Explain the basic steps in farm planning and budgeting

I. RESOURCE INVENTORY:

The development of whole plan is directly dependent upon an accurate inventory of available resources. The resources provide the means for production and profit. The type and quality of resources available determine the inclusion of enterprise in whole farm plan.

1) Land: Land resource should receive top priority when completing the resource inventory. It is one of the fixed resources. The following are some of the important items to be included in land inventory
a) Total number of acres available

b) Soil types ( slope, texture, depth)

c) Soil fertility levels.

d) Water supply or potential for developing an irrigation system.

e) Drainage problems and possible corrective measures.

f) Existing soil conservation practices

g) Existing and potential pest and weed problems which might affect enterprise selection and crop yields.
h) Climatic factors including annual rainfall, growing seasons etc.

2) Buildings: Listing of all farm buildings along with their size, capacity and potential uses. Livestock enterprises and crop storage may be severely limited in

both number and size of the build ings available.

3) Labour: Labour should be analyzed for both quantity and quality. Quantity can be measured in man days of labour available from the farm operator (farmer),
family members and hired labour. Labour quality is more difficult to measure, but any special s kills, training and experience should be noted.

4) Machinery: it is also a fixed resource. The number, size and capacity of the available machinery should be included in the inventory.
5) Capital: The farmer’s own capital and estimate of amount which can be

borrowed represent the capital available for developing whole farm plan.

6) Management: The assessment of the management resources should include not only overall management ability but also special skills, training, strengths, weaknesses of mana ger. Good management is reflected in higher yields and more efficient use of resources.

II. Identifying enterprises: Based on resource inventory, certain crop and livestock enterprises will be feasible alternatives. Care should be taken to include all possible enterprises to avoid missing enterprise with profit potential. Custom and tradition should not be allowed to restrict the list of potential enterprises.

III. Estimation of co-efficients : Each enterprise should be defined on small unit such one acre or hectare for crops and one head for livestock. The resource requirements per unit of each enterprise or the technical coefficients must be estimated. The technical coefficients become very important in determining the maximum size of enterprise and the final enterprise combination.

IV. Estimating gross margins :

A gross margin is estimated for a single unit of each enterprise. Gross margin is the difference between total income and total variable costs. Calculation of gross margin requires the farmer’s best estimate of yields for each enterprise and expected prices for the output. The calculation of total variable cost requires a list of each variable input needed, the amount required and the price of each input.

V. Developing the whole farm plan:

All information necessary to organize a whole farm plan is now ready for use. The systematic procedure to whole farm planning is identifying the most limiting resource and selecting those enterprises with greatest gross margin per unit of resource.

Returns per unit of resource = Gross Margin/Units of resources required

Land will generally be a limiting resource and it provides a good starting point. At some point in the planning procedure, a resource other than land may become more limiting and emphasis shifts to identifying enterprises with greatest return or gross margin per unit of this resource.

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raphael answered the question on August 12, 2021 at 06:07