AGRIBUSINESS AND VALUE CHAIN

MANAGEMENT

FARM MANAGEMENT
Outline……..
1. Chapter one: Concepts of Farm Management and Decision
Making
2. chapter two: Production Resources and Management
3. Chapter three:. Analysis of Farm Records and Accounts
4. Chapter four: Production Functions and Relations
5. Chapter five: Farm Planning and Budgeting
6. Chapter six: Risk and Uncertainty in Agriculture
7. Chapter seven: Role of gender in Farm Business and Its
Management
8. Chapter eight: Natural Resource and Environmental
Economics

___________________________________________________________________________
Farm management March, 2019
 Introduction and Preliminary Concepts

Agriculture is the art and science of cultivating crops,

raising livestock, provision of raw materials for industries
and agricultural products for man’s use.
Branches of agriculture
 Evolution of Agriculture

Evolution of agriculture involves the

gradual change of agriculture from
ancient era to the civilized
condition.
Agriculture is directly or
indirectly contributed to many
sector of our basic needs or
livelihood. Some of these are:
 Food
 Cloth
 Houses
 Industry
 Fuel
 Earning source
 Foreign currency
 International relation
 Revenue income
 Natural beauty
 Environmental balance

 Significances of Agriculture
  Management involves rational decision-making and also
the planning, organization, execution and control of
human and material resources to achieve the
entrepreneurial objectives.

 Management is the process of designing and maintaining an

environment in which individuals, working together in groups, to
efficiently accomplish selected aims.
 The three central thoughts emerging from the above
description:
o Objectives
o Management tasks
o Decision-making

Slide 7
 Stock and flow inputs: Stock inputs are resources which
are consumed during the production period, like seeds,
fertilizers, pesticides and the like. They can be stored, if
not used currently, for future use

 Economic unit: It is the sum of resources for which costs,

returns and net income can be worked out. As such, a farm is
an economic unit.

Slide 8
 CHAPTER ONE
CONCEPTS OF FARM MANAGEMENT AND DECISION MAKING

 Definition of Farm management

 The importance of Farm management

 Scope of Farm Management and its relation with

other field of study

 Basic Farm Management decisions

 Attributes and Functions of Farm Manager

 Farm Management Decision Making Problem in

Ethiopian Case

Slide 9
 Learning Objective

 By the end of this unit, you will be able to:

 Understand the concept of farm management and
agricultural economics.
 Explain the importance of farm management.
 Explain the scope of farm management.
 Understand the dynamic nature of Farm management decisions.
 Identify characteristics and functions of a good farm manager.

___________________________________________________________________________
farm management Slide 10
Jan, 2019
 Pre-test

 What is farm management?

 What decisions are made in farm

business?

 What distinguishes farming

sector from other industries?

 Why are some farmers more

successful than others?

Slide 11
 Definitions and concepts

 Farm management can be defined as a science which

deals with judicious decisions on the use of scarce farm
resources, having alternative uses to obtain the
maximum profit and family satisfaction on a continuous
basis from the farm as a whole and under sound
farming programs.

Slide 12
 Definitions and concepts
 It is difficult to formulate objectives for a farming
enterprise because conditions are uncertain and
unpredictable.
 It takes too much time to set proper objectives for a
farming enterprise.
So, Farm Management tries to answer the basic economic
questions related to a given farm conditions.

The objective of the farming enterprise is the pursuit of

maximum profit with the proviso that the economic resource
resources (land, capital, labor, etc.) are left in such a condition
that they can still produce a high yield, and provided that the
pursuit of profit is not at the expense of a happy family life.
Slide 13
 Farm management may in short be called a science of
decision-making or science of choice in farm business.

 Farm management seeks to help the farmer in deciding

problems like:
 What to produce? (e.g. selection of profitable
enterprises)
 How much to produce? (e.g. resource use level)
 How to Produce? (e.g. selection of least cost production
method)
 When to buy and when to sell, and in organization and
managerial problems relating to these decisions?
Slide 14
Economics is the study of the principles that determine the
allocation of scarce resources among competing ends, for
the maximization of those chosen ends over time.

Agricultural Economics is the application of economic

techniques and principles to agricultural industries (solve
agricultural problems).

Farm Management – a branch of Agricultural Economics –

deals with the economics of individual farm units.

Farm management is concerned with the organization of

factors of production for the production of farm products.

Slide 15
It is an applied science because it deals with the
ascertainments and solutions of farm management problems
(technology).

Slide 16 of 27
Distinguishing characteristics of farm management

1. Practical science:
2. Profitability oriented
3. Integrating science or
interdisciplinary science:

4. Broader field:
5. Micro-approach:

6. Farm unit as a whole:

Slide 17 of 27
Distinguishing characteristics of farm management

7. Farm is a firm

8. Risk management

Slide 18 of 27
 Objectives and Scope of Farm Management

 The central theory of farm management is

the theory of optimal decision-making in the
organization and operation of a farm for
profit maximization.

9/8/2020
 Broadly speaking the objectives of farm management are:

 To study the existing economic resources and the

production pattern on the farm.

 To perform the strategic task of finding out the deviation

of the resources from their optimum utilization.

 To explain the means and the procedure of moving from the

existing combination of resources to their optimum use for
profit maximization.
 Broadly speaking the objectives of farm management are:

 To outline conditions that would simultaneously obtain its

objectives of profit maximization and maximization of
family satisfaction through optimum use of resources and
judicious income distribution.

 To workout costs and returns on individual enterprises and

on the farm as a whole.
 Scope of Farm Management
Farm Management is generally considered to be
MICROECONOMIC in its scope.
The primary concern of the farm management is the farm as a
unit.
It deals with the allocation of resources at the level of an
individual farm.

Farm Management seeks to help the farmer in deciding

the problems like what to produce, buy or sell, how to
produce, and how much to produce etc.
It covers all aspects of farming which have bearing on
the economic efficiency of farm.
___________________________________________________________________________
farm Management
 Scope of Farm Management
 Farm Management is broader than any of the other areas of
Agricultural Economics since knowledge of production economics,
marketing, financing and government policy is useful in order to
solve a farm management problem.

 Besides, the farm manager may require information from other

disciplines like Sociology, Psychology, Mathematics and Law, when
confronted with a problem .

As a result, it’s called a “Jack of all trades” discipline involving a

knowledge of the ARTS AND SCIENCES and harmonizing them
into a useful amalgam for the purpose of solving a particular
problem.
Farm Management Problems in Developing Countries
Small size of farm business:

Farm as a household

Inadequate capital:
Under-employment of factors of
production:
Slow adoption of innovations:

Inadequacy of input supplies:

Managerial skill:

Communication and markets:

Characteristics of Farming as a Business
The major differences between farming and other industries are:

Primary forces of production:

Size of the production unit

Heavy dependence upon climatic
factors:

Frequency and speed of

decisions:

Changes in prices:

Fixed and variable costs:

Inelastic demand for farm products:

 Farm Decision Making Process
 Decision Making is the conscious selection of a course of action
from available alternatives to produce a desired result.
 Notice several aspects of this definition.
 conscious choice
 two or more available alternatives
 course of action selected leads to a desired result.
 farm management is concerned with the allocation of limited
resources among a number of alternative uses which requires a
manager to make decisions.
 Decision Making process
Following steps ensure that the decision is made in a logical and
organized manner.

Objective planned

6. Evaluation

5. Implementing
decision
4. Making decision:
3. Identifying
2. Collecting relevant data and analyzing
and information: alternatives:
1. Identify and define 1

the problem
 Classifying Decision
 Decisions can be either organizational or operational in
nature.

 Organizational decisions are those decisions made in the

general areas of developing plans for the business,
acquiring the necessary resources and implementing the
overall plan.

Example: decisions regarding selection of the best size of

the farm, what scale should be the farm operation, decisions
regarding (how much land to purchase or lease; how much
capital to borrow; the level of mechanization; construction
of buildings and irrigation facilities, etc.).
 Classifying Decision
 Operational decisions are made more frequently than the
organizational decisions and related to the many details
made on a daily, weekly or monthly basis and are repeated
more often than the organizational decisions as they
follow the routines and cycles of agricultural production.

example o What to produce (selection of

enterprises)
o How much to produce (enterprise mix
and production process)
o How to produce( selection of least
cost method)
o When to produce (timing of
production)