CUTTING COSTS

Sun (Auckland), Volume II, Issue 490, 20 October 1928, Page 25

CUTTING COSTS

BUSINESS IN FARMING Much of the loose thinking in connection with the agricultural question is due to certain obvious false conceptions, writes R. Stewart, in ‘‘The’ Independent.” It is a common practice to talk and write of the “average” farmer and to draw certain deductions regarding the farming business from a consideration of the results obtained from such a hypothetical conception wihch are entirely misleading. A writer in a farm magazine, for example, says: “No plan for farm relief based solely upon reduction of farm crops can be successful for the reason that such plans are not farreaching enougii. A 25 per cent, reduction in ali moneys expended by the farmer for wages, interest, taxes, rent, repairs and supplies bought would aggregate only 267 dollars a farm or 1 dollar S I cents an acre.” This writer has a simple solution of the farm problem: “If all competing agricultural products were shut out of the country by a prohibitive tariff there Would be no surplus and no problem.” This conception that the farmer’s problems are peculiar and not subject to adjustment by effective management and in accordance with economic law is certainly an unfortunate one. It is entirely misleading and delays the proper adjustment in the farming industry while the operator waits for outside agencies to solve Mb problems for him. It deters young men of ability and liking for agriculture from undertaking farming because they are dismayed at the prospect from a consideration of poor ’’average” returns on the farming industry.

Profit ts not an easy thing to obtain ■n industry, and, in fact, profit hazards are greater now in industry than in any previous time in history. Forty-five per cent, of the companies doing business in the United States reported deficits during the past four years. Over 100,000 concerns showed a Profit of only 95 dollars each. Yet we do not hear much regarding the “average” return in business. The truth is that efficient management in industry or agriculture is meeting with its just reward at the present time, while the inefficient is falling by the wayside. A reduction of 25 per cent, in the cost of production may not seem very great when applied to the average tarnier. But let us consider for a moment the problem of cost of production from the individual point of view. The cost of producing farm Products varies very widely on the farms of America. In 1919 the United states Department of Agriculture ffiade a study of the cost of producing kheat in the Wheat Belt in Arkansas, -lissouri, Nebraska, Minnesota, South and North Dakota. This study included the cost of producing winter "heat on 254 farms and spring wheat °n 197 farms. The average cost of Producing winter wheat was 1.87 dolars, but the cost of production varied u-om 1 dollar to 5.20 dollars a bushel. *he average cost of producing spring rh 6at W3S dollars a bushel, but i® COB t of production varied from 1 IJ to 14.40 dollars a bushel; Surely

all will agree that the only possible solution of the farmer’s problem whose cost of production is 8.20 dollars for winter wheat ’ and 14.40 dollars for spring wheat is reduction in the cost of production or else quit farming. No legislation on earth can help him at all. A clear analogy may be drawn from the business world. Henry Ford is probably not interested at all in the average cost of producing automobile valves, but he is vitally interested in making certain adjustments in his own plant whereby the cost of making valves is reduced from eight cents to 3.5 cents!

Cannot the farmer adopt similar methods successfully? C. J. Hayward, a farmer in Colorado, has the right idea when he says: “Some Government legislation may help the farmers a little, but the main help must come from within. Wheat is now worth 1.25 dollars a bushel at the local elevator. If I can produce it for 1.20 dollars I can get ahead. If it cost 1.30 dollars for me to produce it, sooner or later I will have to move into the city, and there is only 10 cents difference between 1.20 dollars and 1.30 dollars. Right there is where some of us farmers lose out. It is not the big things, but the little leaks that make the difference between 1.20 dollars and 1.30 dojlars.”

The cost of production, of course, is by no means the whole of the farmer’s problem. But the successful farmer must pay more attention to this phase of his business. The first step in successful marketing is economic production. No possible system of marketing, and no possible legislation can help the farmer whose costs of production are so high that his products cannot successfully be sold at any possible price which may reasonably be obtained. The successful farmer must pay more attention to his cost of production, and when he does the effort will pay him rich dividends.