Front Cover
 Title Page
 Table of Contents
 List of Tables
 List of Figures
 Abbreviations, acronyms and symbols...
 Agricultural and farm systems -...
 Farm management and farm types
 Elements of farm-household systems:...
 Further farm-household system elements:...
 Further farm-household system elements:...
 Household goals, farm planning...
 Economic evaluation of farm systems:...
 Optimization of resource use levels:...
 Planning whole-farm systems: Allocation...
 Planning farm systems over...
 Planning and managing farm systems...
 Management, farm management and...
 Subject index
 Back Matter
 Back Cover

Group Title: FAO farm systems management series
Title: Farm management for Asia
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00085362/00001
 Material Information
Title: Farm management for Asia a systems approach
Alternate Title: FAO farm systems management series - Food and Agriculture Organization of the UN ; 13
Physical Description: xxix, 355 p. : ill. ; 30 cm.
Language: English
Creator: McConnell, D. J. ( Douglas John ), 1928-
Dillon, John L.
Food and Agriculture Organization of the United Nations
Affiliation: University of New England -- Armidale, New South Wales, Australia
Publisher: Food and Agriculture Organization of the United Nations
Place of Publication: Rome
Publication Date: 1997
Copyright Date: 1997
Subject: Farm management -- Asia   ( lcsh )
Agricultural systems -- Asia   ( lcsh )
Landbouwstelsels   ( gtt )
Management   ( gtt )
Systeemanalyse   ( gtt )
Genre: international intergovernmental publication   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
Statement of Responsibility: Douglas J. McConnell, John L. Dillon.
Bibliography: Includes bibliographical references and index.
 Record Information
Bibliographic ID: UF00085362
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 38963695
lccn - 98211971
isbn - 925104077X
issn - 1020-2080 ;

Table of Contents
    Front Cover
        Front Cover 1
        Front Cover 2
    Title Page
        Page i
        Page ii
        Page iii
        Page iv
        Page v
        Page vi
    Table of Contents
        Page vii
        Page viii
        Page ix
        Page x
        Page xi
        Page xii
        Page xiii
        Page xiv
    List of Tables
        Page xv
        Page xvi
        Page xvii
        Page xviii
    List of Figures
        Page xix
        Page xx
        Page xxi
        Page xxii
    Abbreviations, acronyms and symbols used
        Page xxiii
        Page xxiv
        Page xxv
        Page xxvi
        Page xxvii
        Page xxviii
        Page xxix
        Page xxx
    Agricultural and farm systems - concepts and definitions
        Page 1
        Page 2
        Page 3
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        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
    Farm management and farm types
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
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    Elements of farm-household systems: Boundaries, household and resources
        Page 45
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    Further farm-household system elements: Enterprises and activities and their budgeting
        Page 61
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    Further farm-household system elements: process, structural, coefficients and the whole-farm service matrix
        Page 89
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    Household goals, farm planning objectives, system planning and performance criteria
        Page 111
        Page 112
        Page 113
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    Economic evaluation of farm systems: Measure for evaluation and comparative analysis
        Page 137
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    Optimization of resource use levels: Response analysis
        Page 169
        Page 170
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    Planning whole-farm systems: Allocation budgeting, simplified programming and linear programming
        Page 189
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    Planning farm systems over time
        Page 231
        Page 232
        Page 233
        Page 234
        Page 235
        Page 236
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    Planning and managing farm systems under uncertainty
        Page 265
        Page 266
        Page 267
        Page 268
        Page 269
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    Management, farm management and farm systems
        Page 323
        Page 324
        Page 325
        Page 326
        Page 327
        Page 328
        Page 329
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    Subject index
        Page 345
        Page 346
        Page 347
        Page 348
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        Page 350
        Page 351
        Page 352
        Page 353
        Page 354
        Page 355
        Page 356
    Back Matter
        Page 357
        Page 358
    Back Cover
        Page 359
        Page 360
Full Text

_;kv 1%

i' -




Farm management

for Asia:

a systems approach

Douglas J. McConnell
John L. Dillon
Department of Agricultural and Resource Economics
University of New England
Armidale, New South Wales

Rome, 1997

j0. oo03




All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying or otherwise, without the prior permission of the
copyright owner. Applications for such permission, with a statement of the
purpose and extent of the reproduction, should be addressed to the Director,
Information Division, Food and Agriculture Organization of the United Nations, Viale
delle Terme di Caracalla, 00100 Rome, Italy.

FAO 1997

The designations employed and the presentation of material in this
publication do not imply the expression of any opinion whatsoever
on the part of the Food and Agriculture Organization of the United
Nations concerning the legal status of any country, territory, city or
area or of its authorities, or concerning the delimitation of its
frontiers or boundaries.


In preparing this book, the authors have received assistance directly or indirectly from many
people. Initial inspiration was provided by Dr Neal Carpenter, then Chief of FAO's Farm
Management and Production Economics Service (AGSP), who saw the need for a more
holistic approach to agricultural development problems at farm, household and village
levels. Following Dr Carpenter's untimely death, the project was carried through with the
energetic support of his successors including Dr Malcolm Hall and Dr Karl Friedrich. The
first draft was constructively criticised by Dr John Dixon, also of AGSP. Nor would the
work have been possible without the assistance and cooperation of the great many
specialists, particularly small farmers and professional agriculturalists, with whom we have
talked and worked throughout Asia. Our thanks must also go to Ms Sally Bearman and Ms
Suzanne Blair for assistance in editing, processing and formatting the manuscript as camera-
ready copy.

The book has two source streams. One, the formal stream, consists of analytical frameworks
and techniques pertinent to the planning and management of farm systems. Our consulting
of other authors in these matters is acknowledged in the cited references. Beyond suggested
classification schema for agricultural systems, farm types and the modes and fields of farm
management analysis, we add little that is new. The main task was to apply these formalities
to the world of small traditional farm systems. Thus we exploit also a second stream: that of
informal knowledge and village lore which flows to us from the developing world itself -
and we try to gain from it sufficient insight to suggest what scope (and limitations) there
might be for applying modern farm management techniques in the context of farm systems
in old traditional but inevitably changing cultures.

Full acknowledgment of the debt which we owe to the small-farm households of Asia is not
possible. This book is dedicated to them with respect and gratitude.

Douglas J. McConnell

John L. Dillon


This book was produced by FAO as part of the work program of its Farm Management and
Production Economics Service (AGSP) for the furtherance of a systems approach to farm
development, especially of small traditional farms of the tropical world. Impetus to this has
been given by the ongoing activity of FAO's Regional Commission on Farm Management in
Asia and the Far East.

Because of both the importance of small farms in Asia and the continuing expansion of
farm management analytical concepts and methodology, it is timely to build on previous
FAO publications in this field. Substantially, these began with the publication in 1958 of
W.Y. Yang's book Methods of Farm Management Investigations and, recognizing FAO's
special interest in world food security and the sustainable development of small farms, have
continued through to today's FAO Farm Systems Management Series to which this book

The present volume is not an updated compendium of methodology. The authors have first
developed an agricultural systems framework and a classification of farm types and the
modes and fields of farm management analysis. They have then selected from the existing
body of farm management methodology those techniques for analysis and planning which,
on the experience of several decades, seem to be of greatest practical use for professionals
analysing and planning farm-level agricultural systems, viz: budgeting, enterprise and
whole-farm comparative analysis, response analysis, mathematical programming, simulation
and risk analysis. Although the authors' techno-ideological framework is economics, they
point out that it usually does not matter which discipline agronomy, economics,
engineering, sociology ... takes the lead role in the analysis of small-farm systems as long
as these typically diversified farms and their farm-household units are approached
holistically as functioning integrated systems which need to be adequately understood
before prescription for 'improvement' is offered.

Most modern textbooks on farm management are set in the context of modern Western
commercial farming. In being oriented to the small farms and rural households of Asia
where population pressure is greatest, this book illustrates the practical application of
analytical methods described in J.L. Dillon and J.B. Hardaker's book Farm Management
Research for Small Farmer Development in this same series.

To contribute positively to sustainable agricultural development, these methods must
contribute to the betterment of food security and income of poor folk supported by small
farms using traditional technology and internally generated resources. To assist in this, the
first requirement is that we have a better understanding of the actual agro-economic
structuring, nature and functioning of these small-farm systems and their households. We
must seek such understanding with great care and humility. For as this book points out,
these small farm-household systems which were once dismissed as 'backward' and as prima
facie evidence of under-development, will generally on closer inspection prove to be far
more sustainable, efficient and resilient than the bulk of commercial agriculture in the West.

From decades of experience, we now know better than to try to replace traditional small-
holder agriculture with some allegedly superior form of modern commercial agricultural

production transferred from the West. The degree of interdependence among crop and
livestock activities and between the farm and the household in such small-holder systems is
such that one would not attempt to adjust, improve or modernize any single element without
expecting repercussions throughout the whole system. This characteristic of more-or-less tight
structural integration does not necessarily mean that all these farms are biologically and
economically efficient and sustainable. They range from what are arguably the world's most
sustainable, sophisticated and complex systems the household forest-gardens of Sri Lanka,
Kerala and Java to systems which, through excessive demands placed on them, not
infrequently generated by external factors, have become degraded to the point of abandonment.

In this book the authors present a powerful argument for the application of farm management
and farming systems analysis to these complex small-holder agricultural systems in Asia. They
leave the reader with profound respect for what this traditional world of the small farm can
offer in return.

Doyle Baker
Chief, Farm Managemen and Production Economics Service,
Agricultural Support Systems Division









1.2.1 Natural, social and artificial systems 2
1.2.2 Further sub-classification of systems 4

1.3.1 Nature of farm-level systems 7
1.3.2 Village-level farming systems 10





2.1.1 Scope 17
2.1.2 Definition 17
2.1.3 Optimization 18
2.1.4 Objectives 18
2.1.5 Economics as the framework for farm-system analysis 19
2.1.6 Alternative bases for farm-system analysis 20
2.1.7 Farm management fields 21
2.1.8 Farm management modes 23

2.2.1 Farm types 25
2.2.2 Structure of small-farm systems 35



3.1.1 Importance of boundary specification 46

3.2.1 Farm household as resource manager 48
3.2.2 Farm household as system beneficiary 50

3.3.1 Farm resources from an accounting view 51
3.3.2 Farm resources from an operational view 52
3.3.3 Operational resource categories 53
3.3.4 Other relevant resource properties 54
3.3.5 Resource acquisition and generation 58
3.3.6 Relationships between resources, capital and costs 58




4.2.1 Enterprise boundaries 62
4.2.2 Enterprise structural types 62

4.3.1 Budget types and purpose 64
4.3.2 Budget standardization: units of measurement 67
4.3.3 Level of budget detail 68
4.3.4 Unit budgets 69
4.3.5 Extending budget scope: processing and marketing 70
4.3.6 Economic and financial budgets 71
4.3.7 Real and imputed input costs and output values 72
4.3.8 Budget-based measures of performance 72
4.3.9 Extension of enterprise or activity budgets to whole-farm
budgets 75
4.3.10 Extension of whole-farm budgets to the household 76
4.3.11 Cost of production 77

4.4.1 Types of resource-generating activities 78
4.4.2 Activity budgets in linear programming format 80



4.7.1 Single-parameter extensions 83
4.7.2 Two- and three-parameter extensions 84




5.1.1 Definition and nature of processes 89
5.1.2 Number of relevant processes 92
5.1.3 Analytical problems presented by processes 96

5.2.1 Interrelatedness within an activity: internal structural
coefficients 96
5.2.2 Structural coefficients as critical parameters 98
5.2.3 Interrelatedness among activities: external structural
coefficients 98

9 102
5.3.1 General charges 102
5.3.2 Capital fixed costs 102
5.3.3 Relative importance of total farm fixed costs 103

5.4.1 Mandatory versus optional farm fixed costs 107





6.2.1 Productivity 114
6.2.2 Profitability 115
6.2.3 Stability 116
6.2.4 Diversity 118
6.2.5 Flexibility 121
6.2.6 Time-dispersion 122
6.2.7 Sustainability 126
6.2.8 Complementarity and environmental compatibility 133
6.2.9 Summary 133




7.2.1 Using data aggregated on a whole-farm basis 139
7.2.2 Using data on an activity-specific basis 143
7.2.3 Productivity of individual resources on a whole-farm basis 145
7.2.4 Productivity of individual resources on an activity basis 148
7.2.5 Total productivity measures 149

7.3.1 Level I analysis the whole farm 152
7.3.2 Level II analysis the household 154
7.3.3 Level III analysis the fixed-capital structure 156
7.3.4 Level IV analysis the individual activities 158
7.3.5 Level V analysis the underlying processes 160
7.3.6 Summary 163

7.4.1 Data for the subject farm 164
7.4.2 Data for the comparative or standard farm 165





8.2.1 Optimization by partial budgeting 173
8.2.2 Optimization by graphical methods 173

8.2.3 Optimization by using the response equation 175
8.2.4 Optimization by using the profit function 176
8.2.5 Maximum output vs optimal economic output 177
8.2.6 Constrained optimization 178

8.3.1 Optimization based on MVP = MC 180
8.3.2 Optimization by using the profit function 181

8.4.1 Using existing data 182
8.4.2 Data from on-farm experiments 183
8.4.3 Trials with 'permanent' or long-term crops 184






9.3.1 Types of farms and activities 192
9.3.2 Assumed optimality of plans 195
9.3.3 Specification of non-resource constraints 197

9.4.1 Operating criteria for allocation budgeting 199
9.4.2 Allocation budgeting using GM per unit of land 199
9.4.3 Allocation budgeting using GM per unit of operating
capital 203
9.4.4 Allocation budgeting using GM per family labour day 204


9.6.1 Linear programming of systems consisting of only final
product-generating activities 211
9.6.2 Linear programming of Type 2 farms: systems with
internally-generated resources 217
9.6.3 Linear programming of Type 1 farms: subsistence-
oriented systems 223
9.6.4 Relevance of LP 228






10.3.1 Short-term activities 235
10.3.2 Intermediate- and long-term activities 236

10.4.1 Compounding or taking a present value forward through
time 237
10.4.2 Discounting or bringing a future amount back to present
value 239

10.5.1 Objective interest rates 240
10.5.2 Subjective interest rates 240



10.8.1 Terminal value of an annuity 246
10.8.2 Annuity equivalent to a future lump sum 247
10.8.3 Present value of an annuity 247

10.9.1 Perpetuities in the valuation of land and farms 250

TIME 250





10.15 REFERENCES 263



11.2 RISK 268








11.10.1 Personal preference or utility 281
11.10.2 Utility function elicitation 284
11.10.3 Probability elicitation 284
11.10.4 Example of subjective expected utility analysis 288




11.14.1 Risk programming 297
11.14.2 Stochastic programming 298

11.15.1 Steps in simulation modelling 299
11.15.2 Example of Monte Carlo simulation 300
11.15.3 Simulation flowcharts and computers 313
11.15.4 Other uses of Monte Carlo simulation 316


11.17 REFERENCES 320


1.1 History of Management Thought 323

1.2 Definition of Management 324
1.3 Major Features of Management 325
1.4 Definition of Farm Management 326

2.1 Biological Effects 328
2.3 Resource-portfolio Effects 329
2.4 Small-farm Effects 330

3.1 Farm-system Theory 331
3.2 Theory of Management by Objectives 337

4.1 Farm-system Approach 339
4.2 Management by Objectives 339






3.1 Gender Analysis of Labour Use in Cassava Production in Northern
Mindanao, Philippines 49
3.2 Gender Analysis of Participation of Farm-household Members in
Household and Other Activities in Northern Mindanao, Philippines 50
4.1 Example of an Enterprise Planning Budget: Inputs, Costs and Returns
for 2.5 Acres of Dryland Ginger in the Wet Zone of Sri Lanka 65
4.2 Evaluation of a 2.5 Acre Dryland Ginger Enterprise under Different
Cost Conditions 75
4.3 Whole-farm Evaluation Budget derived from Enterprise Budgets 76
4.4 Example of Budgets for Resource Generation by Purchase or Barter-
exchange Activities 79
4.5 Example of Resource-generating Activity Budgets in Linear
Programming Format 80
4.6 Evaluation of Adjustments to an Enterprise or Activity by Partial
Budgeting 82
5.1 Budget of a Maize-growing Activity 90
5.2 Internal Structural Coefficients and Annual Activity Budget for a Self-
sustaining Flock of 100 Ewes 97
5.3 Example Listing of Annual Total Fixed Costs on a Rubber Estate 103
5.4 Average Annual Costs of Production of Made Rubber for a Sample of
Sri Lankan Rubber Estates (Rs per Pound Weight) 104
5.5 Farm Capital Investment Inventory and Schedule for calculating
Annual Capital Fixed Costs 105
6.1 Relative Importance of Main and Secondary Products of Some Crops
on a Sample of Forest-garden Farms 115
6.2 Year-to-year Variation in Clove and Coconut Yield 117
6.3 Calculation of the Coefficient of Variation (CV) for the Copra Yield
Data of Table 6.2 118
6.4 Worksheet Calculation of Simpson's Diversity Index for a South East
Asian Mixed-farm System in Terms of (A) Species and (B) Income 120
6.5 Monthly Distribution of Production of Some Tropical Tree and Vine
Crops at Selected Locations in Malaysia (M) and Sri Lanka (SL) 123

6.6 Relative Monthly Production (or Income) and Relative Time-
concentration and Relative Time-dispersion of Four Crops on a Sri
Lankan Farm 126
6.7 Summary of Farm-household System Objectives by Farm Type and
Performance Criteria 135
7.1 End-of-year Operating Statement for a Mixed Farm of 2.8 Ha 140
7.2 Derived Measures for Annual Whole-farm Evaluation 141
7.3 Example Format for Whole-farm Comparative Analysis (Annual
Basis) 142
7.4 Farm-system Evaluation using Activity-specific Data (Annual Basis) 144
7.5 Worksheet for Allocation of Farm Capital Investment to Specific
Activities or Farm as a Whole as required for Analysis of Table 7.4
(Annual Basis) 145
7.6 Worksheet for deriving per Unit Productivity Values of Farm
Resources (Land, Labour, Capital) on a Whole-farm (Annual) Basis 147
7.7 Worksheet for deriving per Unit Productivity Values of Farm
Resources (Land, Labour, Capital) on an Activity Basis for the Maize
Activity of Tables 7.4 and 7.5 (Annual Basis) 149
7.8 Worksheet for deriving Total Factor Productivity, Return on Capital
and Return on Equity on a Whole-farm (Annual) Basis 151
7.9 Worksheet for deriving Total Factor Productivity, Return on Capital
and Return on Equity on an Activity-specific (Annual) Basis 153
7.10 Broad Sequence of Steps in Comparative Analysis 154
7.11 Level I Analysis: Comparative Analysis with Some Whole-farm
Performance Criteria 155
7.12 Level II Analysis: Indicative Aspects of the Household to be
considered in Diagnosis and Comparative Analysis 1 56
7.13 Level III Analysis: Aspects of Fixed Farm Capital to be considered in
Diagnosis and Comparative Analysis 157
7.14 Level IV Analysis: Example of Comparative Analysis of Individual
Activities 159
7.15 Level V Analysis: Example of Comparative Analysis of Processes 161
8.1 Response Optimization by Partial Budgeting of Profit 173
8.2 Response Optimization by Partial Budgeting of Marginal Value
Relationships 174
9.1 Example showing Components of a Base Table for Whole-farm
Planning 191
9.2 Example of AB Worksheet for Whole-farm Planning based on GM per
Unit of Land 201

9.3 Final Whole-farm Plan based on GM per Unit of Land for the AB
Worksheet Example Farm of Table 9.2 203
9.4 Example of AB Worksheet for Whole-farm Planning based on GM per
Unit of Operating Capital 205
9.5 Whole-farm Plan based on GM per Unit of Operating Capital for the
AB Worksheet Example Farm of Table 9.4 206
9.6 Example of AB Worksheet for Whole-farm Planning based on GM per
Family Labour Day 207
9.7 Example of SP Worksheet for Whole-farm Planning 208
9.8 Final Whole-farm Plan for the SP Worksheet Example of Table 9.7 210
9.9 Example of LP Worksheet for Whole-farm Planning with only Final
Product-generating Activities 213
9.10 Example of Base Table with Resource Generation and Activity
Interdependence 218
9.11 Example of LP Base Table for Whole-farm Planning of Small (Type
2) Farms with Resource-generating Activities 220
9.12 Example of LP Base Table for Whole-farm Planning of Small (Type
1) Farms with Subsistence-oriented Mandatory Activities 226

10.1 Compound Growth Factors (1+i)n 238

10.2 Discount Factors l/(1+i)n 241
10.3 Example of Discounted Cash-flow Analysis 245

10.4 Annuity Discount Factors [(l+i)"-l]/[i(l+i)"] for obtaining the
Present Value of an Annuity: PV = A[(1 + i)" -1] / [i(l + i)n ] 249
10.5 Inputs and Costs for Establishment and Maintenance of Cardamom
(per Acre Basis) 256
10.6 Derivation of Cost of Harvesting and Processing Cardamom (Rs per
Cured Pound) 257
10.7 Revenue and Cost Streams for Cardamom over 25 Years (Rs per Acre) 257
10.8 Example of Some Factors relevant to the Choice and Evaluation of
Long-term Investments 258
10.9 Example of Worksheet for obtaining the Benefit-cost Ratio and
Internal Rate of Return of a Long-term Investment 259
11.1 An Overview of Small Farmers' Risk-management Strategies 272
11.2 Example of Classification by Level and Time of Risk-management
Strategies used by Small Farmers in the Semi-arid Tropics 273
11.3 Annual Enterprise Budget for a 0.4 Ha Sponge Farm with 0.133 Ha
harvested Annually 276
11.4 Summary of Sensitivity of Annual Net Return, Cost per Sponge, and
Break-even Survival Rate to Changes in Four Key Variables 277

11.5 Effect on Annual Net Return of Simultaneous Variation in the Four
Key Variables of Table 11.4 278
11.6 Stochastic Budget relative to Survival Rate for the Sponge-farm
Investment of Table 11.4 279
11.7 Relationships between the Shape of the Utility Function, Risk Attitude,
Risk Premium and Marginal Utility 283
11.8 Monetary Payoff Matrix for a Farmer's Fertilizer Decision Problem
together with EMV and CE of Each Risky Prospect 290
11.9 Utility Payoff Matrix for the Farmer's Fertilizer Decision Problem of
Table 11.8 290
11.10 Base Budget for Simulation Analysis of Banana Investment (per Ha
Basis) 301
11.11 Incidence and Effect of Major Weather Events on Banana Crops in the
Study Area, 1909 to 1995 303
11.12 Probability of Storm Losses in Banana Production in the Study Area 304
11.13 Assignment of Event Identification Code Numbers to Economic-loss
Events in Banana Investment Simulation Exercise 305
11.14 Worksheet for a Run of the Banana Monte Carlo Simulation Model
(per Ha Basis) 307
11.15 Estimated CDF and Reliability (Reverse CDF) of PV of Net Returns
from Monte Carlo Simulation of Banana Production (per Ha Basis for
Three Six-year Cycles) 310


1.1 Agriculture in relation to Other Systems 3
1.2 The Hierarchy of Agricultural Systems 6
1.3 Interrelationships of Elements in a Simple Farm-household System 13
2.1 Relationship between the Four Modes of Farm Management Activity 24
2.2 Sub-classification of Type 3 Farming Systems 30
2.3 Alternative Processes in producing Tea on an Estate 35
2.4 Structural Model of a Pathan Farm exemplifying a Type 2 Farm 37
2.5 Structural Model of a Bhutanese Farm exemplifying a Type 1 Farm 41
3.1 Boundaries of Three Contrasting Farm Systems 47
3.2 Direction of Resource Flows within a Whole-farm System 52
3.3 Relationships among Categories of Resources, Capital and Costs in a
Whole-farm System Context 59
4.1 Comparative Structure of Traditional and Modern Wheat Enterprises 64
4.2 Example of a Flowchart: Post-harvest Handling and Disposal of a
Paddy Crop, Bhutan 71
4.3 Example of Relationships between Level of Output and Fixed Costs,
Variable Costs and Total Costs 73
4.4 Example of Enterprises as Resource Generators 78
4.5 Example of a Single-variable Parametric Budget showing Ginger
Gross Margin per Acre for Ginger Prices ranging from 3 to 6 Rs/kg 84
4.6 Example of a Three-variable Parametric Budget showing Annual Net
Returns on a Cassava Estate by Tuber Yield, Dry Chips Recovery Rate
and Sale Price 85
5.1 Example of Alternative Technologies in Maize Production (per Acre
Basis) 91
5.2 Graphical Examples of Single-variable Input and Two-variable Input
Production Functions 93
5.3 Stylized Production Functions or Input-Output Relationships for a
Single Variable Input 95
5.4 Flowchart depicting Role of Internal Structural Coefficients in Annual
Maintenance of a Self-sustaining Flock of 100 Ewes 99

5.5 Structural Relationships among Four Coconut Activities (per Acre
Basis) 100
5.6 Example of Straight-line, Declining-balance and Sum-of-integers
Depreciation Methods applied to an Item with an Initial Value of
Rs 1 000, a Ten-year Life and Zero Salvage Value 108
6.1 Stylized Representation of Relative Importance of Financial Profit and
Subsistence by Farm Type 112
6.2 Product Diversification from a Maize Crop on a Javanese Farm 121
6.3 The Spiral of Unsustainability 127
6.4 Illustrative Income Flow of Sustainable and Unsustainable Systems 131
6.5 Successive Exploitative and Regenerative Phases in a Johor Vegetable
Production System 132
7.1 Sequence of Analysis in Farm-system Evaluation 138
7.2 Yield, Hand-weeding Cost and Oxpower Cost in relation to Number of
Cultivations 162
7.3 Response of Rice Yield to Seedling Age at Transplanting 163
7.4 Isoquant showing Combinations of Two Variable Inputs Xi and X2 to
Produce a Fixed Level of Output Y' 168
8.1 Total Physical Product (TPP), Marginal Physical Product (MPP) and
Total Value Product (TVP) per Technical Unit for a Single-variable
Production Function Y = fX) 171
8.2 Example of Graphical Analysis of Response 176
8.3 Graph of Optimality Condition MVP = MC 177
8.4 Sketch of Field-trial Results for Two Varieties of Cassava 183
8.5 Results of a Cashew Spacing Trial 186
8.6 Sketch of Cacao Yield relative to Tree Density and Age from a Farm
Survey in Sri Lanka 187
9.1 Schematic Example depicting Whole-farm Planning Situations with
(A) Independent and (B) Dependent Activities 196
10.1 Profit in relation to Time for a Particular Run of a Repetitive
Production Process having Time as a Decision Variable in the Absence
of Time-preference 234
10.2 Example of an Input-output Time Chart 244
10.3 Relationships between a Terminal Value (An) due at the End of Year n,
its Present Value (PV) and an Equivalent Annuity (A) for an Interest
Rate of i 253
10.4 Yield Curve for Cardamom Investment Example 255
10.5 Graphical Determination of IRR 261
10.6 Schematic Depiction of a Rolling Planning Strategy 263

11.1 Uncertainty in Crop-yield Response to Fertilizer and its Depiction (a)
by a Continuous and (b) by a Discrete Subjective Probability
Distribution 267
11.2 Cumulative Probability Distribution of Annual Net Return (R) for the
Stochastic Budget of Table 11.6 280
11.3 Illustration of the Concept of a Utility Function and Expected Utility
for a Risk-averse Decision Maker 282
11.4 Application of Visual-display Procedure for the Elicitation of the
Farmer's Subjective Probabilities for the Joint Occurrence of Survival
Rate (si) and Marketability (mi) Levels in the Sponge-farm Example
of Table 11.4 285
11.5 Second-stage Visual Display for the Elicitation of the Farmer's
Subjective Probabilities for the Joint Occurrence of Survival Rate (si),
Marketability (mj) and Market Price (Pk) Levels in the Sponge-farm
Example of Table 11.4 286
11.6 Triangular Probability Distribution f(X) and Cumulative Distribution
Function F(X) for the Net Return Data of Table 11.5 289
11.7 Risky Decision Problem of Table 11.8 expressed as a Decision Tree 292
11.8 Example of a Decision Tree for a Risky Decision Problem 294
11.9 Folding Back of the Decision Tree of Figure 11.8 on the Basis of
Certainty Equivalence 295
11.10 Stochastic Dominance Analysis of Five Alternative Decisions A, B, C,
D and E 296
11.11 Estimated Reliability of the PV of Net Returns from Banana
Production 311
11.12 Calibration of Banana Simulation Model by Plot of Simulated Farm-
yield Decreases against Regional Exports of Bananas, 1964 to 1995 314
11.13 Initial Elements of a Flowchart for the Monte Carlo Simulation of
Banana Production 315
11.14 Flowchart for Monte Carlo Simulation Model of Alternative Rice-
based Farm Systems 318
A. 1 Generalized Schematic Representation of the Farm System 334



a: the lower-range or minimum value of a random variable

A: an annual payment amount which, continued over n years, constitutes
an annuity with a terminal value A, =A[(l +i)"-1]/i or which
amortizes a PV where A = PV[i(l + i)"] / [(1 + i)" -1]

A,: a future amount to be received or paid in n years' time; it is equivalent
to an annuity over n years of A=Ai/[(1+i)"-1] and has a PV of
A, /(1+i)"

AB: allocation budgeting

ac: acre(s)

ac ft: acre feet (of irrigation water)

AME: adult male equivalent, a standardized unit of labour measurement

APP: average physical product, equal to Y/X for Y = f(X)

AU: animal unit, a standardized unit for aggregation or comparison of
different types of animals

AVP: average value product, equal to (APP)p,.

b: the upper-range or maximum value of a random variable

B: the resource pool available to the farmer or, in LP, the level of
resource constraints or activities constituting the farm 'plan' at each

B: size of the available cash budget

B/C: ratio of benefits to costs

B-l: in AB and SP, the initial set of resource constraints

B-i: in AB and SP, the balance of resource constraints after sequential
introduction of the i-th activity into the plan, i = 1, 2, ...

C: depending on context, cost or the coconut-to-copra conversion rate

CDF: cumulative distribution function

CE: a decision maker's certainty equivalent for a risky prospect


cm: centimetre(s)

COP: cost of production, calculated per unit of output as total cost divided
by quantity of output, i.e., TC/Y

CV: coefficient of variation, calculated as 100 SD/X to express the
standard deviation of a variable as a percentage of its mean

CY: crop-cycle year of a perennial crop

d: the constant annual rate of depreciation under the declining-balance

D: the annual depreciation cost as measured by the straight-line method

D,: the annual depreciation cost in year t as measured by the declining-
balance or sum-of-integers methods

DC: direct cost of an enterprise (or activity), calculated as the sum of its VC
plus its share of farm FC

DI: Simpson's diversity index, equal to l-,(nIN)2 where S is the
number of species or activities present; ni is the number of individuals
in the i-th species, or area devoted to the i-th species or activity, or
income or value of the i-th species or activity; and N (= In,) is the
total population of individuals across all species, or total area across all
species or activities, or total farm income or value across all species or

dUldX: marginal utility of X for U = f(X)

dY/dX: marginal product of X in Y = f(X) or the first derivative of Y with
respect to X

E: mean or expected value, calculated for a variable X as X, / n for a
i= I
sample of observations X,, X,,... X

EMV: the expected money value of a risky prospect

EU: subjective expected utility of a risky prospect

EV: expected value of a risky prospect

fo.i: the i-th fractile of a probability distribution; a proportion 0.i of the
distribution of a random variable X will lie below the value X = f.,

FC: fixed cost

F(PV): CDF of PV

F(X): the cumulative probability or CDF of a random variable X


G: yield of grain

GAMS: General Algebraic Modelling System

GM: gross margin, calculated as gross return less variable cost

GR: gross return or gross revenue

ha: hectare(s)

HYV: high-yielding variety

i: real annual rate of interest after correcting for inflation or deflation,
equal to [(I +i*)/( + w)]-1, or, when used as a subscript, denotes the
i-th member of a set

i*: nominal annual rate of interest or rate of discount

IRR: internal rate of return defined as the annual interest rate i at which the
PV of an investment's costs is equal to the PV of its gross returns

K: in LP, the maximum level of an activity permitted by a particular

kg: kilogram(s)

km: kilometre(s)

L: the expected total years of useful life of a capital item

LP: linear programming

LU: labour unit, a standardized unit for measuring labour

m: metre(s)

m: the modal value of a random variable

-M: in LP, the notional high negative p value placed on Q,

MC: marginal cost or the change in TC as one more unit of a variable input
factor is used

mds: maunds, a volumetric measure used in Pakistan and India

MOTAD: Minimization of Total Absolute Deviations, a form of linear risk

MPP: marginal physical product, equal to dY/dX for Y = f(X)

mt: metric tonne(s)

mths: months





















P(R < R*):


marginal value product, equal to (MPP)p,

depending on context, the number of observations on a variable, or the
size of a sample, or the number of input factors in a production
process, or the number of equal intervals (usually years) in a period of

for a given farm system, the number of individuals in the i-th species,
or area devoted to the i-th species or activity, or income from the i-th
species or activity; used in calculating the DI of a farm system

depending on context, quantity of nitrogen fertilizer or, for a given
farm system, the total population of individuals across all species, or
total area across all species or activities, or total farm income or value
across all species or activities; used in calculating the DI of a farm


fertilizer containing nitrogen, phosphorous and potassium

net return or net revenue, calculated as TGR minus TC

Ngultrum; Bhutanese unit of currency

overhead costs, defined as fixed costs accrued on a whole-farm basis

operational gross margin of an enterprise (or activity), calculated as
TGR minus DC of the enterprise (or activity)

the i-th possible outcome of a particular risky decision

in LP, the unit price or value of each real or disposal activity; it is
equivalent to an activity's unit GM

unit price of grain

unit price of the i-th good

unit price of N

unit price of input factor X

unit price of product Y

quantity of phosphate fertilizer

patok(s), a Javanese land unit equal to about 0.1 ha

the decision maker's subjective probability for the occurrence of Oi

the probability that net return R will be less than or equal to any
nominated value R*


PV: the present value of a future lump sum or stream of payments or of an
item; if Aq is to be received n years from now, its PV is A,/(l+i)"
assuming an annual interest rate of i

PV,: PV at time t

P(X): probability of X

q: number of times per year that compounding or discounting is to occur

Q: in LP, the i-th minimum planning constraint or its corresponding
artificial activity

r interest rate per period of length l/q years, equal to an annual interest
rate i of (1+r) -1

R: depending on context, rainfall, or net return, or an annual payment
amount that continues in perpetuity and thus has a PV of Rli, or the
income diversity ratio, equal to ( Ri )2 /, R2 where Ri (i = 1 to n) is the
income from the i-th activity and 1 5 R 5 n for R, 2 0

R, income from the i-th activity

R*: any nominated value of net return R

RN: random number

Rp: Rupiah; Indonesian unit of currency

Rs: Rupee; Indian, Pakistani and Sri Lankan unit of currency

RTC: index of relative time-concentration of annual production or income
of a product, calculated as the CV of the product's production or
income pattern as a fraction of the corresponding CV for a perfectly
concentrated product

RTD: index of relative time-dispersion of production or income, calculated
as 1- RTC

S: the number of species or activities in a farm system; used in
calculating the DI of a farm system

SD: standard deviation, calculated as the positive square root of variance

SP: simplified programming

SV: the salvage value of a capital item

t: depending on context, ton(s) or tonne(s)

t: time, e.g., year t, or the time-length of an activity

TC: total cost, calculated as the sum of total variable cost and total fixed



















X, = h(X,2Y *):


total digestible nutrients

total fixed cost

depending on context, the total gross margin of an activity, of an
enterprise or of the whole-farm system; equal to TGR TVC

total gross return or total gross revenue

total physical product, equal to Y for Y = f(X)

total variable cost

total value product, equal to (TPP)p,

a decision maker's utility function

the linear transformation of U, equal to aU + b with a > 0

United Arab Emirates

a decision maker's utility function specified in terms of the variable X

variance, calculated for a variable X as .(Xi- Y) /(n- 1)for a sample
of observations X, X2,...X,

the depreciated value of an item at the end of year t under the
declining-balance method

variable cost


annual rate of inflation (w > 0) or deflation (w < 0)

a variable or an input factor

arithmetic mean of a set of sample observations {X,}, i = to n, on a

variable X, calculated as X, n

isoquant equation giving the locus of all combinations of two variable
inputs X, and X2 to produce a fixed level of output Y*

depending on context, the i-th observation on a variable X, or the i-th
input factor, or the level of the i-th input factor

depending on context, a product or the yield of product (or output)
from a production process

some fixed level of output Y


Y = f(X):

Y= f(x,,X2):

Y = f(X,,X2, ...X,):


greater than, i.e., a > b indicates a is greater than b

less than, i.e., a < b indicates a is less than b

single-variable production or response function indicating output Y is
a function of the variable input factor X

production or response function indicating output Y is a function of
two variable inputs X, and X2

production or response function indicating output Y is a function of n
variable inputs X,,X2,...X,

production or response function indicating output Y as a function of
the variable input X, when inputs X2,...X, are held constant

in LP, the TGM of a farm plan or the opportunity cost of including a
unit of an activity in the plan

in LP, for an activity, when multiplied by minus one, indicates the net
increase in plan TGM to be gained by adding one more unit of the
activity to the plan

marginal product of Xi in Y=f(XI,X2,...X,),i=l ton, or the first
partial derivative of Y with respect to X,

a small incremental change in (.)

a small incremental change in the level of the variable input Xi

profit, equal to TVP-VC-FC= p,.Y- piXi -FC for the single-

product activity Y=f(X,,X2,...X,); for multi-product situations,
equal to TGR TVC TFC or, more simply, GR VC FC

for a variable X, the sum of the values X,,X2,...Xn


dY/x, :




n ):

Farm-.--IT a for Asia: a systems a.1mach .1-1


'For an understanding, not only the elements but their interrelations as well are required.'

Ludwig von Bertalanffy (1973)

The first purpose of this introductory chapter is to develop a conceptual framework for the
examination of the agro-economic structure of farm-level agricultural systems. The second
purpose is to sketch the relationships among these farm-level systems, and between these on
the one hand and higher-level systems on the other. These considerations form the basis for
the presentation in later chapters of an analytical approach to farm management from a
systems perspective applied in the context of Asian agriculture.

While somewhat original in the comprehensiveness of its farm systems' schema, the
analytical framework and approach taken are not in conflict with the approaches to systems
theory and (agricultural) systems analysis as presented by such authors as Ackoff (1973),
Ackoff and Emery (1972), Boulding (1956), Checkland (1981), Dillon (1992), Dillon and
Anderson (1990, pp. 164-174), FAO (1989 and 1990), Fresco and Westphal (1988),
Friedrich (1992), Kast and Rosenzweig (1974), Norman (1980), Ruthenberg (1976 and
1980), Shaner, Philipp and Schmehl (1982), Spedding (1979) and von Bertalanffy (1973).


An agricultural system is an assemblage of components which are united by some form of
interaction and interdependence and which operate within a prescribed boundary to achieve
a specified agricultural objective on behalf of the beneficiaries of the system.

This definition is analogous to the general definition of any artificial (i.e., man-made)
system of which all managed agricultural systems (including specifically the farm-level
systems) form one sub-division as shown in Figure 1.1.

From a practical production, administration and management point of view, as shown in
Figure 1.2, 'all agriculture' can be regarded as consisting of sets of systems at 16 Order
Levels or levels of generality. As discussed in Section 1.3, these 16 Order Levels largely
constitute a nested hierarchy. This book is concerned with the 12 lowest-order systems,
those at farm level, i.e., systems of Order Levels 1 to 12 in Figure 1.2.


Discussion and analysis of systems can be of them as actual systems (e.g., of constituent
physical processes in the case of natural physical systems) or as representational systems.
Common representations or models of actual systems take such forms as written

Farm mana
cement for Asia: a systems approach


2 Agricultural and farm systems concepts and definitions

descriptions, physical models, mathematical models, flowcharts, tables of data and computer
programs. In the following discussion, reference is to representational systems.

1.2.1 Natural, social and artificial systems

Systems can be classified into three broad families or divisions as either natural, social or
artificial systems (Figure 1.1).

(a) Natural systems those that exist in Nature consist of all the materials (both physical
and biological) and interrelated processes occurring to these materials which
constitute the world and, inter alia, provide the physical basis for life. They exist
independent of mankind. Our role in relation to natural systems is to try to
understand them and, as need be, make use of them. We also (increasingly) attempt to
duplicate them, in part or whole; but at this point they become, by definition, man-
made or artificial systems. These fundamental natural systems remain unaffected by
attempts at imitation. Those natural physical and biological systems (shown in their
totality as the division of natural systems in Figure 1.1) which are relevant to
agriculture will be self-apparent: rock weathering to form soil; plants sustained by
such soil; animals sustained by such plants ... are examples of the outward forms of
agriculturally relevant natural systems in operation.

(b) Social systems are more difficult to define. Essentially they consist of the entities
forming animate populations, the institutions or social mechanisms created by such
entities, and the interrelationships among/between individuals, groups, communities,
expressed directly or through the medium of institutions. Social systems involve
relationships between animate populations (individuals, groups, communities), not
between things. Concern here is with human social systems as they relate to or
impinge upon farming, and the term social system is used broadly to include
institutions and relationships of an economic, social, religious or political nature.
There is a certain degree of ambiguity in defining social systems. As an example, the
law of property is in its essence a social system. Insofar as it is viewed as consisting of
concepts, principles and rules, it is a pure social system, independent of natural
systems. But its existence also presupposes the existence of property, including
natural physical things, some of which exist as systems. To this extent, as a social
system the law of property is dependent on or subordinate to natural systems.

(c) Artificial systems do not exist in Nature. They are of human creation to serve human
purposes. All artificial systems, including agricultural systems, are constructed from
either or both of two kinds of elements: (a) elements taken from either or both of the
other two higher-level orders of systems at division level, i.e., from natural and social
systems, and (b) from elements which are constructed or proposed for specific use
by each respective artificial system as the need for this arises.

The upper part of Figure 1.1 depicts the dependence relationship between natural and social
systems on the one hand and between these and artificial systems on the other. The relevant
relationships are: (i) natural systems are independent of systems of the other divisions;
(ii) social systems could also be viewed as being independent, but generally a more
legitimate view would be that they depend immediately or eventually on natural systems for
the essentials of their material existence; and (iii) artificial systems are directly dependent
on either or both natural and social systems, or indirectly on natural systems (through the
dependence of social systems themselves on natural systems).

Farm management for Asia: a systems approach 3

Agriculture in relation to Other Systems





Order Level

All Systems

Agricultural and farm systems concepts and definitions

In Figure 1.1, agriculture is shown as comprising one of a very large number of actual or
potential artificial systems at the sub-division level. Others are those relating to mining,
transport, public health, education etc. What such systems at this sub-divisional level have in
common is that each is artificial: each is based upon or draws elements from higher-level
natural and social systems; and each also contains elements which are purposefully created
by some human agency in order to meet its needs.

1.2.2 Further sub-classification of systems

As shown in Figure 1.1, systems within the three broad divisions or their multitudinous sub-
divisions can be further classified according to system 'type', a loose term but one which
might be used to differentiate among agricultural systems according to a number of factors
of which only two are shown in the sketch. As outlined below, first, the system might be
either an explicit or implicit one; second, its purpose might be either descriptive or
operational. Other 'type' designations could be added; e.g., operational systems could be
further classified according to whether or not they are amenable to optimization.

* Explicit systems are those in which the constituent elements are more or less closely
identified and defined, and the relationships among these elements are stated formally
in quantitative, usually mathematical, terms. Agricultural scientists and economists
who work with farmers are concerned mainly with explicit systems of Order Levels 1
to 10 as specified in Figure 1.2. But farmers themselves will seldom be concerned
with explicit systems only with systems of a simpler kind, or only with selected parts
of such systems.

* Implicit systems are systems in which only the main or critical elements are
acknowledged and only the major or immediately relevant interrelationships are
considered. However, these elements and relationships are not formally recorded,
analysed or evaluated. Farmers themselves deal primarily with implicit systems. In
both traditional and more modern societies particular agricultural systems of Order
Levels 1 to 10 are implied in what farmers do, or deliberately do not do. In more
'advanced' societies, farmers might formalize and work with a few explicit systems or
parts of systems (farm record books, simple crop budgets, household expenditure
accounts) but here also most agro-management systems will exist by implication.

The purpose in here distinguishing between explicit and implicit systems is to discourage
the view that, because farmers (especially small traditional farmers) do not deal with explicit
formal systems, these farmers are backward, ignorant, unsophisticated and generally inferior
as resource managers. If anything, the facts generally point to a contrary conclusion. While
bad farmers can be found anywhere, any close study of small traditional farmers and
farming villages in the developing world will, with patience, identify implicit systems at
agro-technical, enterprise, farm, farm-household and village levels which are far more
complex, sophisticated, sustainable and socially efficient than most agricultural systems
found in developed countries.

Descriptive systems are usually intended to facilitate an understanding of the
organization, structure or operation of a productive process. This might be their sole
purpose; e.g., a farmer might construct a simple input-output budget table in order to
learn the structural configurations of some potential new crop. Depending on the
results of this, he or she might then proceed to construct a more detailed budget (an
operational system) to find how best to fit this new crop into his or her farm plan. At
higher Order Levels an organogram describing the administrative structure of a
ministry of agriculture or of an extension service might be constructed or the

Farm management for Asia: a systems approach 5

flowchart of a commodity from farm to consumer might be drawn these also are
descriptive systems.

S Operational systems are constructed (by an analyst or manager or research worker) as
a basis for taking or recommending action aimed at improving the performance of
the system. Such systems are often elaborate (as exemplified in Chapters 9 and 11).
However, increased precision is not infrequently achieved at the cost of decreased
practical usefulness. Thus farm managers themselves work primarily with simple
operational systems, although the actual physical systems which these represent may
be very complex.

As outlined by Dillon (1992), it is also sometimes useful to recognize that, like other
systems, agricultural systems may be categorized as:

* Purposeful or non-purposeful depending on whether or not they can select goals and
the means by which to achieve them.

* Static or dynamic depending on whether or not they change over time in response to
internal or external influences.

* Open or closed depending on whether or not they interact with their environment.

* Abstract or concrete depending on whether or not they are conceptual or physical in

* Deterministic or stochastic depending on whether or not their behaviour exhibits
randomness over time, i.e., their future behaviour is uncertain.


Agricultural and particularly farming systems exhibit great diversity as shown by, e.g.,
Duckham and Masefield (1970), Grigg (1974), Kostrowicki (1974) and Ruthenberg (1980).
They have been classified in various ways as reviewed by Fresco and Westphal (1988) who
also present an ecologically-based classification and typology of farm systems. The
hierarchical classification of farm systems presented here is distinctly different. It is
specifically oriented (i) to a farm management and farm-household perspective and (ii) to
use as a framework for analysis of what are proposed as the six basic types of farms found
in Asia (and elsewhere in the developing world).

Figure 1.2 is an elaboration of the lower part of Figure 1.1 and relates specifically to
agricultural systems. These are listed in largely hierarchical order encompassing 16 Order
Levels. Alternatively, with a few minor exceptions, the Order Levels 1 to 16 could have
been depicted, reflecting their nested character, as a set of concentric circles with Order
Level 1 as the innermost and Order Level 16 as the outermost circle.

In Figure 1.2, the sectoral system, 'all agriculture', is specified as being of the highest order
rank, i.e., Order Level 16. Any national or regional agricultural sector, however, consists of
such subordinate sub-sectors or subsystems as agricultural credit, education, research,
production, transport etc. Each of these constitutes and would be analysed, administered
and managed as a system of Order Level 15. Each such (sub)system may then be further
disaggregated into commodity-based industry systems of Order Level 14 such as for
coconuts, rubber, wheat, coffee, fish etc. If that flow-path relating to production is being

6 Agricultural and farm systems concepts and definitions

The Hierarchy of Agricultural Systems



15. Sub-sector

14. Industry

All Agriculture

SCredit IExtension Production 1 Research etc.

Wheat Coffee Mixed Dairy etc.

13. Village-community

12. Farm-household

11. Household

10. Whole-farm

9. Service Matrix

Resource Pool L

All Animal Types


All Crop Types


Enabling Activity

Multi-dimensional Process

Uni-dimensional Process

Each Resource-generatin

Complex Agro-tech. Syste
Activities (3) and Enterpris

Simple Agro-tech. System
Activities (3) and Enterpris

Type I: Material, Economic: Family income-earning activities off the farm;
some are sufficiently complex to warrant their designation as
systems. They affect the household or farm components (11, 10)
or both.

Type II: Non-material, Social: These systems are extemal to
but significantly affect the household in relation to its
farming operations, abilities. Some examples are:

ial3 (7)

nation of All
ial Types

rn;mal Type

g Activity

ms within
es (4, 6)

s within
ses (4,6)

Off-farm J

Malaria General Social
Control Education Security
Program System System



I 7.


I 5.







Farm management for Asia: a systems approach 7

followed, as depicted in Figure 1.2, this would then lead to villages or other community
units where such production occurs (systems of Order Level 13); these would in turn consist
of and could be disaggregated into the individual farm-household systems of Order Level
12 which comprise such villages. Further lower Order Level systems relate to the agro-
economic structure of individual farms and, in turn, their component crop and livestock
enterprises and to the activities and individual agro-technical processes which underlie such

Systems of Order Levels 1 to 12 comprise the field of farm management (as discussed in
Chapter 2). But systems of Order Level 1 and 2 are also, indeed primarily, the domain of
the applied agricultural sciences. A further proviso is that the 'household' components of
farm-household systems of Order Level 12 remain as yet not very well understood. This
component is primarily the province of workers in such fields as household economics,
rural sociology and social anthropology. While these various farm family-related fields are
fairly well established, they have yet to be brought together in a comprehensive and
cohesive way at farm-family level to provide verified models of how rural families in the
developing world think about, plan and operate the 'farm' component of their farm-
household systems (Clayton 1983, Chs 4 and 5).

Figure 1.2 depicts the direction of hierarchical status as proceeding downward from sector
to industry to village to farm to crop etc. But whether this direction of subordination is
valid will depend on circumstances and analytical purpose. Agricultural scientists would
probably reverse the order-ranking shown for the systems on the grounds that, unless the
basic agro-technical processes (Order Level 1 and 2 systems) are well developed, the
production of individual crops will be inefficient, total farm production will be low and the
agricultural sector itself will in consequence be an impoverished one. Similarly extension
workers might be inclined to place household systems at the top of the systems hierarchy on
the basis that good farming practices (Order Level 1 and 2 systems) will not be adopted
unless the household systems are working well, nor consequently will the 'higher'-order
systems at industry and sector level operate at their full potential.

1.3.1 Nature of farm-level systems

The nature of each farm-level system (i.e., Order Levels 1 to 12) of the hierarchy presented
in Figure 1.2 may be specified from a management point of view as follows:

* Order Level 1: Uni-dimensional process systems. Systems of this lowest order are of
an agro-technical nature. They involve an issue or problem which for purposes of
analysis or management is abstracted from the context in which it naturally or
normally occurs. One example is the application of a single fertilizer element, say
nitrogen (N), to a crop and consequent plant response to N in terns of crop yield Y.
As noted previously, systems of this order are primarily the domain of physical
scientists, but those systems which have practical relevance for farmers thereby also
have an economic dimension and so fall within the scope of farm economics. Such
simple single-dimensional systems are later examined as processes (Chapter 5) and as
input-output response relationships (Chapter 8).

Order Level 2: Multi-dimensional process systems. Systems of this second order are
also concerned with limited agro-technical relationships and again they are primarily
the domain of physical scientists. They differ from Order Level 1 systems in that they
take or are defined to take a wider and more realistic view of a subject or problem.
To use the same example of fertilizer response: at Order Level 2 an agro-technical
system might involve the response of plant growth or yield Y to not one but to several

8 Agricultural and farm systems concepts and definitions

or a large number of input factors such as nitrogen, phosphorous, irrigation water,
crop hygiene, soil tilth etc. These multi-dimensional systems also are later examined
as processes (Chapter 5) and as response relationships (Chapter 8). Order Level 2
systems can be viewed as aggregations (often interactive) of constituent Order Level 1

S Order Level 3: Enabling-activity systems. Systems of this order are certain enabling
activities which generate an intermediate product intended for use as an input/resource
by enterprises which do produce a final product. An example is offered by a legume
crop turned under to provide fertility for a following (final product-generating)
paddy crop. There will often be alternative ways of obtaining this resource: e.g.,
stripping leaves off leguminous trees, keeping cattle for their manure, or buying a bag
of fertilizer. These are all enabling, resource-generating activities but only some of
them, the complex ones, warrant designation as systems. They are intended to supply
resources to systems of Order Levels 4 and 6.

* Order Level 4: Crop systems. Systems of this order relate to the production of
individual crops; but if these are primarily intended to produce inputs for other crops
or livestock, they are regarded as systems of Order Level 3. On many small farms,
crop and livestock enterprises produce both final products and resources (as discussed
in the context of activities in Chapters 3, 4 and 9).

Order Level 5: All crop systems. Systems of this order, known also as cropping
systems, refer to the combined system of all the individual crops on a farm. On a farm
with a single mono-crop, this Order Level 5 system will obviously be equivalent to an
Order Level 3 system; but on small mixed farms there will usually be four, five, six or
more different crops (of Order Levels 3 and 4) grown in some degree of combination
and as many as 20 or more on the highly diversified forest-garden farms of South

* Order Level 6: Animal systems. These systems relate to single-species animal
enterprises or activities e.g., dairy cows, camels, fish, ducks. They are the animal
equivalent of Order Level 4 (i.e., individual crop) systems.

* Order Level 7: All animal systems. These systems are the aggregation of all
Order Level 6 (sub)systems on a farm. Known as livestock systems, they are the
animal equivalent of Order Level 5 (i.e., all crop) systems.

* Order Level 8: Resource pool. This subsystem is a conceptual device for farm-system
planning in which resources and fixed-capital services required by other subsystems
are 'stored' in a 'resource pool' from which they are allocated to the other subsystems
(of Order Levels 1, 2, 3, 4 and 6). The resource pool is central to operation of the
whole farm-household system. It is discussed in Chapter 3.

* Order Level 9: Farm service matrix. A system of this Order Level consists of all the
fixed capital resources of a farm which are pertinent to the operation of the farm as a
whole but are not assigned to the exclusive use of any particular enterprise or activity:
land, fences, barns, irrigation channels and work oxen are common examples. Some
of these capital items are true (sub)systems, having interdependence among their
component parts (as in an irrigation storage/delivery/distribution network, a grain
drying facility, an integrated network of soil conservation structures etc.). Some are
only things (e.g., fences, a plough, a barn). But, in its totality, such capital is managed
and manipulated as a system for the purpose of providing general services which,

Farm management for Asia: a systems approach 9

while not specific to them, enable the functioning of lower Order Level systems of the
farm. This service matrix is discussed in Chapter 5.

S Order Level 10: Whole-farm systems. Systems of this Order Level consist of all the
lower Order Level (sub)systems which go to make up a farm. They consolidate in a
single entity all the farm fixed capital, all the operating capital, all the final-product
enterprises, all the activities and all the agro-technical processes which underlie such
enterprises and activities. Structuring and managing systems of this Order Level are
the main tasks or focus of farm management as carried out, on the one hand, by
farmers and as investigated, on the other hand, by farm management economists in
their professional capacity of providing advice to farm managers, development
agencies and governments.

The terms farm system and farming system are often used interchangeably. Here the
practice is to use farm system to refer to the structure of an individual farm, and
farming system to refer to broadly similar farm types in specific geographical areas or
recommendation domains, e.g., the wet paddy farming system of West Java or the
grain-livestock farming systems of Sind.

* Order Level 11: Household systems. On small farms the household itself is the most
dynamic and complex of all farm-level systems, although it is a social system not an
agricultural one. It dominates the agricultural systems which comprise the farm
component. It has two functions: as household it provides purpose and management
to the farm component, and as major system beneficiary it receives and allocates
system outputs to itself and other beneficiaries.

Order Level 12: Farm-household systems. These consist of two components or
(sub)systems of Order Levels 10 and 11, i.e., the whole-farm system and its associated
household system, respectively. The term is a very useful if not mandatory one when
used to refer to the small farms of Asia. It carries an insistence that the technical
analysis discussed in following chapters will amount to nothing at all unless it is
applied to achieving the real needs and aspirations of the household which, as
discussed in Chapter 6, might be quite a different thing from evaluating the
performance of a farm system according to the subjective or preconceived ideas of
agricultural technicians and economists (Chambers and Ghildyal 1985; Rhoades and
Booth 1982). As the peak farm-level system, the farm-household system may be
described in system terms as a goal-setting (i.e., purposeful) open stochastic dynamic
system with a major aim of production from agricultural resources. These attributes
are sufficient to make it also a complex system. The purposefulness of a farm-
household system is ensured by its human and social involvement which enables the
system to vary its goals and their means of achievement under a given environment.
The openness of the farm-household system is obvious from its physical, economic
and social interaction with its environment. The non-deterministic or stochastic nature
of the farm-household system is guaranteed both by the free-choice capacity of its
human (and, if present, animal) elements and by the stochastic nature of the
environment with which it (and all its subsystems) interacts. Necessarily, a farm-
household system is also dynamic by virtue of its purposefulness, openness and
stochasticity which ensure that the system changes over time. Too, any farm-
household system is a mixture of abstract and concrete elements or subsystems. The
concrete elements are associated with the physical activities and processes that occur in
the system. The abstract elements relate to the managerial and social aspects of the

10 Agricultural and farm systems concepts and definitions

1.3.2 Village-level farming systems

Not infrequently in parts of Asia, as also elsewhere in the developing world, the village may
replace the farm-household in whole or part as the focal entity for agricultural production.
Systems of Order Level 13, i.e., village or community systems, are thus often relevant to the
performance of farming systems (Cederroth 1995; Walker and Ryan 1990).

Order Level 13: Village-community systems. Village-level systems or community
systems in some situations replace all or part of individual farm-household systems.
Three situations are common. First, some production activity in its entirety, including
the operation of whole farms as production units, may be on a formal cooperative or
group basis. Second, only part of an activity might be carried on by individual
farmers while critical parts of it (such as land preparation, the supply of inputs,
harvesting and/or marketing) are the responsibility of a formal farmers' club or
cooperative. Third, and most difficult to analyse, is the situation found in many
Indonesian villages where informal and temporary groups form to perform certain
production tasks in common (such as land preparation, irrigation and/or harvesting)
then disband and re-form to do different tasks on different crops, with membership
continuously changing as individuals drop in and out of groups according to their
interests, needs and mutual obligations. In a village there might be 10, 20 or 30 such
'cooperatives', though none might exist officially. Other examples are offered by the
semi-nomadic livestock farmers of West Asia who sometimes operate as individual
households and sometimes as members of a collective. In all these situations the
boundaries of individual units are often so fluid and obscure that the focus for
productive analysis has to be the group or village community. (Nevertheless, much
externally sponsored farm-development planning remains locked into the mythology
of agricultural individualism; perhaps that is why on the small farms of Asia it has
borne so little and often poisonous fruit.)

Farm-level systems of Order Levels 1 to 12 are discussed more fully in the following
chapters. Before proceeding, however, it will be useful to examine those constituent
structural elements of a farm-household system which are relevant to its organization and


The definition of an agricultural system given in Section 1.1 is a general one and applies
broadly to systems of all the Order Levels. When applied specifically to a farm-household
system of Order Level 12 it implies the system involves ten structural elements or

1. Boundaries

*2. Household

3. Operating plan

*4. Production-enabling resources: the resource pool

*5. Final product-generating enterprises

*6. Resource-generating activities

Farm management for Asia: a systems approach 11

*7. Agro-technical processes

*8. Whole-farm service matrix

9. Structural (interdependence) coefficients

10. Time dimension.

Those elements marked by an asterisk have been considered above as subsystems of the
farm-household system (see Figure 1.2). The ten elements are briefly discussed below and,
except for structural coefficients and the time dimension, their interrelationships as
components of a farm-household system of Order Level 12 are sketched in the example of
Figure 1.3 where they are denoted El, E2 ... E8.

1. Boundaries: This first element, the boundaries of the farm-household system, set it
apart from other systems and from the world at large. These boundaries are provided
partly by the structural characteristics of the particular type of farm (Chapter 2), and
partly by the purpose of analysis, i.e., to some extent they are subjective and relate to
more than the simple physical boundary of the farm. Boundaries are discussed in
Chapter 3.

2. Household: As previously noted, the household plays two roles: first, it provides
purpose and management to its associated farm system and, second, it is the major
beneficiary of its associated farm system. Its role as beneficiary is discussed in
Chapter 3. In its first role it provides purpose, operating objectives and management
to the farm component of the farm-household system according to its broad domestic
and social goals. Obviously these goals vary widely with culture, tradition and the
degree of commercialization and external influences to which the household is
exposed. However, one would probably be not too far wrong in offering a
generalization that the primary economic goal on most small farms (Types 1, 2, 3 of
Chapter 2) is security and the primary non-economic goal is social acceptance
(Clayton 1983, Ch.4). If this is correct, the primary objectives for the farm are, first,
production of a low-risk sustainable subsistence for primary system beneficiaries;
second, generation of a cash income to meet needs not directly met in the form of
food and other farm-produced materials; and third, pursuit of both of these in ways
which are not in conflict with local culture and tradition. Goals, objectives and
planning criteria are discussed in Chapter 6.

3. Operating plan: The above objectives are pursued through preparation and execution
of a farm operating plan. The core of this may be taken as selection of the best
possible mix of agro-technical processes, activities, enterprises and fixed capital
(systems of Order Levels 1, 2, 3, 4, 6 and 8). Formulation of operating plans is
discussed in Chapter 9.

4. Resource pool: This element was noted above as a system of Order Level 8 central to
the management of other subsystems within the farm system. It is discussed in
Chapter 3.

5. Final product-generating enterprises: These were noted as systems of Order Levels 5
and 7 in the previous section and are discussed in Chapter 4 and Section 9.3.

6. Resource-generating activities: These also were previously discussed as systems of
Order Level 3. They are intended to supplement or entirely supply the resource pool
as discussed in Sections 4 4.1 and 9.3.1.

12 Agricultural and farm systems concepts and definitions

7. Agro-technical processes: These were defined above as systems of Order Levels 1 and
2. Processes may be of a biological or mechanical kind. They are a shorthand
designation of all the potentially complex and interrelated physical and biological
factors underlying production from crop or livestock species, only some of which
may be economically relevant. They are discussed in Chapter 5.

8. Whole-farm service matrix: This was discussed previously as a system of Order Level
9. It is further examined in Chapter 5.

9. System structural coefficients: These coefficients identify and quantify linkage
relationships (a) among the various parts or elements within each subsystem and
(b) between subsystems. From the general system definition, an essential property of
any system is that there be interrelatedness between its parts. In farm-household
systems (and in subordinate subsystems of lesser Order Level, particularly Order
Levels 4 and 6) such interrelatedness is specified by these coefficients. They are
discussed in Chapter 5.

10. Time dimension: Unlike mechanical systems which stamp out buttons or TV sets,
agricultural systems rest on biological processes which occur over considerable
periods of time from, e.g., a few days in the case of quick-response agricides to 70
or more years in the case of growth and decline of a coconut palm. Agricultural
systems are thus inherently stochastic: being dependent on the passage of time, ex
ante, their outcomes are uncertain. Moreover, because agriculture is also a set of
economic activities, the old adage applies: time is money. Other things being equal, a
system which yields its product or ties up resources over a short time is better than one
which yields its output or occupies resources over a long time. Strictly speaking, time
is not a system component; rather it is a dimension in which the system operates. The
time dimension in relation to resource use is discussed in Section 3.3.4 and in relation
to farm planning in Section 9.1. The evaluation of activities which occur over long
time periods is examined in Chapters 10 and 11. The latter chapter also considers
uncertainty as it occurs in farm planning and decision making. Also important from
a time perspective are the sustainability and environmental compatibility of the farm
system being used. If, over time, the farm system is not biologically and
economically sustainable or causes resource degradation, as discussed in Sections
6.2.7 and 8, this is to the disadvantage of both the farm household and society at


Before examining the elements of a farm-household system in more detail in later chapters
it is useful to consider where they lie in relation to each other in the structure of a small
mixed farm as exemplified in Figure 1.3.

Element 1, system boundaries: Depending on the purpose of analysis, the farm-household
system may be specified with different boundaries. In Figure 1.3, these are suggested
by the shaded circle around the system which sets it apart from other neighboring
systems and from the larger community or environment in which it is imbedded.

Element 2, household: As noted at the top of Figure 1.3, the household provides objectives
and management of the farm-household system and, at the bottom, it exists as the
primary internal beneficiary of the system, while distributing some of the system
output to external beneficiaries.

Farm management for Asia: a systems approach 13

Interrelationships of Elements in a Simple Farm-household System

Element 3, operating plan: As shown in Figure 1.3, this is determined largely by the
household but it might also be influenced by the requirements of external individuals,
agencies or other influences, some of whom might be (external) beneficiaries of the
system as outlined below.

Element 4, resource pool: This element consists of resources which are initially present at
the time of planning or commencing operation of the system some pool or stock of
land, water, seed, cash etc. which the other elements of the farm system may draw
upon. Once the system begins operating, certain components of it (the resource-
generating activities and by-products of the enterprises) will replenish the pool. In the
schematic sketch of Figure 1.3, the arrows from the farm resource pool indicate that
items from the resource pool flow to processes as well as to activities and to enterprises
(as well as possibly to maintenance of the whole-farm service matrix). Strictly
speaking, resources should be shown as flowing directly only to processes, since this is
the level (subsystems of Order Levels 1 and 2) at which they are actually used. But
from a practical viewpoint and because most of the potential processes are actually
ignored in planning the operation of a farm system, resources may also be viewed as
flowing directly to activities and enterprises as indicated.


14 Agricultural and farm systems concepts and definitions

Element 5, final-product enterprises: Only four enterprises are shown in the system of
Figure 1.3: wheat, paddy (rice), cotton and fish. Only the flow lines of inputs to and
output from the paddy crop are shown.

Element 6, resource-generating activities: In the example of Figure 1.3, there are two of
these supplying some resources to paddy (e.g., a prior fertility-generating legume
crop and possibly a cattle activity providing oxpower).

Element 7, agro-technical processes: These underlie the activities and enterprises. Only
three are indicated as relevant to paddy in Figure 1.3 but (as discussed in Chapter 5)
there are a very large number of biological and mechanical processes actually present
in any form of agricultural production.

Element 8, whole-farm service matrix: This was defined previously in relation to Figure 1.2
as a system of Order Level 9. It consists of fixed farm capital which provides a flow
of services (not shown in Figure 1.3) to all other elements of the system, particularly
to Elements 5, 6 and 7 but it is not specific to any one of them.

Element 9, structural coefficients: These are not depicted in Figure 1.3. They are discussed
in Chapter 5.

Element 10, time: In the schematic example of Figure 1.3, the time dimension is not
specified explicitly but the model would probably refer to a single operating phase
with a duration equal to the life of the longest-term enterprise subsystem, here cotton
with a term of six to seven months, or, if climatic seasons are constraining, to a full
seasonal cycle of one year. If the system proves to be a 'good' system in terms of
household objectives, it might be reactivated in successive phases and continue
indefinitely; if a 'very good' system it might permit further farm intensification and
development; if a 'bad' system it might be restructured (as discussed in Chapters 6 and
9); if a 'very bad' system it will, in the absence of restructuring, prove to be non-
sustainable and eventually collapse.

Figure 1.3 is intended only as a schematic example to indicate the broad relationships which
the elements of a farm-household and its associated whole-farm system bear to each other.
Real small-farm systems are much more complex than Figure 1.3 suggests, particularly in
their internal cycling of resources. The following chapters are essentially an elaboration of
Figure 1.3 in terms of managerial considerations.

Outputs of the farm component of the farm-household. system depicted in Figure 1.3 are, as
an example, shown as flowing from the paddy enterprise. They do not comprise a separate
element but are part of Element 5 (final-product enterprises). Outputs are allocated to the
farm component and to system beneficiaries. Thus, to enable continuation of the system in
subsequent phases (seasons or years), some paddy grain output is cycled back to the
resource pool to replenish the seed stock. Similarly, to replenish the cash resource which
was used up in this phase, some rice grain is sold. Whatever grain is left might also be sold
to generate cash income or be used as food. These latter outputs will be distributed among
system beneficiaries who might be internal to the system, i.e., the household, or external to
it. External primary beneficiaries may consist of needy relatives and friends, landless
neighbours, a landlord receiving cash or part of the crop as rent etc. External secondary
beneficiaries, as discussed in Section 3.2, might also be present usually the tax collector.
External beneficiaries often also play another role: they can exercise a direct influence on
how the system is planned, constructed and operated. This influence is indicated in Figure
1.3 by the broken line indicating feedback from external beneficiaries to Element 3,
formulation of the farm plan. Returning to the paddy flow column of Figure 1.3, the

Farm management for Asia: a systems approach 15

system will also generate a second type of output apart from the material one of grain,
namely non-material output. This consists of the knowledge and experience gained from
operating the system over any phase. Farm-household systems are dynamic: the results of
one operating phase flow back not only as products giving sustenance and cash income to
the household but also as knowledge and experience to influence the formulation of plans
for future phases.


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16 Agricultural and farm systems concepts and definitions

Kast, F.E. and J.E. Rosenzweig (1974). Organization and Management: A Systems Approach,
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Farm management for Asia: a systems approach 17


'He that by the plow would thrive
Himself must either hold or drive.'

Benjamin Franklin, 1706-1790

This chapter introduces the discipline of farm management as it applies to the main
structural types of Asian farms, particularly small family farms (Types 1 and 2 of Section


2.1.1 Scope

To a layman 'farm management' probably means just that a body of activities and
procedures carried out by a farmer in the ongoing management of his or her farm and for
which advice may be available from professional specialists in farm management.1 To an
extent this is correct (as per farm management in Field A of Section 2.1.7) but, more
broadly, farm management as considered here is a professional discipline which relates to
the description, construction, analysis and evaluation of farm systems of Order Level 10
(Figure 1.2). In this wider sense, farm management is the discipline within whose ambit
farm-level systems analysis most clearly falls. (This does not exclude from farm systems
analysis other disciplines of a technical or special-purpose nature.) Farm management
system analysis can have several operating objectives (Section 2.1.4); there are several
alternative bases (Section 2.1.6) on which analysis can proceed; and it can operate in four
fields (Section 2.1.7) and in four modes (Section 2.1.8) within these fields. These several
aspects of farm management as a systems-related discipline are now briefly discussed in

2.1.2 Definition

Except when it serves a descriptive purpose, farm management is the science (and art) of
optimizing the use of resources in the farm component of farm-households, i.e., in systems
of Order Level 10 (see Figure 1.2), and of achieving the optimal functioning of these
systems in relation to household-specified objectives; and since Order Level 10 systems
consist structurally of subsystems, farm management is also concerned with the operation of

I Farm management as carried out by farmers has been defined (Dillon 1980, p. 258) as 'the process by which
resources and situations are manipulated by the farm manager in trying, with less than full information, to
achieve his [or her] goals'. See also Makeham and Malcolm (1986, Ch. 2) and Upton (1973, Ch. 1). The
appendix to this text gives the authors' perspective on farm management as it relates to management per se and
to farm systems theory.

18 Farm management and farm types

subservient subsystems of Order Levels 1 to 9 in such fashion as to optimize the whole-farm
system. However, for reasons discussed in Chapter 1, it is often essential, especially when
dealing with small farms, that farm management extends also to the family or household
component, thus its true scope extends to Order Level 12 systems. A second consideration
is that the village is sometimes a more relevant unit for analysis than the farm, and where
this is so the scope of 'farm' management extends to systems of Order Levels 1 to 13 as
discussed in Section 1.3.2.

2.1.3 Optimization

Optimization of the planning objective is defined as achieving the farm household's goals
as efficiently as possible in the face of whatever constraints of a physical, environmental,
legal or socio-cultural nature may be relevant. This implies obtaining maximum possible
net benefit over time from the operation of the farm system. Net benefit is measured, as
appropriate, in terms of output or profit or, more broadly, as satisfaction or utility.
Maximization of net benefit implies efficient use of available resources and opportunities.
For the achievement of a given level of net benefit, it implies the minimization of costs.
This reflects a theoretical view. In the real world, as discussed in Chapter 6, the general
objective is often constrained by household and social factors other than availability of
physical inputs and their costs. Thus many small-farm households place a high value on
the long-term sustainability of their farm system. Also, in the real world, uncertainty will
generally prevail about yields, prices and other relevant influences so that the farmer's
choice will lie not between sure alternatives but between alternative (subjective) probability
distributions of net benefits. This aspect is considered in Chapter 11.

Optimization can occur at two levels: local or global. When operating in Field A (on-farm
problem solving see Section 2.1.7 below), farm management will seek optimization at the
global level of the Order Level 12 farm-household system. This sets it apart from other
farm-related agricultural sciences which are usually (though not always) concerned
primarily with optimization of lower order subsystems, i.e., local optimization. Two
examples will clarify this point. First, a farm might involve only two irrigated crops, cotton
and sugarcane. If only the cotton is considered, the local optimum might be to use all of
the water supply on cotton, but if the farm as a whole is considered, i.e., a global optimum
sought, this might well require that the water be shared between both crops. Second, a farm-
household system itself might be only a subsystem within some larger system. For example,
the optimal irrigation water supply to a farm might, from the viewpoint of the farm, be
1 000 m3, but if such water is to be provided only as a minor by-product by a large multi-
purpose dam project (the chief purposes of which are power generation and flood control),
these purposes will determine what discharge rate/farm supply is optimal from an overall
project or global viewpoint and this would override whatever supply rate might be optimal
from a farm perspective.

2.1.4 Objectives

Optimization of farm-household systems takes the form of conditional maximization over
time of the socioeconomic welfare of farm families. The term 'welfare' is used broadly to
include money income, sustenance food, farm-produced consumption goods and factors of
production, non-material benefits such as those enabling the attainment of education and
health standards, and satisfactions derived from work well done as well as from cultural and
religious sources. Whichever of these system outputs/family benefits are relevant in a
particular farm situation will depend on the farm type and on the values held by the
particular family values which will normally reflect the society and cultural context in

Farm management for Asia: a systems approach 19

which the farm-household exists. Welfare maximization is conditional because it is
constrained by resource availability and, as relevant, legal constraints and socio-cultural

Typically the farm plays only an enabling role towards achieving broad family goals. Thus
farm management is concerned with conditional optimization of only part of a farm-
household system but usually the most important material part. The specific objective
might be to maximize money profit or, recognizing the presence of uncertainty, to
maximize the expected utility (Chapter 11) of risky profit (farms of Type 4, 5 and 6 and
possibly Type 3 as defined in Section 2.2.1), or such money profit might be only incidental
to other objectives (Type 2 farms), or hardly relevant at all (Type 1 farms). Goals and
objectives are discussed in Chapter 6.

2.1.5 Economics as the framework for farm-system analysis

Economics or economic analysis is the science of making choices so as to best achieve
desired objectives given that only limited (physical and other) resources and opportunities
are available and that the future is uncertain. There are no choices to which the science of
economics cannot be applied. It is just as pertinent, e.g., to the choice of a spouse as to the
choice of which crops to grow or to the choice between using an insecticide or using
environmentally friendly integrated pest management. In contrast to this wide applicability
of economic analysis, financial analysis is restricted to matters that are naturally of a
financial or monetary nature. Financial analysis is thus a subset of economic analysis and,
in circumstances where everything is valued in money terms, may be the natural way in
which to conduct economic analysis. In other cases, it may be feasible to facilitate
economic analysis of possible choices by imputing money values to possible gains and
losses. And in yet other cases, such as assessing the resource sustainability and
environmental compatibility of alternative farm systems, it may often be infeasible to
impute money values to the gains and losses of alternative choices. Decisions must then be
made using economic analysis based on non-money values, intuition and judgement.

Farm management economics (i.e., economic analysis applied to the choices confronting
farmers) provides the general disciplinary basis for farm-level systems analysis (Dillon and
Hardaker 1993, pp. 22-30; Upton 1973, Ch. 1). Obviously other farm and family-related
disciplines will be involved in systems' construction: agronomy, animal husbandry, soil and
water conservation/management, human nutrition etc. However, except in the case of
special-purpose technical systems (e.g., when the farm-household unit is analysed in terms
of nutritional or energy flows among components as discussed below), these other
disciplines should play subordinate contributing roles coordinated by farm management
economics as the lead discipline. That in fact this often does not happen and the lead is
taken instead by workers in other disciplines is really not important. It might just reflect the
fact that many agriculturists are aware of the necessity for a systems approach if application
of their expertise is to be effective; or that many agricultural economists are content in the
more modest role of economics apparachnik.

Nevertheless, the disciplinary basis of farm management remains economics but
economics of a special wide-ranging kind, the core of which is production economics
supported by other branches of economics of which marketing, resource economics,
agricultural credit and data analysis (including operations research, econometrics and risk
analysis) are probably the most important. When working with the household component,
especially of small traditional farms, the most important supporting disciplines are
sociology and social anthropology.

20 Farm management and farm types

2.1.6 Alternative bases for farm-system analysis

There are several reasons why farm economics provides a good conceptual framework for
most farm-household systems analysis. The most important of these is the necessity to
bring the many relationships of a system and between systems to some common unit or
basis of comparison. Unless this is done, systems analysis and the comparison of
alternatives will not be possible. The base usually most convenient and in the case of
commercial farm systems most relevant and which has the highest degree of universality is
money or financial value. But several other bases for systems analysis are possible and in
certain circumstances they might well be more relevant than money value. The four most
important bases of comparison are as follows:

(a) Money value: The convenience of using money or financial values as the basis of
commercial farm systems analysis will be obvious: it permits the various system
inputs (e.g., seed, fertilizer, power, labour etc.) to be standardized as money costs and
the various system outputs to be standardized as money returns so that net revenue,
i.e., money returns minus money costs, can be used as the basis of comparison
between alternatives. In commercial farming, all or most of these inputs/costs and
outputs/revenues can be stated in explicit quantitative terms. On the other hand, when
dealing with less commercialized systems where there are no actual price-setting
markets for farm inputs and/or outputs, one is often obliged to base the analysis on
imputed values. However, this is possible only up to a point; beyond this point, as
one moves further from a commercial environment towards a traditional one (as
discussed in Chapter 6), the attempted use of money value as the basis or num6raire
for analysis becomes too abstract to be useful and one has to search for some other
base (Dillon and Hardaker 1993, pp. 28-30).

(b) Family labour effort: Probably the best alternative to money value on small family
farms of a subsistence or semi-subsistence nature is labour input, both as a measure of
inputs and as a yardstick to judge the worth of outputs. At least this is so in the eyes
of the majority of Asian (and African) small-farm families for two reasons. First, on
these farms most production activities involve few if any commercial inputs and most
outputs are also not disposed of through commercial channels. Money hardly enters
into the matter at all. What such activities do have as their common factor is family
labour often very hard labour from hand-preparation of fields, to carrying all
inputs/outputs perhaps long distances, to hand-pounding the harvested grain. Not
unnaturally then, these families plan, compare and evaluate their several different
farming activities and alternatives (i.e., analyse their systems) in terms of labour
content. To conduct such analysis on any other basis such as money value would be
an incomprehensible abstraction. However, 'labour' is not a simple quantity. It can
have several dimensions: quantity when labour is measured in terms of standardized
units (e.g., labour-days or task-days on estates); quality where the relevant factor is
the actual effort required or the degree of skill or unpleasantness associated with
separate tasks; and agency where the labour measurement reflects the social position
or status of the person performing the task. Thus, in different societies, patriarchal or
matriarchal, women's labour will be valued less or more highly than the labour of men
regardless of the actual effort expended, while the labour performed by children
might also be valued according to their (usually inferior) social status rather than to
the actual work they perform. These dimensions of labour and the implied
difficulties of measurement often limit the use of this factor as an alternative to
money value. Nevertheless labour often provides a more relevant basis for systems
analysis of a very large number of small traditional farms than does money.

Farm management for Asia: a systems approach 21

(c) Bio-mechanical energy: A factor which all farm-household systems and their sub-
systems have in common is their explicit or implicit energy content (including labour,
above). Farm-system models have sometimes been structured on the basis of such
energy content and inter-component energy.flows see, e.g., Axinn and Axinn
(1983). Use of energy-based farm systems analysis rests on the view that, in a world
of declining energy resources and materials that can be represented by their energy
content, the energy generation and consumption of farm-household systems is a more
valid basis for systems analysis than is money profit, and usually also that energy
flows which are directly or indirectly involved in all economic activities (including
agriculture) are not properly represented indeed they are often severely distorted -
by commercial pricing mechanisms. However, these views involve issues and require
solutions at much higher than farm level. Farm systems analysis based on energy
flow is more appropriate for some aspects of macro/industry/sector strategic planning
than for farm-level operational planning where the immediate interest of farm
families is in income (in whatever form it takes) and the effort required to achieve it.

(d) Water consumption: A fourth possible basis for analysis of farm systems is offered
by water with systems analysis conducted in terms of the relative water consumption
of different crops and animal populations and the implicit water content of products
and by-products. Water is obviously the critical common factor in all the farming
systems of that great belt of lands stretching from North Africa to India, so much so
that even the very wealthy Gulf States, while they have been able to import or create
all other agricultural resources, including soils, micro-environments and farmers,
remain constrained by water. Moreover, in the 'wet' tropics, the critical nature of this
input common to all parts of all farming systems is not yet widely recognized; e.g.,
even 'well-watered' Java will probably exhaust its water supplies before its soils.
However, as important as water is, like bio-mechanical energy it is more appropriate as
a basis for some aspects of macro-level systems analysis than for operational-oriented
systems analysis at farm level.

In summary, except when used in connection with special-purpose systems, such bases of
analysis as energy, water, ecological balance etc. lack the universality and the value
orientation required of a general systems base. Money value and labour will probably
continue to be used as such a base, either separately in the case of commercial and near-
subsistence farms respectively, or jointly in the case of the bulk of small traditional partly
commercialized farms.

2.1.7 Farm management fields

Farm management analysis and advisory activities can be categorized in terms of four fields
defined in terms of the purpose of the analysis as follows:

Field A consists of those problems and analyses which are only or primarily of direct
interest to the farmer subjects of the analysis and where solutions to problems are offered
on the basis of their beneficial effect on the welfare of these farmers and their families. The
great bulk of farm management systems analysis occurs within this field. Field A is the
conventional area in which farm management operates, directed to solving the on-farm
problems of individuals and groups. Except where otherwise noted, this book is concerned
with farm management within Field A; it needs no further discussion at this point except to
note that such analysis should, whenever possible, involve farmer participation so as to
ensure that the farmer's felt needs are considered (Ashby and Sperling 1995; Chambers
1983; Chambers and Ghildyal 1985; Matlon et al. 1984; Mikkelsen 1995; Rhoades and
Booth 1982; Tripp 1991; Werner 1993).

22 Farm management and farm types

Field B consists of those problems and analyses which should not really fall within Field A
(i.e., they do not properly constitute farm-level problems) but which for convenience or
purposes of analysis can be defined, regarded and treated as if they do Examples of the
scope of Field B farm management analysis are offered by the agricultural industries and
sectors of some of the mini-states. For example, the agricultural sector of the island nation
Kiribati is equivalent to not much more than a single good-sized coconut estate with a few
supplementary enterprises added. This sector (a system of Order Level 16) could easily and
probably most effectively be analysed, of course with the necessary modifications, as if it
were a system of Order Level 10 or 12. An example at industry level is offered by the
banana industry of Western Samoa which, although it consists of a large number of
individual farms, has been centralized (through the government) in fruit
collection/inspection/ transport/export and other important aspects. The industry could
justifiably be analysed as a single large 'farm system' even though in fact (and in respect of
banana-growing activities) it really consists of many farm-household systems .

Obviously, since this type of higher-than-farm-level analysis will be concerned with a range
of subject matter in addition to farm economics processing, marketing, transport, research,
extension etc. farm management can operate successfully in Field B only if the analyst
can ignore artificial divisions which are conventionally imposed between the various
disciplines. Another condition is that the analysis could not be better performed by a
systems analyst working within the conceptual framework of some other discipline. (If this
is the case then farm management analysis would operate in a subservient role in Field C.)

Field C consists of problems or issues arising within or in relation to higher systems of
Order Levels 13 to 16, towards the resolution of which farm management plays only a
secondary contributing or partial role, e.g., the lead discipline might be water resource
engineering if the problem is planning of a public irrigation project, or agronomy if it
consists of planning for the introduction of new crops, or agricultural credit if it is to plan
the establishment of a farmers' bank. In this type of supporting role, farm management can
operate in any or successively all of Modes 2, 3 and 4 i.e., description, diagnosis and
prescription, respectively, as defined in Section 2.1.8 below. However, any 'prescription'
that is offered will be of a limited kind and fall short of being a plan for the overall project
or program. Analysis will be directed towards the achievement of some global optimum
which is not defined in terms of farm management itself. A few of the very large number
of situations in which farm management operates in Field C are:

(i) Descriptive studies of farm-household systems to provide background for local or
multi/bilateral investment programs in agriculture and/or agricultural infrastructure
(e.g., the Country Background Reports of the World Bank). This type of analysis is
in Mode 2 (Section 2.1.8 below).

(ii) Diagnostic studies of farm-households to determine just what developmental or
investment assistance is needed (e.g., roads, health, transport, extension, credit etc.),
and the priority ordering of specific projects to provide such assistance (Mode 3).

(iii) Prescriptive analysis (i.e., Mode 4) aimed at providing the farm-related part of some
uni- or multi-purpose project or plan: e.g., farm-level demand schedules for
irrigation water in a multi-purpose water storage project (where irrigation is only one
planned activity in addition to power generation, flood control, fish production etc.);
scheduling of produce supply as part of a feasibility study for the establishment of a

Field D consists of farm management in the role of generating data for the guidance or
support of agricultural policy making. Provision of such data might not require special

Farm management for Asia: a systems approach 23

studies or systems analysis for this particular purpose; often such data will be an incidental
output of analysis undertaken for some other purpose, e.g., in Field A. Field D analysis is
also of a supportive kind and operates in Modes 2 and 3 (quantitative description and
diagnosis as outlined in Section 2.1.8 below). The aim is usually to generate knowledge
about farm-households or their component subsystems which is to be used by governments,
public agencies etc. as a basis for structuring agricultural or broader economic policies -
setting farm-input prices or consumer food prices, establishing transport services or credit
programs etc. (Dixon et al. 1994; Upton and Dixon 1994). These policies might imply
either enhancing farmer welfare or reducing it (e.g., if their thrust is to minimize urban
living costs). This is a very important and wide-ranging field: it is difficult to think of any
policy which is to affect farmers which should not be based at least in part on farm-level
analysis, despite the fact that such farm-level analysis is in fact frequently not carried out,
much to the detriment of sound policy making.

2.1.8 Farm management modes

Farm management operates in four modes within the above fields.

Mode 1 encompasses routine operational and control activities. It is concerned with the
day-to-day operation and management of an actual farm, estate, cooperative or other farm-
based producing/marketing entity. This may be thought of as practical or 'muddy-boots'
farm management. Management in this mode is largely outside the scope of the present
discussion, except that the systems concepts discussed here will, it is hoped, provide
principles to guide practical (i.e., Mode 1) management.

Mode 2 refers to descriptive activities whereby farm management provides a conceptual
framework for the study, understanding and description of farm systems or farm-related
problems. This might be an end in itself; or more likely it will be a necessary stage in the
logical-event sequence towards action, as suggested in Figure 2.1. The chief function of
descriptive farm management studies is to provide a basis of understanding before problem
diagnosis is attempted. There are still many societies in the world with farm-household
systems of which we are in nearly complete ignorance; understanding and description of
these systems must precede problem diagnosis and, if need be, prescription of solutions.

Mode 3 refers to diagnostic activities concerned with the identification of problems and
weaknesses in farm-level systems of all Order Levels 1 to 10 and those parts of Order Level
11 household systems relating to the farm. Such problem diagnosis includes the
identification of potential opportunities. Problem diagnosis is usually carried out as a
separate mode, but on some commercial farms it might be built into their routine
monitoring and management mechanisms (as also on more sophisticated estates).

Mode 4 refers to prescriptive activities in which farm management is aimed at the
prescription of action plans for both (a) the overcoming of problems or weaknesses and (b)
the seizing of opportunities uncovered in Mode 3 (diagnostic) analysis.

Thus farm planning, as discussed in Chapters 8, 9, 10 and 11, is a prescriptive (Mode 4)
activity based on the descriptive (Mode 2) and diagnostic (Mode 3) activity of farm
evaluation as discussed in Chapter 7.

Analytical situations within modes

In Modes 3 and 4, three analytical situations will arise, viz.:

24 Farm management and farm types

Relationship between the Four Modes of Farm Management Activity

Mode 1: Operation and Control,

Mode 2: Study





Mode 3:

Mode 4:

(i) Diagnose and prescribe: First, the problem might require that a diagnostic analysis
be made of a system of Order Level from 1 to 10 (or 1 to 12) leading to the
identification of some specific weakness or opportunity to be investigated by research
on the farm or experiment station see Norman et al. (1995). If the problem falls
within the competence of the investigator, the analysis would at this point go into
prescriptive Mode 4 to develop and offer solutions.

(ii) Diagnose and refer: This second situation arises when the diagnosed problem lies
beyond the competence of the analyst: e.g., low milk production on a dairy farm
might be due to animal disease or a genetic factor or to the household itself (such as a
low educational level leading to product adulteration). In such situations the role of
the farm analyst is or should be to refer the problem to some relevant agency or
specialist, i.e., to diagnose but not to prescribe.

(iii) Prescribe only: Often only a prescriptive analysis is called for: e.g., if the problem is
to generate land-use plans intended to serve as the agro-economic basis of new
settlement projects or transmigration schemes.


To date, farms have most often been classified on the basis of agro-ecological factors (such
as climate, soil, slope, altitude and, not unrelated to these factors, the crop and livestock
systems used) overlaid, to a lesser extent, with socioeconomic criteria (Fresco and Westphal
1988). Inevitably such an approach leads to a plethora of farm types. A different

Farm management for Asia: a systems approach 25

approach is taken here. Emphasis is on farm-system structure from a farm management
and farm-household perspective with classification based on: (1) the main purpose of the
farm, (2) its degree of independence and (3) its 'size'. From such a structural viewpoint
there are basically six major types of farm system to be found in Asia and elsewhere around
the developing world with dozens of subtypes constituting a continuum of farm types
between the extremes of a totally subsistence to a totally commercial orientation.

2.2.1 Farm types

The six basic farm types are:

Type 1. Small subsistence-oriented family farms.

Type 2. Small semi-subsistence or part-commercial family farms, usually of one half to
two hectares, but area is not a good criterion: the same basic structure can be
found on much larger 20- to 30-hectare farms as in the Punjab, Sind, and North
West Frontier Provinces of Pakistan.

Type 3. Small independent specialized family farms.

Type 4. Small dependent specialized family farms, often with the family as tenants.

Type 5. Large commercial family farms, usually specialized and operated along
modified estate lines.

Type 6. Commercial estates, usually mono-crop and with hired management and
absentee ownership.

Each of the six farm types is now discussed in turn.

Type 1: Small subsistence-oriented family farms

There are two main subtypes. First, and of lesser numerical importance, are those based on
only one or two crops or livestock types (e.g., on maize or cassava or coconuts; or on yaks
or camels). Some farms of this subtype are based more on exploitation or management of
a local natural resource in the extreme case, by use of shifting cultivation or by nomadism
- than on deliberate choice of their main farm enterprise (e.g., on indigenous sago palm,
palmyrah, coconut or nipah). However, the main group of Asian subsistence-oriented farms
is based on a wide range of crops and animal types. This second subtype is of necessity
more highly mixed than are Type 2 part-commercial farms. Farms which are completely
self-sufficient are rare, but self-sufficiency remains the operating objective and, if forced by
circumstances, farms of this type could exist in isolation from the outside world. The
structure of a Type 1 farm is exemplified in Figure 2.5 below. The focus for evaluation
and analysis of Type 1 farms is the household rather than the farm component of the
system. However, Type 1 farms have most of the characteristics of Type 2 farms and these
are discussed below in relation to this latter type.

Type 2: Small semi-subsistence or part-commercial family farms

This type is predominant throughout South and South East Asia in terms of the number of
such units, the large number of people supported by them and the total volume of their
production especially of basic foodstuffs.

26 Farm management and farm types

Operating objective: The general operating objective of this farm type is family sustenance,
pursued first by production of foodstuffs for consumption and of produce/materials for use
on the farm, and second by generation of some cash income for the purchase of (a) non-
farm produced food essentials (salt, tea etc.); (b) other essentials such as clothing,
medicines, transistor radio, batteries etc.; and (c) some farm inputs (such as agricides and
fertilizer). Such cash is obtained primarily by sale of commodities which are surplus to
family requirements, and secondarily where this is possible by production and sale of
some cash crop raised specifically for this purpose. The comparative operating objectives
of this and other farm types are discussed in Chapter 6.

Production activities: Type 2 farms can be further classified according to geographical
occurrence (e.g., wet tropics; sub-tropics of India/Pakistan; temperate zone of North India,
Nepal, Bhutan), and by whether these farms are dryland (as most are) or part irrigated.
However, they are all basically similar in their crop activities which consist essentially of one
or more staple food crops plus a leguminous protein source plus an oil crop (see Section
9.6.3). Some examples of geographically typical crop mixes are:

Himalayan hills: barley or buckwheat; beans or peas; mustard.

sub-tropics: wheat; soybeans; sesame.

wet tropics: cassava or rice; groundnuts; coconut or sesame.

In general, land is cropped to its maximum intensity, but the number of crop species grown
in each of the energy/protein/oil crop subgroups, as well as the area of each, is limited by
length of growing season (dependent upon temperature), rainfall occurrence and/or
irrigation water supply.

Livestock, whether fish, poultry or larger animals, are typically important on Type 2 farms.
They are closely integrated with the crop activities, and here unlike the situation on farms
in developed countries they are kept for a range of purposes: direct production, draught
power (except on the smallest farms), transport, manure production to sustain field and
pond fertility levels, and as a store of wealth. The combination of livestock with crops
results in a large number of activities, and an even larger number of different farm

A special subtype of this highly-mixed farm type consists of the forest-garden farms of the
wet tropics as found in Kerala, Sri Lanka, Malaysia and Indonesia. These consist of both
whole farms, e.g., the forest-garden farms of Kandy in Sri Lanka see McConnell (1992) -
or the house-yard parts of farms forested with a more or less dense mix of economic species
as in the Pekarangan lands of Java. Except for poultry, livestock are relatively unimportant
on this subtype.

Farm system boundaries: Discussion of system boundaries in Chapter 3 mainly relates to
farms of this type. Briefly, boundaries of Type 2 farm systems (and of Types 1, 3 and 4)
segregate them distinctly from the external world, but the boundaries between individual
farms are relatively weak. In contrast with farms in developed countries, they often have
much stronger links to and interdependence with other farms in the local community than
they do with the outside world, i.e., with commercial input suppliers and markets for their
outputs. Through such practices as exchange of labour and animal services among farms,
group farming, community work ('gotong royong' in Indonesia) to develop irrigation
channels, village roads etc., barter of food grains for animal products, and village-level
savings' mobilization ('arisan' in Indonesia), each farm-household unit is a link in an often
highly developed agro-socioeconomic network within the local community. Whatever the

Farm management for Asia: a systems approach 27

basis for such informal integration culture, religion, isolation its effect is to provide
strong structural boundaries around groups of farms, hamlets and villages rather than
around individual farms. Each Type 2 farm is very much a part of the community and
often could not function effectively if divorced from it. It might well be said that 'No such
farm is an Island, entire unto itself.'

Activity and product diversity: Diversity, or the degree to which farm income (however
measured) is derived from a range of activities and products rather than from a single
source, is discussed in Section 6.2.4. Type 2 farms are typically the most diverse of all
farms. Diversity has three elements: the number of crop/livestock activities present; the
number of products obtained from those activities; and the number of ways in which each
product can be used or disposed of.

The mixed farms of the Punjab commonly consist of four to six crop activities and three to
six livestock activities; those of Bhutan somewhat fewer. In Sri Lanka the forest-garden
farms commonly grow up to 16 or so tree and vine species producing 20 to 30 different
products; and since each can be disposed of in up to four different ways (sold/bartered,
consumed, processed, stored), such a system will possibly generate some 60 or so end
products. This contrasts sharply with the situation on farms of Type 6, the estates
producing a single product (tea, rubber etc.) with a single end use (sale).

Even a common field crop such as maize may be managed so as to yield four or five
primary products (green pick, dry grain, fodder leaves and stalks, fuel, live stripped stalks as
supports for a companion bean crop), and two or three subsequent processed products
(maize cakes an important kitchen industry in parts of Bhutan, alcohol etc.).

Diversification of Type 1 and 2 farms has several bases. Broadly it follows from their
sustenance orientation. In remote tracts of Nepal and Bhutan it is a necessity. In the
Punjab it results largely from the possibility of growing a wide range of summer and winter
crops and combining these with livestock. On the closely integrated vegetable-poultry-pig-
fish farms of West Malaysia and Sarawak it results from a business-like approach to profit
maximization. On the forest-garden farms of Kandy in Sri Lanka it results partly from
historical circumstance (the wide botanical base provided by Indian, Arab, Portuguese,
Dutch and British immigrants and colonizers) and partly from a tendency of the Kandyans
to plant a tree/vine/shrub in any vacant space. (If they did not, the space would soon be
filled anyway through natural seed fall and germination.)

Sources and uses of farm resources: An important characteristic of Type 2 farms (and of
farms of Type 1) is the high proportion of farm and household resources generated on the
farm and, correspondingly, the low level of dependence on purchased inputs. Further,
where purchased resources are used, it is common practice to restrict their use to cash crops
(cotton, sugarcane, tobacco etc.) with non-cash crops receiving no purchased inputs or
being grown on the residual fertilizer (and often soil tilth and soil moisture) from some
previous commercial crop. Those farms which do use purchased inputs often operate at
dual levels of technology 'advanced' for some main crop, 'traditional' for the rest. Farm-
generated resources including food supply (as distinct from purchased resources) are
obtained in a wide variety of ways as follows:

By operating separate specific-purpose resource-generating activities. These, as
distinct from cash-generating activities, are relatively important on farms of Types 1,
2 and 3. The most common example is livestock kept primarily for manure
production (as well as for other purposes). Growing a green manure crop serves a
similar purpose. Growing and lopping the leaves from leguminous trees for paddy
fertilizer is still common in Java. Such activities need not be elaborate: in Bali and

28 Farm management and farm types

Sri Lanka the most common 'resource-generating' activity is simply growing a clump
of bamboo in the house-yard (for construction material, produce containers, fences,
water pipes).

* Through simple apportionment of part of a commercial crop for household use as
food or livestock feed.

* By carrying on parallel crop activities by growing one variety/type for the market and
another for the family's own use. The first, typically a high-yielding improved
variety, might be deficient in taste and storability but will generate cash. The second
might be capable of long storage and possess other qualities valuable in rural but not
in sophisticated urban markets.

* Through extensive use of all by-products: stalks of maize, tobacco, pigeon pea,
cotton etc. as household fuel; wheat straw for mud brick making; etc. With some
crops especially tree crops the 'by-products' may take on such relative importance
in the range of their uses as to make unclear just what the 'main' crop is.

* By growing/keeping generally low-yielding but multi-purpose types of crops and
livestock rather than high-yielding specific-purpose types. Maize, wheat etc. might be
grown nearly as much for green/dry animal fodder as for grain, or in the case of
maize as a standing trellis for some following climbing crop, e.g., beans or
cucumbers. (Thus the not uncommon observation that farmers are 'backward'
because they do not adopt 'improved' varieties is often based on ignorance as to the
real reasons why the 'old' varieties are grown.)

* Finally, resources are also generated by the multiple use of farm capital. A common
example is provided by farm boundary and roadside fences. In the Matale district of
Sri Lanka most of the fences consist of kapok trees planted at very close spacing.
They also support pepper vines and thus yield four 'products': kapok floss and seed
(for oil) and black pepper, as well as field security. Farm fences in the Yogyakarta-
Boyolali area of Central Java are used to generate a wider range of resources (or to
directly produce a marketable commodity). There are four main types: (a) bamboo-
lattice fences, invariably used also as supports for long-beans; (b) napier grass fences
consisting of a single row of grass, laced together into an upright position by a strip
of bamboo about a metre above ground level which permits the growing top of the
fence to be regularly cut for cattle feed; (c) live leguminous trees whose leaves are
harvested periodically for cattle feed or seasonally as field green manure; and (d)
cassava fences, formed by planting cassava very close (15 to 20 cm) and weaving one
or two bamboo strips through the line of cassava stems at about one metre from
ground level. The cassava stems are then used also as a bean trellis.

Following is a partial list of the farm and household resources/inputs/capital equipment
commonly generated on farms of Types 1 and 2. The list suggests the high level of self-
sufficiency that characterizes these farm-system types, especially in isolated areas.

Labour and power: all labour (except at peak periods, then by labour exchange or
mutual help); all ox/buffalo/camel draught power, grain grinding power and transport;
ox/buffalo treading power for grain threshing (mainly of paddy).

S Crop inputs: most seed, animal manure (with a chemical fertilizer supplement on
some cash crops); lopped high-nitrogen tree leaves for paddy fields (wet tropics);
packing materials for market (woven bamboo baskets, teak and plantain leaf

Farm management for Asia: a systems approach 29

Capital equipment: all ploughs, harrows, rakes and levellers from farm or village
timber; all animal harness and repairs; fences (live kapok, areca palm, napier grass,
cassava, woven bamboo); sugarcane roller crushers; oil extractors; irrigation water
delivery systems (bamboo pipes in parts of Bali and the Madiun Valley of Indonesia).

S Buildings and household: building panels/roofing/flooring (woven bamboo and
sago/nipah/coconut leaves); buckets, containers (areca palm spathe and woven
bamboo); cordage, twine, ropes; granary containers (woven, wood, packed earth);
stoves and jaggery sugar boilers (packed earth); household fuel (crop residues, tree
prunings); domestic light (coconut oil, butter lamps).

Type 3: Small independent specialized family farms

The key characteristics of Type 3 farms are (a) their specialization in some particular crop
or livestock activity which distinguishes them from the mixed farms of Types 1 and 2; and
(b) their management independence which distinguishes them from Type 4 farms.

Type 3 farms fall into three subgroups according to their management orientation/purpose
and type of income: (A) commercially-oriented farms, and family sustenance-oriented
farms which achieve this objective through either (B) sale of part of their production (which
makes them of necessity part-commercial farms) or (C) multiple-use of produce from their
single specialized activity and/or barter of some of this produce for necessary
commodities/goods which cannot be produced or purchased. In this latter situation such
farms are also a subtype of subsistence farms (Type 1), but differ from the main body of
near-subsistence farms in that only one main production activity is pursued. A sub-
classification of Type 3 farms is shown in Figure 2.2. Some examples of these Type 3 farm
subtypes are noted below. Probably the most important are the Subtype B near-continuous
paddy farms of the wet tropics.

Subtype A (commercial):
* small farms specializing in poultry, pig, dairy or vegetable production around
metropolitan areas.
* orchid and horticulture farms.
* vegetable farms in upland areas throughout Malaysia, North Sumatra and Java.
* smallholder rubber, oil palm or pepper holdings in Malaysia and Indonesia.
* citronella and cinnamon farms in southern Sri Lanka.

Subtype B (part-commercial):
* continuous and near-continuous paddy farms of the monsoon lands.
* upland/dryland maize and cassava farms.
* smallholder coffee or cacao farms.

Subtype C (near-subsistence):
* near-subsistence maize farms of East Bhutan, Nepalese hills and Sarawak.
* cassava-based farms on poor soil in South Java.
* sago farms of South East Asia and New Guinea.

30 Farm management and farm types

Sub-classification of Type 3 Farming Systems

* yak/sheep migratory farms of the high Himalayan valleys.

The specialization of Type 3 farming systems is based on a wide range of factors as follows:

S Subtype A farms: on commercial/profit opportunity and proximity to urban markets
(poultry, pig, dairy and vegetable farms). The development of such profit-oriented
peri-urban farm activities is a reflection of economic growth with its demands for
intensively produced products with a high income elasticity of demand.

- Subtype B farms: on the presence of specific physical/geographical factors (water
and good soils for continuous paddy farms; favourable temperature and rainfall
regimes for coffee or cacao farms).

- Subtype C farms: on necessity (cassava on the poor soils of South Java; yaks and
sheep in the high valleys of Nepal and Bhutan).

Yet other bases for specialization are historical accident (e.g., smallholder tea in Sri Lanka
on lands acquired from previous tea estates); or prior presence of some natural resource
(e.g., the sago and nipah farms in the coastal swamps of the Philippines and New Guinea).

Farm management for Asia: a systems approach 31

Type 4: Small dependent specialized family farms

Structurally, except for their lack of independence, Type 4 farms are quite akin to Type 3
farms and contain the same three (A) commercial (B) part-commercial and (C) near-
subsistence subtypes; however, they are sufficiently important to be examined as a separate
type. The characteristics which set them apart from farms of Types 1, 2 and 3 are their high
degree of activity specialization and the lack of real decision-making power possessed by
the farm family. The specialization characteristic may be based on the same factors noted
above for Type 3 (independent specialized) farms. The dependence characteristic arises
from the fact that on Type 4 farms the family is not free to decide what to produce, nor
frequently the conditions under which some obligatory activity is to be carried on. This
lack of independence can be due to several factors, viz.:

(a) Terms of tenancy: Tenant farmers are often obliged to produce one or more specific
crop or livestock products, as dictated in a landlord-tenant agreement. The tenant-
operated vegetable farms of Qatar are an example.

(b) Structural integration: In this situation small family farms are integrated more or less
closely as the production arm of some larger farming cum processing system. Small
tenant-operated farms supplying sugarcane to a mill or leaf to a tobacco-processing
factory are common examples of such vertically integrated farms. Not only is the
crop which is to be grown specified, but the conditions of production timing of
planting and harvesting, amounts of fertilizers to be used, spraying programs etc. -
are also dictated by the controlling authority.

(c) Debt: Some agro-industrial units (such as milk processing plants) often provide
farmers with input factors (such as cattle, feed and technical assistance) in order to
achieve a regular or higher quality supply of their needed raw material (e.g., milk).
These advances are usually made in the form of a loan at attractive terms, but often
the only way farmers can liquidate this loan (and perhaps eventually regain their
independence) is to continue to produce the particular commodity usually under
conditions set by and to the relative advantage of the lender.

A second kind of debt, that entered into for consumption rather than production
purposes, can also provide the basis for farmer dependence. Thus for generations the
small cardamom farmers of the southern Bhutan hills have been indebted to the
cardamom traders/money lenders of the towns along the West Bengal border. The
only hope these farmers have of liquidating such debt usually used for food,
clothing and household items is to continue to grow this specialist crop and sell it at
whatever terms may be offered by the traders.

(d) Government policy directives: In some countries, farmers' lack of independence in
production decision making is the result of government power to issue production
directives. In Indonesia, e.g., the Government has the broad power to direct that some
percentage of those village lands which lie within the command area of each sugar
factory be planted to sugarcane. Typically each hectare of land, owned by
individuals of the village, might be under sugar for one year during which time it is
farmed by the company as part of a larger estate. It then reverts to its owner for three
years during which period he or she will operate it as a complete and independent
farm, until it is again taken for sugar. During this three-year period the farmer has all
normal decision-making powers (crop selection and how each is grown). During the
one-year cane phase, for which the farmer receives payment as a 'landlord', he or she
has no decision-making power whatsoever. This system thus involves the alternating
of two distinctly different farming systems (as shown diagrammatically in Figure 3.1).

32 Farm management and farm types

(e) Lack of alternative market outlets: Absence of any real independence in management
can also be due to lack of alternative market outlets, especially when the product is
too bulky or fragile to be transported far from the farm. For example, most of the
small cassava farms of Perak in West Malaysia are located on poor soils which would
grow little else except cassava (many are located on tailings or spoil from tin mines).
This accounts for their specialization. The second factor, their lack of management
independence, is due to the high bulk/low value of their product which must be
disposed of to chipping factories in the immediate vicinity. There is little practical
possibility of seeking higher prices by transporting the raw cassava further afield.
Similar situations face the citronella grass and cinnamon leaf farmers of the Galle-
Matara district in southern Sri Lanka. Here again the high bulk/low value of these
farm outputs deny the growers any real choice in disposing of their crops to other
than the local oil mills under price/quality conditions set by the mills.

Source of farm resources: Farms of Type 4 (and Type 3) are usually not self-sufficient in
resource-generation; e.g., the continuous cropping of specialized paddy farms (Subtype B
in Figure 2.2) is usually possible only because it is based on some purchased package of
'high technology' inputs HYV seed, artificial fertilizer and agricides. Dependence on
commercial inputs is even greater on farms of Subtype A, e.g., purchased feed and
veterinary supplies for specialist poultry and pig farms. However, Subtype C farms might
exist with only minimal purchased inputs; e.g., the upland near-subsistence maize farms of
Nepal, Bhutan and Sarawak are based on use of retained 'local' seed, no artificial fertilizer
and no agricides.

System boundaries: The boundaries of the specialized farms also vary with subtype. Those
of the commercially-oriented farms of Subtype A will interface more to the outside world
(i.e., to suppliers of inputs and product markets) than to other farms; however, the
boundaries of farm-system Subtypes B and C will tend to be stronger around groups of
contiguous farms or all the farms of a hamlet or village in much the same way as the
communal boundaries of Type 1 and 2 farming systems set these apart from the outside

Type 5: Large commercial family farms

Type 5 farms are similar in most respects to estates except that usually the primary
beneficiaries are members of an (often extended) family rather than absentee owners or
shareholders. They fall into two subtypes. The first consists of mono-crop farms which are
at the fringe of the estate sector proper and which are usually dependent on this estate sector
for research, availability of new crop varieties and often for processing and marketing
facilities. The 10- to 20-hectare coconut farms of Sri Lanka which exist side-by-side with
the large (now nationalized) coconut estates are examples.

The second subtype consists of either mono-product or mixed farms which are not part of
any estate sector but are organized along commercial lines, e.g., using hired labour, being
dependent on purchased rather than farm-produced inputs and, except in the case of tree-
crop farms, adjusting the activity or activity mix according to commercial opportunity. The
larger cinnamon farms of Galle-Matara and the mixed coconut-dairy farms of Sri Lanka
are examples of this subtype. So also are the large 30- to 50-hectare mixed grain-livestock
farms of Sind and Punjab.

The operating objective of Type 5 farms is profit or utility maximization through market
sales. As a group and in pursuit of that objective, they are the most dynamic of the six farm
types discussed here.

Farm management for Asia: a systems approach 33

Type 6: Commercial estates

Commercial estates are generally mono-crop in nature. They are largely a colonial legacy,
first established to provide cheap raw materials (and later some food and beverage products)
to the industries of Europe and North America. This role continues except that they now
also serve national industrialization. The chief characteristics of this farm type are as

Crops: The main crops on which Type 6 farms were initially based are rubber, sugar,
cinchona, cacao, tea, coffee, cinnamon, cloves, nutmeg, coconut and the coarse fibres. Some
of the old traditional crops have become uneconomic (sisal and to some extent cinchona);
some have become primarily smallholder crops (the spices and coffee); and new estate
crops (such as flowers, oil palm and citronella) or improved varieties of old crops have
emerged. Recent years have also seen the emergence (usually close to metropolitan areas)
of livestock-based estates, particularly for pork and broiler production.

On-estate processing: Primary processing is an integral part of the operation of most estates
(e.g., tea manufacture, sheet and crepe rubber production, copra curing). This requires a
high level of capital investment which, to be fully utilized, requires a flow-type of operation
rather than a batch-type. This has two effects. On the one hand it tends to restrict estate
production to those crops which yield a fairly uniform year-round flow of produce (tea,
rubber, coconut, cocoa etc.). On the other hand it gives estates certain advantages, e.g.,
quality control, relative to smallholders producing these same products. Some crops which
naturally give an intermittent or irregular product flow are also made amenable to
continuous estate-type production by relay-planting or chemical control of growth time-
patterns (e.g., sugar, sisal and pineapple).

Size: Estate size is commonly from 200 to 2 000 hectares but area itself is not an important
criterion: a 40-hectare orchid estate will generate about as much income and employment
as will a 200-hectare tea estate or a 400-hectare coconut estate.

Marketing: Marketing plays a very important role in estate operations. Most estates are
jealous of their product reputation or 'mark' and make deliberate attempts at product
differentiation. They also maintain close contact with buyers and monitor demand trends.
Thus the larger cacao estates of Malaysia might be in daily telex or e-mail contact with
buyers in Hamburg and Amsterdam. This contrasts sharply with the situation on
smallholder farms growing the same crops: most smallholders have little interest in their
product once it leaves the farm gate and, not infrequently, have no knowledge of its use
after export.

System beneficiaries and operating objectives: Previously, the primary beneficiaries of
estates were usually absentee shareholders who employed professional expatriate
management and often also a docile expatriate labour force (as was the case in Malaysia, Sri
Lanka, Fiji and Mauritius). Thus, before their nationalization, the estates of Sri Lanka were
referred to accurately, if somewhat emotively, as 'islands of privilege and prosperity in a sea
of poverty'. With exceptions, this situation has changed markedly; consideration of the
interests of secondary beneficiaries now receives far greater attention than formerly and
these are more widely defined to include the host government, the estate labour force and
their dependants, local communities and councils. Profit remains the main operating
objective but this is increasingly tempered by the condition that worker retirement schemes,
schools, clinics, roads, village welfare centres etc. be provided at estate cost. In short,
increasing proportions of operating profit are being diverted from the primary to the
secondary beneficiaries of this system type.

34 Farm management and farm types

Management: A mono-product estate system is at once more simple and more complex
than the systems found on mixed family farms. Since only one product is usually involved,
only one production activity exists, and there is no need to allocate resources among five,
six, seven or more competing production enterprises, as on a typical mixed family farm.
Also, very little if any of an estate's resources have to be generated within the system's
boundaries. (On a typical tea estate usually only fuelwood and hydro power might be
produced as inputs to tea production, and even the use of these is declining.) Thus, again in
contrast with family farms, there are no resource-generating activities to divert attention
from the main production task. However, although only one production enterprise sub-
system rather than a multiplicity exists, it is carried on at a sophisticated level. Volume
production usually means that per unit profit margins are thin; the wrong decision at some
critical time, especially with long-term tree crops, can have serious and long-lasting

Specialization means that the advantages of crop diversification are not available; there is
no possibility of making up on the swings what might be lost on the roundabouts. If a
Bhutanese farm with one pig suffers an outbreak of swine fever the farmer would probably
shrug his shoulders and go off to the paddy field or do something else. If it happened on a
500-sow estate it could spell disaster. Moreover, insofar as most estates are based on one or
other of the tree crops, the effects of some sub-optimal decisions (e.g., regarding
variety/strain of crop to be planted, spacing, initial fertilizer etc.) might well have long-
lasting if not permanent adverse effects, possibly over the 30-year life of a rubber stand, the
65-year life of a coconut stand, or even longer in the case of tea.

While not requiring the allocation of resources among enterprises, planning and
management of a mono-product estate system requires the explicit recognition,
organization and optimization of a large number of agro-technical processes (as discussed
in Chapter 5). An example is given in Figure 2.3 which shows the sequential steps in
establishing and operating a tea crop. For each step, several alternatives are possible. If this
were only one of several crops to be grown (e.g., as on a mixed smallholding), most of the
questions listed in Figure 2.3 would not be asked; each operation would proceed on the
basis of village tradition, farmer experience or local lore. But on an estate they have to be
explicitly asked and answered if the optimal level of long-term sustainable production and
profit is to be achieved.

In the management planning of estates, three kinds of management analysis can be
particularly important: (i) evaluation of some single production enterprise (crop or
livestock) over a long time period (as presented in Chapter 10); (ii) the optimization of
processes (because even small marginal reductions in inputs/costs will become important
when spread over many hundreds of hectares or thousands of tonnes of produce (Chapters
5 and 8); and (iii) simulation of estate operations as a whole system under uncertainty
(Chapter 11).

Having defined the six main farm types and outlined their chief structural characteristics, it
is now possible to turn in following chapters to a consideration of the field of farm
management analysis as this would be applied to these farm types, especially the small
farms, i.e., Types 1 to 4. First, however, two contrasting examples of small-farm systems are
presented in the following section.

Farm management for Asia: a systems approach 35

Alternative Processes in producing Tea on an Estate


(1) Clear land

(2) Establish
cover crop

(3) Plant tea

(4) Weed

(5) Fertilize

(6) Pick

(7) Cure/pack

Alternative processes for each operation

Method: labour? elephants? tractor?
Level: what season? depth? tilth?

Method: which crop?
Level: for how long? 15, 18 or 24 months?

Method: what kind?
seedling or vegetatively propogated?
Level: what population density? 3-4-5 000 plants/acre?

Method: how? hand? chemical? men? women?
Level: every 4, 6, 8 ... weeks?

Method: what type(s)?
Level: what levels of application? frequency? timing?

Method: how? machine? hand? male or female?
Level: frequency? every 25, 30, 35 ... days?

Method: how? for which of many markets?
Level: mix grades? in what proportions?

(8) Etc.

2.2.2 Structure of small-farm systems

A useful way of introducing the discussion of following chapters is to look briefly via
examples at the structure of two of the small-farm types, the partly commercialized farms
(Type 2) and the near-subsistence farms (Type 1).

Model of a Type 2 farm

Based on McConnell (1972), Figure 2.4 presents a model of the annual operation of a
'representative' Pathan farm in the Peshawar district of North West Frontier Province,
Pakistan (the data are actually means of a group of 11 similar farms). The central core of
the farm system consists of two livestock, seven crop and two on-farm processing activities:
dairy and draught cattle, berseem (clover), a mixed orchard, sugar beet, sugarcane, maize,
millet and wheat. The processing activities consist of converting some of the milk to ghee
for sale or consumption (in this particular year it was all consumed), and crushing/boiling
some of the sugarcane to make gur (unrefined 'country' sugar), some of which is consumed,
some sold. These 11 activities are represented by bar columns in the middle part of Figure
2.4. Input and output values are in rupee (Rs) terms. The levels of the various activities,
livestock population and other relevant structural data are summarized below.

36 Farm management and farm types

berseem (cattle feed)
orchard (use + sale)
sugar beet (sale)
sugarcane (sale + gur)
maize (use)
millet (use)
wheat (use)
sold as cane

0.6 acres
1.1 acres
0.7 acres
1.3 acres
1.3 acres
0.2 acres
2.0 acres

542.0 maunds2 plus 15.5 maunds of gur
542.0 maunds


milk animals:
young stock (dairy + draught)
ox traction available (pair)
actually used
milk produced:
used/sold as milk
converted to ghee

2.0 head
1.7 head
1.1 head
0.6 head
1.2 head
365 days
74 days
22.0 maunds
18.4 maunds
3.6 maunds

Figure 2.4 consists of two sections: the household component, circumscribed by a
boundary line in the top right section of the diagram, and the farm component of the farm-
household system which constitutes the remainder of the diagram.

Referring to the household component of Figure 2.4, the farm family consists of seven
members of all ages. Together these members are capable of supplying 1 053 labour days
annually. In fact there is only enough work on the farm to occupy 443 labour days, and
only 21 days of off-farm work can be found, thus 589 days are either occupied in farm
maintenance or development work not connected with any particular crop, or are occupied
in social/religious activities, or are idle. (Here they are shown as 'idle'.)

The second general input by the family into the farm component is cash for meeting the
direct costs of each of the production activities. This cash is obtained by the household as
Rs 2 848 from sale of farm produce plus Rs 65 from 21 days of off-farm work. (Of course
the family component also supplies other vital inputs to the system management, direction
and purpose but these cannot be measured.) These family-provided inputs into each of
the activities, cash and labour days, are shown in Figure 2.4 in the two top rows of the farm

Consider now the farm component as depicted in Figure 2.4.

Activities: Referring to the activity columns in the body of Figure 2.4, each of these is an
abbreviated activity budget (Chapter 4) showing first the inputs to and then the outputs
from the activity. For example, the inputs to 0.7 acres of sugar beet are cash Rs 79, labour

2 Maund (abbreviated to mds in Figure 2.4) is a volumetric measure corresponding to about 90 pounds (40 kg) of
sugarcane; ghee is measured by the seer (about 14 pounds or 6 kg).

Structural Model of a Pathan Farm exemplifying a Type 2 Farm

Production whole
and whole ldie
|s 1201 Rs 20 -- I Rs 10 --- Is 13 -- Rs 79 A-- |Rs250|-- Rs77 I-I s40 IRs 66 lauarrsh -- ws
costs Farm family, 58 ys
03 days 60 days | 12 days -115 days | 48 days 82 days H 25 days 63 days 4 days | 31 days Worked m r -
on farm Farm labour Off-farm
rass Total feed pool 443da s 1053 day s wod
5.9 mds TTN amount
TDN 101 mds 0
I~^_ Lj-- Rs65
Feed Feed
Dairy Draught ash Produce
DrIdtea income consumed
Bflock bullocks --\s 2848 Rs 1638 C<
days _91 da V
2.0days 5.5 days 8.5 days 4.4 das -f 5.2 da s 1.6 days 24.6 da
re Manure 25.8 mds 0.4 mds 66.5 mds 80.6 mds 48.5 mds 13.0 mds 7.2 mds TON
Milk Total 31.3 mds 3
2 mds Berseem Orchard Sugar Sugar Maze Millet Wheat
0.6 ac 1.1 ac beet cane 1.3 ac 0.2 ac 2.0 ac material
79.3 mds
BBB sFruit Leaves Tops Chop
246 mds 32 mds 185 mds 150 mds I

Beets er Millet Bhoose fed
TDN i 14.8 mds 33.2 mds 31.3 mds pool
-* amount amount feed- -
6.8 mds 613 mds t poo 2
6---- 3::'I poCane Grain rain
3.6 mds 2 2 day

18.4mds Ghee Fit Beets Cane Gur Maize Wheat
Produced 552 Rs 12.2 seer 795 Rs 175mds 542 mds 15.5 mds 20.4 mds 39.3 mds
109 Rs 480 Rs 1150Rs 465Rs 326Rs 609 Rs
Consumed 9 12.2 seer - - - - - - 6.8 mds > 20.4 mds - - 39.3 mds - - -
390 s 109 Rs 204 Rs 326 Rs 609 Rs
Sold 175mds-542 mds 8.7 mds - - - - J
480 Rs I 115RS 261 Rs

38 Farm management and farm types

48 days, bullocks 8.5 days, manure 66.5 maunds; and the outputs are 32 maunds of leaves
(by-product) and 175 maunds of beets. Similarly, the inputs to sugarcane are cash Rs 250,
labour 82 days, bullocks 14.4 days, manure 80.6 maunds; and the outputs are 185 maunds
of cane tops (for bullock feed) and 542 maunds of sale cane, plus a small but unknown
amount of cane diverted to home processing for gur which as a separate activity uses Rs 77
cash, 25 labour days and 2.2 bullock days, and yields 15.5 maunds of such 'country' sugar
of which 6.8 maunds is consumed and 8.7 maunds is sold.

The two livestock activities dairy and draught oxen are shown at the left side of the
model. Inputs are cash costs, labour and livestock feed. This latter is somewhat complex.

Livestock feed: Feed is shown in two units of measurement: amount (i.e., maunds of
around 40 kg) of actual material, and the equivalent in maunds of total digestible nutrients
(TDN). This conversion is desirable in order to standardize each of the several different
feedstuffs produced on the farm, each having a different nutritional value, into a common
basis of units of TDN. The total amount of feed fed to the livestock is shown at the top of
the livestock columns, 101 maunds of TDN, coming from the 'total feed pool'. All feed
entering this common pool comes from one of three sources: (a) grass (cut from the
orchard) equivalent to 5.9 maunds of TDN; (b) 613 maunds of green feed, equivalent to
63.8 maunds of TDN, which comes from some of the crop activities (berseem 246 maunds,
beet leaves 32 maunds, cane tops 185 maunds, maize green chop 150 maunds) and (c)
79.3 maunds of dry feed, equivalent to 31.3 maunds of TDN, from some of the crops
(maize stover 14.8 maunds, millet 33.2 maunds, bhoosa/wheat straw 31.3 maunds).

The green feed is shown as cycling to the left and being accumulated in a 'green feed pool'
totalling 613 maunds of material, equivalent to 63.8 maunds of TDN; the dry feed items are
accumulated to the right into a 'dry feed pool' totalling 79.3 maunds of material or 31.3
maunds of TDN. Then, as the arrows indicate, both these green and dry feed pools are
accumulated above the livestock activities into a 'total feed pool' which, when supplemented
by cut grass, totals 101 maunds of TDN flowing to all the dairy and draught animals (which
include young and dry stock as previously listed). These feed flows refer only to feed
produced on the farm. In addition, stock are grazed on village common lands when grass is
available there (the amounts of such grazing could not be recorded).

In summary, the following widely diversified feedstuffs are obtained on this type of farm:
grass from the orchard, some rough common-lands' and roadside grazing, berseem clover,
beet tops, sugarcane tops, green maize chop, dry maize stalks, millet and wheat bhoosa
(straw). Only two of these items are specially grown for the cattle, namely berseem and

Livestock outputs: The cattle activities generate three outputs: bullock power, manure for
the crops, and milk. The number of bullock days flowing to each of the crops are shown,
being 2.0 for the clover, 5.5 for the orchard, 8.5 for the sugar beet etc. Crushing of
sugarcane for gur also uses 2.2 days of bullock power. Bullock power not used is shown as
291 'idle' bullock days. Below the livestock activities, a total of 242 maunds of manure are
accumulated from all the livestock. This also is shown flowing to the crops: 25.8 maunds
to berseem, 0.4 for the orchard, 66.5 for the sugar beet etc.

Final activity outputs: The lower section of the model shows the final products flowing
from each activity and the amount of each product consumed by the household or sold,
each in quantity and value terms.

Farm management for Asia: a systems approach 39

Household income: Farm income consists first of the value of produce consumed. This is
accumulated to the right in Figure 2.4 and enters the household component of the system as
a total value of Rs 1 638. Second, cash from farm sales is similarly accumulated and has a
total value of Rs 2 848. Total income, real plus imputed, is Rs 4 551 which includes the
small income from non-farm work. Thus, for this year, income in kind from home-
consumed production constitutes 1 638/4 551 or 36 per cent of total gross family income.
On this basis, it might be said that the farm is about one third subsistence oriented and two-
thirds commercially oriented.

As shown, total cash inputs into all the activities amount to Rs 675. Thus, in this particular
year, the household would have a cash 'surplus' of Rs 2 848 + 65 675 or Rs 2 238. This
amount would be available to meet any cash costs in farm maintenance (which were not
considered as a cost in the model), and to meet cash living expenses for purchased clothing,
food, medical expenses etc. Any final surplus after meeting these latter expenses would be
available as savings.

In summary, this Pathan farming system from the North West Frontier Province of Pakistan
is a highly diversified one. It has 11 major production and processing activities and it
produces 15 separate products and by-products (excluding bullock power, young livestock
and manure for the fields). Cash inputs are low, mainly for fertilizer for some of the crops
and a minimal amount of agricides; most seed is retained. Although a significant degree of
self-sufficiency is present, it is not a true subsistence farm. This latter type is examined in
the following section.

Model of a Type 1 farm

Most farms of Type 1 (i.e., small subsistence-oriented family farms) in Asia now have at
least some element of commercialization and generate at least some small amount of cash
for the purchase of essential items. At the top end of the structural scale this type merges
into the small mixed Type 2 farms; at the bottom end it includes the locally-shifting
cultivators of Sarawak-Kalimantan (and these merge into the hunter-gatherers and forest
dwellers of New Guinea, Kalimantan, Sarawak and Sumatra).

Subsistence or near-subsistence is a condition more often imposed than voluntary: one sub-
classification could be on the basis of external causal factors; e.g., the near-subsistence
farms of India, the hills of Nepal and parts of Java exist because of shortage of land; those
of Bhutan (where land is seldom limiting) because of isolation and the lack of roads and
markets; and those of the new settlement areas of Sri Lanka because of the lack of family
labour and oxpower to till more than a minimal subsistence area.

When examined from the viewpoint of their range of activity, variation of this farm type
ranges all the way from being highly mixed to almost mono-crop. In the first of these
conditions, this type merges into Type 2 farms. In the second extreme condition these
farms are structured around production of a single bulk staple usually maize, dry paddy,
cassava, palm sago or coconut. Secondary foodstuffs and non-food subsistence items are
obtained by supplementary activities: fishing; hunting or collecting in nearby forest areas
for food or items for sale (birds, monkeys, butterflies, orchids, beeswax, rattan etc.); or by
sending a family member off to work somewhere outside the subsistence environment.

Although they can generally be described as resource-poor, poverty is not necessarily a
characteristic of Type 1 farm families. At one end of the scale the economic condition
might be poverty verging on destitution, even starvation. At the other extreme it might be
prosperity when that condition is judged by an availability of resources in excess of those
needed to maintain a reasonable physical existence.

40 Farm management and farm types

Again the best way of illustrating systems of this subsistence type is with the aid of a model.
Such a model is shown in Figure 2.5 which describes the structure and operation of a near-
subsistence farm located at about 1 700 m (5 500 feet) above the town of Wangdiprdan in
Central Bhutan. The chief features of this farm are its highly diversified activities and its
very high level of self-sufficiency. In this example the farm is a prosperous one (as that
term was defined above) and its subsistence nature is based on isolation, poor roads, lack of
markets and therefore of incentive indeed opportunity to enter the commercial world.
The model refers to an operating period of one year.3

The farm's land resources consist of 1.75 langdo4 (0.25 hectares) of dry paddy fields, 1.25
langdo (0.18 hectares) of dry fields, and 4.00 langdo (0.4 hectares) of wetland rented from
a local monastery. However, the effective size of this farm is only 5.75 langdo: the 1.25
langdo of dryland is too far away to be easily worked and, since more accessible land can
be rented from the local monastery, the dryland portion is not used. (If it were cultivated
there would be no market for the extra produce, which would also be surplus to family

The farm family consists of five adults, all able to work full-time if necessary, i.e., a
population density and potential workforce of six persons per hectare. It is assumed that
this family could provide a potential supply of 1 200 labour-days annually. Livestock
resources are also high relative to farm size: two oxen, two milkcows, three young cattle,
three pigs, three hens. Cattle are grazed off the farm on common lands for more than half
the year.

The farm structural model of Figure 2.5 consists of six parts as indicated by the circled
numbers 1 to 6 in the diagram. Part 1 shows human, livestock and land resources, as noted
above. Part 3 shows the farm resource pool. All resources except rented land are owned or
are generated by the system itself (all seed, manure, bran, labour etc.). There are no
purchased inputs; even the rented land is paid for by barter with the monks.

In Part 2 of the structural model, all productive activities (subsystems) are listed in separate
activity columns. There are nine of these (plus one external resource-generating activity):
tending cattle, pigs and poultry; growing paddy, wheat, buckwheat, mustard,
vegetables/chillies and fruit. The external resource-generating activity consists of one
family member working part-time off the farm (for local government, clearing paths and
roads after landslides).

The coefficients within each upper column of Part 2 are the resources used by the respective
subsystems: e.g., the paddy crop uses 5.25 langdo of land, 115 labour days, 29 kg of seed,
14 tonnes of manure and 23 draught ox days. Of the used total area of 5.75 langdo, two
langdo are doublecropped.

Part 4 shows all intermediate products (bran, grain, straw, draught days, manure and seed)
which are produced by the nine farm activities. These are generated in the activity columns,
accumulated to the left in the 'intermediate outputs' section (Part 4), then cycled back to the
resources pool of Part 3 and from there to the activities which use each such resource/input.
As shown by the left-side arrows from Part 4 to Part 3 and thence to Part 2 of Figure 2.5,
resources used up by the activities (Part 2) in any year are replenished by the activities

3 Data from a 1985 farm survey by Nim Dorji and the senior author. The monetary unit is Ngultrum (Nu) = US
8.7 cents in 1985.
4 A langdo is the area a pair of oxen can plough in a day: a dry langdo is about one seventh of a hectare and a wet
paddy-field langdo is about one tenth of a hectare.


Structural Model of a Bhutanese Farm exemplifying a Type 1 Farm

Family labour: 3 male 2 female |
Livestock owned 0
Land 3 lando owned + 4 rented

Activities tl
Farm Resources Pig Buck- Mustard I Frit | Off-farm
wheatveg work U---
Land 5.75 langdo 5.25 1 1.25 0.25 .01 3 trees Family labour
Livestock no. 7 3 3 Available 1200 days I
S Labour 1200 days 150 40 115 20 22 5 20 2 70 Used 444 days
SSeed 102 kg 29 5 10 2 1 Ie 756
--- Manure 15 mt 14 4 2 1 0.5
S Draft 300 days 23 4 4 1.5 0.5
Straw 12 mt 5 3
Grain 160 kg NA NA
Bran 201 kg- NA NA
0m1 4, 2 1 0. ( Household Component
SBran 201 kg 180 6 15 Cash Nu 720
-Grain 160 kg I-- 120 40
Straw 12mt --- I11 1
Draught 300 days 300 Total Family Net
Manure 15 mt-- 15 cash living cash
Seed 102 kg 40 33 26 2 1 income costs surplus
Nu 786 Nu 975 Nu -18
Final Output
Food 1487 kg 63 50 10 934 20 130 20 200 60 Food 600 Nu
Alcohol 366kg 340 26 Fuel 70 Nu
Bartered 410 kg- 410 Household 80Nu
To monks 112 kg <-- 112 Insurance 75 Nu
70Clothes 150 Nu
Sold 146 kg I<.--I I I ote 1N76
Sold 66 Nu I 1-- 50 16 ashNu66

----- - - - - --Nu-66

Note: NA indicates the item is present but data is not available.

42 Farm management and farm types

producing intermediate products, but these need not exactly balance because some
resources may be held over in storage: e.g., in this year 21.5 tonnes of manure are used on
the crops but only 15 tonnes were produced; 6.5 tonnes came from storage not recorded in
Part 3 of Figure 2.5.

Part 5 of Figure 2.5 lists and aggregates final outputs from the nine activities: e.g., for the
paddy activity the intermediate products from paddy (bran, straw, seed) cycle to the left in
Part 4 and then up to the resource pool. But the final paddy products consist of 934 kg of
grain used for family food, 340 kg converted to alcohol (consumed not sold), 410 kg
bartered to other families for other types of food not produced on this farm and 112 kg of
paddy paid as rent to the monks for the four langdo of wetland.

The various food items produced and consumed on the farm are shown in the 'food' line of
Part 5: 13 kg of butter and 50 kg cheese from the cattle, a 50 kg pig, 10 kg eggs, 934 kg of
paddy, 20 kg of wheat etc. Alcohol was made from a total of 366 kg of grain (paddy and

The bottom of Part 5 shows those outputs which were sold. In this particular year the only
marketed items were some citrus fruit (76 kg) and vegetables (70 kg) which were sold for
Nu 16 and Nu 50 respectively at the Wangdiprdan weekly 'hat' (street market).

Clearly this farm system is one very close to complete subsistence. There are no purchased
inputs into the crop/livestock activities and all farm capital items such as ploughs, harrows
and ox gear are home-made, as are the woven storage bins for grain storage. The mustard
seed oil for home use is extracted using a kitchen press and used for both cooking and in
the lamps before the family's Buddhist altar.

Parts 1 to 5 of the model refer to the farm components of the farm-household system. Part
6 refers to the household component: this consists of data relating to the use of family
labour, and to family income (cash plus food) and non-farm family expenditure. Of the
1 200 days of family labour available, 444 days are used in farm activities and off-farm
work, leaving 756 days designated as 'idle'. (In fact some of these would be used in general
maintenance around the farm in jobs not directly related to any of the nine production

Total cash family income as shown in Part 6 amounts to Nu 786: Nu 720 is from off-farm
work; only Nu 66 is from sale of farm produce. From this cash income, family cash (non-
farm) living costs are deducted, leaving an apparent net deficit this particular operating year
of Nu 189. The items comprising family cash expenditure are shown: Nu 600 for
purchased food, Nu 70 for purchased fuel (kerosene), Nu 80 for household items, Nu 75
for insurance and Nu 150 for clothing. The apparent negative cash balance of Nu 189
would be made up from savings or by obtaining credit for purchases.

Due to off-farm work and cash expenditures for the items shown, the farm-household
system at this point has ceased to be a purely subsistence one. However, if the family's
economic conditions changed for the worse, the expenditure pattern could be easily
adjusted to reduce or eliminate some of the cash expenditure items (especially food which
consists mainly of 'luxury' items), and the remaining needs for cash could be met by sale of
a pig or a little mustard oil.

It is now possible to turn in following chapters to an examination of the individual structural
elements of this and other types of farm systems.

Farm management for Asia: a systems approach 43


Ashby, J.A. and L. Sperling (1995). 'Institutionalizing Participatory, Client-driven Research and
Technology Development in Agriculture', Development and Change 26(4): 753-770.

Axinn, N.H. and G.H. Axinn (1983). Small Farms in Nepal: A Farming Systems Approach to
Description, Rural Life Associates, Kathmandu.

Chambers, R. (1983). Rural Development: Putting the Last First, Longman, London.

Chambers, R. and B.P. Ghildyal (1985). 'Agricultural Research for Resource-poor Farmers: The
Farmer-first-and-last Model', Agricultural Administration 20(1): 1-30.

Dillon, J.L. (1980). 'The Definition of Farm Management', Journal of Agricultural Economics 31(2):

Dillon, J.L. and J.B. Hardaker (1993). Farm Management Research for Small Farmer
Development, FAO Farm Systems Management Series No. 6, Food and Agriculture Organization
of the United Nations, Rome.

Dixon, J.M., M. Hall, J.B. Hardaker and V.S. Vyas (1994). Farm and Community
Information Use for Agricultural Programmes and Policies, FAO Farm Systems Management
Series No. 8, Food and Agriculture Organization of the United Nations, Rome.

Fresco, L.O. and E. Wesphal (1988). 'A Hierarchical Classification of Farm Systems',
Experimental Agriculture 24: 399-419.

McConnell, D.J. (1972). The Structure of Small Farms in Peshawar, NWFP, Pakistan, UNDP-FAO
Consultant's Report TA3070, Food and Agriculture Organization of the United Nations, Rome.

McConnell, D.J. (1992). The Forest-garden Farms of Kandy, Sri Lanka, FAO Farm Systems
Management Series No. 3, Food and Agriculture Organization of the United Nations, Rome.

Makeham, J.P. and L.R. Malcolm (1986). The Economics of Tropical Farm Management,
Cambridge University Press.

Matlon, P., R. Cantrell, D. King and M. Benoit-Cattin (eds) (1984). Coming Full Circle:
Farmers' Participation in the Development of Technology, IDRC, Ottawa.

Mikkelsen, B. (1995). Methods for Development Work and Research: A Guide for Practitioners,
Sage Publications, London.

Norman, D.W., F.D. Worman, J.D. Siebert and E. Modiakgotia (1995). The Farming
Systems Approach to Development and Appropriate Technology Generation, FAO Farm Systems
Management Series No. 10, Food and Agriculture Organization of the United Nations, Rome.

Rhoades, R.E. and R.M. Booth (1982). 'Farmer-back-to-farmer: A Model for Generating
Acceptable Agricultural Technology', Agricultural Administration 11(2): 127-137.

Tripp, R. (ed.) (1991). Planned Change in Farming Systems, Wiley, Chichester.

Upton, M. (1973). Farm Management in Africa, Oxford University Press, London.

44 Farm management and farm types

Upton, M. and J.M. Dixon (eds) (1994). Methods of Micro-level Analysis for Agricultural
Programmes and Policies, FAO Farm Systems Management Series No. 9, Food and Agriculture
Organization of the United Nations, Rome.

Werner, J. (1993). Participatory Development of Agricultural Innovations: Procedures and Methods of
On-farm Research, Schriftenreihe der GTZ No. 234, GTZ, Eschborn and SDC, Bern.

Farm management for Asia: a systems approach 45


'Before I built a wall I'd ask to know what I was walling in or walling out...'

Robert Frost, 1874-1963

In this and in Chapters 4 and 5 the several structural elements of a farm-household system
noted in Section 1.4 are more closely examined.


In analysing any farm-household system or any other agricultural system, an obvious first
step is to define the scope of such a system, i.e., its boundary as relevant to the purpose of
analysis (FAO 1990). Sometimes this will present no problem, particularly if, as here, the
focus of analysis is on farm production and its management. In this case, unless they relate
significantly to production management, interfaces of a purely social, religious or political
nature between the farm-household and its environment can be ignored (Dillon 1992).
However, as the following examples illustrate, even if the focus of analysis is production and
its management, the specification of the farm-system boundary (and likewise of the farm-
household system boundary) may be quite complicated. Boundary definition may also
vary with the purpose of analysis. Thus the relevant boundary for annual enterprise
planning may simply correspond to the boundary of the physical farm entity. In contrast,
for long-term development planning, the boundary may need to include off-farm income-
generating activities and the interface with suppliers of long-term credit.

Modern Western and Asian farms in a highly commercial environment (e.g., West Texas
cotton farms and Malaysian rubber smallholdings and estates) have one or a limited number
of farm production enterprises and clear sets of trading relationships between the farm and
its input suppliers on the one hand and its output markets on the other. Relationships
between a given farm and other farms will often be minimal, even non-existent. From a
production management perspective, the boundary of this type of farm system will
encompass the farm in its physical extent and its input suppliers and market outlets, but will
typically exclude other farms.

In a second situation, as exemplified by many isolated near-subsistence farm-household
systems of the Himalayan valleys, the boundary of the farm system also corresponds closely
with the farm's physical boundary but in this case the system excludes the outside world.

More common is a third situation. It comprises the great bulk of small traditional farms of
Types 1, 2 and 3 (i.e., subsistence, semi-subsistence and specialized independent,
respectively) which are moderately or heavily dependent on each other for supply of inputs
- exchange or hired labour, oxpower, village transport etc. and often also for the disposal
of produce, e.g., by barter or trading among friends and neighboring families. In this
situation the real boundary of a farm-household system, from an operational management

46 Elements of farm-household systems: boundaries, household and resources

viewpoint, might encompass all the farms of a hamlet or even of several mutually dependent

This third situation in some of its variations can be quite complex. For example, the farms
of the villages around Karanganyar in the Solo Valley of Java commonly consist of some
area of household garden devoted to fruit trees and bamboo plus a larger area of fields
(Prabowo and McConnell 1993). They are nominally 'owned' (in the Javanese sense, or
held in trust in perpetuity) by the operating families who in fact do exercise full control
over the garden or 'pekarangan' parts of their farms. In three years out of four the field
area of a farm will usually be under paddy, grown either by the farmer himself or herself or
more typically as a quasi-cooperative/mutual-help undertaking ('gotong royong') by the
farmer and his or her neighbours. Thus in this first phase the boundary around each farm
system encompasses its household garden and some area of paddy shared with other farm
households. But in the fourth year the farm paddy fields, together with one fourth of all
other village fields (which lie within the command area of a publicly owned sugar mill) are
pooled, put under sugarcane, and the farmer becomes both a labourer (on his or her own
land) for the mill and a landlord (receiving rent from the mill). In short, the boundary of
this farm system is fluid over time: it always encompasses the pekarangan (household
garden) lands; it sometimes encompasses the rice field and other farm households which
participate in the rice phase; and it sometimes exists only as one part of the boundary of a
much larger sugar-estate system. The situation is depicted diagrammatically in the
righthand side of Figure 3.1. The lefthand side of Figure 3.1 refers to an isolated
subsistence farm system. The central part of Figure 3.1 depicts a commercial system in
which the alternatives are to define the system as consisting only of the farm (implying
boundary B') or as also including input suppliers and output markets (implying boundary
B). The contrast in complexity between these three examples of farm-system boundaries is

3.1.1 Importance of boundary specification

At farm-household level, one obvious essential step in planning farm development programs
and investment projects is to accurately identify the relevant boundary of the subject system;
yet it is a step sometimes not taken. In the 1970s a project in North East Africa was aimed
at village economic development through introduction of modern rice-growing technology
to Dinka tribespeople in the hope of supplementing and if possible replacing their
traditional millet (as well as supplying rice to the urban population). Project planning
overlooked the fact that, while millet was indeed important, the real boundary of the
traditional farming system encompassed also keeping cattle and catching mudfish. Thus,
while project planning management was directed at zealously maintaining field polder
embankments to grow rice, Dinka management was directed even more zealously at
breaking them down to get at the fish. (Planning that was less technically oriented would
have aimed for the integration of all three components in a locally acceptable system.) This
and similar mistakes in other farm projects also provide a caution that structuring or
restructuring of a system must always start with an understanding of the farm-household
system as discussed in Section 3.2.

At the levels of subordinate subsystems, the boundaries of processes, activities and
enterprises, although set approximately by technical factors, are determined also by the
purpose of the analysis or by operational convenience (as discussed in Chapter 4).

Farm management forAsia: a systems approach 47

Boundaries of Three Contrasting Farm Systems

a In Phase I the boundaries of each farm encompass its household gardens and some area
of paddy shared to some extent with other households. The boundaries of individual farms overlap.
In Phase II the boundaries of individual farms no longer overlap.


'I grant indeed that fields and flocks have charms
for him that grazes or for him that farms;
But when amid such pleasing scenes I trace
the poor laborious natives of the place ...'
George Crabbe, 1754-1832

The household component of a farm-household system is a somewhat flexible concept. It
can consist only of the farm's nucleus family but more often includes extended-family
members. It also commonly includes some number of more or less permanent domestic
and farm workers and miscellaneous dependants. Most farm development projects are
structured on the assumption that households are headed by males, but this is often not so.
In a typical Javanese village anywhere from 10 to 25 percent of households might consist

48 Elements of farm-household systems: boundaries, household and resources

only of women and children. Where poverty exists, here and elsewhere, it will generally be
concentrated on such households.

3.2.1 Farm household as resource manager

The two roles of the household as resource manager and as system beneficiary were noted
in Section 1.3.1. The household's role as resource manager is to provide purpose, direction,
objectives and management to the whole-farm system and its subsystems (Shaner, Philipp
and Schmehl 1982). On farms of Type 5 (large commercial family farms) and especially
Type 6 (estates) the place of the household might be taken by professional management.
However, on small farms and within limits set by the physical environment and available
resources, the planning objectives are set by the household's broad social-value structure and
local tradition (though the latter is increasingly being corroded by commercialization and
the influence of modem communications technology). The farm economist is usually not
well equipped to question these goals or the farm-planning objectives which result from
them. His or her role is to attempt to optimize the farm component of the system in terms
of whatever mix of socio-cultural, religious, traditional and material goals is relevant to the
household. He or she might also evaluate and convey the material consequences of
alternative choices and management strategies within the farm component.

Decision making within the household

It will often be necessary to enquire more deeply into who does what and who decides what
within the household if sound farm planning is to be possible (in Field A) or sound farm
development programs are to formulated (Fields C and D). Real power and responsibility
for the farm component might not always lie with the apparent or nominal household head.
Thus in the Wadi Hadramant of Yemen, as throughout most of Africa, although women
might play an otherwise subservient role or seem to they are in fact the effective farmers,
doing everything except the heaviest chores from planning the production system and
executing most of it to preparing and allocating its output. Yet farm 'development' projects
here and elsewhere with few more than token exceptions and invariably conceived,
planned, evaluated and managed by men do not acknowledge this fact and remain
directed at the mirage of some unspecified but assumed patriarchal 'farmer'. Without at least
an insight into local culture, the conceptual models of how a system works which an analyst
may have can be unproductive if not dangerous things.

Gender analysis

As noted above, sound farm planning often necessitates an understanding of how resources,
responsibilities, tasks and benefits are distributed between the men, women and children of
the farm household. This is the subject of gender analysis as discussed and illustrated by,
e.g., Feldstein and Jiggins (1994), Feldstein, Flora and Poats (1990), Gondowarsito, van
Stanten and Bottema (1995), Quisumbing et al. (1995) and van Herpen and Ashby (1991).
The need for gender analysis, particularly in relation to the role of women in the farm-
household system, is well illustrated by the following response by a small farmer when
interviewed in a farm survey (Gabriel 1995, p. 68):

Q. 'Does your wife work?'
A. 'No, she stays at home.'
Q. 'I see. How does she spend her day?'
A. 'Well, she gets up at four in the morning, makes the fire and cooks breakfast.
Then she goes to the river and washes clothes. After that she goes to town to get
corn ground and buy what we need. Then she cooks the midday meal.'

Farm management for Asia: a systems approach 49

Q. 'You come home at midday?'
A. 'No, no. She brings the meal to me in the fields about three km from home.'
Q. 'And after that?'
A. 'Well, she takes care of the hens and pigs, and of course she looks after the
children all day. Then she prepares supper so it is ready when I come home.'
Q. 'Does she go to bed after supper?'
A. 'No, I do. She has things to do around the house until about nine o'clock.'
Q. 'But you say your wife does not work?'
A. 'Of course she doesn't work. I told you, she stays at home.'

Tables 3.1 and 3.2 provide an illustration of some aspects of gender analysis (labour and
task allocation but not the distribution of benefits) relative to a sample of small-farm
households in Northern Mindanao, Philippines.

Gender Analysis of Labour Use in Cassava Production in Northern Mindanao,

Activity Family Exchanged Hired Total
Adult Adult Sonsb Daughtersb Adult Adult Adult Adult Adult Adult Children
Male Female Male Female Male Female Male Female
Land 12.8 0.0 13.1 0.0 0.0 0.0 13.0 0.0 25.8 0.0 13.1
Furrowing 1.9 0.0 2.0 0.0 4.0 0.0 3.0 0.0 8.9 0.0 2.0
Putting up sticks 2.6 2.2 10.9 0.0 0.0 0.0 7.0 3.9 9.6 6.1 10.9
Planting 5.5 5.0 9.5 8.0 6.0 2.0 3.3 2.8 14.8 9.8 17.5
Thinning 2.7 0.0 6.0 0.0 0.0 0.0 0.0 0.0 2.7 0.0 6.0
Weeding 8.7 6.0 9.9 9.4 22.0 0.0 18.3 23.0 49.0 29.0 19.2
Fertilizing 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.5 3.0 0.5 0.0
Hilling up 1.3 0.0 8.0 0.0 0.0 0.0 3.0 0.0 4.3 0.0 5.0
Clearing prior to
harvesting 5.3 5.3 26.3 36.8 0.0 0.0 31.5 36.8 36.8 42.0 63.0
Harvesting 9.3 7.0 11.4 12.5 0.0 0.0 29.4 19.2 38.7 26.1 23.9
Drying 4.1 4.1 12.1 5.1 0.0 0.0 16.7 2.6 20.8 6.7 17.2
Hauling 2.0 0.0 0.8 0.0 0.0 0.0 13.8 1.1 15.7 1.1 0.8
Peeling/choppin 6.3 5.9 16.4 10.4 0.0 0.0 26.2 7.4 32.4 13.3 26.9
Sacking/packing 1.3 1.2 1.9 0.0 0.0 0.0 5.8 0.6 7.1 1.8 1.9
Storing 3.1 0.0 0.2 0.0 0.0 0.0 0.0 0.0 3.1 0.0 1.2
Marketing 1.2 0.4 0.0 0.0 0.0 0.0 0.0 0.0 1.2 0.4 0.0
Total 68.1 37.1 128.5 82.2 32.0 2.0 174.0 97.9 273.9 136.8 208.6
a Based on a sample survey of 75 small farms (Rola 1995).
b Over six and under 18 years of age.

50 Elements of farm-household systems: boundaries, household and resources

Gender Analysis of Participation of Farm-household Members in Household and Other
Activities in Northern Mindanao, Philippines a

Activity Participation (% of respondents) Time spent (hours/week)
Husband Wife Daughtersb Sonsb Husband Wife Daughters Sons
Go to market 40.5 81.3 35.9 19.0 3.5 3.8 1.0 0.7
Cook breakfast 23.0 89.3 38.5 11.9 1.5 4.1 2.7 0.9
Cook lunch 17.6 88.0 41.0 7.1 2.3 4.4 2.7 0.8
Cook supper 18.9 89.3 43/6 14.3 2.1 4.2 2.7 1.9
Wash dishes 17.6 80.0 66.7 23.8 0.7 1.7 1.7 1.0
Wash clothes 14.9 88.0 48.7 9.5 3.4 6.1 6.9 0.7
Iron clothes 1.3 30.7 7.7 0.0 1.0 2.1 2.4 0.0
Fetch water 52.7 56.0 64.1 71.4 4.0 4.8 7.6 52
Clean house 17.6 86.7 61.5 16.7 1.6 5.1 4.3 1.1
Cut/collect firewood 68.9 24.0 15.4 50.0 4.2 2.8 2.7 3.9
Vegetable gardening 33.8 53.3 25.6 19.0 2.5 4.9 1.3 12
Fruit gardening 12.2 17.3 5.1 7.1 1.9 2.5 22 12
Look after children 32.4 66.7 33.3 9.5 42 18.4 12.7 4.8
Take children to school 0.0 8.0 0.0 0.0 0.0 1.8 0.0 0.0
Play with children 48.6 53.3 35.9 23.8 4.4 7.4 92 3.8
Farm production 85.1 61.3 28.2 59.5 36.0 19.9 8.4 27.8
Care of livestock 64.9 46.7 20.5 57.1 7.7 3.0 0.8 4.7
Care of poultry 32.4 32.0 23.1 21.4 2.3 1.4 1.1 0.6
Off-farm activities 64.9 36.0 20.5 40.5 20.0 18.6 20.5 20.8
a Based on a sample survey of 75 small farms (Rola 1995).
b Over six and under 18 years of age.
c Average for those respondents who participated in the activity.

3.2.2 Farm household as system beneficiary

On small farms the primary beneficiaries are usually the members of the household itself.
However, external beneficiaries are also often important. In Bhutan it is common for farm
family members long resident far from the farm and not dependent on its output to still
retain important rights. They exercise these by returning at harvest time and taking their
benefits in the form of pork and grain. In the villages of Central Java up to 30 percent of
households might be landless and subsist as farm labourers or especially important in the
case of households consisting of only poor women and children by harvesting their
neighbours' paddy in exchange for retaining one seventh or one tenth of the crop (the
'bawon' system). This latter can be the only significant source of income for otherwise
practically destitute people. They are perhaps proportionately more dependent on the
farms of their more fortunate neighbours than are the farmers themselves, although they are
from a formal viewpoint external to these systems. This is one common reason why some
forms of Western-style farm 'development' do not occur. Javanese villagers have a strong
sense of mutual economic and social responsibility. 'Advanced' technology which would

Farm management for Asia: a systems approach 51

prepare land more quickly (tractors) or give higher grain recovery rates (mechanical
harvesters, grain dryers) or other technology whose first effect would be to increase the
comparative wealth of the few would be frowned on because of its adverse effect upon the
many. Thus external beneficiaries can impose constraints on the household, in its first role
as system manager and internal resource allocator, by exerting a collective moral influence
on how crops are to be produced and even which crops are to be grown.

Other obvious groups of external beneficiaries consist of landlords, village traders, local
governments as taxing authorities etc. and, at further remove, national governments deriving
their foreign exchange from the export of farm produce. These can also influence how a
farm-household functions in its first role as system manager, e.g., through tenancy
agreements, provision of credit, price policy etc.


The supply of resources in a whole-farm system can be examined from either an accounting
or, more fruitfully, an operational perspective.

3.3.1 Farm resources from an accounting view

From an accounting viewpoint with its ex post or backward-looking emphasis, farm
resources fall into two broad categories (Makeham and Malcolm 1986):

* Fixed resources provide services over a number of years or at least over a period
longer than the production cycle of short-term (seasonal, annual) crop or livestock
enterprises. Common examples are land, machinery, an irrigation system. These
services may be used either by individual enterprises or to maintain the farm as a
whole. In the very long run, of course, few resources are truly fixed in supply. Even
land and climate in their productive dimension can be created (as in the controlled-
environment greenhouses of Saudi Arabia, UAE and Qatar).

* Short-term or variable/operational resources are those that are usually entirely used up
in the annual production cycle, e.g., a supply of seed or fertilizer.

The essential difference between fixed and short-term resources is that the former provide a
stream or flow of services over time while the latter consist primarily of quickly exhaustible
material things or time-bound institutional sanctions (as noted in Section 3.3.3).

From an accounting viewpoint, both fixed and short-term resources have two other relevant
dimensions. In their economic dimension they become respectively fixed/long-term capital
and operating/short-term capital; and in their financial dimension these generate,
respectively, fixed costs and operating/variable/direct costs, viz.:
Fixed Short-term
land seed
As resources: machinery fertilizer
buildings cash

As capital: fixed/long-term operating/short-term

As costs: fixed operating/variable/direct

52 Elements of farm-household systems: boundaries, household and resources

The distinction between these two cost categories of fixed and variable is discussed further
in Sections 4.3.8 and 9.

Discussion so far has concerned resources when used at whole-farm level, i.e., at Order Level
10. At lower Order Levels of farm systems (processes, activities and enterprises), the above
classification of resources relative to capital and costs is parallel to that for the whole-farm:
e.g., the resources assigned to a paddy crop can be broken down and become fixed and
operating paddy-crop capital, generating fixed and operating/variable/direct paddy costs.

Variable/direct costs are discussed in Section 4.3 in the context of enterprises and activities,
and fixed costs in Section 5.3 relative to the whole-farm service matrix.

3.3.2 Farm resources from an operational view

From an operational viewpoint the picture of farm resources is somewhat different. Here
emphasis is on the ex ante potential or planned use of resources rather than the results of
their past use. In this forward-looking context it is more fruitful to regard farm resources
from a systems viewpoint. Distinction between fixed and short-term resources is now less
relevant. As shown in Figure 3.2, more relevant are the flows of both short-term or
operational resources and of services from fixed resources to the farm's subsystems.

Direction of Resource Flows within a Whole-farm System


Fixed Resources
Irrigation system

Farm pond




Services from
Fixed Resources
Barn space
Irrigation system

Machinery days

Paddy Sesame ...... Cows
Inter- Inter- Inter-
mediate mediate mediate
and and and
final final final
outputs out uts out uts

V ____ _____ f


Farm management for Asia: a systems approach 53

Central to these resource flows is the farm's resource pool (a system of Order Level 8,
discussed from an operational perspective in Section 3.3.3 below). Short-term or
operational resources flow from the pool primarily to lower Order Level production
subsystems (processes, activities and enterprises) to generate the farm's intermediate and
final outputs. Some also flow directly to the whole-farm service matrix to maintain the
structure (repair of fences, buildings etc.) or permit the functioning of this subsystem (e.g.,
payment of land, water and road taxes).

The services of long-term or fixed resources flow both to maintain the service matrix and to
the resource pool from where they are assigned to the various production subsystems.

Any initial stock of both fixed and short-term resources must sooner or later be replenished
from output of the productive enterprises/activities, either as materials purchased with
income from the activities or as resources/intermediate products generated by these activities,
e.g., oxen produced as a by-product of the dairy activity. These resource return flows are
indicated in Figure 3.2 as flowing both to the resource pool and to maintain the stock of
fixed resources or capital in the whole-farm service matrix.

3.3.3 Operational resource categories

From a planning and operational viewpoint, farm resources fall into five categories.
Discussion from an operational viewpoint is focused on how specific resources might
constrain or limit farm production. The five resource categories are:

(1) Material long-term: This category consists of material things which yield their
services over relatively long time periods. They were referred to above as fixed
resources or fixed capital. Land is typically the most important such item and will
usually provide its services indefinitely (but see system sustainability, Section 6.2.7.)
On the other hand, land is relatively less important on many capital- and labour-
intensive specialist Type 3 farms such as those producing orchids, poultry and pigs.
Other examples of resources in this category are irrigation systems and farm sheds
generating their services over 20 to 30 years or an ox pair providing draught power
over five or six years.

(2) Material short-term: This category, exemplified by such items as seed and other
seasonal inputs, was also discussed above. In a commercial environment where these
items are purchased, the production constraint is generally set by the amount of
money available to buy them, not by the supply of these items in themselves.

(3) Financial: This category consists of cash, debts receivable, and access to credit from
formal (banks, cooperatives) and informal (shops, traders, relatives) sources.

(4) Institutional: This category consists essentially of rights of access to materials,
markets and services. In its financial dimension, this category takes the form of land
and road taxes, water-use license fees, payments for production-quota rights (as
sometimes prevail for sugarcane, milk, tobacco etc.). They are termed 'institutional'
because they consist of relationships between the farm family on the one hand and
institutions/agencies/persons on the other. Note that where they are transferable and
have financial value, these rights are assets as well as production resources.

(5) Labour: This consists of family labour available for general farm work or which
might be available only for specific tasks. For example, specific-purpose labour
might consist of the very old and young family members who can do only light work

54 Elements of farm-household systems: boundaries, household and resources

such as tending livestock; or a family member who prefers and is especially skilled in
tapping toddy palms etc. (Management ability is an important attribute of family
labour, sufficiently so as to sometimes warrant attempts at separate evaluation of its
productivity, but it is usually not possible to measure management as an ex ante input,
only in terms of what it actually achieves as discussed in Sections 7.2.3 and 5).

Resource inventory for planning

For planning (ex ante) purposes, specification of the farm resource pool simply amounts to
making a list of the availability of those resource items which might limit production in the
planning period, e.g., for the coming year the resource pool may include the following

(1) Material long-term: land 0.25 ha irrigated lowland
0.60 ha eroded upland
oxen 1 pair
ploughs/harrows 3 units
pump 1 unit
buildings 1 house, 1 shed (100 m2)

(2) Material short-term: fertilizer 6 bags
cow feed 3 tonnes

(3) Financial: cash 1 500 Rs
expected from crops 3 500 Rs
(4) Institutional: milk quota 20 litres/day, sold in town
water license 0.25 ha
(5) Labour: work-age adults 490 labour days
children 180 days (cattle only).

Listing of the initial resources will depend partly on the resources actually available but also
on the uses to which they are likely to be put, i.e., the types of enterprises/activities which are
likely to be operated. The procedure, therefore, is somewhat circular and subjective but in
practice it poses no serious problems. The aim is to identify all the main farm resources,
particularly those which are likely to be production-limiting and relatively costly, rather
than to compile an exhaustive list of all resources which are present or which could
conceivably act as constraints.

In almost all planning situations, the analyst will be able to form a general idea of the likely
production possibilities and therefore the types or categories of resources needed to exploit
such possibilities. If, as is often the case on many small farms, there exists two or three times
the amount of labour likely to be needed to execute the production plan, one would not
devote much attention to this resource. But, on the other hand, if the production system is
likely, e.g., to include strawberries, and this requires the deft fingers of children, then one
would measure this particular category of available labour with some precision.

3.3.4 Other relevant resource properties

Resource quality

For planning purposes it will often be necessary to quantify some resources according to the
specific uses to which they can be put. These uses may have a quality as well as a quantity
dimension. The example of child labour was noted above. If a farmer has 1.5 hectares of

Farm management for Asia: a systems approach 55

land and an asset statement is being prepared (below), it would be enough to describe this as
simply 'Land....1.5 ha', but for planning purposes it would be necessary to list this in the
resources pool as, e.g.:

wet-land (necessary for paddy) 0.25 ha
upland (suited to maize) 0.75 ha
orchard (inter-cropping possible) 0.50 ha.

Similarly, if total crop-storage capacity is six tonnes, but only three tonnes of this is secure
and rodent-proof, this fact will be specified in the resource pool statement. Likewise, while
'Pasture' might be an adequate description of a land parcel if all cattle/donkeys/buffalo/sheep
are to run together as a combined herd, it would not be adequate if the producing dairy
cows are to be given preferential treatment. The pasture might then be quantified as:

good fresh pasture (for cows only) 0.50 ha
rough grazing (all other stock) 0.70 ha.

Resource-use time dimension

From the viewpoint of resource use in relation to time, resources fall into two groups: those
which provide a flow of services over time, and those which consist of a consumable store or
stock of materials or other farm resources. Land, family labour, oxpower, tractors and
machinery, crop storage space, fences and livestock housing are examples of service-
generating resources which provide their services as a flow over time. A store of seed or
agricultural chemicals in a shed, a pond of irrigation water, a contract to produce sugarcane,
or a shed of animal feed are examples of store-type resources, since once they have been
consumed in the production process they cease to exist.

Flow resources have a time as well as a quantity dimension. Because agricultural production
does not occur instantaneously but over some time period of months or years, the resources
allocated to such production must be provided at discrete points in time or during specific
time periods. Thus a one-hectare paddy crop to be grown from March to June might
require the following resources: one hectare of irrigated land, 90 days of family labour, 21
days of ox work etc. This would be sufficient information if the purpose is to compare the
economics (input costs versus output value) of paddy against other crops; but for planning
purposes a more satisfactory statement concerning paddy-enterprise resource needs would
be as follows:

March April May June
land (ha) 1 1 1 1
labour (days) 40 10 5 35
oxen (days) 18 0 0 3

where 12 types of inputs are identified rather than just three, each having a quantity-time
dimension. In short, in planning where the resource inputs of an enterprise have to be time-
scheduled, e.g., by months, then the farm resource pool also has to be specified in these
same quantity-time units. Labour-days or ox-days in March are, respectively, different
resources from labour-days or ox-days in June.

However, the more closely that the resource needs of a production activity are specified (as
occurring in June, early June, first week of June etc.), the greater the degree of detail needed
in quantifying the resource pool. Obviously this could result in the specification of an

56 Elements of farm-household systems: boundaries, household and resources

unmanageably large number of resource items. Some limits must be imposed on the
procedure of adding a time-dimension to flow-type resources; but, on the other hand, a
resource pool constructed without noting when resources are to be available would be of
little use in planning. The problem is largely removed by the fact that farm resource-using
activities fall into four groups according to their relative needs for precision in time-
specification, viz.:

Highly time-specific: These are farm production activities which must be operated
according to some tight time schedule or calendar of operations. Examples are found
in the production of vegetables/fruit/poultry/fish to be marketed on festival days such
as Id or Chinese New Year. They must be ready on that day, not three days earlier or
they would spoil, nor one week later or there would be no demand. All production
operations leading up to final sale will be according to a close timetable. Thus, for the
activities producing these commodities, the time dimension of inputs might be
specified as closely as within a given week, perhaps even on a given day, rather than
within, say, a looser one-month timeframe. In planning this type of enterprise it
follows that the resource pool must also be specified in similar small quantity-time
units: e.g., so many labour days or so much transport in the first/second/third week of
August etc. Note also that production on a continuous-flow basis throughout the year
(as with orchids, pigs, coconuts etc. on some specialist farms of Types 3, 4, 5 and 6)
implies ensuring adequate resource availability on a continuous basis throughout the
year. Paradoxically, such production is thus highly time-specific on a continuing

Moderately time-specific: Typical of these activities is the planting/production of a
crop under seasonal irrigation conditions. The appropriate time-unit for operation
scheduling will usually be as broad as one month. In South India, the monsoon will
probably arrive in late May and provide enough rain for paddy fields to be ploughed
during June. The irrigation channels will start flowing in July to permit planting.
July, August and September are the growing months, followed by harvesting some
time in September. In this case, crop input requirements, and farm resource
specification, need be on only a monthly basis (e.g., June: oxpower and labour; July:
planting labour; September: harvest labour etc.).

* Low time-specific: Activities in this category include some rain-fed crop production
where the agricultural year typically consists of only two periods, the wet and dry
seasons. If the farming system (in terms of the number of production activities) is not
very complex, it may be sufficient to define farm resources only on the basis of
season. The timing of operations will be quite flexible and if a wet-season crop is not
to be followed by a dry-season crop it will not matter much, within limits, how long
some mature crops are left in the field (e.g., for cassava this might be many months).

* Not time-specific: A few agricultural enterprises are not managed with respect to time
or the seasons. A small two-cow dairy herd kept for household milk supply is one
example. Commonly such stock are run on the common lands along with the other
livestock of the village. They receive no special attention whether they are in milk or.
not, and inputs are the same throughout the year. The resource supply for this type
of activity need not be specified as having a time dimension.

Family labour resources

Obviously family labour is a very important resource on small farms. In some areas of high
population pressure, small farms might support nucleus and extended families of up to ten
or more persons, all of whom except the very young and very old can supply some labour.

Farm management for Asia: a systems approach 57

But the actual available supply is often difficult to measure because family labour has
quantity, quality, time and often custom dimensions. Difficulty in measurement arises from
the fact that the different family age/sex population classes often generate different amounts
of labour service (e.g., as differentially provided by young men, women, older children and
grandparents), and that some farm operations/tasks are labour-type specific while others can
use any class of labour. The custom dimension complicates things further by insisting that
certain tasks which could well be done by men (or women) must in fact be done by women
(or men) (van Herpen and Ashby 1991).

Assuming that such activity-specific available labour has been identified, the procedure for
quantifying the general family labour resource is to standardize all remaining labour
according to some common quality unit, frequently adult male equivalents (AME). In the
following example, an extended family of 18 persons shown in column (2) is converted to a
general farm labour force of 9.1 'adult male equivalents' in column (4). When dealing with
these typically heterogeneous populations, this or a similar standardization procedure is
necessary. But the limitations should be noted.

Col (1) Col (2) Col (3) Col (4)

Age Group in Family Members Conversion Factor Work Force in
Years Adult Male
M F M F Equivalents
Oto8 2 3 0 0 0
9 to 15 2 1 0.5 0.5 1.5
16 to 55 3 4 1.0 0.8 6.2
56 and over 1 2 0.6 0.4 1.4
Total: 18 9.1

First, the conversion coefficients of column (3) are necessarily subjective and thus somewhat
arbitrary. Even if correct for one society, they might not be for another. In Nepal a man
might be considered old at 50; but in parts of Iran he might be thought still capable of hard
work at 70. Second, the male to female comparison suggested in column (3) is a
generalization to which there will be many exceptions. There are many field tasks which
women can or do in fact do better than men (e.g., planting seed, plucking tea, weeding,
harvesting paddy). In these tasks the 1:0.8 comparison ratio of male to female labour is
invalid (it possibly holds for heavy tasks). Finally, for some jobs children might in fact be
equivalent in labour supply to only half an adult male, but for such jobs as herding livestock
they are fully equivalent because one child can do as much as one adult.

Before leaving this topic, one further possible problem should be noted. The above
procedure will result in a farm labour supply that is (it can be assumed) arithmetically valid
but in some cultures this might still not be a measure of family labour actually available.
Many families set a high value on what in developed countries would be called 'leisure' but
which in South Asia would be regarded by even poor families as necessary participation in
social and religious festivals, community affairs and village politics. The labour supply
standardization procedure might result, for example, in an apparent labour supply of, say,
750 AME labour days; but when this is adjusted for non-farm socio-cultural demands on
the family's time, the actual supply might be only half this. The point could be of obvious
practical importance in the planning of new farms (on irrigation or settlement projects etc.)

58 Elements of farm-household systems: boundaries, household and resources

where such planning should obviously be based on actual rather than apparent family
labour resources.

Resources versus assets

Quantifying a farm resource pool is roughly akin to constructing an asset statement for the
farm family, but there are differences. An asset statement is a listing of all property owned
and its value. Value might be based on the (imputed) productivity value of the assets
(Section 7.2), but is more commonly based on their current market value. An asset
statement might be prepared periodically as an instrument for measuring a family's
economic progress over time (in terms of its changing 'net worth'), or occasionally as
evidence of security in applying for a bank loan etc. A family's asset statement includes
both farm and non-farm property and other items of financial value.

3.3.5 Resource acquisition and generation

As indicated in Section 2.2.2, the main structural characteristic of small farms of Types 1
and 2 is their orientation to internal generation of most of their needed resources. Farms of
the other types must also generate their resources, at least in the long run, but do so through
the medium of cash sales and external or off-farm purchase. The various ways by which
small farms can obtain their resources are discussed in Sections 4.4.1 and 9.3.1.

3.3.6 Relationships between resources, capital and costs

Perhaps the best way to conclude this discussion of resources is to summarize the
relationships between resources, capital and costs, as shown in Figure 3.3. This shows (a)
how the five categories of resources discussed above become, in their economic dimension,
either fixed or operating capital; (b) the various types of costs which are generated by the
use of capital; and (c) how each resource/capital category (1) to (5) of Section 3.3.3
contributes to final total farm costs. Figure 3.3 serves as a useful introduction to discussion
of the whole-farm service matrix (Section 5.3) and the evaluation of past whole-farm system
ex ante operational planning (Chapter 9). While Figure 3.3 refers to a whole-farm system,
the cost structure of an enterprise or activity subsystem would be analogous.

In Figure 3.3, starting with the first resource category of long-term fixed material resources
in column 1, row (ii) shows this as becoming farm fixed capital. In row (iii) this type of
capital gives rise to fixed capital costs. Then, going to row (iv), this group of fixed costs
forms one component of total farm fixed costs (the other component of farm fixed costs
being those fixed costs which might arise from institutional resources as discussed below).

Returning to column 1 and continuing down to row (v), this indicates the purposes for
which total farm fixed costs are incurred: replacement of capital resources as these wear out
or become obsolete, routine maintenance of these capital items, and (for some fixed capital
or institutional items only) costs of operating them so long as these costs cannot be allocated
to any specific farm activity or enterprise if they could be so allocated, they would be
included as a variable cost in column 3.

Continuing, row (vi) is a more precise description of each of the cost purposes of row (v):
'replacement' is achieved by setting up a depreciation fund (depreciation costs),
'maintenance' by incurring costs for repairs or periodic servicing of capital items, while
'operating' remains as 'operating'.

Farm management for Asia: a systems approach 59

Relationships among Categories of Resources, Capital and Costs in a Whole-farm System

|Family |
labour |

(i) Resource category or class:

(ii) As capital, by type:

(ii As costs, by type:

(iv) Total costs, by type:

(v) As costs, by purpose:

(vi) Specific purpose:

Fixed |Other fixe Variable Variable
capital costs costs costs costs

Total Total i
fixed costs I variable costs

cement + Maintenance Operaing fixed costs production costs

eciation + Repas 'Operating'= fTotal p Total direct
Total direct Total
e ]- Rpfixed costs + IproductncostsIfa s

Column 2 refers to institutional resources. In row (ii) these do not become either fixed or
working capital (although one could argue that such institutional resources as a licence to
produce and sell milk to a town market is a sort of capital). In row (iii) the use of
institutional resources could generate a type of farm fixed costs known as general charges
(see Section 5.3.1), e.g., the payment of a land or road or house tax which purchases the
right to use or occupy these resources (as distinct from the physical resources themselves).
In row (iv) such general charges or institutional fixed costs, if any, would combine with
capital fixed costs from column I to give total farm fixed costs. In addition, in row (iii)
some of the institutional resources might also incur variable costs (e.g., payment of an
output-based tobacco production tax), in which case they would combine with the variable
costs of column 3 and (if relevant) column 4 to give total farm variable costs in row (iv) or
total direct production costs for the system in row (v).

Considering resource category columns 3 and 4 in Figure 3.3, these show short-term
material and financial resources as operating or working capital in row (ii), which generates
variable costs in row (iii); these in turn are totalled in row (iv) as total variable costs of the
system. The specific purpose of these could be shown in rows (v) and (vi). Note that, as
indicated in the diagram, while financial resources are used to pay for the fixed and direct
farm costs, they may also incur variable costs through such items as bank fees and interest

Family labour is shown as a resource in column 5 of Figure 3.3. In contrast to hired labour,
it is usually not costed. Instead, family labour is taken as receiving income (for its services

60 Elements of farm-household systems: boundaries, household and resources

of labour and management) as a beneficiary of the farm system. However, as outlined in
Section 7.2.5 and illustrated in Tables 7.8 and 7.9, family labour is costed on an
opportunity cost basis in the calculation of such total productivity measures as total factor
productivity and return on capital or equity.

Row (vi) of Figure 3.3 shows how all fixed and variable costs arising from the employment
of the various categories of resources become total farm costs.

The specific types/categories of resources used in and generated by individual farm
enterprises and activities are discussed in Sections 4.1 and 9.3.1.


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Quisumbing, A., L.R. Brown, H.S. Feldstein and L. Haddad (1995). Women: The Key to
Food Security, Food Policy Report, IFPRI, Washington, D.C.

Rola, M.F.M. (1995). 'Gender Roles and Attitudes in Upland Farming Systems in the Philippines',
Palawija News (CGPRT Centre Newsletter) 12(4): 1-12.

Shaner, W.W., P.F. Philipp and W.R. Schmehl (1982). Farming Systems Research and
Development: Guidelines for Developing Countries, Westview Press, Boulder.

van Herpen, D. and J.A. Ashby (eds) (1991). Gender Analysis in Agricultural Research,
Publication No. 204, CIAT, Cali.

Farm management for Asia: a systems approach 61


'Every production of a specific crop on a specific soil type, in a specific season, with a
specific husbandry technique, is a distinct activity.'

Hans Ruthenberg (1976)

Structurally, a farm enterprise is a set of input-output relationships involving input
resources which are used to generate one or more final products. Such products are 'final'
in that they are suitable for consumption on or sale off the farm (beyond which point they
might or might not be further processed). Enterprises are subsystems and comprise the
main structural building blocks of farm-household systems.1 They are designated by their
main product: e.g., a farm growing coconuts and paddy operates coconut and rice
enterprises. The main enterprise categories are field crops, intensive-horticulture crops, tree
crops, aquaculture and livestock.


In everyday language, the terms 'enterprise' and 'activity' are often used interchangeably. In
technical usage, however, these terms have quite distinct meanings. There are two reasons
for this.

First, in systems analysis, many 'enterprises', if they are to be analysed as systems, must be
broken down into subsystems. 'Coconut enterprise' is a good enough description if it refers
to growing and selling coconuts; but if it includes selling some nuts, making coir from the
husks of others, making and selling yarn from this coir, and making and selling charcoal
from the coconut shells etc., it will obviously be necessary to differentiate among these
various subsystems of the coconut enterprise (Figure 5.5). This is best done by referring to
all coconut-based subsystems in aggregate as an enterprise, and to each respective
subsystem as a separate activity. Clearly, selling fresh coconuts will involve different
resource inputs, product outputs and management problems than spinning coconut-husk
yarn. Thus a particular farm enterprise may involve one or more activities.

Second, some planning methods in farm-system analysis and construction (e.g., budgeting
and linear programming) require that the alternative tactics or technologies which can be
used in the production of some resource or final product be specified. To take a very
simple example, production of one hectare of paddy might require 100 kg of cattle manure
or its equivalent as fertilizer. If the farmer has no manure, possible alternative tactics for
obtaining it might be for him or her to buy NPK fertilizer, or to exchange labour with a
neighbour for the needed manure, or to grow a green manure crop in the future paddy

I In industrial and commercial economics, 'enterprise' is generally used to refer to a whole economic entity or
system (e.g., plant, factory, store) rather than to any of its individual subsystems.

62 Further farm-household system elements: enterprises and activities and their budgeting

field, or to buy a cow. These alternative tactics (or any particular mixture of them) are each
different activities which might be used to the same end of producing paddy. An important
aspect of farm planning is thus to determine which technological activity or activities might
best be used within each enterprise.

There are three ways in which 'activity' may be used as a technical term relative to the
hierarchy of agricultural systems of Figure 1.2. These are: (i) to refer to a particular
technology or process used at Order Level 1 or 2 in the farm system; (ii) to refer to a
resource-generating subsystem of Order Level 3 in the farm system; and (iii) to distinguish
at Order Levels 4 and 6 (a) a particular method of producing the product of an enterprise
from other methods of producing the same product or (b) the production of a particular
product in an enterprise which has a variety of possible products. In general, which
meaning should be given to the term 'activity' will be apparent from the context. Most often
it will have the enterprise-related meaning pertinent to systems of Order Levels 4 and 6.
Fuller consideration of the various types of activities relevant to the planning of farm
systems is given in Section 9.3.1.


As noted above, an enterprise consists of a farm subsystem aimed at the output of final
product. It may involve one or more activities in terms of the technologies used and the
form of the final product.

4.2.1 Enterprise boundaries

For farm management systems analysis in all Modes (as defined in Section 2.1.8), an
essential property of enterprises is that they be possible of identification and disaggregation
from the whole-farm system context in which they occur, i.e. that their boundaries be
defined and that their input-output relationships be measurable. Where the enterprises
already exist as part of a mixed farm system this proceeds by the three sequential steps of:
(i) examining the farm system to identify the main commodities being produced; (ii)
identifying the resources used in relation to each commodity; and (iii) identifying and
quantifying enterprise input-output relationships in the form of an enterprise budget table
as outlined in Section 4.3 below.

4.2.2 Enterprise structural types

In terms of their structure, enterprises may be broadly categorized as simple, composite or

A simple enterprise is one which can be readily identified within and disaggregated from a
whole-farm system. The extreme case is found on mono-crop estates and single-enterprise
farms (e.g., Sri Lankan tea estates, Singaporean pig farms) where the enterprise subsystem is
practically equivalent to the whole-farm system. Only slightly more difficult to
identify/disaggregate/quantify are the buckwheat and apple enterprises on small Himalayan
hill farms; but the disaggregation of, e.g., cotton/wheat/paddy/livestock enterprises on a
mixed Sind farm is usually more difficult because of the structural interrelationships among

A composite enterprise is one which aggregates what structurally or logically should be
considered as two or more different enterprise subsystems into a single composite enterprise

Farm management for Asia: a systems approach 63

for one of two reasons the practical difficulties of disaggregation, or the fact that the work
involved in disaggregation might not be warranted for the purpose at hand. An example
would be the 'livestock' component of a typical Peshawar mixed farm where the livestock
could consist of two cows (for milk, butter, ghee, cheese sale and/or consumption), two oxen
for ploughing (but sometimes rented out), three young sale cattle, one camel and three
donkeys for transport, six sheep for wool (to be sold or spun) and five goats for milk and
meat. All these classes of stock would usually be run/pastured together most of the year,
none receiving any special treatment. While the different classes of stock can be readily
identified, it would be very difficult indeed to disaggregate them into seven separate
livestock enterprises, i.e., to define meaningful boundaries for each livestock species
subsystem. For most planning purposes they could be regarded as a single composite
'livestock' enterprise.

A similar situation arises on the intensive vegetable farms in the mountain zones of Java,
where five, six, seven ... vegetable species occupy the same field simultaneously, some
directly dependent on others for shade, wind protection or live trellis support, and where
each relay of each crop is partly dependent on previous relays for residual fertilizer and
pest reduction. It is very difficult to disaggregate the species into separate bean, maize,
sweet potato ... enterprises. Possibly the most difficult of all systems to disaggregate are the
highly mixed forest-gardens of the wet tropics, partly because the mix of 15 or more
species is continuously changing (McConnell 1992).

A complex enterprise is one in which there is more than one important product and where
there is some considerable degree of cycling of resources within the same enterprise, usually
via the farm resource pool. This is common in traditional agriculture as exemplified in
Figures 2.4 and 2.5. By comparison, most enterprises on modem commercial farms are
structurally simple. Using wheat production as an example, the situations are compared in
Figure 4.1.

As shown on the righthand side of Figure 4.1, on modem commercial farms most resources
are typically purchased, wheat is often grown as a sole crop for grain which is sold, and that
is the end of the matter. On the other hand, in the traditional Asian situation, wheat is
usually combined with several other enterprises and most resources are farm-generated.
Thus, in the lefthand-side example of Figure 4.1, wheat both uses and produces some of its
resources (retained seed and stockfeed cycled as oxpower and manure fertilizer). The
enterprise has several products: grain (for family sustenance, sale and farm use), retained
seed, bhoosa (straw, some of which might be sold for use in brickmaking and some retained
for use as livestock feed/bedding), and stubble which will be used or sold to other villagers
as grazing. In addition, the enterprise might provide the basis for kitchen-scale food
processing/marketing activities. Figure 4.1 clearly illustrates the complexity of what at first
glance might seem a fairly simple enterprise.


An enterprise or activity is defined and quantified in terms of a budget table (as illustrated
by Table 4.1) which, relative to some specific time span, defines the boundaries of the
subsystem. A budget is essentially a listing of all resource inputs to an enterprise or activity
and their costs, and all outputs and their values, both inputs and outputs being measured
over some specified time period (Barnard and Nix 1973, Ch. 14; Brown 1979, Chs 2 and 3;
Makeham and Malcolm 1986, Chs 8 and 9; Upton 1987, Ch.14). As appropriate, a budget
can also show the difference between total costs and returns which is enterprise net return or,
if no allowance is made for fixed costs, enterprise gross margin (as discussed in Section

64 Further farm-household system elements: enterprises and activities and their budgeting

Comparative Structure of Traditional and Modern Wheat Enterprises

Family Needs
Food 4--Rs 100
I'- -Rs220-
Crop Inputs Rs 220
Seed Rs 30-
Ox Feed 4 Rs 100-

--- --


SGrain | Seed I Bhoosal tubble

| Bricks F 4 Feed I
V \' w


Sell : Rs 100
Food: Rs 100
Use :Rs 50

Rs 80

Rs 30

Rs 50

Rs 40 220


Modern Simple

Family Needs
Food -

4.3.8). The time span to which the budget refers needs always to be specified and borne in
mind. This period of time may be the production period of the output involved or some
other period such as an annual cycle.

4.3.1 Budget types and purpose

From a time perspective there are three kinds of budgets pertinent to enterprises and

Planning budgets are forward-looking projections of the resources which will be
required to obtain some anticipated outcome. They are prepared as a basis for
formulating an activity, enterprise or whole-farm production plan, usually for the next
crop or seasonal or annual phase (if it is a long-term activity). They are concerned
with what should happen.

Traditional Complex

-Power ---
-Manure --

- Cattle

_ 1



Farm management for Asia: a systems approach 65

Example of an Enterprise Planning Budget: Inputs, Costs and Returns for 2.5 Acres of
Dryland Ginger in the Wet Zone of Sri Lankaa

Input Real level Per acre
(per 2.5 or unit
acres) level
Operation Timing Labour days Family or Labour days
Clear land Mar 25 F 10
Clean drains Mar 38 F 15
1st fork Mar 125 H 50
2nd fork Mar 88 H 35
3rd fork, smooth Apr 63 H 25
Line for planting Apr 5 F 2
Hole, plant, mulch Apr 38 F 15
Fertilize Apr 5 F 2
Weed once May 25 F 10
Fertilize Jul 5 F 2
Weed twice Jul 40 F 16
Guard Dec-Jan 75 F 30
Harvest Jan 40 H 16
Total family labour 256 102
Total hired labour 316 Rs 3 160 Rs 1 264
Item Amount Price Cost Cost
Seed Mar-Apr 1 635 kg Rs 5.90/kg Rs 9 647 Rs 3 859
Tools Mar-Apr 63 25
Watcher's hut Mar-Apr 25 10
Fertilizer Jul 340 kg Rs 1.60/kg 544 218
Straw mulch Jul 3 750 bundles Rs 0.10/bundle 375 150
Crop storage Jan (already exists 0 0
on farm)
Transport Jan 63 25
Market sacks Jan 250 100
Total materials Rs 10 967 Rs 4 387
Total all costs Rs 14 127 Rs 5 651
Clean ginger 6 825 kg Rs 4.50/kg Rs 30 713 Rs 12 285
Gross margin Rs 16 586 Rs 6 634

a Constructed in February 1993 for the production period March 1993 to January 1994.
b Days are in AME.
c For purposes of later analysis related to Figure 4.5, note that these total costs are all variable
costs. There are no fixed costs pertinent to this particular budget formulation.

66 Further farm-household system elements: enterprises and activities and their budgeting

* Control budgets are used to maintain a current check on and adjust resource supplies
to an enterprise or activity once it is in operation, i.e., once the planning budget has
been activated. They are not used on small farms but are an important management
tool on estates. Usually they take only a financial form and are designed to control
fiscal expenditure in the activity or enterprise. The degree of control can be very
high: e.g., on Malaysian and Sri Lankan rubber, tea, oil-palm and coconut estates the
daily-prepared control budget can show on any day of the operating year the amount
of money spent on and the amount and value of product harvested from the
enterprise, down to practically the last cent and kilogram. Control budgets are used
for these and other continuous activities (such as on orchid, dairy, pig and poultry
farms). Obviously, the shorter the production phase, the less need there is for budget

* Evaluation budgets are backward-looking summations of what did happen. They are
essentially accounting documents intended to measure the past performance of an
activity or enterprise over some period, usually the prior phase. They are better
referred to as operating statements because they state with certitude the facts they
contain (inputs, outputs etc.). These might be intended only to offer an accounting
of past results or, more analytically, to allow diagnosis of weaknesses within the
system (or subsystem) and prescription of remedial action (Chapter 7).


The use of evaluation budgets for diagnostic purposes implies feedback from evaluation to
planning budgets: adjustments to the system made on the basis of the former will occur via
the planning budget prepared for the next operating phase. Even if there are no weaknesses
to correct, the actual enterprise outcome will seldom be exactly as predicted in the planning
budget. Referring to Table 4.1, hired labour actually used might be 270 rather than 316
days and actual achieved yield might be 6 270 rather than 6 825 kg. These results would
now flow back as guides to hopefully more accurate updated estimates in the next planning

Data content

In addition to summarizing likely enterprise or activity results, planning budgets are
primarily concerned with identifying those resources and other factors which might limit or
constrain production. Accordingly, in constructing them, it should be kept in mind that
what might be apparently unimportant outputs (by-products) of one system might be
critical inputs to another (especially on Type 1 and 2 farms, as discussed in Chapter 9 and
illustrated in Figures 2.4 and 2.5).

In control budgets the most important and often the sole data recorded might relate to flows
of finance to the activity or enterprise; alternatively, the critical factor to control might be
labour, or in an irrigated desert environment it might be water. Control budgets are not
further discussed.

The basic data content of an evaluation budget depends on analytical circumstances,
specifically the operating objectives of the enterprise or farm (Chapter 6). If this is profit
maximization, financial data alone will enable the evaluation; but if the objective is
subsistence food production, the data will relate to resource inputs (mainly labour) in
comparison with food outputs. But while either of these might be sufficient for only an
accounting of what did happen, they would in themselves be practically useless if the
analysis was in diagnostic mode. Evaluation budgets in this mode have the most extensive

Farm management for Asia: a systems approach 67

and detailed data requirements. These are discussed in general terms in the remainder of
this chapter and are applied in examples of systems' comparative analysis in Chapter 7.


The different types of budgets and their purposes will be clear enough. But budgets are not
always what they seem. On one group of commercial farms it was routine office practice,
until recently, to propose planning budgets for each enterprise in the approved way but
then, at the operational stage, as the need arose, to allocate cash which had been budgeted
for the wheat to the sheep, fertilizer budgeted for the pyrethrum to the wheat etc. In
consequence, at the end-of-year evaluation stage, all that could be said was that some total
amount of cash, fertilizer, labour etc. had disappeared somewhere into the farm, but as to
the economics of the individual subsystems, or whether uneconomic enterprises should be
curtailed or replaced by more efficient ones ... 'O God I know not'.

4.3.2 Budget standardization: units of measurement

For some purposes and modes of analysis (e.g., description), the budget might be specified
at real level (i.e., at the actual levels of the input and output variables) and refer to the
enterprise as it actually exists. But for most planning and evaluation purposes, since e.g. -
2.5 acres of ginger cannot be directly compared with 1.9 hectares of paddy, it will be
necessary to standardize the various enterprise or activity budgets by bringing them to a per
acre or other unit level as in the righthand column of Table 4.1. Further, for purposes of
comparison between enterprises or activities, these unit-level budgets must also refer to a
common time basis such as, e.g., per hectare per year.

Use of land area as the basis for standardizing crop and livestock budgets is not always
appropriate or possible. The most appropriate standard unit to use will depend on the
category to which the enterprise or activity belongs and the particular farm type/situation.
Most field-crop and tree-crop budgets will in fact usually most appropriately be on a land-
unit basis. So will budgets for the horticultural crops on large farms. But for small farms
growing tree or vine crops and some horticultural crops (anthurium flowers in Sri Lanka,
vanilla in Java), a more appropriate budget basis might be costs and returns per 100 plants
or even per single tree (as for the houseyard farms of Java growing three or four high-value
clove trees).

Further, in the wet tropics the tree crops in particular are often grown in highly mixed
stands: a forest-garden farm in Kerala or in Java might consist of six coconut palms, two
breadfruit, three jackfruit, four coffee trees, three pepper vines, etc. These species-
enterprises would be best budgeted/evaluated on a per tree or per vine basis (or for some
purposes these various species might be consolidated into a single composite enterprise

In other situations, even though a species might be present in large numbers as part of the
whole of a farm system, it might be grown/managed/exploited without any regard to the
land area it occupies as in the case of nipah palms along the rivers of Trengganu, sago
palms on village lands in Irian Jaya and palmyrah palms in the dry zone of Sri Lanka.
Perhaps the extreme case is found in Kordofan where the baobab trees, each of which is the
property of some family or clan and an important basis of their semi-nomadic existence,
might be scattered along the clan's seasonal migration routes over a distance of 600
kilometres or so. Budgets for these and similar tree-crop enterprises could obviously not be
expressed on a unit of land area basis; more appropriate would be inputs/outputs per family,

68 Further farm-household system elements: enterprises and activities and their budgeting

or, since labour is a common factor in their control or exploitation, per labour day of effort
expended in maintaining or exploiting some specified number of trees.

Livestock enterprises can present special problems in preparing standardized budgets for
purposes of comparison. In some cases it will be possible to construct budgets for dairy
cows, sheep etc. on a 'per hectare of land use' basis; but the yak herders of Haa and the
camel people of Wajir would not have the slightest idea of the number of hectares over
which they range.

Highly-mixed sedentary herds/flocks, as found in parts of Pakistan and North India, require
standardization of two kinds (assuming they can be disaggregated). First, the separate
species (cattle, camels, sheep etc.) and classes of each species have to be standardized in
terms of some common animal unit (AU) basis2 and then, as discussed above, the budgets
for each of these (standardized) species-enterprises might have to be compared on the basis
of some common input or production factor (such as land or labour or cash required or
generated etc.).

Long-term crop and livestock enterprises require a somewhat different approach in

* Evaluation budgets of long-term enterprises (or activities) are usually prepared on an
annual or seasonal basis and relate to the performance of the enterprise over its most
recent operating phase. These single-phase budgets are the same as budgets prepared
for short-term enterprises (or activities) and ignore what might have happened to the
enterprise in earlier phases and what might happen to it in future phases.

* Planning budgets of long-term enterprises (or activities) are a different matter. Here
the inputs/outputs of the enterprise (or activity) must usually be specified for each
year of its future life over 20 to 25 years for coffee, 20 to 40 years for cardamom,
60 to 70 years for coconut, etc. Methods for doing this are discussed in Section

4.3.3 Level of budget detail

The necessary degree of detail in a budget is determined by the mode and purpose of
analysis. Thus Table 4.1 would probably be adequate for descriptive purposes and for

2 In the following example, a farm's herd of five head of mixed cattle and a flock of 16 head of sheep are each
standardized (on the basis of approximate feed requirements) by taking one lactating cow as equivalent to one
animal unit (AU). Each other type of animal is then expressed as AU relative to a lactating cow, for example:

Cattle Equivalence Factor Sheep Equivalence Factor
milk cow 1.0 AU all types 0.15 AU
ox 0.9 AU
calves 0.3 AU
Population equivalence in AU:
cows: 2 head x 1.0 AU = 2.0 AU sheep: 16 head x 0.15 = 2.4 AU
oxen: 2 head x 0.9 AU = 1.8 AU
calves: 1 head x 0.3 AU = 0.3AU
Total cattle in AU: = 4.1 AU
Total cattle and sheep in AU = 4.1 + 2.4 = 6.5 AU.
It is important to note, however, that from a farm management as opposed to an animal nutntion point of view,
it may sometimes be more relevant to standardize livestock on some such basis as labour required by each
species/type, or cash inputs required by each, etc. The above nutrition-based equivalence factors are for
purposes of illustration only.

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