Having outlined the cropping system and made a careful estimate of the total annual production of each crop, the next step is to determine the amount of food and bedding required for the live stock. From this data it may be determined what products will be available for sale, and what foodstuffs must be bought. Thus, it may be found, for example, that the amount of oats raised just meets the requirement, while more maize must be purchased, together with nitrogenous concentrates, and that a portion of the hay is available for sale. In the farm under consideration there will, of course, be wheat, potatoes, tomatoes, cabbages, garden peas and the animal products previously mentioned for sale, and later there will be apples and some lumber from the wood lot.
The data are now at hand by which to estimate the total receipts. Having made the estimates of receipts, the expenses are estimated, and the difference gives the cash balance, if there is any. The most important items of expense will be labor, feed, seeds, fertilizers, harvesting and threshing expenses, spraying material, shipping packages, blacksmithing and repairs. After all expenses that can be thought of are included not less than 10% should be added for incidental expenses.
The amount of commercial or natural fertilizers to be purchased is, of course, related to the yard manure which will be produced on the farm; therefore some estimate of the probable amount is desirable. In a roughly empirical way the amount of manure produced may be estimated at twice the amount of dry food and bedding used, provided it is hauled daily to the field. Where stored and drawn to the field at stated periods, the shrinkage in weight, although not necessarily in plant food, may be as much as one-half.
The estimate of what the inventory should be at the beginning and end of the year is not so simple a matter as it may at first seem to be. The purpose of taking the inventory is twofold: First, to determine whether the inventory has increased or decreased, and second, to determine on what amount of capital interest is to be calculated. For example, one must carry forward each year seed for the next years crop. Feed must be carried over to feed live stock until other food becomes available, and there must be money on hand with which to pay for labor unless there is a cash income from the sale of products sufficient to care for the labor bills.
In the case of the farm under consideration there is a young orchard of about one thousand trees. This orchard is not bringing in any income, but there is a constant expenditure of money on it, and a constant increase in its value. While, therefore, it decreases the cash income it increases the farm income and the labor income. On the other hand, it increases the interest charges because the plant or farm is increasing in value. How much will it increase in value? In some sections it is customary to consider that an orchard increases in value $1 per tree per year. If this is a correct estimate, this 1,000-tree orchard will increase the value of the farm $1,000 a year until it comes into full bearing. The farm under consideration was purchased two years ago for $9,500. On the assumption just stated, at the end of 15 years from date of purchase this farm should be worth $25,000, at least $15,000 of which will be due to a 30-acre orchard. This is at the rate of $500 an acre for the orchard itself.
In order to bring out some of the phases of the inventory more clearly the following classification of items is given below:
INVENTORY
A. Plant.
The real estate, 200 acres at $60 per acre.
The live stock.