Farmer Business School

Transcription

1 Farmer Business School Sustainable cotton production systems Training notebook Zambia NWK Agri-Services Cotton, Maize, Soya

2 Foreword The Farmer Business School approach has been developed for cocoa production systems in 2010 by GIZ/Sustainable Cocoa Business and local partners from Ghana, Nigeria, Côte d Ivoire and Cameroun. With the support of BMZ, World Cocoa Foundation and 20 local partners, over 95,000 farmers have been trained in the 4 countries. The present trainer s file is an adaptation of this curriculum to cotton production systems in Zambia. The adaptation is done in partnership between the GIZ/Sustainable Cocoa Business and the GIZ Competitive African Cotton Initiative (COMPACI). FBS Trainers undergo a special qualification program including class-room and learning trainings with farmers to deliver the training in line with the principles of adult and discovery learning and the quality standards of FBS. Contents of the Training Notebook Module 0 Introduction to the Farmer Business School - What are the advantages?... 2 Module 1 Is farming a business?... 3 Module 2 Know the units to know your assets... 6 Module 3 Manage your farm for enough food Module 4 Money Out, Money In - Know whether you are doing successful business Module 5 Impact of YIELD on profit, a tool for doing good business Module 6 Diversifying your farm enterprise for more income throughout the year Module 7 Manage your money throughout the year Module 8 How to get good financial services Module 9 How to produce and gain income from good quality cotton Module 10 Benefits from membership in farmer organizations Module 11 Conclusion - Becoming an entrepreneur in practice

3 Module 0 Introduction to the Farmer Business School - What are the advantages? M1 Is farming a business? M2 Know the units to know the assets M3 Manage your farm for enough food M4 Money-In/Money-Out: Know whether you do good business M5 Impact of YIELD on profit a tool for doing good business B a n k M6 Seize opportunities to diversify your farm enterprises M7 Manage your money throughout the year M8 How to get good financial services M9 How to produce and gain income from good quality cotton M10 Benefits of membership in a farmer organization M11 Becoming an entrepreneur in practice The skills learned at the Farmer Business School help the farmers to become better entrepreneurs who: - Take advantage of improved technologies and market opportunities to increase income - Plan and adapt their production to assure food security for their family - Lead professional negotiations with buyers, input suppliers and credit institutions - Manage financial means and credit 2

4 Module 1 Is farming a business? What examples of businesses do you know? Examples of businesses Start and end of activities Money-out Money-In Construction business One can start when one has a contract with a client One must respect the conditions of the client For the machines, the materials and the employees When the construction is completed One construction site follows the next Commerce One can start and stop commerce at any time. To buy merchandise and to pay employees All year long Processing of agricultural products maize, processed cassava, local beer One can start the processing at any time if one has the equipment and primary materials One stops the processing when the primary material is no longer available. To buy raw material, equipment and employees All year long as long as you have raw material Agriculture My farm is my business One needs to start the agricultural work at the beginning of the season One cannot stop the field work before the harvest (or the use of the seedlings) For tools, equipment, inputs, services (tractor) and hired labour force After harvest at moment of sales What do you need and use to produce? Inputs Tools and equipment Labour Money Land Seeds Insecticide Fungicide Machete, hoe, sprayer, drying bay Family work force Paid workers Own money Credit Own Land Rented Main Lesson The agricultural entrepreneur (man or woman) plans and organizes him/herself to have inputs, tools, labour and money necessary for the production ready at the right time. 3

5 What does one need to know about the market if one wants to do good business? The market for agricultural produce The market for inputs and equipment The location of the market The locations of sale Who needs the product and wants to buy it? The quality of product that is demanded by the market The price of the product compared to other markets Who sells the inputs and equipment? The quality of the inputs and equipment The price of sale of the inputs and equipment. How does the price of agricultural products change? The price of agriculture products change according to the season of the year At times of abundance the prices are lowest. At times of scarcity (during the dry season for example) the prices are highest. The price of agriculture products change between years. The price of a product that is needed by more and more people will rise from one year to the next. The price a product that is produced in greater abundance will fall from one year to the next. How can one reduce the effect of changing (lower) prices? Make sure you produce efficiently Make sure you reach a high productivity by following recommended good agricultural practices (profit is not only determined by price, but also by productivity!) Main Lesson To do successful business, the agricultural entrepreneur (man or woman) informs him/herself on the prices (of inputs and produce) at different markets. This allows the farmer to plan production, and to make decisions on the purchase of inputs and the sale of produce. 4

6 September October November December January February March April May June July August Module 1 Agricultural Calendar to plan the production of your crops The times of work put an X to show the month when you do the task The tasks of the entrepreneur Planning and record keeping Early and proper land preparation (CA, crop rotation) Manure, fertilizer and lime application (soil fertility) Early and proper planting Cotton Maize Soya Correct plant population (thinning and gap filling) Timely and regular weeding Scouting, threshold spraying Safe handling of agro-chemicals Harvest Cotton Maize Marketing Soya Destruction of Stalks! Main Lessons A good agricultural entrepreneur (man/woman) plans to do the necessary work in the field for a good yield, considering which crop to plant and/or harvest first, and uses inputs efficiently for better profit 5

7 Module 2 Know the units to know your assets Measure and calculate the surface of a field. The size or surface area of a field is measured in meters squared or hectares. 1 hectare (ha) is 10,000 meters squared (m 2 ). But before we start measuring an area, let s get familiar with the calculator. How to use a calculator What is a Calculator? A calculator is a tool you can use to do addition, subtraction, multiplication and division To put on the calculator Press the ON/AC To clear a wrong number Press C CE To start a new calculation Press the ON/AC to clear Addition (plus) Example: = 14 Type Example: = 30 Type 6

8 Subtraction (take away) Example: Type 9-4= 5 Example: = 80 Type Example = - 9 Type If you take away a bigger number from a smaller number, the calculator will give you a take away number as in this example. You will know that by the small dash - in front of the answer. Example: = - 49 Type Multiplication (times) Example: 25 x 12 = 300 Type Example: 22 x 27 = 594 Type 7

9 Division (divide) Example: 26 / 2 = 13 Type Example: 123 / 3 = 41 Type Here are some more examples. Try to get the same result. Addition (plus) Subtraction (take away) Multiplication (times) Division (divide) / / / 8 137,5 We will now start measuring and calculate the surface of an area. 8

10 Measuring an area using a measuring tape Measuring an area using a cord with knots Exercise Method Length Width Surface size Difference with measuring tape Rank Group 1 Group 2 Estimation by steps Measuring tape in meters Estimation by steps Cord with knots 9

11 Main Lessons 1. Measuring the size of field by using walking-steps is not always accurate due to differences in heights. 2. The agricultural entrepreneur (man or woman)... Who underestimates field size risks using too little fertilizer and too little seeds. This can lead to reduced yields. Who overestimates field size risks using too much fertilizer and to plant too close together. This can lead to reduced yields and unnecessary spending. 3. Accurate knowledge of the size of the farm is important to plan production, to correctly apply inputs, and to correctly space plants and seeds. 4. The agricultural entrepreneur (man or woman) measures his/her fields with a measuring tape, a cord with knots or a measure band. 5. A field in the shape of a rectangle or square is easy to measure. On such a field it is easier to sow or plant in lines respecting the correct spacing distances. 10

12 Standard Measures and Units Distance Kilometer (km) : 1 km is 1,000 meters (m) Length or width of a field Meter (m): 1 m is 100 centimetres (cm) Surface Area Meter squared (m 2 ) Hectare (ha) : 1 ha is 10,000 m 2 1 Acre : 4000 m 2 (e.g. 50 m x 80 m, or 40 m x 100 m) 1 Lima: 2,500 m 2 (e.g. 50 m x 50 m) 1 Hectare : 2.5 acres Yield per Unit Area Yield per hectare : Yield per acre e.g. 400kg seed cotton /ha: 160kg seed cotton /acre Volume Litres (L) Weight Grams (g) Kilograms (kg) : 1 kg is 1,000 g Ton (T) : 1 Ton is 1,000 kg Time Agricultural work Minutes (min) Hour (h)= 1 hour has 60 minutes Day (D) = 1 day has 24 hours Man-days (MD): The work of an adult man in one day. Example: Work on one hectare requires 10 Man-days. (10 MD / ha). The work can be done by 1 man in 10 days or 10 men in 1 day. It is important to specify the number of hours in a work day. Main Lessons Units and measures are important for the agricultural entrepreneur (man or woman). They are necessary To know precisely your assets such as your land and labour To correctly plan production and the quantities of inputs that need to be purchased in time To apply correct amounts of inputs such as fertilizer, chemicals To know the quantity harvested To correctly evaluate losses or profits To better sell the products Measures and units are essential to do good business in agriculture. 11

13 Module 3 Manage your farm for enough food These products give us energy and physical strength to work and to grow These products give us physical strength and mental force Maize Rice Beans Poultry Millet Cassava Groundnut Meat Sorghum Sweet potato Eggs Fish Oils give us energy and make the meals tasty Fruits give us energy (sugar) and health Vegetables give us health and make the meals tasty Clean drinking water gives us health Source: adapted from FAO Family Nutrition Guide 12

14 How much energy and protein do we need per day? Energy Kcal per day Protein Grams per day Pregnant woman Breastfeeding woman Children 0 to 6 months Children 7 to 11 months Children 1 to 3 years 2,690 2, , Breast feeding Breastfeeding plus 2 to 3 meals per day Breastfeeding plus 3 to 4 meals per day Energy Kcal per day Protein Grams per day Children 4 to 6 years Children 7 to 9 years Girls 10 to 17 years Boys 10 to 17 years 1,350 1,700 2,330 2, Energy Kcal per day Protein Grams per day Men 18 to 59 years Women 18 to 59 years Men 60 years and more Women 60 years and more 3,100 2,410 2,500 2,

15 Food products and their content in energy, protein and fat Food Energy kcal per kg Fat Grams per kg Protein Grams per kg Maize Sorghum Rice Cassava Sweet Potato Beans Groundnut Soybeans Eggs Meat Adapted from FAO 2004.Family Nutrition Guide; Explanation The kilocalorie (kcal or 1,000 calories) is a measure for the energy of food. The number of kilocalories of one kg of a given food shows you whether the food is rich or poor in energy. 14

16 Main lessons The agricultural entrepreneur (man or woman) knows that each type of food is necessary for a good and balanced nutrition of his/her family. The agricultural entrepreneur (man or woman) knows that the different types of food ensure a healthy nutrition of his/her family. The agricultural entrepreneur (man or woman) knows that the members of his family have different needs of food. Very good food for pregnant and breastfeeding women ensures good health and growth of new children From the 7 th month onward children need good quality meals (without spices!) and breast feeding for good health and growth. Children of a certain age need almost as much food as adult persons. The agricultural entrepreneur (man or woman) knows that the members of his/her family need clean water therefore he/she takes the necessary measures such as Integrated Pest Management including safe use of pesticides and disposal of empty containers to conserve water resources. 15

17 September October November December January February March April May June July August Nutritional calendar: How do you cover the food needs of your family? Mark a square if the product is sold Mark a triangle in the months you need to buy the product Mark a circle if the product is eaten Indicate by a line how long the product is available from own production What are the months of high prices and the months of low prices for a food item? Sell Eat Cotton Fresh cassava Rice Sorghum Millet Maize 16

18 September October November December January February March April May June July August Sell Eat Beans Groundnut Meat Fish Fruits Vegetables 17

19 How to have more and better food? Use improved varieties for improved yields Integrated soil fertility management Associate crops Mulching to conserve soil moisture Use proper facilities to reduce losses in storage Improve financial management Raise animals Diversify cropping Other possibilities - Produce early maturing and drought tolerant crops; - Use water harvesting techniques to conserve water and for small-scale irrigation - Some families might have the opportunity to establish fish ponds Source: Based on FAO Family Nutrition Guide 18

20 Module 4 Money Out, Money In - Know whether you are doing successful business Two farmers are discussing whether they did good or bad business last season. - One farmer doesn t know. Why? - The other knows. Why? And what is the use of knowing? In this module we will learn how to calculate and determine whether our current way of farming is a good or bad way of doing farming business. We will calculate the money in and money out from different produce. In this exercise we will use the calculator again To put on the calculator Press the ON/AC To clear a wrong number Press C CE To start a new calculation Press the ON/AC to clear 19

21 Module 4 - Exercise Sheet 1: Maize (Non-Improved) Steps: - Multiply the yield by the sales price ( money in ) - Multiply the quantity with the price in each line for inputs/services - Sum the money spent ( money out ) on inputs and services - Subtract the sum of money-out from the money in - Determine if there was a profit or a loss 1 ha of Maize: 1,000 kg/ha local variety 1. Money In Unit Quantity Price (ZMW) Total (ZMW) Production Sales price Kg 1, , Money Out - Inputs and Services Land preparation tractor/oxen Ha Seed OPV 20 kg Herbicide Glyphosate Herbicide Dual Litre Litre Fertilizer Basal NPK 50 kg Fertilizer Top dressing Urea 50 kg Pesticides Actellic Super 500 gram Bags 50 kg bag Transport field to house Trip Transport to market Bag Total Cost of Inputs and Services ZMW 1, Labour Supervision land preparation MD Planting MD Herbicide applications MD 10 Fertilizer applications MD Weeding 1 MD Pesticide application MD 10 Harvesting, stoking, dehusking MD Shelling, bagging MD Total Labour Needs (man days) MD Total Money Out ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW Unit Cost (Total Money Out/Production) ZMW

22 Module 4 - Exercise Sheet 2: Cotton (Non-Improved) Steps: - Multiply the yield by the sales price ( money in ) - Multiply the quantity with the price in each line for inputs/services - Sum the money spent ( money out ) on inputs and services - Subtract the sum of money-out from the money in - Determine if there was a profit or a loss 1 ha of Seed Cotton: 600 kg/ha Unit Quantity Price (ZMW) 1. Money In Total (ZMW) Production Sales price Kg , Money Out - Inputs and Services Land preparation tractor/oxen Ha Seed 15 Kg Herbicide Nova Quizalofob Herbicide Glyphosate Fertilizer Basal NPK Litre Litre 50 kg Input pack (pesticides + foliar feed) Pack Transport field to house Trip Total Cost of Inputs and Services ZMW Labour Supervision land preparation MD Planting MD Herbicide application MD Thinning, Gap filling MD Fertilizer applications MD Weeding manual MD Pest scouting MD Pesticide application knapsack MD Picking and baling MD Destruction of stalks MD Total labour needs (man days) MD 65 ZMW Total Money Out ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW Unit Cost (Total Money Out/Production) ZMW

23 Module 4 - Exercise sheet 3: Soya beans (Non-Improved) Steps: - Multiply the yield by the sales price ( money in ) - Multiply the quantity with the price in each line for inputs/services - Sum the money spent ( money out ) on inputs and services - Subtract the sum of money-out from the money in - Determine if there was a profit or a loss 1 ha of Soya beans: 800 kg/ha Unit Quantity Price (ZMW) 1. Money In Total (ZMW) Production Sales price Kg , Money out Inputs and Services Land preparation tractor/oxen Ha Lime 50 kg Seed + inoculum 25 kg Herbicides Classic Herbicides Glyphosate Herbicides Nova Quizalofob Sachet Litre Litre Fertilizer Basal NPK 50 kg bag Bags 50 kg bag Transport field to house Trip Transport to market by truck Fee/bag Total Cost of Inputs &Services ZMW 1, Labour Supervision land preparation MD Lime application MD Planting MD Herbicide application Fertilizer application MD MD Weeding MD Harvesting, threshing, winnowing and bagging MD Total Labour Needs (man days) MD 29 ZMW Total Money Out ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW Unit Cost (Total Money Out/Production) ZMW

24 Module 4 Solution to exercise 1 Maize (Non-Improved) 1 ha of Maize: 1,000 kg/ha local variety 1. Money In Unit Quantity Price (ZMW) Total (ZMW) Production Sales price Kg 1, , Money Out - Inputs and Services Land preparation tractor/oxen Ha Seed OPV 20 kg Herbicide Glyphosate Herbicide Dual Litre Litre Fertilizer Basal NPK 50 kg Fertilizer Top dressing Urea 50 kg Pesticides Actellic Super 500 gram Bags 50 kg bag Transport field to house Trip Transport to market Bag Total Cost of Inputs and Services ZMW 1, Labour Supervision land preparation MD Planting MD Herbicide applications MD 10 Fertilizer applications MD Weeding 1 MD Pesticide application MD 10 Harvesting, stoking, dehusking MD Shelling, bagging MD Total Labour Needs (man days) MD Total Money Out ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW Unit Cost (Total Money Out/Production) ZMW

25 Module 4 Solution to exercise 2 Cotton (Non-Improved) 1 ha of Seed Cotton: 600 kg/ha Unit Quantity Price (ZMW) 1. Money In Total (ZMW) Production Sales price Kg , Money Out - Inputs and Services Land preparation tractor/oxen Ha Seed 15 Kg Herbicide Nova Quizalofob Herbicide Glyphosate Fertilizer Basal NPK Litre Litre 50 kg Input pack (pesticides + foliar feed) Pack Transport field to house Trip Total Cost of Inputs and Services ZMW Labour Supervision land preparation MD Planting MD Herbicide application MD Thinning, Gap filling MD Fertilizer applications MD Weeding manual MD Pest scouting MD Pesticide application knapsack MD Picking and baling MD Destruction of stalks MD Total labour needs (man days) MD 65 ZMW Total Money Out ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW Unit Cost (Total Money Out/Production) ZMW

26 Module 4 Solution to exercise 3 Soya beans (Non-Improved) 1 ha of Soya beans: 800 kg/ha Unit Quantity Price (ZMW) 1. Money In Total (ZMW) Production Sales price Kg , Money out Inputs and Services Land preparation tractor/oxen Ha Lime 50 kg Seed + inoculum 25 kg Herbicides Classic Herbicides Glyphosate Herbicides Nova Quizalofob Fertilizer Basal NPK Sachet Litre Litre 50 kg bag Bags 50 kg bag Transport field to house Trip Transport to market by truck Fee/bag Total Cost of Inputs &Services ZMW 1, Labour Supervision land preparation MD Lime application MD Planting MD Herbicide application MD Fertilizer application MD Weeding MD Harvesting, threshing, winnowing and bagging MD Total Labour Needs (man days) MD 29 ZMW Total Money Out ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW Unit Cost (Total Money Out/Production) ZMW

27 Comparing Results Please tell what is good and what bad business is and give reasons. Unit 1 ha of Maize 1 ha Cotton 1 ha Soya Production Kg/ha 1, Money In ZMW/ha 1,300 1,035 2,000 Money Out ZMW/ha 1,420 1,075 1,607 Profit or Loss? ZMW/ha Unit Cost ZMW/kg Ranking Main Lessons 1. To know if you are doing successful business with a crop, you need to know the Money In and Money Out with precision. 2. The agricultural entrepreneur (man or woman) tracks the inputs and labour used in a field, and calculates the Money In and Money Out 3. From the Money In the entrepreneur subtracts the Money out. The result tells him if he made profit or loss. 4. The agricultural entrepreneur (man or woman) makes a profit, if the Money In is greater than the Money Out. In that case he/she does good business. 5. The agricultural entrepreneur (man or woman) makes a loss, if the Money Out is greater than the Money In. In that case he/she does bad business. 6. You recognize a loss with the minus dash in front of the number: - 7. The good agricultural entrepreneur (man or woman) will abandon this crop or use a better technique to make a profit. 8. To make sure that he will make a profit, the agricultural entrepreneur calculates «Money In» and «Money Out» before production. 26

28 Module 5 Impact of YIELD on profit, a tool for doing good business Exercise Maize Maize Current (1 ha) Maize Improved (1ha) Price Total Price Total Unit Quantity Quantity (ZMW) (ZMW) (ZMW) (ZMW) 1. Money in Production Sales price Kg 1, ,300 3, , Money out Inputs &Services Land preparation tractor or oxen Ha Seed OPV/Hybrid 20 kg Herbicide - Glyphosate Litre Herbicide - Dual Litre Fertilizer Basal NPK 50 kg Fertilizer Urea 50 kg Pesticides Actellic Super 500 gr Bags 50 kg Transport field to house Load Transport to market Trip Cost of Inputs and Services ZMW 1,020 ZMW 3, Labour Supervision land preparation MD Planting MD Herbicide application MD Fertilizer application MD Weeding MD Pesticide application Harvesting, stoking, de-husking MD MD Shelling, bagging MD Total Labour Needs MD 40 ZMW ZMW Total Money Out ZMW 1,420 ZMW 3, Profit or Loss? Money in MINUS Money Out (Gross Margin) 27 ZMW -120 ZMW Unit Cost (Total Money Out/Production) ZMW 1.42 ZMW 1.19

29 Exercise Cotton Cotton Current (1 ha) Cotton Improved (1ha) Price Total Price Total Unit Quantity Quantity (ZMW) (ZMW) (ZMW) (ZMW) 1. Money in Production Sales price Kg ,035 1, , Money out Inputs &Services Land preparation Tractor/oxen Ha Seed 15kg Herbicide Nova Quizalofob Herbicide Glyphosate Litre Litre Fertilizer Basal NPK 50 kg Input pack - pesticides/foliar feed Transport field to house Pack Load Cost of Inputs and Services ZMW 425 ZMW 1, Labour Supervision of land preparation MD Planting MD Herbicide application MD Thinning, gap filling MD Fertilizer application MD Weeding 3-4 vs. 1 MD Pest scouting MD Pesticide application Knapsack vs. Ulva+ MD Picking and baling MD Destruction of stalks MD Total Labour Needs MD 65 ZMW ZMW Total Money Out ZMW 1,075 ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW - 40 ZMW 1, Unit Cost (Total Money Out/Production) ZMW 1.79 ZMW

30 Exercise Soya Soya beans Current (1 ha) Soya beans Improved (1ha) 1. Money in Unit Quantity Price (ZMW) Total (ZMW) Quantity Price (ZMW) Total (ZMW) Production Sales price Kg ,000 2, , Money out Inputs &Services Land preparation tractor/oxen Ha Lime 50 kg Seed + inoculum Kg Herbicides Classic Litre Herbicides Glyphosate Herbicides Nova Quizalofob Litre Litre Fertiliser Basal NPK 50 kg Bags 50 kg Transport field to house Transport to market by truck Load Fee/ bag Cost of Inputs and Services ZMW 1,317 ZMW 2, Labour Supervision land preparation MD Lime application MD Planting MD Herbicide application MD Fertilizer application MD Weeding MD Harvesting, threshing winnowing & bagging MD Total Labour Needs MD 29 ZMW ZMW Total Money Out ZMW 1,607 ZMW 2, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW 393 ZMW 2, Unit Cost (Total Money Out/Production) ZMW 2.01 ZMW

31 Explanation of Fixed Costs Certain costs are called «fixed costs». These are costs for equipment and tools that the farmer owns and are used on various crops or over various years, such as sprayers or irrigation pumps. The Fixed Costs do not vary with the size of the field. Main Lessons 1. The difference between Money-in and Money-out indicates whether we are making a loss or profit from the use of the land. 2. The good agricultural entrepreneur (man or woman) calculates well ahead of the season to decide what he/she will produce. 3. A good agricultural entrepreneur (man or woman) knows the impact yield has on profit, and therefor decides which techniques (non-improved vs. GAP) in order to obtain the optimum yields for better profit. 4. The good agricultural entrepreneur (man or woman) knows the effect of time, labour and inputs on profit therefore takes sustainable approaches to use these resources efficiently, for example the use of the ULVA+ sprayer, ripping, and using herbicides to conserve time and labour. 5. During the production season the good agricultural entrepreneur (man or women) registers money spent for farm operations and inputs. 6. After the harvest, the good agricultural entrepreneur evaluates his/her profit and identifies what changes are needed to improve the planning and profit for the next production season. 30

32 SOLUTION Exercise Maize Maize Current (1 ha) Maize Improved (1ha) Price Total Price Total Unit Quantity Quantity (ZMW) (ZMW) (ZMW) (ZMW) 1. Money in Production Sales price Kg 1, ,300 3, , Money out Inputs &Services Land preparation tractor or oxen Ha Seed OPV/Hybrid 20 kg Herbicide - Glyphosate Litre Herbicide - Dual Litre Fertilizer Basal NPK 50 kg Fertilizer Urea 50 kg Pesticides Actellic Super 500 gr Bags 50 kg Transport field to house Load Transport to market Trip Cost of Inputs and Services ZMW 1,020 ZMW 3, Labour Supervision land preparation MD Planting MD Herbicide application MD Fertilizer application MD Weeding MD Pesticide application Harvesting, stoking, de-husking MD MD Shelling, bagging MD Total Labour Needs MD 40 ZMW ZMW Total Money Out ZMW 1,420 ZMW 3, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW -120 ZMW Unit Cost (Total Money Out/Production) ZMW 1.42 ZMW

33 SOLUTION Exercise Cotton Cotton Current (1 ha) Cotton Improved (1ha) Price Total Price Total Unit Quantity Quantity (ZMW) (ZMW) (ZMW) (ZMW) 1. Money in Production Sales price Kg ,035 1, , Money out Inputs &Services Land preparation Tractor/oxen Ha Seed 15kg Herbicide Nova Quizalofob Herbicide Glyphosate Litre Litre Fertilizer Basal NPK 50 kg Input pack - pesticides/foliar feed Transport field to house Pack Load Cost of Inputs and Services ZMW 425 ZMW 1, Labour Supervision of land preparation MD Planting MD Herbicide application MD Thinning, gap filling MD Fertilizer application MD Weeding 3-4 vs. 1 MD Pest scouting MD Pesticide application Knapsack vs. Ulva+ MD Picking and baling MD Destruction of stalks MD Total Labour Needs MD 65 ZMW ZMW Total Money Out ZMW 1,075 ZMW 1, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW - 40 ZMW 1, Unit Cost (Total Money Out/Production) ZMW 1.79 ZMW

34 SOLUTION Exercise Soya Soya beans Current (1 ha) Soya beans Improved (1ha) 1. Money in Unit Quantity Price (ZMW) Total (ZMW) Quantity Price (ZMW) Total (ZMW) Production Sales price Kg ,000 2, , Money out Inputs &Services Land preparation tractor/oxen Ha Lime 50 kg Seed + inoculum Kg Herbicides Classic Litre Herbicides Glyphosate Herbicides Nova Quizalofob Litre Litre Fertiliser Basal NPK 50 kg Bags 50 kg Transport field to house Transport to market by truck Load Fee/ bag Cost of Inputs and Services ZMW 1,317 ZMW 2, Labour Supervision land preparation MD Lime application MD Planting MD Herbicide application MD Fertilizer application MD Weeding MD Harvesting, threshing winnowing & bagging MD Total Labour Needs MD 29 ZMW ZMW Total Money Out ZMW 1,607 ZMW 2, Profit or Loss? Money in MINUS Money Out (Gross Margin) ZMW 393 ZMW 2, Unit Cost (Total Money Out/Production) ZMW 2.01 ZMW

35 Module 6 Diversifying your farm enterprise for more income throughout the year After all the calculations, we will determine the opportunities to increase revenues. By looking at the numbers on this page we will learn how to make investment decisions. We will determine the best opportunities as follows Rank crops based on Profit or Loss What crops and techniques will you choose? Make a choice based on this ranking Without Risk Unit Maize Current Maize Improved Cotton Current Cotton Improved Soya bean current Soya bean improved Surface Area Ha Production Kg 1,000 3, , , Money-in ZMW 1,300 3,900 1,035 3,105 2,000 5, Money-Out ZMW 1,420 3,580 1,075 1,775 1,607 2, Profit or Loss? (Gross Margin) ZMW , ,295 Rank (Profit) What is a risk in agriculture? The agricultural entrepreneur (man or woman) does not like risks because they are difficult to predict. However, one can determine during the planning what the impact of risks could be on revenues (income). Market Risks The market price of maize may fall from 1.3 ZMW per kg to 0.9 ZMW per kg Production Risks Because of a lack of rains the yield of maize falls from 3,000 kg/ha to 1,500 kg/ha Calculate the Money-In and profit from Maize. Money-Out remains unchanged as the money is already spent. Rank crops once more based on Profit or Loss using the table below What has changed? How would you decide? With Risk Unit Maize Current Maize Improved Cotton Current Cotton Improved Soya bean current Soya bean improved Production Kg 1,000 1, , , Money-in ZMW 1,300 1,350 1,035 3,105 2,000 5, Money-Out ZMW 1,420 3,580 1,075 1,775 1,607 2, Profit or Loss? (Gross Margin) ZMW , , ,295 Rank (Profit)

36 Main Lessons 1. Comparing profits of different crops and production techniques helps to make decisions on using the land to maximize revenue. This comparison is important to all agricultural entrepreneurs (man or woman). 2. Production decisions are based on these comparisons. 3. The good agricultural entrepreneur knows that a fluctuation in prices constitutes a risk on revenue. Risks are a concern for traditional as well as improved varieties and techniques. 4. To evaluate the impacts of this Market Risk, the entrepreneur calculates the Money In with a much lower price ( pessimistic ) than the current price (or last season s price). If the pessimistic profit can still satisfy the revenue objectives, then the risk is acceptable. 5. A good agricultural entrepreneur does not just bases his decision to grow a crop only on the profits showing on Money-In and Money-Out calculations, but also takes into consideration other factors such as: - Availability of a market for the product - Pre-financing opportunities - Supply of packaging materials - Availability and cost of transport to the market - Mode of payment and payment period by the customer - Availability of inputs 6. A good farmer as much as possible avoids risks, e.g. will make sure that he/she buys his seed and agro-chemical inputs from genuine sources, will create fire breaks around his farm, and uses water conservation methods to reduce the effects of droughts 35

37 Module 7 Manage your money throughout the year Management of money How does one know if the money is managed badly? What are the causes? What must one do to manage money well during the year? One must plan! The person who fails to plan, plans to fail! We have looked at «Money In» and «Money Out» for different crops on the farm. Now we will have a look at the expenditures of a household of 6 persons (2 of the children not yet in school, 2 children in primary school). How much money is needed for the household in one year? Can we foresee these expenditures? When is the money needed? Exercise Money needs of the household Money needs of the household Can be foreseen? Period - month Money-out per period (ZMW) Money-out for one year (ZMW) Matches Yes Each month 1 12 Salt Yes Each month 2 24 Soap Yes Each month 5 60 Paraffin/kerosine Yes Each month 8 96 Purchase food Yes Each month 150 1,800 Subtotal each month/per year ZMW 166 1,992 School uniforms for 2 children Yes January Clothing at end of the year Yes December Happy events Yes December Unexpected events Yes Anytime Annual money needs for household ZMW 2,952 In this exercise we will now consider a household managing 3 ha of fields, looking at how expenditures and income are spread over the year for both non-improved and improved production techniques as in Module 6, and then look if the money needed for the household is really available. 36

38 Module 7 Exercise Financial Calendar for a farm using current practices (ZMW) 3 ha field FINANCIAL CALENDAR Money Out Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Maize (1 ha) Inputs and services 1,020 Labour 400 Cotton (1 ha) Inputs and services 425 Labour 650 Soybean (1 ha) Inputs and services 1,317 Labour 290 TOTAL expenditures for production (3x1): 3 ha 4,102 Household 1,992 School uniform 160 Clothing 500 Happy events 150 Unexpected events 150 Household expenditures per month 2,952 TOTAL expenditures per month 7,054 Money in Maize (1 ha) 1,300 Cotton (1 ha) 1,035 Soybean (1 ha) 2,000 TOTAL income from production (3x1): 3 ha 4,335 Other income TOTAL income from production and other sources 4,335 Balance (Money in - Money out) - 2,719 Cumulative Balance (Money in Money out) - 2,719 37

39 Module 7 Exercise Financial Calendar for a farm using improved practices (ZMW) 3 ha field FINANCIAL CALENDAR Money out Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Maize (1 ha) Inputs and services 3,100 Labour 480 Cotton (1 ha) Inputs and services 1,085 Labour 690 Soybean (1 ha) Inputs and services 2,295 Labour 410 TOTAL expenditures for production (3x1): 3 ha 8,060 Household 1,992 School uniform 160 Clothing 500 Happy events 150 Unexpected events 150 Household expenditures per month 2,952 TOTAL expenditures per month 11,012 Money in Maize (1 ha) 3,900 Cotton (1 ha) 3,105 Soybean (1 ha) 5,000 TOTAL income from production (3x1): 3 ha 12,005 Other income TOTAL income from production and other sources 12,005 Balance (Money in - Money out) 993 Cumulative Balance (Money in Money out)

40 Let s discuss the results using this overview Can be foreseen? Period With current production techniques Per year (ZMW) With improved production techniques Per year (ZMW) Money-Out of the household Yes Each month 2,952 2,952 Money-Out for inputs and services Yes Different months 4,102 8,060 Money-Out for household and production Yes Different months 7,054 11,012 Money-In from production Yes, but can change Different months Money available for next season, other expenditure including labour, and savings (ZMW) Money-In from production minus Money-Out for household and production 4,335 12,005-2, Difference between the two situations ZMW 3,712 Main Lessons 1. In the agricultural enterprise, expenditures (Money Out) for the farm and the household are made each month, but the revenue (Money In) comes only during the months of harvest or sale of produce. Therefore there are months of the year where the expenditures are greater than the revenues. These months are called deficit months. 2. For this reason, the good agricultural entrepreneur (man or woman) plans with the spouse(s) the expenditures for production and household needs. 3. To be able to cover the expenditures in deficit months, the good agricultural entrepreneur saves money from the sales of produce ( surplus months ). 4. Improved techniques may contribute to improve the revenues of the agricultural entrepreneur. 5. The needs for inputs can be identified with calculations of Money-out. This information can be used to make savings in a targeted way or to solicit credit for production. 39

41 Module 8 How to get good financial services Savings Why is it important to create savings? With savings you can invest in your enterprise and thereby make greater revenue. For example, by buying fertilizer or improved seeds. If you save on a bank account, your money is safe. With savings you protect your money against inflation (inflation is when the cost of living increases). Savings on an account are often necessary to obtain a loan. How can you create savings? What are the advantages and disadvantages? Advantage Disadvantage Hide money at home 1. The money is immediately available 1. Money is not safe and can be stolen 2. Money can be destroyed (by a fire, for example). 3. There is increased risk of making impulsive expenditures Bring money to a rural bank 1. The money is safe at the bank 2. Having savings at the bank facilitates a loan from the bank 3. Saving at the bank reduces the risk of spending money impulsively because it is not immediately available 1. The money is not immediately available Paying money into your bank account Go to the bank or village financial institution Fill out the deposit form Your deposit is registered in your savings booklet Removing money from your bank account Think why you need money, and how much Go to the bank or the village financial institution Fill out the money withdrawal form Your withdrawal amount is registered in your savings booklet 40

42 Bank Deposits Collection of money from the people Commercial Banks, Rural Banks, Development Banks and Savings and Loans Companies collect money from people who have it to spare or who are saving it from their income. They keep the money safe on your account. If you want to put your money in the bank, you can choose one of the following accounts: A Current Account is an account for business people like you. Money put in this account can be taken out without telling the bank to be prepared for your coming to take out money. You use a cheque to take out money or to pay a bill. The bank charges a fee for the services it has given to you for this account. You will open a Savings Account to save money to keep it safe or with objective to get a loan. You can take money only when you are present at the bank. The bank pays additional money on the money in this account every three months, every six months or every year. As owner of a savings account you receive passbook from the bank into which money put in and money taken out is recorded. The Fixed Deposit Account helps you to keep money safe and to earn more money. You can only take out your money at a time you have agreed with the bank, let us say six months. The money that is paid on top of the amount in this account depends on how long the money will be in this account. If for any reason, you want to take out the money before the time you have agreed with the bank, the bank charges you a fee. This type of account could be used by a farmer business person planning to put in more money into say fertilizer for cotton. What is Credit (Lending) It is money you borrow from a person or a bank promising to pay back this money. This is a service you get and you pay a fee for this service The bank gives you a letter telling you it has agreed to give you the money you have asked for. The bank also shows when you have to pay back the total amount of money. You, the borrower and the bank know what will be the payments of the loan and service fee is being paid, and when is it to be paid. This makes planning very simple for all. Example Malambo is a farmer from Zambia. He needs ZMW 800 to buy fertilizer for his maize crop (1 hectare or 2.4 acres). He decides to go to the bank to borrow this money. The bank agrees to give Malambo the money but told him, he has to pay back ZMW 900 in 6 months. The ZMW 800 Malambo borrowed is the credit. Malambo will have to pay ZMW 100 as fee for the money he borrowed. The 6 months is how long it will take until Malambo has to pay back the money. 41

43 A common example of Credit is a Loan A loan is money you borrow (credit) from a person or a bank. Money can be borrowed for a very short time (1 month to 12 months). Money can be borrowed for a short time (1 to 2 years) Money can also be borrowed for a long time (3 years onwards). Service fee can be charged every week or every two weeks, every month or every year on the money you borrowed. There are two common types of loans Business loans Personal loans Business Loan This loan is given to business men and women like farmers to make their business (farming) better or to increase the size of their business (farm increasing from 1 ha to 2 ha). Examples of farm business loans are Inputs Loan: Expansion Loan: This is a very short time loan that can be used to buy planting material, seeds, fertilizer, insecticides, and herbicides. This loan helps farmers to increase their farming business by increasing the cropping area. Other investment loans: For planting of tree crops, you might need a loan for at least 3 years. Personal Loan This type of loan is not for business. It is rather used to buy things that are needed for the home like a fridge or to pay school fees. Main Lessons The good agricultural entrepreneur (male or female) takes a loan only when he/she is sure to be able to repay on time. For this reason he/she plans the investments and expenditures required. Once the good agricultural entrepreneur (male or female) has taken a loan, he/she sticks to the objective of the investment. Otherwise, the agricultural entrepreneur is likely to have repayment problems. 42

44 Ways by which money can be borrowed You can borrow money as a single person (individual loan). In this case, the bank always asks for things like a building, a car or land to be put down before giving out the money. If you pay the loan back and the service fee in time, the bank will be happy to serve you in the future. You can borrow money as a member of Group (group solidarity loan). The group can be a cooperative or a registered Farmers Association. If you pay the loan back and the service fee in time, the other group members will be happy to keep you in the group. Main Lessons 1. The good agricultural entrepreneur (man or woman) plans his/her expenditures and money entries all along the year to avoid shortages of money and unforeseen loans that are expensive. 2. To meet the needs of money in deficit months, the good agricultural entrepreneur (male or female) makes savings with the surplus money from product sales. It takes discipline to do so. 3. Saving money with a rural bank or a micro-finance institution which is close by has the advantage that money is safe. Another advantage is that one is obliged to plan for expenses before withdrawing money. 4. There are different types of savings that offer various benefits. Rural banks and institutions of micro-finance provide information and advice to inform their customers. 5. There are different types of loans. Choose the type of credit that offers a convenient service fee and delay for reimbursement. 6. The good agricultural entrepreneur (male or female) inquires about the possibilities and conditions for savings and loans before making a decision. 7. The good agricultural entrepreneur (male or female) takes a loan only when he/she is sure to be able to repay on time. For this reason he/she plans the investments and expenditures required. The Gross Margin and the Financial Calendar are the appropriate tools for this planning. 8. Once a loan is received, the good agricultural entrepreneur (male or female) sticks to the objective of the investment. Otherwise, the agricultural entrepreneur is likely to have repayment problems. 43

45 Module 9 How to produce and gain income from good quality cotton The example given is for two categories/grades applied to the quality of seed cotton, A and B. Quality of the cotton Grade A Grade B Description White cotton, without foreign matter, dry, uniform, without spots, shiny Discolored cotton, stained and nonwhite, contains traces of foreign matter (boll husks, leaves, etc.) Humid cotton may need to be dried prior to purchase. Causes Respect of good agricultural practices, proper pest control, well and early harvested, properly dried, cotton well stored in appropriate conditions Good agricultural practices not respected, neglected pest control, harvested in rush, stripped, harvested when wet and not properly dried, cotton stored in inappropriate conditions Why all this? Not all recommended practices are applied to ensure good quality cotton Who can change this? The entrepreneur (man or woman)! Exercise Calculation of income benefits from good quality cotton (1 ha) Cotton (1 ha) Unit Current agricultural practices Good agricultural practices Grade B Grade A Grade B Grade A Production Kg/ha ,800 1,800 Selling price ZMW/kg Money In ZMW 1,035 1,095 3,105 3,285 Money Out ZMW 1,075 1,075 1,775 1,775 Profit or loss? (Money In minus Money Out) ZMW/ha ,330 1,510 Profit difference between bad and good quality cotton

46 Module 10 Benefits from membership in farmer organizations - What is the use of being in a farmer organisation? - What are the problems and risks of an organization that you know? - How do you avoid these problems? - What is your conclusion? How can one know if a farmer organization works well? Existence of the group - Members pay of annual contributions without pressure - Members accept the costs (deductions on sales) without complaining Operation of the group - Existence of Rules Existence of rules on the control of accounts - Regular Report Production - The evolution of group activities (tonnage production, sales volumes or expenditure group purchasing of inputs) is positive What other characteristics do you know for a good farmer organization or farmer group? Evidence of registration with appropriate authorities Track record Evidence of financial commitment by members Minutes of meetings Type of leaders and/or members Group sales can help to get better prices Group purchase of inputs can help to get them at lower prices as larger quantities are bought Let s see what the possible benefits of being a member of a farmer organization or a farmer group are. 45

47 Module 10 Exercise Sheet 1 Let s calculate the additional benefits obtained through group sales that give better prices in the case of improved farm production Maize Improved Cotton improved Soybean improved Individual Group Individual Group Individual Group Unit Sale Sale Sale Sale Sale Sale Surface Area Ha Money-Out (Inputs & Services) ZMW 2,800 2,800 1,085 1,085 2,115 2,115 Production Kg 3,000 3,000 1,800 1,800 2,000 2,000 Price ZMW/kg Money-In Production 3. Benefit from Group Sales ZMW 3,900 4,200 3,105 3,285 5,000 5,200 ZMW Total Benefit from the Group Sale ZMW

48 Module 10 Exercise Sheet 2 Calculation of the benefit of group purchase of inputs in the case of improved farming techniques Inputs can be provided less 10% less expensive through grouped purchase. Let s see how much the benefit is for one group member, if all required inputs (lime, seed, herbicides, fertilizer, pesticides, bags services such as land preparation, transport from field to house and transport to market are not to be included) are bought by the group at lower price. Maize improved Cotton improved Soybean improved Unit Individual input purchase Group input purchase (less 10%) Individual input purchase Group input purchase (less 10%) Individual input purchase Group input purchase (less 10%) Surface Area Ha Cost of Inputs (i.e. without services) Benefit from Group Purchase ZMW 2,460 2, ,670 1,503 ZMW Total Benefit from the Group Purchases ZMW

49 What lessons can you learn from these examples? Main Lessons 1. Agricultural entrepreneurs (men or women) form groups or associations to do things they are not able to do alone. 2. Groups or associations of agricultural entrepreneurs (men or women) have a common business objective. To achieve their common goal, the members learn together, from each other and support each other. 3. For service providers, it is easier and cheaper to work with farmer groups or associations than with individuals. A group of agricultural entrepreneurs (men or women) can more easily seek financial services or information on production techniques from extension. 4. For input suppliers, it is easier and cheaper to work with farmer groups or associations than with individuals. A group of agricultural entrepreneurs (men or women) can organize grouped purchases of agricultural inputs and can better prices from the input supplier. 5. For buyers of agricultural products, it is easier and cheaper to work with farmer groups or associations than with individuals. A group of agricultural entrepreneurs (men or women) can organize grouped sales of agricultural products like cotton. The group can get better prices from the buyer if the quality of the product is correct. 6. Associations or groups of agricultural entrepreneurs that function well have clear rules that are respected. When the rules are broken by members, sanctions are applied. 7. Good leaders of farmer associations play their role to improve the business of all members. 8. Agricultural entrepreneurs (men or women) that are members of well-functioning associations or groups do better business. 9. Agricultural Entrepreneurs that are doing better business with the support of their association pay their membership fees without reluctance. 48

50 Module 11 Conclusion - Becoming an entrepreneur in practice The workbook has been presented to you in this session. - What have you learned? - What will you change? - What do you need to succeed and do good business? What I like to improve or start to do Planning (using the agricultural calendar) Using good quality seed Using good quality inputs and applying these on time Keeping records of all activities (labour, inputs and services) using the FBS workbook Producing and delivering good quality cotton (clean, dry...) Calculating the profit (gross margin) Opening a bank savings account Establishing an interest group / producer organisation Others (specify) 49