Farm Management, Production & Resource Economics

Lesson-1

Lesson-1
Concept of Farm Management

Content
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 Farm Management, Production & Resource Economics

Course Name Farm Management, Production & Resource

Economics
Lesson 1 Concept of Farm Management

Content Creator Name Dr G M Hiremath

University/College Name University of Agricultural Sciences Raichur, Raichur
Course Reviewer Name Dr. Dhruv Kishor Sinha
University/college Name Dr. Rajendra Prasad Central Agricultural
University, Samastipur

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 Farm Management, Production & Resource Economics

Objectives:
 To understand the concept of FM, its importance and scope
 To understand nature and characteristics of FM and its relationship
with other sciences
1. Glossary of terms

Farm Management (FM) comprises two words ‘farm’ and ‘management’.

Similarly, there are other related concepts like firm, farm-firm that we
can understand.
Farm: It is a piece of land where crop and livestock enterprises are taken
up under a common management and has specific boundaries.
Management: It means the act or art of managing the farm.
Firm :A firm is a for-profit business organization—such as a corporation,
limited liability company (LLC), or partnership—that provides
professionalservices.
Farm-firm: the farm firm will be regarded as a managerial unit in which
labor and physical capital are applied to land in order to produce
primary farm products.
2. Farm Management concept

Like any other economic problem farm management is a rational

resource allocation proposition more particularly from the point of view
of an individual farmer. One an hand, a farmer has a certain set of farm
resources such as land, labour, farm buildings, working capital, farm
equipment, etc., that are relatively scarce. On the other side, the same
farmer has a set of goals of objectives to achieve, may be maximum
family satisfaction through increasing net farm income. In between these
two poles is the farmer himself with specific degree of ability and
awareness. This gap is bridged by the mental exercise and concentration
of desire and will power of the individual farmer, to use his scarce
resources in a way that desired objectives are levied. This bridging up

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process necessitates taking a series of rational decisions in respect of

farm resources having alternative uses and opportunities
Thus, in simple words, farm management can be defined as a science
which deals with judicious decisions as the use of scarce resources having
alternative uses to obtain the maximum profit and family satisfaction on a
continuous basis from the farm as a whole under sound farming
programme.
According to Prof. Gray “The art of managing a farm successfully, as
measured by the test of profitableness is called farm management”.
Farm management seeks to help the farmer in deciding problems like
what to produce, how much to produce and when to buy and sell and in
organizations and managerial problems relating to these decisions.
Farm management may in short be called a science of decision making or
a science of choice. It is to be emphasized that managing a farm is a
continuous process of decision making. The need for it arises out of
changes occurring outside of the farm; hence need of continuous
adjustment of farm operations to these changes frequently encountered
by the farmer are fluctuations in prices; weather variations, inventions in
farming methods, changes in socio-economic environment including
changes in government policy and social responses and values.
What makes a successful farm manager?
1. Farmer acting on the goal or objectives of the farm
2. Recognition and definition of a problem or opportunity
3. Obtaining information – observation of relevant facts
4. Specification and analysis of alternatives
5. Decision-making – choosing an alternative
6. Taking action
7. Bearing responsibility for the decision or action taken
8. Evaluating the outcome.

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3. Scope of FM

• Farm management is generally considered to fall in the field of

microeconomics.

• It deals with the allocation of resources at the level of an individual

farm.

• While in a way concerned with the problems of resource allocations

in the agricultural sector, and even in the economy as a whole, the
primary concern of farm management is the farm as a unit.

• It covers aspects of farm business which have a bearing on the

economic efficiency of the farmer.

• Thus, the type of enterprises to be combined the kind of crops and

varieties to be grown, the dosage of fertilizers to be applied, the
implements to be used the way the farm functions are to be
performed all these fall within the purview of the subject of farm
management.

• The subject of farm management includes: Farm management

research, training and extension

4. Importance of FM

• Through the process of mechanization, automation, communication

and modernization, farm has gone beyond its framework of mainly
providing the necessities of life to the farm family.

• Now the farmer produces not only to meet his family subsistence
needs, but at the same time he endeavors to produce maximum
surpluses to be sold in the market to buy some non-farm products
for fuller satisfaction of life.

• This has made agricultural production market oriented and as

introduced a business output in the farm profession.

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5. Nature and characteristics of FM science

FM is practical science:While dealing with the facts of other

physical and biological sciences, it aims at testing the applicability of
those facts and findings and showing how to put these results to
use on a given situation. Threshing of wheat for example, can be
done by different methods such as phalla system disc thresher,
power thresher, tractor, fodder culture, etc. All these methods have
their own weak and strong points. A farmer has to select a method
which is more practicable and economical to his particular farm
situation taking into consideration the volume of work and financial
implications.
• FM is profitability oriented: Physical scientists always concern
themselves with obtaining maximum yield irrespective of
profitability of inputs used. But the farm management specialist
always considers the costs involved in producing each unit of
output in relation to returns and decides the optimum level of
production. He has to consider all relevant factors such as financial
implications, marketing, transportation and storage facilities and
costs. In the decision making process profitability is thus the major
criterion of selection / adoption of an enterprise or practice. Other
science deals with physical efficiency, the farm management
concerns with economic efficiency.
• FM is an integrating science: It is an integrating science in a sense
that the facts and findings of other sciences are coordinated for the
solution of various problems of individual farmers with a view to
achieving certain desired goals. It considers the findings of other
sciences in reaching its own conclusions. Most of the physical
sciences throw out results having usefulness under specific set of
conditions. The principles of farm management help integration of
these results to reach at optimum combination of practices under
the frame work of restraints of individual farm situations.

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• FM is broader field: Farm management decisions are made by

getting information from more than one discipline. Most of the
physical sciences concern themselves within narrower
compartments of information. A farm management specialist has to
know the broad principles of all other concerned sciences in
addition to specialization in the business principles of farm
management. It is thus a much broader field, because it has to
gather knowledge from many other sciences for making its own
decisions. A farm management specialist has become thus a “Jack
of many trades and master of one”
• FM is micro approach: It treats every farm unit unique in available
resources, problems and potentialities. It requires that no two
farms are exactly identical with respect to soil, other production
resources, farmers’ managerial ability etc. Each farm unit has to be
therefore, studied, guided or planned individually. The major
emphasis of this approach lies on treating the farm as an
operational unit and tailoring the recommendations to fit into its
resource position. Recommendations tailored to suit particular farm
situations instead of blanket recommendations an important
approach of the farm management extension education.
• Farm as a unit:The objective of FM is to maximize the returns from
the whole farm instead of only improving the returns from a
particular enterprise or a practice. No agronomist will tell a farmer
how to utilize his surplus labour and scarce capital by taking up
supplementary enterprises. The sciences like horticulture, dairy etc.
are similarly concerned with only one aspect of the whole farm
business.

6. Relationship of FM with other sciences

a) Physical and biological sciences: FM has to depend on other
physical and biological sciences for its source material. These
sciences provide the input-output relationships in respective areas

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in physical terms i.e., they define production possibilities within

which various choices can be made. Agronomy discipline provides
input-output relationships in crop production. Animal sciences:
refers to gain in live-weight associated with feed rations. Soil
scientist: dose of fertilizers
b) Economic Theory: FM as a subject matter is the application of
business principles in farming from the point of view of an
individual farmer. The tools and techniques for farm management
are supplied by the general economic theory. Law of variable
proportions, the principles of substitution and the marginal analysis
are all instances of tools of economic theory used in farm
management analysis.
c) Other Social Sciences:
Psychology: provides information on human motivation and
attitudes. In decision making many psychological aspects and
mental reservations of decision maker come in, such as attitude
towards taking likes and work under conditions of uncertainty.
Sociology: The farmer lives and works in a given a social matrix.His
decisions are influenced by the customs, habits and cultural values
of the society in which he lives. Similarly, many decisions are made
by the family jointly. Sociology, which deals with social problems,
responses and reactions of the rural people vis-à-vis their main
occupation. i.e., agriculture has a great bearing on the farm
management decisions the farmers make.
Political science: Various pieces of legislation and political actions
of the Govt. affect the production decision of the farmer such as
scale of production, restrictions or encouragement on growing of
certain crops such as poppy, tobacco in India, land utilization,
ceiling on land, minimum and maximum prices, food zones, etc.
Supplementary sciences (statistics): It is extensively used by the
agricultural economists and farm management specialists. The
statistics is helpful in providing methods and procedure by which

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data regarding specific farm problems can be collected, analyzed

and evaluated.
References
1. Johl S.S. and Kapur T.R. (2007) Fundamentals of Farm Business
Management. Kalyani Publishers, New Delhi
2. Subba Reddy S., Raghu Ram, P., Neelakanta Sastry T. V. and Bhavani
Devi, I. (2012) Agricultural Economics. Oxford and IBH Publishing
House, New Delhi
3. Sadhu A. N. and Singh Amarjit (1993), Fundamentals of Agricultural
Economics. Himalaya Publishing House, Bombay