farm management

key enterprise tools

• gross margin analysis

• partial budgets

• investment appraisal

• financial feasibility

• decision tree analysis

• cost effectiveness analysis

what is gross margin analysis

• used to assess and compare different enterprises

• not a full measure of profitability

• is a measure of financial efficiency of conversion of variable costs into outputs

• does not take in fixed costs nor management time given by owner of the enterprise

• does not take account change in enterprise

• GROSS MARGIN=OUTPUT-VARIABLE COSTS

what are the 3 important aspects to consider when calculating output

• animals and products that move out

• animals and products that move in

• change in herd or flock value

animals or products that move out

• sale of products

• sale of animals

• value of livestock products consumed in the household

• value of products and animals given to workers as a form of payment

• value of animals that are gifted or loaned

animals or products that move in

• purchased animals

• animals recieved as gifts or loans

what is producitivity

measure of efficiency of the conversion of inputs into outputs

variable costs

costs that vary in the short term according to the scale of production. if there is no product produced the variable costs will be 0

• eg vaccines and drugs

• concentrate feeds

• mineral supplement

• forage costs

fixed costs

those that vary in the long term. if there is no production the fixed costs will still exist. in a farm with a mixture of enterprices, the fixed costs will be shared between them

• eg salaries for permanent staff

• maintenance of machinery and farm infrastructure

• rent

• admin costs

• electricity, water, fuel

• depreciation

• interest

sources of prices

• farming uk

• dair ahdb

• quality meat scotland

• defra

what influences prices

• consumer demand -quantity, quality, taste, presentation, food safety, welfare and production standards

• production supply- cost of inputs, breeds, technology, disease control, transport, processing and retailing

• media- food scares, superchefs

• marketing- brand image

what do economics help in terms of agribusiness?

• understanding why people have made animal health decisions in the past

• predicting how people will make animal health decisions in the future

• guiding people on how to improve future animal health decisions for the benefit of individuals and society in general

how to animal health economics reach these objectives?

• concepts eg opportunity costs, producitivity

• theoretical frameworks eg marginality of decision making, instituitonal setting in which a decision is made

• practical tools that stimulate reality eg a decision tree analysis