An Analysis of Family Farm Growth in Western Manitoba – A Systems Approach

Abstract

This study deals with the process of family farm growth in Western Manitoba. Many people believe that the long run objective of Canadian agriculture should be the development of rural communities based upon the maintenance of the economically viable family farms. The means of achieving this objective are influenced by the technological changes in agriculture. The technological changes and increased use of machinery have changed the internal dimension of family farming. The present study attempts to identify these changes and provide a guideline to achieve the objective of maintaining the economically viable family farm. Several studies have been done in the area of farm growth using various methods. These can be grouped into three, narrely;traditionaltheory of the finn, behaviouraltheory of the firm, and systems approach. Present study takes the systems approach to study the process of growth of the familv farm system. The system view is an overall view which implies that an isolated study of the parts of system will not be adequate to understand the complete system. A system is a set of componen ts that works together for achievingthe overall obj ective of the system. The components of the system are linked in an interchanging manner, therefore, a study of the isolated parts would not provide a complete view of the system.

The growth of the net-worth is taken as the performance measure of the system. The major components of the family farm system, which affects the growth, are production and consumption. These two components compete for the available resources. Within the production component, crop and livestock operations compete for the resources. Production generates income which is available for consumption and re-investment for future production. The allocation of resources among consumption and investment is one of the major factors which decide the growth rate and therefore, the viability and competitiveness of family farms. The other factor which is affected by this allocation decision is the standard of living of the farm family. These interrelations between standard of living, investments, growth and therefore, future production and future standard of living make it difficult to understand the system by studying the parts of the system. An econometric model was formed on the basis of systems approach to study the system. The model consists of three estimated equations for production, consumption and investment. An equation of performance measure, or of growth, is formed combining the models of production, consumption and investmen t. This combined equation links the production and consumption components and investment pattern of the system. The Solow's model is used to determine the technological change in Western Manitoba agriculture.

The data for the study were taken from 23 members of the Western Manitoba Fa~m Business Association. The analysis of data shows that the farmers have increased production by expanding the size of operations and increasing the use of machinery and material inputs. The growth of net-worth in 1961-69 period in terms of current dollar value was 184 percent. The major factors affected by this high rate of growth are increased use of factor inputs including land and extensive use of credit. The econometric results and a significant test with 99 percent probability indicate that the industry was at constant return to scale during 1961-69 period. The farmers have carefully expanded the size and increased the use of machinery and material inputs during 1961-67 period. These inputs have been used productively in this period. However, the results indicate that the heavy investments on land and machinery in 1968 have not been productive. The material inputs have been ~sed productively almost throughout the period, however, the labour was not used productively. The analysis of MVP/Price of input ratios indicates that the farmers were not able to coordinate resources to obtain the maximum possible net income from the operations. The analysis of performance measure shows a 118.2 percent growth of net-worth during 1962-69 period, in terms of 1961 constant dollar value. This is an average rate of 14.78 percent per year. The major factors that influenced this high rate of growth are expanded operations, increased use of factor inputs and extensive use of credit. The analysis of technological change shows an increase in technological index from 1 in 1961 to 1.8773 and 1.5228 in 1969 in net and gross measures respectively. The analysis is extended to 1974 by means of forecasting. The forecasting results have shown that the model has a good forecasting power. The 1974 values of the economic variables show an increase in production and factor inputs used. However, these v~lues include the price hikes experienced in 1973-74 period. The rate of growth of networth is a result of high production and low consumotion. The overall analysis of 23 Western Manitoba farms has shown that the solution to the problem of poverty among farmers is the expansion of the size of operations. The programmes for improving managerial ability of farmers would be helpful in achieving the objective of a viable competitive farming industry.