Farm budget is a detail written plan which is prepared in advance for using the resources of a farming business. It shows the intended use of all resources and the estimated results expected from their use. The process of preparing the farm budget is termed as farm budgeting. Or, the expression of farm plan in monetary terms is called farm budgeting.

In other words, farm budgeting may be defined as the detailed Quantitative statement of a farm plan. It sets out (i) the physical aspects of the plan, what to produce, how much the resources to use (ii) the financial aspects of the plan, the expected cost and return and therefore the profit.

The necessities of farm g are given below:

a. To choose different farm activities which are suited to the given farm conditions.

b. To look into the future and decide on suitable course of action.

c. To select appropriate enterprise combinations that results in the better use of resources.

d. To help the farmers in timing various jobs and operations for smooth conduct of operations without competition. To determine the amount of loan for farm management if necessary.

c. To avoid wastages that occurs in the resource use. Budget is also necessary at the change of site of the farm in terms of area.

f. To provide guidance and flexibility to the farmers for ensuring, better use and growth of the farm.

g. To provide allocation of resources for producing the requisite products for marketing and household consumption.

h. Budget is necessary when a farmer accumulate capital and wishes to change his farming operations to meet his new financial situation.

i. Budgeting is needed before the beginning of new financial year to know in advance the amount of money to be required for that particular year.

A.      On the basis of extent of time, the farm budget is two types:

i)                    Long run budget

ii)                   Short run budget

i)                    Long run budget: By a long run budget, we mean budget prepared for several years for the future. Usually a long run budget varies from 5-25 years. It is estimated as an average year over some period of time.

ii)                   Short run budget: Budget formed for a unit time usually a year or less is termed as short run budget. Once a long run budget for 5-25 years has been prepared, it is needed to make short run budget for each year. Annual budget is made to fit the individual year. Cropping scheme is a short run budget.

B. On the basis of content of budget:

i) Partial budget

i) Partial budget: Partial budgeting is a statement of anticipated changes in cost, returns and profitability for a minor modification or change. When a farmer considers few modifications or minor changes in the existing organization of the farm business, partial budgeting technique is employed. Only some changes such as adding to an enterprise; introducing a new enterprise, purchasing a new machine, etc. are adjusted by partial budgeting. Partial budgeting consists of four important elements viz., i) added costs ii) added returns iii) reduced returns iv) reduced costs. Partial budgeting technique is generally used to evaluate the profitability of input substitution, enterprise substitution and scale operation.

Items		Items
Added costs (200 gm Carbendazim 500gm Mancozem)	Tk.628.00.	Added returns (Yield 187 kg @ Tk12.50)	Tk.2348.72
Reduced returns	Nil	Reduced costs	Nil
Total of added costs and reduced returns	Tk.628.00	Total of added returns and reduced costs	Tk.2348.72
Net change = Tk.2348.72 — Tk.628.00= Tk.1720.72 (Profit)

SL.	Particulars	Existing situation groundnut (Tk.)	Alternate situation of sunflower (Tk.)
a	Human labour	1474.00	1017.00
b	Bullock labour	872.00	831.00
c	Manures	864.00	902.00
d	Fertilizers	1164.00	1023.00
e	Seed	2200.00	800.00
Total operation costs/ha		65741.00	4573.00
Gross income/ha		9.20 quintal @Tk.1212.82=Tk.11158.00	9.86 quintal @Tk.1114 .01 = 11280.00

Items		Items
Added costs Manures	Tk.38.00	Added returns	Tk.122.00
Reduced returns	Nil	Reduced costs
		Human labour	Tk.457.00
		Bullock labour	Tk.41.00
		Fertilizers	Tk.141.00
		Seed	Tk.1400.00
Total added costs	Tk.38.00	Total reduced costs	Tk.2039.00
Total of added costs and reduced returns	Tk.38.00	Total of added returns and reduced costs(Tk.122.00 + Tk.2039.00)	Tk.2161.00
Net change = Tk.2161.00 —Tk.38.00 = Tk.2123.00 (Profit)

It refers to the preparing of a plan for the whole farm business activities or for all decisions of an enterprise. It is a method of estimating expected income, expenses and profits for the farm as a whole. It is also used when a plan for a new farm or a new farmer is required. A complete budget goes into details on the following aspects:

a. Use of specific farm land (area)

b. Area of each crop to be grown

c. Details of inputs such as, seed, fertilizer, labour, marketing cost etc.

d. Dispersion of production for faun uses and sales

e. Details of the livestock, fisheries, poultry programs

f. Machineries and equipment with their cost.

g. Summary of production rates

h. Consumption, expenditure, saving and investment.

Preparation of a complete yearly budget of an agricultural farm having an area of 50 ha land.

a) Human resource:

         i.            Farmers goal

       ii.            Farmers skill

      iii.            Labours availability at the surrounding area of the farm

b) Physical resources:

         i.            Land topography-medium high land, more or less plane land ‘

       ii.            Soil type — clay loam

      iii.            Crop — Suitable for the cultivation

     iv.            Machineries — 2 deep tube-well, 2 power tiller, 30 country plough

c) Financial facilities:

i) Cash in hand — Tk.150000.00

ii) Cash in bank — Tk.500000.00

i) Single cropped farm (paddy)

i) Cropped area = 40 ha

ii) Road, building and threshing floor = 7 ha

The total land = 50 ha

         i.            Permanent employee (officer)          2

       ii.            Permanent employee (staff)              5

      iii.            Permanent labours                             40

     iv.            Temporary labours                           1000

         i.            Salary for officer                                               Tk.1,15,000.00

       ii.            Salary for staff                                                   Tk.1,40,000.00

      iii.            Salary for permanent labours                            Tk.800000.00

     iv.            Taxes                                                                  Tk.5000.00

       v.            Miscellaneous cost                                             Tk.10,000.00

     vi.            Repairing cost of machineries                           Tk.40000.00

    vii.            Repairing cost or building and houses              Tk.5000.00

  viii.            Electricity, fuel and telephone cost                   Tk.200000.00              

                                  The total fixed cost                           = Tk.13, 15,000.00

         i.            Payment for temporary labours (8,000)                       Tk.3,00000.00

       ii.            Fertilizers                                                                     Tk.1,60000.00

      iii.            Seeds                                                                            Tk.24,000.00

     iv.            Pesticides                                                                      Tk.24,000.00

       v.            Miscellaneous (fence, fodder, fuel)                              Tk.5000.00                     

                                  The total variable cost                        = Tk.5, 13,000.00

So, the total cost= Fixed cost + Variable cost

                              = Tk.13, 15, 000.00 +Tk.5, 13,000.00

                              = Tk.18, 28,000.00

Net income/Profit = Tk.25, 50,000.00 — Tk18, 28,000.00

                                  =Tk. 7, 22,000.00

                                                                                                           Signature of farm manager