality assumptions, the representative unit was assumed to vary in percent cropland and other components in fixed proportion. The following land qualities were defined and used in this study (Appendix A, Table A.5):
(a) Average quality land was defined as a representative
hectare of land containing 54 percent Class 1, 7 percent Class 11, 25 percent Class III, and 14 percent,
Class IV soil.
(b) Good quality land was defined as a representative
hectare of land containing 62 percent Class I,
8 percent Class 11, 20 percent Class 111, and 10
percent Class IV soil.
(c) Poor quality land was defined as a representative
hectare of land containing 46 percent Class I,
6 percent Class 11, 31 percent Class III, and 17
percent Class IV soil..
Land values were assumed to vary with the percentage of each
productivity class comprising the poor land, average land, and good land qualities as shown in Appendix A, Table A.5. The land prices included were from INCORA files and were based on purchase price plus prorated charges for improvements that INCORA has made in the area. Estimated costs per hectare of owning land are shown in Appendix A, Table A.6.




33
A fixed amount of available operator and family labor was determined by an area survey (Appendix A, Table A.2). The available annual labor was divided into time periods reflecting the seasonal farm labor requirements. It was assumed that because of the high rate of unemployment (currently about 30 percent) and the underemployment in the area, additional labor could be hired any time at the prevailing wage rate of 15 pesos ($.90 U.S.) per man-day.
Capital was a variable resource that could be borrowed in any amounts up to the loan limits set by INCORA. These limits were 45,000 pesos for crop operating capital loans, 80,000 pesos for livestock operating capital loans, and 80,000 pesos for total operating capital loans. As long as returns to capital for- the firm were greater than or equal to the cost, capital could be borrowed up to the limit. The basic capital cost was 9 percent annually for crop and livestock operating capital, 11 percent for farm machine capital, and 4 percent for land and housing capital (17, p. 9). None of the land and housing capital and only one-fourth of the machine capital was included within the 80,000 pesos limitation. Additional capital could be procured in the commercial capital market at about an 18 percent annual interest rate (8).
Operators entering INCORA programs generally are peasants and,
therefore, have no capital. They must pay full interest charges for all operating and land capital. Therefore, in the analysis, only the full interest charges were considered. However, as the family farm unit develops in the future, it should acquire some capital ownership, thereby reducing its interest cost as capital borrowings are reduced. Both total, operating capital required and semester capital required were important. Total operating capital was the limiting factor in estimating




34
capital requirements, and interest on semester capital was considered the relevant cost factor in production. A more detailed discussion of the capital and credit resources and limitations is given in Appendix A. Production Alternatives
Alternative crop and livestock enterprises were restricted to
those which could be produced efficiently in the area and for which there were no major obstacles to production. Those enterprises considered to be of minor importance to the production potential of the area because of technical, economic, or institutional limitations were excluded. Identification of the crop and livestock enterprises to be considered was accomplished through consultation with professional agricultural workers in the area, local producers, and professionals at the Turipana Experiment Station. The crop enterprises included corn, cotton, grain sorghum, sesame, soybeans and rice. The forage enterprises were Para grass (Brachiaria iitica) under traditional, improved, and best management methods. The livestock enterprises were beef bull fattening and beef cow herds managed with traditional, improved, and best methods. (See Appendix B.)
Prices and Costs
The prices paid for inputs and received for production were those prevailing in the area. These prices are listed in Appendix A, Table Al.l. Input prices were obtained from local suppliers and were based on cash sales. Prices of crops were based on actual. prices received by farmers in the area. Livestock prices were based on the fat cattle market in Medellin and the local feeder price obtained from interviews with area producers and livestock specialists.




35
Machinery prices and costs were based on local dealers' F.O.B. Monteria, quotations for lines sold and serviced in the area. Sizes of machinery were based on present INCORA use specifications and on the area to be cultivated by the machinery set. A machinery set is the complement of equipment required to work a certain area of land under predominant enterprise combinations and area work patterns. Machine service life is longer than it is in the United States because of a higher original investment cost and a lower repair labor cost, making continued repair economical. The costs of operation, including parts, repairs, machine operator labor, and maintenance are included in the per hectare charge shown in Appendix A, Table A.l.
Some costs are practically independent of farm size and, therefore, cannot be allocated to specific enterprises, while others are related to farm'size. Such costs as fencing, pasture establishment, building depreciation, and machinery ownership costs varied, according to farm size and, therefore, were included in the enterprise budgets.
Expenses such as family housing and human transportation could not be allocated to specific enterprises. The per farm unallocated overhead costs based on information provided by INCORA were considered to be negligible in the area. They were, therefore, assumed to be included in the specified income level so that the farm size that covers a specified income level would also include a small renumeration for these factors.
Institutional Restraints
In addition to the INCORA requirement that economically viable farm family production units be established, the relevant institutional




36
restraints were capital availability, land tenure, and market facilities.
Semester operating capital and short term investment capital were limited to 80,000 pesos total. Up to 45,000 pesos could be used for crop production and the remaining sum up to 80,000 pesos was available for livestock and forage production. One-fourth of the machine capital was borrowed from INCORA and was included in the 80,000 pesos maximum. The remaining three-fourths was borrowed from the Caja de Credito Agrario Industrial y Minero (Agricultural, Industrial, and Mineral Bank) and was not included in the 80,000 pesos maximum loan limit. Credit for land was provided by INCORA at an annual interest rate of 4 percent. No limitation was placed on borrowing of land capital. The analysis was made with as well as without these restrictions in order to determine their effects on enterprise organization and resource requirements.
Owner-operated farm units were assumed for the area. The analysis was not concerned with alternative ways by which operators can obtain control over resources. In this project area control is gained through loans. The form of control assumed for the operational model was consistent with INCORA's goals and policies for establishing owner-operated family farm units in the area.
No market restraint for outputs or inputs was assumed. INCORA provides the necessary assistance for drying, storing and marketing when private and commercial facilities are inadequate. Commercial suppliers, Caja Agraria, INCORA, and the producers' associations provide all the necessary physical production inputs. Because of the extensive area import and export trade, and the all-weather transportation system,




37
the area's production is integrated into national commerce. Therefore, it is assumed that area development will have an insignificant impact on product prices. The INCORA co-operative and the Caja Agraria supply inputs at cost, plus a small percent markup, which is consistent with the assumption of constant input costs.
Resource Requirements per 1,000 Pesos of Net Revenue
Resource requirements per 1,000 pesos of net return for the crop and livestock enterprises considered in the analysis are shown in Tables 3.1 and 3.21, respectively. These data were developed from the enterprise budgets given in Appendix B. The net returns of the budgets did not include a charge for labor. The programming model included a labor hiring activity which allowed additional labor to be hired during any period that operator and family labor was exhausted.
A comparison of the data in the separate columns of the tables indicates which enterprises are the most efficient users of the restrictive resources. Livestock activities generally required more land to return 1,000 pesos of net income than did crop enterprises. Mechanized crops required less labor, but more land and operating capital) than semi-mechanized crops. Best managed beef cow enterprises required less labor, total operating capital, and forage per 1,000 pesos of net return than the other beef cow enterprises. Fattening beef bulls required less forage and land than best managed beef cows per 1,000 pesos of net return. However, the operating capital requirements for fattening beef bulls were considerably higher than for the beef cow enterprises.




38
TABLE 3.1.--Resource requirements per 1,000 pesos of net return,
selected crop enterprises--INCORA Cordoba II Project,
Sinu River Valley, Colombia
Corn Cotton
Resource Unit Mech.a Semi b Mech. Semi.
Total labor Man-day 8.9 12.8 10.8 13.4
Jan.-Feb. Man-day 7.4 7.7
Mar.-June Man-day 1.0 6.1
July-Sept. Man-day 5.7 4.7 .5
Oct.-Dec. Man-day 2.2 2.0 3.4 5.2
landc
Class I Hectare .41 .39 .18 .16
Class II Hectare .45 .43 .19 .18
Class III Hectare
Class IV Hectare
Total operating
capital Peso 916 825 673 542




39
TABLE 3.1 (Extended)
Grain Sorghum Rice Sesame Soybeans
Mech. Semi. Mech. Semi. Semi. Semi.
1.4 9.8 2.3 32.6 20.3 9.3
.1 8.5 .7 3.5 9.3
1.3 1.3 1.6 .8 2.5
28.3 17.8
.45 .42 .32 .25 .51 .58
.50 .47 .36 .28 .54 .64
.32 .25
1,309 1,046 1,196 728 399 857
aMechanized or most advanced technology.
bSemi-mechanized or less advanced technology.
cThe land requirement is for a given land class only. For example, the land requirement for mechanized corn production is .41 hectare of Class I land or .45 hectare of Class II land to provide 1,000 pesos of net income.




40
TABLE 3.2.--Resource requirements per 1,000 pesos of net return, selected
livestock enterprises--INCORA Cordoba II Project, Sinu River
Valley, Colombia
Beef cow on traditional Para Beef cow on improved Resource Unit
Tradi- Traditioala Improveda Besta Tra Improvedaditionala tonala mrvd
Total labor Man-day 15.6 12.7 7.4 13.9 11.6
Jan.-Feb. Man-day .8 .7 .1 1.1 1.0
Mar.-June Man-day 7.1 5.7 3.6 6.1 5.0
July-Sept. Man-day 1.1 1.0 .1 5.4 4.3
Oct.-Dec. Man-day 6.6 5.3 3.6 1.3 1.3
Landc
Class I Hectare 1.67 1.26 1.05 1.07 .81
Class II Hectare 1.67 1.26 1.05 1.07 .81
Class III Hectare 1.67 1.26 1.05 1.07 .81
Class IV Hectare 1.67 1.26 1.05 1.07 .81
Forage for
grazing AUM's 40.1 30.3 25.3 40.1 30.3
Total operating
capital Peso 6,654 5,235 4,956 6,544 5,152




41
TABLE 3.2 (Extended)
Para Beef cow on best Para Fattening beef bulls on Para
Tradi- TradiBesta Tronaladi- Improveda Besta tionalb Improvedb Bestb
tionala toa
6.0 15.6 12.9 7.3 6.6 5.6 6.7
.2 2.5 2.0 1.1 .2 1.0
2.9 4.1 3.5 1.8 3.3 2.7 1.6
2.7 5.4 4.3 2.7 2.5 2.5
.2 3.6 3.1 1.7 3.3 .2 1.6
.67 .77 .58 .48 .97 .62 .45
.67 .77 .58 .48 .97 .62 .45
.67 .77 .58 .48 .97 .62 .45
.67 .77 .58 .48 .97 .62 .45
25.3 40.1 30.3 25.3 23.3 23.3 23.3
4,887 6,708 5,275 4,990 7,928 7,864 7,959
aTraditional, improved, and best refer to herd management practices.
bTraditional, improved, and best refer to pasture management practices.
CThe land requirement is for a given class for land only.




CHAPTER IV
THE EFFECTS OF VARIATIONS IN YIELDS
ON MINIMUM RESOURCE REQUIREMENTS
The theoretical analysis indicated that net farm returns will vary directly with yield levels given constant production costs, and that minimum land requirements for specified income levels vary inversely with yields. This chapter analyzes the effect that a 10 percent increase or decrease from average yields of crop, pasture, and livestock enterprises had on land, labor, and capital requirements. These effects were t;leri generalized to selected physical and economic production uncertairities in the area.
Operationally, the gross receipts of crops and livestock and the physical outputs of pastures were varied. The direction of the effects on minimum resource requirements would have been the same as: (a) varying output prices of all crops and livestock, (b) varying physical production, (c) varying all production costs, (d) using different soil classes if costs were constant, and (e) any combination of these variables. The model used for the programmed results can be represented as
Y = ZPxlj XIj + ZPx2j X2j EPalj Alj ZPa2j A2j EPa3j A3j
- ZPa4j A4J ZPa5j A5j EPa6j A6j F
Y = specified income level
Pxij = crop prices
Xlj quantity of crop production
42




43
Px2j = livestock prices
X2j = quantity of livestock production
Palj = crop input costs
Alj = quantity of crop inputs
Pa2j = livestock input costs
A2j = quantity of livestock inputs
Pa3j = crop and livestock capital cost
A3j = quantity of crop and livestock capital
Pa4j = machine capital cost
A4j = quantity of machine capital
Pa5j = land capital cost
A5j = quantity of land capital
Pa6j = hired labor cost
A6j = quantity of hired labor
F = unallocated fixed costs
The solutions obtained assumed that all prices and quantities were known with certainty. Holding Y constant and varying X, and X2, the minimum land requirements were determined for different yield levels.
Farm operators with different managerial abilities typically operate in a situation where yields and prices are not known with certainty. Therefore, it is not unrealistic to interpret the results of varying XI and X2 as being caused by fluctuations in other variables and coefficients in the equation. The plus and minus 10 percent variations from average may not cover the range of managerial abilities or uncertainty typically encountered by decision makers, but it should provide a guide for decision making.




44
The establishment of average production costs, crop yields,
livestock yields, soil productivity base, and output prices representative of the area was difficult. For simplicity, perfect knowledge and single valued coefficients were assumed. By establishing norms in this manner, the degree of abstraction from individual farm situations may limit the use of the results for INCORA and individual decision making. Using a range of yields provided a means of estimating the effects of individual managerial differences and the uncertainty within a static framework; they made the programmed results applicable to a larger body of individual decision makers. At the macro level, variable yields rather than a single estimate provide a range of possible outcomes for policy decisions. A crude estimate of the cost or value of technology and other factors that affect yields or prices can be determined.
As defined in Chapter III, the yield levels assumed for this study were: (a) average yields, (b) high yields which are 10 percent above average yields, and (c) low yields which are 10 percent below average yields.
In the following section the basic solution with average yields is discussed. The effects of yield variations on the programmed farm solutions are discussed in the remaining sections of this chapter.
Basic Solutions
INCORA's goals of establishing the maximum number of family farm units to increase area production, income, and employment, while keeping land, capital, and infrastructure requirements to a reasonable level, can be met with a minimum size unit producing high return labor




45
intensive crops. Crops such as cottons corn, and rice fall into this category. Livestock activities utilize forage produced on lands that are not economical for use in the production of other crops. INCORA, other government agencies, and private organizations provide all the credit and other services needed in the area.
The land qualities that provide the resource base are given in Appendix A, Table A.5; the values of each productivity class are listed in the same table. The value of good quality land was 18,000 pesos per hectare. Average quality land was valued at 16,850 pesos per hectare and poor quality land at 15,820 pesos per hectare. Purchase of this land by farm operators is financed by INCORA. Details of the repayment plan are given in Appendix A. In addition to interest cost, annual land ownership costs included registration and municipal taxes shown in Appendix A, Table A.6. The basic solutions requested by INCORA are for 15,000 pesos and 25,000 pesos net income to operator and family owned resources.
15,000__Peso Income
The basic solution for a 15,000 peso income was programmed for
average quality land and average yield levels. A total land area of 3.9 hectares was required and six production activities were included. The crop activities and their magnitudes as shown in Appendix C, Table C.5, were 2.4 hectares of semi-mechanized cotton, .3 hectare of mechanized rice, .7 hectare of semi-mechanized rice, and .5 hectare of best managed pasture. The livestock activities included a .4 cow unit of best managed beef cows and 1.9 head of fattening beef bulls. There were no double cropping production practices entering this basic solution; thus,




46
the total land utilized was 3.9 hectares. A total of 291.2 man-days of labor was required. Mainly, family labor was employed since only 8.7 man-days of hired labor was needed. Operator and family labor was fully utilized in the January to February period; also during this period, additional labor was hired for picking cotton.
The total operating capital required was 18,779 pesos. This amount included all capital needed for production operations. It did not include land capital payments which must be paid from operator and family income.
Machine capital investment of 570 pesos was required to cultivate the land. The interest cost was included in operating cost, but the payment. on principal was made from the machine operating charges listed in Table A.1 of Appendix A.
Crop and livestock semester capital included all operating capital used for that particular semester. This included all inputs required each. sewester for production; a total of 5,891 pesos of crop semester capital and 4,116 pesos of pasture and livestock semester capital was required.
Gross receipts of 33,389 pesos were received trom the sale of all products. From the gross receipts were deducted: crop operating expenses, pasture and beef operating expenses, annual interest on operating capital., cost of hired labor, and returns to land. The return to operator and family labor, mtanagement and owned resources remained.
It is not possible to efficiently- produce at the small scale of s4ome of the activities entering the programming solutions. Therefore, some activities can be combined without causing major alterations in the resource requirements as shown in Appendix C, Tables C.14, C.16, and




47
C.18. With fattening beef bulls as the only forage utilizing activity, the land area increased by .1 hectare for average quality land. There were proportional increases in all activities. Eliminating the best managed beef cows decreased total operating capital requirements by 1,480 pesos. The total and hired labor requirements remained about the same.
In addition to eliminating the best managed beef cows activity,
mechanized rice and best managed pasture were also eliminated (Appendix C, Table C.16). Land requirements were increased by .2,hectare above the base solution causing proportionate increases in all activities. The total operating capital remained the same. However, the total labor and hired labor increased by 49.3 and 44.8 man-days, respectively, reflecting the labor effect of including only semi-mechanized rice production.
In a~ third situation best managed beef cows, best managed
pasture and semi-mechanized rice were eliminated. The results are shown in Appendix C, Table 0.18. Land requirements increased by .2 hectare when compared with the basic solution and proportionate increases in all activities occurred. Total operating capital increased only 254 pesos.
Introduction of mechanized rice reduced the total man-days of labor utilized by 71.4 man-days, but it increased hired labor by six mnar-days. The increase in hired labor was for the purpose of harvesting the additional cotton produced.
Z2r,000 Peso Income
The basic solution for a 25,000 peso income was programmed for average quality land and average yield levels. A total of 7.1 hectares were required and six production activities were included. The crop




48
activities and their magnitudes, as shown in Appendix C, Table C.6, were 4.3 hectares of semi-mechanized cotton, 1.7 hectares of mechanized rice, .1 hectare of semi-mechanized rice and 1.0 hectare of best managed pasture. The livestock activities included a .7 cow unit of best managed beef cows and 3.4 head of fattening beef bulls. No double cropping of activities was practiced.
The 391.0 man-days of labor required included 102 man-days of hired labor to assist in cotton harvest. Operator and family labor was fully utilized during rice harvesting and cotton harvesting periods of the crop year.
The operating capital requirement was 36,61.1 pesos. Machine
capital amounted tok 1,045 pesos. The crop semester capital requirement was 11,910 pesos and the pasture and livestock semester capital needs were 5,097 pesos. Gross receipts were estimated to be 61,057 pesos.
Eliminating the best managed beef cow activity caused total land, labor, and operating capital requirements to increase slightly but did not cause any activity reorganization.
The elimination of best managed beef cows, best managed pasture, and mechanized rice increased the land requirement by .7 hectare and total operating capital by 1,992 pesos. Total labor requirement increased by 265 man-days, of which 240 man-days were additional hired labor. This reflected the increase in size of semi-mechanized rice and semi-mechanized cotton enterprises.
The third variation of the basic programmed solution consisted of the semi-mechanized cotton, mechanized rie improved managed pasture, and fattening,.beef bulls activities. There was a .1 hectare increase in land required as compared with the basic solution. The labor requirement




49
decreased by six man-days and operating capital decreased by 2,562
pesos.
Summary of Variable Yield Results
In this section, the programmed resource requirements for high,
average, and low yields are presented for income levels of 15,000,
25,000, 35,000 and 45,000 pesos.
The major findings and implications were:
(a) A 10 percent change in yield did not eliminate the
cotton activity from the solution; however, the size
of the enterprise changed inversely with the yield
levels. Mechanized rice replaced the semi-mechanized rice at all yield levels as the specified income level
was increased, reflecting the higher production cost due to hiring of additional labor. Best managed Para
replaced improved managed Para at high yield and income
levels reflecting the greater availability of labor
through crop mechanization systems and the lower land
capital requirement. Best managed beef cow and fattening beef bull activities remained for all yield
levels, changing only in size with increases in income
levels.
(b) Minimum land requirements varied inversely with yields
at all income levels.
(c) interpreting the results from the three yield levels
to include uncertainty showed that as yields decreased and farm size increased, the income variance increased.
(d) Expanding the yield results to management and technology
implied that improved management or new technology paid
off faster on a larger farm.
(e) Increasing or decreasing the yield levels by 10 percent
directly affected area farm income by about plus or
minus 7 million pesos or 27 percent.
Effects of Yields on Farm Organization
The farm organization for three land qualities, at four income
levels with high, average, and low yields are given in Appendix C. The
farm organization was relatively stable over the entire range of all




50
variables. Evaluation of programmed results indicated that no major organizational changes were attributable to different yield levels. The same cotton activity remained in the solutions; only the size of the activity changed. Rice was included in all programmed solutions, but at higher yield and income levels, the mechanized activity replaced semimechanized rice production. At high yield levels, Para grass pasture was more intensively managed. The organizational changes observed were attributed to other variables in the program, such as labor and capital costs.
Effects of Yields on Land Requirements
The minimum quantities of land required to-obtain four different income levels on three different land qualities with average yields are given in Appendix C. The minimum land requirement for a 15,000 peso net return to operator and family owned resources on average quality land with average yields was 3.9 hectares. With high yields, it was 3.1 hectares, and with low yields, it was 5.3 hectares as shown in Table 4.1. With 10 percent higher yields, the minimum land requirements were decreased by an average of 21.5 percent over the four income levels. The largest percentage decrease was for the two highest income levels. The minimum land requirement was increased by an average of 38.3 percent when yields were changed from average to 10 percent lower levels. The three highest income levels required the greatest percentage increase in the minimum land requirement.
Effects of Yields on Capital Requirements
Variations in yields changed the capital required to obtain a specified income through the effect on both land capital and nonland




51
TABLE 4.1.--Resource requirements to obtain specified operator and family
incomes with high, average, and low yields, average land
quality--INCORA Cordoba II Project, Sinu River Valley,
Colombia
Income level
Yields Item Unit
15,000 25,000 35,000 45,000 pesos pesos pesos pesos
Land Hectares 3.1 5.6 8.1 10.8
Changea Percent -20.5 -20.5 -22.8 -22.3
Operating
capital Pesos 14,703 28,076 42,319 57,324
High
Change Percent -21.7 -23.3 -15.0 -14.0
Labor Man-days 263.2 343.3 438.6 581.2
Change Percent -9.6 -12.2 -21.5 -21.5
-----------------------------------------------------------------Land Hectares 3.9 7.1 10.5 13.9
Average Operating
capital Pesos 18,778 36,611 49,809 67,249
Labor Man-days 291.2 391;0 558.6 740.0
-----------------------------------------------------------------Land Hectares 5.3 9.9 14.6 19.3
Change Percent 35.9 39.4 39.0 38.8
Operating
Low capital Pesos 23,537 46,495 70,730 94,965
Change Percent 25.3 27.0 42.0 41.2
Labor Man-days 333.1 524.1 776.3 1,028.4
Change Percent 14.4 34.0 38.9 39.0
aChange from average yields.
capital. As yields increased, the land required to produce a specified income decreased, thereby reducing the land capital. With land price constant, land capital and hectares of land are perfectly correlated, causing relative changes in land capital and hectares of land to be the same. However, the change in nonland capital is not necessarily in pro-




52
portion to changes in land requirements, if changes occur in the kinds of activities entering into the solution, or if a change in the size of any activity occurs.
At a 45,000 peso income with low yields on all land qualities, the total operating capital restrictions of 80,000 pesos imposed by INCORA were exceeded, and the current crop operating capital limitation of 27,000 pesos per semester was exceeded as well. Thus, under present institutional restrictions, the 45,000 peso income level at low yields would not be feasible. Based on the programming results, all other income levels considered are possible.
The total operating capital required to earn 15,000 pesos varied from 14,703 pesos for high yields to 23,537 for low yields, as shown in Table 4.1. High yields reduced operating capital requirements 21.7 percent, and low yields increased these capital requirements 25.3 percent. For all income levels, high yields reduced the operating capital requirements by an average 18.5 percent, and low yields increased the capital requirements by an average of 33.9 percent. Effects of Yields on Labor Recjuirements
Labor requirements are affected directly by the crop, pasture
and livestock activities included in the farm organization and the sizes of those activities. The variation in labor requirements due to yields was a result of changes in farm size or a shift to less labor intensive activities.
The labor required to obtain a 15,000 peso income with average yields was 291 man-days, 263 man-days with high yields, and 333 man-days with low yields. This represented a decrease in labor requirements of




53
9.6 percent for high yields and an increase of 14.4 percent for low yields as compared to the average yield situation. The same general trend was found for the 25,000, 35,000 and 45,000 peso income levels.
Implications of Yields for Farm Size Planning Decisions
Variable yield results can provide information on environments characterized by risk and uncertainty rather than by perfect knowledge. The results can also provide information for groups of producers outside the project area or for producers whose management abilities are above or below the average assumed in this study.
It was assumed in all programmed results that the amounts and
prices of all inputs and outputs were known with certainty. Use of high, average, and low crop yields provided a method for obtaining information on a range of possible outcomes through programming. The effect on operator incomes would be the same if any of the assumed constants in the equation at the beginning of the chapter were allowed to vary.
Theoretically, uncertainty implies additional costs or lost
revenue due to improperly timed harvest, grass not grazed, inopportune livestock sales, or reduced input levels with resulting lower outputs than under conditions of certainty. No attempt has been made to determine the range or standard deviation of net income variability encountered by producers. Assuming the probability is low that net income will vary more than the variations associated with yield changes of plus and minus 10 percent, the results will be useful for evaluating management decisions under uncertainty. If the probability is great that net income will vary more than that associated with these yields, then these results are of limited worth in evaluating uncertainty.




54
For some of the peasant farm units, uncertainty is closely associated with survival of a family farm unit. If a normal distribution for programmed incomes is assumed, 50 percent of the time incomes will be less than specified. If family farm unit survival requires a minimum income 75 percent of the time, a larger size unit than indicated by average yields is required. For example, with low yields on average land a family farm unit required 5.3 hectares for a 15,000 peso income. However,
with average yields on average land, only 3.9 hectares were required. A farmer receiving low yields on average land for a unit programmed with average yield would have only 73.5 percent of the land necessary to attain an income of 15,000 pesos annually.
Another aspect of interest to peasant farmers and INCORA concerning uncertainty, is the variability of income about the mean or its range. The programmed results showing Figure 4.1 indicate a range of farm incomes for various farm sizes with three different yield levels. The range of incomes increases as farm size increases. For example, a six-hectare farm has an income variance from 16,000 pesos to about 28,500 pesos or a range of 12,500 pesos. A 50 percent increase in farm size to nine hectares causes an increased income variance from about 22,500 pesos to 38,000 pesos, or a 15,500 peso range. The expected results of larger family farm units are: (a) increased expected mean incomes, (b) increased range of expected incomes, and (c) increased expected income in good weather years.
Environments above or below average are shown by the fact that individual operators have different average returns from the same set of production conditions. This difference is often attributed to differences in production techniques, managerial skills, or both. Therefore,




55
Hectares
o f I Ind
20 /
...... High yields /
18 Average yields /
. - Low yields
I( /
/
14 /
12/
10
S // .
6
4
5,000 15,000 25,000 35,000 45,000
Net income in pesos
Figure 4.1.--Hectares of land required to obtain specified net
income levels with high, average and low yields
on average quality land.




56
average for some farm operators may be represented by high yields in this study, whereas average for others may be represented by low yields.
If the programmed results cover the practical range of variability in management skill, the information presented in Figure 4.1 may show the probable gains or losses from different levels of management employed on various farm family unit sizes. For the next 15 years, farm sizes in the Cordoba II Project area will be fixed. Any increases in farm family income will come from increased productivity or efficiency.
Results of programming high, average, and low yields indicated that when labor was fixed to the family production unit, increases in farm size increased utilization of family labor, increased family income, and also provided enlarged returns to superior management skills.
Area Im2lications of Yield Variations
The economy of an area can be greatly affected by a 10 percent increase or decrease in area yields. Increasing area yields by 10 percent can increase area farm income by approximately 7 million pesos, as shown in Table 4.2. Total economic activity in the area would be increased by 7 million pesos times the multiplier effect. It is apparent that nonfarm businesses as well as farmers can benefit from improved agricultural technology, such as new crop varieties, water management, chemical inputs, and improved management systems that increase yields. The reverse is true if these improved technologies are not adopted in the study area and if other areas of Colombia adopt output increasing technologies which cause prices to decline because of increased supply.
Net returns are practically a linear function of the number of hectares in the farm unit. The increase or decrease in area income




57
caused by how farms are organized is relatively small compared to the increase or reduction in income caused by lower yields.
TABLE 4.2.--Effect of high, average, and low yields on numbers of farms
and area net farm income for specified income levels--INCORA
Cordoba II Project, Sinu River Valley, Colombia
Income level
Yields Item Unit
15,000 25,000 35,000 45,000 pesos pesos pesos pesos
Area farmsa Number 2,258 1,250 864 648
Changeb Percent 25.9 26.9 29.7 28.8
High Area incomec Pesosd 40,572 38,063 37,197 36,147
Changee Percent 20.6 20.7 23.2 22.2
----------------------------------------------------------------Area farms Number 1,794 985 666 503
Average Area income Pesos 33,638 31,539 30,191 29,578
Area farms Number 1,320 707 479 362
Change Percent -26.4 -28.2 -28.1 -28.0
Low
Area income Pesos 26,508 24,400 23,706 23,280
Change Percent -21.2 -22.6 -21.5 -21.3
aThe number of farms is calculated from the estimated 7,000
hectares in the study area and the minimum land requirements given in Table 4.1.
bThe percent change is based on the number of farms the area can support at average yields.
cArea income used here includes only returns to operator and family labor, a 4 percent return on land capital, a 9 percent return on crops and livestock operating capital, 11 percent return on machinery capital, and real estate taxes.
dThese units are in thousands.
eThe percent change is based on the area income at average yields.




58
Though the specific income level and activity mix selected for each farm unit does not materially affect total farm income of the area, it does have a direct effect on the number of farm family units the area can support. The number of farm families and their income levels are important for decisions concerning schools, social institutions, markets and communications.
The number of farms and the area income for alternative levels
of farm family income are shown in Table 4.2. High yield levels increase both area farm income and the number of farm family units that can be established in the project area by an average of about 27 percent for all income levels.
The number of farms and the per farm income are also important for evaluating future levels of demand for inputs and consumer goods within the area. If development results in larger units with a larger per farm income, the aggregate demand schedule for products in the area will differ from that under a situation of lower incomes per farm and more farm units. The actual aggregate demand will depend on individual tastes and preferences and the income elasticity of demand for a particular good.




CHAPTER V
THE EFFECTS OF DIFFERENCES IN LAND QUALITY ON MINIMUM RESOURCE REQUIREMENTS
For this analysis, the land quality was varied by changing the percentage of cropland and pasture land in a representative hectare. The programmed effects of land quality were directly related to the proportion of each productivity class in a representative hectare.
Summary of Variable Land Quality Results
The percentages of Classes I, II, III, and IV land in a representative hectare of good, average, and poor quality land are given in Chapter III and in Appendix A, Table A.5. Programmed results using good, average, and poor land with four income levels and average yields were evaluated. The principal findings and implications were:
(a) Land quality had no effect on the combinations of crops
and livestock produced on a particular soil productivity
class except indirectly through labor requirements.
Land quality did affect the quantity of each soil productivity class on a given farm size and, therefore, the
size of each crop and livestock activity produced.
(b) For the land qualities and land prices programmed, as
land quality increased, the minimum land required and the total operating capital required decreased. However, the total labor required increased,
(c) Good quality land required more labor per hectare and
poor quality land required less labor per hectare. The
reason was that good quality land had a higher proportion
of land capable of producing labor intensive crops.
59




60
Effects of Land Quality on Farm Organization
The crop and pasture enterprises that can be grown most profitably were related to land quality. These crops and pastures in turn affected which livestock activities could best utilize the forage produced.
Based on programmed results, land quality had no direct effect on land use for any given productivity class. Differences in land quality changed the proportions of each soil productivity class comprising a representative hectare. The cropland-noncropland proportions varied with land quality changes, causing proportional changes of the crops, pastures, and livestock activities required within the farm unit to provide various specified income levels. Indirectly, land quality also affected farm organization through the labor requirements of various activities. Good quality land had a higher proportion of Classes I and II cropland which was capable of growing more labor intensive crops than Classes III and IV; therefore,,' good land required more labor per hectare. Farm organizational changes resulting from variations in hired labor costs will be discussed in Chapter VI.
The farm organization for three land qualities at four income levels with high, average, and low yields are given in Appendix C. Effects of Land Quality on Land Requirements
The quantities of land required for four income levels, with average yield levels and three land qualities are given in Table 5.1. Within any given land quality, the minimum land requirements were almost a linear function of income levels until available operator and family labor in a period was completely utilized.




61
TABLE 5.1.--Resource requirements to obtain specified operator and family
incomes with good, average, and poor land, average yield
levels--INCORA Cordoba II Project, Sinu River Valley,
Colombia
Land Income level
Quality Item Unit
15,000 25,000 35,000 45,000 pesos pesos pesos pesos
Land Hectares 3.7 6.7 9.9 13.1
Changea Percent -5.1 -5.6 -5.7 -5.8
Good Operating
capital Pesos 16,141 29,079 44,934 60,789
Change Percent -14.0 -20.6 -9.8 -9.6
Labor Man-days 297.2 400.4 593.5 785.7
Change Percent 2.1 2.4 6.2 6.3
-----------------------------------------------------------------Land Hectares 3.9 7.1 10.5 13.9
Operating
Average capital Pesos 18,778 36,611 49,809 67,248
Labor Man-days 291.2 391.0 558.6 739.0
Land Hectares 4.1 7.6 11.1 14.7
Change Percent 5.1 7.0 5.7 5.8
Operating
Poor capital Pesos 21,297 41,102 54,328 73,235
Change Percent 13.4 12.3 9.1 8.9
Labor Man-days 283.9 377.3 516.7 684.0
Change Percent -2.5 -3.5 -7.5 -7.4
change from average quality land.
An important effect of land quality on minimum land requirements was the relationship between land quality, capital requirements, and labor requirements. Good quality land reduced the minimum land and the total operating capital required to attain specified levels of income as shown in Table 5.1. However, the total labor required to attain the




62
specified income levels on good land increased slightly. This was because good land permitted cultivation of crops that were more labor intensive such as cotton. Poor land required more hectares, therefore, more total operating capital to attain specified income levels. Because livestock and pasture activities required less labor per unit of production, the labor requirement for specified income levels on poor land decreased as compared to average quality land. A representative hectare of good quality land had 15 percent more of Classes I and II soil than average quality land. Poor land had 15 percent less-of Classes I and II soil than a representative hectare of average quality land.
The amount of good quality land required to produce a 15,000 peso net income was 5.1 percent less than with average quality land, while poor quality land required 5.1 percent additional land to attain the same specified income level. These same trends continued through the other income levels as shown in Table 5.1. Effects of Land quality on Capital Requirements
The total capital requirement was composed of both land capital and nonland capital. Land quality affected both. Land capital was affected through the size of farm unit required and land price. Nonland capital was dependent on the crop and livestock activities best suited to a particular land quality. The total operating capital requirements for three land qualities and four income levels are shown in Table 5.1.
Operating capital requirements associated with poor quality land were greater than those for the better land qualities for all programmed situations. As expected from the minimum land requirements of Table 5.1, the operating capital requirement spread between different land qualities




63
increased at higher income levels. With different land prices for the three land qualities as the minimum land requirements changed, total operating capital requirements changed in the same direction. This change reflected the high influence of land productivity on total operating capital requirements.
Effects of Land Quality on Labor Reauirements
The variability of labor as related to land qualities was due to a greater labor requirement of cultivated crops, particularly cotton, when the larger proportions of Classes I and Il soils comprising good land permitted increasing the area planted to these crops. Cotton required considerably more labor than any other activity considered. Poor quality land utilized less labor intensive activities to achieve the specified income levels. Poor quality land had a higher proportion of land suitable only for Para pasture. The pasture can only be utilized through livestock activities which are less labor intensive than cultivated crops.
As shown in Table 5.1, programmed results of labor requirements varied directly with land quality. A net income of 15,000 pesos for average quality land and average yields required 291.2 man-days of labor. With good quality land and average yields, 297.2 man-days of labor are required to obtain the same income level representing an increase of
2.1 percent in labor requirements. Poor quality land with average yields required 283.9 man-days of labor or a decrease of 2.5 percent to receive a 15,000 peso net income. In general, the same relationships between land quality and labor requirements held true for all other income levels.




64
Land quality has important implications for labor utilization in the area. Higher quality land means more labor intensive enterprises such as cotton, rice, or corn and less labor extensive activities such as native pastures and extensive beef cow activities. The labor intensive activities are somewhat more compatible with INCORA's goals of increasing the general level of employment in the area.
Implications for Farm Mana&2Ment
and Area Policy Decisions
As land quality improved, the number of hectares required by a
farm family unit to earn various specified levels of net income decreased. Also, as land quality is increased and farm unit size is decreased, the total operating capital required to obtain specified incomes decreased at every income level. The higher quality land increased the labor required for production at every income level. For the individual operator and his family, this means a smaller unit, smaller total operating capital requirement, and greater utilization of operator and family labor.
Improving land quality through drainage increases area employment as well as the number of family farm units that can be established in the area. Because the reduction in operating capital requirements to attain specified income levels is more in proportion to the increase-in the number of farms, the aggregate amount of agricultural production capital required for the area is reduced as land quality is increased. This reduction in aggregate production capital requirements amounted to 2.3 million pesos for a 15,000 peso income level per farm, 5.7 million pesos for a 25,000 peso income, and 1.4 million pesos for both the 35,000




65
peso and the 45,000 peso income levels. Increasing the number of family farm units in the area through improvement in land quality increased the area's farm income by slightly over 6 percent at all income levels. The overall effect on area economic activity would be this 6 percent increase in farm income plus its multiplier effect.




CHAPTER VI
THE EFFECTS OF PRICE CHANGES ON MINIMUM RESOURCE REQUIREMENTS
In this chapter, the cost of two critical inputs, labor and
capital, and the net return from the two principal enterprises, cotton and rice, are varied to evaluate the effects on the optimum enterprise and minimum resource solutions. Wage and interest rates were varied upward at specified increments. In a similar manner, returns from cotton and rice were decreased.
Effects of Increases in Interest Rates
The optimum organizations for a 15,000 and a 25,000 peso income level and four levels of interest rates are considered in this section. Higher interest rates increased the minimum farm size, decreased the total operating capital used and slightly increased the total labor required. Although the kinds of crops and livestock produced did not change, there were shifts to more labor intensive methods of producing these activities. Because of increased emphasis on activities which used labor during one peak period, a near doubling of the interest rates decreased the area's aggregate farm income by only 1.9 million pesos or
7.5 percent.
The effects of higher interest rates on farm organization are shown in Appendix D, Tables D.1 and D.2. As interest rates increased, there was an increase in semi-mechanized rice production. Double
66




67
cropping of corn entered the programming solution at the higher interest rates for the 25,000 peso income level. There was a decrease in the pasture management level and in the size of the livestock activities.
As the interest rate increased, the number of hectares in the
minimum size unit for specified incomes increased as shown in Table 6.1. Each 1 percent increase in interest rate required about a .9 percent increase in land area.
Increased interest rates had a decreasing effect on the total operating capital requirements as shown in Table 6.1. Resources were shifted into less capital intensive enterprises. The magnitude of the effect of interest rates on total operating capital requirements decreased as interest rates increased. Labor requirements increased only slightly with higher interest rates.
interest rates had no effect on the principal activity mix of tlie area, although increasing capital costs encouraged use of more intensive levels of management. Area farm income and the number of farms in the area decreased as interest rates increased.
Effects of Increases in Hired Wage Rates
The optimum organization of farm family units for the 15,000 and 25,000 peso income levels and four different wage rates are considered in this section. Increasing wage rates had negligible effects on land requirements. A moderate increasing effect on operating capital requirements occurred. A shift to enterprises that more fully utilized operator and family labor occurred as the wage rate for hired labor was increased.
Increasing the wage rate affected organization by encouraging maximum use,.of farm family labor and keeping hired labor at a minimum.




68
TABLE 6.1.--Resource requirements for a 15,000 and 25,000 peso net
income, alternative levels of interest rates and average
land quality--INCORA Cordoba II Project, Sinu River Valley,
Colombia
Interest Income level
rate Item Unit
15,000 25,000
pesos pesos
Land Hectares 3.9 7.1
Basea Operating capital Pesos 18,778 36,611
Labor Man-days 291.2 391.0
-----------------------------------------------------------------Land Hectares 4.0 7.3
Changeb Percent 2.6 2.8
+ 3% Operating capital Pesos 16,973 33,397
Change Percent -9.6 -8.8
Labor Man-days 292.5 394.0
Change Percent .4 .7
--------------------------------------------------------- m-------Land Hectares 4.1 7.5
Change Percent 5.1 5.6
Operating capital Pesos 17,396 34,264
+ 6% Change Percent -7.4 -6.4
Labor Man-days 295.1 399.3
Change Percent 1.3 2.1
-----------------------------------------------------------------Land Hectares 4.2 7.7
Change Percent 7.7 8.5
Operating capital Pesos 17,842 35,209
+ 9% Change Percent -5.0 -3.8
Labor Man-days 297.9 405.1
Change Percent 2.2 3.6
aBase interest rates are 9 percent on crop and livestock semester capital and 11 percent on machine capital.
bChange from base interest rates.




69
The quantity of total labor required increased as the hired wage rates were increased until a rate of 19 pesos per day was reached. The quantity of hired labor remained almost constant for wage rates of 15 and 17 pesos per man-day. At a wage rate of 19 and 20 pesos per manday, hired labor was eliminated from the production units for a 15,000 peso and 25,000 peso income levels, respectively. Changes in hired wage rates had little effect on the size of the farm family units. As wage rates rose, more efficient use of operator and family labor minimized the area income loss to about 1.4 percent based on the programmed results.
Varying the wage rates ofhired labor had a very minor effect on farm organization as shown in Appendix D,'Tables D.3 and D.4. At the highest wage rates double cropping of corn replaced some cotton and thus used operator and family labor more fully.
The minimum quantity of land required for the specified income level was only slightly affected in an upward direction as shown in Table b.2. At the lower specified income level no effect of increased wage rates on land requirements was apparent from the programmed results. This was because of the high utilization of the operator and family labor on the farm units. Capital requirements increased slightly in an almost linear relation with the increased wage cost.
As wage rates increase, managers will need to reallocate present resources to take advantage of unused family labor. An example of this is indicated by the introduction of a double cropping system.
The change in hired wage rates had no effect on the number of
farms or area income for the 15,000 peso income level. This was because the units relied almost entirely on operator and family labor. At the




70
TABLE 6.2.--Resource requirements for a 15,000 and 25,000 peso net
income, alternative wage rates and average land quality-INCORA Cordoba II Project, Sinu River Valley, Colombia
Income level
Wagea Item Unit
15,000 25,000
pesos pesos
Base of Land Hectares 3.9 7.1
Base of
15 pesos Operating capital Pesos 18,778 36,611
Labor Man-days 291.2 391.0
Land Hectares 3.9 7.2
Changeb Percent 0.0 1.4
Operating capital Pesos 18,810 36,982
17 pesos Change Percent 1.7 1.0
Labor Man-days 291.4 393.1
Change Percent 0.0 0.5
Land Hectares 3.9 7.2
Change Percent 0.0 1.4
Operating capital Pesos 18,846 37,377
19 pesos Change Percent 3.6 2.1
Labor Man-days 291.5c 395.0
Change Percent 0.1 1.0
Land Hectares 3.9 7.2
Change Percent 0.0 1.4
Operating capital Pesos 18,846 37,643
20 pesos Change Percent 3.6 2.8
Labor Man-days 291.5c 385.0
Change Percent 0.1 -1.5
aRate paid for one man-day of labor.
bChange from base hired wage rate.
cNo labor was hired with wage rate of 19 pesos per day.




71
25,000 peso income levelarea income and the number of farms in the area decreased slightly when the wage rate on hired labor was increased to 17 pesos per day. For further wage rate increases, no change occurred in the number of farms or area income.
Effects of Reductions in the Price of Cotton
Cotton was included in the farm enterprise mix of all the programming solutions. Therefore, the price of cotton was varied to determine its effects on farm size, capital requirements, labor requirement, activity mix, area income and number of farms in the area. This analysis was particularly relevant for future decisions concerning the price support program for cotton in Colombia on the area.
In the programming analysis, the gross revenue from cotton was varied downward at 500 peso increments (equivalent to $29.85 U.S. per hectare) until cotton did not enter the optimum activity mix for the 15,000 peso and 25,000 peso income levels. The effects on farm organization of decreasing the revenue from cotton are shown in Appendix D, TablesD.5 and D.6. As the price of cotton decreased, production was shifted to a double crop corn rotation. A small increase in pasture area was also noted. When cotton was dropped from the activity mix, corn replaced all the land formerly used by cotton. A decrease in the price of cotton increased the quantity of land required to obtain the specified income levels. The total operating capital requirements tended to increase as the price of cotton was reduced. Total labor requirements increased slightly as long as cotton was still included in the activity mix, but dropped when it was excluded. Hired labor was eliminated after the first price drop in all solutions. A 500 peso decrease in gross returns per hectare is equivalent to a price decrease




72
of 20 pesos per kilogram. Thus, with only a slight decrease in the price of cotton, the activity mix excludes cotton production in the area. This result points to the importance of maintaining price support programs for cotton if its production is to be encouraged in the area.
As farm size increased, the number of farms possible in the area decreased, and the variance of an individual farmer's possible income range increased because of the increased size of unit required for a specified income level.
The minimum resource requirements for the two specified income levels are shown in Table 6.3. The minimum land required increased for each incremental decrease in cotton price until cotton was eliminated from the activity mix. Total operating capital requirements also increased with each reduction in the price of cotton. Labor requirements increased only slightly and even dropped when cotton was withdrawn from the activity mix for the 25,000 peso income level.
Price reductions reduced the overall area farm income and the number of farm family units that can obtain the specified income. The elimination of cotton also reduced the overall employment in the area. However, the elimination of cotton permitted making greater use of operator and family labor.
Effects of Reductions in the Price of Rice
The optimum solutions for the specified income levels all included some level of rice production. Rice is especially well adapted to the heavy humid soils of the area and will likely become increasingly important in the area. Changes in price levels will affect the optimum size unit required to utilize operator and family labor and attain the specified income levels.




73
TABLE 6.3.--Resource requirements for a 15,000 and 25,000 peso net
income, variable cotton prices and average land quality-INCORA Cordoba II Project, Sinu River Valley, Colombia
Income level
Cotton
Cotton Item Unit
price 15,000 25,000
pesos pesos
Land Hectares 3.9 7.1
Base Operating capital Pesos 18,778 36,611
Labor Man-days 291.2 391.0
Land Hectares 4.3 7.6
Changea Percent 10.3 7.0
500 peso Operating capital Pesos 20,892 39,681
decrease Change Percent 11.3 8.4
Labor Man-days 302.1 395.1
Change Percent 3.7 1.0
Land Hectares 4.6b 8.0
Change Percent 17.9 12.7
1,000 peso Operating capital Pesos 24,640 42,772
decrease Change Percent 31.2 16.8
Labor Man-days 298.8 396.7
Change Percent 2.6 1.5
Land Hectares 4.6 8.0
Change Percent 17.9 12.7
No Operating capital Pesos 24,640 44,105
cotton Change Percent 31.2 20.5
Labor Man-days 298.8 372.5
Change Percent 2.6 -4.7
aChange from base price of cotton.
bNo cotton entered the solution at a gross return 1,000 pesos ($60 U.S.) below the base gross return.




74
The farm organization of enterprises for the 15,000 and 25,000 peso income levels at different price levels for rice and one without rice production were programmed. The effect of decreasing the price of rice was to increase the size of unit required to obtain the specified income levels. The effect on operating capital requirements varied directly with the size of the farm unit in the case of a 15,000 peso income level. For the 25,000 peso income level, operating capital requirements increased due to an increase in farm size and A readjustment of the activity mix when rice was eliminated. The labor requirements generally increased as the price of rice declined except in the case of no rice at a 15,000 peso income where shifting to livestock enterprises reduced the total labor requirement. The optimum organizations for the 15,000 and 25,000 peso income levels with a declining price for rice are shown in Appendix D, Tables D.7 and D.8. The basic solution and the effects of varying the price of rice and of excluding rice are shown in Table 6.4.
The assumption of average yields implies that 50 percent of the producers will get an income below the specified level and 50 percent will get one above it. As the price of rice declines, farm size will have to be increased to obtain the specified incomes; the variance of incomes within a particular farm unit size will increase because of a greater opportunity for differentials to develop between good and poor managers.
Reducing the price of rice decreased the number of farms in the area and decreased area net farm income. Elimination of rice from the activity mix decreased area farm income by 3.5 and 4.5 million pesos for the 15,000 peso and 25,000 peso income levels, respectively.




75
TABLE 6.4.--Resource requirements for a 15,000 and 25,000 peso net
income, variable rice prices and average land quality-INCORA Cordoba II Project, Sinu River Valley, Colombia
Price Income level
of rice Item Unit
15,000 25,000
pesos pesos
Land Hectares 3.9 7.1
Base Operating capital Pesos 18,778 36,611
Labor Man-days 291.2 391.0
Land Hectares 4.2 7.8
Changea Percent 7.7 9.9
1,000 peso Operating capital Pesos 20,665 35,752
decrease Change Percent 10.0 -2.3
Labor Man-days 301.8 412.3
Change Percent 3.5 5.4
Land Hectares 4.6 8.3b
Change Percent 17.9 16.9
2,000 peso Operating capital Pesos 29,014 51,967
decrease
Change Percent 54.5 41.9
Labor Man-days 317.1 447.8
Change Percent 8.9 14.5
Land Hectares 4.7 8.3
Change Percent 20.5 16.9
No Operating capital Pesos 35,958 51,967
rice Change Percent 91.5 41.9
Labor Man-days 262.9 447.8
Change Percent -9.7 14.5
aChange from base price of rice.
bNo rice entered the solution at a gross return 2,000 pesos ($119 U.S.) below the base gross return.




76
The large potential for expansion of rice production presents
important considerations for INCORA policy makers. Rice production could easily be tripled with only small increases in inputs. This could have a tremendous effect on area output and area income, and cause considerable reallocation of production resources.




CHAPTER VII
SUMMARY AND CONCLUSIONS
The overall objective of this study was to determine the nature of the enterprise organization and the magnitude of resource levels needed under alternative conditions to obtain specified levels of income to farmers in the Cordoba II project area in Colombia. The specific objectives included determination of the effects on enterprise combinations and requirements of land, capital, and labor for obtaining the specified income levels to farm operator controlled resources under alternative yield levels, land qualities, interest rates, wage rates, and product price levels.
The soil resource base for this study was a heavy-textured, fine silt or clay topsoil underlaid with fine or medium grain subsoil. The institutional and economic restrictions imposed were in accordance with the production possibilities defined from the set of available farm resources. All important crops that can presently be grown in the area were considered; those included were corn, cotton, grain sorghum, rice, sesame, and soybeans. Para grass pasture was considered under three levels of management. Livestock enterprises included were cow-calf operations under three levels of management and fattening beef bulls. Product and resource input prices were based on current estimates for the area.
Conceptual models were developed for analyzing alternative farm unit plans in a resource minimizing framework. Linear programming 77




78
techniques were used to determine the enterprise organization and the minimum resources required to obtain income levels of 15,000, 25,000, 35,000 and 45,000 pesos to operator and family owned resources. Three enterprise yield levels and three land qualities were used in the analysis. Similar methods were used to determine enterprise organization and minimum resources required for a 15,000 and a 25,000 peso income under conditions of: (a) increasing interest rates, (b) increasing wage rates for hired labor, (c) decreasing prices of cotton, and (d) decreasing prices of rice.
Results
The effects of yields and land quality on minimum resource
requirements can be evaluated from Table 7.1. The effects of increasing the cost of hired labor and capital and the effects of decreasing the returns from cotton and rice can be evaluated from Table 7.2. The number of farm units that can be supported on the first phase of the Cordoba II project, a 7,000 hectare soil resource base, for the alternative income levels and different levels of variables is also given in these tables.
The organization of crops and livestock activities remained relatively stable over all ranges of the yield and land quality variables programmed. The basic farm organization of average land quality with average yields indicatedthat semi-mechanized cotton production would be the principal enterprise. Rice was included at a lower level of production. Para grass pasture was included on land not suitable for rice and cotton production. As specified income levels were increased, rice production shifted from semi-mechanized to mechanized, and pasture management shifted from best to the lower level of improved




TABLE 7.1.--Summary of resource requirements to obtain various levels of net income for alternative
yield levels and land qualities--INCORA Cordoba II Project, Sinu River Valley, Colombia
Average yield Average land
Item Unit
Good Average Poor High Average Low
land land land yields yields yields
,15,000 Peso income
Land Hectares 3.7 3.9 4.1 3.1 3.9 5.3
Operating capital Pesos 16,141 18,778 21,291 14,703 18,778 23,537
Labor Man-days 297.2 291.2 283.9 263.2 291.2 333.1
Area farms Number 1,944 1,794 1,707 2,258 1,794 1,320
25,000 Peso income
Land Hectares 6.7 7.1 7.6 5.6 7.1 9.9
Operating capital Pesos 29,079 36,611 41,102 28,076 36,611 46,495
Labor Man-days 400.4 391.0 377.3 343.2 391.0 524.1
Area farms Number 1,044 985 .921 1,250 985 707
35,000 Peso income
Land Hectares 9.9 10.5 11.1 8.1 10.5 14.6
Operating capital Pesos 44,934 49,809 54,328 .42,319 49,809 70,730
Labor Man-days 593.5 558.6 516.7 438.6 558.6 776.3
Area farms Number 707 666 630 864 666 479
45,000 Peso income
Land Hectares 13.1 13.9 14.7 10.8 13.9 19.3
Operating capital Pesos 60,789 67,249 73,235 57,324 67,249 94,965
Labor Man-days 785.7 739.0 684.0 581.2 739.0 1,028.4
Area farms Number 534 503 476 648 503 362




TABLE 7.2.--Summary of resource requirements to obtain a 15,000 and 25,000 peso net income for average
land, average yields, variable interest rates, variable wage rates, variable cotton prices,
and variable rice prices--INCORA Cordoba II Project, Sinu River Valley, Colombia
Interest rates Wage rates
Item Unit
Base +3% +6% +9% 15 pesos 17 pesos 19 pesos 20 pesos
15,000 Peso
income
Land Hectares 3.9 4.0 4.1 4.2 3.9 3.9 3.9 3.9
Oper. cap. Pesos 18,778 16,973 17,396 17,842 18,778 18,810 18,846 18,846
Labor Man-days 291.2 292.5 295.1 297.9 291.2 291.4 291.5 291.5
Area farms Number 1,794 1,750 1,707 1,667 1,794 1,794 1,794 1,794
25,000 Peso
income
Land Hectares 7.1 7.3 7.5 7.7 7.1 7.2 7.2 7.2
Oper. cap. Pesos 36,611 33,397 34,264 35,209 36,611 36,982 37,377 37,643
Labor Man-days 391.0 394.0 399.3 405.1 391.0 393.1 395.0 385.0
Area farms Number 986 959 933 909 986 972 972 972
0




TABLE 7.2 (Continued)
Cotton prices Rice prices
-tmUi ae500 -1,000 No Bae1,000 -2,000 No
ItmUi ae pesos pesos cotton Baepesos pesos rice
15,000 Peso
income
Land Hectares 3.9 4.346a 4.6 3.9 4.2 4.6 4.7
Oper. cap. Pesos 18,778 20,892 24,640 24,640 18,778 20,665 29,014 35,958
Labor Man-days 291.2 302.1 298.8 298.8 291.2 301.8 317.1 262.9
Area farms, Number 1,794 1,627 1,522 1,522 1,794 1,667 1,522 1,489
25,000 Peso
income
Land Hectares 7.1 7.6 8.0 8.0 7.1 7.8 8.3b 8.3
Oper. cap. Pesos 36,611 39,681 42,772 44,105 36,611 35,752 51,967 51,967
Labor Man-days 391.0 395.1 396.7 372.5 391.0 412.3 447.8 447.8
Area farms Number 986 921 875 875 986 897 843 843
aThe solution is the same as with no cotton because cotton was eliminated when the gross revenue per hectare decreased by 1,000 pesos.
bThe solution is the same as with no rice because rice was eliminated when the gross revenue per hectare decreased by 2,000 pesos.




82
management. Livestock activities included best managed beef cows and fattening of beef bulls. However, the beef cow enterprise was so small that it was considered to be economically infeasible. Therefore, only the fattening beef bulls activity is recommended as a livestock enterprise on the farm situations. Changes in land quality had little effect on the basic organization of enterprises. However, by assumption, land quality changed the proportions of cropland productivity classes, therefore, changing the magnitudes of the crops and livestock enterprises in the farm plans. The level of each livestock enterprise in the farm organization depended on the quantity of pasture forage produced. Summary of Yield Results
Minimum resource requirements to obtain incomes of 15,000, 25,000, 35,000, and 45,000 pesos to operator and family owned resources on average quality land were estimated for the following yield situations:
(a) production assumed to be normal or average for all crops, pastures and livestock, (b) production 10 percent above average (high yields), and (c) production 10 percent below average (low yields). The principal findings and implications of the effects of yields on minimum resource requirements were:
(a) Yield levels above or below average had no effect on the
kinds of enterprises produced, but they did have an
effect on the sizes of the enterprises included in the
programmed solutions.
(b) The minimum resource requirements for specified income
levels varied inversely with yields. At the 15,000 peso
income level, a 10 percent increase in yields decreased
the minimum land required by 20.5 percent, and a 10 percent decrease in yields increased in the minimum
land required by 35.9 percent. These trends continued
on an increasing scale throughout the higher income
levels.




83
(c) Using three yield levels to represent a range of
uncertainty, management levels and/or technology
implied that: (1) larger farms used fixed resources
more efficiently and thereby offset some of the increased risk of large farms, (2) larger farms
received greater gains from improved management and
technology, and (3) a 10 percent increase or decrease
of yields changed area farm income by about seven
million pesos.
f-O
Summary ofLand quality ResulMinimum resource requirements for income levels of 15,000,
25,000, 35,000 and 45,000 pesos to operator and family owned resources
were estimated for land composed of 61 percent Class. I and II cropland
(average quality land), 70 percent Class I and II cropland (good quality
land) and 52 percent Class I and II cropland (poor quality land). The
major findings and implications relating to land quality were:
(a) Land quality affected the size of unit required to
attain a given income level. The size of unit required
decreased as land quality improved.
(b) Land quality as used affected the ratios between soil
productivity classes. For a given income, the same
crops, livestock, and pasture were included in the solution. However, the enterprise management level varied for different land qualities because of different soil productivity class proportions.
(c) For a given income, labor requirements were greater
on good quality land than on poor quality land. Per hectare labor requirements were greater on good land because of the larger proportion of more labor intensive crops on the better land.
Summary of Interest Rate Increases
Minimum resource requirements for a 15,000 and 25,000 peso income
to operator and family owned resources on average quality land with
average yields were estimated for: (a) a base interest rate of 9 percent
for crop and livestock operating capital and 11 percent for machine




84
capital, (b) a 3 percent overall increase above the base rates, (c) a
6 percent overall increase above the base rates, and (d) a 9 percent overall increase above the base rates which was equivalent to the local commercial loan rate. The principal findings and implications of the effects of higher capital costs as shown in Table 7.2 were:
(a) Interest rates affected the size of unit required to
attain a specified income level. The size of unit required increased as the interest rate increased.
(b) The total amount of operating capital required at
both income levels decreased slightly as the interest
rate increased. This was because of a reallocation from livestock to less capital intensive activities.
(c) For a given income level, the minimum quantity of
labor required increased slightly as interest rates
increased.
Summary of Hired Wage Rate Increases
Minimum resource requirements for a 15,000 and 25,000 peso income to operator and family owned resources on average quality land producing average yields were estimated using wage rates of 15, 17, 19, and 20 pesos per man-day of hired labor. The principal findings and implications of the effects of an increased hired labor cost on minimum resource requirements as shown in Table 7.2 were:
(a) Farm size was virtually unaffected by increases in
hired labor costs.
(b) Labor and capital requirements increased slightly
with increased wage rates except at the very highest
wage level where a different combination of enterprises slightly decreased the labor requirements.
(c) increased hired labor costs resulted in a substitution of a double crop corn enterprise for a single crop cotton enterprise, thus utilizing more operator
and family labor.




85
Summary of Decreases in Cotton Revenues
Minimum resource requirements for a 15,000 and 25,000 peso income to operator and family owned resources on average quality land producing average yields were estimated for decreases in the gross revenue from cotton. The revenue situations were: (a) base price solution, (b) 500 peso decrease in gross revenue per hectare, (c) 1,000 peso decrease in gross revenue per hectare, and (d) no cotton allowed in the solution. The findings and implications as shown in Table 7.2 were:
(a) Total land requirements for a specified income level
increased as cotton revenue decreased and cotton was
deleted from the solution. A corn enterprise replaced
cotton on these farm units.
(b) Total capital requirements varied inversely with
cotton revenue. As cotton revenue dropped, land
requirements increased and, hence, land capital
increased. Since corn is a double crop enterprise
and cotton is a single crop enterprise, the total
operating capital requirements also increased.
(c) Total labor required increased with the decrease in
cotton revenue until cotton was replaced by corn in
the enterprise combination. This replacement reflected
a shift from labor intensive cotton production to less
labor intensive enterprises. Livestock enterprises
increased as more pasture became available because of greater quantities of land required to meet the specified income levels.
Summary of Decreases in Rice Revenues
Minimum resource requirements for a 15,000 and 25,000 peso income to operator and family owned resources on average quality land producing average yields were estimated for decreases in revenues from rice. The revenue situations included: (a) the basic solution, (b) a 1,000 peso decrease in gross revenue per hectare, (c) a 2,000 peso decrease in gross revenue per hectare, and (d) no rice production in the enterprise mix.




86
The findings and implications of decreases in revenue from rice as shown in Table 7.2 were:
(a) Land requirements increased as the revenue from rice
was decreased.
(b) Operating capital requirements increased with decreased
rice revenues. These changes were effected because
land removed from rice went into improved pasture to expand the livestock enterprises which required more
capital.
(c) Labor requirements increased as rice revenues decreased.
However, at the 15,000 peso income level, labor requirements decreased when livestock completely replaced rice
in the enterprise combination.
Implications for Farm-Adjustments
The motives and objectives of INCORA and those of farm operators and the area resources available must be considered in evaluating the potential farm organization for the area. For this particular study area, it is likely that producers' adjustments will be made in accordance with goals and objectives of the agrarian reform program. The potential number of farms for the area as given in Table 7.1 has no meaning unless a single development criterion is selected. The minimum resource requirements present ted should be more useful for evaluating the type and size of farm units to establish in the study area if consideration is given to characteristics of the peasant producer.
The characteristics of the peasant farmer groups are:
(a) The 15,000 peso income level represents the return to
operator and family owned resources which is about
equivalent to the national average per capita income
for a family of nine persons. The peasant operator has
little or no capital, has low levels of knowledge of technical production, displays poor marketing skills,
and possesses limited entrepreneurial experience. INCORA
will provide technical assistance, credit, marketing
assistance, land, and some physical production inputs.
The operator and his family must provide the majority of