The Farmer's Finance
By H. D. WALSTON DURING the war it was not uncommon for farmers to grumble about the higher wages paid to agricultural workers, not because the employer could not afford them, but because a man earning Sos. or 9os. a week was less likely to work overtime than when he was earning 35s. or 4os. At Newcastle the other day Professor Cooper said the same thing about the farmers themselves. According to Press reports, the professor's text was: "British farming today is only at half-cock, because the farmer gets his money so easily that there is no need for him to make the special effort needed to bring about maximum production." An argument on whether farmers are too rich or on the verge of bankruptcy is unlikely to convince anybody. We can all point to under-stocked farms and worn-out machinery, or to the growing total of farm over- drafts, as evidence of the need for fresh capital in agriculture ; equally we can point to the large proportion of new cars seen round market- place and corn-exchange, to the good living enjoyed by most farming families, and to the high prices still being paid for pedigree live- stock, as proof of farming prosperity. What is of more practical importance today is to decide whether we are more likely to get an increased production from our farms by raising prices, by keeping them the same, or by lowering them.
Farmers, like most people with a proper sense of values, as opposed to those who devote their life to amassing ever-increasing quantities of wealth regardless of the use to which the wealth will eventually be put, have certain static and well-defined needs which do not increase rapidly with increased prosperity. Take, for instance, the case of a farmer whose annual cash requirements are £I,000. Out of this he pays his rent, buys the materials necessary for carrying on his business, hands over to his wife a few pounds every week for hoysehold requirements, and retains enough for himself to buy his beer and tobacco. Probably unconsciously he has evolved a system of cropping on his farm which will enable him to raise this LI,000. In a bad year he may not reach this figure, but his expenses will not alter greatly ; he will merely slightly increase his overdraft or leave a few accounts unpaid for another month or so. In a good Year he will spend no more, but pay off some of his overdraft and perhaps set aside a few hundred pounds for the next lean year. If the profit margin is decreased, he finds that he has to work harder to obtain Li,000. This may mean keeping a few more pigs or chickens, using rather less milk in the house, or growing a few acres extra of wheat or potatoes. If it is increased, household con- sumption will go up, some of the poultry may be dispensed with in order to ease the burden on his wife, while his wheat and potato acreage will decrease, and crops will be grown which will bring in less cash but will improve the fertility of the soil. Thus far the thesis is correct that a high profit margin is a disincentive to high production.
It is not true, however, that a reduction of prices will bring about an increased effort on the part of the farmer. There might be some increase in the acreage of cash crops, but there would undoubtedly be a very great decrease in the confidence of the farming community as regards the intentions of the Government. Whatever might be the political repercussions, the practical one would be a farmer that would say: "These promises of security are, as I have always sus- pected, useless. This reduction of prices is the thin end of the wedge.
Before long we shall be back where we were in the 'twenties." He would start at once to reduce his liabilities ; he would no longer spend money on drainage or improvement to his buildings ; he would cancel the order for the new tractor and combine-harvester ; he would cut down on his purchase of fertilisers, and by every means in his power begin to set aside a reserve of cash with which to weather the storm when it burst in full force upon him. He would go to ground—hibernate—and try to struggle on on a care-and-mainten- ance basis, with a consequent big decrease in output.
Fear of starvation may be a powerful incentive to production in a new country like New Zealand, peopled largely by men who have gone out there imbued with the pioneering spirit. They deliberately chose for themselves a life where their own efforts would lead to success, and where their own failure would lead to disaster. But the man who is fainting in England is no more like these pioneers than is the English coalmir•.er, stockbroker or civil servant. Some- thing other than the doctrine of the survival of the fittest must be applied to him. What is needed is a price structure which will make it easier than it is today for those farmers who wish to adopt new methods to increase their efficiency or to bring into cultivation new land which, it might reasonably be expected, will eventually be worth cultivating.
The first point can be illustrated by the sugar-beet harvest which is about to start. Let us assume that the total cost of growing an acre of sugar-beet is L40, Do of which has to be spent on manual harvesting. For £750 a machine can be bought which will reduce the cost of harvesting to £5 per acre. A man who grows fifty acres of sugar-beet, therefore, will save the cost of the machine in three years, but very few growers of fifty acres of sugar-beet will con- template such an expenditure. For one thing, at present prices it is possible to make a reasonable profit even if £m an acre is paid for harvesting. The extra profit made if the machine were employed would first be taxed, and what was left over would have very little effect upon the farmer's standard of living. Why, therefore, go to the trouble of raising an extra £750 of capital and running the risk of having a machine which may be of little use in two or three years' time because of an alteration in cropping plans, when so little benefit can be gained from it ?
"'But surely," some will say here, " this is precisely a case where the price of sugar-beet should be lowered so that it is impossible for a farmer to grow it profitably unless he uses this machine." But farming does not work this way. Even those who grow fifty acres of sugar-beet would not buy the harvesting machine, but instead would give up growing sugar-beet, while the vast majority of beer- growers are smaller farmers who at no time could justify the expendi- ture of such a sum on a small acreage. If it is really felt that the use of such a machine should be encouraged, it can only be done by a direct subsidy which will allow individual farmers or contractors to buy the machine at a lower figure than the cost of manufacture. A similar principle applies to marginal land. A farmer who has on his holding twenty acres of rough grazing will rarely be encouraged to bring it into full production by high prices because he is already making enough money for his needs. But he will be even less likely to cultivate it properly at times of low prices, because his instinct then is to reduce his expenses in every possible way. The only certain means of ensuring the proper cultivation of these twenty acres will be by a direct subsidy on the lines of those at present in force for ploughing up, liming and laying on water-supplies. All of us, whether farmers or not, like the idea of getting something for nothing. It is this instinct that must be appealed to rather than the instinct of fear. Low prices may boost production if they have never been high, but in agriculture a reduction of prices from an existing level can only lead to a reduction in output.
While, therefore, there may be justification in saying that today's high prices militate against an all-out effort on the part of the farmer, the obvious deduction from such a statement is not only highly mis- leading, but would be highly dangerous if acted upon.
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