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The net effect of these adjustments in commercial farm sales, operating expenses, and wage
expenses, are summarized in the partial net revenue figures in table 7.15. Partial net revenue is
negative for the small farm sector in nearly all years from 1975 to 1989, partly because of missing
income from livestock and the fact that revenues include only farm sales, not the value of home
consumption. However, even for medium-scale farms for which auto-consumption should theoretically
be much smaller, very large negative figures for net revenue are reported. Only for the large-farm
sector is net revenue positive, and then only in the early to mid-1980s. However, by 1988, even the
large-scale sector again appeared to be operating in the red, with very large deficits reported for
medium-scale farms.
Data presented for CPIs and selected commodity and input price indexes (agricultural
wholesale prices, building materials, and fixed capital goods) in table 7.16 reflect rapid inflation in
the 1970s and hyperinflation by the late 1980s. The CPI of low income consumers tripled over the
period 1970 to 1980, then increased by a factor of 43 between 1980 and 1990. Prices of building
materials and capital goods rose faster that the CPI, while the wholesale index of agricultural prices
grew at a slower rate suggesting a worsening terms of trade for agriculture in the 1980s. The effect
on prices of selected individual farm commodities (maize, tobacco, wheat and cotton) and fertilizer
prices (triple super phosphate and urea) are presented in table 7.17. Real output prices of maize, which
were relatively constant in the 1970s, tended to rise over the period 1980 to 1986 before falling
sharply to a twenty-year low in 1989. Real tobacco and wheat prices declined during the 1970s,
fluctuated up and down in the early- to mid-1980s, before also falling precipitously in 1989. Real
cotton prices appear to have been in a long-term secular decline from 1970 to 1989. The price of
fertilizer over time has tended to be constant to increasing over the period 1971 to 1985-86, before
also falling sharply in the late 1980s.
Growth in farm profitability can theoretically occur through a number of sources: (a)
increasing production through area expansion; (b) increasing production through technical change; (c)
increasing output prices; (d) decreasing tradable input use; and/or (e) decreasing input prices. Data
on commercial farms from section IV indicate that over the period 1975 to 1989 (southeast region),
production of maize fell, and that of wheat, soybeans, and burley tobacco increased, largely due to
crop area adjustments. However, these adjustments moved in directions surprisingly counter to trends
in real prices, i.e., rising real maize prices and falling prices for industrial crops. No data were
reported on tradable input use, but the above analysis of price indexes suggests rising real costs of
fixed and variable capital inputs. Assuming these data are correct, it may be that commercial farms
are shifting away from maize not because of price incentives but due to restrictions on marketing that
act to limit the amount of maize sold in the marketplace.
The analysis thus suggests that profitability has historically been closely linked with the ability
to expand crop area and substitute land for capital inputs. Such strategies would work to the advantage
of smaller farms employing oxen and labor-intensive management, and to the disadvantage of larger
farms relying on capital-intensive techniques. The data are far from sufficiently reliable to reach strong
conclusions (and this analysis is highly speculative), but the analysis does provide some very weak
evidence for the increasing area cultivated by small farms, as documented in chapter 3.