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I've recently started playing the original Harvest Moon for the SNES. The farm is surrounded by (movable) fence posts, and it can be added to or rearranged. I can't tell what it does for me, though.

So what's the purpose of the fence? Does it have to be a continuous enclosed space? Is it safe to grow crops outside the fence boundary? Do I need to repair damaged fenceposts?

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According to this FAQ, fences simply look nice. If you like how a farm looks with a fence, keep 'em around and maintain them. If you don't care, don't use 'em!

I always used them to separate parts of my farm for organizational purposes.

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"A fence does... nothing!" – Josh K Jul 21 '10 at 16:14
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I haven't played this game in years, but I recall after bad weather fenceposts would get damaged, and crops inside a broken fence could get messed up. Wasn't there even dialogue in the game to this effect? (Did I waste all those hours COMPLETELY ENCLOSING THE FARM?) – Shinrai Apr 27 '11 at 21:11
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@MagRoader: Actually, that very same FAQ verifies a functional use for the fences which matches my in-game experience. See my answer for details. – Shaun Oct 24 '11 at 19:11
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From a GameFAQ's article:

When it rains or snows, there is a chance that some pieces of the fence will break. You should always thoroughly inspect the day after a storm. Broken pieces can be removed with the hammer and then replaced. If you have any broken pieces, there is a chance wild dogs will come at night. The dogs are characterized by high pitched barking after you go to bed, and they will eat any chickens you leave outside (you will find chicken feathers the next day).
The more broken pieces, the greater the chances that dogs will come. Once you exceed about 15 or so broken pieces, the dogs will come every night until the fence is fixed.

I can verify that I have experienced this in-game.

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I'd like to add, small rocks can't substitute for fences, I've tried those and it didn't keep the dogs out. Broken fences are annoying to mend, however, so its best to just keep chickens inside. – spartacus Oct 24 '11 at 19:23

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