How Danish agriculture gained in the German occupation

Transcription

1 How Danish agriculture gained in the German occupation Mogens R. Nissen, associate professor at University of Southern Denmark During the German occupation Denmark was a very special case among all Germanoccupied countries. Agricultural production and exports played a crucial role in this regard. It was the core of the Danish economy, where the bulk of the exports consisted of agricultural goods, and where about one third of the employed population worked on farms or in the processing industry. The German occupiers led through all five years of occupation a particular economic policy in Denmark, which should ensure the important agricultural production. The basis was that the Danish authorities, agriculture organizations and farmers themselves in their own interest guaranteed maximum production and effective control of the Danish food consumption. In this way agriculture directly affected the relatively lenient policy of occupation in Denmark, both as a means to maintain peace and order and as an end to ensure food supplies to Germany. This paper is based on a part of my doctoral dissertation Produktions- und Lieferfreudigkeit. Landbruget under den tyske besættelse It focuses on agricultural earnings, savings and investments during the occupation compared to the years before and after. In this way, a trend in recent Danish and European history research is followed, not perceiving the situation during WWII as a brief interlude in history. To understand the situation during the war, it is necessary to relate to what happened in the 1930s, and it is important to assess the war impact on development in the early postwar years. Danish agriculture a brief introduction The structures of Danish agriculture were defined in the latter decades of the 19th century and early 20th century. Until the beginning of the 1950s there were approximately 200,000 farmers who almost all were freeholders. The vast majority of land reforms were implemented in Denmark in the late 19th century, and in the beginning of the 20 th Century the parceling out of land to small holders was almost ended. An important feature was that the farms were relatively homogeneous, because the geographic and climatic conditions were almost identical for all. And in relation to agriculture in other European countries there were relatively modest regional differences in terms of quality of land. 1 1 Nissen, 2009, p

2 In the period about half of the Danish farms were small with less than 10 hectares. Approximately 40% of the farms had between 10 and 50 hectares of land and the remaining 5-10% had more than 50 hectares of land. 2 Almost all farms were in this period characterized by having a diversified production. In the fields were mainly cultivated forage crops such as cereals, pasture and beets, but often were also grown cash crops such as bread cereals and potatoes. Production of milk was at almost all farms the main income, but the pork revenues were a large and growing part in the interwar period. Finally, it was usually sold eggs and chickens on most small farms, while production of sheep and wool was modest in Denmark. 3 This image of a mixed production applied to all farms regardless of size and regional location. But there were differences, however. Then as now, was grown relatively much grain on the islands Sealand, Funen and Lolland-Falster and in the eastern part of Jutland. The southern, western and northern part of Jutland was characterized by the fact that there was a relatively large animal production, and relatively many potatoes were grown on the sandy soils. Furthermore, there was a marked tendency that the largest farms many of whom were located on the islands grow comparatively much grain and sold a relatively large proportion of the harvest. On the other hand, the smallest farms had large animal production, which entailed a relatively large supply of grain and feed. In other words, production was more intensive in the smaller farms than on large ones. Thus, it was the smallest farms that were hit hardest when Denmark was occupied and unable to import grain and feed, because of the imbalance between the population of animals and the farms own feed production. 4 It is also noteworthy that the Danish agriculture in the late 1930s were among the most efficient in the world, which was noticed by various German authorities. In two reports from March 1939 on Danish agriculture conducted by the esteemed Institut für Weltwirtschaft in Kiel, it was concluded as a fact that productivity in Denmark was much higher compared to what German agriculture demonstrated. In autumn 1939 and spring 1940, these conclusions of OKW 5 were used to recommend that Denmark were cut off from England. At the same time, it was suggested that Germany supplied feed to Denmark to take advantage of the effectiveness of Danish agricultural production to increase food supplies to Germany. 6 2 Bjørn & Porsmose, 1997, p Helmer Pedersen, 1988, p Nissen, 2004a, p Oberkommando der Wehrmacht. 6 Nissen, 2004a, p

3 Another important feature of Danish agriculture was that a significant part of the processing industry was cooperative enterprises owned by the farmers. And that these cooperatives were represented in the umbrella organization Andelsudvalget, which was represented in the executive committee of The Agricultural Council of Denmark (Landbrugsraadet), together with leaders of the Farmers Organization and until 1939 the Organization of Smallholders. Organizational, Danish agriculture was thus very hierarchical with the executive committee of the Agricultural Council as the decision-making body, which quickly and efficiently reached out to individual farmers through representatives from member organizations. The Agricultural Council also had strong political power in Denmark in the first half of the 20 century. 7 This centralized and hierarchical structure was of great importance during the occupation, where the German economic policy and especially the German price policy quickly was communicated to and utilized by individual farmers. 8 Earnings in the 1930s As the international economic crisis broke out from , Denmark was hit hard. The country was Europe s most open economy, and imports and exports accounted for 40-45% of the domestic production. Agriculture was particularly hard hit, as 75-80% of Denmark s total export value consisted of agricultural products, especially of butter and pork. It corresponded to that about 2 / 3 of agricultural production was exported. 9 Britain purchased virtually the entire Danish pork export, while 75% of butter exports were sold at this market. When the British authorities in 1932 imposed quantity restrictions on food imports from countries outside the Dominions, the Danish agricultural exports were hit. At that time export prices had been halved since the turn of , so all in all agriculture was in a bad economic crisis with losses and compulsory sales as consequenceshowever, it would be misleading to claim that the entire decade was a long agricultural crisis. Already from the beginning of 1933 and especially from the middle of the decade most farmers coped very well. Centralized agreements to control production were implemented, managed by the agricultural organizations affiliated The Agricultural Council. The Danish currency was devalued, so farmers got more kroner for their goods. And through key trade negotiations between Danish and foreign authorities where agricultural organizations were well represented and had a decisive influence on price agreements was the Danish export conditions gradually improved. There were a number of grain laws whose main aim was to provide support to grain 7 Nissen, Nissen, 2004a, p Statistisk Aarbog

4 producers. This support was mainly paid by grain consumers that is the grain purchasing farmers and the Danish consumers of bread and granule while the system almost was self-financing so the government subsidies for grain producers was modest. 10 Figure 1: Yield in percent, all farms 1927/ / Percent Source: Statistisk Aarbog In the second half of the 1930s the agricultural crisis definitely was over. In particularly the smallest farms with relatively high livestock production made good profits. This can also be seen in relation to agricultural investments. Latter half of the decade is characterized by the fact that electricity was installed at most farms, which was used to illumination of stables, the purchase of electric grinders, threshers and milking machines. In the field tractors began to turn up on the larger farms, and improved tools and machines were purchased by the farmers often in cooperation. There was also invested in production buildings and the production land was extended and improved through drainage, marling etc. Altogether, some mechanization took off, which was interrupted by the war and the German occupation of Denmark. 11 When the war broke out in September 1939 the crisis turned back in a new and strengthened version. Denmark and other neutral countries in Europe had difficulties continuing trade with the belligerent parties. Although in early October 1939 the Danish authorities entered into a unique 10 Just, 1992, p and Nissen, 2004a, p Det landøkonomiske Driftsbureau, 1968, p

5 tripartite trade agreement with the British and German authorities the so-called Maltese Cross Agreement which ensured that Denmark could continue trade with both sides, there were still major problems for the agricultural exports. It was in particularly the British transition to war economy, which among other things included the devaluation and food rationing, had very negative consequences for Danish exports. Prices fell by around 20% until April 1940, and in the weeks leading up to the occupation the British authorities claimed a fall in export volumes of around 40%. When German occupied Denmark the agricultural economy was very bad, although the Danish government during the spring of 1940 subsidized the farmers heavily. 12 Agricultural economy during the German occupation When Denmark was occupied on 9 April 1940 it caused severe uncertainty for the country as a whole and for agriculture in particular. The crucial exports to the Britain of butter and pork were cut off, and imports of feed and fertilizers were stopped. Already at a meeting on 10 April officials from the Danish Foreign Ministry and the agricultural organizations expressed that they did not expect difficulties in exporting the food to Germany. In the weeks leading up to the occupation various German authorities had indicated that they were keen on getting supplied with more food from Denmark. The uncertainty was therefore whether Denmark could be supplied with feed from Germany or German occupied territories. 13 Soon it was clear that this was not possible. It is important to note that the German occupation authorities did not have a master plan for the implementation of the occupation of Denmark. The policy was more or less ad hoc solutions to specific problems that had to be solved. But the German occupation policy was determined by the German promises made 9 April respecting Danish sovereignty and Danish neutrality, which resulted in the so-called peace occupation. This fiction had the very tangible consequense that it was the same German authorities, who had the deciding influence in relation to Denmark during the occupation, as it had been in the 1930s. The German envoy in Denmark, Cecil von Renthe-Fink and the Auswärtiges Amt continued to have Denmark as its area of responsibility, and Alex Walter from ministry of nutrition and agriculture continued to be chairman of the German committee, which negotiated trade agreements and trade conditions with the Danish authorities. 14 This was to the benefit for Danish agriculture. There was considerable agreement between the agricultural leaders and the German negotiators on the objectives of agricultural production just as 12 Nissen, Nissen, 2004a, p Nissen, 2004a, p

6 there was consensus on the means that should be implemented. At a meeting on 15 May 1940 in the German ministry of nutrition and agriculture, permanent secretary Herbert Backe outlined the reorganization of the Danish agricultural production. 15 The main problem was that animal production had to be reduced, because it was impossible getting imported feed. The objective was to achieve a sharp cut in the chicken and pig populations, while dairy herds would be kept intact. Targets for future animal populations corresponded entirely to the calculations made by experts affiliated to the Agricultural Council of Denmark. These calculations had been distributed to the German authorities two weeks before the meeting. The clear message at the meeting in the ministry of nutrition and agriculture was that the production shift would be implemented through a differential pricing policy. The price of butter should increase, while the price of beef was kept unchanged. The price of pork was also kept constant, while the price of eggs would be reduced and the price of chicken meat increased. In the following 18 months the appropriate price policy was implemented. Until 1 January 1941 increased the export price of butter about 100%, while the Danish consumer prices rose by approximately 30%. The export price of pork increased approximately 33% until November 1941, while the Danish consumer prices rose by 40% during the same period. Finally, there was a modest overall export price increase on beef, but there were conducted several short-term price increases when they wanted to get farmers to slaughter cattle. In return, the Danish consumer prices on beef rose about 100% until January One consequence of the Nazi price policy was that from the summer of 1941, Danish export prices on food almost corresponded to the German domestic prices. In this way, the Danish food production actually was a part of the total German food market. 16 This Nazi price policy with differentiated food prices at a considerably higher level had a significant positive impact on farm incomes during the occupation. The price increases slid relatively unimpeded through because it was representatives from the Danish agricultural organizations, who by the Danish government was authorized to negotiate export prices with the German authorities. When price increases stopped during 1941 it was mainly because the Germans were against further price increases; partly because export prices at that time largely corresponded to those in Germany, and partly because the occupation power wanted to prevent increasing inflation in Denmark. 17 By contrast, there was considerable political controversy in the Danish 15 Nissen, 2004a, p Further readings about Herbert Backe: Gerlach, 1998, p and Nissen, 2004a, p Nissen, 2004a, p and Nissen, 2004b. 17 Nissen, 2004a, p

7 government and parliament on how grain prices should be. And there was a sharp debate about how much grain was needed to meet the Danish populations consumption of bread, grains etc., and how much grain the large grain producers compulsively had to deliver to the small farms with relatively large animal production. The fixed prices for cereals increased about 50% according to the Cereals Act in July Despite this throughout the occupation years the statutory grain prices were well below the feed value of the grain. This does not change the fact that even the grain-selling farmers had a noticeable profit increase during the occupation. 18 Figure 2: Index over the produce of butter, pork and beef , an average = 100. Butter Pork Beef Source: Nissen, 2004a, p Due to the lack of import of feed, livestock production decreased sharply, and it is noteworthy that the production of butter and pork decreased significantly in the period In 1942, butter production has fallen by around 40% compared to the average production in This was mainly due to shortage of protein feed, and in winter and butter production was only around half of the normal production in the years before the war. In the following two years of occupation, the butter production increased and in 1943 and 1944 it was about 70 and 80% respectively of the pre-war production. This was linked to the fact that the number of dairy cows decreased only modestly, so when the total Danish harvests in the period were above average in the 1930s, livestock production went up. 18 Nissen, 2004a, p

8 A similar but even more pronounced image was evident to pork production. In 1942 it had decreased to little more than one third of production in the years before the war, and in 1943 and 1944, production was approximately 60% and 70% of the pre-war production. 19 In contrast, beef production decreased only around 10% for all five years of occupation. The overall picture is, that the livestock production declined significant during the occupation, but less than feared in the summer of The reason was that the harvest of grain and feed in four out of five years of occupation were above average in the 1930s. Only the harvest in 1941 was poor. 21 Yet during the occupation agriculture profited significantly more than in years before and after, despite of the production decline. Thus, profit growth can be explained by the fact that producer prices on food increased more than the production drop, because the running costs generally and labor costs in particularly rose during the occupation. Earnings and costs during the occupation and in the post-war years The calculations in this chapter are made on the basis of Det landøkonomiske Driftsbureaus (The Rural Economic Bureau) annual publications. The bureau had a semi-official status, which is illustrated by the fact that the Statistical Department used the bureau s data in its records. Each year, the accounts from different farmers were collected and analyzed. They were selected as they were representative nationwide in relation to location, size, production etc. Calculations from the bureau were without discussion used as facts about agro-economic conditions of the contemporary actors from the agricultural organizations, the ministry of agriculture and the foreign ministry, the occupying power and others. In this context there is no reason to doubt the credibility of the data that was released by Det landøkonomiske Driftsbureau. Figure 3 shows that all farms regardless of size increased the net earnings considerable in the financial year 1940/41 22 compared to the previous year. The reason for this was basically the same for all farms: 1) markedly increased gross earnings per hectare, with a clear tendency towards increasing growth rates the larger the farms were. Gross revenues per hectare 1939/ /41 increased some 8 % at the smallest farms with less than 10 hectare land; approximately 25% on farms between 30 and 50 hectares and just over 30% on the largest farms with more than 100 hectares land. 2) Gross revenue from crop production mainly the grain production rose much 19 Nissen, 2004a, p Nissen, 2004a, Nissen, 2004a, p The financial year runs from 1 July to 30 June. 8

9 more than the gross revenue from livestock production. It was to the advantage of farms with relatively large grain sales, while it was a disadvantage for small farms, which had to purchase feed. 23 3) Operating costs increased very modestly as a result of declining cost of sales and a modest increase in labor costs. Figure 3: Index over the net earnings at unencumbered farms 1939/ /49, 1935/36 = u. 10 ha ha o. 100 ha / / / / / / / / / / /36 = 100 Source: Det landøkonomiske Driftsbureau (1939/ /51) Behind this overall development 1939/ /41 some important points are hidden. The mediumsized farms between 20 and 100 hectares had a greater increase in net earnings than farms which were either larger or smaller. 24 It was due to that medium-sized farms were better able to maintain revenues from the production of both pork and dairy products. As sales of animal products accounted for 65-85% of medium farms turnover, the increasing prices of animal products had a significant impact on these farms total earnings. The figure shows that the medium-sized farms had an advantage compared to both the smallest and largest farms, because the animal population corresponded better to their own feed production. This made it possible to maintain the animal 23 In the period 1939/ /45 the revenues from crop sales were constantly 40-50% of the total revenue at farms with more than 100 hectare land, while it only was 5-10% of the total revenue at small farms with less than 10 hectare. 24 The net revenue at farms between 20 and 30 hectare increased some 100 %; at farms between 30 and 50 hectare some 125 % and at farms between 50 and 100 hectare some 120 %. 9

10 production better than at the small farms, and they escaped from selling much grain at prices below the feed value, which was the case at the biggest farms. Det landøkonomiske Driftsbureau argues further that the medium-sized farms maintained a significantly higher milk yield per cow than at the smallest farms, because the dependence on buying protein feed was smaller. 25 During the occupation the turnover from the production of pork and milk products generally represented 70-75% of the sales of animal products and 50-60% of the total turnover. But a significant change happened. While all farms regardless of size in the period 1941/ /44 had slightly decreasing turnover on milk products, the turnover in the same period from the production of pork increased very significantly by % depending on farm size. This increased turnover from the production of pork was primarily due to increased production, but at the same time export and producer prices of pork increased in October 1942 and March Therefore, the mediumsized farms, which in 1941/ /44 increased the turnover on pork the most, also increased the net earnings more than the smaller and bigger farms in this period. This again illustrates that the medium-sized farms gained more than other Danish farms during the occupation. In the financial year 1944/45 agriculture s net earnings fell sharply on all farms regardless of size, and the decline continued during the financial year 1945/46. The overall decrease was bigger on the smallest and the largest farms, while the medium-sized farms managed relatively well in the first year. The net earnings at farms with more than 10 hectares decreased some 50-60% in this two years, with a slight tendency so that the bigger farms managed better than farms between 10 and 30 hectares. In comparison, net earnings on the smallest farms decreased very sharply and in 1945/46 it was just over 5% of the level from 1943/44. The operating costs were steadily increasing during the occupation and in the first postwar years. This made agriculture generally more sensitive to market fluctuations. The operating costs were only partially variable, because the strongest growing and largest type of costs the labor costs were more or less fixed. The number of agricultural workers, managers, or the family itself was not changed, if turnover decreased a single year. This means that in periods in which the turnover stagnated or fell, the net earnings declined more because the operating costs increased. This was the case after the harvest in 1941, when the rising prices ensured fairly constant turnover despite of decreasing production, but since the operating costs continued rising the net earnings decreased. This was especially visible on small and medium-sized farms. The substantial increase in 25 Det landøkonomiske Driftsbureau (1940/41), p Nissen, 2004a,

11 net earnings in the period after the financial year 1941/42 therefore was due to that the turnover increased significantly more than the operating costs. On the other hand, the sharp fall in net earnings in the financial year 1944/45 mainly was due to rising operating costs. Figure 4: Index over the turnover and operation costs at all farms 1939/ /51, 1935/36 = 100 Earnings Operating costs /36 = Source: Det landøkonomiske Driftsbureau, As shown in figure 3 and 4 net earnings decreased in the first postwar years. Although production increased, as feed and fertilizers were imported again, the prices of butter and pork decreased strongly. The reason was that trade agreements with Britain in resulted in significantly lower export prices compared to the export prices during the occupation. 27 At the same time the operating costs continued to go up, so the net earnings fell sharply - especially at the smallest farms. Savings and investments Roughly speaking one can devide savings into two; either by price increases on assets such as land and buildings, or that the revenues are bigger than costs and other expenditures. Value increases on assets is basically only important when the property is sold. But obviously such increase also improves the financial status of the farmers and opens for better opportunities to borrow money for investments. 27 Nissen, 2004a, p

12 During the occupation the government and agricultural leaders were very careful to avoid sharp price increases on agricultural properties. There was a perception that the strong profits combined with the ability to produce food for one s own family would push farm prices up. The government tried to prevent this scenario, because it was perceived as unjust wealth increases, and because it could cause inflation. Farming leaders wanted to prevent real estate speculators bought up farm to slaughter them by selling land, buildings and operating assets. Therefore, in early August 1940 an act passed parliament limiting the scope of taking out mortgages in agricultural properties. The law worked effectively, and there were not traded significantly more farms during the occupation than in years before and after the war. 28 Therefore, there was not carried out further restrictions on the owners rights during the occupation. Figure 5: Index over the value of farm assets compared to the inflation , 1939 = Fixed assets Current assets Market value, all assets Inflation 'Pristallet' = Source: Det landøkonomiske Driftsbureau (1939/ /51) and Statistisk Aarbog ( ). 28 Nissen, 2004a, p

13 There is indeed nothing to suggest that the increase in value of agricultural property was particularly strong during the occupation. At least not as strong as one might have expected. Almost the entire increase in value occurred in the operating assets, which includes furniture, machinery and livestock. It was particularly the value of cattle herds, which rose sharply in the last years of occupation and in the postwar years. Conversely, there was a very moderate increase in the value of fixed assets, which means production land and production buildings. If the value increases is related to the size of the farms there was a very small difference between the groups. There was a slight tendency that the market value of the largest farms increased slightly more than the value of the smaller farms, but it was very marginal. The main reason for this trend was that the value of working capital increased relatively more on larger than smaller farms because the herds were maintained relatively better there. Thus, the price differentials per hectares between the different sized farms were almost unchanged throughout the period. From 1939 to 1950 represented the value of all assets per hectare at farms between 30 and 50 hectares only % of the value of the smallest farms, while on the largest farms reached 50-55% of the value per hectare at farms under 10 hectares. Thus, if earnings are considered in relation to property value, the smallest farms had relatively lower profitability than larger farms because the market value per hectare was higher. At the same time improvements were made and money invested in various assets during the occupation and in the postwar years. The extent of wear was undoubtedly greater than the improvements carried out on buildings, equipment and machines during the occupation, like the soil after the war was in need for fertilizers. Therefore it is important to evaluate to which extent the relatively high earnings during the occupation was used for savings and spent on investments after the war. By looking at the cash flow per hectare one can survey how the net earnings during the occupation were used after the liberation. The cash effect is an estimation of the gross cash income minus running cash expenses, household expenses and private consumption, personal taxes and major new acquisitions. When reading Figure 6, it is obviously important to be aware that farms with more than 100 hectares on average were more than 20 times larger than the farms with less than 10 hectares, so there was a very big difference between the total cash flow changes. It is also important to point out that there is a difference between the cash flow and the income statement, although there is obviously a direct correlation. In periods when the herds were reduced there was a positive impact on the farmers cash flow, while the opposite was the case when the herds were increased. Similarly, the expenses to new acquisitions are included in the cash flow 13

14 estimation, while it is absent in the income statement. In return, farmers received money for their supplies soon after delivery, so there was little funds tied up in outstanding claims. Figure 6: The average cash flow per hectare at different sized farms, 1939/ / u. 10 ha ha o. 100 ha / / / /43 Kroner per hectare 1943/ / / / / / / / Source: Det landøkonomiske Driftsbureau (1939/ /51). In relation to the cash flow it can be noted that in July 1946 an extraordinary taxation was implemented, which was designed to absorb black money that had been sent into circulation during the occupation. Agriculture was covered by the Act, and taxes were imposed on property increase in value after 1 January Based on the financial statements made by Det landøkonomiske Driftsbureau it seems as the tax had very little impact on agriculture in general, and it was not commented in any of the bureaus publications. Indeed, from the financial statements it cannot be 29 Wendt, 1966, p and Giltner,

15 demonstrated that farmers taxes rose as a result of the Act. Thus, it appears like the increased taxes did not affect farmers cash flow notably. Figure 6 shows that all farms regardless of size had a cash surplus during the occupation, if one disregards the financial year 1942/43, where the smallest farm had cash flow deficit. Fluctuations during the occupation is primarily associated with changes in the Cash Earnings, as the cash outflow for all farms was steadily rising, but with a clear tendency that the costs per hectare increased more the larger the farms were. 30 This caused large fluctuations in the total cash flow when the turnover in 1941/42 and 1942/43 increased modestly, just as the significant increase in the turnover in 1943/44 and 1944/45 led to large cash surpluses. The figure also shows that the medium-sized farms had larger cash surplus per hectare compared to the largest and the smallest farms, and that the fluctuations were significantly smaller than at the smallest farms. One major reason was that the cash expenses to feed were relatively small at the medium-sized farms, because they were more self-sufficient in feed. Looking at the investments made in new acquisitions during the occupation and shortly after the liberation, it can be estimated in several ways. Here it is chosen to look at the expenses of new acquisitions in relation to the total cash expenses, and it shows that all farms had significant fluctuations during the occupation and relatively sharp increases in the post-war years. It is important to point out that the "new acquisitions" does not include investments in larger herds, because funds tied up in livestock increases implicitly appears as relatively lower cash earnings and the relatively higher expenses. At farms with less than 10 hectares the farmers made increasing investments during the occupation, especially in 1941/42. It was particularly investments in building improvements and new constructions. A similar trend was true for larger farms between 10 and 50 hectares and Det Landøkonomiske Driftsbureau noted that government subsidies for building improvements apparently prompted the investments, although the subsidies were much less than the amount used. 31 This indicates that farmers chose to spend a large portion of their relatively high earnings from the financial year 1940/41 on stable building improvements at a time when it was still possible to provide manpower and building materials. After the liberation, investments on the smallest farms increased considerably, both in absolute and relative terms, and they invested in both buildings and 30 The expenditures at farms with more than 100 hectare land and at farms between 30 and 50 hectares on average increased some 60 % in the period 1939/ /45, while the expenditures on small farms only increased some 33 % in the same period. 31 Det landøkonomiske Driftsbureau (1941/42), p

16 equipment. The expenses on new acquisitions per hectare rose from approximately 50 Kroner in 1944/45 to about 180 Kroner in 1950/51, representing an increase from approximately 3 ½% to almost 7% of the total cash expenses in the period. Figure 7: Expenses to considerable new purchases in percent of the total expenses at different sized farms, 1939/ /51 12 u. 10 ha ha o. 100 ha 10 8 Procent Det landøkonomiske Driftsbureau (1939/ /51). A somewhat similar but even more significant development took place at the medium-sized farms between 30 and 50 hectares. During the occupation fluctuated investments in new acquisitions substantially, with markedly increased investments in buildings in 1941/42. After the liberation the expenditures on new acquisitions increased more steeply than was the case for the smallest farms. In 1944/45 almost 40 Kroner per hectare was spend of new acquisitions, which in 1950/51 was approximately 190 Kroner. This represents an increase from nearly 4 % to about 9 ½% of the total cash expenditures in the same period. Compared with the smallest farms, the medium-sized farms spend a much larger proportion of the investments on equipment and machinery than on building improvements. In total approximately seven times more in 1959/51 was invested in equipment and machinery than in 1943/44, while only invested almost three times more in buildings. The trend 16

17 shows a clear priority in line of increased mechanization on the medium-sized farms. Of course, one must take into account that modest investments in machinery and equipment was made during the occupation because it was very difficult to get these assets. But it does not change the fact that farmers at the medium-sized farms were focused on machinery and equipment investments in the early postwar. This fact was noted repeatedly in the publications of Det landøkonomiske Driftsbureau. In 1946/47 it was first pointed out that at farms with more than 20 hectare land... in no small degree... the number of machines was extended. In 1948/49, it was followed up by the statement that... at the larger farms very substantial amounts have been spent on a continuing mechanization.... Finally, in 1949/50 it was stated that... there has been a real improvement of the operating equipment and by this a rationalization of production. Those statements included both the medium-sized and large farms, while the smaller farms with less than 20 hectares as pointed out made relatively small investments in machinery and equipment. 32 Investments at the largest farms with more than 100 hectares land also increased significantly in the early postwar. In relative terms the increase was indeed almost as large as for the small-and medium-sized farms, but in absolute terms and seen in relation to the total cash expenses investments per hectare was much lower. Thus, investments increased to only approximately 70 Kroner per hectare in 1950/51, which was less than half the level in small- and medium-sized farms. On the largest farms it is particularly noteworthy that investment in machinery and equipment was less than at the medium-sized farms. Everything indicates, therefore, that it was the medium-sized farms between 20 and 50 hectares that made the relatively largest investments in mechanization in the post-war years. At the small farms half of the investments were made in building improvements, while at the major farms relatively less was invested compared to the small and medium-sized farms. One can also look at trends in savings and equity on the basis of book values. This means that the value increases on various assets, which are shown in Figure 5 are not included in this calculations. It is only the earnings from ongoing operations that affected the savings and equity. The book equity 33 per hectare was steadily increasing during the occupation on all farms, but there was a clear tendency that the increase was bigger on the smallest farms and at least at the largest farms. The progress may seem strange when Figure 2 shows that the smallest farms had the smallest relative earnings growth during the occupation. The accounting technical explanation is that the 32 Det landøkonomiske Driftsbureau (1946/47), 2. del, p. 80; (1948/49), 2. del, p. 79 and (1949/50), 2. del, p. 79. Somthing similar is noted in (1950/51), 2. del, p Book equity is the difference between the value of all assets and all debts. 17

18 value of the assets of the smallest farms increased by approximately 22% from 1940 to 1945, while total debts were almost constant. The reason behind the value increase on the asset is that the main item farm capital represented 85-90% of the total assets increased by approximately 15%, while cash savings more than doubled in the period. This suggests that the construction investments, which took place during the occupation, had significance for the value of the smallest farms, and that only modest operational depreciation was made. Figure 8: Index over the book value of the equity per hectare at different sized farms = u. 10 ha ha o. 100 ha = Source: Det landøkonomiske Driftsbureau (1939/ /51). The explanation why the equity on the medium-sized farms increased relatively less than at the smallest farms is that the value of assets increased relatively less than on small farms. The farm capital, which represented 80-90% of the total assets rose from 1940 to 1945 only just under 10%, while cash savings more than doubled in the period. At the same time, the total debts constantly declined, because the item "other loans" decreased significantly, while mortgage debt increased slightly. In the period decreased the equity per hectare, since the value of assets increased less than the mortgage debt and other loans. 18

19 The increased equity in the largest farms emerged in a substantially different way than at the small- and medium-sized farms. The value of assets decreased during the occupation, but when the debt decreased even more, the equity per hectare rose. The value of the farm capital fell by almost 10%, while mortgage debt decreased by approximately 20% , after which it remained relatively constant until Thus, apparently there was made relatively little investment at the largest farms during the occupation. The decline in equity per hectare in the period was linked to the value of assets was roughly constant, while mortgage debt increased significantly by almost 10%. Investments at the largest farms in the first post-war did not lead to increasing equity, which may possibly be connected with relatively large operational depreciation. Figure 9: The cash savings per hectare at different sized farms u. 10 ha ha o. 100 ha Kroner per hectare Source: Det landøkonomiske Driftsbureau (1939/ ). By looking at the cash savings 34 you can get an idea of how farmers used the relatively high earnings during the occupation. Both small- and medium-sized farms had a very strong increase in cash savings over the period This was done partly by reducing the short-term loans, which in 1945 almost was eliminated, and partly by deposit the bulk of net earnings in the bank. As 34 Cash savings are calculated as the asset items bank balance, receivables and cash balance, minus the debt items other loans and trade debts. 19

20 shown in Figure 10, most of the largest farms chose to reduce mortgage debts, which had contributed to that the cash savings increased relatively little. In comparison with Figure 7 over the expenses on new acquisitions it is shown that the decline in small- and medium-sized farm cash savings in the post-war years happened simultaneously with the increasing investments at these farms in the years after the war. The main reason for the decline in the cash savings were, however, that net earnings fell sharply after the financial year 1943/44 and subsequent years see Figure 2. It led, as shown in Figure 6 to a very marked decline in cash in the financial year 1944/45, which only partly was linked to increasing investments. It may be noted that particularly small- and medium-sized farms during the occupation increased the cash savings substantially. Therefore, they were financially strengthened to make new investments and reinvestments in the early postwar years. The strengthened financial situation is also valid for the largest farms, although the cash savings did not increase as much as at the smaller farms. But the mortgage debts were in exchange reduced markedly during the occupation. Figure 10: Index over the mortgage debts per hectare at different sized farms , 1940= u. 10 ha ha o. 100 ha 1940 = Source: Det landøkonomiske Driftsbureau (1939/ /51). The medium-sized and large farms increased mortgage debts in the years after 1945, and a large proportion of the increased indebtedness was undoubtedly used for new acquisitions and reinvestments. This increased indebtedness after the war must to some extent be seen in 20

21 continuation of that the agriculture during the occupation increased the cash savings and / or reduced debts, which made the farmers financially stronger when Denmark was liberated. Summary Overall it can be stated that Danish agriculture as a whole increased revenues significantly during the German occupation compared to the previous years. Net earnings per hectare increased at all farms regardless of size, but there was a slight tendency that farms with 30 hectares of land or more had a greater earnings growth than the smallest farms. The major reason for this was that the feed consumption on the bigger farms to a large degree was covered by the farm s own production of feed, so the animal production could be maintained at a relatively high level. The smallest farms were forced to buy feed, and because it was difficult to obtain feed and only at very high prices, production and turnover decreased rather heavily on these farms. At the same time, a significant proportion of the turnover on the larger farms related to the sales of various plant products. High prices for cereals, sugar and other crops led to an increase in the turnover at the largest farms. The running costs increased continuously during the occupation and in the post-war years. This was due to both increasing labor costs and to increasing cost of sales, especially on the smallest farms. It is not possible to determine how large a part of agriculture s increased earnings was due to rising sales prices and how much depended on the volume of production. However, it is clear that both factors had a decisive influence on agricultural profitability. During the first year of occupation net earnings rose sharply, mainly attributable to increased sales prices and moderate price increases on expenditures. After the poor harvest in 1941 decreased the turnover, but it was far less than the production decline, and the level of net earnings in financial year 1941/42 was still above the level in the years before the occupation. On the other hand, there is no doubt that relatively large harvest in the years ensured a relatively large animal production, which ensured good profits to the farmers. The commercial value per hectare increased during the occupation and it was virtually identical for all farms regardless of size, but the increase in value corresponded roughly to the general price development according to the price index. The increase in value was almost entirely due to rising value of the herds and to a lesser degree of operating equipment and machinery, while the commercial value of land and buildings increased relatively modestly. 21

22 The book value of equity per hectare increased significantly more on small farms than on the larger ones. This was due to increasing value of assets in small- and medium-sized farms, while the debts decreased. The book value of assets per hectare at the largest farms declined somewhat during the occupation, but when the debts decreased even more equity also rose at these farms. Similarly, the cash savings increased substantially during the occupation. At the small- and medium-sized farms this was done partly by reducing short-term loans and partly by making large bank deposits. On the largest farms the cash savings were relatively small, but mortgage debts were reduced significantly. Thus, all farms regardless of size came financially stronger from the war. In the early postwar years expenses to new acquisitions and improvements increased rapidly. Particularly the small- and-medium-sized farms increased the level of investment significantly in the years after the war. At farms with hectares land very large investments in machinery and equipment were made from the 1946/47 and the subsequent years. In this way, the relatively high earnings and savings during the occupation influenced the investments and the mechanization in the post-war years. 22