Sustainable farm income through use of efficient farm management practices
- Part 2 -

Y Chakraborty Singh *

CAPITAL MANAGEMENT

Capital is a man-made factor of production. Economic principles are used to increase capital use efficiency. Important economic principles used in capital management are;

(i) Law of variable proportions or law of diminishing returns
It solves the problems of how much to produce?
It guides in the determination of optimum input to use to produce a given level of output and optimum output to produce for profit maximization. It explains the one of the basic production relationships viz., factor-product relationship.

(ii) Principle of factor substitution
It solves the problem of ‘how to produce? It guides in the determination of least cost combinations of resources. It explains factor-factor relationship.

(iii) Principle of product substitution
It solves the problem of ‘what to produce’?It guides in the determination of optimum combination of enterprises (products). It explains Product-product relationship.

(iv) Principle of equi-marginal returns
The principle is applicable when the farm resources are unlimited. It guides in the allocation of resources under conditions of scarcity. Produced output as long as Added Returns > Added Cost

(v) Opportunity Cost Principles
The principle is applicable when the farm resources are limited but there are more than one enterprise to invest. When resources are used in one enterprise some alternative is foregone. Opportunity cost is the value of next best alternative forgone.

The principle thus refers to the advantages (returns) which might have been obtained from any factor if it had not been used in producing that commodity, but would have been used for othernext best purpose.

(vi) Time comparison principle
It guides in making investment decisions to those enterprises which require long duration of investment e.g., investment in orchard

(vii) Principle of comparative advantage
It explains regional specialisation in the production of commodities.

(viii) Cost Principle
It explains how losses can be minimized during the periods of price adversity.
Total Cost = Total Fixed Cost + Total Variable Cost
Net Revenue = Total Revenue – Total Cost
In Short Run: Gross Return should cover variable cost.
Maximum net revenue is when Marginal Cost = Marginal Revenue
If GR < TC but > VC, keep increasing production as long as MR > MC

FARM ORGANIZATION

Farm should be well organized so that income earned from the farm will be sustainable in the long run. Overexploitation of farm resources will lead reduction in production and income. The following are the requirements for a well organized farm:

1.Farm Inventory: The farm should have the list of farm assets both livestock and dead stock along with its value counted on a particular date. Preferably the farm inventory should be made in the beginning of agricultural year i.e., 1st July.

2.Farm Map: The farm should have a map. The map should include the number and area of fields, irrigation and drainage system, roads and sub-roads, approach roads.

3.Farm Record: A record about the history of the farm should be maintained. The record should include area, production, and productivity of each enterprise taken up in the farm during the last 5-10 years.

4. Cropping Scheme: The farm should prepare a cropping scheme in relation to types of soil, labour availability, machinery and farm implements, family consumption needs and requirements etc.

5. Labour Requirement and Distributions: The farm should prepare labour calendar. The calendar should reflect the labour requirementfor each month and for each enterprise. The number and hours of family labour available should be known and the number of hired labour to be employed.

6. Livestock and Cropping Scheme Adjustment: Farm should decide the number of livestock to be kept on the farm in relation to feed and roughages produced by the crops grown in rotation on the farm.

7. Income and Expenditure Statement: Farm should maintained income and expenditure statement of each enterprise. Cost and returns of each enterprise should be worked out through budgeting technique and principle of opportunity cost.

8. Marketing Programme: Farm should prepare a good marketing programme where it should reflect when and where the produce should be sale.

CONCLUSION

Sustainable farm income is of paramount importance so as to remain the farmers in the farming occupation and to supply the farm output requirements to the coming generations. Since, the market price for farm products is not controlled by the producingfarms, emphasis should be given in sustainable production for income sustainability.

Various farm management practices should be employed to sustained agricultural production in the long run. Management of factors of production viz., land, labour, capital, and farm organization should be carried out to increase their efficiency.Increase in the resources/factors use efficiency is the key to successful sustainable farm production and thereby farm income.


For further details contact: -
Public Relations & Media Management Cell,
CAU, Imphal.
Email: prmmcell@gmail.com

Concluded.....