Topic 2: Farm Planning and Budgeting

1. Farm Planning

A farm plan is a programme showing what a farmer intends to produce, how, with what resources and when.

Importance

1. Ensures efficient use of resources.
2. Helps in decision making.
3. Reduces risks and wastage.
4. Guides credit applications.
5. Helps in monitoring and evaluation.
6. Maximises profit.

Steps in Farm Planning

1. Survey resources: land, labour, capital, management, climate and markets.
2. Identify enterprise options.
3. Select the best enterprises (using budgets).
4. Draw the farm plan and layout.
5. Implement the plan.
6. Monitor and evaluate; revise when needed.

2. Farm Budgets

A budget is a forecast of expected income and expenditure for a given period.

Types

3. Partial Budget

If benefits exceed costs, the change is worth making.

4. Gross Margin

Gross margin = Total revenue (gross income) - Total variable costs

Example: Maize (1 acre)

Gross margins are used to rank enterprises and choose the most profitable.

5. Cash Flow Budget

Shows cash inflows (sales, loans) and cash outflows (inputs, wages, loan repayments) month by month to identify periods of cash shortage.

6. Factors Considered when Choosing Enterprises

• Climate and soil suitability
• Market and prices
• Capital and labour available
• Skills and technology
• Risk and profitability
• Government policy