Farm Horizons, November 2011
What is farm management?
By Myron Oftedahl, Farm Business Management Instructor, South Central College
Management can be one of those words that is just a word; we don’t fully understand it, so we just accept it as a word. But, let’s dig into the word, management.
Webster defines it as the act of managing; the conducting or supervising of something. Still confused? Let’s keep digging. Peter Drucker said that the basic task of management is twofold; marketing and innovation. Okay, you are saying, I know that I need to market my product and adopt new technologies or innovations to be more efficient, but is that all there is to management?
If you really go back into history, Sir Thomas More (1478-1535) studied low-efficiency and failures of certain enterprises, and is credited with the development of the practice of modern management.
So you are saying that I need to study failing businesses and that is management?
Let’s look at a couple more definitions first. Farm management is the application of business principles and the scientific principles of agriculture to the business of farming. Or, farm management is the study of the business principles of farming. It may be defined as the science of organization and the management of the farm enterprise for the purpose of securing the greatest continuous profits.
Now, let’s pull a definition together. Farm management is the application of business principles (accounting, benchmarking, marketing, human resources) and the scientific principles (agronomy, animal science and husbandry, chemistry, engineering) to the business of farming, by striving for continuous profits while protecting the environment.
Is this starting to sound like your day? You are in the middle of doing your accounting for the day, when an employee asks for the weekend off to attend a wedding, the seed dealer wants to do a yield check on that new variety you purchased for this year, the grain markets are going down and you are wishing that you had more sold, and you want to know how this crop yield compares to the previous five years.
Does that fit our definition? Kind of looks like it does. You are doing accounting, dealing with a human resource issue, verifying an agronomic choice, considering marketing decisions while doing some benchmarking on yields, all the while striving to make profits while protecting the environment.
To expand this, the objective of farm management is to obtain the maximum profit from each enterprise on the farm and to get maximum returns for the farm as a whole.
You, as a farmer, have a certain set of resources, such as land, labor, equipment, buildings, and money, to work with. Then, you couple the resources with the goals of the farm and the family, and the balancing act begins. This is when you begin to manage or more simply put make decisions based on what resources you have, while respecting your goals, in an attempt to be profitable.
You, as a farm manager, need to gather the information needed, consider the alternatives, make a decision, and then monitor the situation to determine if the decision was correct or if it it needs some adjustment.
An example of this would be that you are considering growing more corn on corn next year. Information you would need might include seed varieties available, soil samples and fertilizer cost, handling and storage capacity, yield deduction for corn-on-corn, and a crop budget.
Now, what are your alternatives? Should you grow more corn? How can you monitor the situation?
First, you need to be checking the field during the growing season, and then you need to follow the marketing plan you would have developed.
What adjustments will need to be made? Is the weed control sufficient? Is there an insect or disease outbreak? Are the marketing goals obtainable or do they need to be adjusted?
So, let’s review that definition of management the application of business principles and the scientific principles to the business of farming, while striving for continuous profits while protecting the environment.
Can you identify some business and scientific principles in the above example?
We did a crop budget, looked at soil samples, plant genetics, and marketing, all in an attempt to be profitable while respecting the family goals.
For more information, contact a farm business management instructor. You can find them by going to www.mgt.org.