Abstract
This study analyzed the economic tradeoffs between dairying and competing enterprises under selected price and resource conditions in the Central Piedmont of North Carolina. The analysis provided insights into optimal individual producer response to changing economic conditions. Competing enterprises modelled included a beef cow herd, barley, corn, oats, soybeans, wheat, and off-farm employment. A synthetic farm enterprise typical of Central Piedmont resource conditions was constructed using North Carolina Farm Business Management System survey data, North Carolina Agricultural Extension Service budgets, and publications of the Department of Economics and Business at North Carolina State University. Linear programming procedures then analyzed this initial on-farm resource situation to determine the optimal combination of enterprises. The initial optimal enterprise mix was a specialized dairy operation with residual acreage devoted to wheat production. Various optimal enterprise combinations and shadow prices for selected limiting resources were calculated for alternative resource situations. Available labor was much more important than land availability in explaining overall farm profitability. The sensitivity of the initial optimum solution was examined using price-mapping techniques. This initial mix of enterprises was very stable, with dairy production dominating the other enterprises over a wide range of milk and beef prices. Blend milk prices, net of hauling and marketing charges, had to drop more than $3 per hundredweight from $13.68 before the size of the dairy enterprise was significantly reduced from its initial level. Beef entered the optimal farm plan only under a combination of low milk prices and high· beef prices. A combination of historically low milk prices and average-to-high beef prices made off-farm employment profitable. The production of wheat, the only cash crop to be grown, was most extensive when both beef and milk price levels were low.
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