Lecture 11 Farm Management Decisions

For undergraduate agricultural students of the course ‘Ag. Econ. 6.4 Farm Management, Production, and Resource Economics (2+1)’ of Junagadh Agricultural University, Gujarat and other State Agricultural Universities in India.

1. Lecture 11: Farm Management
Decisions
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2. Farm Management:
•Whatis‘farm’?
•Apieceoflandwithafixedboundarywhereincrops
areraisedoranimalsarerearedforeconomicreturns.
•Whatis‘management’?
•Co-ordinationofalltheactivitiesinfarmingfromland
preparationtoharvestingforrealizingsustainable
profits.
•Farmmanagement:Itcanbedefinedasascience
dealingwithjudiciousdecisionsontheuseofscarce
farmresources,havingalternativeusestoobtainthe
maximumprofitonsustainablebasis.
•Or,organizationandoperationoffarmswithaviewto
makecontinuousprofits.
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3. Farmers and decision making:
•Decision-making is central to farm management.
•Each decision has an impact on the farm and on the
farm household.
•Even deciding to do nothing is a decision and has an
impact.
•The more a farmer is aware of the decision-making
processes that affect farm and household, the more
sustainable the enterprise will be and the more
likely it will be profitable and sustainable.
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4. Farm Management Decisions
•Farmmanagementseekstohelpthefarmerindeciding
problemslikewhattoproduce,howmuchtoproduce,how
toproduce&whentobuyandsellandinorganizationand
managerialproblemsrelatingtothesedecisions.
•Farmmanagementdecisionscanbeclassifiedinto:
1)organizationalmanagementdecisions,
2)administrativemanagementdecisionsand
3)marketingmanagementdecisions
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6. Organizational Management Decisions:
1. Organizational Management Decisions:
1A. Operational management decisions
involve less investment, made more frequently
effect is short lived, reversed with less cost
what, how and how much to produce?
a.k.atactical decisions
1B. Strategic management decisions
involve heavy investment, made less frequently
effect is long lasting, cannot be reversed
size of farm, machinery, farm building construction, etc.
a.k.abasic decisions
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7. 1A. Operational management decisions
-What to produce?
to be decided before the season in tune with available resources
whether to produce crop or to rear livestock or try both
should aim at profit maximization
-How to produce?
manner in which the resource combinations are to be made
should aim at cost minimization
-How much to produce?
level of inputs to be used
finding our optimal use of input and output
MVP = MIC (optimal input level) and MR = MC (optimal output level)
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8. 1B. Strategic management decisions
-Size of farm:
determine pros and cons of operating enterprises on various scales
influenced by various economic, social, natural, and policy factors
should aim at profit maximization
-Machinery and labour programme:
appropriate resource combination to produce output at less cost
identify resource substitutes
-Construction of farm buildings: Involves heavy
investment and heavy penalty –farmer has to tread cautiously
-Irrigation, conservation and reclamation programmes:
lasting effect on farm business
should choose most appropriate and economical method
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9. 2. Administrative management decisions
-Financing the farm business:
whom to borrow, when and how??????
-Supervision:
keep a close watch for getting desired results
-Accounting:
farm records provide control over the farm business
-Adjusting the farm production programme:
allocation of farm resources should be consistent
with the government policies.
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10. 3. Marketing management decisions
Buying and selling decisions:
-Buying:
buy inputs at least cost
should decide agency, timing and quantity to be purchased.
-Selling
should try to adjust time of selling
should try to harness all the utilities (i.e. form, place, time,
possession, information)
what to sell? When to sell? Where to sell? and whom to sell?
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