THEME 05: FARMING BUSINESS ECONOMICS AND AGRICULTURAL EXTENSION
Agricultural economics (agronomic) is an applied field of economics concerned with the application of economic theory in optimizing the production and nglish-swahili/distribution” target=”_blank”>distribution of food and fiber — a discipline known as agronomic. Agronomic was a branch of economics that specifically deal with land usage. It focused on maximizing the crop yield while maintaining a good soil ecosystem. Throughout the 20th century the discipline expanded and the current scope of the discipline is much broader. Agricultural economics today includes a variety of applied areas, having considerable overlap with conventional economics. Agricultural economists have made substantial contributions to research in economics, econometrics, development economics, and environmental economics. Agricultural economics influences food policy, agricultural policy, and environmental policy
Importance of agriculture economics
• Agriculture economics enable farmer to know the cost involved in production of a particular farming programmed
• To enable the farmer to know the returns or benefit this will be obtained from the programmed.
Objectives
• To enhance students’ acquisition of the understanding of basic natural science concepts in agriculture.
• To enhance students’ comprehension of agricultural science concepts, principles, theories and skills in crop production, livestock production, and soil management, fisheries and renewable resources.
• To inculcate in students fundamental principles, theories and knowledge in all branches of agricultural economics including production, farm management, marketing, policy and development, finance, project monitoring and evaluation
• To equip students with skills to work in an interdisciplinary environment and collaborate with technical scientists in developing new technologies that improves yield, nutritional qualities, storage values and various prototype equipments for agro –businesses;
• To equip students with skills for carrying out economic analysis, feasibility studies, establishing appropriate monitoring and impact assessment mechanisms for Local, States and Federal governments, NGO’s , and international agencies;
• To equip students with relational skills that can strengthen linkages with private and public enterprises.
• To make our research finding available to local, national and international communities
BRANCHES OF AGRICULTURE ECONOMICS
A. Production economics; this is a branch of economics dealing with the production of a particular farm project. It involves the use of several resources called INPUTS to create or produce goods and services called OUTPUTS.
B. Agriculture marketing; this is the performance of all business activities that are involved in the flow of agriculture goods and services from the area of production to the consumer.
C. Farm management; this is a branch of economic which involves the study of using the scarce resources available in different ways and combination to produce different items.
D. Economic concepts; this is the study of production nglish-swahili/distribution” target=”_blank”>distribution and consumption of goods and services.
E. Rural sociology; these deals with social aspects of rural community i.e. customs, norms and tradition of the farmers
The Importance of Agriculture
For decades, agriculture has been associated with production of essential food crops. At present, agriculture above and beyond farming includes forestry, dairy, fruit cultivation, poultry, bee keeping, mushroom, arbitrary, etc. Today, processing, marketing and nglish-swahili/distribution” target=”_blank”>distribution of crops and livestock products etc. are all acknowledged as part of current agriculture. Thus, agriculture could be referred to as the production, processing, promotion and nglish-swahili/distribution” target=”_blank”>distribution agricultural products. Agriculture plays a critical role in the entire life of a given economy. Agriculture is the backbone of economic system of a given country. In addition to providing food and raw material, agriculture also provides employment opportunities to very large percentage of population. Below are the importance of agriculture:
Source of Livelihood
The main source livelihood of many people is agriculture. Approximately 70 % of the people directly rely on agriculture as a mean of living. This high percentage in agriculture is as a result of none development of non-agricultural activities to absorb the fast growing population. However, most people in developed countries do not engage in agriculture.
Contribution to National revenue
Agriculture is the main source of national income for most developing countries. However, for the developed countries, agriculture contributes a smaller per cent age to their national income.
Supply of Food as well as Fodder
Agricultural sector provides fodder for domestic animals .Cow provides people with milk which is a form of protective food. Moreover, livestock also meets people‘s food requirements.
Significance to the International Trade
Agricultural products like sugar, tea, rice, spices, tobacco, coffee etc. constitute the major items of exports of countries that rely on agriculture. If there is smooth development practice of agriculture, imports are reduced while export increases considerably. This helps to reduce countries unfavorable balance of payments as well as saving foreign exchange. This amount may be well used to import other essential inputs, machinery, raw-material, and other infrastructure that is helpful for the support of country’s economic development.
Marketable Surplus
The growth of agricultural sector contributes to marketable surplus. Many people engage in manufacturing, mining as well as other non- agricultural sector as the nation develops. All these individuals rely on food production that they might meet from the nation’s marketable surplus. As agricultural sector development takes place, production increases and this leads to expansion of marketable surplus. This may be exported to other nations.
Source of Raw Material
The main source of raw materials to major industries such as cotton and jute fabric, sugar, tobacco, edible as well as non-edible oils is agriculture. Moreover, many other industries such as processing of fruits as well as vegetables and rice husking get their raw material mainly from agriculture.
Significance in Transport
Bulks of agricultural products are transported by railways and roadways from farm to factories. Mostly, internal trade is in agricultural products. Moreover, the revenue of the government, to a larger extent, relies on the success of agricultural sector.
Foreign Exchange Resources
The nation’s export trade depends largely on agricultural sector. For example, agricultural commodities such as jute, tobacco, spices, oil seeds, raw cotton, tea as well as coffee accounts for approximately 18 % of the entire value of exports of a country. This demonstrates that agriculture products also continue to be important source of earning a country foreign exchange.
Great Employment Opportunities
Construction of irrigation schemes, drainage system as well as other such activities in the agricultural sector is important as it provides larger employment opportunities. Agriculture sector provides more employment opportunities to the labor force that reduce the high rate of unemployment in developing countries caused by the fast growing population.
Economic Development
Since agriculture employs many people it contributes to economic development. As a result, the national income level as well as people‘s standard of living is improved. The fast rate of development in agriculture sector offers progressive outlook as well as increased motivation for development. Hence, it aids to create good atmosphere for overall economic development of a country. Therefore, economic development relies on the agricultural growth rate.
Source of Saving
Development in agriculture may also increase savings. The rich farmers we see today started saving particularly after green revolution. This surplus quantity may be invested further in the agriculture sector to develop the sector.
Food Security
A stable agricultural sector ensures a nation of food security. The main requirement of any country is food security. Food security prevents malnourishment that has traditionally been believed to be one of the major problems faced by the developing countries. Most countries rely on agricultural products as well as associated industries for their main source of income.
Challenges facing Tanzania food systems
Each day – all around the world – farmers face the same common threats to their productivity and livelihood. In Africa, however, the challenges go beyond damaging weather, pests and disease. And, with 80 percent of Africa’s farmers cultivating less than two hectares (five acres), getting to know small-scale farmers is essential to understanding the hurdles facing the continent’s food system.
As Africa’s population grows from 1.1 billion to an estimated 2 billion by 2050, what critical factors will need to be overcome?
1. Critical inputs
Farmers at all scales of production need access to the inputs required to produce a successful crop – high-yielding seeds, effective fertilizer and sufficient water. Even when these are available, input pricing is often too high for smallholders – resulting in fertilizer use in Sub-Saharan Africa of just one-tenth the world average.
2. Access to financing
Challenging legal and financial environments are constraining growth in African agriculture. For smallholders, especially, credit is often inaccessible or unaffordable. Without appropriate financing, farmers are not only less able to invest in their operations but also much more vulnerable to market volatility and unpredictable weather.
3. Property rights
According to the Food and Agriculture Organization (FAO) of the UN, secure land tenure and property rights can drive poverty reduction, rural development and global food security in developing countries. Farmers with clear land ownership are motivated to reinvest in their operations and increase production beyond subsistence farming, selling the surplus. Yet in many parts of Africa, farmers are unable to own their land and pledge it as collateral, limiting their incentive to reinvest in their businesses.
4. Infrastructure for market access
Farmers generally can earn higher prices outside of harvest season – yet few African smallholders have access to proper storage to take advantage of price fluctuations. Furthermore, many smallholders live in isolated, rural areas. Infrastructure like paved roads, reliable energy, warehouses and cold storage not only benefits farmer livelihoods but improves food security by reducing post-harvest loss. According to FAO, 40 percent of the population in Sub-Saharan Africa lives in landlocked countries, versus just 7.5 percent in other developing countries. That means farmers in this region require greater access to primary cross-border markets – access that is made slow and costly by poor roads, long delays at borders and other issues.
5. Off-farm income
It may sound counter-intuitive, but off-farm income is critically important to agricultural development. The first migrants from farms to cities often send money back to their family members. Those remittances can fund better farm inputs – seed, fertilizer and machinery, for example. The resulting improvement in productivity enables more people to leave the countryside for cities where their incomes, and their diets, tend to improve – boosting demand and prices for farm output. In short, farmers and farm output benefit when urban workers have incomes sufficient to purchase food at prices that ennglish-swahili/courage” target=”_blank”>courage farmers to produce more.
Agriculture, industry, and their inter-relationship
All industries which uses agriculture raw material are known as Agro-industries; and industries which provide inputs for agriculture production are known as Agriculture Related Industries
The contribution of agriculture development to industrial development to industrial development; Normally, the agricultural sector of a country has to improve before the industrial sector improves.
Hence the developments of agriculture help the following,
1. Agricultural development allows the agriculture sector to release part of its labour force of which can be employed in the industrial sector.
2. Agriculture development saves foreign exchange. Through reduced importation of food of which can be used to buy industrial goods and raw materials.
3. Agriculture development increases the total income of farmers, through selling of surplus to urban population and thus increases farmers purchasing power of industrial good.
4. Agricultural development increases government revenue, through taxation of the income above subsistence level of which can be used to finance various industrial development projects.
5. Agriculture development stimulates the formation of raw marketing firms, through increased transportation, agriculture processing industries, storage firm, nglish-swahili/distribution” target=”_blank”>distribution firms e.g. The contribution of industrial development to agricultural development
• Industries increase urban workers income, this in turn increase food demand, thus creating a ready market for agriculture product
• Industries create employment, through absorption of surplus labour from the agricultural sector, thus improving the standard of living of both rural and urban people.
• Industries create urban areas, through increased migration of rural people to areas with industries, thus increasing industrial population.
