Production costs
(Continued from Page Dl7)
costs of sideline revenues would be
m the same proportion to total
costs that sideline revenues were
to total revenues. In this way,
sideline revenues would be
assumed to be neither more nor
less profitable than the main
source of revenue, milk sales.
A direct critique of the estimates
of the cost of producing milk, made
annually by the U.S. Department
of Agriculture since 1974, received
a great deal of emphasis. The
difficulty of this agency’s task, and
the restrictions under which it has
had to operate, were recognized.
Primary criticism was directed
at;
(1) Its use of the enterprise
rather than the whole farm ap
proach
(2) Charging home-grown feeds
to the dairy enterprise at market
prices rather than at cost of
production.
(3) The way land charges were
handled
(4) The use of replacement
reserves in lieu of depreciation for
depreciable capital assets
(5) The arbitrary inclusion of a
cost for owner management at
seven percent of total costs.
The appropriateness of using
cost of production as the basis for
setting minimum prices was
examined in two different con
texts. With the continuation of the
price support purchase program,
cost of production would not
necessarily be any better or worse
than continuing to set prices on the
basis of parity. If the price support
The Automatic Micro-Mist Concentrate Sprayer can be
powered by the tractor pto for use on rowcrops, vegetables and
orchards.
The Automatic Micro-Mist Concentrate Sprayer is a faster, more efficient,
economical alternative to conventional boom and aerial spraying of rowcrops,
vegetables and orchards.
It takes mist blowing techniques a step further by giving the operator the
ability to control the diameter of the spray droplets and choose the diameter
best for each particular spraying application.
Controlling droplet diameter results in increased effectiveness and reduced
materials cost.
The smaller droplets of the Micro-Mister coat all sides of the target evenly,
due to the powerful turbulence produced by the unit. The Micro-Mister ef
fectively coats the undersides of leaves, reaches inside trees, even coats the
back sides of fruit.
The compact size and the utilization of chemical concentrates by the Micro-
Mister offers many advantages. The unit comes in models that can be powered
by PTO on small tractors, or a gasoline powered skid unit that slides into the bed
of any pickup. Because the Micro-Mister eliminates the need for cumbersome
water hauling equipment that requires additional manpower and time
consuming stops for refilling, the Automatic Micro-Mister saves both time and
money.
The Automatic Micro-Mister can offer effective coverage up to 250 feet,
depending on application, and can operate at speeds up to 12 m.p.h., with no
dangerous overspray or drift.
| 539 Falling Spring Road
I P.0.80x 219
I Chambersburg, PA 17201-0219
1 Phone 717-263-9111
_
Ryder supply
program were to be discontinued,
it is difficult to see how cost of
production pricing could work very
well for very long, if at all. It
totally ignores the demand side of
the dairy industry, one-half of the
market equation.
If cost of production is to be used
as a replacement for parity, it
must be coupled with seme other
program or instrument. Direct
payments to dairy farmers,
consumer subsidies, or marketing
quotas are seen as possibilities, but
it may be that the continuation of
support purchases would be the
least objectionable. In any case, a
relatively substantial moder
nization of the parity formula
would seem to hold as much
promise as cost of production
pricing.'
The most recent U.S. Depart
ment of Agriculture estimates of
the cost of producing milk were
issued July 1982 (6). Rather than
restructure this bulletin to in
corporate all the changes in
estimation procedures reported in
that publication, the major ones
are summarized here. Although
prelilminary 1979 and projected
1980 estimates of the cost of
producing milk were published in
earlier reports, these were revised
in accordance with the findings of
the new survey of costs conducted
in 1980. The revised estimates of
costs for the earlier years also
were included in the 1982 report.
The estimates of 1974 costs
depended almost wholly on data
obtained from personal interviews
of dairy farmers. The estimates
Automatic Micro-Mist Sprayer
Controls Droplet Size
ADDENDUM
•< T r *■“ -
for 1979 still relied to an important
degree on personal interviews, but
the USDA drew more heavily from
a variety of other data souces.
Generally, the philosophy guiding
the development and use of the
second farm survey was to limit
questions to those not already
being asked regularly by the Crop
Reporting Board of the Statistical
Reporting Service. Thus, in
formation on agricultural prices,
production inputs, and production
outputs that were regularly
published elsewhere by the U.S.
Department of Agriculture was not
sought during the survey of 1979
costs of production.
A potential weakness of the
procedures arising out of the
foregoing philosophy is that two
different populations were used to
obtain data that were later merged
for analysis. Farmers included in
the special survey were selected to
represent all dairy farmers. Those
responding to the questionnaires
mailed regularly by the Crop
Reporting Board are not
necessarily representative of dairy
farmers, because information is
sought from voluntary fanner
reporters of all enterprise
specializations. Thus, the elements
of cost of production estimates that
depend on this latter source of
information might have been
different bad they been based on a
representative sample of
specialized dairy farmers.
The July 1982 report generally
provides more insight into the pros
and cons of the several alternative
procedures and uses of cost of
production studies than the earlier
reports in the series. A useful and
relevant distinction between the
costs that a new entrant to the
industry would face, and those of a
continuing dairyman, is made (6,
page 10).
On page 11 of the 1982 report the
reader is properly cautined about
making too much of the study
results to infer profitability of
dairying or farmer well-being at
any one point in time. The authors
acknowledge it is more ap
propriate to use their data to
evaluate geographic advantage at
a given point in time, or of changes
in farmer well-being over time.
The format of the tables in the
1982 report is simpler and more
straightforward than all earlier
ones. Specific references in
footnotes 4 and 6 to interest, or
returns to equity capital, are
helpful. They seem to suggest
there might be reason to dif
ferentiate between borrowed and
owned capital, although there is no
way to separate them in the data
that are published.
Finally, the way management is
Md. market line service begins
ANNAPOLIS, Md. - The “MDA
Market Line" telephone news
service featuring timely crop,
weather, price, availability, grain
and livestock market information,
started this week, according to
Bradley H. Powers, of the
Maryland Department of
Aagnculture’s Marketing Services
Section.
Each day during the week,
Powers explains, a new three
minute tape recorded message will
be put on a telephone answering
machine at about 4 p.ra. Persons
interested in the reports can then
call at anytime by dialing (717)
841-5763 and listen to the message.
The schedule for the reports will
be:
Mondays - a weekly Crop
Weather Report prepared by the
Maryland Delaware Crop
Reporting Service.
Tuesdays - a Crop and Livestock
update also prepared by the Crop
Reporting Service.
Lancaster Farming, Saturday, Jane 25,1983—P19
handled in the 1982 report (page
31) now coincides with the biases o!
this writer. That is, management
is trated as a residual claimant of
income, rather than as a specific
item of cost of producing milk, i
would yet argue that the cost of
equity capital should be treated in
like fashion.
Overall, the 1982 report is
stronger in both its format and
interpretation of data than the
earlier reports. It is probably
weaker, however, in the quality of
its basic data because of the
methods used and sources from
which they were obtained.
Again,- no personal criticism of
workers involved in the tedious
and difficult development of the
USOA cost of production estimates
is intended. Where they have been
granted increased freedom to
carry out the work as they see fit,
the results have been improved.
Where less freedom or resources
were provided, the quality of the
results may have been reduced.
Wednesdays - The Baltimore
Retail Food Price Report prepared
by MDA’s Marketing Services
Section based on in-person survey
of prices in area food stores.
Thursdays - The Maryland Feed,
Grain and Livestock Report
prepared by MDA’s Marketing
Services Section.
Fridays - A Fresh Produce
Update, based on an MDA survey
of growers, designed to update the
buying public on local fruits and
vegetable harvest and supply
situations along with product
prices from the Wholesale Food
Center at Jessup.
“The MDA Market Line is an
expansion of the former ‘Produce
Hotline’ report which we have
offered in season in cooperation
with the Maryland Wholesale Food
Center in Jessup”, Powers said.
"Our new service will feature
much more information and make
the reports available to the public
faster. The telephone number we
are using for the service this
season, (301) 841-5763, is toll-free
for the Baltimore metropolitan
area and reaches mto major
portions of Anne Arundel,
Baltimore, Harford, Carroll and
Howard counties. It was not
possible this year to have a
statewide toll free number but if
demand for it is strong we will
consider it,” Powers concluded.