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An Extension Method Op Farm Management Training AN EXTENSION METHOD OP FARM MANAGEMENT TRAINING DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By NEAL ROSS CARPENTER, B. S., M. S. -a-***** The Ohio State University 1959 Approved by /I Advil ^Department of Agricultural Economics and Rural Sociology ACKNOWLEDGMENTS I should like to express my deep gratitude to Dr. J. Robert TompkLn for his guidance In the preparation of this manuscript, to my wife, Florentine, for her patience and understanding, to Howard Showalter, County Agricultural Agent and Lloyd Sharp, Veterans Instructor, to all the farmer cooperators for their willing coopera­ tion, to Ruth Haynam who typed this manuscript, and to Louise Swift and Sue Richardson, my secretaries* ii TABLE OF CONTENTS Chapter Page I Introduction ...................................... 1 II A Description of the Extension Ilethod of 7a m ilanagernent as Taught Since 1 9 5 6 .................... 6 III Review of L i t e r a t u r e .............................. 21 IV Applicable Theoretical Concepts..................... 26 V Statement of Problem, Procedure Followed and method of S t u d y .......................................... U2 VI Assumptions and Coefficients used to Determine Optimum Combination of Resources by Linear Programming Procedure.............................. U9 VII Interpretation of Results.......................... 72 VIII Conclusions........................................ App en d i x e s ........................................ 93 Bibliography ...................................... 159 Autobiography...................................... 161 iii LIST OF TABLES Table Page 1 Assumed Hours of Labor Available by Operator and Family Members, by Months, Southeastern Ohio, 1955 and 1958 ..................................... $2 2 Net Receipts, Amount of Labor and Capital (Jsed, Per Unit, by Specified Activities in Linear Programming, Carroll County, Ohio, 1955 ....................... 55 3 Net Receipts, Amount of Labor and Capital Used, Per Unit, by Specified activities in Linear Programming, Carroll County, Ohio, 1958 56 1; Production Assunption Per Unit of Livestock Used for Linear Programming Coefficients, 1955 and 1958 . 58 5 Prices Used for Farm Products in Ohio, 1955 ........ 59 6 Prices Used for Farm Products in Ohio, 1958 ........ 60 7 Estimated Costs Per Unit of Livestock Used in Linear Programming, Carroll County, Ohio, 1955 . 61 8 Estimated Costs Per Unit of Livestock Used in Linear Programming, Carroll County, Ohio, 1958 . 62 t 9 Estimated Annual Crop Costs Per Acre of Grain Rotation Consisting of .5 Corn, .13 Oats, .37 1/Kheat, Carroll County, Ohio, 1955-58 61* 10 Estimated Annual Costs Per Acre of Meadow, 2-Cuttings Per Year, Carroll County, Ohio, 1955-1958 ......................................... 65 11 Estimated Annual Costs Per Acre of Meadow, 1 Cutting Plus Rotation Pasture, Carroll County, Ohio, 1955-1958 ................................... 65 12 Estimated Annual Costs Per Acre of Meadow Used For Rotation Pasture Only, Carroll County, Ohio, 1955-1958 ......................................... 66 iv LIST OF TABLES (Cont'd) Table Page 13 Investments Per Unit of Livestock Adjustments, Carroll County, Ohio, 1955 69 Hi Investments Per Unit of Livestock Adjustments, Carroll County, Ohio, 1958 70 15 Feed Requirements Used Per Unit of Livestock, Carroll County, Ohio, 1955-1958 ................... 71 16 Changes in Labor Income for 10 Farms, Carroll County, Ohio, 1955 to 1958 82 v LIST OF FIGURES Figure Page 1 Principle of Diminishing R e t u r n s ................ 29 2 Illustration of Elasticities of Demand and Supply . 32 3 Constant Rate of Substitution Relationships.... 35 ii Diminishing Rate of Substitution................ 35 5 Complementary and Competing Substitution.......... 35 6 Tangency of Outlay and Iso-product Curves at Optimum Production Point.......................... 39 7 Results From Changes in Factor Prices............ Ill 8 Model; Resource Use 1955 Il3 9 Model; Resource Use 1 9 5 8 ........................ U3 vi LIST OF ILLUSTRATIONS Illustration Page 1 Matrix for Program, 1955 Actual Prices........ 7h 2 Matrix for Program, 1958 Actual Prices........ 75 3 Optimum Combination and Family Labor Earnings, Actual Prices, 1955.................. 76 h Computation of Labor Income, Actual and on the Basis of Linear Program Solution........ 77 vii CHAPTER I INTRODUCTION In Southeastern Ohio, soils are relatively unproductive, farm labor frequently is not fully employed, and farm incomes are loir* Soils and topography limit farmers' opportunities to increase earnings* But with better management of land, labor and capital many could achieve higher incomes* The purpose of this publication is to develop a methodology for measuring the effectiveness of an Extension farm management program and to use that methodology to test a specific extension farm management method that has been used in the southeastern Ohio area since 1956* The situation existing at the beginning of this program will be described* Past programs will be presented next with the development and description of the present method being studied* Then the method­ ology used and results obtained will be set forth in that order* Situation in Southeast Ohio in 1951* and 1955 The 1951* Census of Agriculture for Ohio shows that the estimated gross cash income per farm was only $3,016 for 22 southeastern Ohio counties* Other farm account studies in the year 1951* and 1955 indi­ cated that fifty eight cents of every dollar went to pay cash 1 operating expenses* This left an estimated average net farm income in the area of $1,267* While this figure does not include the monetary value of farm produced foods or housing, neither does it include such costs as depreciation and interest on investment* The average annual income per Ohio industrial worker was $U,U36 in that same period* The average crop acres per farm in these counties was calculated to be a little more than forty-nine acres per farm* In the late 1920's many of these farms had a total capital investment of less than $10,000 and some of the farms in 1955 had an investment of four to five times that amount* Machinery investment per crop acre on many of these farms was twice that of farms in other agricultural areas of the state* Ad­ justments in farm organization have not been made in accordance with the amount of added labor saving devices, resulting in a disproportion­ ate share of gross receipts being used to pay fixed costs* In searching for reasons for the low incomes in southeastern Ohio many factors were listed as possible contributors* Farms generally are too small* The capital available per farm is insufficient to pro­ vide important improvements in technology* Volume of business is not large enough to efficiently employ available labor* In some cases, the farm is not suited to the type of agriculture being practiced* In addition, the families on many of the farms are poorly equipped for the competitive struggle in agriculture* Lack of training in the field of farm management and scarcity of opportunities for off-farm employ­ ment are also limiting factors* 3 Past Extension Farm Management Programs Past extension farm management programs have recognized the low level of farm management ability which was apparent from the poor com­ bination of resources* The major method used to oorrect this in past years has been the comparative farm management approach* Farmers records were brought to the Ohio State University and summarized, then grouped by livestock enterprises* The average of the top quartile, the bottom quartile and of the entire group were then computed and set forth with standards and efficiency measures for each group. A compari­ son type of farm management analysis was then made for each cooperator and economic reasoning applied to explain possible areas of improvement* It was possible in this manner to locate weak spots in the farm organi­ zation, except in thos instances where all farms in the group had exactly the same weakness, such as insufficient volume of business* The average of the top quartile normally established the standards of production and efficiency that were used during the year for teaching purposes. These summaries were also used for county wide meetings* Farmers were given a prepared summary corresponding to their type of farming and instructed to fill in the blank column for their own organization* The farm management specialist injected the use of the various economic principles as he presented the average receipts, expenses and produc­ tion standards* Other one-night meetings were conducted in conjunction with the above type of training* The topics were normally dictated by the findings in the comparative farm management program just described. Generally the topics for the evening were "cutting costs," "barnyard economics," "keeping farm accounts," "general outlook," and other pertinent topics. Why Change Past Method This type of fara management extension program has contributed materially to the betterment of agriculture in southeastern Ohio over the past few decades. It has also been in keeping with the stated objectives prior to 1956, namely* (1) to acquaint farmers with the various standards of production necessary to attain a profitable organization. (2) to teach farmers a method of analyzing current operations and making adjustments, where needed, in the farming organization. The past program, however, had some weaknesses which those of us in extension
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