FARM PLANNING AND BUDGETING

FARM PLANNINGDefinition

All planning is a matter of forecasting.

It is an attempt to state logically in conformity with the economic principles as to what will happen in the future.

Evidently planning is to serve as a blue print for the future.

All business undertakings plan their production and marketing operations consciously in respect of

what how much, how to produce and when and where to buy and sell. The planning of operations and their

execution is secret of their success. In agriculture also planning is must. Therefore farm planning has been defined by

different farm economists as under.

1. Farm planning is a process to allocate the scare resources of the farm to organize the farm production in such a way as to increase the resource use efficiency and the income of the farmer.

2. Farm planning is process of deciding in the present what to do in the future about the best combination of crops and livestock to be raised through rational use of resources.

3. Farm planning is mainly a process of choice making or choosing from among competitive alternatives. It is concerned with various adjustments the farmer makes in the existing organizations.

Objective of Farm Planning

1. The immediate objective of farm planning is to maximize the annual net income sustained over a long period of time.

2. The maximization of net income through improved resource use planning.

3. The ultimate objective of farm planning is improvement in the Standard of living of the farmer.

Importance of Farm Planning

 If necessity is the mother of invention, scarcity of resources is the mother of farm planning.

The fact of scarcity makes it necessary for the farmer to make the most what he has in their efficient utilization.

Farmer can make optimum utilization of scarce productive resources.

The farm planning, of course, may be annual or long range planning.

Annual planning obviously is meant for ensuing agril year. In case of long range planning, long range objectives are involved, covering a longer period over the next 5 to 10 years

The importance of farm planning can be examined through its helpfulness (or usefulness). In view of this following things are very important (Advantages).

1. It enables the farmer to achieve his objectives in relation to his farm and family in a more organized manner.

2. Farm planning enables a careful examination of the existing resources and their best allocation.

3. It helps farmer to take decisions in relation to selection of crops, hectare under different crops and number of live-stock to be maintained.

4. It helps the farmer to identify the input and credit needs.

5. It helps in estimating future cost and returns.

STEPS OF FARM PLANNING

To have a best farm plan, some steps are needed to follow while farm planning is prepared. They are

1) Preparing the farm map: The general lay out of the farm, number and shape, irrigation channels can be shown in the farm map.

2) Recording the History of the Farm: It is very important to obtain the information pertaining to utilization of resources and their efficiency.

What was the crop rotations followed previously, etc on the basis of this information planning in respect of crops to be grown, crop rotations to be followed; requirement of credit along with their sources etc can be possible.

3) Planning Bullock and Human Labour Requirement:

Next a calendar of farm operations should be prepared and bullock and human labour requirements determined for different months.

A labour schedule should be developed as to guide a farmer to appraise the amount of labour need in relation to the availability.

4) Planning the Land Use and Soil Conservation practices:

When a full picture of the resources and their appraisal is obtained, the next step in farm planning is to adopt such practices which would lead to the best use of land.

While planning the cropping scheme, due importance should be given for soil conservation. Therefore purposively crops and crop rotations need to be introducing a plan which will enhance soil conservation.

5) Planning Livestock Programme:

Livestock and crop production is having supplementary relationship.

The size of livestock depends upon size of farm, cropping intensity, availability of irrigation etc.

If irrigation water is ample naturally cultivator can grow fodder crops through out year and he can maintain milch animals more.

6) Planning the Marketing of Produce:

Only production is not sufficient to maximize

the returns, good price for the produce is also important.

Therefore, study of market conditions, prices etc. are essential to decide the time of selling.

Similarly the agency through which marketing is to be done must be identified in view of getting maximum shares in consumer’s price.

TYPE OF FARM PLANS

1. Simple farm planning: It is adopted either for a part of the land or

for one enterprise or to substitute one resource to another. This is very simple and easy to implement. The process of change should always begin with these simple plans.

2. Complete or whole farm planning: This is the planning for the whole farm. This

planning is adopted when major changes are contemplated in the existing organization of farm business.

Characteristics of Good farm plan 

1. It is should be written.2. It should be flexible.3. It should provide for efficient use of resources.4. Farm plan should have balanced combination

of enterprises. Such combination in turn ensures, a. Production of food, cash and fodder crops. b. Maintain soil fertility. c. Increase in income. d. Improve distribution of and use of labour,

power and water requirement throughout the year.

5. Avoid excessive risks.

6. Utilize farmer’s knowledge and experience and take account of his likes and dislikes.

7. Provide for efficient marketing.

8. Provision for borrowing, using and repayment of credit.

9. Provide for the use of latest technology.

FARM BUDGETING

After farm planning budgeting is undertaken. Budgeting is a method of analyzing plans for

the use of agricultural resources at the command of the decision maker.

Farm plan is a programme of the total farm activity of a farmer drawn up in advance. Farm plan serves as the basis of farm budgeting.

Therefore farm plan can be prepared without a budget but budgeting is not possible without farm plan. Therefore the budgeting can be defined as under.

1. The physical aspects of farm planning when expressed in monetary terms called budgeting.

2. The expression of farm plan in monetary terms by estimation of receipts, expenses and net income is called budgeting.

3. Farm budgeting is a process of estimating costs, returns and net profit of a farm or a particular enterprise.

4. Budget is a statement of estimated income and expenditure.

Types of farm budgeting

a) Partial budgeting b) Complete budgeting.

a) Partial budgeting:

It refers to estimating costs and returns and net income of a particular enterprise. It refers to estimating the returns for a part of the business i.e. one or few activities for example

1. To estimate additional cost and returns from growing one hectare of hybrid Jowar in place of local Jowar.

2. To estimate additional cost and returns by adopting foliar application of chemical fertilizers instead of soil application.

b) Complete Budgeting:

It is also called as total budgeting.

It refers to preparing budget for the farm as a whole.

Complete budgeting considers all the crops, livestock, methods of production and aspects of marketing in consolidated form and estimates costs and returns for the farm as a whole.

Therefore complete budgeting can be specifically defined as

“An estimation of the probable income and expenditure is made for the farm as a single unit of course, a complete budget is required when a farm plan is prepared for new farm or when drastic changes are suggested in the plan of the existing pattern on an established farm”.

Complete budgeting can be prepared for short run (annual budget) and for long run.

The Different between complete and partial budgeting

Sl. No.

Complete Budgeting Partial Budgeting

1 The whole farm is considered as one unit It is adopted when a minor aspect of farm organization is touched.

2 All the aspects like crops, livestock, machinery and other assets are considered

It is practiced within the existing resources structure of the farm.

3 Both fixed and variable costs are calculated for working out costs and returns.

Only variable costs are considered.

4 Net income is estimated by deleting fixed costs and costs of variable inputs from the value of the product

Net income is estimated by deleting only cost of variable inputs from the value of the product.

5 It requires more efforts and time for preparation.

It requires relatively less efforts and time for preparation.

Advantages of Farm Budgeting

It evaluates the old plan and guides the farmers to adopt a new farm plan with advantage.

It makes the farmer conscious of the waste (leakage) in the farm business.

It gives comparative study of receipts, expenses and net earnings on different farms in the same locality and in different localities for formulating national agricultural policies.

It guides and encourages the most efficient and economical use of resources.

It serves as valuable basis for improvements in farm management practices.