What is Farm Management?
Farm Management is a branch of Agriculture Economics that deals with the principles and practices of farming, with an objective to get maximum profitability from the farms. Farming today is more than just producing crops. It needs to address the productivity, profitability and sustenance and conservation of farms.
All farmland are not equal, hence their management to realize return on investment is crucial. It is a decision-making process, in which resources are allocated to operate the farm business in a way to achieve some objectives. These resources include land, labor, capital and knowledge
A farm is normally an area of land under the single ownership of a farmer used to raise crops or for pasture. The management refers to the production planning and the necessary activities undertaken to get maximum returns from the cultivated yield. Agriculture encompasses growing of crops, raising livestock for milk, eggs and meat, providing raw materials to industries and marketing of products for use.
The farm practices have improved over a time to realize quality yields to feed the growing population. The natural inputs are today replaced with purchased inputs and the production is nowadays being oriented towards the market rather than use by the family. Agriculture is getting business oriented.
The need for Farm Management
- The farmers need to maximize their profit and increase their livelihood
- The producers need to make better utilization of resources and manage the varying costs and climatic changes
- They should incorporate new technologies and use it to the best advantage.
- It enhances production planning and gives the farmers better insights.
Farmers run the farm business and they have their goals.
The New age Farm
Agricultural progress of a country entirely depends on good management of farms. The process of agricultural production is always in a constant flux which could include economical, climatic, technical and policy changes. The lack of availability of farm land, climatic changes, insufficient resources and the growing population question the sustainability of production.
Modern technologies are the right solutions to revolutionize the way farmers farm. Innovation is very important in modern agriculture. Agriculture technology is penetrating the market at an accelerated pace in farming and agriculture practices. This is making businesses more profitable, safe and climate resilient. Blockchain, IoT, Automation, Vertical farming, Precision agriculture and AI are the major game changers in agriculture.
Agriculture technology offers the following benefits
Types of Farms
There are more than 570 million farms around the world, most of which are small and family operated.
Globally based on a study farms are distributed as
It is seen that the average farm size has decreased in the developing countries and increased in the developed world. The farmland distribution is more unequal in developed countries compared to developing regions.
The farm size matters for organizations and policy makers to develop policies and support family farming, increase their productivity and improve their livelihood. These policies are important for organizations to reach their Sustainable Development Goals. Farm size does not correlate with the types of commodities produced.
These are Type-1 farms covering less than one hectare and the farmers are called marginal farmers
65 % of total farmers in India are marginal farmers
Average landholding of farmers is around 3 acres
The number of marginal farms has been increasing over time due to growing population. The percentage of holdings, operated area and average holdings differ based on geography. Marginal farmers play a significant role in maintaining food security and sustainable agriculture.
These are Type-2 farms covering an area between 1 and 2 hectares and the farmers are called smallholder farmers.
According to FAO, the world’s smallholder farmers produce a third of the world’s foods.
5/6 farms in the world consist of less than 2 hectares
They operate around 12% of agriculture land
They produce 35 % of world’s food
The importance of small holder farming is often advocated because they are responsible for world’s major food production. These farms allocate their greatest share of their crop production to human food.
These are type 3 farms covering an area greater than 5 hectares. The rapid rise of medium farms has been due to the fact that some smallholder farmers have acquired more land, driven by urban professionals and influential class. Especially in countries like Africa, these farms account for the 40% of the country’s agriculture produce. These farms are important for rural transformation.
These are type 4 farms which are small dependent specialized family farms, often with family as tenants. Family farmers account for 80 % of world produce and they represent the largest source of employment worldwide, They are mostly involved in multi-cropping farming systems which enhances resilience and sustainability.
Commercial Family Farms
These are type 5 farms that usually specialize and operate along the likes of estates. Commercial farms is about growing crops or rearing animals for raw material, food, export, specifically for profitability.
These are the type 6 farms which are large areas of land owned by a person or family. These are normally used for farming and ranching.
Problems of Farm Management
These are the questions that come forward while discussing about farm management
- How much to produce
This is dependent on the type and level of inputs used. The amount of seeds, fertilizers, water and other resources used decide the level of production and the profit.
- How to produce
There are many techniques in the way crops can be produced including beef and meat. A farmer must choose the appropriate combination of inputs to minimize cost of production.
- What to produce
This involves selection of crops or combination of crops and livestock or crop rotation. The alternative combinations should maximize profits
- When to produce
This is also important as the timing is crucial in crop cultivation and based on that, decisions need to be taken.
Principles of Farm Management
The principles of Farm Management are the fundamental laws on which the farming practices are built. They provide a foundation for effective practices and guide the farmer or farm manager to take the right decisions.
The 6 principles of Farm Management are
- Principal of Variable proportions or Laws of returns
This helps in deciding the optimum usage of input that needs to be applied for crop cultivation. This results in law of diminishing returns ie. If increasing amounts of one input is added to a process, while all other inputs are constant, amount of output added per unit of input variable will eventually start decreasing. It solves the problems of how much to produce.
For example, while considering the use of weedicides, the farmer needs to balance the cost involved as against the value of the expected yield.
- Law of Equi-Marginal returns
The farmer has limited capital and he has to use that for cultivation of crops. He has to decide the type of crops and the area and maximize the net revenue as a whole. The profits are maximized in such a way that marginal returns are equal in all cases. It guides in allocation of resources in conditions of scarcity.
- Law of Substitution
In agriculture varying inputs can be substituted in varying degrees for producing a given output. A farmer can choose a combination of sources like farm manure, vermicompost, other inorganic fertilizers for meeting the nutrient requirements of crops. It is essential that he chooses a combination of least cost to produce a given level of output. Cost minimization will depend on the rate of substitution.
For example, the farmer can use mechanical equipment, manual labor or chemicals to control weeds. He needs to decide which method is cost and performance effective. It has to be ensured that the substituted method ensures greater saving than the cost of technique used.
- Principle of Combining enterprise
This principle describes the product-to-product relationship. Instead of considering inputs, a product mix is considered. Joint products, complementary products and supplementary products. It guides in determining optimum combination of products.
- Law of opportunity cost
This is also called alternative cost. It is the earning from the next best alternative. The farm resources being limited, there are more than one alternative use to these resources. It explains how losses can be minimized during adverse conditions.
For example if a farmer can earn a profit of $1000 from a farm growing apples and $3000 by growing avocados, then the opportunity cost of growing apples is $3000, by continuing to grow apples, he is earning $2000 less profit than he could have earned.
- Law of Comparative advantage
This is related to resource productivity and cost of production.
Cost of production is given importance while taking production decisions. There could be short run and long run accounting periods. This explains details of regional specialization in the production of commodities.
These principles are influenced by two main factors, one the degree of uncertainty under which the activities have to be planned. These uncertainties could be due to climatic influence, pests and diseases, natural disasters, technology used and the price and markets. The other factor is farm orientation, whether it is market oriented commercial farming, subsistence farming etc. Farm management involves a constant process of economization.
The technologies are developed using scientific research, performed in laboratories while farm management research is done in the field by collecting data and analyzing them from farms and evaluate the farming practices. The main intention is to optimize farm management practices for higher production efficiency and enhancing farmer earnings.
Technology and Agriculture and the Recent trends
The agriculture sector forms 18% of India’s GDP and employs 65% of the workforce. Despite the improvement in food production, there are several challenges. Agriculture is largely dependent on climate and its impact and technology innovations are required to realize higher productivity and profitability.
With the advent of digital technology, there has been an evolution in agriculture practices reducing losses and improving the operational efficiency. The use of digital tools has positively impacted the farmers. Technology in agriculture is helpful in the use of fertilizers, pesticides and seeds. The mechanization has also led to efficient methods of harvest, tilling, thereby reducing labor. Irrigation methods have resulted in saving of resources and improved processing has reduced wastage.
The dependency on chemical fertilizers and pesticides for increasing the productivity is a threat to the environment that affects food production. It is necessary to integrate the new technologies into mainstream agriculture to address these challenges. Vertical farming and Organic farming are two of the research areas which should help to tackle these problems. While vertical farming helps in utilization of smaller land areas, organic farming promotes usage of environmentally friendly inputs for crop growth.
Vertical farming would help in meeting the demand for food production while organic farming will address the concerns of environment and climatic stress.
In Vertical farming, crops can be cultivated by planting in vertically stacked layers, that saves space especially in urban areas. There is also a minimal usage of energy and water needed for irrigation. The plants are vertically stacked in a tower-like structure. A combination of natural and artificial lights are used for a perfect environment for growth. As a medium, hydroponic and aquaponic mediums are used
In the physical layout, the plants are vertically stacked in a tower-like structure. This way, the area required to grow plants in minimised. Next, a combination of natural lights and artificial lights is used to maintain a perfect environment for an efficient growth of the plants. The third parameter is the growing medium for the plants. Instead of soil, aeroponic, hydroponic or aquaponic growing mediums are used as the growing medium. Vertical farming requires 95% less water compared to other methods, thereby promoting sustainability.
The three techniques of Vertical Farming are
Key Challenges in Vertical Farming
- Not all crop varieties can be grown in vertical farms
- Uniform practices cannot be followed
- The costs are high and controlled environments require infrastructure
- Lack of knowledge and skills.
Benefits of Vertical Farming
- Conservation of natural resources as requirement of land and water is less.
- Water is recycled and saved
- Organic production with pesticide-free method of cultivation
- Not dependent on weather, so fresh produce can be generated
- Reduction in transportation requirements saves fuel costs
- Environment friendly with reduction in wastages and emissions
Compared to traditional means of farming, harvesting of plants can be done almost 15 times in a year and products can last for about 15 days. Though it is expensive and there are related costs due to controlled environments, it is still the highly efficient and sustainable way of growing food.
Also known as Ecological agriculture, Organic farming protects the nature and the environment. The nutrient management is based on agronomy practices like crop rotation, nutrient recycling, use of crop residues, manure and minimal use of chemical fertilizers. Pests are controlled naturally with predators with optimum usage of water.
It is a method of farming where the land is cultivated keeping the soil enriched in organic wastes and other biological materials to release nutrients and keeping it pollution-free. The restricted use of synthetic fertilizers and pesticides and the use of traditional cultivation practices nurtures sustainability in food production.
Key Challenges in Organic Farming
- Labor intensive
- Agronomic practices are not followed consistently.
- Non-availability of organic inputs
Benefits of Organic Farming
- Reduces biodiversity losses, helping in conservation of environment.
- Sustainable agriculture practices help in maintaining the ecological balance
- Saves the soil with reduction in soil erosion and increasing its fertility
- Reduces air and water pollution
- Carbon sequestration helps in reducing greenhouse gas emissions
- The usage of GMO is totally absent.
The need for food security in the food ecosystem drives the need for quality crop production with sustainable means of achieving them. Protecting long term fertility of soils, saving the natural resources and addressing the climatic challenges should ensure a safe and a sustainable future for mankind and the planet.
Vertical farming and Organic farming can be adopted on a global scale to increase the food production and also conserve the environment. With the threat of rapid urbanization, vertical farming can generate qualitative and quantitative crop yields. Organic farming promises a healthier environment. Both these are promising techniques in agriculture that can be integrated into the existing stream of agriculture to realize resilience and sustenance in food production.
Check how TraceX is helping the food and agriculture industry with their farm management solutions.