Journal of Agriczclturd Ecommics. 13

Country and on the heavy clays of Cheshire or the Weald of the South-East, t o appreciate that not only will cultivations be expensive but yields poor. Average cereal yields in the Weald of Kent and Sussex are about 18 cwt. per acre. Again the predominant nature of the livestock chore work on many of these farms is a factor to be considered. It leaves so small a portion of each day available for the effective operation of the field machinery.

In any attempt at reduction in the costs on the smaller dairy farms a simpler cropping plan could often be a starting point. The longer ley might not be SO productive per acre as the shorter-term ones. But the system will probably provide sufficient quality bulk feed for the number of cows which the buildings can hold. There is obviously no point in expanding the production of feed beyond the capacity of the labour to handle it or the livestock to eat it.

For years past, and still to-day, much of the investigation into the economics of dairy fanning has been on the basis of enterprise cost studies. It would be superfluous here to discuss the errors which can arise from trying to isolate one enterprise from a truly interdependent system. But it is pertinent to suggest that the presentation of the data from these studies has produced a rigidity of thought, which has handicapped many a farmer in the profitable solution of the problems of policy and operation on his farm.

Accountancy cost may be satisfactory for the purposes of price-fixing, but i t is certainly not for dealing with the effect of changes in the business of a farm. One has only to consider carefully such statements as “ It costs L70 to produce a heifer ” to realise what missed opportunities of profit it may lead to. The concept of opportunity cost is one of the most vital in the correct thinking upon the questions of change on a farm. The technique of partial budgeting, based upon the distinction between fixed and variable costs gives the farmer a tool which is flexible enough to handle the individuality of his circumstances and his problems. If the profitability of dairy farming is to be maintained, farmers must know how to assess the effect upon their business, not only of alterations in prices and husbandry techniques, but also of the inclusion or exclusion, contraction or expansion of their different enterprises. They will then be able to show that flexibility wherein lies strength.

DISCUSSIQN ON MR. -ID’S PAPER. T. W. Gardner :

I t gives me the very greatest pleasure to introduce the discussion on Mr. Reid’s paper. It is not the first time that I have been asked to take up the threads where he has dropped them, but the fact that he makes such a thoroughly good job of anything which he undertakes makes my task in this particular instance rather more difficult that it might otherwise be.

I t seems to me that in this discussion on rigidity in milk production there are two rather distinct problems. One concerns the milk producing industry-the dairy farming industry as a whole-and the other concerns the individual farm. So far as the industry as a whole is concerned I think Mr. Reid has shown that changes during the last ten years in the proportions of different breeds, in the average yields, in the areas which have most greatly increased milk production, and in the methods which are employed. indicate that there is not a great deal of rigidity. I believe I have seen it said by the Milk Marketing Board that there are something like 20.000 changes a year in the list of registered milk producers. All this suggests to me that so far as the industry as a whole is concerned we are not really over-troubled by excessive rigidity and, therefore, not terribly worried by this problem for the whole industry. In so far as I believe that flexibility is essential to economic health, Mr. Reid’s analysis of the general situation is most welcome and I am further very glad that quantitative quotas, a t any rate for t h e time being, have been rejected.

But if you turn to the individual dairy farm with which the paper is particularly concerned you may come up against a number of rigidities. Under existing circumstances,

14 Journal of Agricultural Economics.

if rigidity on the farm is excessive, certain producers will be forced out of production by the cost-price squeeze ; this leads us back to the problem which Mr. Reid has developed : i f the milk producer is to be preserved, what can he do ?

It seems that it is possible for the milk producer to change his method of production most easily if he has adequate capital. In our area we are beginning to work with a farmer who has done this and who hopes that the very considerable capital outlay which he has made will be saved by a reduced wages bill in a matter of perhaps three years. If you do not have adequate capital to institute a new system, rearrange or build a new set of buildings, the problem is far more difficult but there are farmers (no doubt known to all workers in the field) who have succeeded in improvising fairly successfully with existing buildings. This kind of improvisation is, I think, more difficult for the smaller farmer and perhaps also for the older farmer who has only a short period of active farming in, which to recoup whatever outlay he may make. Here you come up against perhaps the most serious rigidity-something of a rigidity in the farmer himself-and here I suspect we may be trespassing a little on the subject of this evening’s paper. If the farmer wishes to become more flexible i t is possible for us to help him in streamlining his work and hi5 use of labour-if only a little-and perhaps encourage him to introduce a complementary enterprise. There seems to me to be great scope for the introduction of small sheep flocks on the typical dairy farm. It also seems to me possible that landlords, who in recent years have tended to contract out of a good deal of responsibility for fixed capital expenditure. might possibly be encouraged to participate a little in h e farming activities: something of the idea of share tenancy, to bring the owner back into active co-operation and greater interest in the actual farming activity.

I turn to the question of feed which is discussed at length in the paper. I found Blaxter’s paper rather difficult for an untechnical man to follow, but I believe he siid in effect that there really is no absolute measure of the value of feed. In other words, the value of any food depends on the utilisation which the animal makes of it at varying levels of production ; thus feed values are somewhat subjective. If this is true then I think the problem of computing rations and calculating alternatives becomes much more difficult.

Mr. Reid has touched upon grassland policy. It may be that the new grassland techniques are not all that their advocates suggest but, surely, out of all the additional expenditure and the new techniques there should be a greater food su ply available from the grassland. If this is so, then i t seems quite clear that farmers L v e not taken full advantage of i t in feeding their livestock. They produce more grass without achieving economies in the feeding of their livestock.

Then there is the problem of levels of feeding, which has been touched on in the paper. On this subject everybody goes back to the Jensen experiments and in my view the basis on which the Jensen experiments were carried out was faulty. ‘ Jensen came to a conclusion which was predetermined by the mode of his experiment so that there is still considerable scope fur work on levels of feeding and also on the ability of bulk foods to substitute for concentrates in relation to the individual dairy cow. I would hope that research might be carried out on this in this country, possibly in co-operation with the economists, but certainly in the form in which i t can be used by economists in their work on farm management.

At the same time I think it might be necessary for economists or sociologists to carry out reseerch on the motivation of farmers.. If then we have greater information about feeding practice, feeding requirements, and on the motivation process, it might be possible for US to go forward and stimulate farmers more readily and more widely to adopt newer, different, more economic practices, either by pressure of prices, stimulus of subsidies o r some other way.

A . J. Wynne : I agree witb the previous speaker that the absence of rigidity of the individual dairy

herd is masked by the global figures that Mr. Reid has quoted. The number of dairy cows in the country has gone up by 15%, but the number of the milk producers has dropped by about 8% in the last few years so that the number of cows per herd has gone up quite considerably more than 15%. We have also the evidence of the milk cost investigations that there is a steady tendency for herds to increase in size. At the same time, of course, others are going out of milk production. We want more information from the Milk Board on the composition of the 20,000 new contracts per year. How many of those are new dairy farms and how many are just changes of name or changes of address, or son taking over from his father, and that sort of thing ?

On this question of the rigidity of the individual farm I have been looking back on the records we have, and out of 45 dairy herds with several years’ records, we find that 19 have increased their herd size within the last ten years, anything up to over 100%-

Journal of Agricltlturd Economics. 15

Another 16 had built O r extended their cowsheds in the previous 15 years. Five of the farmers are not using their existing buildings to capacity and could therefore expand production, and only 5, as far as our records go, have not made any alterations in the last 25 years. That does not suggest much rigidity in herd size.

Mr. Reid attributes much of the national yield increase to A.I. I do not think that anyone would claim that A.I. was the most important factor as yet, although it may be in the future. As far as our part of the world is concerned the replacement of many nondescript dual-purpose Shorthorns largely by Ayrshires in the dales and by Friesians in the lowlands is of great importance.

I do not think that labour is as rigid as Mr. Reid suggests. Over the years the milk cost investigation has shown a steady fall in the labour hours per cow and those of us who get about on the farms will realise that there is enormous scope for improvement in labour economy on many of them.

I agree entirely that we need more technical information about grassland conservation. we want to know why silage making is not as simple as it would appear to be from the way Some technical officers talk. I was certainly horrified by the figures he produced. But I am not sure he is right in saying that you get more nutrients from grazing than you do from conserved grass. H. T. Williams in his article in Agriculture quoted I.C.I. figures in which they estimated the output of starch equivalent from pasture was about the same as i t was from well consorved grass ; in other words there is a certain amount of wastage in the pasture as well as in conservation. The same point was made by Rex paterson at a discussion reported in the Journal of the Farmers’ Club some years ago.

Finally, I disagree about rigidity in general-I think the majority of dairy farmers today are worried about the future and they are considering their whole farming programme. Under these conditions there can be no fixed costs, and no rigidity arising from the level of fixed costs.

D. B. Wallace: You ask for eveidence from the husbandry farms. I think you are asking a lot, but

some of i t is now coming forward and is being published in a new journal called “Experimental Agriculture”. In the first number there was the result of an experiment using silage as a replacement for hay and concentrstes carried out on the Lancashire Experimental Farm and the data for three years were given. If you care to cost it ou t a t any sort of reasonable prices and values you will find there is very little in it. Still the data are there and I think you will find in the next few years that there will be more of them coming forward PS these experiments reach their conclusions. I would agree that very manv of them have not been designed in a way that will help the farm economist, although 1 hope that representations made on this point will have their effect in future.

I agree entirely with Mr. Wynne about A.I. I have heard at Cambridge that there is no evidence whatsoever that A.I. has in fact increased the yields of progeny very much over those of dams. I believe that at one station the increase was as little as )-gallon a year over that of the original dam’s.

I am in entire agreement that merely growing more food on farms can be quite dangerous i f there is no capacity to utilise it to the full. I remember being taken round a hill farm where the advisory service were very pleased with the new leys which had replaced permanent grass, but as there was no prospect of keeping any more cows on that farm due to rigidity of building, this extra grass was not being used.

I think we might look to the Swedes for some information as to what happens to milk producers in a period of falling prices and what their reactions may be. I understand that in Sweden they have had five years of continuously falling milk prices and the result has been that the number of cows has dropped considerably but the amount of milk coming forward has hardly dropped at all. The very smallest producer has, if anything, increased his numbers, the very large producer has either continued dairying or cut down his production while the middle range man has very often opted for an entirely cash crop system and abandoned dairying. If the Swedes are anything to go by the prospect of small dairymen abandoning milk production seems to be a remote possibility.

P. 11.1. Reason : When

Mr. Reid turned in the middle of his paper to the budgeting system he shied a t i t violently and pretty well unseated the reader ! But towards the end he told us that budgetary methods will be of very considerable assistance and will help to solve many problems. There is a conflict here which I find rather interesting. No doubt it could be explained by those who have actually worked with budgeting, which I have not, but i t occurred to me to wonder whether this shying away from budgeting, in the example given, is to be taken

There is one point which struck me as being rather difficult to resolve.

16 Jowna l of Agricultural Eeommics.

all that seriously. Is the system really as hopeless as that ? The author says that you can budget until you are blue in the face and get a different answer every time. But surely it is a question of seeking the best answer that the system can give. To achieve this-though some might say i t would not help-I would like to see a group of farms chosen, dfty or B hundred, that have made a switch from, say, milk to beef, and budget them backwards to the position they would have been in if they had not made the switch. Then as a cross check on that I would like to see another group of farms chosen that had not made any great changes and, reversing the process, budget them forwards to the position that they would be in if they made the switch, and compare the results of the two series.

Further, it might help if these f m s were classified into different types and also since budgeting is so subjective a process, to have it camed out by two people independent1 The averages for these groups of farms so obtained might then yield information whicl: though perhaps not very sound statistically, would, I think, give us quite a lot to think about in relation to some specific change in farming pattern.

J. D. Empson : I would like to comment firstly upon Mr. Reid's remarks on the increases in milk

supplies in recent years and the reasons for them. The situation is that over the ten years from, say. 1945 to 1955 about 85 per cent. of the increases came from rising yields and about 15 per cent. from greater cow numbers. In this context the conclusions one can draw can be rather different from Mr. Reid's. The starting point in 1945 was a time when yields were unusually low in conditions when feed supplies were i:$short supply and controlled. Since that time there have been, what might be termed, increases in yield resulting from, tirstly. increases in the supplies of purchased feed available and, secondly, from breed changes. Both these factors raised yields in this ten-year period and the gains from both are now almost entirely behind us and unlikely to be repeated, at least in the same degree.

Moving on to the question of rigidities in the dairy industry, if one looks back over the last twenty years, one would, I think, comment rather on the flexibility to change. Production has risen some 40 to 50 per cent. and the consumption of milk by rather more. Resource use has also changed : the milk costs show a use of 4 lb. of purchased concentrates a gallon pre-war compared with about 2)lb. now and other speakers have referred to changes in the use of labour. The tenor of Mr. Reid's paper is concerned not so much with rigidity in the upward movement in supplies but in the downward adjustments and he seems to infer a backward sloping supply curve with perverse reactions to price.

Here I would point to the relationships between beef and milk prices. In each of the years of 1955-6 and 1956-7 milk supplies rose by about 6 per cent., of which a third was from greater cow numbers arising from a switch of replacement cattle from beef to dairy uses originating in the slump in beef ,prices coming a !fttle while after the decontrol of meat. There is, in thig,connection, a beef-milk cycle similar in some respects to the recognized " pig cycle

Several speakers have mentioned the decline in producer numbers in recent years and here I would mention a small study we carried out to try and identify the producers in one area-the Eastern Counties-where the decline has been especially great. who had ceased to produce milk. They appeared to be the smaller producers with an average herd size of 12 cows compared with that of 18 cows for the area as a whole. They tended, also, to be the producers who had not gone in for T.T. or had attested herds-only 30 per cent. of them had T.T. licences compared with 55 per cent. of all producers in the area.

Another speaker mentioned supply changes in relation to size of farm. We made a limited study of this with regard to the changes in supplies between 19523 and 1956-7 from over 700 producers in an area of Wales and over 500 in Essex. We related the changes in supplies between these two years with herd and farm size with a view to seeing whether the smaller producers had raised their output of milk to a greater extent than the larger ones. The results were rather surprising. As far as the group in Essex was concerned, it seemed the percentage changes in supplies were broadly the same throughout the whole size range. In the Welsh group, there were indications that the smaller producers had increased their supplies by more than the larger ones, but there was not a lot in it. In other words, these admittedly small scale investigations did not seem to suggest a very p e a t difference in response between large and small scale producers.

G. W. Furness: Mr. Reid's paper is a very comprehensive analysis of the present situation in milk

production but I am disappointed that he has not made any strong proposals as to what might be done to overcome the rigidities he sets out. I am referring particularly to the last part of the paper where he discusses opportunities of lowering costs of production and wonder whether we, ourselves, are guilty of rigidity in outlook and approach to this

one-and-for-all

calling for stability in price relationships.

Journal of Agricultural Economics. 17

problem. Throughout the paper Mr. Reid mentions rigidities due to buildings, high fixed costs and the inability of labour to cope with more intensive cropping and additional bulk feeding. But is not the acceptance of these and the bexing they have on advice to farmers due to consideration only in the very short term. Many district officers and economists have advised marginal changes for example, in fertiliser use and cropping, to produce extra bulk feed which, fed to a few more cows together with additional purchased concentrates, increased milk output with the object of raising nct income by one or two hundred pounds. Has not the time come when we should be much bolder in our planning and break Some of these rigidities by thinking of a period in which far more costs are variable ?

Recently, when studying figures for a farm with fifty cows, I found th3t a drop of 3d. gallon in the price of milk would reduce receipts by i700. I suggest that any useful advisory plan for ths farm should raise income, ar: present prices, by at least &l,OOO

in full operation in, perhaps, three years. There would be little purpose in immediate marginal adjustments. I am thinking of changes such as, complete rehousing, drastic alterations in feeding methods involving, perhaps, halving the use of purchased concentrates and of a reduction in the labour force.

The success of the few farmers who are really forage farming conlirms what we know of the relative costs of the feeding value in such feeds compared with purchased concentrates. There is no need to be pessimistic about the ability of many more farmers to change to what is really an alternative system of milk production. We have only to look a t the impressive advance in attestation in the last ten years. This brought similar problems, for in changing to T.T. milk production most farmers were faced with capital expenditure, different policies, risks and loss of income for a year or two. But there is one difference ; the advantages of becoming attested and producing T.T. milk were widely recognised and there was the direct incentive of an additional 4d. a gallon on the price of milk. At the present time, we should not approach a change to forage farming as marginal or gradual, but look upon it as a direct alternative, deciding what would be the benefits and tying down what is not an incentive in higher price but in lower costs of production.

Finally, like Mr. Wallace, I would like to comment on the statement towards the end of the paper th2t ” There is no point in expanding the production of feed beyond the capacity of labour to handle it 0: the livestock to eat it.” I agree with this when i t is applicable, but surely it gives a false impression of the majority of small farms. There are hundreds of small farmers whose land is producing less than the maintenance require- ments of their cows but who are making no attempts to improve their gra-s. They prefer to have most of their COWS dry in summer and produce winter milk with the traditional heavy feeding of concentrates and moderate or poor hay. Many of them are under- employed, particularly on the smaller holdings. When visiting farmers one always feels that i t is the man with a large farm who values his time, whereas the occupant of a small one often has the opportunity to do far more than he is doing to improve his position.

Andrew W. Ashby : Mr. Empson discussed farmers’ reactions to changes in incomes and I would like to

add a word on that subject. Mr. Reid, at the beginning of his paper, says that costs of milk production must be lowered so that despite falling prices profit margins are main- tained. I would like to suggest to Mr. Reid that, as milk prices fall, costs of milk production will also fall, and I think that the matter comes back to what he said about the least cost combination of bulky and concentrated foods. The point I want to make is that farmers’ ideas of least-cost are very much conditioned by the amount of time and effort that will be involved and the amount of leisure time that will be available to them. We all like leisure but I would suggest that we all have different ideas as to how much leisure we should have, and that our ideas vary according to our incomes. If incomes are high additional leisure is valued more than additional income, but when incomes are lower people put a higher valuation on income than on leisuze. I think that farmers will give much more thought to their inputs of feedingstuffs of all kinds if prices and incomes fall. For example, some farmers who a t present know about modern grassland practices but do not adopt them because of the planning and effort involved will decide that i t is preferable to adopt these practices rather than suffer a drop in income. When we determine the least-cost combination of bulky and concentrate foods we can only do this by taking into account farmers’ valuations of leisure, and these vary with their incomes. Because of this, as prices and incomes fall farmers will tend to cut down on what are currently their items of high feed cost, substituting cheaper feeds and thereby bringing down their costs.

E . Dawson : I would like to say a few words on the question of terminology. Mr. Reid has described

a number of problems that arise in milk production and has shown that they have a common

18 Journal of Agricultural Economics.

feature which he calls “ rigidity.” My main diasgreement with ,?fr. Reid is in his use of this word “ rigidity.” It is inaccurate for two reasons. Firstly, rigidity ” is a one-sided concept, whereas in all the situations he has described there have been two elements a t work, the farmers who are trying to expand production, for example, on the one hand, and the consumers who are refusing to drink the increased production, on the other. To take another example, there are farmers who feel the need to increase the number of their stock but who find themselves with buildffgs which do not allow such an increase. My second reason is that I consider “ rigidity too strong a word, and I believe this has been shown up in the discussion. What we have in all these cases is a situation that cannot be changed easily. In the discussion many examples have been brought forward to show that many of these “ rigidities ” are only apparent. Quite often the position can be altered by science, by ingenuity, or even by the application of plain commonsense ; and situations which appear to be rigid in the short run are often much less rigid over a longer period. Therefore, I suggest that in order to avoid what could easf!y becom: a very genuine rigi$ty in our manner of tekiL‘ffg. we ought to,substitute for rigidity some such word as antinomy,” “ conflict or contradiction because I think that a term of this kind would come nearer to describing the kind of situation we have in mind.

0. J . Beilby : I would just like to say a word about this question of changes in yields and cow

numbers in Scotland, particularly as our experience has been rather different from that in England and Wales. ‘The position for some years now is that our dairy cow numbers have been almost stationary and we have had significant increases in milk production, due almost entirely to an increase in yields. Instead therefore, of the figures which Mr. Reid gives of 85 and 15 per cent. of the increased production being due to yields and numbers respectively, the Scottish figures would be nearer 100 end 0 per cent. This is also rather different from the position Mr. Empson described in England and Wales. In Scotland, there is the same tendency for the number of producers to decline slightly and for the average size of herd to increase : the average commercial dairy herd has in fact 35 cows -twice as many as in England and Wales. At the same time there has been a very substantial and continuing rise in beef cow numbers in Scotland in the last ten years- again a rather different situation from that in England and Wales. I mention these points because they suggest a rather different response to price changes in recent years.

I . G . Reid : May I say that I find the problem of summing up extremely difficult insofar as

the comments that have been made have been of considerable diversity and complexity. Quite a considerable amount of the discussion has centred upon t h i s question of where

the increase in producrion has come from. Has i t come from the yield factor or has i t come from the cow population factor ? It seems to vary as between England and Wales and Scotland and I am indeed grateful to Mr. Empson for giving us the results of calculations made with rather more up-to-date data than I was able to use. It is interesting to see that the cow population factor seems to be of greater importance than I had at first anticipated and that perhaps I must revise my ideas as to how rigid the capacity of present fixed equipment is. It does lead me on to the point which Mr. Gardiner made that we must not neglect the ability of the British fanners to improvise. I think we often tend t o be guided or perhaps misguided by our fellow professional people such as land agents who cast before us such incredibly high figures for improving fixed equipment. YOU find when P farmer has the ability and also the will to improvise then he can do a perfectly satisfactory job at about onequarter of the capital cost that other professional colleagues rather frighten him with. And if there is this quality of improvisation then I can well see that i t immediately lessens one of the rigidities, conflicts, or what you will, and makes the increase in cow numbers a more important factor.

I am interested, too, in Mr. Furness’ points. They rather confirmed and strengthened what I said in my introductory remarks, not in my paper, that we ought perhaps to think very much more in terms of doing something completely different as against doing what we have been doing in the past, only a little better, Should we not move into completely different methods of production of milk as against keeping our cows in cow stalls and feeding them a little more concentrates or a little better quality roughages and so on ? But once again, as Mr. Furness said, i t is much easier when a person has adequate supplies of capital. It is lack of capital which creates that inability to move into these rather different methods of production. It may well be fruitful for us in our enterprise studies to pay much more attention to the individual idiosyncrasies and particular features of different methods of production rather than to continue the conglomerate heterogeneous type of study that we do a t present, where we have not made a particular distinction between the various methods of producing the particular commodity.

Journal of Agricultzcral Economics. 19

The other point that has come up in the discussion is this question of the reaction of farmers to the movement of prices. Mr. Wallace. Mr. Ashby and Mr. Empson and others have all dwelt upon it. It would seem to be a field of worthwhile study to see where change is taking place in the structure of a particular industry and to find out just exactly why people are moving in the direction that they are. IS there any rational explanation for it, or is i t mainly a subjective valuation. and Z. subjective " hunch " jump that makes people move out of milk production into other enterprises. I, too, from a very quick look a t the figures pertaining to my area, find that it is the small milk producer who has gone out of milk production. In the counties that I am working in I would say that the average site. of herd of those producers who have abandoned milk production is somewhere in the: region of ten cows as against a county average of somewhere between 20 and 22. Have- those f x m s gone completely put of existence, or have the farmers turned themselves into, part-time farmers wlth jobs in other industries ? What, in fact, are they doing with the: resources that were in Agriculture ? Are they still in agriculture and, if so, what are they producing ?

I n conclusion I would thank you for the wide and diverse discussion we have had. Thank you, too, for treating me so lightly because I left many gaps in my paper. I did not mention as I should have done or you should have done the whole question of rigidity in the present price mechanism. Is not that one of the major rigidities within the industry at the moment, the extremely small movement of prices possible within a relatively short time ? If we are to persuade people to go out into other enterprises fairly quickly, we need a far more flexible price system than we have at the moment.