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 Copyright
 Title Page
 Suggested citation
 Acknowledgement
 Table of Contents
 List of Tables
 Introduction
 Procedure
 Description of Pensacola area dairy...
 All farm receipts and expenses
 Measures of income and profits,...
 Input and output efficiencies
 Dairy herd characteristics and...
 Management practices and biographical...
 Summary


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A summary of costs and returns and an economic description of wholesale dairy farms in the Pensacola, Florida milk marke...
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 Material Information
Title: A summary of costs and returns and an economic description of wholesale dairy farms in the Pensacola, Florida milk marketing area
Series Title: Agricultural economics mimeo report Department of agricultural economics. Florida agricultural experiment stations. University of Florida
Physical Description: 65 p. : ; .. cm.
Language: English
Creator: Smith, B.J
Publisher: s.n.
Place of Publication: Gainesville
Publication Date: 1964
 Subjects
Genre: non-fiction   ( marcgt )
 Notes
Funding: Agricultural economics mimeo report ;
Statement of Responsibility: by B.J. Smith.
 Record Information
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 67276561
clc - 000472442
System ID: UF00071973:00001

Table of Contents
    Copyright
        Copyright
    Title Page
        Title Page
    Suggested citation
        Page i
    Acknowledgement
        Page ii
    Table of Contents
        Page iii
        Page iv
    List of Tables
        Page v
        Page vi
    Introduction
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
    Procedure
        Page 6
        Selection of sample
            Page 6
            Page 7
        Conduct of survey
            Page 8
            Page 9
        General computational procedures
            Page 10
            Page 11
            Page 12
            Page 13
    Description of Pensacola area dairy farms
        Page 14
        General measures of size
            Page 14
            Page 15
        Milk production
            Page 16
            Page 17
        Livestock
            Page 18
            Page 19
            Dairy
                Page 18
            Non-dairy
                Page 18
        Management and labor
            Page 20
            Page 21
        Land and its utilization
            Page 22
            Page 23
            Page 24
        Capital investment and depreciation
            Page 25
            Page 26
            Page 27
    All farm receipts and expenses
        Page 28
        General
            Page 28
            Page 29
            Page 30
            Page 31
            Page 32
        Farm receipts
            Page 33
            Cash receipts
                Page 33
                Page 34
            Non-cash receipts
                Page 35
        Farm expenses
            Page 36
            Cash expenses
                Page 36
                Page 37
                Page 38
                Page 39
            Depreciation
                Page 40
            Interest on investment at five and one-half per cent
                Page 41
            Value of unpaid labor
                Page 42
            Value of operator's labor and mangement
                Page 42
            Some general comments on farm expenses
                Page 43
                Page 44
    Measures of income and profits, the over-all financial position of dairymen, funds for family living, and net cost of producing milk
        Page 45
        Page 46
        Measures of income and profits
            Page 45
            Family farm income
                Page 45
            Family income
                Page 45
            Family labor income
                Page 45
            Operator's labor income
                Page 47
            Net farm income
                Page 47
            Net profit or loss
                Page 47
            Return above quality maintanance
                Page 47
        Over-all financial position of area dairymen
            Page 48
        Funds for family living
            Page 49
        Net cost of producing milk
            Page 50
            Page 51
    Input and output efficiencies
        Page 52
        Page 53
        Page 54
    Dairy herd characteristics and facilities
        Page 55
        Page 56
        Herd characteristics
            Page 55
        Facilities
            Page 57
    Management practices and biographical data
        Page 58
        Management practices
            Page 58
            Page 59
            Page 60
        Biographical data
            Page 61
    Summary
        Page 62
        Page 63
        Page 64
        Page 65
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida




luly, 1964


/ i
~<-* II


A Summary of sts-nd Returns and an Economic

Description of Wholesale Dairy Farms in the

Pensacola, Florida Milk Marketing Area
Blair J. Smith
Assistant Agricultural Economist


Department of Agricultural Economics
Florida Agricultural Experiment Stations
University of Florida, Gainesville, Florida


Agricultural Economics Mimeo Report EC 65-1





/0o


4-; Ec<3
AGRI-
CULTURAL
LIBRARY"


Requests for additional copies of this report should be forwarded to:

The Department of Agricultural Economics
Unit B, McCarty Hall
University of Florida
Gainesville, Florida


SUGGESTED CITATION

Smith, B. J. A Summary of 1962 Costs and Returns and an Economic Description
of Wholesale Dairy Farms in the Pensacola, Florida Milk Marketing Area
Agricultural Economics Mimeo Report EC 65-1, July, 1964
Florida Agricultural Experiment Stations, University of Florida
Gainesville, Florida







ACKNOWLEDGEMENTS

The general tax-paying public aside, this report properly belongs to

the Pensacola Area dairymen whose cooperation in supplying the highly de-

tailed data necessary to the study went well beyond the limits one had any

reasonable right to expect. Obtaining and verifying this information in-

volved as many as four or five visits with the dairyman, and took the

equivalent of as much as a whole day, or more, of his scarce and valuable

time. Without their kind assistance the study obviously could never have

taken place.

The Florida Milk Commission was of valuable help to the project in its

provision of the data on November shipments used as the basis for selecting

the sample of farms to be studied.

County agricultural extension personnel were most accommodating in

their response to requests for assistance in locating producers and in

making contacts with dairymen to solicit their cooperation and to estab-

lish their confidence in the study and in the people who were to obtain

the information from them.

There are a number of people in the Department of Agricultural

Economics who deserve recognition for their contribution to this study.

The field enumerators, the members of the staff who reviewed the manu-

script, and several others who aided in a number of other ways should all

receive due credit. Special notes of gratitude are extended to

Dr. R. E. L. Greene for his ever ready and ever capable assistance

throughout the conduct of the entire project, and to Mrs. Donna W. Pursell

who so patiently and capably labored through the seemingly endless series

of calculations and who converted an almost illegible hand-written first

draft into the finished type-written copy of the report now before you.

ii







TABLE OF CONTENTS

Page

ACKNOWLEDGEMENTS i


TABLE OF CONTENTS i

V
LIST OF TABLES


INTRODUCTION 1


PROCEDURE 6

Selection of Sample 6

Conduct of Survey 8

General Computational Procedures 10


DESCRIPTION OF PENSACOLA AREA DAIRY FARMS 14

General Measures of Size 14

Milk Production 16

Livestock 18

Dairy 18
Non-dairy 18

Management and Labor 20

Land and Its Utilization 22

Capital Investment and Depreciation 25


ALL FARM RECEIPTS AND EXPENSES 28

General 28

Farm Receipts

Cash receipts
Non-cash receipts 35







Farm Expenses 3

Cash expenses 36
Depreciation 40
Interest on investment at five and one-half per cent 41
Value of unpaid labor 42
Value of operator's labor and management 42
Some general comments on farm expenses 43


MEASURES OF INCOME AND PROFITS, THE OVER-ALL FINANCIAL POSITION OF
DAIRYMEN, FUNDS FOR FAMILY LIVING, AND NET COST OF PRODUCING MILK 45

Measures of Income and Profits 45

Family farm income 45
~6anAsSRJA income 45
Family labor income 45
Operator's labor income 47
Net farm income 47
Net profit or loss 47
Return above equity maintenance 47

Over-All Financial Position of Area Dairymen 48

Funds for Family Living 49

Net Cost of Producing Milk 50


INPUT AND OUTPUT EFFICIENCIES 52


DAIRY HERD CHARACTERISTICS AND FACILITIES

Herd Characteristics 55

Facilities 57


MANAGEMENT PRACTICES AND BIOGRAPHICAL DATA 58

Management Practices 58

Biographical Data 61


SUMMARY 62







LIST OF TABLES

Table Page

1. Base-Holders, Production Units, Fat Uncorrected November Milk
Shipments, and Sample Numbers, by Size of Farm, Pensacola Milk
Marketing Area, 1962 7

2. Dairy Specialization Factors, Pensacola Area Dairy Farms, 1962 11

3. Some Measures of Farm Size by Size Groups Based on Fat Uncorrect-
ed November Shipments, Pensacola Area Dairy Farms, 1962 15

4. Annual Production and Disposition of Milk (Corrected to Four Per
Cent Butterfat), in Gallons per Farm, by Size of Farm, Pensacola
Area Dairy Farms, 1962 .17

5. Average Farm Numbers and Average Values in Dollars per Head of
Dairy Livestock, by Size of Farm, Pensacola Area Dairy Farms, 1962 19

6. Labor and Management Hours, Values, and Man Equivalents per Farm,
by Size of Farm, Pensacola Area Dairy Farms, 1962 21

7. Acreages per Farm by Major Uses, by Size of Farm, Pensacola Area
Dairy Farms, 1962 23

8. Number of Sample Farms with Land in Listed Uses, by Size of Farm,
Pensacola Area Dairy Farms, 1962 24

9. Capital Investment and Depreciation in Dollars per Farm, by Size
of Farm, Pensacola Area Dairy Farms, 1962 26

10. All Farm Receipts and Expenses in Dollars per Farm, by Size of
Farm, Pensacola Area Dairy Farms, 1962 29

11. All Farm Receipts and Expenses in Cents per Gallon of 4% F.C.M.
Sold at Wholesale, by Size of Farm, Pensacola Area Dairy Farms,
1962 30

12. All Farm Receipts and Expenses in Dollars per Cow Based on 13-
month Inventory, by Size of Farm, Pensacola Area Dairy Farms, 1962 31

13. Per Cent That Listed Items of Receipts and Expenses are of Total
Receipts and Expenses, Respectively, by Size of Farm, Pensacola
Area Dairy Farms, 1962 32

14. Income, Profits, Net Worth, Funds for Family Living, and Net Costs
of Milk Sold at Wholesale, in Dollars per Farm, by Size of Farm,
Pensacola Area Dairy Farms, 1962 46

15. Comparison of Etticiency in the Use and Production of Selected
Items, by Size of Farm, Pensacola Area Dairy Farms, 1962 53








16. Herd Turnover Rates, Source of Replacements, Breed Percentages
and Facilities, by Size of Farm, Pensacola Area Dairy Farms, 1962 56

17. Management Practices and Biographical Data, by Size of Farm,
Pensacola Area Dairy Farms, 1962 60








INTRODUCTION

A study of the management and economics of West Florida dairy farms

was initiated by the Department of Agricultural Economics of the University

of Florida early in 1963.

The two major objectives of the study were to develop an economic de-

scription of dairying as it is carried out in those areas, and to get re-

liable information on area dairy production costs and returns. The data

and findings were based on the situation which prevailed in the area in *

the calendar year 1962 and on the operational experiences of the dairymen

during that same year.

West Florida included both the Pensacola and Tallahassee Milk Market-

ing areas as defined by the Florida Milk Commission (see Figure 1). Each

area was studied independently of the other and the findings are reported

in separate publications.

This publication reports the results of the study which pertain to

the Pensacola Area. It is similar in format to those done in other Florida

areas by R. E. L. Greene, et al.1/, but is somewhat broader in scope as it

also presents information on such things as the dairyman's over-all

financial position, management practices followed, and



1/ R. E. L. Greene, et al., Summary of Costs and Returns for Whole-
sale Dairy Farms, Northeast Florida, 1958: Department of Agricultural
Economics Mimeograph Series 60-5, October, 1959, Florida Agricultural
Experiment Stations, University of Florida, Gainesviile, Florida.

(b) R. E. L. Greene, et al., Summary of Costs and Returns for Whole-
sale Dairy Farms, Central Florida. 1958: Department of Agricultural
Economics Mimeograph Series 60-2, October 1959, Florida Agricultural
Experiment Stations, University of Florida, Gainesville, Florida.

(c) R. E. L. Greene, et al., Summary of Costs and Returns for Whole-
sale Dairy Farms, Tampa Bay Milk Marketing Area, 1959: Department of
Agricultural Economics Mimeograph Series 61-5, November, 1960, Florida
Agricultural Experiment Stations, University of Florida, Gainesville,
Florida.








Figure 1:


Geographical Delineation of Florida's Milk Marketing Areas as Defined
On December 31, 1962.


Pensacola

Tallahassee









LEGEND
Areas Under the Florida Milk Commission:


Pensacola


STallahassee


S Northeast Florida


Central Florida


Tampa Bay

Other Milk Marketing Areas:


Tampa


Southeastern Florida Federal Order


Unregulated


TO MONROE COUNTY

.9es


Miami








biographical data pertaining to the farm operator. It differs most sub-

stantially with respect to the quantities of milk shipments which serve

as the basis for dividing farms into small, medium, and large size groups.

Thus the reader is cautioned against making direct, unqualified comparisons

of, for example, small farms in the Pensacola area to small farms in the

Tampa Bay area as the definition of small is not the same in both instances.

The Pensacola Milk Marketing Area is composed of Walton, Okaloosa,

Santa Rosa, and Escambia counties as can be seen from Figure 1. These,

the westernmost counties in Florida, had a combined population of 280,127

in 1960. The Pensacola Urbanized Area was the major milk market, and the

1960 census listed the population of that area at 128,049.

Regular Pensacola Area producers shipped approximately 2,960,000

gallons of milk in 1962 which was 32.5 per cent of all the milk received

in that area and about two per cent of all milk sold to plants and

dealers in all of Florida that year. This production took place on approx-

imately 68 dairy farms by 71 base-holding producers. There were more bases

than production units because of occasional father-son or brother-brother

relationships where each held separate bases but had combined herds and

milking facilities. The 68 producers and producer-distributors repre-

sented 9.5 per cent of the total of approximately 705 commercial milk

production units over the whole state at the time of the study. Sixty-five

of the farms were engaged only in production. The other three were producer-

distributors, one of which was processing milk received from one other

area producer in addition to his own. Neither production nar-tlipmeats

for any of these latter four was available when this study was initiated

and no attempt was made to include them in the study.








The great bulk of all milk shipped by regular area producers was

received by one or the other of the two major distributors in the area.

The balance of thermilk was produced or received by the three producer-

distributors who operated there in 1962. There were three additional

firms distributing milk within the area which was processed outside the

area, thus making a total of eight firms distributing milk in that mar-

ket at the time of the study.

In addition to the 68 regular producers located in Florida, there

were 22 base-holding producers located outside Florida who regularly

shipped to distributors in the Pensacola area. Most of these producers

were situated just over the State line in Southern Alabama, and were not

a part of this study. There were a few producers in the Pensacola area

who regularly shipped to other Florida- oeas or to receivers .-titsi4de'the

state. Insofar as these could be identified, they were included in this

study. Producers who regularly shipped to the Pensacola market from the

Tallahassee area were included in the Tallahassee study. The intent was

to include all the producers whose farms were actually located in the

Pensacola Area without- regard to the location of their receiver.

The information upon which this report is based was obtained by

personal interview with the primary manager (or managers) of each farm

included in the study. A formal questionnaire was used by the enumerator,

and the information the farmer gave was substantiated, insofar as possible,

by his own records (including his 1962 income tax return and milk settle-

ment sheets) and such other records, if any and as needed, that were

kept by the farmer's bookkeeper or accountant. As preliminary summaries

and analyses of individual records were carried out, and as certain








discrepancies and deviations from the apparent or expected norm were ob-

served, farms were revisited to verify or modify, as appropriate, those

items which seemed most doubtful.

This report is prepared in such a way that the farmers who cooperated

in the study can use it to compare their =wn farm operation to other

farms of similar size. Space is provided on most tables to record the

information from individual farms which corresponds to the data presented

in that particular table for the small, medium, large, and all farm groups.

It is recommended that cooperating dairymen take advantage of this oppor-

tunity to evaluate their operation and to seek assistance in interpretation,

if desired, through their County Agricultural Extension Agent.








PROCEDURE

Selection of Sample

The Florida Milk Commission supplied a list of milk shipments by

base-holding: producers for the month of November, 1962. After deleting,

from that list, the three producer-distributors and their one lone addit-

ional supplier, and before multiple bases in a single production unit

were combined, there remained 67 base-holding producers from which the

sample was initially drawn. These 67 producers were first arrayed in

order of size with respect to November shipments, then divided into

three groups. The first of these groups included all producers shipping

less than 75 gallons per day and numbered 32. There were 21 producers

in the middle group with shipments between 75 and 150 gallons per day,

and 14 in the large group shipping over 150 gallons per day. After the

producers were thus divided into size groups, they were arranged in-

order of size according to the county in which they were located. A

random start was made and every third farm selected for inclusion in

the original sample for the small and medium size groups. The farm

immediately following each original was selected as an alternate to

that particular original. This method of selection insured good dis-

tribution by size and by geographical location within the area. Due

to the small number involved, and the importance of the group with

respect to total production, it was decided to attempt to include in

the study all the farms classified as large. More complete information

on farm and sample sizes, numbers, and percentages are presented in

Table 1, below.








PROCEDURE

Selection of Sample

The Florida Milk Commission supplied a list of milk shipments by

base-holding: producers for the month of November, 1962. After deleting,

from that list, the three producer-distributors and their one lone addit-

ional supplier, and before multiple bases in a single production unit

were combined, there remained 67 base-holding producers from which the

sample was initially drawn. These 67 producers were first arrayed in

order of size with respect to November shipments, then divided into

three groups. The first of these groups included all producers shipping

less than 75 gallons per day and numbered 32. There were 21 producers

in the middle group with shipments between 75 and 150 gallons per day,

and 14 in the large group shipping over 150 gallons per day. After the

producers were thus divided into size groups, they were arranged in-

order of size according to the county in which they were located. A

random start was made and every third farm selected for inclusion in

the original sample for the small and medium size groups. The farm

immediately following each original was selected as an alternate to

that particular original. This method of selection insured good dis-

tribution by size and by geographical location within the area. Due

to the small number involved, and the importance of the group with

respect to total production, it was decided to attempt to include in

the study all the farms classified as large. More complete information

on farm and sample sizes, numbers, and percentages are presented in

Table 1, below.








Table 1. Base-Holders, Production Units, Fat-Uncorrected November Milk
Shipments and Sample Numbers, by Size of Farm, Pensacola Milk Marketing
Area, 1962


Area
Item Size of Farm C/ Total or
Small Medium Large Average

Number of Base-Holders/ 32 21 14 67

Number of Production Units / 27 23 14 64

Average Daily November Shipments
per Production Unit (gals.) 52.2 103.4 280.6 120.6

Total November Shipments (gals.) .142300 71,310 117,870 231,480

Farms in Size Groups as Per Cent of
Total Number of Production Units 42.2 35.9 21.9 100.0

Shipments by Size Groups as Per Cent
of Total November Shipments for All
Farms 18.3 30.8 50.9 100.0

Number of Farms in the Original
Sample 10 8 14 32

Number of Completed Survey
Questionnaires 9 8 11 28

Number of Survey Questionnaires Used
in This Report 7 7 10 24

Number of Questionnaires Used as Per
Cent of Farms in Respective Size
Groups 25.9 30.4 71.4 37.5



a/ Exclusive of the three producer-distributors and the one producer
supplying one of those producer distributors.

b/ The result of the combining of multiple bases in a single production
unit.

c/ Size of farm is based on the daily average number of gallons of milk
shipped in November, 1962, as noted in the text.







Conduct of the Survey

The originals were all first contacted and their cooperation solicited.

If they did not qualify, or did not choose to cooperate, the cooperation

of their respective alternates was next sought. Then, if for any reason

a questionnaire was not completed with the alternate, a replacement was

randomly chosen from among the producers who were.initially selected for

the study.

It was only after the survey work was well under way that an identi-

fication of the multiple bases which existed in single production units .

could be made. Since the number involved was so small, it was decided that

the reclassification of farms necessary as the result of the combination

of bases would have no significant effect on the reliability of the study.

Farms were initially disqualified in the field if:

(1) the producer's fiscal year deviated from the calendar

year 1962 by more than three months

(2) the producer processed any milk for any other producer

or more than 10% of his own milk

(3) the producer sold more than 10% of his own milk to his own

retail outlets

(4) the producer was a tenant on anything bit a fixed cash

rental or fixed crop or livestock share basis.

After some experience was gained in the field, it was decided farms

should also be disqualified in those cases where:

(1) principal management had changed hands at any time in 1962

(2) multiple production units operated with autonomy in some

areas, but were interdependent in other areas







(3) if gross receipts from sales of milk were less than 50%

of gross receipts from all farm enterprises as reported on

their 1962 Federal Income Tax Return.

A formal questionnaire was followed and the producer's answers record-

ed on the questionnaire itself at a personal interview with the principal

manager or managers of the fari. All information recorded at this inter-

view was taken from records, from the farmer's memory of his records, or

from the farmer's own best estimates of those things-which he did not

normally record. The principal records were the Federal Income Tax Return,

Producer Milk Settlement sheets, and such other records as farm account

books, ledgers, check stubs, etc., that the farmer or his bookkeeper

might have.

The schedules were checked for completeness in the field at the first

opportunity, and farms immediately revisited if there were errors of ommis-

cion or of obvious commission. They were given another more detailed check

for the same purpose at Gainesville at the earliest opportunity, and farms

were again revisited as appropriate. As soon as the field work was com-

pleted, the records were summarized individually and by size groups. This

provided a basis for comparison of individual records within a group to

the average for that same group for all the items of coats and returns

recorded in the interviews. These cost and return items were compared

both as to their total magnitude and on per cow, per acre, or per gal-

lon of milk bases, as appropriate. As discrepancies or deviations of

substantial degree from the apparent or expected averages were discovered,

and where these could-notbe rationalized on the basis of other pecularities

about a particular farm, farms were once again revisited. At this final

stage of the information gathering and verification process, 14 of the

24 farms used in this study were revisited.







General Computational Procedures

Dairymen in the Pensacola Area are less specialized in the production

of milk than those in any other area of the state. Not only did they pro-

duce a higher percentage of their own feed for their dairy enterprises,

they were also relatively heavily involved in the production of crops

for cash sales and, though to a much lesser extent, in other livestock

enterprises.

Farms whose gross receipts from milk were less than 50% of all gross

receipts were initially excluded from the study. Once the survey was com-

pleted, and more complete data for each of the cooperating farms was at

hand, a dairy specialization factor was computed 2/. All farms for which

this factor turned out to be less than .70 were arbitrarily deleted from

the original set of completed survey schedules and were excluded from

all calculations for this report. Table 2 shows these factors for each

farm, the weighted averages for each size group, and the over-all weighted

factor for the entire Pensacola Area.


This factor was computed as follows:

The sum of: (1) gross receipts from wholesale sales of milk
(2) receipts from retail milk sales
(3) value of milk used in operator's home
(4) receipts from sales of veal dairy calves
(5) value of dairy animals butchered for home use
(6) net dairy herd appreciation

Divided by the sum of:
(1) (1) through (6) above
(2) net non-dairy livestock appreciation
(3) value of non-dairy livestock butchered
(4) receipts from sales of crops
(5) net feed inventory increases








TABLE 2. Dairy Specialization Factors, Pensacola Area


11

Dairy Farms, 1962


i Small Farms Medium Farms Large Farms
Item Farm No Factor Farm No, Factor Farm No, Factor

1 .97 1 .85 1 .99

2 .100 2 .83 2 1.00
Individual
Farm Factors 13 .73 3 .99 3 1.00

4 .96 4 1,00 4 1.00

5 1.85 5 .71 5 .84

6 .73 6 .89 6 1.00

7 .81 7 .99 7 .86

8 .99

9 .99

10 .99

Size Groups
Average Factors .- .837 .883 .967

Overall Area Factor --- .921 Your Farm Factor


The elimination of farms with dairy specialization under 70% did much

to remove the effects of non-dairy enterprises on the estimate of the appar-

ent cost of producing milk. The farms which remained showed an over-all

area average specialization of 92%. To correct, farm by farm, for the

approximate eight per cent non-specialization which remained, total farm

expenses were reduced by all farm receipts except those from the whole-

sale sale of milk. The resulting balance of expenses were charged to the

production of milk which was sold at wholesale. The assumption implied

here was that the costs of producing non-wholesale milk items were just

equal to the receipts from the same, and that the receipts accurately

measured the returns to those items.







Beyond these adjustments for non-dairy specialization and for non-

wholesale milk receipts, no attempt was made to separate costs or returns

for the farm production of goods or services which were used as direct

inputs to the dairy enterprise. The most common of these is the farm

production of feeds and the growing of herd replacements.

The estimate of the cost of producing milk was based on total milk

shipments corrected to a four per cent butterfat basis3/. The butterfat

test reported by the receiver was used in the calculations. Unless speci-

fied otherwise, all further references to milk will be to that which has

been so corrected.

The estimate of mature cow numbers was based on a 13-month inventory

obtained for each dairy. This consisted of the farmer's best estimate

of the number of mature cows (in milk and dry) on hand at the beginning

of each month, and the number on hand the last day of the last month of

the year. These 13 on-hand counts were added and the total divided by

13 to yield the estimate of the average number of cows on that farm

for the year 1962. This method gives a count which in effect weights

cow numbers by length of time in the herd and is more precise than a

simple average of the cows at the beginning and the end of the year. The

13 month average is therefore used throughout this report except as noted

to the contrary.



SMilk is customarily corrected to a common butterfat percentage where
quantity of milk is an important factor in the element under study.
It is, simply, an attempt to make unlike things more alike, and is
calculated as follows:

(0.4 x pounds or gallons of milk)

plus

(15 x pounds or gallons of butterfat)






13

The summarization of individual farm records was a straight forward

procedure and involved, for the most part, only simple totals, averages,

or percentages. Though care had to be taken that averages of averages

or averages of percentages were not used, estimates for size groups were

for the most part developed simply by summing the items under consideration

for all farms within a given size group and then dividing these sums by

the appropriate number of sample farms. It was when size groups were

combined to make up area averages that the best procedures were not immed-

iately clear. The primary source of the problem resided in the fact that

there were unequal numbers of farms in each size group in the first in-

stance, and that the proportions of farms sampled from each group was

different in the second. One had to be able to legitimately assume, of

course, that the farms that were sampled were representative of the group

from which they came. Otherwise the study would be of doubtful statistical

validity.

The weights and weighting procedures used depended on the particular

estimate that was to be made. They were carefully selected and employed

throughout this study to ensure that size groups and area totals, averages,

and percentages were both meaningful and contained a minimum of

distortion.








DESCRIPTION OF PENSACOLA AREA DAIRY FARMS

General Measures of Size

There is no one all-inclusive, over-all best way of measuring the

size of anything that exists in more than one dimension, and dairy farms,

of course, exist in many dimensions. Daily fat-uncorrected November

shipments were originally used as the basis for division into size groups

for purposes of drawing the sample of farms to be studied, and it is on

that basis that farms continue to be classified with respect to size

throughout this report. Total shipments for the year, as well as total

production for the year, are better measures of size with respect to

milk output than November shipments alone. Since these figures were not

available before the study began, farms could not be classified on those

bases for purposes of sampling, and to maintain the statistical validity

of the study, it was necessary to continue on a Ncvember shipment basis.

Other measures of size which are of interest are cow numbers, acreages,

men, capital, and gross cash farm receipts. These are listed in Table 3

by size groups based on fat-uncorrected November shipments. Further

detail regarding the descriptive aspects of these measures of size is

presented in succeeding parts of this section.








DESCRIPTION OF PENSACOLA AREA DAIRY FARMS

General Measures of Size

There is no one all-inclusive, over-all best way of measuring the

size of anything that exists in more than one dimension, and dairy farms,

of course, exist in many dimensions. Daily fat-uncorrected November

shipments were originally used as the basis for division into size groups

for purposes of drawing the sample of farms to be studied, and it is on

that basis that farms continue to be classified with respect to size

throughout this report. Total shipments for the year, as well as total

production for the year, are better measures of size with respect to

milk output than November shipments alone. Since these figures were not

available before the study began, farms could not be classified on those

bases for purposes of sampling, and to maintain the statistical validity

of the study, it was necessary to continue on a Ncvember shipment basis.

Other measures of size which are of interest are cow numbers, acreages,

men, capital, and gross cash farm receipts. These are listed in Table 3

by size groups based on fat-uncorrected November shipments. Further

detail regarding the descriptive aspects of these measures of size is

presented in succeeding parts of this section.








TABLE 3. Some Measures of Farm Size Groups Based on Fat-Uncorrected
November Shipments, Pensacola Area Dairy Farms, 1962

-~ '- -- : : '

Item Size of Farm All Your
Siall Medium Large Farms Farm


Average 45.4 60.2 135.3 70.4

Number of
Cows Range 33 31 55 31
to to to to xxxxx
68 97 259 259


Average 146 289 417 257
Number of
Acres
Operated Range 35 145 100 35
to to to to xxxxx
265 486 1,615 1,615


Average ,U.3 .2.7 4.8 2.6
Number of
Man
Ecuivalents Range 1.0 2.2 2.8 1.0
to to to to xxxxx
1.6 3.3 8.0 8.0


Average 42.262 79,986 122,445 73,359

Total Farm
Capital Range 19;553 46,440 67,653 18,553
(Dollars) to to to to xxxx
65.956 124,283 285,284 285,284


Average 13,115 25,212 54,331 26,478

Cash Farm
Receipts
.Dbllars) Range 4,604 18,548 28,686 4,604
to to to to xxxxx
20,155 37,636 111,676 111,676








Milk Production

Average annual butter-fat percentages and individual farm totals

for; 4% fat corrected milk (4% F.C-M.) shipped in 1962 estimated from

November shipments alone, 4% F.C.M. actually shipped during the year

based on settlement sheets, other 4% F.C.M. produced in 1962, and total

4% F.C.M. produced during the year, are shown in Table 4, below. Other

milk produced is broken down into milk retailed at the farm, milk used in

the operator's household, milk used by hired workers and their families,

milk fed to calves, and milk in all other uses, principally that which

was dumped or given away.

The estimate of annual shipments based on November data was only

94% of annual shipments based on settlement sheets for the whole year.

This means, of course, that November was a seasonally low production

month, and that farms were larger, from the standpoint of total milk

shipments, than the November data alone indicated. It can be shown,

too, from the data of Table 4, that the estimate of annual shipments

based on November data was only 91% of total production for the year.

Thus the deviations between total production and the estimate of ship-

ments based on the November data are explained more by seasonality in

production than by the quantities of milk used for purposes other than

wholesale sales.














TABLE 4. Annual Production and Disposition of Milk (Corrected to Four
Per Cent Butterfat), in Gallons per Farm, by Size of Farm, Pensacola
Area Dairy Farms,.1962



Size of arm All Your
Item Small Medium Large Farms Farm
1Med~~IujLag


Average Butterfat Test (%)

Milk Estimated Shipped (Based
Only on November Shipments)

Milk Actually Shipped (Based
on All Settlement Sheets)


Other
Milk
Produced


Retailed at the
Farm

Used in.OpepatorAs
Household

Used by Hired
Workers


Fed to Calves


All Else


Total Other.


I


4.34


9-948


'0,291




83


425





1,417


53


1,978


22,269


3.95


38,836


40,251




651


433



104

31


37


1,256


4.28


89,884


98,949




570


355



501

347


108


1,881


41,509 1100,831


4.18


42,035


44,670




393


413



147

685


60


1,697

46,368


j I


Total Milk Produced, 1962










Livestock

Dairy

The average numbers and values for cows, heifers of all ages, and

bulls of all ages are shown in Table 5 below. In a later section of this

report will be shown herd turnover rates, source of replacements, breed

percentages, as well as facilities for housing and milking the dairy

herd.

Non-edairy

Livestock other than dairy is of very limited importance on

Pensacola Area dairy farms. One farm in the sample had a few hogs and

some dairy-beef animals which amounted to approximately 18% of all

receipts from livestock A/ and another farm had hogs to approximately

4% of all livestock receipts. The farms that were eliminated because

of a low degree of specialization in dairy were receiving the great

bulk of their other farm income from cash crop enterprises and were

not involved in other livestock production to any appreciable extent.










- Livestock receipts as used here is the sum of:
(lY gross receipts from wholesale sales of milk
(2) receipts from retail milk sales
(3) value of milk used in operator's household
(4) receipts from sales of veal dairy calves
(5) value of dairy animals butchered
(6) net dairy herd appreciation
(7) net non-dairy livestock appreciation
(8) value of non-dairy livestock butchered









TABLE 5. Average Farm Numbers and Average Values in Dollars per Head
of Dairy Livestock by Size of Farm, Pensacola Area Dairy Farms, 1962


:' Size ofFarm
Small Medium Large All Farms four Farm
Item Ave. Ave. Ave. Avei Ave.
No. Value No. Value No. Value No. Value No. Value


Cows
Beginning Inven.
Additions
Purchased
Transferred in
Subtractions
Sales
Died
Butchered
Ending Inven.
Ave. of Begin-
end Inven.

13-Month Average
Inven.

Heifers (All ages
Beginning Inven.
Additions
Purchased
Transferred in
Subtractions
Sales
Died
Butchered
Transferred Out
Ending Inven.
Ave. of Begin-
End Iven.

Bulls (All Ages)
Beginning Inven.
Additions
Purchased
Transferred In
Subtractions
Sales
Died
Butchered
Ending Inven.
Ave. of Begin-
rnd Inven


44.6

.1.0
5.3

5.0
0.3
0
45.6

45.1


45.4

)
10.3


6.4

0.1
0.1

5.3
11.1

10.7


1.0

0.1
0.1

6.1


1.1

1,1


214

218


107


217

216





131


47



114

122


158

251


125


188

174


63.0 250

4.3 222
11.4 -


12.0
4.7
0.3
61.7


62.41250


60.2


32.41122


0.7
14.4

0.4
0.4
1.7
11.4
33.6


33.0 123


1.1 304

0.3 288
1.1 -


1.8 268


140.2 222

.':9.1 206
24.1 -


*.31.7
3.4
0.1
138.2

139.2


135.3


51.0

0.5
26.6

0.1
1.5
0.1
24.1
52.3

51.6


1.8

0.3
0.1

0.3


1.9

1.9


146


229

225





132

94


125



126

129


315

205


270


296

305


72.1

4.0
11.6

13.4
2.6
0.1
71.6

71.9


70.4


27.1

0.4
13.7

0.2
0.5
0.6
11.6
28.2

27.7


1.2

0.2
0.5

0.1


1.7

1.5


128

96


76



123

126


259

248


199


235

247










Livestock

Dairy

The average numbers and values for cows, heifers of all ages, and

bulls of all ages are shown in Table 5 below. In a later section of this

report will be shown herd turnover rates, source of replacements, breed

percentages, as well as facilities for housing and milking the dairy

herd.

Non-edairy

Livestock other than dairy is of very limited importance on

Pensacola Area dairy farms. One farm in the sample had a few hogs and

some dairy-beef animals which amounted to approximately 18% of all

receipts from livestock A/ and another farm had hogs to approximately

4% of all livestock receipts. The farms that were eliminated because

of a low degree of specialization in dairy were receiving the great

bulk of their other farm income from cash crop enterprises and were

not involved in other livestock production to any appreciable extent.










- Livestock receipts as used here is the sum of:
(lY gross receipts from wholesale sales of milk
(2) receipts from retail milk sales
(3) value of milk used in operator's household
(4) receipts from sales of veal dairy calves
(5) value of dairy animals butchered
(6) net dairy herd appreciation
(7) net non-dairy livestock appreciation
(8) value of non-dairy livestock butchered










Livestock

Dairy

The average numbers and values for cows, heifers of all ages, and

bulls of all ages are shown in Table 5 below. In a later section of this

report will be shown herd turnover rates, source of replacements, breed

percentages, as well as facilities for housing and milking the dairy

herd.

Non-edairy

Livestock other than dairy is of very limited importance on

Pensacola Area dairy farms. One farm in the sample had a few hogs and

some dairy-beef animals which amounted to approximately 18% of all

receipts from livestock A/ and another farm had hogs to approximately

4% of all livestock receipts. The farms that were eliminated because

of a low degree of specialization in dairy were receiving the great

bulk of their other farm income from cash crop enterprises and were

not involved in other livestock production to any appreciable extent.










- Livestock receipts as used here is the sum of:
(lY gross receipts from wholesale sales of milk
(2) receipts from retail milk sales
(3) value of milk used in operator's household
(4) receipts from sales of veal dairy calves
(5) value of dairy animals butchered
(6) net dairy herd appreciation
(7) net non-dairy livestock appreciation
(8) value of non-dairy livestock butchered









Management and Labor

Each principal operator was asked as to the total number of hours,

days, weeks, or months that each individual person employed on the farm

in 1962 worked. He was also asked as to the number of hours each person

worked per day, week, or month, if appropriate, and as to the hourly,

daily, weekly, monthly, or annual wages paid or the worth of the individ-

ual's service if not paid, for all labor and management performed on

his farm in 1962 other than that associated with custom work or hired

under special contract. He was also asked to estimate the total number

of man hours spent in performing the regular daily routine chores of

feeding, milking, and caring for his entire dairy herd. Table 6 pre-

sents data gathered in this connection in some detail. No individual

manager or laborer was listed at over 14 hours of work per day, and a

standard work day of nine hours at six dollars per day was used for day

labor rates where some of the information for this item was missing.

Man equivalents were arbitrarily developed on the basis of the average

number of hours worked by each man who appeared to be employed on the

farm on a full-time basis. Total wages paid was computed through

extending the rates of pay per pay period by number of ?.y periods worked

for all hired labor. This total wage figure was compared to the state-

ment of wages paid on the Federal Income Tax Return, and, the time

worked and wages paid adjusted in proportion to the differences, if any,

found between the two wage bills. No allowance was made for the value

of perquisites granted hired labor, and so to the extent the value of .

these perquisites varied between farms, farm to farm labor costs are

not strictly comparable.












TABLE 6. Labor and Management Hours, Values, and Man Equivalents per
Farm, by Size of Farms, Peusacola Area Dairy Farms, 1962.



Item Size of Farm All Your
Small Medium Large Farms Farm

All Labor
Total hours 5,085 11,866 16,301 9,975
Total dollar value 6,037 11,237 15,868 10,056
Value per hour 1.19 .95 .97 1.01
Man equivalents 1.32 2.70 4.80 2.58

Operator's Labor and Management
Total hours 3,918 4,771 4,432 4,337
Total dollar value 5,120 5,486 6,960 5,654
Value per hour 1.31 1.15 1.57 1.30
Man equivalents 1.00 1.00 1.22 1.05

Hired Labor
Total hours 280 2,105 10,942 3,268
Total dollar value 195 1,231 8,080 2,292
Value per hour .70 ..58 .74 .70
Full-time man equivalents 0 .43 2.90 .79
Part-time man equivalents .09 .20 .42 .20

Unpaid Family Labor
Total hours 886 4,989 .926 2,369
Total dollar value 722 4,520 829 2,110
Value per hour .81 .91 .90 .89
Man equivalents .23 1.08 .25 .54

Shares to Dairy2/
Total hours- 4,256 10,478 15,763 9,187
Total dollar value 5,053 9,922 15,344 9,262
Man equivalents 1.11. 2.38 4.64 2.38

Annual Dairy Chore Hours 3,170 6,232 10,224 5,813


SComputed by multiplying the average total labor figures for appro-
priate items by the dairy specialization factors first referred to
under the General Computational Procedures section above.









Labor and management shares to dairy in terms of man equivalents,

value, and hours were developed from total farm figures through the

application of the Dairy Specialization Factors first referred to under

the General Computational Procedures section above. This adjustment was

made so that individual farms could be later compared, with respect to

the efficiency of their labor in just the dairy enterprise, on a more

uniform basis.

Land and Its Utilization

A complete statement of acreages owned, rented, and operated, and

their utilization by crops was obtained from each farm in the survey.

Sample totals and averages were expanded to area totals and averages

using weights as appropriate.

Value per owned acre was the farmer's own best estimate of the

value of his land for agricultural purposes. The estimate was, for the

most part, based on the price he felt he could afford to pay for land

of similar quality and realize a return from it in agricultural pro-

duction at least equal to the costs of carrying that land.

Acres owned and rented refer to actual physical acreages only.

Table 7 shows that 20.4% of all land operated on all fzrms was double or

triple cropped. It shows, too, that 32.4% of all high-order use land

was double or triple cropped.

Acreages classified as low-order or non-use acreages are, for the

most part, of no consequence from the standpoint of productive output.

Farms studied would have been at least as well off without them insofar

as the 1962 production of milk was concerned.









TABLE 7. Acreages per Farm by Major Uses, by Size of Farm, Pensacola
Area Dairy Farms, 1962.

Item Size of Farm All Your
Small Medium Large Farms Farm
Value per owned acre (dollars) 160.0 142.0 177.0 156.0 _
Total Acres Operated
Acres owned 136.0 277.0 281.0 218.0
Acres Rented 10.0 12.0 137.0 39.0
Total operated 146.0 289.0 418.0 257.0
Per cent rented 6.8 4.2 32.8 15.2
Low-Order or Non-Use Acreages
Unusable 14.1 25.4 34.9 22.7
Idle (though useable) 30.4 6.7 12.4
Woodland pastured 23.6 55.6 120.0 56.2
Unimproved open pasture 5.0 .7 .4 2.5
Total low-order 42.7 112.2 162.0 93.8
High-Order Use Acreages
Forage Crops
Permanent improved pasture 32.1 79.6 151.2 75.2
Temporary pasture 34.9 72.9 111.3 65.2
Hay 5.3 31.6 46.7 23.8
Silage 5.3 11.9 26.3 12.3
Green chop 0 0 1.6 .35
Total forages 77.6 195.9 337.1 176.9
Grain Crops
Corn 14.6 19.6 3.0 13.9
Oats 5.6 3.7 11.8 6.3
Wheat 2'6' 12.1 7.8 7.2
Soybeans 28.6 23.3 14.9 23.7
Total grains 51.3 58.7 37.5 51.0
Other High-Order Uses 1.6 11.9 1.4 5.3
Total high-order (includes
multiple crops and uses) 130.4 266.5 376.0 233.0
Acres double-cropped a/ 27.0 65.2 78.9 52.1
Acres triple-cropped 0 0 6.0 .9
Acres double-use crops 1 0 24.4 35.7 16.6
Actual, physical high-order
acreages 103.4 176.9 255.4 163.1
Per cent of total land operated
double or triple cropped 18.5 22.6 20.3 20.6
Per cent of actual, physical
high-order use land double or
triple-cropped 26.1 36.9 33.2 32.5

a/
/ Double-cropped acreages were those from which two different crops were
; harvested for example, oats followed by millet on the same land.
Triple-cropped acreages were those from which three different crops were
harvested f6r example, oats followed by corn and then millet on the
same land. If the same crop on the same land was successively harvested
in two different ways, for example, bahia grass that was pastured and
then c't for hay, it was listed as a double-use crop.







24

Table 8 shows the number of sample farms who had some land in the

various uses listed. This is a tabulation of possible interest, and

since it is largely self-explanatory, no further comment seems warranted.



TABLE 8. Number of Sample Farms With Land in Listed Uses, by Size of
Farm, Pensacola Area Dairy Farms, 1962.



Itm Size of Farm All
SSmall Medium Large Farms


Number of Farms in Sample

Number of Sample Farms:

With woodland pasture

With unimproved open pasture

With permanent improved pasture

With temporary pasture

That made some hay

That made some silage

That made some green chop

That harvested some corn for
grain

That harvested some oats for
grain

That harvested some wheat for
grain

That harvested some soybeans
for grain


6

1

7

7

2

3

0


3


2


1


1 1 _________ 3









Capital Investment and Depreciation

The asset values listed in Table 9 are for owned assets only, thus

they do not include the values of rented land. Values for buildings,

fences, machinery, and equipment are the depreciated book values, if

such assets were on a depreciation schedule, otherwise they are the

farmer's best estimate of their current market value. Land was valued

as explained under the Land and Its Utilization section above, and

livestock on the basis of the farmer's estimate of its current market

value.

Milk base is not listed as an asset anywhere in this report.

When it is sold it is frequently sold along with a number of cows, and the

problem of separating the value of the base from the value of the cows

presents itself. The difficulty of base valuation is further compounded

by the uncertainty surrounding its legal basis, and the rather marked

fluctuation in its market price over time as the institutions and organ-

izations which give it substance vacillate between views as to what

status base can and should have.

Depreciation on buildings, fences, machinery, and equipment was

taken, as available, from the depreciation schedules usd in the

preparation of the Federal Income Tax return. Buildings and fences not

listed on the schedule were depreciated at four per cent of their cur-

rent value and machinery and equipment at eleven per cent of its current

value. These rates are approximately two-thirds of the over-all rates

of depreciation taken on scheduled buildings, fences,:.machinery, and

equipment. About one-half of the assets not listed were newly purchased

in 1962, ahd the other half of the items were not listed for a variety

of other reasons. Using the two-thirds rates for such unlisted assets

seemed a reasonable compromise.








TABLE 9. Capital Investment and Depreciation in Dollars Per Farm,
by Size of Farm, Pensacola Area Dairy Farms, 1962.



Item Size of Farm All Your
_____ Small Medium Large Farms Farm

Capital Investment:
Land (rented land not included) 21,732 39,249 49,733 34,152
Buildings and Fences 2,658 8,246 17,327 7,875
Machinery and Equipment 6,158 12,387 16,395 10,636
Dairy Livestock 11,357 20,103 38,779 20,499
Non-Dairy Livestock 357 213 197
Total Investment 42,262 79,986 122,445 73,359

Depreciation:
Buildings and Fences 274 437 975 486
Machinery and Equipment 930 2,283 .3,554 1,990
Dairy Livestock a/ -619 -401 -2,945 -1,050
Non-Dairy Livestock a/ -369 -171 -217
Total Depreciation 218 2,147 1,585 1,209


Dairy Specialization Factor .837 .883 .967 .921


Dairy Share of Capital
Investment b/
Land 18,190 34,657 48,092 31,454
Buildings and Fences 2,225 7,281 16,755 7,253
Machinery and Equipment 5,154 10,938 15,854 9,796
Dairy Livestock 11,357 20,103 38,779 20,499
Total 36,926 72,979 119,480 69,002

Dairy Share of Depreciation: b/
Buildings and Fences 229 386 943 448
Machinery and Equipment 778 2,016 3,4371 1,833
Dairy Livestock -619 -401 -2,945 -1,050
Total 388 2,001 1,435 1,231

Overall Rates of Depreciation:
Buildings and Fences ~10l3% 5.3% 5.6% 6.2%
Machinery and Equipment 15.1% 18.4% 21.7% 18.7%


Dairy and non-dairy livestock depreciation is negative because
there was, on the average, an over-all increase in all live-
stock values in 1962 as computed for purposes of this report.
The basis for these computations is given in the accompanying
text.

Computed by multiplying the average total investment and depre-
ciation figures for appropriate items by the dairy specialization
factors first referred to in the General Computational Procedures
section above, and listed again in this table for convenience of
reference.






27

Depreciation on livestock was computed as follows:

(Value of beginning inventory + cost of purchases)
less
(Value of ending inventory + receipts'from sales.)

If the herd decreased in value based on these computational procedures,

the sign of the answer was positive. If it increased in value (that is,

if the herd appreciated in value) the sign was negative.







ALL FA~R RECEIPTS AND EXPENSES

General

The data in Tables 10, 11, and 12 show all farm receipts and ex-

penses on the basis of per farm, per gallon of 4% F.C.M., and per cow,

respectively. The classification of receipts and expenses used is

thought to be the most meaningful within the limits within which the

study was conducted. Precise comparisons among individual farms of

specific receipts or expenses items is not always possible since farmers

themselves do not classify such factors in a completely standardized

way. Where there was good reason to believe that a particular item

was improperly listed, however, it was assigned to the most likely

classification. Though there are likely to be some substantial errors

in classification in the case of individual farms, it is felt the

estimates for size groups and the estimates for all farms are uniform

enough for reliable comparisons of the individual items of receipts

and expenses. Of course the classification of individual items has

no effect on total receipts or expenses, so the accuracy of the over-

all analysis is unaffected by whatever errors in classification might

exist.

It must be clearly noted and understood that this section of this

report deals with all farm receipts and expenses, and Ltat no attempt

is made to separate the milk-producing operation from other farm enter-

prises. It is, then, a total farm analysis, and it is not until the

following section that an attempt to separate out the costs and re-

turns to the production of milk for wholesale shipment is made.

Table 13 shows the percentage that each receipt and expense item

is of total receipts and expenses, respectively. This table shows most

clearly the relative importance of each item listed.







ALL FA~R RECEIPTS AND EXPENSES

General

The data in Tables 10, 11, and 12 show all farm receipts and ex-

penses on the basis of per farm, per gallon of 4% F.C.M., and per cow,

respectively. The classification of receipts and expenses used is

thought to be the most meaningful within the limits within which the

study was conducted. Precise comparisons among individual farms of

specific receipts or expenses items is not always possible since farmers

themselves do not classify such factors in a completely standardized

way. Where there was good reason to believe that a particular item

was improperly listed, however, it was assigned to the most likely

classification. Though there are likely to be some substantial errors

in classification in the case of individual farms, it is felt the

estimates for size groups and the estimates for all farms are uniform

enough for reliable comparisons of the individual items of receipts

and expenses. Of course the classification of individual items has

no effect on total receipts or expenses, so the accuracy of the over-

all analysis is unaffected by whatever errors in classification might

exist.

It must be clearly noted and understood that this section of this

report deals with all farm receipts and expenses, and Ltat no attempt

is made to separate the milk-producing operation from other farm enter-

prises. It is, then, a total farm analysis, and it is not until the

following section that an attempt to separate out the costs and re-

turns to the production of milk for wholesale shipment is made.

Table 13 shows the percentage that each receipt and expense item

is of total receipts and expenses, respectively. This table shows most

clearly the relative importance of each item listed.







TABLE i9. All Farm Receipts and Expenses in Dollars per Farm, by Size
of Farm', Pensacola Area Dairy Farms, 1962.

Item I Size of Farm IAll Your
_Small Medium Large Farms Farm
Cash Receipts:
Wholesale milk sales O0,289 20,969 51,553 23,154
Retail sales of milk 51 394 231 214
Value of milk used in home 212 238 189 216
Dairy calves sold 390 311 793 450
Dairy animals used in home 76 59 40
Non-dairy animals used in home 18 8
Crop sales 1,930 2,838 1,223 2,102
Other and miscellaneous reptbs&.. 225 386 283 296
Total Cash Receipts L3,115 25,212 54,331 26,478
Non-Cash Receipts:
Dairy livestock appreciation 619 401 2,945 1,050
Non-dairy livestock apprec. 369 171 217
Total Non-Cash Receipts 988 572 2,945 1,267
TOTAL FARM RECEIPTS 14,103 25,784 57,276 27,745

Cash Expenses:
Labor hired 195 1,231 8,080 2,292
Repairs and maintenance 496 762 1,818 881
Feed purchased 3,621 9,071 19,915 9,144
Seeds and plants .315 601 .662 ',494
Fertilizer and lime 1,445 1,980 3,837 2,161
Machine hire and custom work 76 337 347 229
Supplies 225 617 1,915 736
Testing, regis., breeding 92 238 250 179
Veterinary and medicine 39 180 329 153
Gasoline, fuel, and oil 331 730 1,501 730
Florida Milk Commission taxes 27 52 125 57
Other taxes and licenses 195 303 1,188 451
Insurance 60 179 609 223
Utilities 253 474 1065 510
Rents paid 136 101 264 151
Milk hauling, handling, trans. 574 1,560 2,890 1,435
Other trucking or freight 15 43 469 124
Legal, accounting, and audit. 15 30 108 41
Farm organization dues 22 47 84 45
Other and miscellaneous 35 146 130 96
Total Cash Expenses 8,167 18,682 45,586 20,131
Depreciation:
Dairy herd depreciation -
Non-dairy livestock deprec. -
Buildings and fences 274 437 975 486
Machinery and equipment 930 2,283 3,554 1,990
Total Depreciation 1,204 2,720 4,529 2,476
Int. on Investment @ 5 1/2% 2,324 4,399 6,734 4,035
Unpaid Labor (other than oper.) 722 4,520 829 2,110
Operator's labor and management 5,120 5,486 6,960 5,654
TOTAL FARM EXPENSES 17,537 35,807 64,638 34,407







TABLE 11, All Farm Receipts and Expenses in Cents Per Gallon of
4% F,C.M. Sold at Wholesale, by Size of Farm, Pensacola
Area Dairy Farms, 1962.

Size of Farm All Your
Item Small Medium Large Farms Farm
Gal. 4% F.C.M. Sold Wholesatee 20,291 40,251 98,9491 44,670

Cash Receipts:
Wholesale milk sales 50.71 52.10 52.10 51.83
Retail sales of milk .25 1.00 .23 .48
Value of milk used in home 1.05 .59 .19 .48
Dairy calves sold 1.92 .77 .80 1.01
Dairy animals used in home .19 .06 .09
Other animals used in home .09 .02
Crop sales 9.51 7.05 1.24 4.71
Other and miscellaneous rcpts. 1.11 .96 .29 .66
Total Cash Receipts 64.64 462164 54.91 59.28
Non-Cash Receipts:
Dairy livestock appreciation 3.05 1.00 2.98 2.35
Non-dairy livestock apprec. 1.82 .43 .49
Total Non-Cash Receipts 4.87 1.42 2.98 2.84
TOTAL FARM RECEIPTS 69.50 64.06 57.88 62.11

Cash Expenses:
Labor hired .96 3.06 8.17 5.13
Repairs and maintenance 2.44 1.89 1.84 1.97
Feed purchased 17.85 22.54 20.13 20.47
Seeds and plants 1.55 1.49 .67 1.11
Fertilizer and lime 7.12 4.92 3.88 4.84
Machine hire and custom work .38 .84 .35 .51
Supplies 1.11 1.53 1.94 1.65
Testing, regis., breeding .45 .59 .25 .40
Veterinary and medicine .19 .45 .33 .35
Gasoline, fuel, and oil 1.63 1.81 1.52 1.63
Florida Milk Commission taxes .13 .13 .13 .13
Other taxes and licenses .96 .75 1.20 1.01
Insurance .30 .45 .62 .50
Utilities 1.25 1.18 1.08 1.14
Rents paid .67 .25 .27 .34
Milk hauling, handling, trans. 2.83 3.88 2.92 3.21
Other trucking and freight .07 .11 .47 .28
Legal, accounting, and audit. .07 .08 .11 .09
Farm organization-,dues .11 .12 .09 .10
Other and miscellaneous .17 .36 .13 .22
Total Cash Expenses 40.25 46.41 46.07 45.07
Depreciation:
Dairy herd depreciation -
Non-dairy livestock deprec. -
Buildings and fences 1.35 1.09 .99 1.09
Machinery and equipment 4.58 5.67 3.59 4.46
Total depreciation 5.93 6.76 4.58 5.54
Int. on investment @ 511/2% 11.45 10.93 6.81 9.03
Unpaid labor (other than oper.) 3.56 11.23 .84 4.72
Operator's labor and management 25.23 13.63 7.03 12.66
TOTAL FARM EXPENSES 86.43 88.96 65.32 77.02








TABLE 12. All Farm Receipts and Expenses in Dollars Per Cow Based
on 13-month Inventory, by Size of Farm, Pensacola Area
Dairy Farms, 1962.

It Size of Farm All Your
Item
Small JMedium Large Farms Farm
Cow No. Based on 13-Mo. Inven. 45.4 60.2 135.3 70.4

Cash Receipts:
Wholesale milk sales 226.67 348.30 380.98 328.79
Retail sales of milk 1.12 6.54 1.71 3.04
Value of milk used in home 4.67 3.94 1.40 3.07
Dairy calves sold 8.59 5.17 5.86 6.39
Dairy animals used in home 1.26 .44 .57
Other animals used in home .40 .11
Crop sales 42.52 47.14 9.04 29.85
Other and miscellaneous repts. 4.96 6.41 2.09 4.20
Total Cash Receipts 288.92 418.77 401.51 375.99
Non-Cash Receipts:
Dairy livestock appreciation 13.64 6.66 21.76 14.91
Non-dairy livestock apprec. 8.13 2.84 3.08
Total Non-Cash Receipts 21.77 9.50 21.76 17.99
TOTAL FARM RECEIPTS 310,69 428.27 423.27 393.98

Cash Expenses:
Labor hired 4.30 20.45 59.71 32.55
Repairs and maintenance 10.93 12.66 13.44 12.51
Feed purchased 79.77 150.67 147.17 129.85
Seeds and plants 6.94 9.98 4.89 7.05
Fertilizer and lime 31.83 32.89 28.36 30.70
Machine hire and custom work 1.67 5.60 2.56 3.25
Supplies 4.96 10.25 14.15 10.45
Testing, regis., breeding 2.03 3.95 1.85 2.54
Veterinary and medicine .86 2.99 2.43 2.20
Gasoline, fuel, and oil 7.29 12.13 11.09 10.37
Florida Milk Commission taxes .60 .86 .92 .81
Other taxes and licenses 4.30 5.03 8.78 6.40
Insurance 1.32 2.97 4.50 3.17
Utilities 5.57 7.87 7.87 7.24
Rents paid 3.00 1.68 1.95 2.14
Milk hauling, handling, trans. 12.65 25.91 21.36 20.38
Other trucking or freight .33 .71 3J477 1176'
Legal, accounting, audit. .33 .50 .80 .58
Farm organization dues .49 .78 .62 .64
Other and miscellaneous .77 2.43 .96 1.36
Total Cash Expenses 179.92 310.31 336.93 285.95
Depreciation:
Dairy herd depreciation -
Non-dairy livestock deprec. -
Buildings and fences 6.04 7.26 7.21 6.90
Machinery and equipment 20.49 37.92 26.26 28.26
Total Depreciation 26.52 45.18 33.47 35.16
Int. on investment @ 5 1/2% 51.20 73.07 49.76 57.30
Unpaid labor (other than oper.) 15.91 75.08 6.13 29.96
Operator's labor and management 12.79 91.12 51.43 80.29
TOTAL FARM EXPENSES 386.34 594.75 477.74 488.71








TABLE 13. Per Cent That Listed Items of Receipts and Expenses are of
Total Receipts and Expenses, Respectively, by Size of Farm,
Pensacola Area Dairy Farms, 1962.

Size of Farm All Your
Item Small Medium Large Farms Farm


Cash Receipts:
Wholesale milk sales 72.96 81.33 90.01 83.45
Retail sales of milk .36 1.53 .40 .77 -
Value of milk used in home 1.50 .92 .33 .78
Dairy calves sold 2.77 1.21 1.39 1.62
Dairy animals used in home .30 .10 .14
Other animals used in home .13 .03
Crop sales 13.69 11.01 2.14 7.58
Other and miscellaneous rcpts. 1.60 1.50 .49 1.12
Total Cash Receipts 92.99 97.78 94.86 95.43
Non-Cash Receipts:
Dairy livestock appreciation 4.39 1.56 5.14 3.78
Non-dairy livestock apprec. 2.62 .66 .78
Total Non-cash Receipts 7.01 2.21 5.14 4.57
TOTAL FARM RECEIPTS 100.00 100.00 100.00 100.00

Cash Expenses:
Labor hired 1.11 3.44 12.50 6.66
Repairs and maintenance 2.83 2.13 2.81 2.56
Feed purchased 20.65 25.33 30.81 26.58
Seeds and plants 1.80 1.68 1.02 1.44
Fertilizer and lime 8.24 5.53 5.94 6.28
Machine hire and custom work .43 .94 .54 .67
Supplies 1.28 1.72 2.96 2.14
Testing, regis., breeding .53 .67 .39 .52
Veterinary and medicine .22 .50 .51 .45
Gasoline, fuel, and oil 1.89 2.04 2.32 2.12
Florida Milk Commission taxes .15 .15 .19 .17
Other taxes and licenses 1.11 .85 1.84 1.31
Insurance A34 .50 .94 .65
Utilities 1.44 1.32 1.65 1.48
Rents paid .78 .28 .41 .44
Milk hauling, handling, trans. 3.27 4.36 4.47 4.17
Other trucking or freight .09 .12 .73 .36
Legal, accounting, auditing .09 .08 .17 .12
Farm organization dues .13 .13 .13 .13
Other and miscellaneous .20 .41 .20 .28
Total Cash Expenses 46.57 52.17 70.53 58.51
Depreciation:
Dairy herd depreciation -
Non-dairy livestock deprec. -
Building and fences 1.56 1.22 1.51 1.41
Machinery and equipment 5.30 6.38 5.50 5.78
Total Depreciation 6.87 7.60 7.01 7.20
Int. on Investment @ 5 1/2% 13.25 12.29 10.42 11.73
Unpaid labor (other than oper. 4.12 12.62' 128' 6t13.
Operator's labor and management 29.20 15.32 10.77 16.43
TOTAL FARM EXPENSES 100.00 100.00 100.00 100.00








Farm Receipts

All receipts have been classified as either cash or non-cash.

Though clear-cut distinctions are not always maintained nor possible,

the calling of, for example, the value of animals butchered for use

in the home a cash receipt is justified on the basis that it could have

been easily converted to cash if the farmer had so chosen. If he had,

he would have needed to turn around and purchase. meat or other foods

to replace that which would have been added to his diet had he not

sold the animal but butchered it for his own use in the first place.

Cash receipts

Wholesale milk sales

The figure reported here was the gross value of milk shipped to

handlers before any deductions were made. Deductions for hauling,

handling, and transfer charges, Florida Milk Commission taxes, and

the like, were not subtracted from milk receipts here, but were listed

as expenses under the expenses section. These data came from the

copies of producer settlement sheets which were returned to the pro-

ducer himself each pay period during the year. The milk was corrected

to a four per cent basis in the manner described earlier in this

report. As Table 11 indicates, the average blend price received over

the entire Pensacola area was 51.83 cents per gallon of four per

cent F.C.M.

Retail sales of milk

This was the value of all milk sold at the farm to final consumers,

and was computed by multiplying gallons sold by price per gallon

charged by the farmer. From Table 10 it can be seen that retail sales

on that basis averaged $214 per farm for the area.








Farm Receipts

All receipts have been classified as either cash or non-cash.

Though clear-cut distinctions are not always maintained nor possible,

the calling of, for example, the value of animals butchered for use

in the home a cash receipt is justified on the basis that it could have

been easily converted to cash if the farmer had so chosen. If he had,

he would have needed to turn around and purchase. meat or other foods

to replace that which would have been added to his diet had he not

sold the animal but butchered it for his own use in the first place.

Cash receipts

Wholesale milk sales

The figure reported here was the gross value of milk shipped to

handlers before any deductions were made. Deductions for hauling,

handling, and transfer charges, Florida Milk Commission taxes, and

the like, were not subtracted from milk receipts here, but were listed

as expenses under the expenses section. These data came from the

copies of producer settlement sheets which were returned to the pro-

ducer himself each pay period during the year. The milk was corrected

to a four per cent basis in the manner described earlier in this

report. As Table 11 indicates, the average blend price received over

the entire Pensacola area was 51.83 cents per gallon of four per

cent F.C.M.

Retail sales of milk

This was the value of all milk sold at the farm to final consumers,

and was computed by multiplying gallons sold by price per gallon

charged by the farmer. From Table 10 it can be seen that retail sales

on that basis averaged $214 per farm for the area.








Value of milk used in the operator's home

Value of milk used for this purpose was based on the fat uncorrected

blend price received by the farmer for milk sold at wholesale and his

best estimate of farm produced milk consumed in his own home. This

averaged $216 per farm.

Dairy calves sold

Included here are only the proceeds from calves sold for veal at

very early ages which were never intended to be kept for other purposes

such as herd replacements or feeding out to higher weights for later

sales as beef. The receipts from these latter animals are accounted

for in the computation of changes in inventory values of livestock.

Value of dairy animals used in the operator's home

Dairy animals butchered were valued on the following basis:

mature cows at $150 each

mature bulls at $200 each

heifers at the average value for all heifers

calves at the average price received for other calves sold.

Value of non-dairy animals used in the operator's home

Valuations of these animals were made by the farmer himself based

on his best estimate of the market value of the particular animals

butchered.

Crop sales

Crops were valued, generally, at their gross sales prices before

deductions for hauling. Most farmers hauled their crops to market them-

selves and the costs of hauling are included in other farm expenses in

the form of labor, gasoline, truck repairs, etc. If hauling was done

commercially, those hauling charges were listed as expenses against the





-35

farm business. Crop sales averaged $2,102 per farm and were 7.58 per cent

of all farm receipts.

Other and miscellaneous receipts

Included here are such things as: patronage dividends, rebates,

and refunds; agricultural programs payments; custom work; and rents

received for farm property. The sum of these was small, and averaged

only $296 per farm which is but 1.12 per cent of all farm receipts.

* Non-cash-receipts

Dairy livestock appreciation

Though for the area as a whole and for each of these size groups

there were increases in the over-all value of the dairy herds, there

were decreases in value for a few individual farms. Thus it was

necessary to make provisions for recording both appreciation in herd

value under the receipts section and depreciation in herd value under

the expenses section.

The figure reported for appreciation is the total for the entire

herd wherein cows, bulls, and heifers are all included. Veal calves

sold and dairy animals butchered for home use were reported separately

and so did not enter into the computations. Cattle deaths during the

year are accounted for as their value appears in the beginning inven-

tory (or in purchases) but not in the ending inventory. Thus appreciation

is reduced, or depreciation increased, by their approximate value at

the time of their loss. The decrease in value of mature cows and the

increase in value of growing youngstock are accounted for: by* the

computational procedures employed. The increase in value of youngstock

is reflected in increased feed, labor, and other costs which are a part

of the total costs reported in the expenses section.








Appreciation on dairy iives.to.ckaveraged $1,050 per farm which is

3.78 per cent of all farm receipts. Thus it is an item of importance

on Pensacola area dairy farms -ranking behind only wholesale milk and

crop sales.

Non-dairy livestock appreciation

The procedures employed for the computation of the appreciation of

non-dairy livestock were identical to those described as used for

dairy livestock just above and the comments under that section are gen-

erally applicable as well.

As was mentioned earlier in this report, non-dairy livestock is

of little importance on Pensacola area dairy farms. Appreciation on

non-dairy livestock is as high as it is because livestock other than

dairy is kept primarily for the increase in animal value that can be

achieved through feeding as contrasted to dairy cattle wherein the

production of meat is principally a by-product operation.

Farm Expenses

The items of expense which it seemed appropriate to elaborate

upon are discussed in.the same manner that receipts items were dis-

cussed above. The ones which did not warrant additional comment are

merely omitted. The others are considered in turn in the same order

that they are listed on Table 10.

Cash expenses

Labor hired

Total wages paid (including legally required payroll deductions)

to all full-time, part-time, and occasional hired labor were included

here. The value of goods and services otherwise provided hired workers,

such as housing, utilities, milk, transportation, and the like, are not








Appreciation on dairy iives.to.ckaveraged $1,050 per farm which is

3.78 per cent of all farm receipts. Thus it is an item of importance

on Pensacola area dairy farms -ranking behind only wholesale milk and

crop sales.

Non-dairy livestock appreciation

The procedures employed for the computation of the appreciation of

non-dairy livestock were identical to those described as used for

dairy livestock just above and the comments under that section are gen-

erally applicable as well.

As was mentioned earlier in this report, non-dairy livestock is

of little importance on Pensacola area dairy farms. Appreciation on

non-dairy livestock is as high as it is because livestock other than

dairy is kept primarily for the increase in animal value that can be

achieved through feeding as contrasted to dairy cattle wherein the

production of meat is principally a by-product operation.

Farm Expenses

The items of expense which it seemed appropriate to elaborate

upon are discussed in.the same manner that receipts items were dis-

cussed above. The ones which did not warrant additional comment are

merely omitted. The others are considered in turn in the same order

that they are listed on Table 10.

Cash expenses

Labor hired

Total wages paid (including legally required payroll deductions)

to all full-time, part-time, and occasional hired labor were included

here. The value of goods and services otherwise provided hired workers,

such as housing, utilities, milk, transportation, and the like, are not








separately reported because the cost of providing these is already in-

cluded in such other expense items as depreciation, electricity bills,

feed, and gasoline. Though this method of reporting complicates the

problem of comparing total labor costs between individual farms, it

has no bearing on the calculation of the over-all profitability of

farms.

Hired labor, as computed, accounted for 6.66 per cent of all farm

expenses and averaged $2,292 per farm.

Repairs and maintanence

Figures for this item are probably less comparable between farms

than those for any other item. There is, in the first place, a good

bit of variation as to the extent that repairs are carried out on the

farm and the extent to which they are hired done by people off the farm.

Thus the labor involved in the former instance is not ordinarily in-

cluded under repairs and maintenance whereas in the second instance it

is. There is in the second place, likely to be a good bit of non-uniform-

.ity-as:.to the. blassiftication of expenses;:into those-piopi.rly bVelonging

under repairs and maintenance, those belonging under supplies, and those

which should actually be handled as a depreciable asset.

The total repairs and maintenance bill, though relatively small,

is nevertheless a significant item of expense as it is given. The

classification of expenses here will affect the calculation of over-

all profits to the extent, but only to the extent, that the value and

kind of any depreciable assets which might be included under the

repairs and maintenance category differed in 1962 from that of other

recent years.








Feed purchased

Purchased feeds were by far the most important single item of cash

expense on dairy farms in the Pensacola area. These accounted for

26.58 per cent of all farm expenses in 1962.and averaged $9,144 per

farm. The total purchased feed bill was adjusted for changes in all

feed inventories (including stored home-grown feeds) for purposes of this

report.

There is, of course, wide variation over the area as to the per-

centages of all feed nutrients that are supplied to livestock from

home-grown sources. No attempt to compute a total feed bill is made

in this report; neither was an allocation of feed to the different kinds

of livestock ( where more than one kind is present on a particular farm)

tried. It seems likely, too, that there was some crossover in class-

ification between feeds, seeds and plants, fertilizer and lime, and

supplies, insofar as any particular farmer's report is concerned. The

extent to which this was done is not known, of course, but it would not

seem to be of any serious consequence, on the whole, even when individual

farms are compared.

Fertilizer and lime

Fertilizer and lime costs are quite a significant part of over-all

farm expenses, about equal to hired labor costs which rank second only

to purchased feed costs insofar as cash expenses are concerned. They

averaged $2,161 per farm, accounting for 6.28 per cent of all farm ex-

penses.








Supplies

This is the sum of all farm supplies purchased, both for use in

the dairy and in crop work, except for possible mis-classified items

as mentioned above. It would probably include some replacement items as

well as the usual soaps, disinfectants, and insect sprays.

Testing, registration, and breeding fees

The amount reported here included artificial breeding fees, stud

service, DHIA testing fees, and fees associated with the registration of

purebred cattle.

Other taxes and licenses

All farm property taxes (including those on real estate, livestock,

and equipment) and the cost of licenses for vehicles used in the farm

business are included here.

Insurance

Premiums on insurance against hazards to buildings, livestock, and

machinery and the costs of liability insurance associated with the farm

business make up the total of costs reported here.

Utilities

The sum of the farm shares of the phone and electric bills.

Milk hauling, handling, and transfer charges

All farms reported hauling charges, a few reported handling and

transfer charges. Handling and transfer fees are charged to the

farmer when some of his milk is diverted or transferred to plants

other than those of his primary receiver.







Other trucking or freight

Costs of transporting crops, feed, cattle, machinery, etc., where

this is not done by the farmer himself, and where the shipping, receiv-

ing, or transporting agency lists such charges separately are included

under this heading.

Legal, accounting, auditing

Bookkeepers', accountants', and attorneys' fees, as well as other

legal expenses of doing business are included in this category.

Other and miscellaneous

The amounts that the farmer himself reported as other and mis-

cellaneous costs on his own tax return, the amounts he reported as

storage and warehousing costs, the farm share of automobile and truck

expenses if reported separately, subscription payments for farm papers

and magazines, and other costs reported by the farmer but not included

under any of the categories already enumerated above were all included

under the heading of Other and Miscellaneous costs for purposes of this

report. The sum of these is very small and of no particular consequence

in relation to total costs.

Depreciation

Dairy herd and non-dairy livestock

The basis for computing depreciation on the livestock has already

been described in detail. Although all farms taken together and farms

taken by size groups show no depreciation, there are instances wherein

individual farms experienced a decline in livestock values as computed

in this study. Thus space was provided to show this depreciation in

this section.








Buildings and fences

The basis for the figures reported here is fully described in the

Capital Investment and Depreciation section above. The amount of depre-

ciation taken on buildings and fences is rather small in terms of total

farm expenses, amounting to only $486 per farm or 1.41 per cent of all

farm expenses.

Machinery and equipment

The basis for these computations is likewise explained in the

Capital Investment and Depreciation section above. As can be seen from

Table 10, depreciation on machinery and equipment averaged $1,990 per

farm which, as Table 13 shows, was 5.78 per cent of all farm expenses.

Interest on investment at' five and one-half per cent

The valuation of assets was done as described under the Capital

Investment and Depreciation and the Land and Its Utilization sections

above. A five and one-half per cent rate of return was used for pur-

poses of exposition as it is representative of interest costs charged

by the principal agricultural loan agencies in the area. For example,

the Farmer's Home Administration was charging five per cent on both

capital and operating loans, the Production Credit Association six

per cent on both capital and operating loans, and the Federal Land

Bank five and one-half per cent on capital loans. Of course one may

assume whatever return to capital he feels is relevant, and the com-

puted costs would change accordingly. In a later section of this

report it will be shown what the effect of altering rates of return

would have on the computed cost of producing a gallon of milk.

The five and one-half per cent rate was applied to the total

capital investment in the farm with the exception of working capital,





42

or the day to day cash needed to carry on the farm business and whatever

minimum stocks of feeds and supplies must be kept on hand. The interest

thus charged is composed of interest payments made on borrowed capital

as well as interest payments to owned capital. The former of course

must be paid currently, and is in the nature of a cash cost. The

latter, though it does not represent an out-of-pocket cost, is a cost

of doing business in the sense that that same capital could earn a

similar return in other uses. A later section of this report shows

the net worth position of the dairyman in the study and distinguishes

between interest on owned and borrowed capital.

Valdb 'of unpaid labor' '.

A brief, general discussion of quantities and values of labor and

management was given in the section titled Management and Labor above.

No standard quantity-value-kind of labor schedule was developed for

purposes of this study. Unpaid labor (other than operator) consisted

almost exclusively of members of the immediate family, and was valued

by the farmer on the basis of his own knowledge of hired labor costs

in light of the quality and quantity of work performed. The value of

unpaid labor was thus set at a level roughly commensurate with what it

would have cost to have had the same work hired done.

The value of unpaid labor was particularly significant on the

medium-sized farms in the study, constituting over 12 per cent of all

farm costs. The average for all farms was just over six per cent and

amounted to $2,110 dollars per farm.

Value -of operator's labor:.and management

There was a total of 26.23 operators on the 24 farms included in

this study. Where a clear-cut partnership existed, each principal





42

or the day to day cash needed to carry on the farm business and whatever

minimum stocks of feeds and supplies must be kept on hand. The interest

thus charged is composed of interest payments made on borrowed capital

as well as interest payments to owned capital. The former of course

must be paid currently, and is in the nature of a cash cost. The

latter, though it does not represent an out-of-pocket cost, is a cost

of doing business in the sense that that same capital could earn a

similar return in other uses. A later section of this report shows

the net worth position of the dairyman in the study and distinguishes

between interest on owned and borrowed capital.

Valdb 'of unpaid labor' '.

A brief, general discussion of quantities and values of labor and

management was given in the section titled Management and Labor above.

No standard quantity-value-kind of labor schedule was developed for

purposes of this study. Unpaid labor (other than operator) consisted

almost exclusively of members of the immediate family, and was valued

by the farmer on the basis of his own knowledge of hired labor costs

in light of the quality and quantity of work performed. The value of

unpaid labor was thus set at a level roughly commensurate with what it

would have cost to have had the same work hired done.

The value of unpaid labor was particularly significant on the

medium-sized farms in the study, constituting over 12 per cent of all

farm costs. The average for all farms was just over six per cent and

amounted to $2,110 dollars per farm.

Value -of operator's labor:.and management

There was a total of 26.23 operators on the 24 farms included in

this study. Where a clear-cut partnership existed, each principal





43

partner was listed as an operator. Three of the 24 farms had such two-

man partnerships. One farm had a full-time manager with the owner de-

voting only the equivalent of .23 of a full-time operator's normal

attention to the farm business.

Operator's labor and management was generally valued by the operator

involved on the lower of the following four bases: (1) what it would

cost to hire done what the operator did, (2) what the operator would

want to be paid to do for someone else what he did for himself, (3) what

the operator could earn in his next best employment off the farm, or

(4) what the operator felt his contribution to the farm business was

actually worth in terms of costs and returns to other factors. The

valuation of the operator's labor and management was one of the most

difficult estimates that had to be made. Though there is considerable

variation from farm to farm, it is felt that the all farms average is

a reasonably good and useful measure for purposes of this study. It is,

in any event, easy to show the effect on milk production costs of any

change in value of operator's labor and management one may wish to

consider.

Table 10 shows an average value for this item of $5,654 per farm

and Table 13 that it constitutes a little over 16 per cent of total

farm costs.

Some general comments on farm expenses

Farm expenses were broken down into cash and other costs which were

generally referred to as non-cash. There is some ambiguity with respect

to certain items placed in those classifications, particularly in the

case of interest on investment,already noted, which might properly

have been considered a cash cost to the extent of interest charges









on farm indebtedness. Then too, if there were purchases of cattle in

excess of the value of sales the amount of the excess could have been

considered a cash expense whether there was an increase in the over-all

value of livestock or not. If livestock sales had exceeded purchase?

on the other hand the difference would have been classified as a cash

receipt.

It is interesting to note how the percentage of expenses which have

been classified as cash increases as the size of farm (with respect to

milk shipments) increases. Table 13 shows these as approximately 47,

52, 71, and 59 for small, medium, large, and all farms, respectively.

This ascending order reflects the effect of the spreading of fixed

costs, which are mostly non-cash items, over greater quantities of

production per farm.

Purchased feed, at 26.58 per cent of all farm expenses, was the

highest single cash expense on Pensacola Area dairy farms. When one

adds hired labor, value of unpaid labor, and value of operator's labor

and management, however, total labor becomes the largest single item

of expense and accounts for 29.22 per cent of all farm expenses. Feed

and labor thus make up a total of 55,8 per cent of all farm costs. The

next highest item of expense is interest on investment at 11.73 per cent

of all farm expenses.






45

MEASURES OF INCOME AND PROFITS, THE OVER-ALL FINANCIAL POSITION OF DAIRY-
MEN, FUNDS FOR FAMILY LIVING. AND NET COST OF PRODUCING MILK

The information presented in Table 14 of this report serves as the

basis for the discussion in this section. Its purpose is to make the

data on costs and returns previously presented more meaningful in terms

of their relationship to the economic welfare of the dairy farm families,

and to permit comparison of farms on that basis. Other data related to

the dairyman's over-all financial and current income position is present-

ed which permits us to look at the dairy farm family as a consumption as

well as a production unit.

Measures of Income and Profits

Family farm income

Family farm income is computed by subtracting cash expenses and

depreciation from all farm receipts. It is, then,the total return for

the operator's labor and management, for other family labor, and the

capital employed in the farm business. This is, as can be seen from

Table 14, a positive quantity for all three size groups of farms.

Farm income

This figure is obtained by subtracting the value of unpaid family

labor from Family farm income. It is the total return for the operator's

labor and management and the capital employed in the farm business.

Family labor income

This is the total return to the operator and his family for their

labor and management and is calculated by subtracting cash expenses,

depreciation, and interest on investment from total farm receipts.








TABLE 14. Income, Profits, Net Worth, Funds for Family Living, and Net
Costs of Milk Sold at Wholesale, in Dollars per Farm, by
Size of Farm, Pensacola Area Dairy Farms, 1962.


a/ Size of Farm All Your
______ _Small Mdium iLarge Farms Farm

Family farm income 4,730 4,385 7,161 5,138
Farm income 4,008 -135 6,332 3,028
Family labor income 2,406 -14 427 1,103
Operator's labor income 1,684 -4,537 -403 -1,009
Net farm income -1,112 -5,620 -628 -2,626
Net farm profit or loss -3,433 -10,022 -7,362 -6,660

Return above equity maintenance 3,657 3,074 5,910 3,940

Total farm assets 42,262 79,986 122,445 73,359
Total farm liabilities 19,574 23,832 22,750 21,799
Total farm net worth 22,688 56,154 99,695 51,560

Ratio of assets to liabilities 2.2::1 3.4::1 5.4:1 3.4::l

Interest on debts at 5 1/2% 1,074 1,311 1,251 1,198
Total 1962 payments on debts 3,404 5,731 7,802 5,202

Maximum possible farm cash avail-
able for family living 3,874 5,219 7,494 5,149
Farm cash actually available for
family living 1,544 799 943 1,145
Family cash income from non-farm
sources 982 920 1,271 1,023
Total cash available for family
living 2,526 1,719 2,214 2,168

Total farm expenses 17,537 35,807 64,638 34,405
Total farm receipts 14,103 25,784 57,276 27,745
Farm receipts except milk shipts. 3,814 4,815 5,723 4,591
Receipts from milk shipped 10,289 20,969 51,553 23,154
Net cost of milk shipped 13,725 30,988 58,!5 29,814

Gallons of milk shipped (4% B.F.) 20,291 40,251 98,949 44,670
Nt cost per gallon of milk
shipped .67641 .76987 .59541 .66743

Change in per gallon cost for
each 1% change in interest .02084 .01987 .01237 .01643
Change in cost needed for a one-
cent change in cost/gal. 203 403 989 447

a/ Each item listed here is explained in the accompanying text
as necessary.






45

MEASURES OF INCOME AND PROFITS, THE OVER-ALL FINANCIAL POSITION OF DAIRY-
MEN, FUNDS FOR FAMILY LIVING. AND NET COST OF PRODUCING MILK

The information presented in Table 14 of this report serves as the

basis for the discussion in this section. Its purpose is to make the

data on costs and returns previously presented more meaningful in terms

of their relationship to the economic welfare of the dairy farm families,

and to permit comparison of farms on that basis. Other data related to

the dairyman's over-all financial and current income position is present-

ed which permits us to look at the dairy farm family as a consumption as

well as a production unit.

Measures of Income and Profits

Family farm income

Family farm income is computed by subtracting cash expenses and

depreciation from all farm receipts. It is, then,the total return for

the operator's labor and management, for other family labor, and the

capital employed in the farm business. This is, as can be seen from

Table 14, a positive quantity for all three size groups of farms.

Farm income

This figure is obtained by subtracting the value of unpaid family

labor from Family farm income. It is the total return for the operator's

labor and management and the capital employed in the farm business.

Family labor income

This is the total return to the operator and his family for their

labor and management and is calculated by subtracting cash expenses,

depreciation, and interest on investment from total farm receipts.






45

MEASURES OF INCOME AND PROFITS, THE OVER-ALL FINANCIAL POSITION OF DAIRY-
MEN, FUNDS FOR FAMILY LIVING. AND NET COST OF PRODUCING MILK

The information presented in Table 14 of this report serves as the

basis for the discussion in this section. Its purpose is to make the

data on costs and returns previously presented more meaningful in terms

of their relationship to the economic welfare of the dairy farm families,

and to permit comparison of farms on that basis. Other data related to

the dairyman's over-all financial and current income position is present-

ed which permits us to look at the dairy farm family as a consumption as

well as a production unit.

Measures of Income and Profits

Family farm income

Family farm income is computed by subtracting cash expenses and

depreciation from all farm receipts. It is, then,the total return for

the operator's labor and management, for other family labor, and the

capital employed in the farm business. This is, as can be seen from

Table 14, a positive quantity for all three size groups of farms.

Farm income

This figure is obtained by subtracting the value of unpaid family

labor from Family farm income. It is the total return for the operator's

labor and management and the capital employed in the farm business.

Family labor income

This is the total return to the operator and his family for their

labor and management and is calculated by subtracting cash expenses,

depreciation, and interest on investment from total farm receipts.






45

MEASURES OF INCOME AND PROFITS, THE OVER-ALL FINANCIAL POSITION OF DAIRY-
MEN, FUNDS FOR FAMILY LIVING. AND NET COST OF PRODUCING MILK

The information presented in Table 14 of this report serves as the

basis for the discussion in this section. Its purpose is to make the

data on costs and returns previously presented more meaningful in terms

of their relationship to the economic welfare of the dairy farm families,

and to permit comparison of farms on that basis. Other data related to

the dairyman's over-all financial and current income position is present-

ed which permits us to look at the dairy farm family as a consumption as

well as a production unit.

Measures of Income and Profits

Family farm income

Family farm income is computed by subtracting cash expenses and

depreciation from all farm receipts. It is, then,the total return for

the operator's labor and management, for other family labor, and the

capital employed in the farm business. This is, as can be seen from

Table 14, a positive quantity for all three size groups of farms.

Farm income

This figure is obtained by subtracting the value of unpaid family

labor from Family farm income. It is the total return for the operator's

labor and management and the capital employed in the farm business.

Family labor income

This is the total return to the operator and his family for their

labor and management and is calculated by subtracting cash expenses,

depreciation, and interest on investment from total farm receipts.






45

MEASURES OF INCOME AND PROFITS, THE OVER-ALL FINANCIAL POSITION OF DAIRY-
MEN, FUNDS FOR FAMILY LIVING. AND NET COST OF PRODUCING MILK

The information presented in Table 14 of this report serves as the

basis for the discussion in this section. Its purpose is to make the

data on costs and returns previously presented more meaningful in terms

of their relationship to the economic welfare of the dairy farm families,

and to permit comparison of farms on that basis. Other data related to

the dairyman's over-all financial and current income position is present-

ed which permits us to look at the dairy farm family as a consumption as

well as a production unit.

Measures of Income and Profits

Family farm income

Family farm income is computed by subtracting cash expenses and

depreciation from all farm receipts. It is, then,the total return for

the operator's labor and management, for other family labor, and the

capital employed in the farm business. This is, as can be seen from

Table 14, a positive quantity for all three size groups of farms.

Farm income

This figure is obtained by subtracting the value of unpaid family

labor from Family farm income. It is the total return for the operator's

labor and management and the capital employed in the farm business.

Family labor income

This is the total return to the operator and his family for their

labor and management and is calculated by subtracting cash expenses,

depreciation, and interest on investment from total farm receipts.







Operator's labor income

When the value of unpaid family labor is subtracted from Family

labor income the quantity remaining is the income to the operator for

his labor and management. This is the balance of receipts after all

cash expenses, depreciation, unpaid family labor, and interest on in-

vestment at five and one-half per cent are allowed. Table 14 indicates

this to be negative for all except the small farms.

Net farm income

Also commonly called return to capital, net farm income is the

portion of receipts remaining after cash expenses, depreciation, value

of unpaid family labor, and value of operator's labor and management

are subtracted. This is negative for all three size groups, and so if

one wished to compute the rate of return on investment, this would

necessarily be negative, too.

Net farm profit or loss

This is, simply, all farm receipts minus all farm expenses.

Table 14 shows this to be negative for farms in each of the three size

groups, indicating they experienced losses in 1962 according to the data

and assumptions of this study.

Return above equity maintenance

The basis for this figure was all farm receipts less cash expenses,

depreciation, and interest (at five and one-half per cent) on farm in-

debtedness. This is the amount that the farm families had available to

live on and to build up their assets in the farm business in 1962.

Table 14 showsthis to be positive for each of the three size groups with

an average for all farms of $3,940.







Operator's labor income

When the value of unpaid family labor is subtracted from Family

labor income the quantity remaining is the income to the operator for

his labor and management. This is the balance of receipts after all

cash expenses, depreciation, unpaid family labor, and interest on in-

vestment at five and one-half per cent are allowed. Table 14 indicates

this to be negative for all except the small farms.

Net farm income

Also commonly called return to capital, net farm income is the

portion of receipts remaining after cash expenses, depreciation, value

of unpaid family labor, and value of operator's labor and management

are subtracted. This is negative for all three size groups, and so if

one wished to compute the rate of return on investment, this would

necessarily be negative, too.

Net farm profit or loss

This is, simply, all farm receipts minus all farm expenses.

Table 14 shows this to be negative for farms in each of the three size

groups, indicating they experienced losses in 1962 according to the data

and assumptions of this study.

Return above equity maintenance

The basis for this figure was all farm receipts less cash expenses,

depreciation, and interest (at five and one-half per cent) on farm in-

debtedness. This is the amount that the farm families had available to

live on and to build up their assets in the farm business in 1962.

Table 14 showsthis to be positive for each of the three size groups with

an average for all farms of $3,940.







Operator's labor income

When the value of unpaid family labor is subtracted from Family

labor income the quantity remaining is the income to the operator for

his labor and management. This is the balance of receipts after all

cash expenses, depreciation, unpaid family labor, and interest on in-

vestment at five and one-half per cent are allowed. Table 14 indicates

this to be negative for all except the small farms.

Net farm income

Also commonly called return to capital, net farm income is the

portion of receipts remaining after cash expenses, depreciation, value

of unpaid family labor, and value of operator's labor and management

are subtracted. This is negative for all three size groups, and so if

one wished to compute the rate of return on investment, this would

necessarily be negative, too.

Net farm profit or loss

This is, simply, all farm receipts minus all farm expenses.

Table 14 shows this to be negative for farms in each of the three size

groups, indicating they experienced losses in 1962 according to the data

and assumptions of this study.

Return above equity maintenance

The basis for this figure was all farm receipts less cash expenses,

depreciation, and interest (at five and one-half per cent) on farm in-

debtedness. This is the amount that the farm families had available to

live on and to build up their assets in the farm business in 1962.

Table 14 showsthis to be positive for each of the three size groups with

an average for all farms of $3,940.







Operator's labor income

When the value of unpaid family labor is subtracted from Family

labor income the quantity remaining is the income to the operator for

his labor and management. This is the balance of receipts after all

cash expenses, depreciation, unpaid family labor, and interest on in-

vestment at five and one-half per cent are allowed. Table 14 indicates

this to be negative for all except the small farms.

Net farm income

Also commonly called return to capital, net farm income is the

portion of receipts remaining after cash expenses, depreciation, value

of unpaid family labor, and value of operator's labor and management

are subtracted. This is negative for all three size groups, and so if

one wished to compute the rate of return on investment, this would

necessarily be negative, too.

Net farm profit or loss

This is, simply, all farm receipts minus all farm expenses.

Table 14 shows this to be negative for farms in each of the three size

groups, indicating they experienced losses in 1962 according to the data

and assumptions of this study.

Return above equity maintenance

The basis for this figure was all farm receipts less cash expenses,

depreciation, and interest (at five and one-half per cent) on farm in-

debtedness. This is the amount that the farm families had available to

live on and to build up their assets in the farm business in 1962.

Table 14 showsthis to be positive for each of the three size groups with

an average for all farms of $3,940.







Over-All Financial Position of Area Dairymen

Total farm assets, already presented and discussed in an earlier

section, are listed again in Table 14 for convenience of reference.

Total farm liabilities, or money owed by the farmer, averaged about

the same amount for each of the size groups, with the average for all

farms being $21,799. Total farm net worth is simply the difference be-

tween assets and liabilities, and is the farmer's equity in his farm.

The ratio of total farm assets to total liabilities was lowest for

the small size group and highest for the large size group. It would

appear, on this basis, that small farms have borrowed on their assets

to about the limit that most lending agencies would normally be willing

to go. Land was valued at its worth in agricultural employment insofar

as possible. It:'s market price would in most instances be higher than

that, and it is the higher value that lenders are likely to use as the

basis for loans. Thus credit may actually be extended beyond what

would appear to be a prudent level based on the assumptions of this re-

port.

There is, on most farms, a fairly persistent increase in the value

of land for non-agricultural uses. Thus, in addition to the returns

above equity cited above, the extent of the increase in land values

each year is a form of return, though it cannot be corn-erted to income,

except through borrowing, until the land is sold. These increases in

land values are extremely difficult to appraise for individual farms

for any particular year, and there was no attempt to make this appraisal

in this study. They are not, in any event, in any direct way related

to the profitability of dairying, though they do have a bearing on the

over-all financial position of the dairyman.








Listed in Table 14 are interest costs on indebtedness at five and

one-half per cent. This was an assumed rate since the data collected

in the study were not in the detail necessary to make an actual com-

putation. Total 1962 payments on indebtedness averaged over $5,000 per

farm which would, of course, include both payments on principal and the

interest charges that were actually made on all outstanding '.oans." Debt

payments and interest on indebtedness, though of interest here, figure

more importantly in the following section of this report.


Funds for Family living

Figures were developed and this section written for purposes of

determining and showing the availability of cash funds for family liv-

ing. Maximum possible farm cash available for family living was computed

by subtracting cash expenses and interest on indebtedness from total

cash receipts and amounted to an average of $5,149 for all farms. This

determination did not take account of the differences in cash exchanges

associated with the purchase and sales of capital assets. Farm cash

actually available for family living was the difference between all cash

receipts and the sum of all cash expenses and total payments on in-

debtedness (principal and interest). When family cash income from non-

farm sources is added to farm cash actually available for family living,

the result is total cash available for family living. This was positive

for all three size groups and averaged $2,168 per farm.

Cash from non-farm sources was almost exclusively from off-farm

work by the operator or by some other member of his immediate family,

usually his wife. There are,of course, other possible sources of cash

income not given here. These might be income from gifts or other assis-

tance by relatives living elsewhere, for example, but more likely, from





50

money borrowed during the year or from the postponement of payments for

items purchased which we have already called cash expenses.


Net Cost of Producing Milk

It has already been noted that Pensacola Area dairy farms are gen-

erally less specialized in the production of milk than are dairy farms

in other areas of the state. Dairy specialization factors were computed

to reduce the effect of non-dairy enterprises on the apparent profit-

ability of producing milk. Costs were further adjusted to take account

of dairy receipts other than those which came from the wholesale sale

of milk for purposes of computing a "cost of producing milk". This adjust-

ment of expenses to account for the production of things other than milk

for wholesale sales was accomplished by subtracting the value of all

non-wholesale milk items from total farm expenses. The remaining ex-

penses were then considered to be chargeable to the production of the

milk which was sold at wholesale.

Total farm expenses, total farm receipts, and both the receipts from

milk shipped and the total farm receipts except those from milk ship-

ments are listed in Table 14. By subtracting farm receipts except those

from milk shipments from total farm expenses we get net cost of milk

shipped. By dividing net cost of milk shipped by gallons of milk

shipped the net cost per gallon of milk shipped was obtained. As Table

14 shows, this was 67.6, 77.0, 59.5, and 66.7 cents for small, medium,

large, and all farms, respectively, on a gallon-weighted basis /.

5/
A publication titled Pensacola Milk Marketing Area Report, Calendar
Year 1961 by Allen, Williams, Sheffield and Waterson, Certified Pub-
lic Accountants, Tallahassee, Florida, for the Florida Milk Commission
showed costs adjusted to a five and one-half per cent return on invest-
ment, of 61.5, 73.3, 60.2, and 64.5 cents for small, medium, large and
all farms, respectively. They defined small farms as those with bases
up to 89 gallons,medium farms those with 90 to 199 base gallons, and
as large as those with bases of 200 gallons or more. The methods of
pro-.-dure and the assumptions under which their study was conducted
were similar, though not identical to those used in this study.








The reasons why costs on medium size farms were so much higher than

those on the other two sizes is not immediately clear from the results

of this study. The per gallon cost of unpaid family labor is unusually

high, and if it followed the general pattern of the other farms would

be some five to ten cents lower than is indicated in Table 11. Feed,

milk hauling, handling and transfer charges, and depreciation on machin-

ery and equipment would seem to explain some of the cost differences,

too, but to a considerably lesser extent. Perhaps the best explanation

is that the farms studied in the medium-sized group, were, for the most

part, just generally less efficient in the production of milk than were

farms of the small and large sizes.

It should be emphasized that these costs are the result of both

the factual data and the non-factual assumptions upon which they are

based. The factual data presented are believed to be reliable. The

non-factual assumptions made are thought to be reasonable. More precise

factual data, or a different set of non-factual assumptions, would alter

the computed cost of producing milk. The change in per gallon cost for

each one per cent change in return to investment and the changes in costs

needed to bring about a one-cent change in cost per gallon are given in

Table 14. With these one can assume any level of return on investment or

any level of costs for any particular item he likes, and develop his own

cost of production estimate. Some specific set of assumptions had to be

made to standardize farms for purposes of comparison, but no claim that

these are necessarily the "best" set is advanced in this report.







INPUT AND OUTPUT EFFICIENCIES

The computation and comparison of farms on the basis of efficiency

in the use of selected productive inputs and the production of selected

outputs is useful in that it may provide leads as to strong and weak

points in the farm business. Areas in which the manager is doing a

comparatively good job, and those to which he might consider directing

more of his attention may be highlighted for him through such a comparison.

Table 15 presents a number of such efficiency ratios and serves as the

basis for the discussion in this section.

The upper group of figures in the body of Table 15 give total

quantities per farm, by size of farm, for the six items listed across

the top of the table. Man equivalents, receipts, and capital have

been adjusted as noted in the table footnote. It was assumed here, for

sake of simplicity, and to make farm to farm comparisons more meaning-

ful, that each of those three items so adjusted were chargeable or attri-

butable to the dairy enterprise in the same proportion as the farm was

specialized in dairy on the basis of the dairy specialization factors

already discussed: For example, small farms had a dairy specialization

factor of .837, and so 83.7 per cent of all capital on small dairy

farms was assumed to be chargeable to the dairy enterprise. This amount-

ed to $35,373 and is so listed in Table 15.

The other groups of figures are the ratios of the items in any

particular row of the first column to the item which appears at the

head of any other column of interest in that same row. For example,

in the Cows, All.Farms row under the Dairy Man Equivalents column, we

find the figure 29.6. This should be interpreted as there being, on all

area farms, an average of'29.6 cows per one dairy man equivalent-.








TABLE 15. Comparison of Efficiency in the Use and Production of Selected
Items, by Size of Farm, Pensacola Area Dairy Farms, 1962.

Cows, High- Total Dairy )airy Dairy
Based on Order Use Milk Man leceipts./Capital-
13-month Acreages Produced Equiva-
Inventory lentsa/
(number) (number) (gal,;.) (number) (dollars) (dollars)
QUANTITIES

Small farms 45.4 130 22,269 1.11 11,804 35,373
Medium farms 60.2 267 41,505 2.38 22,767 70,628
Large farms 135.2 376 100,831 4.64 55,386 118,404
All farms 70.4 233 46,368 2.38 25,553 67,564
Your farm

RATIOS

Cows
Small farms xxxx 0.35 xxxx 40.9 xxxx xxxx
Medium farms xxxx 0.23 xxxx 25.3 xxxx xxxx
Large farms xxxx 0.36 xxxx 29.1 xxxx xxxx
All farms xxxx 0.30 xxxx 29.6 xxxx xxxx
Your farm. xxxx xxxx xxxx xxxx

Milk
Small farms 491 xxxx xxxx 20,062 xxxx xxxx
Medium farms 690 xxxx xxxx 17,441 xxxx xxxx
Large farms 746 xxxx xxxx 21,731 xxxx xxxx
All farms 659 xxxx xxxx 19,482 xxxx xxxx
Your farm xxxx xxxx xxxx xxxx

Dairy Receipts
Small farms 260 xxxx xxxx 10,634 xxxx 0.33
Medium farms 378 xxxx xxxx 9,566 xxxx 0.32
Large farms 410 xxxx xxxx 11,937 xxxx 0.47
All farms 363 xxxx xxxx 10,737 xxxx 0.38
Your farm xxxx xxxx .xxxx

Dairy Capital
Small farms 779 xxxx 1.59 31,868 3.00 xxxx
Medium farms 1,173 xxxx 1.70 29,676 3.10 xxxx
Large farms 876 xxxx 1.17 25,518 2.14 xxxx
All farms 960 xxxx 1.46 28,388 2.64 xxxx
Your -farm xxxx xxxx

a/
SThe quantities used in the computations involving these items were
developed by multiplying the all farm totals for man equivalents,
farm receipts, and capital investment by the appropriate dairy
specialization factors first presented under the General Computation-
al Procedures section above.





54

Table 15 also shows, by way of further example, that Dairy Receipts for

all farms per one dollar of Dairy Capital is 38 cents. This says that

for each dollar invested in the dairy enterprise, there was a return of

38 cents in the form of dairy receipts. All other figures in the table

can be read in a similar way. Little xxx's appear at places in the table

where ratios would not be relevant or meaningful.

A comparison of efficiency in the use and output of the factors

selected provides some additional insight into why farms of medium size

had costs so much greater than farms of the small and large sizes.

Medium size farms were, for example, lowest in cows per acre, cows per

man, milk per man, receipts per man, and receipts per dollar of capital.

They were highest in capital per cow, capital per gallon of milk, and

capital per dollar of receipts. Each of these positions is, generally,

the least desirable one to be in. While medium-sized farms ranked in

the center of the three size groups of farms in milk per cow, receipts

per cow, and capital per man, they were not in the most favorable posi-

tion, relative to the other groups, for any ofthe factors listed.

The foregoing examples point out some possible uses of the data of

Table 15. Each farmer in the study should find a comparison of his

farm to the group averages both interesting and useful.








DAIRY HERD CHARACTERISTICS AND FACILITIES

The information developed for this and the following section is pre-

sented primarily as a matter of possible interest from the standpoint of

description, though it may at some later date be useful for purposes of

analysis. The data to be presented in this section is summarized in

Table 16. Though this table is largely self-explanatory, a few comments

with respect to each of the two major parts of that table are in order.

Herd Characteristics

The basis for the computation of herd turnover rates is shown in a

footnote to Table 16. The average number of years that cows remained in

the herd (based solely on the 1962 experience) is gotten by dividing

the herd turnover.rate into the number one. In other words, for all

farms, .23 or 23% of all the mature cows were replaced in 1962, which

is to say that each mature cow remained in the herd an average of

4.3 years.

It is interesting to note that 74 per cent of all replacements were

from the farmer's own cows in 1962. In view of the relatively low

average production per cow on Pensacola Area farms, and to the extent

this low production is due to the inherent ability of the cows now

found there, the up-grading of herd averages will indeed be a slow

process with such a high proportion of replacements currently coming

from present stock.

Guernseys are the predominant breed at 38% of all cows, though Jer-

seys are not far behind at 32% of the total. Holsteins at 22 per cent

and all other breeds at eight per cent make up the remainder. Twenty-

seven per cent of all cows on Pensacola Area farms were purebred,

though not necessarily registered, according to area dairymen.





56

TABLE 16. Herd Turnover Rates, Source of Replacements, Breed Percentages,
and Facilities, by Size of Farm, Pensacola Area Dairy Farms,
1962

Size of Farm All Your
Item Small Mediuml Large Farms Farm


1W.RTT ~ARAflT1RTSTTfl!?


Herd turnover rate a/

Average no. of years cows in herd

Per cent replacements raised

Per cent replacements purchased

Per cent cows died h/

Cows died as per cent of all removals

Per cent all cows purebred

Per cent all cows grade

Per cent all cows Holstein

Per cent all cows Guernsey

Per cent all cows Jersey

Per cent all cows all other breeds /

FACILITIES

Per cent farms milking in stanch, ban

Ave. no. of stanchions per barn

Per cent farms milking in parlors

Ave. no. of stalls per parlor

Ave. no. milking units per farm

Per cent farms using pipeline system

Per cent farms providing herd shelter


.12'

8.3

84.0

16.0

0.7

5.7

20.0

80.0

5.0

32.0

62.0

2.0



86.0

7.8

14.0

6.0

2.1

29.0

0


.28

3.6

73.0

27.0

7.8

27.6

33.0

67.0

30.0

29.0

18.0

24.0



29.0

9.0

71.0

4.6

3.4

100.0

28.6


.26

3.9

73.0

27.0

2.5

9.7

27.0

73.0

23.0

43.0

29.0

5.0



60.0

15.7

40.0

9.5

5.3

90.0

30.0


.23

4.3

74.0

26.0

3.7

16.1

27.0

73.0

22.0

38.0

32.0

8.0



58.0

11.4

42.0

6.7

3.8

75.0

16.9


Herd turnover rate is computed by dividing the total number of cows re-
moved during the year by the 13 month average inventory of cows.

Per cent cows died is computed by dividing the number of cows died dur-
ing the year by the 13 month average inventory of cows.
C/
SThese other breeds were only 4% purebred and consisted of 23% recognizable
Ayrshires, 21% recognizable Brown Swiss, and 55% other breeds and crosses
not recognizable as any particular breed.


xxx

xxx

xxx_

xxx

xxx

xxx

_xx


ns








DAIRY HERD CHARACTERISTICS AND FACILITIES

The information developed for this and the following section is pre-

sented primarily as a matter of possible interest from the standpoint of

description, though it may at some later date be useful for purposes of

analysis. The data to be presented in this section is summarized in

Table 16. Though this table is largely self-explanatory, a few comments

with respect to each of the two major parts of that table are in order.

Herd Characteristics

The basis for the computation of herd turnover rates is shown in a

footnote to Table 16. The average number of years that cows remained in

the herd (based solely on the 1962 experience) is gotten by dividing

the herd turnover.rate into the number one. In other words, for all

farms, .23 or 23% of all the mature cows were replaced in 1962, which

is to say that each mature cow remained in the herd an average of

4.3 years.

It is interesting to note that 74 per cent of all replacements were

from the farmer's own cows in 1962. In view of the relatively low

average production per cow on Pensacola Area farms, and to the extent

this low production is due to the inherent ability of the cows now

found there, the up-grading of herd averages will indeed be a slow

process with such a high proportion of replacements currently coming

from present stock.

Guernseys are the predominant breed at 38% of all cows, though Jer-

seys are not far behind at 32% of the total. Holsteins at 22 per cent

and all other breeds at eight per cent make up the remainder. Twenty-

seven per cent of all cows on Pensacola Area farms were purebred,

though not necessarily registered, according to area dairymen.








Facilities

Stanchion milking barns were somewhat more in evidence (58 per cent)

than milking parlors (42 per cent) in the area in 1962. Medium size

farms had a significantly higher percentage of parlors, but these par-

lors were smaller, on the average, than the parlors of either the

small or the large size groups. It is also noteworthy that medium sized

farms all had pipeline systems, whereas only 29 per cent of the small

farms and 90 per cent of the large farms had such equipment.

Just 16.9 per cent of the area farms studied provided any sort of

constructed shelter for their cows, and all of these were simple roof

shelters open on all four sides. There may be other types of shelter in

the area, but none of these were found on the farms surveyed.








MANAGEMENT PRACTICES AND BIOGRAPHICAL DATA

The writing of this section was undertaken for the same general

reason as for the section immediately preceding, that of description

for present purposes and for possible analysis at a later date. It,

as does the previous section, tells us more completely "how dairying is

carried out" in the Pensacola area. It should as a result provide bet-

ter insight into problems and problem settings than just a simple iter-

ation of costs and returns would permit.

Management Practices

Dairymen were asked as to whether they followed a number of

practices which were considered to be generally desirable from the

standpoint of good management. Their responses to certain selected

practices are given in Table 17. They were queried as to other prac-

tices not listed there, too, but their replies were either virtually

all positive or all negative, or generally incoiolusive because of the

form in which questions regarding the practices were cast.

All the dairymen's replies are given on a whole farm basis in

Table 17. For example, the data show that 26 per cent of all farms

keep some sort of individual cow production records. This should

not be interpreted as meaning that individual production records are

kept for just 26 per cent of the cows in the area. In this par-

ticular case, since a higher percentage of the larger farms kept

records, and since they had higher than average numbers of cows per

farm, actually more than 26 per cent of all the cows in the area

were on some sort of production record-keepin, system. The kinds

of production records kept ranged all the way from those wherein

the farmer merely weighed each cow's milk once a month to full








MANAGEMENT PRACTICES AND BIOGRAPHICAL DATA

The writing of this section was undertaken for the same general

reason as for the section immediately preceding, that of description

for present purposes and for possible analysis at a later date. It,

as does the previous section, tells us more completely "how dairying is

carried out" in the Pensacola area. It should as a result provide bet-

ter insight into problems and problem settings than just a simple iter-

ation of costs and returns would permit.

Management Practices

Dairymen were asked as to whether they followed a number of

practices which were considered to be generally desirable from the

standpoint of good management. Their responses to certain selected

practices are given in Table 17. They were queried as to other prac-

tices not listed there, too, but their replies were either virtually

all positive or all negative, or generally incoiolusive because of the

form in which questions regarding the practices were cast.

All the dairymen's replies are given on a whole farm basis in

Table 17. For example, the data show that 26 per cent of all farms

keep some sort of individual cow production records. This should

not be interpreted as meaning that individual production records are

kept for just 26 per cent of the cows in the area. In this par-

ticular case, since a higher percentage of the larger farms kept

records, and since they had higher than average numbers of cows per

farm, actually more than 26 per cent of all the cows in the area

were on some sort of production record-keepin, system. The kinds

of production records kept ranged all the way from those wherein

the farmer merely weighed each cow's milk once a month to full









participation in a DHIA program.

Considerably higher percentages of farmers tested soil for lime

and/or fertilizer needs than kept cow production records. .'Al large

farms in the survey had tests made regularly, and an average of 66 per

cent of all farms in the area followed a fairly regular program of

soil analysis.

Forty-seven per cent of all farms fed concentrate feeds to cows

on an individual cow basis. A further attempt to evaluate their feed-

ing program was made by computing a weighted sum of factors by rank-

ing nine factors that might be considered as a basis for determining

quantities of concentrate feeds needed in the approximate order of

their importance. The least important was assigned a weight of one

and the most important a weight of nine. The complete list of factors

and their weights is as follows:


The composition of the concentrate feed itself 9

The quality and quantity of roughages available 8

The production of the cow 7

The condition of the cow 6

The size of the cow 5

The stage of lactation of the cow 4

The stage of pregnancy of the cow 3

The age of the cow 2

The weather 1

The dairyman was asked in this connection: "What determines the

quantity of concentrate feed that you do feed each cow" (whether he fed

them individually or not). The factors he gave were recorded and later

assigned to one of the nine categories and weighted accordingly.








TABLE 17. Management Practices and Biographical Data, by Size of Farm,
Pensacola Area Dairy Farms, 1962

Size of Farm All
Item Small Medium Large Farms
Management Practices:

Per cent of farms keeping any kind of
individual cow production records 0 43 '50 26
Per cent of farms testing soil for lime
and/or fertilizer needs 43 71 100 66
Per cent of farms feeding concentrate feeds to
cows on an individual cow basis 43 57 40 47
Sum of weights for factors considered in the
determination of amounts of concentrate fed 9.4 11.4 6.9 96

Per cent of farms:
(a) vaccinating calves for Bang's disease 71 86 100 83
(b) dehorning calves 29 29 70 38
(c) using artificial breeding 43 71 70 59

Biographical Data:

Average number of years present operator has
had management control of farm 10 15 11 12
Average number of years of other farm
experience of operator 19 15 14 16
Average number of years of non-farm work
experience including military service by
operator 5 6 4 5
Average number of years of formal schooling
by operator 7.9 8.4 10.6 .8.7

Average age of operator 48 50 46 48


SThe basis upon which these weights were developed is explained in
the text accompanying this table. A maximum score of 45 was possible
under the system of weights used.

None of the nine factors were "suggested" as the dairyman did not have

any knowledge of the factors or their ranking at the time of the inter-

view. The weights for each farm were then added, and an average weight

for each size group developed. These average sums of weights are given

in Table 17, and it could be reasonably concluded, insofar as the ques-

tions concerning feeding are valid and discerning, that Pensacola area

dairymen do not pay a good deal of attention to the quantities of con-









centrate feeds fed to their cows, either on an individual cow or on a

herd basis. Little regard is given at least in a formal way, to the

varying needs of the cows, though with a good many dairymen there is

something of an automatic adjustment which takes place as the cows are

frequently permitted to eat all they can while in the milking barn or

parlor.

Biographical Data

Little comment with regard to the data of this part of Table 17

seems warranted beyond an explanation of the basis for the computation

of the years of both other farm and non-farm work experience on the

part of the operator. Full work experience credit of one kind or

another was given for the years of life of the dairyman between his

age at the time his formal schooling ceased and his age in 1962. It

was listed as management control of present farm, other farm experience,

or non-farm work experience as classified by the dairyman himself. If

one adds these categories of work experience, the years of formal school-

ing, and six years for preschool time, the sum is the age of the operator

in 1962.

In conclusion of this section, it is pointed out that Pensacola area

dairymen have had relatively little (about one year out of seven) non-

farm work experience and that, as Table 17 shows, an average formal

educational achievement not quite through the junior high school level.









SUMMARY

An economic study of wholesale dairy farms in the Pensacola Milk

Marketing Area was conducted in 1963 based on the situation of those

dairies and their operational experience in the calendar year 1962.

The two major objectives of the study were to develop an economic

description of dairying as it was carried out in the area, and to get

reliable data on the costs and returns experienced by dairymen for

that year.

There were approximately 68 dairy farms in the Pensacola Area

and they supplied 32.5 per cent of all the milk received by handlers

there in 1962. Producers were grouped according to size based on

November, 1962 shipments of milk into small, medium, and large groups.

A systematic, random sample of producers stratified by size and loca-

tion was drawn for inclusion in the study and data from 24 of the

68 farms was ultimately used in the report. The information collected

in the survey was summarized and presented in the report using the

same size groupings that initially served as the basis for drawing the

sample of farms to be contacted.

Farms with gross receipts from wholesale sales of milk less than

50 per cent of all farm receipts were excluded from the study at the

outset. After the survey woik was completed, farms with a dairy spec-

ialization factor (as defined in the report) of less than .70 were

excluded from further consideration and were not permitted to enter

into the calculations upon which the final report is based.

Small farms shipped an average of 53, medium farms 111, and large

farms 260 gallons of fat-uncorrected milk daily. There were 45, 60,

and 135 cows per farm on the small, medium, and large farm sizes,








respectively, in 1962. By size groups, in ascending order of size, there

were averages per farm of 146, 289, and 417 acres of land operated; man

equivalents of 1.3, 2.7, and 4.8; capital of $42,262, $79,986, and

$122,445; and $1 44 $25-82, and $455-6 of gross cash receipts.

All farm receipts and expenses were broken down into cash and

non-cash items, and presented on per farm, per gallon of four per

cent fat-corrected milk shipped, and per cow bases. Each item of re-

ceipts and expenses was shown as a per cent of total receipts and

total expenses, respectively. Cash receipts for all farms were 95.4

per cent of total receipts, and cash expenses 58.5 per cent of

total expenses. Receipts from wholesale sales of milk were 83.5

per cent of total receipts, and sales of crops 7.6 per cent. Appre-

ciation on dairy livestock, the only other receipts item of any

particular significance, amounted to 3.8 per cent of total receipts.

Purchased feed, at 26.6 per cent of all farm expenses, was the larg-

est single item of cash expense on area farms, though when hired labor

at 6.7 per cent, value of unpaid labor at 6.1 per cent and value of

operator's labor at 16.4 per cent are added, total labor expenses at

29.2 per cent becomes the largest over-all expense item. Interest on

investment at 11.8 per cent of total expenses, depreciation at 7.2 per

cent, and fertilizer and lime at 6.3 per cent were the other categories

of expense of major importance in 1962.

An analysis of costs and returns showed the income to the oper-

ator for his labor and management, after all expenses including an

interest allowance of five and one-half per cent on investment were met,

to be -$1,009 per farm with only the small size group of farms showing

a positive value. Net farm profit, or total receipts minus








total expenses, averaged -$6,660 for all farms in the area based on

the assumptions and findings of the study.

Levels of indebtedness were tabulated in the study, and these

were analyzed along with cost and return data to determine the over-

all financial position of Pensacola area dairymen. There was an

average of $1,145 of farm cash available for family living, and

when cash from known non-farm sources was added, the farm families

studied had an average total cash available for family living of

$2,168. A figure of particular interest was the farmer's return above

the amount needed to just maintain his equity in his business. This

came to an average of $3,940 for all farms in the area, and goes a

long way toward explaining how area dairymen can continue to pro-

duce milk at computed costs so much higher than prices received.

The net cost of producing a gallon of four per cent fat-

corrected milk, based on the data and assumptions of this report,

was 67.6, 77.0, 59.5, and 66.7 cents for small, medium, large, and

all farms, respectively. Farmers received blend prices for milk

corrected to four per cent fat basis of 50.7, 52.1, 52.1'ana 51.8 cents,

for mall, medium, large, and all farms, respectively. The differ-

ences between costs and blend prices multiplied by the number of

gallons of four per cent fat-corrected milk shipped equals net farm

profit, which, as reported above, averaged -$6,660 for all farms in

the area.

A comparison of farms on the basis of efficiency in the use of

selected productive inputs and the production of selected outputs

was made. This sort of comparison provided some leads as to the

strong and weak points in the farm business and showed that








medium-sized farms, who experienced the highest over-all production

costs in 1962, were generally least efficient in the use and production

of the factors studied.

Information obtained on dairy herd characteristics showed that

cows on all farms remained in the milking herd an average of 4.3

years, that 74 per cent of herd replacements were raised from the

dairyman's own herd, and that 27 per cent of all cows were classified

as purebred animals.

Cows were milked in stanchion barns on 58 per cent of all farms

surveyed, with 42 per cent milking in parlors. There was an average

of 3.8 milking units per farm, and just 16.9 per cent of the farms

surveyed supply any type of constructed shelter for their herd.

The report was concluded with a section on management practices

and bioJraphical data, presented for purposes of further description and

for possible later analysis. It was found that only 26 per cent of

all farms kept any sort of individual cow production records, but

that 66 per cent had their soil tested on a fairly regular basis.

Dairymen generally did not appear to pay a good deal of formal atten-

tion to the variation in feed concentrate needs of cows.

Area operators averaged 48 years in age in 1962 and had had

management control of their present farm for 12 years. Their formal

schooling had ended just short of completing junior high school, as

they averaged 8.7 years of attendance at educational institutions from

the elementary through the college levels.


BJS: bfc 7/21/64
Exp. Sta., Ag. Ec. 500