agricultural economics

LEARNING OBJECTIVES

By the end of this lesson, you should be able to:

• Describe economics and agricultural economics
• Explain the importance of agricultural economics
• Explain types of farm records
• Explain importances of farm records

Let us start by describing the meaning of the following terms.

Economics refers to the study of how people make choices to use the scarce resources to produce goods and services to satisfy human wants.

Agricultural economics is a branch of agriculture that deals with allocation and management of limited resources of land, capital and labor to produce goods and services to satisfy human wants.

Importance of agricultural economics

• Agricultural economics aims at minimizing costs and maximizing output.
• It helps in the allocation of limited resources between various competing activities.
• It describes how farmers can best utilize the limited resources to produce goods and services to satisfy needs.

Basic concepts in agricultural economics

• Scarcity. This is a situation where resources are limited and therefore not sufficient to meet demand. It is an imbalance between desires and means of satisfying them.
• Opportunity cost. This is the value of the best foregone alternative. When there is scarcity and a choice is made, the value or cost of the commodity that is foregone is known as opportunity cost. Opportunity cost does not exist when: commodities are unlimited in supply, there is no alternative choice or a factor of production is offered freely.
• Choice and preference. Choice and preference describes the act of selecting from the available alternatives. Due to scarcity, a choice has to be made on the manner in which resources will be used to get maximum returns.

Topics in agricultural economics

Agricultural environment and natural resources. This is involved in matters like: controlling enviromental degradation like water pollution, brought about by agricultural activities, valuing non-market benefits of natural resources like parks, and relating economic activities in agriculture to environmental consequences. Maximizing agricultural production while improving the environment is the goal.

Food and consumer economics. Agricultural economists study the economics of food consumption under this topic. They study matters like the decisions househols such as to buy food or prepare it at home, and how food prices are determined.

Development economics. This is mainly concerned with improving the living conditions of people through agricultural related practices, by contributing to the GDP and creating employment. This helps us understand the role of agriculture in economic development.

Production economics and farm management. This deals with economic decisions at farm level. Analysis is done of farmer's costs and sales in an attempt to maximize profits and minimize costs.

Farm records

These refer to information on farm activities that is written and stored by a farmer.

Importance of farm records

• They help determine the value of a farm through its assets and liabilities.
• They find use in income tax assessment.
• They can be used for reference.
• They help in budgeting and planning.
• They determine the credit worthiness of a farmer.
• They help detect theft and losses.
• They help in sharing profits or losses in partnerships.
• They help support insurance claims.
• They help in comparisons of performance between different farm enterprises.

Types of farm records and their uses

Different types of farm records as well as their uses are described in the table below.

Type of farm record	Uses
Breeding records	Selection and culling of animals. Controlling breeding. Showing the ancestral history of animals. Showing fertility and prolificacy of every animal.
Feeding records	Calculating profits and losses.  Calculating food conversion efficiency. Ensuring availability of feeds at all times. Evaluating animal response to feed.
Health records	Selection for culling and breeding. Tracing a disease's history. Show when routine practices are to be carried out. Show the cost of disease and parasite control. Monitoring livestock's health conditions.
Production records	Helps one decide on which enterprise is more viable. Shows the productivity of each enterprise. Calculating profit and loss.
Field operation records	Help in timely performance of farm activities. Shows when farm activities are carried out. this prevents repetition. Shows the cost of different field operations. this can be used for future planning.
Labor records	Helps in the payment of wages and benefits. Calculation of labor costs. Helps in the assessment of income tax.
Marketing records	Helps determine the profit or loss made. Used for assessing market trends.
Inventory records	Shows the assets owned by the farm. Helps in detecting thefts or losses on the farm.

It is crucial for farmers to keep records. Records help a lot with decision making.

As you have learnt, Agriculture plays a part in the economy. Agricultural economics teaches us this and much more about agriculture, allocation and management of resources.