A farm can grow a large crop and still make a loss. Agricultural economics asks what the enterprise cost, what it earned, and where the produce was sold.
The idea
Fixed costs do not change when output changes, within a season. Rent of the land, depreciation of a knapsack sprayer, and the wage of a permanent worker are examples. Variable costs change with output. Seed, fertiliser, animal feed and the wages of casual labour at harvest are examples. Total cost is fixed cost plus variable cost. Revenue is the money from sales: price times quantity sold. Profit is revenue minus total cost. A loss is the same subtraction when cost is greater. Gross margin, where a question asks for it, is revenue minus variable cost, and it still has to cover the fixed costs before there is a profit. Do not call revenue the profit.
Price is not fixed by the farmer alone. At harvest, many farmers sell the same crop and supply is high, so the price often falls. A farmer who can store dry grain safely may sell later, which is a marketing decision, not a production one. Outlets include the farm gate, a trader, a cooperative, and a direct stall at a market. A cooperative can bargain and can share transport. It does not remove the need for records. Production records, input costs and sales show whether the enterprise paid. They are also what a lender asks to see. Opportunity cost is the next best return given up. Land used for maize cannot, in the same season, be used for cassava. The profit on the maize should be compared with what the cassava would have earned.
The General Agriculture tips guide sets out the papers, how to answer the essay and the practical, and the mistakes that cost marks. WASSCE General Agriculture tips