Planning Farm Returns

by NEIL W. JOHNSON and C. P. BARNES MORE AND MORE farmers are putting the farm on a business basis by using budgeting methods to help plan changes in their farming systems. In doing this they can be helped by knowing about the yields generally experienced by farmers who have used land like their own for different crops and under different methods.

A good farmer knows that before he makes a major shift in crop or livestock production he had better do some figuring to find out how his income is likely to be affected.

Before he buys a new farm he will work out as best he can how much he can make from it. He knows that a fair price to pay for the farm depends on how much income it will return over the years. Perhaps he will calculate what his returns might be if he kept dairy cows and sold cream, and then compare them with what the returns would likely be if he fed hogs and beef cattle. He might also work out his probable income if he raised grain and sold it instead of feeding it. At any rate, he can do a better job of figuring how much the farm will produce if he knows what soil types are on his farm and what the yield experience of many farmers who use these types has been on the average.

How is this figuring done? Is it just a matter of making a few long-range guesses? Not if we want to know what we are really getting into when we buy a new farm or make a major change in the way we farm an old one. It means getting .down on paper some definite figures on acres of crops and numbers of livestock; on expected production and expected receipts; on quantities and cost of labor, fertilizer, feed, seed, gasoline, and equipment; on taxes, insurance, and other expenses; and finally, on the probable income from the whole farm operation. It is possible to bring all these considerations together on a single work sheet as shown in a table. Putting them all down like this helps one think through the production process without overlooking important items.

Suppose we want to compare the prospective returns from this particular plan of operating the farm with other plans. We can make a similar budget for each one and see how the returns compare. The another table shows how this was done for a certain Georgia farm. One should notice how the possible alternatives varied-from cotton to no cotton, from a small peanut enterprise to one that is three times larger, from three cows to six, et cetera. The alternatives seem able to produce more income than the regular plan being followed.

This was true with prices and costs as they were in 1942. But we shall not always have these costs and prices----those items vary from year to year. The budget process permits us to compare returns under different prices and costs. We can find how we would get along with cotton at 10 cents and at 25 cents a pound. Thus we can get an idea of what the income might be over the long pull, in periods of depression as well as in prosperity. We can then appraise the ability of the farm to weather the lean years as well as to prosper in the fat ones. For instance, on this Georgia farm the net cash income of $1,479 when figured with 1942 prices and costs, was only $665 under 1940 conditions, and only $370 at the prices and costs that prevailed in 1932.

To estimate the returns from any farm it is, of course, necessary to know how much the farm will produce. A new feature of the most recent county soil reports issued by the Department and the State colleges gives average crop-yield estimates for different soil types and different systems of soil management. These will help us if we know what soils are on the farm. Take, for example, a farmer in Alabama who has grown cotton mainly and is thinking of improving part of his. land by putting it in pasture, growing some feed crops, and getting some beef animals. Naturally he wants to know how much this will increase his income. He can use a work sheet like the one shown in the first table, and set down all his estimated costs and returns. But to do that he will need to decide what land he will use to grow his feed and forage, what feed or grazing crops he will-grow, with what rotations and practices, and how much they will produce each year.

If he has not grown these crops before, he cannot rely on his own experience to tell him these things. If his figures are to be anything but guesses, he must rely on the experience of other farmers. But he can depend on others' experience only if their soils and practices were similar to those he will use.

Yield estimates for some of our important soil types, have been made in connection with the Nation-wide soil survey program. More will be made and published in the county soil survey reports as soil maps are made of additional counties.

The third table illustrates the considerations that are necessary if we really get down to brass tacks in estimating yields. Soils can be used or abused. They can be cropped continuously or they can be handled under careful systems of rotation. Fertilizer, lime, or manure can be applied at regular intervals where needed to get better yields. Wet land can be drained and dry land can be treated in ways to control soil moisture better and to discourage erosion. Eventually we come to know how best to handle each type of soil and the probable effect on crop yields of each common system of management. It is this kind of information that is provided in table 3 and in the newer soil survey reports. It enables us to benefit from the experience of many farmers who have used the particular soil types. The yield estimates are more likely to represent what can be expected on the average than the yields experienced by any one farmer or any small group of farmers in a given locality.

With a map of the farm showing the soil types and phases, and with the estimated yields of different crops and pasture under stated cropping systems and practices for each soil, the cropping program can be planned so that each of the different bodies of soil can be used in the way that will contribute most toward profits and stability in farming. Different field arrangements can be laid out on the map and alternative cropping systems can be considered, until the most satisfactory plan is worked out.

The county agricultural agent will know whether detailed soils maps and accompanying data on yields to be expected under different systems of management, are available for his county. If information of this kind is still lacking, he may be able to assist in making satisfactory approximations for an individual farm.

The process of thinking through all the steps and items in the farm's operation-fitting new methods in crop and livestock production to the land, labor, and capital resources that are available, and then making actual estimates of costs and returns in the light of thorough consideration of market and price prospects can go a long way toward improving farm profits and adding satisfaction and permanency to farm life.

THE AUTHORS Neil W. Johnson is assistant head of the Division of Farm Management and Costs, Bureau of Agricultural Economics.

C. P. Barnes is chief analyst in the Division of Soil Survey, Bureau of Plant Industry, Soils, and Agricultural Engineering.