This topic entails the following:

• Parameter of national development
• Factors of production
• Law of diminishing returns
• Farm planning and budgeting
• Agricultural services
• Risks and uncertainities
• How to adjust to risks and uncertainities.

            The following relevant questions and their answers in this topic will greatly motivate and help the             user to comprehend and understand the required concepts and practices:

1. State four ways of increasing labour efficiency on the farm
2. The table shows egg production from individual birds with varying mounts of layers mash

            (a) Sketch a graph representing the total egg production per week against amount of feed given  

(b) Identify the type of production function represented by the graph in (a) above             

3. (a) What are the uses of farm records to a farmer?                         (b) Explain four ways in which a farmer may improve Labour productivity in the farm          

            (c) Outline the process followed in land adjudication                                                           

4. Name any three types of agricultural services available to the farmer
5. Outline four management guideline questions which assist a farm manager in making accurate

            farm decisions                                                                                                                        

6. Give four ways of improving labour productivity
7. List four variable inputs in sorghum production
8. List four agricultural support services available to a crop farmer in Kenya
9. Define the following as used in Agricultural economics:-

            (a) Gross domestic product (GDP)                                                                                        

            (b) Per capita income                                                                                                 

10. Explain the various ways in which farmers may adjust to risks and uncertainties    

11. (a) The table below represents the yield of maize in 90kg bags in response to application of

                        different quantities of planting fertilizer

            (i) Fill in the blank spaces      

               (ii) Suggest the best level of production in relation to the inputs and output                                

            (b) A farmer is considering undertaking the production of either maize or beans. Study the

                   following  information about the two crops then answer the questions that follow:

(i) Maize

            Yield per hectare                                 5,500 kg

            Price                                                    15 per kg

            Cost of cultivation / ha                       Kshs. 3000

            Amount of seeds/ha                            25kgs

            Cost of DAP fertilizer/bag                  Kshs.1,500

            Amount of DAP fertilizer/ha              3bags

            Cost of seeds/kg                                  Kshs.100

            Labour requirements/ha                      50 man days

            Cost of labour                                    Kshs.150 per man day

            Amount of CAN fertilizer/bag            3 bags

            Cost of CAN fertilizer/bag                  Kshs.1000

(ii) Beans

            Yield per hectare                                 5000kg

            Price                                                    50per kg

            Cost of cultivation / ha                       KShs.3600

            Labour requirements/ha                      75 man days

            Cost of labour                                     Kshs. 200 per man day

            Cost of DAP fertilizer/bag                  Kshs. 1500

            Amount of DAP fertilizer/ha              2bags

            Cost of seeds/kg                                  Kshs.800        

            Amount of seed/ha                              20kg

            Amount of CAN fertilizer/bag            1bag

            Cost of CAN fertilizer/bag                  Kshs.1,000

            Cost of sprays                                     Kshs.3,000

            (i) Calculate the gross margins for each crop                                                                         (14mks)

             (ii) From your calculation, which crop is profitable to grow?                                             

12. Below is a graphical representation of the law of diminishing returns.

            (a) Explain what happens in each of the three zones marked I and III in relation to the output

                 of maize     and the NPK fertilizer input

            (b) Which of the three is a rational zone of production                                                        

13. Give four variable costs in maize production
14. A farmer has the following yield from a two hectare millet crop enterprise at Oluch irrigation schemes.                                                

            Study it and prepare his gross margin. is it  profitable to grow millet? He spent the following in

his operations

            Weed                        800/=

            Seeds                        20kg/ha

            Irrigation                  600/=/ha

            Ploughing                500/=/ha

            Clearing the land   1200/=

            Cost of seeds           300/= /10kg bag

            Planting                   400/= /ha

            Harvesting              1200/= /ha

            Yield                       32bags

            DAP fertilizer         2 bags at 10 000/= /50kg bags

            CAN fertilizer        2 bags at 700/= /50kg bags

            Gunny bags            40/= /bag

            Transport to market    2000/=                                                                                                   

14. A farmer has the following yield from a two hectare millet crop enterprise at Oluch irrigation schemes. Study it and prepare his gross margin. is it profitable to grow millet? He spent the following in his operations

            Weed                        800/=

            Seeds                        20kg/ha

            Irrigation                  600/=/ha

            Ploughing                500/=/ha

            Clearing the land   1200/=

            Cost of seeds           300/= /10kg bag

            Planting                   400/= /ha

            Harvesting              1200/= /ha

            Yield                       32bags

            DAP fertilizer         2 bags at 10 000/= /50kg bags

            CAN fertilizer        2 bags at 700/= /50kg bags

            Gunny bags            40/= /bag

                        Transport to market    2000/=                                                             (20mks)

15. What is profit maximization in Agricultural Economics
16. a) A farmer is considering undertaking the production of either maize or beans. Study the

                following information about the two crops and then answer the questions that follow:   

1. i) Calculate the gross margin for each crop                                                                                   
2. ii) From your calculation which crop is profitable to grow                                                          
3. b) Discuss five factors considered when planning a farm
4. Using the data provided in the table below, make an interpretation and advice the farmer on which

            crop to grow ;                                                                                                                         

18. Outline three advantages of budgeting in farm business                                                 
19. A farmer has 1 Ha piece of land on which he grows maize. His farm record on maize

            production for nine years is as shown in the table below:                                                     

(a) i) Using an appropriate scale, with input on the X-axis draw a graph to show the relationship  

                    between inputs and total output                                                                                                      

    (ii) From the graph you have drawn, how many bags of maize would the farmer produce if

           he applied 9bags of fertilizer?

     Calculate the farmers marginal products and average products for the years                                    (i) From the data given, what rate of fertilizer application would the farmer choose if he

            wanted to grow maize in 2004?                                                                                                  

(ii) Give an explanation for your choice in (c) (i) above                                                              

(b) Assuming that the average price of fertilizer over the years recorded was shs. 1,200/= per bag

               and the price of maize was ksh.1000/= per bag :

Calculate the gross income for the years 2002 and 2003                  

Calculate the net income for the year 1999. (Assume no other costs were incurred)           

20. Name five types of costs incurred in a farming business
21. List any four sources of credit to farmers.
22. List three ways in which labour peaks can be overcome in the farm (1½ mks)
23. State four ways of improving farm labour productivity
24. A farmer had a plot of land measuring 5 hectares in which be intended to plant maize.

            He was advised to apply 150 kg of P₂0 per hectare at planting and 200kg N per hectare during

            top dressing. The fertilizer available in the market was Calcium Ammonium Nitrate containing

             20% N and Di-ammonium phosphate 46% P₂0₅. Calculate.                                                

            (a)  (i) The amount of Di—ammonium phosphate required                                                 

                  (ii) The amount of calcium ammonium nitrate required                                                 

            (b) Baraka farm manager plans to grow Irish potatoes or maize for grains. Study the information

                 below and answer the questions that follow:

Irish potatoes

Cost of fertilizers/ha____________________________ Ksbs 10,000.

Labour requirements/ha ______________________ Kshs 50 man – days

Yield /ha ___________________________________ 10,000kg

Seed potato/ha ________________________________Kshs20, 000

Cost of labour ___________________________ Kshs 200 per man day

Cost of fungicides___________________________ Kshs 5000

Cost of ploughing____________________________ Kshs 4000

Selling price of potatoes per kg __________________ Kshs 30.

Maize

Yield per hectare ______________Kshs.7,500kg

Selling price of maize per kg _____________Kshs 20.

Cost of ploughing /ha ________________Kshs.4000

Seed maize/ha _____________________Kshs.3000

Labour requirement /ha _________________________ 200 man days.

Cost of fertilizers /ha ____________________Kshs 10,000

Cost of top dressing fertilizers __________________Kshs 4,800

Cost of labour _____________Kshs 150 per man – day

            (i) What is gross margin?                                                                                                      

            (ii) Calculate the gross margin of each of the crops                                                              

            (iii) From the calculation above which crop should the farm grow?                                    

            (d) Describe the environmental factors that may lead to poor yields in crop production     

AGRICULTURAL ECONOMICS III

(PRODUCTION ECONOMICS)

1. four ways of increasing labour efficiency on the farm

• Training them
• Giving incentives
• Supervision
• Good operator – worker relationship
• Farm mechanization
• Assigning tasks according to skills & specialization
• Proper remuneration : Attractive salaries

2. a) graph representing the total egg production per week.

1. b) – Increasing returns production function.
2. (a) – Help to determine the value of the farm/ determine assets and liabilities.

            – Provide history of the farm.

            – Assist in planning and budgeting in various fields.

            – Helps to detect losses or theft in the farm.

            – Assists when sharing losses or profits (dividends)for communal owned farms/ partnership.

            – Help to settle disputes in the farm among heirs.

            – Help to support insurance claim e.g. against fire and theft.

            – Provide labour information like terminal benefits, NSSF due, Sacco dues for all employees.

            – Help to compare the performance of different enterprises within a farm or other farms.

            – Help in the assessment of income tax to avoid over or under taxation.

            – Records, helps to show whether the farm business is making profit or losses. This information

   helps in obtaining credit.                                                                                      (10 x 1 = 10 mks)

            (b) – Training worker e.g. in F.T.C’s, during field days, Agricultural shows, through

demonstrations and workshops.

• Measuring farm operations to supplement the labour force.
• Providing incentives to workers such as attractive wages, free protective wear, housing, medical facilities, proper feeding, rewarding good workers. Et.c
• Supervising and counseling workers.
• Creating good operator – worker relationships.
• Assigning specific tasks to the labor force.

            (c) – Establishment of land ownership.

            – Measurement of land size.

            – Description of the land.

            – Recording and mapping of the surveyed land.

            – Solving objections if any.

            – Submission of the maps and records to the district land office registration

4. Three types of agricultural services available to the farmer

• Credit
• Extension and training
• Agricultural research
• Banking
• Artificial insemination

–     Veterinary      

5. Four management guideline questions which assist a farm manager in making accurate

             farm decisions                                                                                                                       

• What product to produce?
• How much to produce?
• What to produce?

–    For whom to produce?

6. – Training

• Farm mechanization
• Labor supervision
• Giving incentives and improving terms and conditions of service

Assign specific tasks

7.  – Fertilizers                 – Seeds

• Pesticides -Casual labor

8. – Banking                                                                                                                              

• Extension and training
• Credit facility
• Agricultural research
• Marketing
• Farm input supplies

Tractor hire service

9. (a) Is the sum total of goods and services produced by a country within a period of one year             (b) -Per capital income: Is the gross national income divided by the number of people living

                  in a country

10. -Diversification- Setting up several and different enterprises on the farm. If one fails the

                 farmer cannot  incur total loss.

• Contracting- farmers can enter into contract with consumers. It guarantees a constant fixed market for goods/services
• Insurance- Taking an insurance cover to compensate them incase of loss
• Input rationing- Farmers can control the quantities of inputs used in various enterprises to reduce losses
• Flexibility in production methods- Ability to change from one enterprise to another in response to demand changes
• Adopting modern methods of production e.g. disease control, irrigation, mechanization e.t.c.

11. Application of fertilizer

    (ii) The best level of production in relation to the inputs and out put is level 3

(b) (i) Gross margins for the crops

    (i) Maize

(ii) Beans

(b) (ii) The crop which is profitable from the calculation is that :     (1mk)

• It is more profitable to grow beans than maize

12. a) ZONE I                                                                                                                             

            – For each additional unit of input applied the output of maize increased at an increasing

              rate because the fertilizer resources are underutilized Ö1                            (1×2=2 mks)

              ZONE II

            – For each additional unit of input applied the output of maize increased at a decreasing

              rate because the resources are used to the maximumÖ1                               (1×2=2 mks)

            ZONE III

            – For each additional unit of input applied the output of maize decreases because

               the fertilizer/ resources are excessively appliedÖ1                                      (1×2=2 mks)

1. b) ZONE II
2. Give four variable costs in maize production       

• Cost of fertilizer
• Cost of seeds
• Cost of pesticide
• Cost of weeding
• Cost of  harvesting
• Cost of casual  labour
• Cost of  fuel

Gross margin=total revenue-total variable cost

                           = 38400-32680  = 5720.00

• Profit maximization is the profit in a production process where the highest net returns (Net revenue) on invested capital is realized/ when the difference between total revenue (TR) and total cost (TC) is the highest point in a production process/ where profit is highest
• Is where marginal revenue (MR) is equal to or almost equal to marginal costs

16. a) i)  Gross margins for the crops

1. ii) Beans

                        iii) It is more profitable to grow beans than maize 1 mark

1. b)

• Size of the farm
• Climatic conditions
• Fairness objectives and preferences
• Existing market conditions
• Available resources
• Expected returns

17. – The farmer should grow groundnuts;

            – The crop has a higher gross margin than cotton;

18. – The farmer may be able to estimate the required production resource e.g labour capital e.t.c

– Assists farmer when e.g. labour capital etc                                                             

– Assists farmer in making management decisions;

– Helps to reduce uncertainties in the production process;

– Shows progress or lock of progress in farm business;

19. (a) (i) See the graph paper

            (ii) 56 bags;     (1×1=1mk)

            (b) Table – (    16x ½ =8mks)

(c) (i) 4 bags (1×1=1mk)

            (ii) MP is maximum;           AP is maximum; (2×1=2mks)

(d) Gross income = Total output x price per unit

                        in 2002  66 x 1000 = 66000/= (1×1=1mk

in 2003: 64 x 1000 = 64000/= (1×1=1mk)

(ii) Net income = Total income – Total cost

             in 1999: Total income was 52 x 1000 = 52000/=

                      total cost was 8 x 1200 = 9,600/=

Hence 5200/= – 9600; (1mk)

= Shs. 42,400/=           (1mk)

21.

• Flood costs (F.C)
• Variable costs (V.C)
• Total costs (T.C)
• Average costs (A.C)
• Marginal costs (M.C)

• Co-operative societies
• Crop boards
• Commercial banks
• Agricultural finance corporation (A.F.C)
• Settlement fund trustees
• Hire purchase companies
• Insurance companies. (Any 4 )

23. three ways in which labour peaks can be overcome in the farm

• Overtime  working  for casual labourers
• Greater use of casual workers
• Mechanization
• Use of  contractors  who may  be  engaged to do some work  at a fee
• Cropping system devised such that  ripening  of crops could be  at  different times

Work study to devise new techniques of  doing  work more  quickly and   efficient

24        . – training

            -giving incentives/motivation

            -farm mechanization

            -labour

25. (a) 1000kg of NAP con 46kg P₂O₅S

                        150 x 100 – 150

                        50

                        300kg of DAP per hectar

                        1ha = 300kg of DAP

                        5ha x 300

                        1                      = 1500g of DAP

             1 bag = 50kg

            1500 x 1 = 1500kg

            50        = 30bags pf DAP

            N/B Approximation = 3obags

                        CAN

                        100kg contain 20kg of price N

                        200x 100 = 200kg

                        30                    = 1000kg

                        I ha = 1000kg

                        5ha = 1000 x 5 = 5000kg

                        1bag = 50kg

                        5000 x 1 = 5000kg

                        50

                        = 100bags of CAN

            (b) (i) – cross margin is variable cost – total revenue

                        Gross margin of irish potatoes

                        Cost of fert = shs 10000 x 5 = 50000

                        Cost labour requirement = 50 x 200 x 5 = 50,000

                        Cost of seed potatoes 20,000 x 5 = 100000

                        Cost of fungicides 5000 x 5 = 25000

                        Cost of ploughing 400 x 5 = 50,000

                        Total variable cost shs.145,000

                        Total revenue = shs.50,000 x 50 = shs.1,500,00

                        Gross margin shs. 1,500,000 – shs.145,000 =shs.1,255,100

            (i)                     Maize

            Cost of fert. shs 10000 x 5 = shs.50000

            Cost of fert. shs. 4800 x 5 = shs.24000

            Cost of maize seed shs.3000 x 5 = shs.15000

            Cost f labour shs.200 x 150x 5 = shs.150000

            Cost of ploughing shs.4000 x 5 = shs.20000

                   Total cost                          = shs.259000

                   Revenue 750000 X 5 X 20= Shs.750000

            Gross margin   = 750000

             – 259000

            Shs.481000

            (ii)He should grow potatoes

            – pests

            Diseases

            Unreliable rainfall

            Change in temperature

            Strong wind

            Light aspect

            Infertile soils