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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, they can also hire.Module 368

BuildingsThe cost of buildings can be kept very low if thefarmers and farm families do most of the building.Careful repair and maintenance of buildings will makethe buildings last longer and this will reducedepreciation cost.Module 369

BuildingsWhere possible and practical, a farmer can hire abuilding. Buildings that are hired should be put tomaximum productive use. An empty building is a wasteof money.There is no use in filling a building with storedproduce where it will be losing value; if produce canbe sold at a good price, it should be sold.Module 370

Machinery and equipmentInvestment in machinery and equipment can be veryprofitable if the farmer can manage the finance andif it increases profitability.Mechanization can be costly both in terms of buyingit and in terms of repairs and maintenance.Module 371

Mechanization through animal tractionIn many countries animal traction with draughtanimals is an immediate way of mechanizing.The investment includes the animals and theequipment they will pull such as a plough, a planter, acart or other farm implements.Module 372

Motorized machinery and equipment,intermediate power driven equipmentThis includes two-wheel tractors and light four-wheeltractors.Farmers can also invest in small-scale post-harvestequipment like threshers, mills or oil-presses; addingvalue to their products before taking them to market.Module 373

Heavier power-driven equipmentThis includes tractors, combine harvesters ortrailers.Hiring is an option that can be used by farmers andthis saves on the cost of buying the machine.Hiring is often cheaper than buying.Module 374

Heavier power-driven equipmentCooperative use of machinery or sharing is anotheroption.Shared use of equipment by two or more farmers hasoften been more successful than cooperatives.Module 375

Short-term decisions about physical andfinancial capitalFarms require many decisions that affect the farmfor a single season;Which seed to buy?When to plant?Which market to use?Module 376

Short-term decisions about physical andfinancial capitalFarms also require short-term decisions which impacton the long-term sustainability of the farm.Often these decisions involve choices about what todo with limited cash.Should the farmer repair a weakening fence thisyear, or use the cash to buy all the seed needed?Module 377

Short-term decisions about physical andfinancial capitalNot buying all the required seed will limit income thisyear.Not repairing the fence may allow cattle into thefields and destroy the crop.Farmers will need to think carefully about the manyshort-term decisions to be made. They need toanticipate what long-term effect short-termdecisions will have.Module 378

Farm management decisions: social capitalSome farm management decisions involving socialcapital affect the farm directly.Other farm management decisions involving socialcapital affect common property, such as in the caseof common forests, grazing land and water to whichthe farm family has access.Module 379

Decisions affecting the farm directly1. What are the sources of crop land available to me? How do I accessthat land?2. What sources of labour are available to me? How do I access it?3. What sources of finance are available to me? Can I borrow from familymembers? Should I be part of a group to negotiate better terms?4. Should I buy my own tractor or alternatively hire from a tractor pool?Is it possible to borrow from a neighbour?5. Should I market my own farm produce? Should I be part of anorganized marketing group?6. Should I buy my own inputs and materials? Should I work with othersto buy in bulk?Module 380

Decisions affecting common property (offfarm)7. How can I access water for irrigation? Is there adequate water forirrigation?8. Should we establish a community forest plantation?9. How should we as a community treat the watershed? How should weorganize ourselves?10. What are the sources of grazing land available to me? How do I accessthis land and vegetation? What are my responsibilities?Module 381

Farm management decisions: social capitalAll these decisions have an impact on the farmer’sresource base and income.Farm household decisions are inseparable from thesocial relations of farming.Module 382

Farm management decisions: social capitalSocial capital can lower the costs of performing farmoperations. In this way it can improve the efficiencyof farming. This often results in financial savings andincreased income.Farmers coming together as a group facilitatecooperation and foster confidence.Module 383

Farm management decisions: social capitalSocial capital is useful in promoting collective actionsuch as water saving and communal grazing.It helps to ensure that farmers get greater benefitswhen negotiating with powerful bodies.Social capital can also promote better use of naturaland other resources, if managed correctly.Module 384

Farm management decisions: social capitalJoint or group interventions contribute to theformation of social capital by developing expertisewithin the group such as;Working together for a common goodLearning and implementing formal rules and proceduresDemocratic election of leadersParticipatory decision-making in allocation of credit and inputsfor farm enterprise developmentModule 385

Farm management decisions: social capitalSocial capital arrangements provide farmers andother members of the rural community with fullcontrol over the use of resources.There are many benefits from such an association atgrass roots level:Higher productivityReduced costsIncreased efficiencyBuilding of democratic group organizationEnhanced self-reliance among the poorModule 386

Farm management decisions: social capitalThe strength of social capital arrangements lies inthe processes that they offer and their economic andsocial benefits.Module 387

Session 3.3Inputs, markets and farm managementLearning outcomes:Understand the range of decisions farmers makeabout inputs, equipment and marketsUnderstand the role of the extension worker insupporting the farmer in making decisions aboutinputs, equipment and marketsModule 388

Inputs, markets and farm managementThis session provides checklists for you to helpfarmers make decisions about inputs, equipment andmarkets. It also helps you identify your role in thefarmer's decision-making process.Module 389

Decisions about inputsFarmers need to know which inputs to use and whereto get them.They need to determine whether the additional costof using inputs will generate sufficient additionalincome to cover these costs.Module 390

Decisions about inputsInputs can be obtained from a number of sources:The farmer ’s own farmAnother farmPrivate suppliersLocal general dealersFarmer cooperativesProduct distributorsIn each case, the farmer must consider the price,quality and availability offered by the various sourcesof inputs.Module 391

Choice of inputs and equipmentWhen deciding on inputs and equipment there are anumber of questions a farmer should ask:Is it technically effective?Is it of dependable quality?Is its price reasonable?Is it available locally when a farmer needs to use it?Is it offered for sale in appropriate sizes or amounts?Module 392

Qualities of inputs (supplies and equipment)Technical effectiveness:Seed, fertilizer or other items must be technicallyeffective.Does the seed produce as promised?Does the fertilizer perform as intended?Does the livestock medicine really work?Does the implement do the job it is supposed to do?Is the input or equipment appropriate to the farmer’s farm system?Module 393

Qualities of inputs (supplies and equipment)Quality and dependability:Sustained quality is another important characteristicfor inputs and equipment.Is equipment built to last?Does it come with a guarantee?Is the seed within its expiry date?Do the pesticides contain any illegal chemicals?Have the feeds been properly mixed?Is the supplier reliable and honest?Module 394

Qualities of inputs (supplies and equipment)Price relationships:A farmer should not buy fertilizer or other inputsjust because its price is low.The inputs must also be effective and of a certainquality.In all events the farmers must take into account theprice, especially the relationship between prices andinputs and the prices the farmer can get for farmproducts.Module 395

Qualities of inputs (supplies and equipment)Availability when needed:The need for each input is highly seasonal.Seeds must be available shortly before planting andcan seldom be sold at any other time of the year.Fertilizers must be applied at specific times and fewfarmers have facilities for storing themsatisfactorily. The same is true of pesticides,although small amounts of them can be held forfuture use.Module 396

Qualities of inputs (supplies and equipment)Quantity offered for sale:The size of the containers in which many supplies areoffered for sale is also important.Frequently containers hold more than a small farmneeds at any one time and the farmer may not havefacilities for storing the extra amount until thefollowing year when it may be needed again.Module 397

Choice of input and equipment supplierFarmers also need to know who are reliable andtrustworthy suppliers of inputs, equipment,machinery, spare parts and maintenance supplies.Farmers also need to know what each supplier offersin terms of prices, quality and availability of inputsand equipment.Module 398

Operations and maintenanceOne of the key factors in profitability is maintainingcapital.The better equipment is maintained, the longer it willretain its productive power.Good farm management includes care for all of thephysical capital on the farm.Maintenance costs money, so as with all farmmanagement decisions, the value of the maintenancemust be measured against the income it generates.Module 399

Decisions about the marketDecisions about markets are

Understand the farm management decision-making process Understand the different roles family members play in the decision-making process . Module 3 4 The farmer and decision-making In this session you will learn to realistically visualize the de