School of Agriculture, Food and Ecosystem Sciences

It is the purpose of this thesis to investigate the level of managerial efficiency obtaining on a group of dairy farms situated in the Nambrok-Denison area of the Central Gippsland Irrigation District, and to enquire into the possible avenues of increasing the profitability of such undertakings under existing conditions. Emphasis is restricted to analysis at the individual farm level, although the results could be adapted to shed some light on a number of important questions of national policy. Farm management is concerned with the proper combination and operation of production factors, and the choice of crop and livestock enterprises to bring about a maximum and continuous return to the most elementary operation units of farming (Yang 1958, p.4). A broader definition encompasses two further functions, viz. acquisition of factors of production, and adaptation of the farm plan to changing conditions (Castle and Becker 1962, p.253). The present investigation is restricted to an examination of the existing resource allocation efficiency. Thus it represents only a partial analysis of the farm management problem, but one which focuses attention on the more feasible possibilities of increasing farming efficiency in the short run; namely a more efficient reallocation of the resources presently employed on the farm, and the more profitable avenues of investment of additional funds. Farm management research employs the two major processes common to scientific research in general - deduction and induction (Heady 1952., p.14) - and the following pages illustrate this procedure. First, the problem is explicitely stated - how efficiently are the individual farms being managed given relevant restrictions? Second, the theoretically optimum model is defined - in terms of the criteria for efficient resource allocation - and the empirical procedures to be employed in investigating departure from this optimum, lug. residual imputation and regression techniques, are described. The required empirical data is then collected and analysed using the statistical procedures appropriate to the above techniques. Finally, the results of the empirical investigation are examined in the light of the defined criteria for efficient resource use, and on the basis of this comparison between actual and theoretically optimum conditions, suggestions are made regarding the possibilities of more closely approximating the latter.

From the study of small dairy farms (defined as producing less than 10,000 pounds of butterfat in 1964-65) in the Shire of South Gippsland, and with the aid of a short-term linear programming model of a typical small dairy farm, it was concluded that alleviation of some of the problems of low-income dairy farms may be achieved by both increased levels of technology and increased farm area. The study began with a review of the structure of the dairy industry and an evaluation of research related to the low-income problem in that industry. An assessment of the extent and nature of the small-farm, low-income problem in the Shire of South Gippsland was made using the results of a survey of 26 small dairy farms in the Shire. To aid consideration of the conditions under which a typical small dairy farm, such as in the Shire of South Gippsland, might obtain a "reasonable" income (judged to be a farm income greater than $2,700), a linear programming model was constructed. The model was a short-term one designed to represent a typical small dairy farm. It was used to show the effects on income levels of the use of sideline enterprises such as vealers, pigs and sheep; the effects of changes in the level of technology (increases in production per cow and pasture production per acre), and the means of achieving improved levels; and also the effects of changes in farm area combined with changes in the level of technology. The marketing and support policies relating to the dairy industry play an important part in influencing the low-income problem, principally through the attraction of resources to the industry and the encouragement of resources already committed to the industry to remain. Such an effect calls for structural change and the reinstatement of the forces of supply and demand as the main determinants of the allocation of resources to the industry. The extent of the small-farm problem in the Shire of South Gippsland was indicated by the finding that 34 per cent of the dairy farms in the Shire produced less than 10,000 pounds of butterfat in 1964-65. The survey of 26 of these small dairy farms has permitted a clear definition of a typical small dairy farm in physical and financial terms. As well, it has highlighted the low income levels on such farms which obtained an average net farm income of $514 over the three years 1962-63 to 1964-65 and $769 in 1964-65. Only four of the survey farms had a net farm income greater than $2,000 in 1964-65. Farm-family welfare on most of the farms was considered to be inadequate and the allocation of resources to these farms was judged to be inefficient, even when the equalized and subsidized price for butterfat was taken to represent the social valuation, placed on butterfat. With an optimum allocation of the resources available to a typical small dairy farm, as represented in the linear programming model, it was found that either with or without sideline activities and with up to 400 acres of land such a farm could not be expected to produce a "reasonable" income. However, with moderate increases in the level of technology considerable increases in income levels were obtained (a farm income of $1,999 was obtained with a standard level of technology and 132 acres, but a farm income of $5,378 was obtained with an improved level of technology). It was also observed that the maximum income levels were obtained at farm areas somewhat larger than was typical of. the survey farms and that the farm area giving the maximum income increased with an improved level of technology. Other results indicated off-farm work to be helpful in raising income levels, but it is likely in the longer term to lead to deterioration of the farm. For this reason off-farm work may best be considered as a temporary expedient. It was found that pasture production was a major restriction preventing increased income and for this reason agistment played an important part in many of the plans derived. Working capital, as defined, was not shown to be a major limitation to the attainment of greater income. The value of linear programming in such a study was apparent. By specifying important relationships it was possible to determine the broad effects of a wide variety of changes that might be made. By making assumptions about the real situation and using a number of simplifications an understanding of a complex situation was made possible with this technique. The results showed the importance of increased farm area combined with higher levels of technology and this led to the suggestion that the proposed scheme for the encouragement of amalgamation of small dairy farms by the Commonwealth Government might well include some form of assistance in,planning farm development and raising levels of technology. Such assistance could be made conditional to the granting of help under the scheme. Although amalgamation and improvement in the level of technology are important adjustments, the problem of greater overall production as a result of such changes can only be overcome if changes in structure are made at both the farm and the national levels.

School of Agriculture, Food and Ecosystem Sciences - Theses

Permanent URI for this collection

Filters

Date

Author

Subject

Type

Settings

Sort By

Results per page

Statistics

Citations

Search Results