Module 3: Farm Management And Decision Making
Module3:FARM MANAGEMENT ANDDECISION-MAKINGSession 3.1 The farmer and decision-makingSession 3.2 Resources and farm managementSession 3.3 Inputs, markets and farm managementSession 3.4 Risk, vulnerability and sustainabilitySession 3.5 Information and farm managementModule 31
IntroductionIn this module the concept of farm management will beintroduced. Farm management decisions will be coveredrelating to the five capitals, inputs and marketing.The concept of risk will be introduced as the importanceof data and information in management decisions.Module 32
Session 3.1The farmer and decision-makingLearning outcomes:Understand the farm/family goalsUnderstand the farmer as managerUnderstand the farm management decisionmaking processUnderstand the different roles familymembers play in the decision-makingprocessModule 33
The farmer and decision-makingIn this session you will learn to realisticallyvisualize the decision-making boundaries of a farm.The physical decision-making boundaries and how theyextend to the farm household will be explored.You will also cover the decisions that have to bemade, who will make them and when.Module 34
The farmer and decision-makingDecision-making is central to farm management. Eachdecision has an impact on the farm and on the farmhousehold. Even deciding to do nothing is a decisionand has an impact.The more a farmer is aware of the decision-makingprocesses that affect farm and household, the moresustainable the enterprise will be and the more likelyit will be profitable and sustainable.Module 35
The farmer and decision-makingIn many parts of Africa, farm decisions are closelytied to decisions made in the household. Farmdecisions affect food availability, play an importantrole in social ceremonies and are linked to issues ofsocial status and wealth.Module 36
The farmer and decision-makingTwo of the main features for understanding economicdecision-making are;(i) the way farm boundaries are determined(ii) the ultimate social objectives for which farm goods areproduced.In this training programme we refer to the farmboundaries as ‘decision-making boundaries’.Module 37
The production decision- making boundariesWe generally first think of a farm in terms of itsphysical enterprise boundaries; land, crops, livestock,fences etc.Many of you are trained only in decision-making aboutproduction.The production decision-making boundaries are justthe beginning of the decision-making boundaries ofthe farm.Module 38
The production decision- making boundariesProduction decisions depend on a number of factorsthat fall outside the physical/ production area of thefarm.One of these factors is the farm family/household.Module 39
Farm and family household decision-makingboundariesIn many parts of Africa, the farm and the householdare virtually one entity.Decisions about the farm directly impact on thehousehold and decisions about the family directlyimpact on the farm.Module 310
Farm and family household decision-makingboundariesMore and more, families require cash for things likeschool fees, medicines, transports, etc.It is useful for anyone working with a farming familyto understand the dynamics of the farm householdand the relative decisions.Module 311
Farm and family household decision-makingboundariesFarm boundaries are determined by family structure.There may be a family farm under the head ofhousehold, but the farm may have various sub-unitsover which a family member will have some level ofcontrol.This will have implications for decision-making,particularly with reference to shared labour andequipment.Module 312
Farm and family household decision-makingboundariesTraditionally men are heads of households, but thereare now many variations.Even within a clearly established arrangement,different members of the family make differentdecisions for the family at different times of theyear.Module 313
Farm and family household decision-makingboundariesFor each specific farm, you will need to identify notonly the physical boundaries of a farm, but who makeswhat decisions and when.This is necessary in order to determine the decisionmaking boundaries of each farm in terms of access toresources, resource sharing at family level and themain objectives of production.Module 314
Social and economic goalsFarmers and their families need a secure source offood and they seek a secure source of income.Many develop a strategy of producing for a marketwhile at the same time ensuring food self-sufficiencyeither from the farm harvest or by use of cash topurchase food from the market.Module 315
Social and economic production goalsIn many countries, even though the profitmaximization objective is of greater importance,farmers are still bound by social obligations withintheir own communities.In some areas farmers are less bound by theseobligations and are freer to focus on farming forprofits.Module 316
Social and economic production goalsFood security is a social goal. Generating income isan economic goal. These family goals often conflict.Uncertainty (or risk) is part of the conflict.Often demands of food security are detrimental tofarm profitability and it can happen that the solefocus on producing for the market can negativelyaffect food balances and other food security factors.Module 317
Social and economic production goalsMarket-orientated farm management skills and toolscan be used to make more informed decisions aboutfood production and income generation.Module 318
Short-term versus long-term viewGood farm management requires a long-term view.It requires thinking carefully about what mighthappen in the future as a result of a decision madetoday.Module 319
Short-term versus long-term viewLearning and applying principles of farm managementenables farmers to look at their farms moreimpartially and to consider alternative actions inadvance.This will help improve performance and profit for thefuture.Module 320
The farmer as a managerAny farmer has two main jobs;(i) To take care of plants and livestock in order to get usefulproducts(ii) To manage the farm; that is, making decisions about how touse the farm’s resources.Module 321
The farmer as a managerDecisions require making choices betweenalternatives.Farm planning is thinking ahead about farm activitiesand making decisions some time before they will becarried out.As a farmer becomes more market-orientated, thefarmer will need to improve planning and decisionmaking skills.Module 322
The farmer as a managerThe kind of decisions farmers make as managers canbe summarized as follows:(i) What to produce(ii) Whether to produce for food, for income, or for both(iii) How to produce it(iv) How much to produce(v) What resources will be used and when(vi) What inputs to use and where to get them(vii) How much of the products to sell and when(viii) Where and to whom to sell the products and at what prices.Module 323
Key aspects of decision-makingIn order to make fundamental decisions farmers needto develop understanding and skills in four broaddecision areas:DiagnosisPlanningImplementingMonitoring & EvaluationModule 324
Key aspects of decision-makingLearning how to make decisions in these four areaswill put farmers in greater command of the resourcesand processes that influence their food security andtheir income generation.The four areas flow in a pattern which supportscontinuous learning processes about what works bestfor the farmer and the farm family.Module 325
Key aspects of decision-makingModule 326
DiagnosisDiagnosis means looking at the farm and household asit functioned over some period of time. For a firstdiagnosis, the farmer may want to understand howthe farm has produced over several seasons.Module 327
DiagnosisJust like a doctor with a patient, a diagnosis will givethe farmer important clues about the ‘health’ of thefarm.How is it producing?What is the condition of the farm’s resources?Are resources becoming more or less productive?How profitable is it?Are farm goals being achieved?What problems are there?What opportunities exist?Module 328
PlanningOnce diagnosis is complete, planning can begin;decisions about what, how and how much to produce.Some planning decisions will be based on knowledge;such as how much land and labour are available. Otherplanning decisions will be based on less certain things,such as rainfall and product prices.The plan will also include an indication of theexpected results in terms of yields and income.Module 329
ImplementingImplementing means putting the plan into action. Ingeneral, implementing does not require majordecisions.Things may not always work according to plan; lessrainfall than expected, the price of a crop changesetc.During implementation, plans may need to be adjustedto accommodate such changes.Module 330
Monitoring & EvaluationMonitoring means keeping track of what is happeningon the farm and the plan is a guide for monitoring.Monitoring provides the farmer with the informationneeded to evaluate the success of the plan.Module 331
Monitoring & EvaluationEvaluation means judging how well the farmperformed when compared to the plan.Did things go as planned?Were expected yields achieved?Were expected incomes reached?Monitoring and evaluation provide the information thefarmer needs to diagnose the farm for the nextseason. It is the basis for making the next plan.Module 332
Key aspects of decision-makingFarmers that follow these decision-making steps willhave a very powerful process in their hands.Just like a doctor, they will be able to know the‘health’ of their farm business.If the farm is healthy the farmer will know what todo again, if the farm has problems, the farmer willpossibly know why and what to do about it.Module 333
Key aspects of decision-makingSuch a process will increase the sustainability of thefarm.It will improve the family’s food security and it willmake the family’s income more predictable andreliable.Module 334
Men and women in farm management decisionmakingThe role or place of women in making farmmanagement decisions varies widely across Africa.Women and men clearly have equal personal capacityto apply the principles and tools of farm management.Module 335
Men and women in farm management decisionmakingMarket–oriented farm management should not, inprinciple, be affected by gender.In practice gender may play a very important role,especially regarding access to resources. Women oftenhave less access than men to the inputs required forfarming.Farm management advice needs to be carefullytargeted in order to address gender specific issues.Module 336
Session 3.2Resources and farm managementLearning outcomes:Understand the importance of maintainingvalue and productive power of resourcesUnderstand the role of farm managementin the sustainable use of resourcesModule 337
Resources and farm managementIn this session you will cover in detail the kind ofdecisions required which affect the use and allocationof the five capitals used by farmers.Module 338
Resources and farm managementEach decision has an impact on the farm and on thefarm household.Farmer awareness of the range of decisions andfactors affecting those decisions, the better thedecisions will be, the more sustainable and profitablethe farm will be.Module 339
Resources and farm managementWe know that some of the key decisions to be madeinclude:What to produce?Produce for food, for income, or for both?How to produce it?How much to produce?What resources will be used and when?What inputs to use and where to get them?How much to sell and when?Where and to whom to sell and at what prices?Module 340
Resources and farm managementUnderpinning all these decisions are the resourcesavailable to the farmer.Each decision a farmer makes is essentially about howto utilize farm and household resources.Module 341
Resources and farm managementResources or capital are categorized into five types:Natural capitalHuman capitalPhysical capitalFinancial capitalSocial capitalModule 342
Resources and farm managementEach of these capitals is vulnerable. Each is subjectto stresses and shocks.There are many pressures on these resources thatmay cause them to decrease in value or reduce intheir productive capacity.There are other pressures and events which maycompletely deplete or remove the resource.Module 343
Resources and farm managementFarmers have two areas of concern:1. Productivity of resources.2. Profits.To achieve both objectives, farmers will need toconsider very carefully decisions about resourceutilization.Module 344
Resources and farm managementFarming for profits does not imply that one mustsacrifice resources to maximize income.The real goal of market-oriented farm management islong-term sustained profits from farming; good farmmanagement demands sustainable use of resources.Module 345
Resources and farm managementMaintaining and improving the value and productivepower of farm resources, sustains profits.Good farm management embraces sustainableagriculture and supports sustained profits from thefarm.Module 346
Resources and farm managementOne of the key decision areas of a good farmmanager is maintaining the farm’s resources.Reducing the vulnerability of a farmer’s natural,human, physical, financial and social capital will helpensure that they are productive for many years.Module 347
Resources and farm managementMaintaining control over the long-term value andproductive power of resources is a very importantpart of market-oriented farm management.Farming for high profits in the short-term withouttaking steps to sustain resources will eventually leadto lower profits.Good farm management looks for ways to put theseresources to work in such a way that the farm will beprofitable in both the short and long term.Module 348
Farm management decisions :natural capitalFarmers do not farm in isolation. They take from andinfluence natural capital.Natural capital is the first resource base on which afarm is established and run.Farmers need to be very aware of the interrelationship of their farms with their naturalresource base.Module 349
Farm management decisions :natural capitalNatural capital is run down and destroyed by one oftwo forces:1. Acts of nature such as droughts, wind and floods2. Deliberate acts of humans such as over-grazing,harmful production practices.Module 350
Farm management decisions —natural capitalSome actions that can be taken by farm managers toenable land remaining productive and to help makesure that common property also remains productiveare:Improved land reclamationIntroduction of soil conservation measuresDevelopment of better integrated on-farm livestock productionactivitiesModule 351
Farm management decisions —natural capitalWhile each of these steps take place at a cost, theyhave long-term benefits. They will contribute to thesustained profitability of the farm.Module 352
Farm management decisions:human capitalDecisions about human capital on the farm are amongthe most important decisions made by a farmer.Decisions about human capital represent choices intechnologies.They represent productivity, technology choices andhow the farm family earns its income.These decisions represent the way the family seesitself and the way it sees its farm.Module 353
Farm management decisions :human capitalWith the change in economies in Africa, theavailability and the cost of labour are changing andwith it farmers now face serious questions.Farmers need to decide if it is better for theirfamilies to sell their labour in town or to use it on thefamily farm.Understanding the concepts, principles and tools offarm management will help farmers assess thechoices and to make better decisions.Module 354
Farm management decisions:human capitalYou will need to take special care in assisting farmerswith examining this aspect of farm management.Human capital decisions touch on societal and culturalissues as well as on more purely management issues.Many of the factors to be taken into considerationare related to the status of women.Module 355
Farm management decisions:human capitalSome technical or practical factors that might alsobe taken into account include:(i) Issues of land rights and inheritance(ii) Who is allowed to work outside the home(iii) The effect of HIV/Aids and other health issues on ‘head ofhousehold’.Module 356
Options for alternative labour sourcesFarmers need to think carefully about options forproviding power on the farm and to plan for them inadvance.Some of the options might include:Labour saving technologiesChanging farm enterprises and combinationsIncreasing productivityModule 357
Labour saving technologiesMost farmers could improve the productivity of theirlabour by adopting better tools that have been triedout successfully elsewhere.This may include replacing hand-labour with animalpower by using drought animals, tractors ormotorized implements. Each of these is an additionalcost to the farm.Farmers should decide to use labour savingtechnologies only when sufficient returns can begenerated to cover the extra costs.Module 358
Changing farm enterprises and combinationsMarket-oriented farmers should consider adding orchanging crops carefully. This can be a very effectiveway to increase farm profitability and cope withlabour productivity problems.Some possible changes include:IntercroppingIntroducing a new cropModule 359
Increasing productivityThere are a number of ways to increase labourproductivity ;Introducing new technologyProducing more per hectareChoosing the right enterprises to produceImproving farm layoutUsing improved tools and working methodsPracticing good labour relations and paying wages in relation to theamount and quality of work doneModule 360
Increasing productivityGood relations means treating labourers justly, payingfair wages and providing good supervision for hiredlabour.Module 361
Increasing productivityNOTEIncreased productivity based on intensification ofcropping techniques together with mechanizationoften results in increases in labour constraints.Module 362
Farm Management decisions;physical and financial capitalDecisions made today limit the decisions you can maketomorrow.Farmers need to make both short-term and long-termdecisions about physical and financial capital.Short-term decisions affect long-term decisions andlong-term decisions affect short-term decisions.Module 363
Long-term capital decisions in differententerprisesCapital invested in livestock, perennial crops, orchardtrees or buildings cannot be readily changed intoanother form of capital which might earn a higherrate of return.Once capital has been invested in durable assets it iscommitted and flexibility is lost.Module 364
Long-term capital decisions in differententerprisesCapital is always limited. It should be used where itwill add most to profits.Different enterprises involve issues when making longterm capital decisions.Module 365
Tree cropsThe capital cost involved in tree production is equal tothe cost of growing that tree up to the stage of fullproduction.Taking good care of trees and controlling diseases andpests is very important to protect the money that hasbeen spent growing the tree.If the tree dies before it has produced anything,capital is lost.Module 366
LivestockThe capital cost involved in livestock production isequal to the cost of keeping that animal up to thestage it reaches full production.Animals being kept for meat, milk, eggs or otherproducts should be kept fit and healthy, so toproduce efficiently. Only in this way can the farmersget high gross margins for their livestock.Farmers want and need to protect investments. Ifthe animal dies before producing, capital is lost.Module 367
LivestockIn cases where farmers cannot afford to raiselivestock
The farmer and decision-making Decision-making is central to farm management. Each decision has an impact on the farm and on the farm household. Even deciding to do nothing is a decision and has an impact. The more a farmer is aware of the decision-making processes that
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