Full text of Agricultural News Letter : Vol. 12, No. 2

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

AGRICULTURAL
NEWS LETTER
F E D E R A L
Vol. 12, No. 2

R E S E R V E

B A N K

DALLAS, T E X A S

OF

D A L L A S
February 15, 1957

SHIFTING FROM CASH CROPS TO DAIRYING
The farm operator faces two major prob­
lems as a result of the changing conditions
of farming. First, he must determine whether
a particular adjustment or investment is
sound. Second, once the farmer has decided
that a change will increase his returns suffi­
ciently, he must ascertain how and under
what conditions the change can be financed.
Credit plays an important role here, since it
is often the implement which facilitates
needed adjustments.
Professors Clarence A. Moore and A. C.
Magee of the Department of Agricultural
Economics and Sociology at Texas A. & M.
College recently made a study of probable
returns and finances needed to shift from
cash-crop farming to dairy farming in the
central Blacklands of Texas. The threefold
objective of the study, entitled “Financing
the Dairy System on a Central Blackland
Farm,” was to determine: (1) the returns
that can be expected from the change, (2)
the finances needed to make the change, and
(3) the length of time required to repay the
debt incurred with the additional income
that may be obtained.
A large number of problems arise in mak­
ing a study of this kind because of the tre­
mendous variations in conditions on farms
as to soils, acreages, buildings and equip­
ment, managerial ability of the operators,
and other factors. If a change in organiza­
tion is contemplated for a particular farm,
estimates would need to be worked out for
the specific situation. Since it would be im­
possible to analyze all possible conditions on
individual farms, the economists set up a
farm situation, based on research findings,
which approximates the situation on many
farms in parts of the Blacklands.

The farm situation used was a 180-acre
Blackland unit consisting of 106 acres of
cultivated land, 72 acres of pasture land,
and 2 acres of homestead and roads. A fairly
high level of soil management and crop pro­
duction was assumed; therefore, the manage­
ment practices and yields used in the study
were better than those on many farms in the
area with similar land capabilities. Only two
farming systems were analyzed — a cashcrop operation without livestock and a 36cow dairy operation.
Prices received for farm products and
costs of purchased items were those prevail­
ing in the area during 1955. Any change in
these cost-price relationships naturally would
alter the final results.
Cash-Crop System

The cropping system was a 3-year rota­
tion of cotton, corn, and oats-clover, fitted
to recommended practices for high-level
production. Acreage controls on cotton were
assumed to be in force. Corn was the grain
used, since it appeared to be more profitable
under the 1955 conditions than any other
grain.
Labor costs were not considered. The
assumption was made that the farm family
could provide the labor needs for both the
cash-crop system and the dairy system, ex­
cept labor for harvesting and weeding
cotton and the labor included in work per­
formed on a custom basis. However, dairy
operations are more confining and allow less
free time for recreation than does the cashcrop system.
Under the conditions outlined, the cashcrop system had total sales of $5,779 and
expenses of $1,726, leaving a return of

AGRICULTURAL NEWS LETTER

2

$4,053. Reduced yields or lower prices than
those used in the study would result in less
return; if the converse were the case, higher
returns would be realized.
The Dairy System

In order to make the
change from a 180-acre
cash-crop farm to a 36cow dairy with an av­
erage annual produc­
tion per cow of 9,000 pounds of milk, an
initial investment of $21,075 would be
needed. Almost half the total investment re­
quired was for the outright purchase of the
dairy herd. (Limited information seemed to
favor outright purchase of the dairy herd for
the full-scale operation, rather than building
up the milking herd over a period of years.)
In addition to the dairy herd, the more costly
investment items needed were the dairy barn,
feeding barns, and feed storage structures.
The cropping system was planned to pro­
vide grazing, hay, and roughage for the dairy
herd; concentrates for the cow herd were
purchased. Thirty acres of Sudan and 41
acres of forage sorghum were planted on the
acreage formerly devoted to corn and cotton;
the 35 acres of oats-clover were unchanged.
G ross incom e from the dairy to ta le d
$16,810, and expenses were $7,989, leaving
a return of $8,821.
Comparison of Returns

In this study, the change from a cash-crop
operation to a 36-cow dairy setup yielded

$4,768 in additional returns. The amount
represents a return of 22.6 percent on the
investment of $21,075 needed to make the
change, and about AV2 years would be re­
quired for the additional net returns to equal
the cost of the change-over.
The results would be changed substanti­
ally if production were above or below the
9,000-pound output per cow assumed for
this study. The greatest changes in expenses
would result from differences in the cost of
purchasing the dairy herd and expenditures
for feed, since both costs vary directly in re­
lation to the productivity of the cows.
If the annual productivity per cow is 7,000
pounds of milk, the farmer converting from
a cash-crop system to a dairy system can
expect only $1,526 of additional net income.
With a level of 12,000 pounds per cow, the
farmer can expect as much as $9,592 of addi­
tional net income annually.
Net returns from either cash-crop farm­
ing or dairying will vary substantially as a
result of relative changes in prices for crops
and milk. For example, milk prices in the
Blacklands from 1948 through 1955 ranged
from 18 percent below to 14 percent above
the average prices received for cash crops in
the area in 1955. Using these extremes in
price relationships and assuming that cashcrop prices remain at 1955 levels, the addi­
tional returns of converting from cash-crop
farming to a 36-cow dairy with cows pro­
ducing an average of 9,000 pounds of milk
annually would have varied from $1,742 to

T IM E A N D A N N U A L PA Y M EN TS R EQ U IR ED TO L IQ U ID A T E A N A M O R TIZED
D EB T IN C U R R E D IN C H A N G IN G FR O M C A SH -C R O PPIN G TO D A IR Y IN G
PRODUCTION LEVEL OF DAIRY HERD
9,000 pounds
12,000 pounds
7,000 pounds
per cow
per cow
per cow

Item

Initial cost of ch an g e-o v er............................
A m ount of loan1 .............................................
Additional net returns2 ..................................
Liquidation of loan (am ortized)3
A t 6 percent interest
N um ber of annual paym ents . . . .
A m ount of annual paym ent . . . .
A t 8 percent interest
N um ber of annual payments . . . .
A m ount of annual paym ent . . . .

. . . .
. . . .
. . . .

$17,475
$13,100
$ 1,526

$21,075
$15,800
$ 4,768

$24,675
$18,500
$ 9,592

. . . .
. . . .

13
$ 1,480

4
$ 4,560

3
$ 6,921

. . . .
. . . .

16
$ 1,480

5
$ 3,958

3
$ 7,178

1 Three-fourths of the initial cost rounded to the nearest $100.
2 Additional net returns expected from changing from cash-crop farming to a 36-cow dairy at 1955 prices.
3 Assuming annual payments do not exceed the expected additional net returns at 1955 prices.

AGRICULTURAL NEWS LETTER

$7,121, compared with $4,768 for 1955
price relationships. This variation in returns
emphasizes the care needed in selecting the
prices to be used in determining whether
a m ajo r change in farm ing system s is
warranted.
Financing the Adjustment

A change from cash-crop to dairy farm­
ing should prove profitable to the central
Blacklands farmer who has good manage­
ment ability and a farm similar in type and
size to that outlined in this study. In most
cases, a farmer would have to obtain credit
to make the changes involved in converting
from a cash-crop system to a complete dairy
operation. Usually, he would expect to make
repayment of credit from the additional
returns.
Often, the lending agency requires the
farmer to provide some of the initial outlay
for the change-over. In this study, it was
assumed that the farmer would provide onefourth of the initial cost, and a lending
agency would provide the remainder. The
time required to amortize the debt from addi­
tional returns would vary from 3 years to
16 years under the situation prevailing in
1955, depending upon the productivity of
the cows and the rate of interest on the loan.
In the study, the additional returns that
can be expected from a change-over to dairy­
ing are average returns and, as indicated
earlier, can vary substantially. This varia­
tion in returns should be taken into consid­
eration when the loan is made.
Messrs. Moore and Magee point out two
possibilities in coping with variations that
might occur in net returns: (1) the term of
the loan could be lengthened, thereby reduc­
ing the annual amortized payments; or (2)
a flexible repayment plan could be used, with
the amount of annual payments set at a
reasonable proportion of the realized net
returns each year.

Turkey Troubles
Turkey producers will need to keep well
informed in order to market their 1957

3

turkey crop at a profit, according to Exten­
sion poultry marketing specialist F. Z. Beanblossom and Extension economist John G.
McHaney.
Government purchases through the school
lunch program eased last year’s supply situ­
ation somewhat; yet, little or no profit was
realized from turkey enterprises. Feed-dealer
credit featuring risk-sharing plans for financ­
ing production may influence farmers to
continue turkey production at a high rate
during 1957, although prices received for
the record crop last year were the lowest in
several years.
Both national and state testing reports
indicate an increase in the number of breeder
hens for 1957. In Texas on December 15,
1956, 40 percent more hens had been tested
than by the same date in 1955. Reports of
the United States Department of Agriculture
indicate that the Nation’s farmers intend to
hold 16 percent more heavy breeder hens
and 3 percent fewer light breeder hens for the
production of eggs and poults in 1957.
The current trend of selling turkeys the
year-round, instead of only during seasonal
holiday periods, may relieve some of the
pressure from the expected large sales of
1957-crop turkeys. However, the specialists
warn that such action will not completely
solve the marketing problem of surplus pro­
duction.

Drought-Feeding Cattle
The Oklahoma Agricultural Extension
Service makes the following suggestions for
drought-feeding beef cows and heifers.
1. Feed at least the minimum roughage
requirements. One pound of roughage per
100 pounds of body weight is the absolute
minimum for the proper function of the di­
gestive system. Two pounds of roughage per
100 pounds of body weight should be suffi­
cient to meet maximum energy requirements.
As long as minimum roughage requirements
are met, 1 pound of grain can be substituted
for 2 pounds of roughage.
2. Feed an adequate amount of protein
because most roughages are not providing

4

AGRICULTURAL NEWS LETTER

$ 5,000 CASH AWARD!
The Hoblitzelle Award for the Advancement of Texas Rural Life will be
presented on May 22, 1957, at the Texas Research Foundation’s annual field day
at Renner to the Texas farmer or rancher who made the most notable contribution
to agriculture in the State during the 4-year period January 1, 1953, through Decem­
ber 31, 1956. The award, consisting of $5,000 in cash and a gold medallion, is made
every 2 years to the individual whose contribution to rural life improvement is judged
the most important for the preceding 4 years.
Nominations may be made by individuals, groups, or agencies to one of the
five regional committees not later than March 1 this year. Information on how the
candidates for the award are nominated and other details may be obtained by writing
the Permanent Secretary, The Hoblitzelle Awards, Texas Research Foundation,
Renner, Texas.
normal amounts of protein. Microorganisms
in the rumen (paunch) require the nitrogen
in protein to digest feeds, especially lowquality roughages. If dry grass or roughage
is ample, the cattle should be fed 2 pounds
of 41 percent protein meal per head daily.
When grain is substituted for a part of the
roughage, feed 1Vi pounds of cottonseed
meal or soybean meal per head daily. Grain
will not substitute for protein. Buy protein
supplement on the basis of the price per
pound of protein.
3. Feed extra phosphorus, free access,
using a half-and-half mixture of salt and
steamed bone meal. Dicalcium phosphate
may be substituted, pound for pound, for
bone meal.
4. Feed vitamin A if needed, especially
to cows with calves and to weaned calves,
using either dehydrated alfalfa pellets or a
commercial vitamin A concentrate mixed
with feed.
Only the best and most productive cows
will pay. Start feeding cattle before they be­
come weak and thin, and creep-feed calves
as soon as they will eat.

Sorghum Protein High
During Winter
Chemical analyses have shown that the
percentage of protein in sorghums is exceed­
ingly high during the early growth stages of
the plant, declines rapidly until about head­

ing time, and then remains relatively con­
stant. From September until March, weather­
ing has little — if any — effect upon the
protein percentage in sorghums, although
total protein decreases as total dry matter
declines from weathering.
Tests conducted at the Oklahoma Agri­
cultural Experiment Station at Stillwater
show that the percentage of protein in sor­
ghums during drought years, when forage
yields usually are low, is two to three times
higher than during “normal” years. Three
years of the tests were considered droughty,
and three were considered normal.

New Nursery to Boost Pine
Seedling Output
A new nursery 12 miles west of Kirbyville
will more than double the Texas Forest
Service’s future production of pine seedlings
for the State’s timberlands.
The service expects to produce 20 million
seedlings in the new nursery this year, ac­
cording to Don Young, Head of the Forest
Management Department of the Texas
Forest Service. When peak production is
reached, the output is expected to be 50
million seedlings a year.
The Agricultural News Letter is prepared in
the Research D epartm ent under the direction
of J. Z. R o w e , A gricultural Economist.