Farm Management and Decision Making

Harsh, Conner, and Sohwah (1981) defined management as the allocation of scarce resources
for the fulfilment of human goals in a world characterized by risk and uncertainty. Farm
management is concerned with decisions affecting the profitability of the farm business. The
farm manager, as the main controller of farm resources, must be a person of many skills.
It is helpful to have both mechanical and mental abilities like financial management skills,
marketing and price determination skills, and the ability to deal with governmental regulation of
term practices.
A farm manager must be able to look through mountains of information available and find the
best information for managerial decisions.
Castle, Becker, and Nelson (1987) concluded that farm managers must incorporate inputs and
outputs, and resource availability information to answer these basic questions:
1. What should be produced? What crops should be grown? What livestock should be raised?
2. How much should be produced? How many area of land, amount of capital, and hours of
labor should be used?
3. How should the factors of production: land, labor, and capital be acquired? Should the capital
be borrowed?
4. What method of production should be used? What feeding, breeding, tillage, and other
practices should be followed?
5. When and where should inputs be purchased and products sold?
Each manager develops a unique style of management. This style, or the way decisions are
made, is determined by personal, economic, and cultural factors, in addition to the life cycles or
stages of the family and enterprise.
Harsh et al. (1981) felt that the importance of a decision varies with its effect on profitability. For
example, a decision about which herbicide to use has less effect on farm profitability than the
decision to install grain drying facilities on the farm.
Harsh et al. also said that decisions vary according to the frequency with which they are made.
Decisions that are made daily tend to affect profitability less than one made only once curing a
growing season. However, repetitive decisions may have a pronounced effect on farm
operations because of their accumulative effects over time.
Nonetheless, farm managers can only make decisions when information are present. Once
relevant information is available, the manager can begin listing alternatives which are potential
solutions to the problem. Several may become apparent during the process of collecting data
and transforming data into information.

Each choice that a farm manager has to make should be analyzed in a logical and organized
manner to ensure accuracy and to prevent something from being overlooked. The information
should be organized to provide an appropriate basis for comparing the consequences of the
alternatives. For example, the alternatives could be compared in terms of their projected effect
on net income, cash flow, risk, or debt. The choice is ultimately influenced by the manager's
goals (Castle, Becker, and Nelson, 1989).

Farm
Manager

Assistant
Farm
Manager
Chief
Farmer

Farmers