USING FARM CAPITAL.

Northern Advocate, 28 August 1919, Page 3

USING FARM CAPITAL.

Every farmer should recognise the fact that the capital invested in his farm should b e expected to earn interest for him just as clearly as money deposited in a savings bank earns interest (says an exchange). A farmer who invests his money in a sheep farm simply chooses the farm as offering an opportunity for better returns than would the same money return if deposited in a savings bank or invested in a farm mortgage, and it is just as much his business to see

that it earns five, or six or ten per cent, as it is for any man investing money in other lines of business to see that it earns a good rate of interest. One of the most effective ways in which to make capital earn interest is to correctly proportion the amount of capital that goes into operating forms. Statistical data covering this point seems to indicate that from 25 ;o 33 per ceru. of the total capital available should be used as operating capital. If used for the purchase of good live stock, for the purchase of suitable machinery, for the employment of labour, and for the purchase of feeds and other material with which to keep the farm going, it will be in the safest form of operating capital. On well-equ.ppfcd dairy farms, p.i»d especially where purebred suck is kept, the proportion of capital in forms for op :r*f .ng may run as high as 40 per ccn 4 ;,, With excellent ;i-suits. One sltarti ii? in the farming business should borrow money on the real estate and invest it in operating expense, first for the reason that it can be borrowed at a lower rate of interest on real estate; and, second, because if ready cash is available more stock and equipment is likely to be purchased. With available capital for buying and selling and for making a quick turnover when opportunity offers, the farmer, if good judgment is used, has many opportunities for making gains on hfis investment. On -every farm there is a certain amount of labour which must be used on non-pfoductive enterprises. On some farms this may run as high as 41 per cent. On well diversified farms, and especially an dairy farms, it may run even as low as 2§ pgr cent, On highl-y specialised farms it may run even as low as 20 to 22 per cent. Obviously where 80 per cent, of the labour is expended on productive enterprises, such as heavy yielding dairy cows, quickly fattened hogs, and large yielding crops, the returns are bound to be larger than where only 60 per cent, of the labour is used for that purpose.