School of Agriculture, Food and Ecosystem Sciences - Theses
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ItemAn economic study of small dairy farms in South Gippsland, Victoria( 1969)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.