Model Construction:
Construct a budget model for a farm
Farm financial plan and budget in excel (be a working budget - ‘talk’ to other components)
Budget model is worth lots of points
Practical assignment:
Compile farm budget in excel
Physical parameters as well as financial outcome
Farm of our choice
Has at least 2 operating branches
‘SIMULATE’ the farm as accurately as possible (make sense, explain the farm,
assumptions, how many tractors and machines and costs and labourers, etc)
(try to get more cultivars, operating branches, larger fancier model for integration)
Correct costs
Physical-biologically explained and sensible (
Economically justifiable
Financially achievable
Management theory:
When we talk about farm management, talking about a business run on the ecological
system (can't optimise as can be done with machinery, organic nature of plants / animals)
Exposed to respiratory (up until the day of harvest, something can go wrong - EX: wind
gusts the day before.
There is a set of subsystems:
Informal structural subsystem
Goals and values subsystem
Technical subsystem
Organizational structural subsystem
All these above systems, where they overlap is the section that is run by managerial
positions.
Whatever goes wrong is essentially the manager's fault.
The farm is designed around one singular purpose - the production of an agricultural good.
Market environment:
Farmers are dependent on input supplies (energy, genetic material, seed, fuel, chemicals,
mechanization, medicine, transport, labour, insurance)
Production: Livestock, crops, nurseries.
Processing and distribution: First handling (transport and warehouse, and silo), processing
( canning, packaging, baking, etc), Distribution (broad line, speciality (cold chain)),
wholesale, retail, food service.
Supply chain:
Input → producers → infrastructure → millers → bakers → wholesale retail
Theoretically, we know farmers and producers don't have a lot of negotiating power in the
supply chain for two reasons:
1. The guy with the most profit-making ability in the supply chain is at the end of the
chain (wholesale & retail)
2. Numbers game. Producers have limited choices with regards to inputs,
infrastructure, millers to choose, etc.
On an R10.28 loaf of bread, a farmer contributes wheat that is R1.77 of the total loaf.
Supply chain vs value chain:
Supply chain: physical passing on of product (order of physical hand-over of product)
Value chain: understanding the distribution of income along the chain (who benefits?). This
will show us who has the ‘most muscle’, IE, who has the most argumentative / bargaining
power. Those with the most value have the most to gain AND the most to lose.
, Yield and price are the MOST sensitive factors towards a farm's profitability.
Financial description:
Capital:
Fixed
Movable
Operating
o (MODEL via an inventory - asset register)
o Inventory of fixed improvements (anything require for farm to be operational
but not used in process of production) (vine and tree that don't get
consumed)
Financing
Add fuel price, % of insurance, etc to inventory of machinery / equipment for the
current price
NB: DO any of your assets need to be replaced in the current year?
Management Theory
Seed: 20-25% share each
Mechanisation in SA all machines are imported according to a specification that can't be
changed for the 2-6 month order time (adhere to European admission standard)
About 6% profit margin
Diesel: Price composed of;
Base price (64.8%),gov taxes (24.7%), sone differential (2.4%), industry margin
(6.9%), service differential (1.2%)
Agricultural chemistry: a large number of enterprises, few entry restrictions
37% of the total EU budget goes towards agricultural subsidies
Millers market shares (4 large brands), difficult to get into the milling industry
Bakers: difficult to enter
Retail: closest to consumers, Los leader policy, benefit not transferred (bread and milk at
the back of the retail shop, have to walk past everything - marketing strategy is called LOS
LEADER POLICY)
Pick n Pay buy bread now, sells it now, but will only pay their supplier in 90 days
New challenges:
Biotechnology
Bioenergy
Information technology
Food security and safety
Globalisation
Land reform and Agri_BEE
Weed resistance to chemicals
Complexity of farming system:
, Identifying what it consists of (at least two components), and how these components
interrelate to each other.
Anything difficult to understand or to comprehend
Having many varied interrelated parts, patterns or elements, meaning it is difficult to
understand fully
Being marked by the involvement of many parts, aspects, details, and nations - and
it necessitates an earnest study of examination to understand or cope with.
Complexity is determined by:
o People
o Things
Parts (structure)
Relations (functions) - farm system is designed to do so
o The more dense the number of parts and relationships, the more complex
the system is.
o The environment containing the system is by definition more complex than
the system
Definition (NOT IMPORTANT)
Management is the process of planning, organizing, leading and controlling the
work of organisation members using all available resources to reach organisational
goals.
Managers are people responsible for directing the efforts aimed at helping the
organisation achieve its goals
Organisational Performance is the measure of how efficient and effective an
organisation is
Managerial performance is the measure of how efficient and effective managers
are
Farm Management (NB!!! IMPORTANT)
Practice (real farming) Profession / academic (in class)
Action-based Based on best practice
Situation specific Applicable in principle
Underpinned by judgement Underpinned by analysis
Interest in actionable knowledge Interested in adaptable knowledge
Necessity to include producers and scientists in group discussions
About the establishment of principles that are applicable beyond place and time
boundaries
Why study enterprises and organisations:
Present: Contribution to the standard of living. Also to provide food, shelter, fibre,
medical care, communications, entertainment and employment
Future: develop through the development of products, evaluating impact on
resources, culture and ethics
Past: individuals associate with organisations (IE: schools, sports teams, politics,
religious communities (churches, mosques, etc) and businesses). This forms part of
their identity and culture
