Lecture 1
Covers
Farm Management:
Definition; Objectives of Farm Management
Relationship with other sciences
Farms, its types and characteristics
Factors determining types and size of farms
Out line
• Farm management
• Why FM
• Relationship
• FM ?; definition by 3 groups of FM Economists
• FM- nature, scope- Research, teaching, extension
FARM MANAGEMENT-
Why FM?
• Twin objective,
• scarce in factors,
• profit –influenced by
• biological, technological, social, economic, political and
institutional factors
Set of scarce
Set of goals
resources: Profit maximization
Land FARM
MANAGEMENT Improve net income
Labour
Farm buildings - Employment family?
Standard of living
Working capital
improvement
Farm equipment
FARM MANAGEMENT- Definitions
Farm means a piece of land where crops and livestock enterprises
are taken up under common management and has specific
boundaries
It gives income to farmer, happiness, improve standard of living
Management is the art of getting work done out of others working
in a group
Farm Management (most acceptable definition) is a science that
deals with the organization and operation of a farm as a firm from
the point of view of continuous maximum profit consistent with the
family welfare of the farmer
Farm management is a branch of agricultural economics which
deals with wealth earning and wealth spending activities of a
farmer, in relation to the organization and operation of the
individual farm unit for securing the maximum possible net
income. (Bradford and Johnson).
Three groups of Farm management
Economists defined FM as
Group I: Taylor and I.C.Gray- viewed FM as
“a art of organization and operation of the farm successfully
as measured by the test of profitableness
Group II: G.F Warner, and J.N Effersen defined FM as
“a science of organization and operation of the farm
enterprises for the purpose of securing the maximum
profit on a continuous basis
Group III: L.A.Moorehouse and W.J Spillman defined FM as
“a study of the business phase of farming”
Nature of farm management
• Apply business principles for individual farm
• Max. returns for individual farmer
• Applies local knowledge and scientific finding
Production Economic and farm management
Law of variable proportions or LDR –how much to produce?
Cost Principle
Principle of factor substitution-how to produce ?
Principle of product substitution –what to produce?
Principle of equimarginal returns : allocation of resources
Time comparison principle: It guides in making investment
decisions
Principle of comparative advantage –regional specification
of production
Relationship between Farm Management and other Science
Physical and Biological Relationships Economic Relationships
Agronomy, Soil Science, Plant Basic Economic Principles (Optimization of
Breeding, Plant Protection, Animal Resources, Cost minimization and Profit
Husbandry, Forestry and Agricultural Maximization, Agricultural Marketing,
Engineering Price analysis, Financing and Co-operation.
Social Relationships FARM MANAGEMENT
Rural Sociology, Psychology,
Ethics, Religion, Habits and Supporting Sciences
Customs Mathematics and Statistics
Guides and helps the farmer to solve Political Relationships
economic problems associated with Political Science, Agrarian Laws, Tenurial
maximization of returns / or minimization System, Ceiling on Holdings, Betterment
of costs. Levy, Price Stabilization Measures,
Subsidies, Food Zones etc.
BETTER LIVING STANDARDS AND HIGHER FAMILY SATISFACTION
Fig. 1 Relationship between Farm Management and other Science
Characteristics of farming as business
Highly influenced by natural factors
Product heterogeneity
Seasonal production- consumption throughout the year
Bulk- perishable, high unit cost of marketing
Joint products- cost and return distribution ?
Time lag- investment and return more
Land share if more now costly
Farmers are price taker –both input and output
Generally owners of land and other fixed assets- also a
manager
Semi commercial- for the market and family
Farm - Definition
A farm is an area of land, together with the
buildings on it, that is used for
growing crops or raising animals, usually in
order to sell them
Factors determining the size of farm
1. Entrepreneurial Skill
2. Managerial Ability
3. Availability of Finance
4. Availability of Labour
5. Nature of Business
6. Extent of the Market.
Factors determining the type of farm
1. Capital
2. Choice
3. Climate
4. Labour
5. Market
6. Policies of Government
7. Relief
8. Soils
Farm types
1. Small subsistence-oriented family farms.
2. Small semi-subsistence or part-commercial family farms
usually of one half to two hectares, but area is not a good
criterion: the same basic structure can be found on much
larger 20- to 30-hectare farms as in the Punjab, Sind, and
North West Frontier Provinces of Pakistan.
3. Small independent specialized family farms.
4. Small dependent specialized family farms, often with the
family as tenants.
5. Large commercial family farms, usually specialized and
operated along modified estate lines.
6. Commercial estates, usually mono-crop and with hired
management and absentee ownership.
