xt75x63b159p https://exploreuk.uky.edu/dips/xt75x63b159p/data/mets.xml   Kentucky Agricultural Experiment Station. 1961 journals 107 English Lexington : Agricultural Experiment Station, University of Kentucky Contact the Special Collections Research Center for information regarding rights and use of this collection. Kentucky Agricultural Experiment Station Progress report (Kentucky Agricultural Experiment Station) n.107 text Progress report (Kentucky Agricultural Experiment Station) n.107 1961 2014 true xt75x63b159p section xt75x63b159p       Economic Analysis
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LEXJNGWN The Division of Form Monogement
Progress Report ]O7— December 1961-—(Fi|ing Code: 7) A

 PROGRESS REPORT 107 December 1961
John G. Stovall, James F. Thompson and George B. Byers
Department of Agricultural Economics
Filing Code 7
University of Kentucky
Agricultural Experiment Station
, Lexington
Under Contract with
The Department of Finance,
Commonwealth of Kentucky
Through the Division of Farm Management


The authors of this study wish to acknowledge the aid, en-
couragement and constructive criticism furnished them by
a number of persons and governmental agencies both state
° and federal
‘ The Division of Farm Management of the Department of Welfare,
' Commonwealth of Kentucky, was extremely helpful in furnishing
much of the necessary data and consulting with the authors
from day to day throughout the study. The managers of the
farms concerned are also due thanks for their time taken in
touring the farms and explaining the present farm operations.
Grateful acknowledgment is made to Mr. Herschel Hecker,
Mr. Roscoe Issacs and other members of the Soil Conservation
Service, United States Department of Agriculture, who aided
greatly by furnishing technical assistance in their field
and constructive criticism of the results.
The Department Heads and staff members of the various Depart-
ments of the College of Agriculture and Home Economics, Uni-
versity of Kentucky aided immeasurably by furnishing needed
data and by criticizing in a very constructive manner the
results of the various phases of the study. Dr. Aubrey J. .N
Brown, Head, Department of Agricultural Economics was espe-
cially helpful in encouraging the authors and in smoothing
the way administratively so that the work could proceed on
Acknowledgment is made to Mr. Robert Smith and Professor William
C. Moore of the Data Processing Center, Texas Engineering
_ Experiment Station, College Station, Texas, for their help in
the use of their computer in solving the linear programming

LIST OF TABLES ........ o ..... . .......... . . V
PREFACE ..... . ............. . . . . . . . .... viii
SUMMARY . . . . ¤ . . . .. . . . ¤ . . . . . . ¤ . .. .. . . . . . . . ix
INTRODUCTION . . . . . . . . . . . . . . . . . . ¤ . ¤ . . . . . . . l Q
Purpose of Study . . . ¤ . . . . . . . . . . . . . . . ¤ . ¤ . ¤ 2 _
Source of Data . . . . . ¤ . . . . . . . . . ¤ o ¤ . . ¤ q ¤ . . 3
Methods of Analysis . . . . Q ¤ . . ...¤.. . . ¤ . . . . . 5
Fruits and Vegetables . . A . . . . . . . . . . . . . . . . . . ll
Poultry Products . . . ¤ . . ..... . . . . . . . . . . . . . l2
Milk Production . . . . ¤ O . . . . . . . ¤ . ¤ . . . . . . . . 12
Beef Production . . . . . . ¤ . . . . . . . . . . . ° . . . . . 13
Pork Production . . . ¤ . ¤ . . . . . . . . . ¤ . . . . . . . . 13
MINIMUM FOOD COST FARM PROGRAM . . . . . . . . . . . . . . . . . . . 14
Individual Farm Programs . . . . . . . . . . . . . . . . . . . . 22
Product and Resource Transfer . . . . . . . ° ¤ . . . . . . . . 33
Role of Centralized Management , , . . . , . . , . , , . , . , . 41 I
Annual Costs . . .... . ...... . . . . . . . . . . . . . 42
Capital Outlay ....,...........¤...... . . 48
Costs versus Savings of Proposed Program . . . ¤ . . . . . . . . 51
APPENDIX . . . ..... . . . . . . . . . . . . . . ¤ . . . . . . ¤ 53

Table No. Page
1. Total Requirements of Farm-Produced Foods, Their
Commercial Value, and Percentages Currently Produced
in Kentucky State Institutional Farm System ......... l
° 2. Acres of Land at Eact State Institution Classified
’ According to Its Most Intensive Rotation Group ........ 4
3. Present Size and Production Per Cow of Institutional
` Dairies ........................... l2
4. Vegetable Acreage, Potential Yeild and Labor
Requirements at Each Institution ............... l5
5. Suggested Size, Location and Estimated Production
of Laying Flocks in the Institutional Farm System ...... 16
6. Proposed Size and Location and Estimated Annual
Milk Production of Dairies in the Institutional
Farm System .......... . .............. 17
7. Size of Beef Cow and Beef Feeder Herds Proposed
at Each Institution ..................... 19
8. Proposed Size and Location of Swine Enterprises
and Quantities of Garbage Available Each Year W
in the Institutional Farm System ............... 20
9A. Proposed Livestock Program for Kentucky
Village Farm ......................... 22
9B. Proposed Cropping Program for Kentucky
Village Farm ......................... 23
` lOA. Proposed Livestock Program for Kentucky
Training Home Farm ...................... 23
· 1OB. Proposed Cropping Program for Kentucky
Training Home Farm ...................... Zh
llA. Proposed Livestock Program for Kentucky
State Hospital Farm ..................... 25
1lB. Proposed Cropping Program for Kentucky
State Hospital Farm ..................... 25
l2A. Proposed Livestock Program for Central
State Hospital Farm ..................... 26

LIST OF TABLES — continued
Table N0. P&§€
12B. Proposed Cropping Program for Central
State Hospital Farm ........ . ............ . 26
13A. Proposed Livestock Program for Kentucky
School for the Deaf Farm ................... 28
13B. Proposed Cropping Program for Kentucky 2
School for the Dear Farm ................... 28
14A. Proposed Livestock Program for Kentucky . `
State Reformatory Farm . . .................. 29
14B. Proposed Cropping Program for Kentucky
State Reformatory Farm .................... 29
15A. Proposed Livestock Program.for Kentucky
Children's Home Farm ..................... 30
15B. Proposed Cropping Program for Kentucky
Chi1dren's Home Farm ..................... 30 `
16A. Proposed Livestock Program for Kentucky
State Penitentiary Farm .................... 3l
16B. Proposed Cropping Program for Kentucky
State Penitentiary Farm .................... 31
17A. Proposed Livestock Program for Western
State Hospital Farm ................ . ..... 34
17B. Proposed Cropping Program for Western
State Hospital Farm ...................... 34
18. Transportation of Feeder Calves in the I
Institutional Farm System ................... 35
19. Transportation of Feeder Pigs in the .
Institutional Farm System ................... 35
20. Transportation of Finished Hogs in the
Institutional Farm System ................... 36
21. Transportation of Feed from the Feed Mill
at Kentucky State Reformatory ................. 36

LIST OF TABLES — continued
Table No; P8g€
22. Farm Produced Grain Transported to the
Kentucky State Reformatory .................. 37
23. Transportation of Hay Among Farms in the
· Institutional Farm System ................... 37
24. Transportation of Meats Among Institutions .......... 38
` 25. Transportation of Milk Among Institutions ........... 39
26. Transportation of Canned Fruits and Vegetables
from Canneries to Consuming Institutions ........... 40
27. Transportation of Eggs from Producing
to Consuming Institutions ................... 40
28. Estimated Variable Costs of Field Crop
Production on Institutional Farms ............... 42
29. Estimated Annual Variable Cost of Vegetable
Production and Processing in the Institutional
Farm System .......................... 43
30. Estimated Annual Variable Costs of Livestock
Enterprises for the Proposed Institutional _
Farm Program ......................... 44
3l. Estimated Annual Costs of Transporting Products
Among State Institutions ................... 45
32. Distribution of Employees by Pay Grade in
Institutional Farm System ................... 46
` 33. Number of Employees and Personal Service
Costs by Institutions ..................... 47
34. Summary of Estimated Annual Costs of Proposed
Farm Program ......................... 48
35. Capital Outlay Required for Implementation of
Proposed Farm Program ..................... 49

The research reported on in this Progress Report was financed
by funds from a contract with the Division of Farm Management
of the state government of Kentucky. The study is economic in
character, with the primary objective being a comprehensive
plan for the operation of the ll institutional farms at a
minimum cost for the whole system. Information as to food ’
needs at the institutions was furnished by the Division of
Farm Management. In addition, certain information as to the
use of parts of the farms for therapeutic or rehabilitation Y
purposes was also provided by that Division from data obtained
by them. This latter information, while limited, became a
part of the linear program.
The plan herein developed becomes a base or master plan from
which adjustments can be made as new factors develop. It
also can be adjusted to conform with decisions relating to
therapeutic or rehabilitation policies.
Centralization of competent management is essential to suc-
cessful economic implementation of the reorganizational pro-
gram proposed in this report. Authority and responsibility at
the state level, throughout the farm system, to supervise and
direct overall farm operations are especially important ifthe
objective is to attain the lowest cost combination of enter-
Aubrey J. Brown, Head ,
Department of
Agricultural Economics

The study reported here was an economic analysis of institutional farms
in Kentucky, made under contract with the Department of Finance, Common-
wealth of Kentucky through the Division of Farm Management. The objective
of the study was to determine how state-controlled land, labor, capital
and management resources associated with mental, correctional and child
care institutions can best be used within specified limits to provide
each institution in the system its required amount of each food cate-
, gory at the least possible total cost to the Commonwealth. The prin-
cipal tool used in this analysis was linear programming.
The ll institutions included in this study have associated with them
nearly 8,000 acres of farm land, varying amounts of patient, inmate
and retardate labor, and a considerable investment in buildings and
agricultural equipment which can produce much of the food products
required by some 15,000 individuals in these institutions. Currently,
these food-producing resources are directed primarily toward food
production for the institution at which the resources are located.
The main feature of the minimum cost food production program outlined in
this report is that farms would specialize in the production of foods I
to which their resources are best suited and receive the remainder of
their food requirements from other institutions. Although speciali-
zation would require that products and some resources be mobile, re-
sulting in some transportation costs, these would be more than offset
by decreased cost of food production.
The largest farm operation would be located at the Kentucky State Re-
formatory and the Kentucky State Penitentiary at Eddyville. These two
farms would produce milk for their own institutional needs and for
those of six other institutions. They would also produce feeder pigs,
many of which would be moved to other institutional farms so that the
garbage available there could be used in the fattening process. In
~ addition, the Reformatory farm would produce eggs for several insti-
' The mental hospital farms would be largely devoted to the production
of feeder calves. These calves would be moved to the Reformatory and
the Penitentiary for finishing and possibly for slaughtering.
The main advantages of this program are derived from: (1) more appro-
priate land use, (2) larger enterprises and lower overhead costs, and
(3) fuller utilization of inmate labor at the Penitentiary and the

Reformatory. The main disadvantages are:(l) the need of transporting
relatively large amounts of food, materials and animals, and (2) the
possible losses due to poor management are greater than under the
present decentralized system of production.
The farm program outlined in this report would produce food products
valued at nearly $2 million per year at wholesale prices. Impleq
mentation of the program would require an initial capital outlay of
about $1.2 million and an annual cost of slightly over $1 million
to keep the program in operation.
One of the most important implications of this program is that com-
petent and dependable management would be required throughout the
farm system to supervise and direct all phases of the farm operation. `
At the state level it is especially important that some managerial
unit have both the authority and responsibility for over-all direction
of the insititutional farm program, Unless these management criteria
are completely satisfied, implementation of this program might in-
crease rather than decrease the cost of producing the required food.

One of the numerous responsibilities of the Commonwealth of Kentucky is the
arduous, but necessary, task of providing for approximately 15,000 unfortu-
rume individuals of our society who are in 11 state·operated mental, correc-
_ tional, and child care institutions. As a measure of the magnitude of this
task, the state has an investment of approximately $75 million in facilities
and requires an annual expenditure of $20 million for their operation,
No small part of this expenditure is required to provide these 15,000 patients
and inmates with a daily adequate diet, Not all of these foods, however, are
bought on the market. The state owns, in conjunction with the institutions,
a total of nearly 8,000 acres of farm land in various-sized plots on which
much of this food is produced, Table 1 shows the quantities of farm—produced
foods required by all institutions along with the wholesale value of each,
The total value of these foods for all institutions is almost $2 million,
Quantity Commercial Percent Now _
Required Value Produced
Beef, lb. 1,008,000 $ 383,000 26
Pork, 1b. 783,000 258,000 70
_ Milk, gal. 890,000 534,000 84
Eggs, doz. 312,000 109,000 33
Fresh Fruit and
Vegetables, lb. 6,141,000 385,000 100*
Canned Fruits and
Vegetables, gal. 390,000 269,000 40
*This refers to fresh fruits and vegetables required during the growing season.
- 1 -

 - 2 -
In addition to being used for food production, the farm land surrounding the
institution serves at least two other purposes. First, it provides employ-
ment for patients and inmates that is considered healthful, mentally and
physically. For the mental patient this work is of definite therapeutic
value, according to many physicians, For the inmate it provides gainful
employment in the open and away from the prison confines, This is believed
to enhance rehabilitation, Second, the institutional farms provide buffer
zones around the institutions which, in many instances, are necessary because
of the encroachment of expanding urban and industrial areas. This is especial-
ly true at the mental hospitals which must maintain a serene and quiet atmos-
phere owing to the nature of their work.
Hence, the reason for maintaining institutional farms is not solely an
economic one. Rather, the production of food is a joint product along with
therapeutic, rehabilitative, and other benefits from the farm. This report
is concerned, however, with only economic considerations. This is not to
say that other factors are ignored, but inasmuch as possible they are taken
as given and act as restrictions on the economic analysis of the farms re-
ported here. No attempt has been made to measure benefits which are not
economic in nature.
Purpose of Study
The purpose of this study is to determine how the land, labor, capital and
management resources on state institutional farms can best be used within
specified bounds to provide each institution in the system with its required
amount of each kind of food at the least possible total cost to the Com on-
wealth. The problem is one of selecting, from a large but finite number of
alternative food sources for each institution, that combination which costs
less than any other,yet satisfies all food requirements and stays within
predetermined limits of the available resources. These possible alternatives
for any given institution include various ways of producing a given food
product from various combinations of land, labor, and capital at the using
institution, the various ways of producing it at each of the other insti-
tutions and then transporting it to the using institution, as well as that
of purchasing the final food product from a commercial source.
In arriving at a solution to the problem of minimum cost food production, *
certain assumptions about the use of state-owned resources were made. These
may or may not correspond to present conditions on the institutional farms.
These assumptions are necessary conditions for the successful implementation L
of the least-cost institutional farm program presented later in this report,
The more important of these assumptions are:
1. Level of management — The farms will be managed by people who are con-
siderably above average in their ability to coordinate the various enter-
prises and to see that improved practices are used to best advantage.
The salary scales used in compiling costs for supervisory labor are
based on this assumption,

 - 3 -
2. Mobility of products and resources - The resources and final products that
are transportable can be moved freely among institutions, usually according
to some prearranged schedule but sometimes on short notice. This means
that feed, livestock and final products can be produced at one institution
and consumed or utilized at another institution without undue delay or
cumbersome administrative procedure. Not all resources, however, are
2 considered mobile in this study. Some are not technically or administra-
tively suitable for transporting.
3. Central decision-making unit - There is some central decision-making unit
with the authority and ability to coordinate all farming activities in
. the institutional farm system. This decision-making unit would also have
the responsibility for carrying out and administering the entire insti-
tutional farm program in the state, This includes the ability to, and
responsibility for, transferring resources and final products among farms,
as well as coordinating the decisions of individual farm managers into
the objectives of the institutional farm system.
4. Labor availability - It is assumed that the farms associated with the
Training Home, the Kentucky State Reformatory and Kentucky State Peni-
tentiary can supply enough retardate and inmate labor to carry on a
farm operation as intensive as the size of the farm will permit. At
Kentucky Village enough labor can be made available to operate a dairy
large enough to furnish the institution with milk, in addition to furnish-
ing labor for vegetable production for fresh consumption, field crop work,
and a small swine enterprise. The four mental hospitals and the Children's
Home are able to furnish enough patient labor to produce their own fresh
vegetables. The Women's Prison and the Kentucky School for the Deaf can
furnish little or no labor.
Source of Data
The data used in this study came from a variety of sources. The State Division
of Farm Management contributed records of the farming operation including prices
of purchased inputs and products. The U.S.D.A. Soil Conservation Service gave
· splendid cooperation in furnishing technical data on soil classification and
land use possibilities as well as crop yield potentials. Input-output data for
livestock enterprises were obtained from records through the Division of Farm
‘ Management and from consultations with the relevant departments in the College
of Agriculture and Home Economics, University of Kentucky.
Personnel of the Soil Conservation Service made a detailed inventory of soil
on each institutional farm and then classified this soil according to its
most intensive use consistent with permissable annual soil loss. Table 2
shows the number of acres at each institution in each of eight categories of
land use. These range from continuous row crops, the most intensive classi-
fication, to rotations of different length and to permanent pasture, the
least intensive classification. Land in any category may be used for any
rotation grouping which is to the right of that category in Table 2; however,
the reverse is not permissable, i.e., land classified in any column may not

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 - 5 -
be used for any rotation grouping to the left of that column. The total
acres of all categories of land use for the institutional farm system is
7,977 acres, This is the total usable acreage in the system,
The Soil Conservation Service also furnished potential crop yields asso-
ciated with each soil type found on the farms, Yields were aggregated
for each category of land use listed in Table 2. For each category within
each farm there is an associated yield potential for each of the major I
A crop enterprises.
Livestock budgets were made up after reviewing actual farm records and
consulting personnel of the Animal Husbandry Department, the Dairy Science
. Department, and the Poultry Science Department. After these budgets were
compiled they were returned to these personnel for review of feed require-
ments and other pertinent input-output data,
Food requirements for each institution were obtained from a survey by the
Division of Farm Management (see Appendix A). Each institution's dietician
estimated the quantity of each food category that would be needed for the
next year based on present institution populations, Estimates were made
in terms of dressed or processed weight, and then these were converted
to live or unprocessed weight. These estimates were then increased by
l0 percent to allow for fluctuations in the food production program as
well as in institutional population fluctuations,
Methods of Analysis .
Linear program ing was the principal tool used in this study. This is a
relatively new procedure that is being used extensively for solving prob-
lems that involve maximization or minimization and utilize scarce resources,
A linear program ing problem has three principal components: an objective,
alternative methods or processes for reaching this objective, and restric-
tions, either on the resources or the products they produce.
l. The objective - Typically, the objective in efficiency type problems
is minimum cost or maximum income. In this study the objective is to
~ minimize the total cost of supplying a given amount of food product to
each of the ll institutions in the state. It is necessary to be able
to state this objective in mathematical language for it to be amenable
‘ to linear programming procedures.
2. Alternative methods - Once the objective is stated, it is obvious that
unless there is more than one way of attaining it, there is no problem,
or at least, it is a trivial one, Given several alternative methods of
attaining the objective, linear programming is a powerful tool for
selecting the ones most efficient, The alternative methods of reaching
the objective in this study include the various methods or techniques
of producing each product, the purchase of this product on the market
and the transportation of this product from other farms in the system.
l .
For a discussion on linear programming see Earl O. Heady and Wilfred Candler,
Linear Program ing Methods (Ames: The Iowa State College Press, 1958.)

 - 6 -
2, Restrictions - For most planning or choice-type problems there are re-
strictions which set limits on the kinds of plans that can be considered.
In fact, a linear programming problem does not exist unless resources
are restricted or limited. The restrictionsi41this study reflected such
things as the quantity of land at each farm, the buildings and other feed
storage space, type of labor, and the quantity of each food product re-
quired at each institution.
Finally, the solution obtained from linear programming has no higher validity
than the data used in the program. Though linear programming, combined with _
the electronic computer,is a powerful computational tool, it is not a substi-
tute for inaccurate data.

The state institutions have associated with them varying types and
amounts of food-producing resources. Differences in these resources
i are inherent in the amounts and types of farm land, the buildings
and equipment, and the amount and productivity of institutional labor.
, The distribution of resources among institutions influences strongly
the type of food program which is best.
· The institutional farm labor forces are especially important when one
seeks to locate enterprises within the farm system. There is a wide
range among the institutions in both the amount and productivity of
labor as well as in the kinds of restrictions on the work which can
be done.
Location of the state institutions is shown in Figure 1.
Kentucky Village - The Kentucky Village farm is located about four miles
northwest of Lexington in the Central Bluegrass region of Kentucky.
The soils on this 395-acrebluegrass farm, of which the most important
series are Maury, Hampshire and Loradale, were mainly derived from
limestone. These soils are high in phosphate but require some lime and
potash for best crop growth.
Institional labor in small quantities is furnished by juveniles who
are committed to the institution. There is a fairly large turnover
in inmate population causing some instability in the farm labor force.
Nevertheless, the inmates furnish labor for the dairy work and for
the raising of fresh vegetables and most field crops.
Kentucky State Hospital - This institution and its farm are located
near Danville. Although the same soil series are dominant on this
farm as at Kentucky Village, the land is more rolling and over half
of the 1,306 acres are suited only to pasture. Less than 60 acres
‘ may be used in continuous-row crops. This soil is extremely drouth- ’
sensitive because of its shallowness.
A' The institution supplies very little patient labor. Enough is furnished,
, however, for fresh vegetable production and miscellaneous jobs that
require very little skill.
Kentucky School for the Deaf — The small farm of 192 acres at this
school, located at Danville, also has as its most important soil series
Maury, Hampshire and Loradale. No institutional labor is available.
- 7 -

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 - 9 -
Kentucky Training Home - This 343-acre farm probably has the roughest
topography in the farm system. Located on the Kentucky River near
Frankfort, this farm has a large variety of'soil types, ranging all
the way from steep upland to fertile river bottom soil. The institution
furnishes more farm labor than any of the other mental hospitals. In
addition, there is less turnover in patient population permitting an
established and experienced farm labor force. Patient labor is avail-
able to do most of the work on this farm with close supervision.
Central State Hospital — Located at Lakeland in Jefferson County and
comprising some @00 acres of cropland, this farm has as its most impor-
~ tant soil series Pembroke, Crider and Russellville. These soils have
developed in shallow loess and limestone residuum, are reddish-to-
brownish colored, and are well drained and productive.
Like most other mental hospitals in the state, this institution does
not furnish a large amount of farm labor. In addition to labor for
fresh vegetable production, patients are available for simple jobs
of a routine nature. The use of patient labor for farm work is handi-
capped by the increasingly high turnover in patient population.
Kentucky Children's Home — The small farm (85 acres ) associated with
the Kentucky Children's Home is located at Lyndon about three miles
from Central State Hospital. Consequently, its soils are quite similar
to those found on the Central State Hospital farm. The Children's
Home furnishes a small amount of labor which is mainly used in the pro-
duction of fresh vegetables. The Kentucky State Reformatory supplies
some prison labor for other enterprises on this farm.
Kentucky State Reformatory - The Reformatory farm of 2,635 acres is
by far the largest farm in the system. It is located near LaGrange
in the Outer Bluegrass region. A large variety of soils is found on
this farm, most of which fall into two soil association areas: Pem-
broke—Crider-Russellville and Lowell-Shelbyville—Fairmount. About
75 percent of the land in this farm cannot be used more intensively
than for pasture and meadow. Another tract of approximately 230 acres
* is located at the Women's Prison a few miles from the Reformatory
and is operated as a part of the Reformatory farm.
' A large prison labor force is available for farm work and is used
extensively in the farm operation. The productivity of this labor
depends to a large extent on the kind and amount of supervision
Western State Hospital — This Western Pennyroyal Limestone area farm
is located near Hopkinsville in Christian County. Major soil series
on this farm, Pembroke, Crider and Russellville, are derived mainly
from loess and limestone residmmn and respond well to lime and fertilizer.

 - 10 -
About 60 percent of this farm is suited only for pasture and meadow,
while the remaining 40 percent can be used for continuous-row crops
or row crops in rotation with pasture or meadow. Institutional labor
is available only in small quantity. Most labor for the farm operation
must be hired. V
Kentucky State Penitentiary - This Lyon County farm is separated into
two tracts about l0 miles apart and each approximately that distance
from the Penitentiary. The larger tract known as the Beck Farm and by
far the more productive, consists of 1,250 acres. Th