Introduction

When thinking about growing agricultural products it is necessary to consider what to work with, the most important needs, what can be expected to be produced in the area, and what can be done best or better than in other places.

If a person can work, then he or she has labour power which could be used as an input in farm production. Labour is a resource, or a ‘factor of production'. Labour on its own does not grow food and fibre. In order to produce something of use, the worker needs other resources to work with (such as soil, tools and equipment, seeds, water, time, and some management skills). Capital is another resource. Capital has many meanings. For farm management purposes it can be thought of as physical goods (like tools and equipment), money, or the worth of what a person owns in his farm or other business.

Another broad class of resource is raw materials, which consists of the land and anything useful which it provides. Resources used in production (or ‘factors of production’) can be classed as land, labour and capital. None of these is plentiful when compared to the many purposes for which it can be used, and the many needs people have for it.

Technical principles

Production is the process of using resources to make goods, provide services, or to do both. Producers can use any or all of the three factors of production (labour, capital and raw materials) in different combinations, to produce one or many products. A key element in a farmer's decision about what to produce and how to do it is the objective of getting more, or even the most, out of the limited amount of resources he has to work with. There are three basic production relationships (also called response relationships):

(Note: output has the same meaning as product.)

Input-output

Let us consider the situation of a small farmer who has some land and a few tools (capital) to work the soil and weed the crop, using his own labour.