Agribusiness and Farm Records

Why agribusiness?

In the CBC Senior School Agriculture pathway, farming is treated as a business. An agribusiness covers every activity from input supply to production, processing and marketing. A Kenyan dairy farmer in Nyeri who also sells milk to a cooperative and makes yoghurt is running an agribusiness.

The farm business plan

A business plan is a written guide showing where the enterprise is going. It should have:

• Business name, location and objectives
• Resources available (land, labour, capital)
• Production plan (what, how much, when)
• Marketing plan (buyers, prices, transport)
• Financial plan (budget, sources of funds such as SACCOs, Agricultural Finance Corporation, Hustler-type funds)
• Risks and how to reduce them

Farm records

Records are written facts about the farm. Common types:

1. Production records - yields, milk output, egg counts.
2. Labour records - workers, days worked, wages paid.
3. Inventory records - tools, stock, feeds, assets and their values.
4. Cash book - receipts (money in) and payments (money out).
5. Marketing records - sales, buyers, prices.
6. Breeding and health records - service dates, vaccinations, treatments.

Good records are accurate, up to date, simple and kept safely.

Importance of records

• Show whether the farm makes a profit or loss.
• Help in budgeting and decision making.
• Are required by banks when giving loans.
• Support tax returns and inheritance or sale valuation.
• Help trace diseases and improve breeding.

Costs and income

• Fixed costs: do not change with output, e.g. land rent, depreciation, permanent labour.
• Variable costs: change with output, e.g. seed, fertiliser, chemicals, casual labour.
• Total cost = fixed + variable.
• Revenue = quantity sold x price.
• Gross margin = revenue - variable costs.
• Net profit = revenue - total costs.

Worked example

A farmer in Kiambu keeps 100 layers. Eggs sold: 60 trays at KES 450 = KES 27,000. Variable costs (feed, vaccines) = KES 16,000. Fixed costs (depreciation of house) = KES 2,000.

• Gross margin = 27,000 - 16,000 = KES 11,000.
• Net profit = 27,000 - 18,000 = KES 9,000.

Since net profit is positive, the enterprise is worth continuing.

Break-even point

Break-even output = fixed costs / (price per unit - variable cost per unit). If fixed costs are KES 12,000, price KES 3,500 and variable cost KES 750 per bag, break-even = 12,000 / 2,750 = about 4.4 bags. Selling more than this gives profit.

Marketing basics

Farmers should consider grading, packaging, storage, transport and value addition. Selling through cooperatives or contracts often gives better prices than selling to brokers at the farm gate.

Try it

• List five records you would keep on a small poultry unit.
• Calculate the gross margin of a 1-acre kale plot with revenue KES 60,000 and variable costs KES 18,000.
• Draw a simple cash book with five receipts and payments for a school farm.
• Write a one-page business plan for a rabbit enterprise.