How To Manage A Farm Business – This chapter introduces the discipline of farm management as it relates to the main structural types of Asian farms, particularly small family farms (types 1 and 2 of Section 2.2.1). 2.1 FARM MANAGEMENT

2.1.1 Farm area 2.1.2 Definition 2.1.3 Optimization 2.1.4 Objectives 2.1.5 Economics as a framework for farm system analysis 2.1.6 Alternative bases for farm system analysis 2.1.7 Areas of farm management 2.1.8 Farm management regimes

How To Manage A Farm Business

How To Manage A Farm Business

To the layman, ‘farm management’ probably means just that – a set of activities and procedures carried out by a farmer in the ongoing management of his farm, for which professional farm management experts can be consulted.

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This is true to some extent (according to farm management in area A of Section 2.1.7), but more broadly, farm management, as considered here, is a professional discipline concerned with the description, construction, analysis and evaluation of farm systems of the Order. Level 10 (Figure 1.2). In this broader sense, farm management is the discipline that most clearly includes the analysis of farm-level systems. (This does not exclude other disciplines of a technical or specialized nature from farm systems analysis.) Farm management system analysis can have several operational objectives (Section 2.1.4); there are several alternative bases (Section 2.1.6) on which the analysis can proceed; and can operate in four areas (Section 2.1.7) and four modes (Section 2.1.8) within these areas. These several aspects of farm management as a systems discipline are now briefly discussed in turn.

1 Farm management by farmers (Dillon 1980, p. 258) has been defined as “the process by which the farm manager manipulates resources and situations to achieve his goals with less complete information.” objectives’. See also Makeham and Malcolm (1986, Part 2) and Upton (1973, Part 1). This appendix presents the authors’ perspectives on farm management as it relates to management and farm systems theory. 2.1.2 Definition

Except when it serves a descriptive purpose, farm management is the science (and art) of optimizing the use of resources in the farm-household economic component, i.e. 10th Order Level systems (see Figure 1.2), and achieving this goal. optimal operation of these systems in accordance with the goals set by households; and Order Level 10 systems are structurally composed of subsystems, farm management also deals with the operation of subsystems subordinate to Order Levels 1 through 9 to optimize the entire farm system. However, for reasons discussed in Chapter 1, especially when dealing with small farms, it is often important that farm management includes family or household components, so that its true scope includes Order Level 12 systems. A second consideration is that the village is sometimes a more appropriate unit of analysis than the farm, in which case the scope of “farm” management includes systems of Order Levels 1-13, as discussed in Section Optimization.

Optimizing the planning objective is defined as achieving the economic goals as efficiently as possible in the face of any physical, ecological, legal and socio-cultural constraints. It involves obtaining the maximum possible net profit over time from the operation of the farm system. Net benefit is measured in terms of output or profit, or more broadly, satisfaction or utility, respectively. Maximizing net profit involves efficient use of available resources and opportunities. It involves minimizing costs to achieve a certain level of net profit. This reflects a theoretical view. In the real world, as discussed in Chapter 6, the common goal is often constrained by household and social factors other than the availability and cost of physical resources. Thus, many smallholders place a high value on the long-term sustainability of the farming system. Also, in the real world, uncertainty about yields, prices, and other relevant effects will prevail so that the farmer’s choice is not between certain alternatives, but between alternative (subjective) probability distributions of net profit. This aspect is dealt with in Chapter 11.

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Optimization can occur at two levels: local or global. When operating in area A (solving intra-farm problems – see Section 2.1.7 below), farm management will seek to optimize the Order Level 12 farm-household system at the global level. This distinguishes it from other farm-related agricultural sciences, which are usually (though not always) mainly concerned with the optimization of low-level subsystems, that is, local optimization. Two examples will clarify this issue. First, a farm can have only two irrigated crops, cotton and sugarcane. If only cotton is considered, the local optimum may be to use all of the water supply in cotton, but if the farm as a whole is considered, i.e. if the global optimum is sought, this may require that water be shared between both. products. Second, the household system itself can only be a subsystem within some larger system. For example, the optimal irrigation water for a farm may be 1000 m from the farm’s point of view.

, but if such water is to be provided only as a minor by-product of a large multi-purpose dam project (with primary objectives being power generation and flood control), these objectives will determine. from an overall project or global perspective and this would override any supply rate that may be economically optimal. 2.1.4 Objectives

Optimization of farm-household systems takes the form of conditionally maximizing social and economic well-being of farm families over time. The term “welfare” is used broadly to include monetary income, food, farm-produced consumer goods and factors of production, intangible goods that enable the achievement of educational and health standards, and the satisfactions derived from a job well done. as well as from cultural and religious sources. Which of the outcomes/family benefits of this system is relevant in a particular farm situation will depend on the type of farm and the values ​​held by the particular family – values ​​that would normally reflect the social and cultural context in which the farm-household exists. Welfare maximization is contingent because it is constrained by resource availability and, accordingly, legal constraints and socio-cultural traditions.

How To Manage A Farm Business

Typically, the farm plays only a convenient role in achieving extended family goals. Thus, farm management deals with the conditional optimization of only one part of the farm-household system, but usually the most important material part. The specific objective may be to maximize monetary return or to maximize the expected utility of risky profit (Chapter 11) given the presence of uncertainty (Types 4, 5 and 6 and possibly Type 3 farms as defined in Section 2.2.1 ), or such monetary profits may be only incidental to other purposes (type 2 farms) or not important at all (type 1 farms). Goals and objectives are discussed in Chapter Economics as a framework for economic system analysis.

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Economics or economic analysis is the science of making choices to best achieve desired ends given that only limited (physical and other) resources and opportunities are available and the future is uncertain. There are no options to which economics cannot be applied. This is relevant, for example, to a spouse’s choice about which crop to grow, or to choosing between using an insecticide or using environmentally friendly integrated pest management. In contrast to the broad applicability of economic analysis, financial analysis is naturally limited to matters of a financial or monetary nature. Thus, financial analysis is a subset of economic analysis and can be a natural way of doing economic analysis in circumstances where everything is valued in terms of money. In other cases, it may be possible to facilitate the economic analysis of possible options by relating monetary values ​​to possible gains and losses. And in other cases, such as evaluating the resource sustainability and environmental compatibility of alternative farming systems, it may often be impossible to assign monetary values ​​to the gains and losses of alternative options. Decisions must then be made using economic analysis based on non-monetary values, intuition and judgment.

Farm management economics (that is, economic analysis applied to the choices faced by farmers) provides a general disciplinary basis for the analysis of farm-level systems (Dillon and Hardaker 1993, pp. 22-30; Upton 1973, Ch. 1). Obviously, other farm and family-related disciplines will be involved in building the systems: agronomy, animal husbandry, soil and water conservation/management, human nutrition, etc. However, for specialized technical systems (e.g., the farm—as discussed below, the household unit is analyzed in terms of the flow of food or energy between components), these other disciplines must play a subordinate role, linked to farm management economics as the leading discipline. In fact, it’s not really important that this often doesn’t happen and is managed by staff from other disciplines instead. This may simply reflect the fact that many agricultural professionals recognize the need for a systematic approach to implement their practices effectively; or many agricultural

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