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.-. ~ c - c This analysis is oriented to estimate potential farm incomes with development of the project. The $3,100 serves as a reference point in comparing potential incomes in the project area. The $3,100 should not be misconstrued to represent the total net return to the farm family from operation of the farm business. In addition to return for management and labor, the farm family would have a return on its equi ty in the far!ll. Assuming that, on the Smi th Fork project, farmers equities 1I in physical assets would compare favorably with the current nati onal average, return on equi ty in phys ical assets would average about $2,025. Return on equity plus return on family labor and management or a total of about $5,125 would be available to the farm family for living expenses, including income and social security taxes, savings, and retirement of debts. In estimating direct agricultural benefits, the $3,IOO serves as a basis for estimating the hourly rate of return to labor and management. The opportuni ty- cost approach is used which evaluates farm family labor and management in the same manner as other resources. Since management and family labor are not priced in the market as are most factors of production, establishment of a price for this resource is necessary. The additional labor required in the 'with' project situation is recognized in the analysis. Local inquiries have been made in connection with the Upper Colorado River Basin survey. Expenditures for family living have been obtained from records of the Farmers Home Administration. Reports on special studies have also been utilized. A general observation is that the standard set forth for the Smith Fork project in terms of funds available for family living, is greater than average current expenditures by farm families in the vicinity of the Smith Fork project. This is to be expected since projections for the Smith Fork project are oriented to an improved agricultural economy. The labor standard used in the projected budgets is a maximum of 3,000 hours labor for the operator and 1,500 hours for the family with,e. maximum in any one month of 420 hours total. Variations in the actual amount of labor required occur on the projected farms because of differences in types and sizes. Projected Agricultural Incomes and Direct Benefits Typical farm budgets are used to estimate potential incomes and direct agricultural benefits. Typical farms were set up and incomes derived on the basis of projected prices and other assumptions. These incomes for individual farms are then weighted on the basis of total acreages in each type to obtain an estimate for the average income expected ~ith development of the proposed Smith Fork project. The potential income budgets also serve as the basic framework for estimating direct agricultural benefits. 1I U. S. Department of Agriculture, Agricultural Research Service 43-42, Agricultural Finance Outlook, November 1956. (Average equity 86 percent) - 28 - I