FARM PLANNING AND BUDGETING

FARM PLANNING
Definition

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. Complete Budgeting Partial Budgeting
No.
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,It is practiced within the existing
machinery and other assets are considered resources structure of the farm.

3 Both fixed and variable costs are calculatedOnly variable costs are considered.
for working out costs and returns.
4 Net income is estimated by deleting fixedNet income is estimated by
costs and costs of variable inputs from thedeleting only cost of variable
value of the product inputs from the value of the
product.

5 It requires more efforts and time forIt requires relatively less efforts
preparation. 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.