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Like Tejpal, other large and medium farmers sell the surplus farm produce. A
part of the earnings is saved and kept for buying capital for the next season. Some
farmers might also use the savings to buy cattle, trucks or to set up shops. These
constitute the capital for non-farm activities. They may also buy more land.

There is often a loss in farm activities, espeically when crops are damaged
because of floods, pests etc. The other risk is sudden fall in the price of
agricultural produce. In such situations, farmers find it difficult to recover
the working capital that they had spent.

Surplus and Capital for Production

Consider three farmers. Each has grown wheat on his field though the production is
different as in Column 2. To analyse the situation faced by different farmers,we
need to assume that some conditions are the same for all. To keep things simple,
let us suppose the following conditions:

The consumption of wheat by each farmer family is the same (Column 3).
The whole of surplus wheat this year is used as seeds for working capital
for the next year’s production by all the farmers. They also have land to do so.
Also suppose, production output is twice the working capital used in
production in all the farms. There is no sudden loss in production.

Complete the table

Farmer 1

Year	Production	Consumption	Surplus = Production - Consumption	Capital for the next year
Year 1	100	40	60	60
Year 2	120	40
Year 3		40

Farmer 2

Year	Production	Consumption	Surplus	Capital for the next year
Year1	80	40
Year 2		40
Year 3		40

Farmer 3

Year	Production	Consumption	Surplus	Capital for the next year
Year1	60	40
Year 2		40
Year 3		40

Compare the production of wheat by the three farmers over the years.
What happens to the Farmer 3 in Year 3? Can he continue production? What will
he have to do to continue production?

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