Farm planning and budgeting

1. FARM PLANNING AND BUDGETING
P. DHAMODHARAN
2019502205
DEPARTMENT OF AGRONOMY

2. Farm plan
 A farm plan is a scheme for organizing
farm business.
 A farm plan is a programme of total farm
activities of a farmer drawn out in advance.
 An optimum farm plan will satisfy all the
resource constraints at the farm level and
yield the maximum profit
 The farm plan is a process for 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
 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.
 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.
 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.

4. Objectives of Farm Planning
 To improve the standard of living of the farmer and immediate goal is to maximize the net incomes of the
farmer through improved resource use planning.

5. Farm planning helps …
 examine the existing resource situation
 identify the various supply needs for the existing and improved plans.
 find out the credit needs of the new plan.
 gives an idea of the expected income
 provide cash incomes at points of time when they may be most needed at the farm.

6. Characteristics of a Good Farm Plan
a) It is should be written.
b) flexibility in a farm plan for changing the environment around the farm.
c) maximize the resource use efficiency at the farm.
d) Attain the objectives of profit maximization through optimum resource use and
balanced combination of farm enterprises.
e) Risk and uncertainty can be accounted .
f) timely acquisition and repayment of farm credit.
g) Utilize farmer’s knowledge and experience and take account of his likes and
dislikes.
h) Provide for efficient marketing.
i) Provide for the use of latest technology.

7. Components of Farm Planning
a) Statement of the objective function
b) Inventory of scarce resources and constraints
c) Alternative Choices
d) Input Output Co-efficients
e) Planning Technique

8. Steps in Farm Planning
 Planning
 Implementation
 Control

9. STEPS OF FARM PLANNING
 Preparing the farm map:
 Recording the History of the Farm:.
 Planning Bullock and Human Labour Requirement:
 Planning the Land Use and Soil Conservation practices:
 Planning Livestock Programme:
 Planning the Marketing of Produce:

10. 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.

11. Depreciation
 Depreciation is the decline in the value of a given asset as a result of the use, wear
and tear, accidental damages and time obsolescence.
 The loss in value of an asset over time is, therefore, determined by
i) remaining life,
ii) extent and nature of use and
iii) obsolescence
The amount of depreciation charged should correspond to the loss in the value of
asset over time.

12. BUDGETING
 It may be defined as a detailed physical and financial
statement of a farm plan or of a change in farm plan over
a certain period of time.
 Farm budgeting is a method of analyzing plans for the
use of agricultural resources at the command of the
decision-maker.
 The expression of farm plan in monetary terms through
the estimation of receipts, expenses and profit is called
farm budgeting.
 It is the process of estimating costs, returns and net profit
on a farm and involves managerial principles of input and
output in relation to the production.
 It is the process of preparing advance estimates of finance
for plan before putting it into effect.

13. Factors Affecting Budgeting:
 Unforeseen circumstances like abnormal weather.
 Outbreak of diseases.
 Changes in market conditions of products and feeds.

14. Importance:
 Budgets can be of considerable
value as guide to policy and plans
for economic gains.
 Helpful in preparing statements of
receipts and expenditure.
 Helpful to draw alternate plans of
quick improvement on the existing
plan.
 Helpful in analysing business
carefully.

15. Objectives:
 To serve as basis of farm plan preparation and its evaluation.
 To help farmer in adopting such farming methods in meeting market demands
which can give higher returns on his investment

16. Requirements of Budgeting:
 Data of input and output estimates.
 Clear distinction between fixed and semi-fixed costs
 Recurring or variable items of expenditure.
 Market prices of raw material like feeds and finished products.

17. Budgeting Methods:
 Budgeting for starting a farm.
 Budgeting for year to year planning.
 Budgeting for a relatively minor change in practice influencing smaller section of the farm
organisation—such as installing a new machine, expansion of a unit etc.
 Budgeting for a drastic change in system.

18. Types of Farm Budgeting
 a) Partial Budgeting.
 b) Enterprise Budgeting.
 c) Cash flow Budgeting.
 d) Complete Budgeting.

19. a) Partial Budgeting:
 Refers to estimating the outcome or returns for a part of the business, i.e., one or few activities.
 Used to calculate the expected change in profit for a proposed change in the farm business.
 A partial budget contains only those income and expense items, which will change, if the proposed
modification in the farm plan is implemented.
 Only the changes in income and expenses are included and not the total values. The final result is
an estimate of the increase or decrease in profit

20. Types of partial budgeting
 1) Enterprise substitution
 2) Input substitution
 3) Size or scale of operation

21. Limitations
 Partial change does not always provide a complete solution.
 The results of partial budgets are subject to variations in output - input prices,
availability of resources and variations due to soil type, soil fertility etc.

22. Partial budgeting model

23. Enterprise Budgeting
 An enterprise budget is an estimate of all income and expenses associated with a
specific enterprise and an estimate of its profitability.
 It is pre-requisite for the preparation of a complete farm budget or for the
application of farm planning techniques.
 An enterprise budget lists down all the expected output, both in physical as well as
value terms, for a unit of a particular activity on the farm.
 It includes variable cost or total operating cost and fixed cost including
depreciation and interest on fixed asset.

24. Enterprise Budgeting model

25. Cash - Flow Budgeting
 It is essential to know about cash flow statement before using the cash flow
budgeting.
Cash Flow Statement:
It summarizes the magnitude of cash inflows and outflows over a period of time.

26. Importance of cash flow Statement
i) whether cash would be available in correct quantity
at right time;
ii) whether the surplus could be profitably diverted
and
iii) timing and magnitude of borrowings required.
The cash flow statement may be constructed over
annually, quarterly, monthly and weekly depending
upon the nature of business.

27. Cash Flow Budgeting
 A cash flow budget is a summary of the cash inflows and outflows for a business over a
given time period.
 The primary purpose is to estimate future borrowing needs and the loan repayment
capacity of the business.
 Cash flow budgeting is to assess the whole farm plan.
Cash inflows- amount of cash received during the particular time period.
Cash Outflows -expenses incurred in a given period of time

28. Cash Flow Budgeting model:

29. Complete or Whole Farm Budgeting
 It is a technique for assembling and organizing the information about the whole
farm in order to facilitate decisions about the management of farm resources.
 It attempts to estimate all items of costs and returns and it presents a complete
picture of farm business.
 It is generally used by beginners or by those farmers who want to completely
overhaul their existing farm organization and operation.

30. Complete Farm Budgeting

31. Advantages of Budgeting:
 Evaluate the old plan and guide the farmer to adopt new plan with advantage.
 Makes farmer careful of leakage or wastes in the operation of farm.
 Gives a comparative study of receipts, expenses and net earnings on farm.
 Helps in formulating rational dairy farm policies.
 Guides and encourages the most efficient and economic use of available resources.
 Serves the base for future improvements in farm practices.

32. Difference between planning an budgeting
 Planning includes your current and future
goals.
 Goals vary throughout the different stages
of life.
 For example, an individual in his 20s might
aim to work up to management level and
travel the world, while someone in his 40s
plans to use his extensive experience to start
a business.
 Common goals include home ownership,
buying a new car, vacations, early retirement
or saving for a special occasion, perhaps a
wedding.
 Each goal needs an estimated cost as well
as a completion date.
 The final planning step is prioritizing the list
of goals.
 Budgeting includes variable and fixed expenses.
 Variable expenses are those you can change
immediately.
 For example, people find savings in their food
expenses by choosing to prepare all meals at
home and brown bag their lunches rather than
eating out.
 Selling a second car can save hundreds of
dollars every month in car payments, insurance,
gas and maintenance.
 Fixed expenses are the same amount every
month.
 Identify the amount of disposable income that
is available to fund your goals.
 If there is not enough for all of them, start with
the highest-priority ones.

33. Thank you…