Farm Management: Principles and Strategies

NACTA Journal, Jun 2005 by Bazen, Ernest

Farm Management: Principles and Strategies By Kent D. Olson, Iowa: Blackwell Publishing Co. (formerly Iowa State Press), 2004, 429 pages, hardbound, $69.99.

Farm business management at the University of Tennessee is required of all students majoring in agricultural economics and/or agribusiness management and also serves as a service course to many other programs. Our course is designed to develop student skills in areas of advanced agricultural business procedures, establishment of agricultural businesses, managing the agribusiness, marketing and advertising, sales techniques and strategies. Choices in farm management textbooks have been limited. In talking with other farm management instructors across the United States, the standard textbook seems to be Kay and Edwards (now Kay, Edwards and Duffy). I can remember back to my undergraduate years in the mid 1980's when Kay and Edwards was the text of choice for my undergraduate farm management class. Kay, Edwards and Duffy is a good textbook, but my impression is that something more was needed.

Blackwell Publishing touts Kent Olson's new edition of Farm Management: Principles and Strategies as a textbook designed to teach the farm managers for tomorrow. The book is intended to serve as a basic textbook for a three-semester-hour course in farm management at the undergraduate level. It is also intended for practicing farm managers. The book contains 14 chapters grounded in familiar topics typically covered in farm management books: budgeting, production, marketing and finance. In chapter 1, an introductory chapter on the scope of farm management, Olson sets out to distinguish his textbook by placing emphasis on the development of a business plan. I found this approach to be brilliant and refreshing. The author believes that the first and foremost foundation for farm managers is to develop and follow a business plan. The second chapter (Strategic management) is the largest chapter in the book. Olson lays out strategic management as a key component in the development and understanding of a business plan. For a book that builds a foundation on developing a business plan, chapter 3 (Marketing plan) seems to be short and inadequately covered. Price movements including trends, cycles, and seasonal patterns are covered, but instructors that chose to use this book may see this as a wave of the wand on a subject that is critical to a business plan. A more in-depth discussion on marketing options available to farm managers is just one area that could be included in a future edition to help improve what I believe is the weakest chapter.

Unlike Kay, Edwards and Duffy who devote entire chapters to each of the essential budgets (i.e., whole-farm, enterprise, cash flow, and partial), Olson discusses all of these budget types within one chapter (chapter 4, Budgeting). Although examples are given for enterprise, cash flow and partial budgeting, my students have complained that one example for each budget type is not enough. I agree with their assessment and suggest that a more rigorous explanation of each budget with extensive examples for various commodities would be useful. Olson presents example budgets in other chapters, but my students and I feel that expansion of example budgets in chapter 4 would improve future editions of Olson's text.

One new topic introduced in chapter 5 (Production and Operations Management) deals with process mapping. Instructors will find this chapter to be very helpful in preparing students for the next four chapters. Students enjoy the integration of both enterprise and partial budgeting into real-world examples. I particularly like the authors discussion on gross margins within enterprise budgeting. Regardless of whether a farm management student is planning to work on a farm or in industry, material covered in chapter 6 (Quality Management and Control) has become more important to today's farms and agri-businesses. I like the addition of this chapter to help break up the typical math and budget oriented class structure. This chapter gives a nice break before taking the reader into the next three chapters devoted to finance: chapter 7 (Financial Analysis); chapter 8 (Financial Management); and chapter 9 (Investment Analysis). One major omission of the textbook deals with accounting and record keeping software. Although Olson mentions the Center for Farm Financial Management software to help develop a business plan in chapter 1, page 16, no other alternatives are given. And there is no mention of accounting software packages except a brief line about FINPACK on page 190.

The next four chapters deal with the acquisition and management of resources. Chapters 10 (Land Purchase and Rental), 11 (Risk Management) and 13 (Staffing and Organization) are well organized and comprehensive. I found chapter 12 (Production Contract Evaluation) to be a solid addition to the textbook. Olson does a good job guiding the reader through the complex issues related to contract evaluation. The final chapter of the book (14: The Future Farm Manager) discusses four themes that Olson developed from his personal talks with farmers about their ideas for the future. Although this information is good farm management survey data, I believe Olson missed a great opportunity to reinforce the importance of developing and maintaining a farm business plan.