Farm Management | Strategies, Market Risk

Farm management is the process of coordinating and carrying out choices necessary to run a farm efficiently and profitably. Agricultural economics provides knowledge on pricing, markets, agricultural policy, and economic institutions like leasing and credit that are used in farm management. It also makes use of agricultural engineering for information on farm buildings, machinery, irrigation, crop drying, drainage, and erosion control systems, as well as plant and animal sciences for soil, seed, and fertilizer information, weed, pest, and disease management, rationing, and breeding. Psychology and sociology are also consulted for information on human behavior. A farm manager, therefore, incorporates knowledge from the social, physical, and biological disciplines into his judgments.

Due to the enormous variety of farms, the primary issue in farm management is the particular individual farm; the strategy that works well for one farm, could not work at all for another. Farm management issues may affect small, family-run farms that are close to subsisting, big, commercial farms that employ skilled managers and the newest technology, as well as farms run by sole owners or the government.

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Fundamental issues

A smart farm manager knows the legal description of the farm property for which he is accountable, as well as its position with respect to other land, highways, markets, and sources of water A competent farm manager knows the legal description of the farm property for which he is accountable, as well as its position in relation to other land, roads, markets, and sources of supplies, the details of the field arrangement and farmstead layout, the farm’s capital position or debt-to-asset ratio, and the farm’s resources, such as the capabilities of its soils. Such information allows the management to study and evaluate his resources, as well as plan their utilization. The farm manager evaluates the production predicted from each acre or hectare of land and each head of cattle to determine profit potential. He then assigns monetary values to these quantities.

The total number of acres or hectares in the farm, acres or hectares planted to cash crops, productive man-work units (the number of workdays of labor needed under average efficiency to care for crops and animals), livestock units retained, capital invested, and total cash revenues are used to determine the size of a farm company. Although total acreage is often used to characterize farm size, it is insufficient since it does not explain how much land is hilly, rocky, marshy, or otherwise unproductive. Better indicators include total cropped land, total earnings, invested capital, or productive labor units. While animals are counted by the head for comparison, one cow is about equivalent in value to two calves, five hogs, ten young pigs, seven sheep, 14 lambs, or 100 laying hens.

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Management of finances and large-scale operations

Financial statements, profit and loss statements, and cash-flow statements are examples of financial instruments that a farmer might use to assess, plan, and regulate his company. A financial statement shows the amount of money invested in farm assets, existing debts, the owner’s ownership in the firm, and how liquid and solvent the farm is. The capacity to satisfy financial commitments on time is referred to as liquidity, while the ability to pay all debts if the firm is forced to close is referred to as solvency. A profit and loss statement details the sources and quantities of revenue and costs. A comparison of profit and loss statements over time reveals which resources have been the most lucrative and if net income has increased or decreased. A cash-flow statement displays the sources and expenditures of monies throughout the course of the year. A statement like this serves as a valuable check on the correctness of the farm’s other business documents.

Land and labor (his own and those of his family) are the primary resources for the traditional farmer. Under favorable circumstances, the farmer’s position has shifted from laborer to operator-manager, resulting in considerably bigger agricultural units with considerable capital investments. Such conditions include the existence of a substantial body of applicable scientific knowledge, the possibility of greater efficiency from large-scale operations, the availability of good markets and transportation, the ability to routinize and centrally direct farm work, and the absence of community hostility to large-scale agriculture.

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Lowering market risks

The agricultural commodities market is very dangerous for three major reasons. First, no single farm producer can place or withhold enough of a single item to affect market price; second, the quantity of a commodity taken off the market does not increase in proportion to price declines; and third, the farm manager cannot react to dropping prices by immediately shifting output from an unproductive item to a lucrative one. The farm manager may specialize or diversify depending on the circumstances to limit his risks and protect his earnings; he may also utilize the futures market (see below).

A specialist farm manager focuses his efforts on one commodity, such as wheat, cotton, milk, eggs, or fruit. He may reap the advantages of large-scale manufacturing and earn the maximum money from a business in which he is highly competent through specialization. The expert, on the other hand, is exposed to market fluctuations, plant and animal illnesses, and soil depletion caused by the cultivation of a single crop.

Farm Management Strategies

Farm management strategies in India vary from contemporary and sophisticated to those that have been in use for generations. Illiteracy, insufficient water, unstable power sources, poor transportation, and communications, all of which make timely supply purchase and selling of output difficult, all impede the development of modern farm management techniques. Many farmers, for example, are unable to read the guidelines on a bag of fertilizer, prepare an application for a production loan, or calculate their profit and loss. Visual and spoken methods of education and training have been employed effectively when progress has been achieved in establishing better farm management strategies. On-farm demonstrations, farmer exchange programs, tours, short courses, literacy classes, displays, and audio-visual vans are examples of training methods.

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