FARM PLANNING AND FARM BUDGETING

        FARM PLANNING AND FARM BUDGETING

WHAT IS PLANNING ?

             It is the intellecual process of thinking before doing.

FARM PLANNING :  

‌          *   It is the determination of line of action to be followed, to achieve the desired results in the farm management system.

          *  ‌ It is the process of deciding the production problems(what, how, when to produce), financial problems(how, how much, when, where to borrow) and marketing problems(where, when, how to buy and sell) in advance.

‌         *   Farm planning is very much important in this competitive and dynamic environment.

‌         *   A farmer must plan what crop or livestock enterprise to produce, what amount of resources to be used. This is known as informal planning. 

         *  ‌ As agriculture is becoming the most complex business nowadays, a farm plan must be in the systematic manner. If the farm plan is being written, then it is known as written plan.

FARM PLANNING - MEANING :

            "Farm planning is the delibrate process of thinking, the organized foresight, and the vision based on facts and past experience that is needed for intelligent action on the farm."

TYPES OF FARM PLANNING :

            I.  ‌Simple farm planning.

            II. ‌Complete farm planning.

SIMPLE FARM PLANNING      -  It includes the minor changes in an particular enterprise.

COMPLETE FARM PLANNING -  It includes the more number of changes in the farm as the whole.

CHARACTERISTICS OF GOOD FARM PLAN:

       1.  ‌It includes efficiency in the utilization of all resources available in the farm.

       2.  ‌It should be flexible to the changing environmental conditions.

       3.  ‌Plans that are complex would consume more money and time and therefore it must be simple and understanable.

       4.  ‌It should ensure the balanced production utilizing all the available resources.

       5.  ‌It should aim at maintaing the soil fertility by following the crop rotation pratices,

       6. ‌It must facilitates the efficient marketing system for the farm products.

       7. ‌It should be based on the knowledge, experience and attitude of the farmers.

       8. ‌It should not include enterprise under risks.

       9. ‌It should be considering upto date technologies. 

FARM BUDGETING

     The expression of farm plan in terms of money is called as farm budgeting.

TYPES OF FARM BUDGETING

             I.  ENTERPRISE BUDGET.

‌             II. COMPLETE BUDGET FOR WHOLE FARM BUDGET.

             III.‌ PARTIAL BUDGET.

ENTERPRISE BUDGET

‌            * It is the estimation of income, cost and profit for an farm enterprise.

‌            * The income from the enterprise is calculated from the expected output and expected price.

            ‌ * It is prepared in terms of acre,hactare etc., which facilitates for the easy comparison of enterprises.

 

COMPLETE BUDGETING OR WHOLE FARM BUDGETING

      It is the estimation of expected income expenses profits involved in the form as on the whole.

PARTIAL BUDGETING

             *  ‌ It is the estimation of cost, returns and profitability for a minor changes in the farm.

             *  ‌ It consists of four elements, 

       I. Added cost : Additional cost invested due to the introduction of new enterprise or the modification in the size of existing enterprise.

      II. Added returns : Additional returns gained due to the introduction of new enterprise or modification in the existing enterprise.

      III. Reduced returns : Decreased gain due to the introduction of new enterprise or modification in the size of existing enterprise.

      IV. Reduced cost : Decreased cost due to the direction of the enterprise or modification in the size of existing enterprise.



PROCEDURE INVOLVED IN FARM PLANNING AND BUDGETING

          I. ‌  Statement of objective.

‌         II.   Diagnosis of existing organisation.

        III. ‌  Identification of enterprises to be included.

        IV.   Preparation of enterprise budgets.

         V.   Identification of risks.

        VI. ‌ Preparation of a plan.

        VII. Assessment of resources endowment on the farm.

1. STATEMENT OF OBJECTIVE

‌              •     The primary aim of the former is to achieve profit maximization and cost minimization.

              •‌     In selecting the enterprises combination he aims at profit maximization whereas in selecting the resources combination he aims and cost minimization.

2. DIAGNOSIS OF EXISTING ORGANISATION

‌             •      Diagnosis and prescription are the two major things that to be focused in planning.

            ‌ •      While preparing the plan one should identify the the defects and the weak points in the current plan of the farm business.

            ‌ •      And prescribe accordingly to rectify the defects of the existing plan.

           Example : when a farmer continuously cultivating a single crop which affects the soil health he can go for crop rotation practice. He can grow cereal crop followed by pulses - rice crop can be followed by black gram which in turn conserves the soil fertility.

3. IDENTIFICATION OF ENTERPRISES TO BE INCLUDED

              •  ‌ Estimation of input and output prices in terms of acre or hactare not only the crops grown by the farmers but also the crops grown in that locality.

4. PREPARATION OF ENTERPRISE BUDGET

            ‌ •   Preparation of enterprise budget facilitates us for the easy comparison of crops which gives relative profitability.

5. IDENTIFICATION OF RISKS

            •‌   A farm plan should be prepared based on the risks involved in the farm production like production risk, weather risk, marketing risk, etc.,

6. PREPARATION OF A PLAN

‌             •  The most important thing is that identifying the limited resources and opting the enterprise which can provide the highest return with that limited resources.

7. ASSESSMENT OF RESOURCE ENDOWMENT ON THE FARM

          I. LAND

               • ‌ Here we need to check the type of soil, crops grown, topography, texture, fertility, drainage, wetland or dryland, etc ..

‌               •  If the land is slope, then soil erosion is a common problem and measures has to be taken to avoid the soil erosion.

               •  ‌If the soil is highly fertile then high income crops can be grown. 

‌               • Therefore the plan must be suitable to the land that is  held. 

          II. LABOUR

‌              •  The plan must include the labour supply for the particular enterprise and the wage rates paid for the labour during the production should be included.

              •‌  The labour viz., Women, men, children, with their age and the work done by them has to be included in the plan.

          III. CAPITAL

                 a. Working capital. 

                 b. Fixed capital. 

‌a. Working capital - It should include the amount required for cultivating the crops. The amount of funds borrowed interest paid etc., are also to be included.

‌b. Fixed capital  -   Information regarding the farm buildings, farm machineries and equipments etc.. to be included. 

         IV. ORGANISATION

‌             •    The farmers knowledge in farming, his experience etc are also to be included in the farm plan.

         V. IRRIGATION SOURCE

‌             •   Sources of irrigation, availability of irrigation, quantity of irrigation water available, the sources of irrigation such as canal, tank etc., near the land should also be indicated.

             • ‌ The cost of irrigation must also be mentioned.

REFERENCE

      Agricultural economics, second edition., S. Subba reddy.,