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Federal Reserve Bank of Chicago - December 11, 1959 In the past two decades, increased mechanization and improved technology have created large increases in both. the number of acres a farmer can operate and the output obtained per acre. Mechanization and new technology in livestock production have not advanced as rapidly as for crops. However, the livestock production picture is changing and the "old farmstead” may show the results. In the past, most mechanization in livestock production has taken place where there i s a high labor requirement such as in dairying. The extent to which dairy farmers incorporate new developments and techniques into their operations depends on many factors, but may reflect largely the relative availability and cost of labor and capital. Each can be substituted for the other. One important feature is the type of milking system employed. The USDA has unveiled some figures which provide a comparison.of the capital investment and labor efficiency of four milking systems. Number 538 modity Credit Corporation at the end of October was up more than $200 million from the month before and far above the $7.9 billion on hand a year earlier. Because of the usual upward _trend of farm surpluses in late fall and early winter, and the large harvest of crops this fall, officials believe the total Federal surplus will top $10 billion by February or March. Crop inventories usually begin a seasonal decline in the spring and summer as stocks are reduced through CCC sales or gifts, both domestic and foreign. CCC Inventories Comparison of cost and efficiency, for a 56-86 cow, one-man milking system System design and features October 31, 1958 Value uantit (mil. dol.) ijiTt1Tons Stanchion Double-2 Double-3 barn Double-4 side tandem system herringbone opening walk through Cow capacity 60 Building cost $ 4,100 Equipment cost ... 9,800 Total building and equipment costs . $13,900 Cost per cow milked . 232 Milking efficiency: cows per man-hour 30 86 $ 9,898 $ 5,900 56 $ 7,434 $ 5,150 64 $ 7,926 $ 5,350 $15,798 $ 184 $12,584 $ 225 $13,276 $ 207 43 28 32 The outstanding conclusion is that efficiency is achieved through larger-size operating units. The double-4 herringbone system permits one man to handle 43 cows per hour compared with 30 in the stanchion barn system. And the investment in building and equipment per cow milked is reduced from $232 to $184. However, the capacity is '86 cows compared with 60 for the stanchion barn system. Farmers will have difficulty justifying large capital expenditures for new equipment and buildings without an increase in income through enlargement in herd size or some other gains (e.g., elimination of a hired man or increase in acreage farmed). Aka °IRV FARM SURPLUSES owned by or under loan to the Government rose to a record high of $9.2 billion on October 31, 1959. The USDA reported that the inventory of farm commodities owned by or under loan to the Corn- Wheat Corn Cotton Grain sorghums Soybeans Barley October 31, 1959 Value luantit (mil. dol.) $2,200.0 834.0 bu. $2,900.0 1,100.0 bus 2,000.0 1,100.0 bu. 2,200.0 1,200.0 bu. 342.9 2.4 bales 1,500.0 *8.5 bales 397.7 164.1 cwt. 696.0 272.5 cwt. 31.1 13.9 bu. 90.9 40.5 bu. 84.2 73.4 bu. 89.7 77.1 bu. The large increase in cotton inventory is due largely to the new Government program. Under Plan A of the program adopted this year, farmers who plant within the acreage allotment are eligible to sell their cotton directly to -the Government at 80 per cent of parity. 'The Government then resells the cotton at a lower price. Farmers who chose Plan B are eligible for sales to the Government at 65 per cent of parity but were permitted to increase the acreage planted by 40 per cent. Eighty per cent of the cotton farmers chose Plan A last spring. Because of this, the Government is expected to buy between 70 and 80 per cent of the 1959 cotton crop of 14.7 million bales at a total cost of nearly 1 billion dollars. However, exports are expected to rise sharply and this, together with anticipated increases in domestic consumption, will absorb most of the 1959 crop. INTEREST RATES on farm real estate loans made by the Federal Land Banks are now 6 per cent in all areas. On November 1, 1958, the rates were 5 percent in nine districts and 5-1/2 per cent in three districts. Research Department