CHAPTER 1:FARM MANAGEMENT IN THE 21ST CENTURY AGRI 4411 Farm Management - Chapter 1
Objectives Discuss how changes in the structure and technology of agriculture in the twenty-first century will affect the next generation of farm and ranch managers Identify the management skills that future farmers and ranchers will need to respond to these changes
Decision Making Manager – Makes decisions – Using economic principles, record summaries, investment analysis, financial statements, etc.. Decisions: – Input and output levels – When and how to acquire resources – Analyze risk and returns from new technology, adjusting farm size, changing enterprises
21st Century Manager Technology Management information systems – Aided by electronic innovations More competition with Non-Ag Businesses for land , labor, and capitalNO3-N Pre-Season Residual Map resourcesfrom 0 to 12 Inches of Soil Depth
Structure of Farms & Ranches # Farms decreasing Average farm size increasingWhy??? Labor saving technology Employment opportunity off-farm Cost of labor increasing faster than cost of capital Desire for higher standard of living (off-farm income) Cost of new technology requires spreading cost over more production Also fixed costs to learn new skills in production, marketing, and finance
Trends Farm sizes will continue to increase Sophisticated management skills Centralized production (poultry industry) Management segregated into more layers – More specialized
Information Age Decision making tools and budgeting tools underused in the past because data was hard to get or to complicated to analyze GPS in crop production Miniature electronic sensors (Animals) Portable computers – Increase speed, accuracy, and availability of information sharing
Financial Management Sources of farm credit more vertically integrated – Increased competition with non- farm sector – require detailed documentation of financial performance and credit needs – Conformity to generally accepted accounting principles (GAAP) – Cash accounting will not always be acceptable – Audits – Controlling assets more important than owning them
Human Resources Team of employees Need to offer wages, benefits, and working conditions comparable to non-farm Increased regulations with chemicals and equipment Specialized responsibilities Paid consultants and advisors
Producing to Meet ConsumerNeeds Ex: Livestock with uniform size to fit processing equipment, standard packaging, and quality levels Foreign markets important Niche market important – Ex: organic farming
Vertical Integration Farmers may fill one niche in the supply chain. – e.g. raising dairy replacement heifers, – producing bedding plants for home gardeners, – buyer supplied inputs such as pigs or broilers finished in contract facilities on independent farms Highly specialized, highly skilled. May have contracts up and down the chain. Quality and timeliness are critical.
Environment & Health Concerns Food quality Food safety Present and future soil condition Agriculture waste (air and water quality) Successful managers will generate profit while conserving resources and minimizing environmental problems
New Technology Biotechnology offers production efficiency Precision Farming Genetic characteristics and growth stimulants
Flow of Information more automated collection of information easier to classify and analyze how much can the human mind comprehend? what information is relevant? electronic communication is fast but impersonal
More Differentiationof Raw Materials genetic engineering product identification and separation specialized markets advance contracts
Globalization World economy is more integrated. Trade barriers are being reduced. Farmers from all countries will compete for markets. All countries will compete for resources.There will be winners and losers.
Smaller Farms Will Continue toForm Alliances achieve efficiencies specialize less independence more difficult to coordinate cooperatives
Rural Communities Farmers will be scarcer More rural residents May be residential centers but not commerce centers Quality of life will be more important
Agriculture must learn to serve anaffluent society
Final Thoughts As long as people eat there will be a living in agriculture. Agriculture is a mature industry. Extreme economic conditions tend to turn around. Good managers will take advantage of the good times and protect against the bad.