Too much emphasis cannot be placed upon the fact that the figures given in the table above are intended to apply to average land and not to the best land adapted to that particular crop. There are large areas in California where five tons of alfalfa per annum may be deemed a safe estimate and where competent men would not undertake to raise alfalfa if they did not expect six tons per acre. On the other hand, there are some areas where much smaller yields may be considered satisfactory. The chief purpose of this discussion is to enforce the principle that the large yields which are obtained under very favorable conditions are not a true business grade. It is necessary to recognize frankly that only a fraction of such possible yields are obtained ordinarily in actual practice. The purpose is not to try to state what yield may be obtained under each given condition of soil and climate, but to give a sort of working basis for reasonable estimation. Thus if in a given region on a particular type of soil, one determines that it has been found possible to get a yield of thirteen tons of alfalfa per acre, on the basis of two-fifths previously stated 5.2 tons of alfalfa would be a safe estimate for business purposes. If, on the other hand, eight tons were found to be an extraordinary yield than 3.2 tons are all that could be safely predicted. However, it must always be kept in mind that the competent man may hope to secure better yields. The second and third columns in the above table are the ones to which the reader should give his chief attention. INVESTMENT REQUIRED FOR SATISFACTORY INCOME Persons will differ widely as to what is a satisfactory income. Some arbitrary figure must be assumed, however, as a basis of discussion. All that can here be hoped is to show such relationship as to enable one to forecast a condition that will be satisfactory to himself. Let it be assumed then that a gross income of $4000 per year is desired. The annual gross income from the chief farm crops of the United States is about 16 per cent, or one-sixth of the capital invested. Under these conditions an investment of $24,000 would be required. Only a modest wage and a small interest would be earned. A satisfactory gross income, one perhaps that competent men may reasonably expect to earn, would be 25 per cent or one-fourth of the capital invested. An investment of $16,000 would therefore be necessary. Suppose a gross income of $4000 per year is obtained, what becomes of it? In a general way this sum may be divided into three parts: (1) expenses, (2) interest on the investment, (3) return to the farmer for his management and labor. The latter may be called the labor income. There has been gathered some data tending to show that if a man has invested wisely in land and equipment he may pay about 7 per cent of the total investment for a working manager. This is equivalent to saying that a farmer should receive 7 per cent. on the capital invested for his management, assuming that he is himself actively engaged either in managing or laboring or both. In reaching this conclusion from data collected, 5 per cent interest on the capital invested was assumed. On this basis the following will result: For labor income-7 per cent on $16,000 Total $1,120.00 800.00 2,080.00 $4,000.00 One thing that is at once obvious from an examination of the data is that if one must pay 10 per cent interest for money to purchase land and equipment there would be only 2 per cent, or $320, left for labor income. It will be noted that for each per cent which is added to the interest charge an equivalent reduction must be made in the labor income. Thus if the interest is 6 per cent one may expect his labor income to be only 6 per cent of the capital invested. interest, is 8 per cent, the labor income will be but 4 per cent. If the Some surprise may be felt that any definite relation can be assumed between labor income and capital invested. The explanation seems to be that the value of the land rises with the income and thus the interest on the new capitalization prevents the labor income from rising. Thus, if a man buys a farm at $50 per acre and the subsequent income justifies valuing the land at $200 per acre, the interest upon the new valuation keeps the labor income from rising. It is well known that this rise in the value of land has been the source of much profit to farmers. Of course, very much will depend upon the wisdom with which expenses are incurred. Without doubt there is in individual cases great opportunity for increasing the labor income by decreasing expenses. What this paragraph suggests is that it is not wise to assume a gross income greater than one-fourth the capital invested and that one must concede that one-half the gross income may be required for running expenses. Unless a man can estimate a satisfactory labor income on this basis, it is prudent to proceed with caution. It is obvious that if a man is satisfied with a labor income of $560 per Too much emphasis cannot be placed upon the fact that the figures given in the table above are intended to apply to average land and not to the best land adapted to that particular crop. There are large areas in California where five tons of alfalfa per annum may be deemed a safe estimate and where competent men would not undertake to raise alfalfa if they did not expect six tons per acre. On the other hand, there are some areas where much smaller yields may be considered satisfactory. The chief purpose of this discussion is to enforce the principle that the large yields which are obtained under very favorable conditions are not a true business grade. It is necessary to recognize frankly that only a fraction of such possible yields are obtained ordinarily in actual practice. The purpose is not to try to state what yield may be obtained under each given condition of soil and climate, but to give a sort of working basis for reasonable estimation. Thus if in a given region on a particular type of soil, one determines that it has been found possible to get a yield of thirteen tons of alfalfa per acre, on the basis of two-fifths previously stated 5.2 tons of alfalfa would be a safe estimate for business purposes. If, on the other hand, eight tons were found to be an extraordinary yield than 3.2 tons are all that could be safely predicted. However, it must always be kept in mind that the competent man may hope to secure better yields. The second and third columns in the above table are the ones to which the reader should give his chief attention. INVESTMENT REQUIRED FOR SATISFACTORY INCOME Persons will differ widely as to what is a satisfactory income. Some arbitrary figure must be assumed, however, as a basis of discussion. All that can here be hoped is to show such relationship as to enable one to forecast a condition that will be satisfactory to himself. Let it be assumed then that a gross income of $4000 per year is desired. The annual gross income from the chief farm crops of the United States is about 16 per cent, or one-sixth of the capital invested. Under these conditions an investment of $24,000 would be required. Only a modest wage and a small interest would be earned. A satisfactory gross income, one perhaps that competent men may reasonably expect to earn, would be 25 per cent or one-fourth of the capital invested. An investment of $16,000 would therefore be necessary. Suppose a gross income of $4000 per year is obtained, what becomes of it? In a general way this sum may be divided into three parts: (1) expenses, (2) interest on the investment, (3) return to the farmer for his management and labor. The latter may be called the labor income. There has been gathered some data tending to show that if a man has invested wisely in land and equipment he may pay about 7 per cent of the total investment for a working manager. This is equivalent to saying that a farmer should receive 7 per cent on the capital invested for his management, assuming that he is himself actively engaged either in managing or laboring or both. In reaching this conclusion from data collected, 5 per cent interest on the capital invested was assumed. On this basis the following will result: For labor income-7 per cent on $16,000 Total $1,120.00 2,080.00 $4,000.00 One thing that is at once obvious from an examination of the data is that if one must pay 10 per cent interest for money to purchase land and equipment there would be only 2 per cent, or $320, left for labor income. It will be noted that for each per cent which is added to the interest charge an equivalent reduction must be made in the labor income. Thus if the interest is 6 per cent one may expect his labor income to be only 6 per cent of the capital invested. interest, is 8 per cent, the labor income will be but 4 per cent. If the Some surprise may be felt that any definite relation can be assumed between labor income and capital invested. The explanation seems to be that the value of the land rises with the income and thus the interest on the new capitalization prevents the labor income from rising. Thus, if a man buys a farm at $50 per acre and the subsequent income justifies valuing the land at $200 per acre, the interest upon the new valuation keeps the labor income from rising. It is well known that this rise in the value of land has been the source of much profit to farmers. Of course, very much will depend upon the wisdom with which expenses are incurred. Without doubt there is in individual cases great opportunity for increasing the labor income by decreasing expenses. What this paragraph suggests is that it is not wise to assume a gross income greater than one-fourth the capital invested and that one must concede that one-half the gross income may be required for running expenses. Unless a man can estimate a satisfactory labor income on this basis, it is prudent to proceed with caution. It is obvious that if a man is satisfied with a labor income of $560 per year an investment of $8000 will suffice. If the farm is paid for he may expect a cash income over expense of $960 per year, since he has a right to expect interest on the investment plus his labor income. SIZE OF FARM How large must a farm be to furnish a satisfactory living? From what has been said the best practical measure with which to answer this question is the gross income. The area of land necessary to obtain a gross income of $4000 will depend upon the crops raised. Thus, if the land is to be put into barley, from which may be expected 40 bushels per acre, worth 60 cents per bushel, or a gross return of $24 per acre, there will be required 167 acres to return a gross income of $4000. If adapted to potatoes, yielding 100 bushels per acre, worth 70 cents per bushel, 57 acres would be required. An orange grove, yielding 225 boxes, netting the grower a dollar per box, would require less than 18 acres in trees. As there is more or less waste land in all types of farming, it may be stated, in general terms, that 200 acres of land would be required for barley and 60 acres for potatoes, while 20 acres would suffice for oranges. A similar estimate may be made concerning dairying. Estimating a yield of 225 pounds of butter fat per year and that three pounds of butter fat are worth a dollar, the total income for butter fat per year is $75 per cow. Each cow may raise a calf, and some pigs and chickens may be kept. It may be possible, therefore, to secure a gross income from all sources of $100 per cow. The amount of land which is required to keep a cow in California varies at least as widely as from one to ten acres where dairying is now actually practiced. Where alfalfa is grown in the open valleys under irrigation, it requires about 14 to 1% acres to support a cow. Assuming the latter figure, it will require 60 acres to bring a gross income of $4000. It is interesting to observe that in a certain irrigated region in the San Joaquin Valley tracts of 20 acres each were sold for dairy purposes. As time has gone on the farmers located upon these tracts have acquired additional lands, so that at present the one-family dairy farm, based upon alfalfa, is actually about 30 acres. This is perhaps another way of saying that these families are satisfied with a gross income of $2000 per year. INFLUENCE OF CHILDREN The one-family farm just mentioned is a familiar instance of the influence of family co-operation in farming. Various members of the family help on these farms. In this way the labor income is apparently increased and the expense of conducting the farm is |