Application of farm management principles in aquaculture
As indicated earlier, the concepts and principles of farm management have been developed on the basis of agricultural and livestock farm operations. In the absence of relevant data andappropriate research, the applicability of these principles has not been explicitly tested in aquaculture. The nature of aquaculture research that is being promoted presently does not include the type of applied research considered necessary for developing farm management procedures. The reliance on the green thumb for successful farming is admittedly a risky approach, as has already been shown in many instances. To some extent, the present state of the aquaculture industry accounts for some of the problems relating to the development of an applied science of farm management. It is seldom possible to carry out farm management analysis, if records and accounts of operations are not available. Unfortunately, reliable farm data are very scarce and this is a major handicap in the development of aquaculture management procedures.
Managing a farm business often involves (i) organizing the farm, (ii) planning and directing its operation from day to day, (iii) planning or conducting the buying and selling and (iv) arranging financing and credit. Planning and organizing the farm operation is not a once-only task, and at least some of it has to be done on a continuing basis at the beginning of each rearing season.
Most of the present-day aquaculture farms are too small to afford a manager who can devote his time entirely to managing. Very often they are family farms, where the owner is also the manager, and he along with his family members and hired labour undertake all the work involved. He does all the organizing and reorganizing and he also does the buying and selling during his spare time. Larger farms are likely to present more varied management problems than family farms, but most tasks of management are the same for both. It is, however, true that on larger enterprises particular functions can be organized more carefully. It is frequently possible to obtain the services of a specialist. However, on larger farms there is the added task of supervising the work of labourers spread over a large area. Because of the larger number of workers employed, management/labour relations take on new forms. Another distinction is that larger farms are likely to employ more equipment, which introduces the problem of maintaining them in good working condition.
Farm business analysis based on data collected through farm surveys is intended to ascertain the relationship between management factors and income. It elucidates factors which affect farm success and failure, so that an individual farmer may recognize his weak points by comparing his performance with relevant standards and take the necessary steps for improvement.There is little doubt that management studies would prove most useful in the development of aquatic farming. The methods of data collection and analysis for agricultural farm management analysis are described in standard text books and could possibly be used in aquaculture farm studies, depending on local situations. In many developing country situations, the simpler methods of tabular and budget analysis may be adequate and more appropriate. In others, more complicated techniques such as linear programming and production function analysis can be employed to provide more direct guides to relevant research conclusions. The need for the preparation of a large number of alternative budgets to determine a near optimum plan can thus be avoided. However, there are grave doubts expressed by many experienced farm planners about the practical value of a precision tool like linear programming at the farm level, when the precision of the input/output data is in doubt. The increasing availability of electronic computers makes it easier to carry out the complicated computations required, but without reliable farm records and accounts not much progress can be made.
Stamp (1978) has described a pioneering attempt to use a computer as a management aid for planning, budgeting, keeping records and accounting at the farm level in shrimp farming in the USA. But because of the need for a computer model that a farm manager can understand and use for decision-making, he considers the sophisticated methods of value only in research, rather than in farm-level management. Nevertheless, it is clear that these methods will find greater application in aquaculture when farm management research based on farm business surveys becomes a reality.
Sound planning of the organization, financing and operation forms the basis of increased productivity of an existing farm business or of new proposed ones. Several questions have to be answered in deciding on the organization of a farm. These would primarily relate to the species and systems of culture to be adopted, the design and construction in the case of new farms, levels or intensity of production to be selected, equipment and labour to be used, etc. These decisions have to be based not only on technological information, but also on the analysis of farm performance data when possible and on the economic principles of comparative advantage, diminishing returns, substitution, cost analysis, opportunity cost, enterprise choice and goal trade-off, as mentioned earlier. Each one of these principles is applicable to small- and large-sale aquaculture enterprises, and it is only the scarcity of farm performance data that restrict their use.
It is essential to assess the comparative advantage of the species which can be cultured economically in a certain area and the advantages of monoculture versus polyculture, based on existing technology, production costs and markets. If adequate farm data are available, it should be possible to determine the intensity of production, e.g. extensive, intensive or semi-intensive, that would yield the maximum economic return. Feeding and fertilization rates and stocking levels are obviously susceptible to the principles of diminishing returns. Whether to substitute labour with mechanization, use artificial feeds instead of fertilizing pond farms, produce fry and fingerlings on the farm instead of buying them from outside producers, are the types of issues that an aquaculturist has to consider. When deciding on mechanization or the greater use of equipment, the manager has to take into account not only the cost of initial investment but also the cost of maintenance and replacement. He would also have to consider possible joint ownership of equipment or hiring equipment for specific uses. Cost analysis to reduce production costs and increase profits is an obvious requirement of any aquatic farm. In making decisions on the establishment of an aquaculture farm, a farmer has necessarily to take full account of the opportunity costs. It will be necessary for him also to consider relations with other enterprises or activities, as for example crop cultivation or livestock farming. As mentioned earlier, the systems of fish/rice farming and integration of pig and duck raising with fish culture are examples of enterprises combined to make the most economical and efficient use of farm resources. Decisions on farming are often based on certain goals, such as increasing the family income, entering the export trade, competing in the domestic fish trade, etc. These goals may change with time and circumstances, but the farmer has to take decisions to achieve gains in his primary goals by making any trade-off that may become necessary.
There is considerable interaction and overlap between the organization and operation of a farming business. As in the case of agriculture, some of the planned operations may have to be changed due to unexpected climatic conditions, including natural disasters. Decisions have to be made on operational details on a day-to-day or week-to-week basis. Whether it is a small farm of a few ponds or a large farming enterprise, there will be the need to implement the various operations according to an appropriate plan. Often, planning would make all the difference between work being completed on time and always being behind. In the absence of suitable operational schedules, it will be very difficult for a farmer or farm manager to make the best use of the hired labour.
Despite efficient organization and well-planned day-to-day operation, a manager may not be able to achieve a good balance sheet unless he is able to handle the commercial aspects of his business properly. He has to use good judgement in buying the inputs and equipment needed and also in hiring labour. He has to follow the markets closely and buy supplies in bulk when possible, to economize on his costs. Participation in cooperatives may, in certain circumstances, help him in buying farm requirements at reasonable wholesale prices.
As mentioned, production has to be scheduled in such a way that the product can be sold when prices are good. Obviously, if the farm has to sell most of its production when prices are low, and has little to sell when the price is high, the profitability of the operation will be greatly affected. At the same time, it is important to ensure that the product is sold at the time of the year when it sells at the highest margin over costs, which need not necessarily coincide with the time when the prices are highest.
Timely decisions have to be taken for adequate financing of the business, and a small-scale farmer is at a great disadvantage in getting the right type of advice in this regard. Some are persuaded to borrow too much and too often, whereas others are too timid to borrow. It is a sound policy to take advantage of opportunities that may occur for expanding the farm or intensifying its production, even when funds have to be borrowed. However, the benefits and liabilities should be carefully analysed and weighted against each other before decisions are taken. The magnitude of the increased income that is likely to be made, the time it will take to achieve the increase and the risks and uncer-tainties that are involved all have to be carefully considered. These factors are also relevant to decisions on investments in starting a new farm business. The best time to borrow is as important as selection of the best time to repay the loans. As indicated, the maintenance of a satisfactory cash flow is a basic requirement for the stability of the farm business.
Although labour relations in a large farm take on a character similar to that in factories, labour management is not a problem restricted only to large farms. It is also important in small-scale and family farms. In a family farm, the farmer-manager directs his own labour along with his family’s and such hired labour as he may employ. In larger farms, the manager often has a number of alternatives for using labour, such as increasing the labour force to implement more intensive farming, combining mechanization with manual labour to increase production or reducing the labour force and substituting it with machinery, etc. Decisions on such alternatives depend very much on the skills and judgement of the manager. They are also strongly
influenced by the special characteristics of farm work. Unlike factories, there are relatively few repetitive jobs in aquaculture farms. Even though chores may be repeated each day, frequent changes are required to meet the constantly changing water and weather conditions and the increasing magnitude of the biomass in the farm. Most workers find themselves doing a wide range of tasks over the year, with very few opportunities for specialization.
The main difference between family labour and operator labour in an aquaculture farm would appear to be personal motivation and appreciation of the importance of the job being carried out. Programming of family labour should take this into account. Hired labour is usually interested in wages, working conditions, security and personal progress. From the point of view of the manager, the greater the work he can get out of his labour hired on a time-rate basis in a given period of time, the lower his labour cost. Good management involves fore-stalling successfully any conflicts that may arise due to differing motivations.
In large farms, the operator seldom works with his men and he may employ a manager or foreman to supervise the work force. The labour often works in groups and generally there is a division of labour. The employer/employee relationship becomes an important factor in the successful operation of such farms. Many of the basic principles of personnel management are applicable in the management of labour in such situations.
Throughout the above discussion on farm management, the need for decision-making on various aspects of organization and operation has been recognized. All the data analysis and application of economic principles cannot completely replace the manager’s task of decision-making. They can help him to make rational decisions, but at the end of the day these have to be based on his personal judgement. In actual practice, most decisions are based on risky choices. A decision-maker has to choose between different alternatives, some of which have consequences that are uncertain. As a result of theoretical studies by economists, statisticians and management specialists, decision
theories or decision analysis approaches have been developed to indicate which alternative he ought to take in line with his goals. But still the decision will be based on the personal belief of the decision-maker about the occurrence of uncertain events and his personal evaluation of potential consequences. Most managerial decisions have elements of uncertainty and are therefore risky. In a risky business like aquaculture, decisions naturally become even more risky. Even though it is not always possible to rationalize risky choices, procedures have been developed to systematize the process through decision analysis. It is a logical procedure for bringing together all the pertinent aspects of a decision environment. The personal element, including perceptions of the risks involved and personal attitude to consequences, still plays a major role in the final decision, but it is preferable to handling complex decisions by mere intuition.
How much effort and time should be spent on decision analysis should depend on the importance and nature of the decision and the time and cost involved in the analysis. Even an analysis at the simplest level, consisting of evaluating the various choices available and asking questions about the consequences of each and the chances of their success, can lead to better management decisions. When risky decisions are taken it will also be necessary to consider ways of covering major losses sustained as a consequence of the decisions, by appropriate risk insurances.