Comparison of resource returns of well-organized Iowa farms with selected nonfarm opportunities

Date
2017-06-16
Authors
Kaldor, Don
Beneke, Raymond
Bryant, Russell
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Abstract

The primary objective of this study was to determine whether the evidence on factor incomes and factor opportunity costs for well-organized Iowa farms supports the hypothesis of an imbalance in the level of output of Corn Belt products.

This presented four subsidiary problems: (1) identifying and selecting a group of well-organized farms, (2) determining the level and pattern of market clearing prices, (3) estimating factor incomes on the selected farms and (4) estimating the factor opportunity costs of the resources employed on these units. The 2-year period, 1954-55, was selected for study.

The farms to be analyzed were selected by Iowa's six district extension economists to represent approximations to optimally organized units under recent price conditions and known technology. After screening the initial selection of 26 farms for effects of abnormal weather and major shifts in resource organization, a residual group of 16 units remained for intensive study. It was assumed that markets would have cleared at a price level of 65 percent of parity with relative prices equal to the average for the 1946-52 period. After the computations for this study had been completed, the results of an investigation of feed-livestock prices under market-clearing conditions in the 1952-58 period became available. On the basis of this investigation, it appears that the price assumptions for market-clearing conditions used in the present study were quite realistic.

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