7.

1 Farm management, scope, importance and characteristics

Basic Terminology related to Farm Management

To get extra 20-30 marks we need to use precise terms instead of juggling with general
stories/lengthy answers. Following terminology will help you with the same

Agricultural Holding: The Economic unit under single management engaged in agricultural
production activities

Cost of Cultivation: Its total cost incurred for production on per unit land (e.g.Rs/ha)

Cost of Production: Its total cost incurred for producing a unit of produce (e.g.Rs/qtl)

Economies of Scale: It is decrease in average cost of production when there is increase in

scale/ amount of production

Economies of Scope: It is decrease in average cost of production when there is increase in

Variety of goods utilising similar resource or production process

Farm Planning: It is continuous, intellectual, first in the order of process wherein a scheme
of steps are predefined to achieve production, financial and marketing goals under sound
farm management program (i.e. resources are utilised sustainably) OR

Farm planning: may be defined as the process of making decisions regarding the
organization and operation of a farm business so that it results in a continuous maximization
of net returns of a farm business. (Agricultural Economics by S Subba Reddy and et al.)

Farm Budgeting: It refers to Farm planning expressed in monetary terms. Farm Budgeting
may be classified as Enterprise budgeting, Partial budgeting and Complete Budgeting

Farm management: is defined as the art of managing a farm successfully as measured by the
test of profitableness (Gray). Or

Farm management is defined as the art of applying business and scientific principles to the
organization and operation of the farm (Andrew Boss).

Operational Holding: All land which is used wholly or partly for agricultural production and
is operated as one technical unit under one person.

Sl. No Category Size-class

1 Marginal <1.00 hectare

2 Small 1.00-2.00 ha
3 Semi-Medium 2..00-4.00 ha
4 Medium 4.00-10.00 ha
5 Large >10 ha
(Source-Agriculture census, agcensus.nic.in)

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Farm: It is Socio economic (since it is source of livelihood income and close to socio-
cultural relation with farmer) and decision making unit (how to allocate scare farm resources
which have alternative uses. (Agricultural Economics by S Subba Reddy and et al.)

Firm: Firm is unit of production that employs factor of production to produce goods and
services under given state of technology (ICAR-IASRI- New Delhi)

Plant: It is a technical unit under same management and same means of production.
(Agriculture census, agcensus.nic.in)

Opportunity cost: Cost of next best alternative. It is the benefit forgone from next best
alternative

Systems of Farming: It is generally used to denote the ownership of land, farm resource
management and other managerial decisions. It may be peasant, cooperative, collective,
Capitalistic or state farming

Types of Farming: defined as ‘when farms in a group are quite similar in the kinds and
proportions of the crops and the livestock that are produced and in the methods and practices
followed in production, the group is described as a ‘type of farming. (Johnson)

It may be Specialised, Diversified, Mixed, Ranching and Dry farming

S.No Type of Farming Amount of Rainfall

1 Dry farming <750mm

2 Dryland farming 750-1150 mm

3 Rainfed farming >1150 mm

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Farm management: is defined as the art of managing a farm successfully as measured by the
test of profitableness (Gray). Farm management is defined as the art of applying business
and scientific principles to the organization and operation of the farm (Andrew Boss).

Scope
 It deals with individual farm units i.e. microeconomic in nature.

 It deals with both technical efficiency (optimum allocation of scarce resources

and economic efficiency (Profit maximisation/ cost minimisation).

 It is multidisciplinary in character and hence holistic in approach

 Farm management principles attempts to solve

 Production problem- What to produce (Principle of Product

Substitution), How to produce (Principle of Factor Substitution) and How
much to produce (Law of Variable Proportion)

 Financial problem- How to arrange capital required quantity of capital

required and timing of its requirement. It involves Farm Budgeting,
preparation of financial analysis tools like Balance sheet, Profit loss
statement and Cash flow statement

 Marketing problem- How to sell, how much to sell and where to sell are
some problems addressed here

 Farm Management includes farm management research, training and

extension

FM Reseacrh FM Training FM Extension

•Scientists of ICAR, SAU, NGO •KVK, State Agri Depts, Farm •ATIC, ATMA, SAUs
and other research depts Schools •Approach may be Individual,
•Development of technolgy •Field demonstration i.e. group or mass based on
Seeing is Believing objective
principle,Participatory •IARI Post office linkage
methods i.e Learning by model, Institute Village
Doing Linkage Program (IVLP),
•Teaching of technology/ Front Line Demonstations
skills (FLD) and Tecnology
Assesment and Refinement
(TAR) programme

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Characteristics of Farm Management

Microeconomic in
Nature
( treats individual farm
as a unit of Analysis)

Economic efficiency is goal Both Art & Science

i.e. profit maximisation Characteristics
under sound FM Practices (Application of human
(sustainable and efficient
of FM creativity and Economic
use of resources) laws to farm)

Holistic and Inder

Disciplinary Approach
which needs Fieldwork

Importance of Farm management in India

 To achieve doubling farmers income by 2024-25 we need to carry out farming under
sound farm management principles
 Cost Minimisation to be achieved by increasing use of in farm resource use
technologies like green manuring, mulching, application of organic farming
(Paramparaghat Krishi Vikas Yojana), Zero Budget Natural farming
 Resources should be utilised efficiently and sustainably like water resource may be
used efficiently (40-70 per cent) through drip irrigation or sprinkler irrigation (PM
KRISHI Sinchai Yojana)
 Better price realisation by increasing farmers share in consumer’s rupee by direct
marketing like Apni Mandi in Punjab, Krushak Bazaar in Odisha, Rythu bazaar
in Andhra Pradesh etc
 Timely credit arrangement through Kisan credit card and income augmentation
schemes like PM KISAN, KALIA scheme in Odisha aids in timely input provision
and reducing farmers dependeny on Local money lenders

Conclusion: Farm management under sound principles leads to prosperity of farmers thus
enabling food and nutritional security to nation along with cushion inflation problem by
reducing food prices

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