In answering these questions they are studied from the view point of farm management. 8. Relation of Rural Economy to Farm Management.
The management of a farm includes the buying and selling of products. It is important that the farmer have a knowledge of markets and of values, and that he know when to buy and sell. Often cooperative marketing offers the best opportunity for disposing of products at a profit. So long as the farmer is concerned only with the business enterprises relating to his own farm, he is within the field of farm management. When the business activities and social welfare of several farms or an entire community are collectively considered, the question becomes one of rural economy. Farm management deals with the problems of the individual farm from the business point of view. Rural economy deals with the problems of a collection of farms or an entire community.
[FIG. 7.--The Percheron draft horse originally imported from France is the most common motive power in use on the farms of the United States.] 9. Studying Farm Organization.
The student of farming is taught how to grow crops by the agronomist, how to grow live stock by the animal husbandman. He learns how to know insects and combat them from the entomologist, and how to cooperate with his neighbors in selling his crops or his stock, from the rural economist. Finally, from the viewpoint of a
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farmer, he will need to select a specific farm, make plans for its arrangement into fields, select the kind of stock and crops that it will be best to raise, and determine how much of each should be raised. He must provide the buildings and equipment, estimate the capital required and the labor necessary to operate the farm. The farm is thus organized into business form and its operation is simplified. This art of farm organization is learned from the farm manager. 10. Meaning Made Clear by Questions.
"How shall I grow corn?" is clearly and agronomy question.
How to select and grow cattle, is just as clearly a question for the animal husbandman.
"Shall I grow corn? or some other crop? or cattle? Having grown corn, shall I sell it? or feed it to cattle? or hogs?" are farm management questions.
If questions similar to the above are put to each problem presented there should be no difficulty in distinguishing the viewpoint from which it should be attacked. 11. Definition of Terms.
In the pages following, reference will be made to the terms, "Capital," "Inventory," "Farm Receipts," "Farm Expenditures," "Farm Income," and "Labor Income." An explanation of these terms is given below. 12. Capital.
Economists divide capital into two classes: (1) Fixed capital, including land, buildings and permanent equipment, as teams, implements and live stock for purposes of production; and (2) circulating capital, which includes values in seed, feed, fertilizers, supplies and market stock or crops as well as cash for operating the farm. The term is limited to those forms which disappear in the process of production, reappearing in other materials of similar kind.
There is a tendency on the part of farmers to tie up most of their capital in fixed forms, leaving too little for circulating or operating capital. 13. The Inventory
is a detailed list of the farm property with values assigned. An average of the values at the beginning of
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the year and at the close is considered to be the value of the capital invested in the business. The difference between the opening and closing inventories shows the increase or decrease in the value of the farm property. 14. Farm Receipts
are derived from two sources: (1) direct and (2) indirect. The direct receipts are represented in the cash received from the sales of crops, live stock, live stock products, for labor for others and from miscellaneous sources. The indirect receipts would arise in an increase in the inventory due to permanent improvements or to appreciated values of any of the various forms of property. Values should not be inflated for the purpose of showing a gain in the inventory. Debts cannot be paid on anticipated rises in land values or in values of property unsold. 15. Farm Expenditures.
Items paid for in cash for the support of the farm only can properly be classed as farm expenditures. Items of personal or family expense should not be charged against the farm in determining the profits from farming. A decrease in the inventory is considered as an indirect expenditure. The amount of the decrease should be deducted, with the direct expenditures, from the receipts to show the net farm income. 16. The Farm Income
is the difference between receipts and expenses. It is the return for the use of capital and unpaid labor. The farmer and his investment unite in earning the farm income. To learn what is earned by the unpaid labor only, the amount that the value of the investment would earn if placed at interest, must be subtracted from the farm income. 17. The Labor Income
is the amount earned by the farmer alone. To learn what this amount is, the amount earned by the money invested at the local interest rate and the value of the labor of other members of the family at local wages while employed at labor on the farm, must be deducted from the farm income. The balance will be the labor income of the farmer.
Copyright 2006 by Tumbledown Farm