[These illustrations of the relations in agriculture between costs and profitable cultivation are taken from pp. 6-9 of Bulletin 209 of the University of Wisconsin Agricultural Experiment Station (May, 1911), by H. C. Taylor, Professor of Agricultural Economics.]

Prices and crop selection. It is essential to good farm management that the farmer understand the trend of prices in order that he may plant and breed to suit the future market on which his products must be sold.

Within certain regions the question whether one should sow oats, barley, or spring wheat is determined by the relative prices for which these products can be sold. In given regions the choice between corn, potatoes, and sugar beets (crops which require cultivation at the same time of the year) should be determined on the basis of the profit the farmer can make from each of these crops and this depends upon the prices for which they can be sold.

Costs and prices. It has been common to hear the statement "The price should be high enough to pay the cost of production and a reasonable profit." This phrase when properly understood is full of significance. It is a misinterpretation however, to assume this phrase to mean that every producer of a given product has a right to expect and to demand a price which will cover his costs and give him what he considers a reasonable profit. Costs in a given locality vary greatly because of differences in the men in charge of the farms. Costs vary greatly in different regions owing to differences in soil and climate, the character and abundance of the labor supply and the location with respect to the market.

Costs and the efficiency of the farmer. It usually happens that there is an inefficient producer here and there who is producing at a cost greater than the price at which other farmers find it profitable to produce enough to supply the demand. Suppose the price were artificially pushed up to a point where the inefficient farmer can make a profit. This would make the enterprise exceedingly profitable to the efficient farmers, and would tend to increase their production, the greater supply would force prices down and the second state of the inefficient farmer would be worse than the first. All who are producing at a loss should change to some other line of production for which their qualifications count for more. It often happens, for example, that a low grade dairyman is a high grade tobacco producer, that a low grade grain farmer can make money in the grazing of cattle, etc.

Costs vary with natural conditions. Low efficiency of the farmer in the given line of production is only one of the causes which may result in costs which exceed prices. As has been stated, costs are greater in some regions than in others. The wheat regions of the world are numerous and widely scattered. The cost, per bushel, of producing wheat and putting it upon the world's central wheat market, Liverpool, varies greatly. During periods when the supply of wheat is increasing slowly and the demand for wheat is increasing at a slightly more rapid rate the price of wheat will tend to remain high enough to retain in the wheat industry the region where the costs are greatest. When, however, as a result of a new discovery or the extension of means of transportation a new and fertile wheat region enters into competition with the old regions it may happen that the supply of wheat will increase more rapidly than the population and to induce the people to consume more wheat per capita the price must be lowered. As a result of the fall in the wheat price some of the old wheat regions will find their costs greater than the prices they can get.

Changes from wheat growing to dairying. This condition was brought about in the wheat industry when the fertile wheat regions of Kansas, Minnesota, and the Dakotas were made accessible, and poured their abundant supplies of grain upon the markets of Europe. The farmers of the east of England found wheat growing a losing enterprise. Had they understood the cause of the fall in wheat prices they would have known that the one thing to do was to drop wheat growing and take up some other line where foreign competition was not so keen. After a long time this came about, the wheat lands were converted into meadows and pastures and the dairy industry pays well for the efforts expended. Unfortunately many farmers held to wheat production long after it had ceased to yield a profit. In some cases this resulted in bankruptcy which alertness to the price situation might have avoided.

We are not without illustrations of this principle in this country. The falling wheat price due to the rapid growth of the wheat industry in the northwest was an important factor in driving Wisconsin farmers from a system of grain farming with wheat as the money crop into the livestock industry with dairy products as the chief sources of income.

The westward movement of the wheat industry in the north was paralleled by a westward expansion of cotton production in the south. From the old centers in Georgia and the Caro-linas the cotton industry extended into the fertile "Black Prairie" of Alabama, sprang up in the rich alluvial of the Mississippi and confluent rivers, and in the Black Prairie of Texas. There was a rapid increase in the quantity of cotton produced. The increased supply was produced at a lower cost than was possible in the old regions. The obvious result was falling prices and an unprofitable industry in the old cotton regions.

Burley tobacco produced at lower costs. Another illustration, which is of particular interest to-day, may be drawn from the Burley tobacco situation in Kentucky. Burley tobacco was first grown in Kentucky in the northern part of the blue-grass region. This is a rough country where the soil soon lost much of its fertility. The industry gradually spread southward into the counties of Scott, Bourbon, Franklin, Woodford, Fayette and Jessamine. These counties contain the blue limestone region known as the heart of the blue grass country. This is a region of unusual natural fertility. A large proportion of this land had remained in blue-grass pastures from the first settlement of the country. As the tobacco industry commenced to encroach upon this fertile region the farmers found it exceedingly profitable to plow up the old pastures and plant them in tobacco. Under these conditions the supply of tobacco was increased enormously. Prices fell, but the farmers in the new regions of production were making large profits at prices which meant starvation to the growers of the old Burley tobacco centers.

The blame for the falling prices was laid at the door of the tobacco trust, and it is doubtless true that the trust made the situation worse, but the condition which made it possible to increase the supply at falling costs in the new region of production was the cause of the depressed condition of the growers in the old regions of Burley tobacco production. The remedy is for the men who are producing tobacco at a loss to change to some other line of production or else move to central Kentucky, where the fertility of the old pasture lands may enable them to make a profit.

Prices and intensity of culture. The choice of crops and of livestock is not the only point where prices are controlling factors in the management of a farm. There is a close relation between the price of products and the degree of intensity of culture which will prove most profitable. High prices for products usually results in high land values. High land values make it profitable to use land more sparingly. For example fewer acres should be used for a herd of a given number of cows or, what is the same thing, more cows must be kept on a given area than formerly, if the farmer is to secure maximum profits from high-priced land. This means more intensive culture.

These illustrations should be sufficient to show that the farmer's interest in prices begins long before his product is ready for the market, and that he should study prices as a farm operator as well as a seller of farm products if he would make his farm yield maximum profits. .