INTRODUCTION TO FARM MANAGEMENT
In order to appreciate the principles of farm management, it is important to first of all understand what a farm is and then the concept of management.
Basically a farm. is an .economic unit (firm) where inputs are transformed into outputs through an interaction between natural and man-made factors. A combination of inputs also called productive resources or factors of production are usually employed in various proportions using the managerial acumen of the operator of the business who may be called a manager. That is the dynamics of the farm as an economic unit.
The process of organizing and coordinating personnel, materials and processes in an organization towards the achievement of the organization goals is termed management. The subject branches into various fields application according to organizational peculiarities. One of such areas of application of the concept of management is in the operation of farm business.
What is Farm Management
There are different definitions of farm management. However it is pertinent to note that Farm management is mainly concerned with the decisions which affect the objective function of the farm business. A cardinal objective function of farm management is that of profit maximization especially in the case of commercial farms.
If the farmer wants to run his farm as an economic entity, his aim should be to produce output which the total value exceeds the total value of input used. This results in profit for the farm. On the other hand, there will be . loss if the total value of the inputs is higher than the total value of the output.
The total value of the output in financial terms is called “Gross Revenue” (Total Revenue) while the total value of all inputs utilized is called the total cost of production.
Farm management can be thought of as being a decision making process, it is a continual process because of the continual changes taking place in the economy, and in an individual agri-business. The decisions are concerned with allocating the limited resources of land, labour and capital among alternative and usually, competing uses. This allocation process forces the farm manager to identify goals and objectives to guide and direct decision making in the farm.
Here we shall adopt the definition, that: “Farm management is a decision-making process in which the available but limited production resources are allocated to selected production alternatives, so as to operate the farm business in such a way as to attain some set objectives”.
Importance of Farm Management
It is important to appreciate the fact that modern business management principles can assist the farmer or farm manager, no matter how small his farm may be and however meager his capital. This is because of the two major tasks facing today’s farm managers, which are:
(a) How best to incorporate new technologies into the farming enterprises; and
(b) How to be sufficiently flexible, mentally and financially, to adjust
the management of resources to meet changing costs and prices
and varying climatic conditions.
If proper management principles and techniques are applied by farmers it helps them to meet these and other challenges with some good level of success.
There are real advantages in utilizing ideas of farm management along with new technical advances and capital. All things being equal, there are always wide differences in net farm incomes per hectare between those farms where modern management ideas are utilized and those where they are not. Some dramatic improvements have been made on farms, which have engaged management specialists to assist in their technical and economic planning. Most farmers who have used management advice have recorded increase in profit, relative to farmers who have not done so. When the reason for the poor financial performance of a farm is analyzed, it is frequently found that: activities (e.g. crops and animal productions) are not being carried out in the best way; different activities are not well coordinated and; wrong activities are being conducted. A farm manager can indicate to a farmer the cost, in terms of loss or unrealized income of the present way of organizing and managing his farm.
This will frequently stimulate the farmer to take a keener interest in the technical aspects of how he carries out his farming activities, it may also arouse his interest in new activities, which can increase his net income.
Problems of Farm Management
The definition of farm management suggests that management is a problem-solving and decision making activity. Many farm management problems fall into one or more of three categories, each of which can be put into the form of a question as follows:
(i) How Much To Produce
Production is determined primarily by the number and levels of inputs used. A manager is faced with various problems such as how much fertilizer and irrigation water to use, seed application rates, feeding levels, labour and machinery use, and determination of rates and levels for other inputs. The input levels selected will determine the level of production and profit.
(ii) How to Produce: Many agricultural products can be produced in a number of ways. Beef can be produced with a high-grain ration or a high-roughage ration. Crops can be produced with large machinery and little labour or smaller machinery and more labour. A manager must select the appropriate combination of
inputs, which will minimize the cost of producing a give quantity of some commodity.
(iii) What to Produce; The problem involves selecting th combination of crops and livestock to be produced. Should tl~ agri-business produce only crops, only livestock or son-combination? Which crop or crop rotation? Which livestock? The management selects from among the many alternative combinations, which will maximize profit, or best meet some other goals.
Every production decision with which a farm manager is confronted relates to one or combinations of these three questions or problem types. However one may also consider a forth question of “when to produce“. This is relevant question because production and marketing of agricultural output has very much to do with time periods, which inform certain management decisions.
Essentially ail these are also general economic problems which have three characteristics viz:
- Goals or objectives to be attained.
- A limited amount of resources to use in reaching these goals and Objectives.
- A number of alternative ways to use the limited resources in attaining the goals and objectives.