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Farm Management

Farm Management. Chapter 1 Farm Management in the Twenty-First Century. Chapter Outline. Structure of Farms and Ranches New Technology The Information Age Controlling Assets Human Resources Producing to Meet Consumer Demands Contracting and Vertical Integration

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Farm Management

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  1. Farm Management Chapter1 Farm Management in the Twenty-First Century

  2. Chapter Outline • Structure of Farms and Ranches • New Technology • The Information Age • Controlling Assets • Human Resources • Producing to Meet Consumer Demands • Contracting and Vertical Integration • Environmental and Health Concerns • Globalization

  3. Chapter Objectives • Discuss how changes in the structure and technology of agriculture will affect the next generation of farm and ranch managers • Identify the management skills that future farm and ranch managers will need to respond to these changes

  4. Structure of Farms and Ranches • Number of farms in US decreasing • Average farm size increasing

  5. Figure 1-1Number of farms in the United States Insert figure 1 here, no title Source: Census of Agriculture, USDA.

  6. Figure 1-2Total sales per farm in 1997 dollars Insert figure 1-2 here, no title Source: Census of Agriculture, USDA. Definition adjusted in 1997.

  7. Changes in Structure Caused by: • Labor-saving technology • Greater off-farm employment opportunities • Desire of farm operators for higher income • High fixed costs of some technology

  8. Four General Business Strategies • Low Volume, High Value Producers • High Volume, Low Margin Producers • Specialty Product and Service Providers • Part-Time Operators

  9. Figure 1-3Alternative paths for farm and ranch businesses

  10. Table 1-1Distribution of Farm Sales Source: 2002 Census of Agriculture

  11. New Technology • Agricultural technology has been evolving for many decades • Biotechnology offers possible gains in efficiency for crop production • Livestock performance may improve through introducing new genetic characteristics or improving nutrient use • Global positioning systems (GPS) increasingly adopted

  12. The Information Age • Improvements in data collection • Very specific data • Automatic recording • Personal computers • A new problem of “too much” information?

  13. Controlling Assets • Need for outside capital • Vertical integration in traditional sources of farm credit • Urban and rural financial markets will move closer together • Increased need for documentation • Need for standard accounting practices • Increase in renting/leasing assets

  14. Human Resources • Increased dependence on teams of employees or partners with division of labor • Farm businesses will need to be competitive with off-farm employment • Increased use of consultants and paid advisors

  15. Producing to Meet Consumer Demands • More specialized and processed food • Buyers are implementing stricter product standards • Producers who can provide high-quality, uniform standard product will receive premium price • More agricultural products will go to industrial uses • Niche markets will also gain in importance

  16. Contracting and Vertical Integration • Some producers will specialize in a phase of production • Examples: raising dairy replacement heifers, custom harvesting crops, producing bedding plants • Marketing contracts provide assured market for intermediate products • Vertical integration occurs if buyer supplies some of inputs and management

  17. Environmental and Health Concerns • Concerns about food safety and environmental preservation are high priority • Increased rural population means more contact between farm and non-farm residents, increased concern about animal waste, air and water quality • Environmental audits becoming routine in farm sales • Each decision must be evaluated for its effect on the environment as well as profit

  18. Globalization • Expansion of markets can occur through international trade • Many governments, including U.S. government, have tried to protect their own farmers from foreign competition using trade barriers • World Trade Organization (WTO) is dedicated to negotiating free trade

  19. Effects of Globalization • Specialization in products that have a comparative advantage, e.g. those that can be produced most efficiently with given resources • Example: Since implementation of NAFTA, the U.S. and Canada have sold more feed grains to Mexico and Mexico has sold more fresh fruits and vegetables to U.S. and Canada • Globalization can affect consumer tastes and preferences • Producers around the world increasingly compete for same resources • Globalization can be seen as an opportunity or a threat

  20. Summary Farmers and ranchers of the future will be making the same basic decisions that they have made in the past. But they will make them faster and with more accurate information. Farm businesses will continue to grow larger, and their operators will need specialized skills in managing personnel, interpreting data, acquiring resources, and customizing products to meet consumer demand.

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