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Agricultural Economics - Agriculture Form 1

Agricultural Economics

Introduction to agricultural economics
Farming like any other business must make profit and therefore need economics knowledge to operate.

Economics is study of how man and society choose with or without the use of money to employ scarce productive resources which could have alternative uses to produce various commodities over time and distribute them for consumption, now and in future, among various people and groups in the society.

Importance of agricultural economics
Helps to:

  • minimize costs
  • maximize profit
  • increase production
  • utilize resources effectively and efficiently

  • meet demand to the satisfaction of consumers

Types of farm records

Types of farm records kept by the farmer depend on the enterprises found in the farm. The following are the commonly kept types of farm records.

  • Production records
  • Inventory records
  • Field operations records
  • Breeding records
  • Feeding records
  • Health records
  • Marketing records
  • Labour records


Economics:- Study of how man and society choose with or without the use of money, to employ scarce productive resources which could have alternative uses to produce various commodities over time and distribute them for consumption , now and in future, among various people and groupin the society.

Agricultural economics:-Study of now limited supplies of land, labour,capital and management are used to produce goods and services for consumption

Opportunity cost:-Returns from best alternative foregone

Scarcity:-State of unlimited want ,need or desire, for what is available at any moment

Preference and choice:-Degree of linking one sector of commodity to another. The commodity linked is chosen therefore becomes ones choice

Farm records:-Sets of information stored or retained in the farm in written form


Agricultural Economics

Lesson objectives
By the end of the lesson you should be able to:-

  • define economics and agricultural economics
  • explain basic concepts of economic
  • explain the importance of farm records
  • describe the different types of farm records
  • appreciate keeping of farm records .

Agricultural Economics
Agricultural economics makes production more profitable, integrated and sustainable by fostering commercialization in agricultural enterprise. This takes business farming style where by a farmer is able to produce enough for the family and sell the surplus.

All resources depend on each other and therefore they need to be managed well. Agricultural economics makes production more sustainable during management of resources as illusrated above. Kenya's economy is market-based, with some state-owned infrastructure enterprises, and maintains a liberalized external trade system. The economy heavily depends on rain-fed agriculture which is affected by cycles of weather. The agricultural sector employs nearly 75 percent of the countrys 37 million people. Half of the sector's output remains subsistence in production.

What is agricultural economics?

Agricultural economics is the study of how limited supplies of land, labour, capital and management are used to produce goods and services for consumption. This is done by farmers employing the above scarce productive resources which could have alternative uses to produce various commodities over time and distribute them for consumption , now and in future, among various people and group in the society This involves all the factors of production namely;

  • Land consist of all natural resources and space available for agricultural production.
  • Labour entails human productive work, employed in production.
  • Capital is material wealth available for production,
  • Time is the require period for production,
  • Management is resourceful organisation of factors in production.

Basic concepts of economic

  • Scarcity is a situation where resources are insufficient to meet the demand, or a state of unlimited want, need or desire, for what is available at any moment.
  • Preference and choice: since available resources are limited, a choice has to be made on how to allocate the available resources. Such choice is determined by the societys needs, farmers preference and ecological factors. Preference and choice therefore is a decision making process on how to utilize the limited resources to satisfy the unlimited wants.
  • Opportunity cost is returns from best foregone alternative. Opportunity cost exist when there are alternatives. Opportunity cost is said to be zero when there is no other alternative or when commodities are plenty in the market.

Production records

Production records show the total yield of the farm.

The yield may be recorded per unit area of production or per enterprise.

For example, number of bags of maize harvested per hectare, amount of milk in liters per animal, number of eggs collected per bird, among other production records

Importance of computerising farm production records

  • Increase the quality of information recorded in the farm to support accuracy in decision making
  • Easy identify top producing as well as lower producing enterprice through record analylsis
  • Possible to organize farm information in a single location using appropriate software
  • Enhance your marketing capabilities by networking with other producers and marketing agencies
  • Save time in record keeping by computerisation and easy accessibility to information for decision making

Example of a farm computer unit

Useful tool for computerising farm production record

Importance of keeping farm records

  • Farm records provide the history of the farm for growth comparison purposes.
  • Farm records help farmers to avoid over taxation during income tax assessment. 
  • Farm records are used to determine credit worthiness when securing loans. 
  • Assist in routine management practices. 
  • Help in planning the budgeting in the farm. 
  • Assist making decision when sharing profits and losses in the case of partnership. 
  • Assist making Insurance claims incase of fire or other accidents. 
  • Records can be used to determine the financial status of the farm. 
  • Records are used to compare performance with other farms that have same enterprises.

There are very many types of farm records.

A farmers chooses the types of records to keep depending on the number of enterprises in his farm.  For example a poultry farmer will only need records related to poultry production.

Health records

Health records deal with disease control measures.

These records are kept to show the health conditions of livestock in the farm.

Such records are useful during selection and culling of animals on health grounds.

They assist in decision making when taking action in health maintenace, for example

  • When to vaccinate.
  • When to deworm.

The records assist in calculation of the cost of treatment.

Deaths, frequency of disease are noted in the remarks column.

A typical health record is as illustrated below.

Human health (HIV&AIDS)
Successful farming requires vigour, strength, vision and determination. HIV & AIDS pandemic is the biggest threat to farming making people unhealthy and reducing population at an alarming rate.

We have a big population that is taking care of AIDS patients spending a lot of time and money in the treatment of opportunistic diseases.

The orphans left by those who die of AIDS and other diseases have become a burden to the society. The overall effect of HIV &AIDS and ill-health in agriculture include:-

(I) Shortage of farm labour increasing the labour cost
(ii) Increasing cost of living of AIDS patient and their relatives.
(iii) Low food supply and poverty in general has increase criminal activities.
(iv)Low living standards leads to dependency, hopelessness and lack of motivation to invest in agriculture.
(v)The government and NGOs are using a lot of time and resources in controlling the HIV/AIDS pandemic. These resources would be used to develop agriculture.

Field operation records

This is the account of all that takes place in the field.

For example ploughing, planting, weeding fertilizer application for each crop enterprise or for a given field.

At the end of the season these records should assist the farmer in working out the cost of production for each enterprise using input records.





The activities are recorded as illustrated below:

Study the farm activities displayed on the stage identify the field operation on each section.

Marketing records

These records shows the commodity, quality or amount sold, date, rate per unit of the commodity, total value where sold.

This can be organised in records as follows:








Labour Records

Farm labour records

Farm labour is one of the most important factor of production.

Labour records should show the skills provided date and payment rate.

There are two types of labour records

  • Muster roll

  • Labour utilization analysis

(a)Muster roll
Muster roll shows the name of the worker, pay-roll number, days worked, rate of payment amount of salary or wage and signature.

The records show both casual and permanent labourers. Such records are important for income tax assessment and permanence of labour in the farm.

(b) Labour utilization Analysis
These records shows how labour is utilized on the farm and assists in making decisions on labour allocation, requirement and budgeting. This help to control labour utilization especially during peak and unproductive part of the season.

The records are kept as illustrated below:- Date, No of workers, Enterprise, Rate of payment/day,Total amount paid in shillings, Remarks.

Inventory records
These includes:- Consumable good inventory and Permanent goods inventory

How can you Classify the items into permanent and consumable goods?

Consumable goods include

  • Animal feeds
  • Fertilisers
  • Cements

They are also referred to as current assets of the business.

Permanent goods include

  • Livestock
  • Machinery
  • Perennial crops/crop in the field

As the record may show this type of goods are long term / fixed assets of the farm business

Breeding Records

These are records kept to show the breeding activities and programmes for different animals in the farm.
These records help in selecting breeding stock and culling according to the performance
In breeding records the following information is usually recorded as illustrated.

Farm records.

Feeding records.

These records are kept to show the types and amounts of feed used in each farm enterprise.

The records help monitor consumption and output of each animal or the livestock flock.
This can assist in adjusting the costing.

When feeding each type of feed and quantity is noted.

Under remarks column performance on each type of feed is noted.

In feeding records the following information is usually recorded as illustrated.

Record Keeping in Farming Business

This lesson will cover the following topic units which can enhance your business farming style.

  • Basic Concepts of Economics
  • Keeping Farm Records
  • Health Records
  • Field operation Records
  • Marketing Records
  • Labour Records
  • Inventory Records
  • Breeding Records
  • Feeding Records
  • Production Records

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