ECONOMICS for farm management extension

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First Printed 2008,Reprint 2013, The designations employed and the presentation of material in this. information product do not imply the expression of any opinion whatsoever. on the part of the Food and Agriculture Organization of the United Nations. FAO concerning the legal or development status of any country territory city. or area or of its authorities or concerning the delimitation of its frontiers or. boundaries The mention of specific companies or products of manufacturers. whether or not these have been patented does not imply that these have. been endorsed or recommended by FAO in preference to others of a similar. nature that are not mentioned, The views expressed in this information product are those of the author s and. do not necessarily reflect the views or policies of FAO. ISBN 978 92 5 107541 8 print,E ISBN 978 92 5 107542 5 PDF. FAO encourages the use reproduction and dissemination of material in this. information product Except where otherwise indicated material may be. copied downloaded and printed for private study research and teaching. purposes or for use in non commercial products or services provided that. appropriate acknowledgement of FAO as the source and copyright holder is. given and that FAO s endorsement of users views products or services is not. implied in any way, All requests for translation and adaptation rights and for resale and other. commercial use rights should be made via www fao org contact us licencerequest. or addressed to copyright fao org, FAO information products are available on the FAO website www fao org.
publications and can be purchased through publications sales fao org. Whether you are working for government an NGO or, the private sector if you are an agricultural extension. worker who is trying to assist farmers in increasing the. profitability of their farms the material in this booklet. should be of help to you,It introduces you to some of the concepts and. principles of economics that are relevant to smallholder. farming particularly market oriented farming You will. learn the application of these economic concepts to the. day to day farming activities of farmers producing for the. market You will look at some of the critical areas in which. farmers make decisions about their farm enterprises. Through this you will gain an insight into the decisions. that farmers make and be better equipped to advise. them on how to become more market oriented and thus. increase their profits,This guide has been produced by the Agricultural. Management Marketing and Finance Service of FAO,AGSF It is one of a planned series of guides and. other materials that look at some of the common farm. management challenges facing farmers and ways of,meeting them.
Preface iii,Acknowledgements vi,INTRODUCTION 1,KEY ECONOMIC CONCEPTS 13. ECONOMICS AND THE MARKET 35,ECONOMICS AND,FARM MANAGEMENT DECISIONS 53. SUMMARY 81,Glossary 87,Acknowledgements, The author would like to acknowledge the assistance of. colleagues and friends Thanks are due to Steve Worth. for his review of the draft guide and to Andrew Shepherd. who reviewed and edited the final version as well as. to Tom Laughlin who managed the production process. Michael Breece for the design and final layout for. publication and to Francesca Cabre Aguilar and Martin. Hilmi for their contributions Errors and omissions do of. course remain the responsibility of the author,David Kahan. Introduction,2 Economics for market oriented farming.
A small scale farmer runs a three hectare farm She. grows maize a mix of beans and pumpkins has two, dairy cows and keeps some chickens around her home. Her farm has sustained her and her family comfortably. for a number of years While producing for home, consumption she has always produced a surplus which. she has sold for cash on the local market Now that her. An example children are older she feels the need for more cash. of a typical She knows that it should be possible to make more. situation money from her farm,faced by an, agricultural She recently heard on the radio that there had. extension been an increase in the demand for vegetables and. high prices could be obtained The announcer said that. worker farmers who know how to produce tomatoes may be able. to make good profits She wants to gain more out of her. farm Beans have not been very successful and she is. considering introducing tomatoes as an alternative She. wonders whether this change will increase her income. To produce for the market will cost her money which she. will have to pay out before she sells her produce These. are some of the factors that she will have to take into. account before making a final decision,If this farmer asked you for advice. about markets demand profits and return,on investment in tomato production.
would you be able to answer her questions,Would you be able to give her good advice. on the management of her farm,If not then the contents of this guide. will be of particular use to you,It begins with a review of farm profits. markets farmer goals and economics,Introduction 3,MAIN POINTS IN CHAPTER 1. Market oriented farming Farm,farming for profit production.
Farming for profit requires that farmers must match. grow crops or raise livestock market,that can be sold on the market requirements. Farmers should understand markets,what leads to profits and what leads to losses. Goals for farm and family,Good farm management requires Goals. clear goals Goals give a focus for making give focus. decisions Some important goals are to making,food security profit maximization risk decisions. reduction and providing education for on the farm,children These and other goals influence.
planning and decision making on the farm,Economics in farm management Farm. Economics as it applies to farming resources,is about the choices that are made should be. in order to obtain the most from available used in the. often limited farm resources most effecient,Economics provides ways to analyse manner. and compare the profitability of crops,and livestock under different circumstances. 4 Economics for market oriented farming,MARKET ORIENTED FARMING.
FARMING FOR PROFIT, More and more farming families are finding that they. increasingly need to produce farm products that can be. sold for cash Farming for profit requires that products. produced on the farm are sold This is more complicated. than simply farming for food Farming for profit requires. that the farmers grow crops or raise livestock that they. can sell on the market It also requires that farmers. understand markets and profits Market oriented farmers. need to understand the kinds of products that consumers. want the quality of the product they must produce the. Farmers need to quantity demanded and the price that consumers are. acquire new skills willing to pay,and techniques,in order to. farm for profit We now have a global economy where farm. products may be sold anywhere in the world These, changes create opportunities for farmers to earn more. money and to make more profits To take advantage of. these opportunities farmers will need to manage their. farms in a market oriented way Farming for the market. requires that farmers become better decision makers. They must also be able to compete with other farmers. The farmer must develop greater skills in buying and. selling and in farm business management,Introduction 5. GOALS FOR FARM AND FAMILY, Goals set the framework and give a focus for making.
decisions Farmers and their families have goals In Good farm. management, many parts of the world the family household and the requires. family farm cannot be separated Therefore the goals of clear goals. the household and the goals of the farm often interlink. Farmers run their farm business They are the,decision makers A farmer can be a husband a wife. a son or a daughter whoever takes the many day to, day decisions needed in farming To ensure better farm. management decisions farmers must have control of the. resources needed to produce a crop or livestock product. If they are farming for the market they will also need to. have a good understanding of that market,Some common goals of farm families. Food security,A primary goal for every farm family.
Profit maximization,Farm families need more than just food. and any cash needed,must often come from the farm,Risk reduction. Risks can create great losses in income,Social goals. The quality of family life may have a,higher priority than just making money. 6 Economics for market oriented farming,Food security.
Every family needs to ensure that it has sufficient. nutritionally adequate and safe food for an active and. healthy life throughout the year This is one of the primary. goals of every farming family especially those whose. only source of income is the family farm,Farmers must decide. what choice to make to ensure,food security for the family. To produce food only for the family,To produce to sell in the market. and buy food with income earned,To produce food for both. the family and to sell,Maximize profits, Farm families need more than just food They also need.
clothes education for the children household items and. other goods all of which require cash Their main source. For most farmers of cash is usually the farm therefore they have to make. the main source profits from their farms,of cash is usually. To make profits a farmer buys inputs uses them, on the land to produce goods and then sells the goods in. the market When the income from the sale of products. is greater than the cost of producing them the farmer. makes a profit When farming for profit farmers should. set goals to gain the most out of their farm to maximize. Choosing between farming for food and farming, for profit is a very serious decision How much of the. farm should be used for generating cash Should the. whole farm be committed to producing for the market or. should some part of it be set aside to provide food for. Introduction 7,FAO 21560 G Bizzarri,the family, Women collecting food for the family Ecuador comes first. live well the,FAO 22632 J Spaull,farm family,also needs to.
make money,Selling fruit for family income Georgia. require farmers,their farming,FAO 21667 J Spaull,Improved watering using a pump Zimbabwe. 8 Economics for market oriented farming, the family Farming for profit can be very risky because. there are many other farmers producing for the market. This creates competition and requires that the farmer be. very skilful both as a farmer and as a manager,Risk reduction. While profit is an important goal many farmers are more. concerned about reducing risks Risks come in many, different ways Rainfall may be scarce or fail prices.
for goods may fall and pests and diseases may affect. crop yields These are only some of the many risks that. farmers face,While profit is, an important goal The risks of farming can create large differences. reducing risk is in the income that the farm family earns from year to. of major concern year An important goal among smallholder farmers. particularly poorer farmers is just to survive A wish for. security is a normal motive for all people Some farmers. see this as a more important goal than making profits But. the goals of trying to reduce risk and to increase profit do. not have to conflict Those farmers who generate more. profit are often better able to survive the bad years in. farming when yields and prices are low,Social goals. Many farmers are more concerned about their quality of. life than they are about making more money They may. be more interested in making sure that farming gives. them the time available for family community or leisure. Some farmers may not be interested in a particular farm. For some farmers enterprise even though they could earn high profits from it. profit is not,the main goal, Farmers often have preferences for different enterprises. Some may not want to raise pigs or poultry others may. not want to keep cattle even if cattle are highly profitable. This is often related to family traditions culture religion. and even social standing in the community,Before you can effectively advise farmers about. farm management decisions you will need to understand. the goals and motives of the farmer and the farm family All. decisions that farmers make have to refer to their goals. Introduction 9,Some of the questions that extension workers may.
wish to ask farmers are therefore,Do you want to produce all your food. requirements,How important is it for you to make profits. in order to be able to buy things,To what extent are you willing to take risks. Do you wish more time for family community,or leisure. Are there any crops you prefer to grow,or animals you prefer to rear.
Are there any crops or animals that you,would not want to grow or rear. Farmers preferences and goals affect the, decisions they make about their enterprises What to. grow How to grow How much to grow For whom to, grow These goals guide their choices between different. courses of action,Goals are about satisfaction However when a. ECONOMICS for farm management extension by David Kahan FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Rome 2008 2 First Printed 2008 Reprint 2013 The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations FAO concerning the

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