1st TERM SS3 (AGRICULTURAL SCIENCE) COURSE OUTLINE

1. Basic agricultural economic principles (factors of production)

2. Principles of demand and supply
3. Functions of a farm manager
4. Agricultural finance
5. Capital market
6. Farm records and accounts
7. Marketing of agricultural produce
8. Agricultural insurance
9. Agricultural extension

1
BASIC AGRICULTURAL ECONOMIC PRINCIPLES (FACTORS OF PRODUCTION)

The basic economic principles are:

- Scarcity - Resources
- Wants - Scale of preferences
- Choices - Law of diminishing returns

2
1. Scarcity: it refers to the limited available resources used in attaining the unlimited wants. It may
also be defined as the inability of “man” to provide himself with all the things he wants. Human
wants are unlimited but the resources to meet them are scarce.
2. Wants: this refers to what human beings desire or need.
3. Choices: this is an act of selecting some needs for satisfaction out of other needs, based on the
available resources
4. Resources: this refers to means of attaining or achieving human desires. It may be material or
immaterial
5. Scale of preference: scale of preference is the list of unsatisfied wants arranged in order of their
relative importance.
6. Law of diminishing return: this law states that as more and more units of a variable factor of a
production are added to fixed factor, after a certain point, the marginal product diminishes or
declines.
FACTORS OF PRODUCTION
Factors of production can be defined as all resources or materials needed during agricultural production
process. It is also known as agents of production. Examples of factors of production are land, labour,
capital and entrepreneur.
1. Land: this can be defined as a free gift of nature which comprises all natural resources such as
forest, sea, water, timber, oil etc. The characteristics of land are:
i. It is a free gift of nature
ii. It is fixed in supply
iii. It is immobile
iv. It appreciates, it does not depreciate
2. Capital: this refers to the amount of wealth set aside to produce more wealth for the owner of
the business. The characteristics of capital are:
- The reward is interest
- It is mobile and can easily be moved from one place to another
- It is prone to depreciation
3. Labour: this is the total sum of both physical and mental efforts of human beings used in
production process. The reward is wages and salary. It possess the following features:
- It is mobile
- It is prone to depreciation
4. Entrepreneur: This refers to a person who coordinate all other factors of production e.g. land,
labour and capital. He receives profits as a compensation for services rendered or goods
produced. He bears all risks that occur. He also makes a decision that is pertinent to the
survival of the business.
PRINCIPLES OF DEMAND

Definition of demand: Demand may be defined as the amount of commodities which a consumer is
willing and able to buy at a particular time and at a particular price.
Law of Demand: The law of demand states that “the lower the price of a certain commodity, the
higher the quantity demanded of such commodity and vice versa”

FACTORS THAT AFFECT THE DEMAND FOR AGRICULTURAL GOODS AND SERVICES
There are numerous factors affecting demand of any given commodity. Some of these factors are
elucidated below:
i. Price of the commodity
ii. Price of other commodities
iii. Income of consumer
iv. Size of the population
v. Taste and fashion
vi. Government policy

Demand Schedule: This is a table showing the relationship between the price and the quantity of that
commodity demanded. This obeys the law of demand.

Price(N) Quantity demanded (kg)

100 10
80 20
60 30
40 40
20 50

Demand Curve: the curve is decided from demand schedule. The demand curve slopes downward from
left to right.

MOVEMENT ALONG THE DEMAND CURVE:

The movement along the demand curve occurs when there is a change in price. An increase in price of
commodities brought about a decrease in quantity bought while a decrease in price will lead to a
decrease in quantity demanded; here the result of change in quantity demanded of a commodity
shown by movement from one point to another on the same demand curve. It is shown below:
 Shift in the demand curve: This is another movement or shiftment in the demand curve which is
brought about by changes in the condition of demand other than price (an outward shift in demand
curve from DD0 – DD1 is an increase demand) and the move from the original position DD0 to DD2
means a decrease in demand.

Goods are shown by a movement from one point to another on the supply curve as shown above.

PRINCIPLES OF SUPPLY
Definition of supply: - this is defined as the amount of commodities which a producer is willing and able
to offer for sale at a particular price.

Law of supply: this law states that “the higher the price of a commodity, the greater the quantity
supplied and vice-versa.” This means that a normal producer will increase his supply of commodity
when there is an increase in price of the commodity and reduce the supply when the price falls. The
producers do so in order to maximize profit.

FACTORS THAT AFFECT THE SUPPLY OF AGRICULTURAL PRODUCE AND SERVICES

1. The price of the commodity
2. The price of other goods
3. Changes in the cost of production
4. Changes in climate and weather
5. Prices of factors of production
6. Technological advancement
Movement along the supply curve: This happens when there is a change in the price of the commodity.
An increase in price shows an extension in supply while a decrease in price will bring a decrease in
quantity supplied

Shift in supply curve: The shift in supply curve exists when there is a change in the condition of supply
other than price. When there is shift to the right, we have increase in supply while to the left means a
reduction in supply.

Generally, the supply curve slopes from right to left.

IMPLICATIONS OF DEMAND AND SUPPLY ON AGRICULTURAL PRODUCTION
Demand and supply have lots of implications on agricultural production. These include:
1. When the demand for an agricultural product is lower than supply, the price for such product
will fall and the farmers would be discouraged from further production.
2. Higher supply of agricultural products by producers may lead to reduction in price and demand.
3. The high taste of agricultural products by consumers will lead to high demand for such products.
4. Increase in the income for consumers may lead to increase in the demand of agricultural
products and vice-versa.
5. High cost of production may lead to low supply and high prices of products and vice-versa
ASSIGNMENT 1
1. Make a table of supply schedule and plot the graph.
2. Mention two (2) importance of scale of preference.
3. Enumerate three (3) importance of law of diminishing returns in agriculture.
4. Give the meaning of price support, price control and subsidy programme.
FUNCTIONS OF A FARM MANAGER
Meaning of a farm manager: farm manager is a person who supervises and controls the human,
physical, financial and informational resources in the farm.

Lyndall Urwick and Luther Gulick propounded an acronym “POSCCORB ” with each letter representing
one aspect of management behaviour. The functions of a farm manager are:

- P= planning
- 0= organizing
- S= staffing
- C= controlling
- C= coordinating
- R= reporting
- B= budgeting

PROBLEMS CONFRONTING FARM MANAGERS

1. Inadequate farm
2. Inadequate information about sources of inputs
3. Government policy
4. Poor infrastructural facilities
AGRICULTURAL FINANCE

Meaning of agricultural finance: - this can be defined as the flow of money into agricultural activities.
The term “flow” refers to how farmers get money and how it is expended to achieve specified goals.

Importance of Agricultural finance

1. Agricultural finance helps to identify all sources of revenue which will be utilized to undertake
day-to-day farming activities
2. It raises income for financing agricultural expenditures
3. It helps farmers to know the area of business that will bring more profits. This is done by
carrying out feasibility study.
4. It assists farmers to manage all the resources involved in agricultural business
5. It enables farmers to ascertain the profits and losses of the business.

Sources of Farm Financing

1. Personal savings
2. Commercial banks
3. Cooperative societies
4. Government
5. Non-governmental organizations (NGOs)
6. Plough back profit

Classes of Credit
Credit may be defined as a situation whereby sellers allow buyers to take possession of goods and
services and pay later. Credit can be classified into the following:

1. Classification based on length of period: this is divided into three (3) main types, viz
a. Medium-term credit: refers to the type of credit where the seller allows the buyers to buy
now and pay within two (2) years.
b. Short-term credit (within a year)
c. Long-term credit (more than two years)
2. Classification based on sources of credit:
a. Institutional credit e.g. banks, cooperatives, government, NGOs
b. Non-institutional credit e.g. personal savings, friends and relatives and money merchants
3. Classification based on liquidity
a. Loan in cash
b.Loan in kind
Problems Faced by Farmers in Procuring Agric-Credit
The farmers need to procure raw materials (seeds) or machines like tractors on credit and pay later due
to other lack of purchase power which is referred to a s the in ability to pay. It is very unfortunate that
they cannot do so due to some obstacles. These obstacles are:
i. Inadequate collateral security
ii. High interest rate
iii. Government policy: A country with critical war problems spends no penny on agriculture but on
importation of weapons to stop war

Problems Faced By Institutions In Granting Loans to Farmers

1. Inadequate record keeping
2. Problem of loan recovery
3. Problem of bad debts
4. Problem of non-lucrative business
CAPITAL MARKET
Meaning of Capital market:- Capital markets are the institutions that deal with medium and long term
loans for agric-business.

Institutions involved in the Capital Market

The capital market is a market for long-term funds. It is made up of several institutions which act as
financial intermediaries for getting funds from investors and for allocating same to institutions which
need them for investment purposes. These institutions include the following:
1. Insurance companies
2. Development banks
3. Merchant banks
4. Stock exchange
5. Pension fund managers
6. Investment banks
7. Mortgage banks

Sources of Funds for the Capital market

The following are some of the ways through which the capital market can secure funds:
A. Stock Exchange: this is an organised market where buying and selling of securities take place.
Example is Nigerian Stock Exchange (NSE). The Nigerian Stock Exchange is the nerve-centre of
the Nigeria capital Market. This is because it (NSE) provides an avenue for the sale and purchase
of existing stocks and shares which eventually provide funds for the capital market.
B. Merchant Banks: These are financial institutions engaged in medium and long term loans. They
finance equipment, leasing, investment management and also provide unit trusts. The issuing
merchant banks engage in issuing of new securities to both private and public companies and
also to government agencies seeking to raise long-term finance. The issuing of shares by
merchant banks will surely bring in money to the purse of capital market.
C. Insurance Companies: insurance may be defined as a provision made by an individual or an
organisation against the occurrence of some of some future loss. Insurance companies gather a
large amount of money from individual, companies and government that have applied for a
certain insurance policy. This sum collected will then be invested in another area. Insurance
companies provide long-term loans to investor to finance their various projects

Roles of Capital market

1. Mobilization of long-term funds
2. Provision of managerial, technical and financial advice to investors.
3. They reduce over reliance on money market
 4. Provision of capital in both industry and commerce

ASSIGNMENT 2
1. Name five (5) sources of credit
FARM RECORDS AND ACCOUNTS
 Farm Record: This can be defined as the documentation of information on every transaction
done in a farm business
 Farm Account: is the record of income and expenses made in the farm in a particular period of
time. It could also be referred to as financial records.
Types of Farm Records
i. Inventory record: this can be defined as the record showing all goods in store at a particular period
of time
ii. Production record: as the name implies, it is a record showing all goods produced by the farm at a
particular period of time
iii. Income and expenditure record: this record is equivalent to a profit and loss account prepared by
profit making organisations. It is used to ascertain the surplus or deficit of the farm business
iv. Farm diary
v. Pay roll or labour record etc.

Importance of farm Records

1. Evaluation of performance: the farm record will clearly show the performance of the farm. It
states whether the business performed below or above expectation.
2. Management decision: keeping of farm records aids decision making without wasting time. This
is because farm record shows the performance of the business from which decisions are quickly
made.
3. It assists the farmer to know his/her total asset (properties) like harvesters, tractor, land etc.
and also the liabilities (debts) of the business.
4. It helps to determine the profitability of farm business.
5. It (farm records) shows the income and expenditure of farm business.
A Farm Record
Date Name
of of crops Amount of seeds used Quantity harvested
planning
FARM ACCOUNT
These are statements of money paid out or received for goods and services used in a farming business.
It is also the process of recording; classifying, selecting and communicating financial data of farm
activities to enable a farmer make decisions.
Types of Farm Account
1. Income sales account
2. Purchase account
3. Profit and loss account
4. Balance sheet
 Income sales account: this is also known as sales and receipt account. This account shows
details of farm produce sold which should include: type of produce, the quantity, date sold, to
whom and what price.
 Purchase account: this is also known as purchase and expenses account. It shows details of all
items purchased for use on the farm. It includes name of input, date purchased, number of
input or quantity as well as the cost of such input.
 Profit and loss account: this is the type of account prepared at the end of a business period,
usually a year by the farmer with the purpose of knowing whether his business is making profit
or loss in this account, all expenses and purchases are listed on the left-hand side i.e. debit side
and all receipts or sales are recorded on the right-hand side i.e. credit side. Closing valuation is
also put on the right while opening valuation is put on the left. The two tables are normally
made equal by adding the profit or loss. Profit is added to the left-hand side while loss is added
to the right-hand side.

Example 1: Prepare a profit and loss account for Bwamakuli farms for the year which ended 31/12/2018
using the following data:

i. Cost of feed N500.00 vii. Farm wages N400.00

ii. Cost of drugs N200.00 viii. Sales of spent layers N1.000.00
iii. Sales of eggs N2,000.00 ix. Transportation cost N300.00
iv. Eggs for domestic use N200.00 x. Depreciation N200.00
v. Loss due to mortality N300.00 xi. Electricity bill N300.00
vi. Value of stock left N600.00 xii. Net profit N1,600.00
Solution:
Bwamakuli farms profit and loss Account as at 31st December, 2018.
DEBIT CREDIT
S/N Particulars N : K S/N Particulars N : K
i. Cost of feed 500 : 00 ii. Sales of eggs 2,200 : 00
iii. Cost of drugs 200 : 00 iv. Eggs for domestic use 200 : 00
v. Loss due to mortality 300 : 00 vi. Value of stock left 600 : 00
vii. Farm wages 400 : 00 viii. Sales of spent layers 1,000 : 00
ix. Transportation cost 300 : 00
x. Depreciation 200 : 00
xi. Electricity bill 300 : 00
Total Expenditure 2,200 : 00
xii. Net profit 1,600 : 00
Grand Total 3,800 : 00 Grand Total 3.800 : 00

Importance of Profit and Loss Account

1. It helps to detect if the farm enterprise is making profit or loss
2. It helps to determine the overall performance of the farm at the end of the accounting period
3. It aids future planning of the farm for better results.
 Balance Sheets: the balance sheet shows the capital or financial position of the farm at the end
of the accounting period, usually a year. In balance sheet, list of assets is on the right-hand side
and the list of liabilities or debts is on the left-hand side. It is concerned with the value of the
assets that would remain if the farm business was liquidated and all outstanding claims against
the farm paid.

Example 2: Bwamakuli farms balance sheet as at 31st December, 2018.

LIABILITY N : K ASSETS N : K
Loan from agric. Bank 3,000 : 00 land 2,000 : 00
Loan from comm. Bank 2,000 : 00 Implements 2,500 : 00
Loan from money lenders 1,500 : 00 Farm building 2,000 : 00
Loan from cooperatives 500 : 00 Livestock 1,500 : 00
Total 7,000 : 00 Feed 1,000 : 00
Net capital/Net worth or owners’
3,000 : 00 Cash in band 1,000 : 00
equity
10,000 : 00 10,000 : 00
Importance of Balance Sheet

1. Balance sheet assists in future planning purposes

2. It also assists in assessment of management performance
ASSIGNMENT 3
1. Give the meaning of salvage value
2. A Fiat tractor was purchased by a farmer in 1978 for N12, 000.00. In 1987, the tractor was sold
off for N3, 000.00 when it was no longer economical to maintain. Calculate the:
i. Salvage value
ii. Total depreciation
iii. Annual depreciation
3. Prepare a profit and loss account for Mr. Segun’s farm for the year ended 31 st December, 2018.
i. Cost of maize seeds N1, 400 viii. Sales of cassava tubers
ii. Cost of fertilizers N1, 200 N5, 500
iii. Cost of insecticides N1, 900 ix. Cost of processing tubers N1, 500
iv. Tractor hiring N2, 000 x. Wages of workers N6, 000
v. Cost of herbicides N1, 000 xi. Maize consumed N300
vi. Cost of cassava stems N1, 200 xii. Potato gift to visitors N1,000
vii. Sales of maize N29, 000
MARKETING OF AGRICULTURAL PRODUCE

Marketing can be defined as the flow of goods and services from the producer to the final consumer.
Importance of marketing
i. Marketing helps in the transfer of goods from the producer to the final consumer
ii. It informs consumers about the availability of goods and services
iii. It creates market for both goods and services
iv. It also reduces wastage through marketing research
v. It improves the standard of living of people by making goods produced in one area available in
another area.
Marketing Agents
These refer to the people involved in the movement of goods from the point of production to the point
consumption. They are also referred to as middlemen. Examples are retailers and wholesalers.
A wholesaler is a person who buys in bulk or large quantities from the producer and sells in small
quantities to the retailers.
A retailer is a person who buys in units from the wholesaler and sells in bits to the final consumers.
Functions of Marketing
1. Pricing: Marketing helps in fixing prices that will enable the organization or farm to make profit
2. Transportation: Marketing helps in the conveyance of goods from points of production to the
point of consumption
3. Warehousing
4. Standardizing: Marketing ensures that goods produced conforms with the required standard
and quality
5. Financing: It provides funds throughout the period of production to the point of sales through
facilitation of loans and credits
6. Assembling
7. Processing
Examples of crops that are commonly exported to other nations from Nigeria: cocoa, cotton, timbers,
rubber, groundnuts, palm oil etc.
Guidelines for Exporting Crops in Nigeria
1. Any crop exported from Nigeria shall be subjected to “inspection ” by relevant agent (s) saddle
with that task by Nigerian government
2. Having submitted goods for inspection, exporters shall open a domiciliary account with any
commercial bank in Nigeria and this same bank shall issue the exporter with a Nigerian export
proceeds form to fill
 3. The exporter shall be required to pay certain amount as administrative charges into Nigeria
export supervision account in a designated bank
4. After the administrative charge has been paid, the inspection agents will carry out physical
inspection and if there is no problem in the condition of the crops, a file will be opened for the
exporter.
Cooperate bodies, cooperative societies and individuals engage in exporting agricultural products e.g.
ANCE (Association of Nigerian Cooperative Exporters).
Importance of Exporting Agricultural Products
a. Foreign exchange earning
b. Wealth creation for farmers
c. Employment opportunities
d. Improve social amenities (through government taxes)
Problems Confronting Marketing of Agricultural Products
i. Inadequate road network
ii. Inadequate storage facilities
iii. Inadequate funds: to facilitate necessary processes like inspection, payment of administrative
charges, opening domiciliary accounts etc. needed to be qualified for crop inspection.
AGRICULTURAL INSURANCE

Meaning of Agricultural Insurance: This can be defined as agreement where one party (insurer)
promises to indemnify another party (insured) of a sum of money in the event of suffering a
specified agricultural loss or damage. It involves insuring against certain risk of fire, accidents etc.
Importance of Agricultural Insurance
i. Insurance help to reduce or control loss or liabilities of agricultural business
ii. Insurance inculcates savings habit in farmers as to prepare them for the future
iii. The insurance certificate received can be used as collateral security to secure loans from
commercial banks by the farmers
iv. It makes funds available for investment in agriculture
v. Life assurance can be used as a means of preparing for old age of farmers
Types of Insurance Policies for Agricultural Produce
1. Farm vehicle insurance: covers death or bodily injury of any farmer arising from the use of
vehicles
2. Fire disaster insurance
3. Life assurance
4. Crop and livestock insurance

Insurance Premiums: This could be defined as the amount of money that is stipulated by insurance
companies which an insurance policy holder must pay in order to maintain the active coverage of
the insurance.
Problems of Agricultural Insurance
1. Uncertainties of weather (fire or flood)
2. Losses due to natural disaster e.g. earthquakes
3. Problem of illiteracy
AGRICULTURAL EXTENSION

Meaning of Agricultural Extension: This can be defined as a process of disseminating information

about new farming techniques from research stations to rural farmers through extension agents

Research station Rural farmers

Agricultural Extension is an informal education programme organised for farmers and other family
members in order to keep them abreast of new farming techniques.
Importance of Agricultural Extension
1. To teach farmers how to improve their farming practices especially in the areas of crops and
livestock production, processing and marketing
2. To disseminate useful information about the new system of farming from researchers to the
rural farmers and also to get feedback from the researchers through the government extension
agents. It therefore acts as a link between researchers and rural farmers
3. It helps in procurement and supervision of agricultural loans
4. It helps to raise the standard of living of farmers
5. It assists farmers in home economics and management
6. It helps farmers to identify proper marketing channels for the sales of agricultural produce
Agricultural Extension Programmes in Nigeria
1. Farm Settlement Schemes (FSS)
2. The National Accelerated Food Production Programme (NAFFP)
3. Operation Feed The Nation (OFN)
4. Green revolution (GR)
5. Agricultural Development Projects (ADP)
6. Directorate For Food, Road and Rural Infrastructure (DFFRI)
Methods of Disseminating Information to Farmers
There are three (3) main methods used in disseminating information on new farming innovation to
farmers:
A. Individual method
B. Group method
C. Mass media method
o Individual method: this is the direct contract between farmers and extension agents. Examples
of individual method are: farm visit, home visit, telephone call, e-mail, internet etc.
o Group method: this is the method whereby the extension agents meet with the farmers in
group. Examples of group method are group discussion, agricultural show, lectures, debates,
excursion, field trips and group demonstration plots.
o Mass media: this method involves the dissemination of information of information by extension
agents to large number of farmers living in different locations at a time. Examples of mass
media are: radio, television, newspapers, banners, pamphlets, magazines etc.
Qualities of a Good Extension Worker
1. Initiative
2. Honesty
3. Communication skills
4. He or she should be free from local politics
5. Punctuality
6. Ability to know the subject matter
Good extension workers should respect the tradition and religion of the farmers. He/she should
not feel superior to the farmers. He should come down to the level of the farmers. He should
associate with them and eat what they eat, drink the type of water they drink and possibly dress
like them.
Problems Confronting Agricultural Extension Agents in Nigeria
1. Illiteracy
2. Transportation problems
3. Inadequate extension agent and poor remuneration by government
4. Language barriers
5. Farmers nonchalant attitude
6. Problem of continuity of government extension programme
7. Poor finance of extension programmes by government